At Bluehost, we love small-business success stories, whether the business revolves around pies, food trucks, minimalism, life coaching, or graphic design. If you run a small business or are considering starting one, we want to help you make your business a success story too. For our “New Year, New Business” series, we’ll be providing insights, methods, and resources for building and growing a small business.
The bootstrapping entrepreneur is admired in the business world and American culture at large: a scrappy, can-do person builds a successful business against the odds, with minimal resources or outside help.
But as many experienced entrepreneurs know, bootstrapping has its limits — because so do people. (This is especially true if you’re trying to start a small business while working a day job.) Even the most determined among us have limited time, energy, and resources.
If you burn out, your business will suffer. A wise approach, then, is to be careful and creative with your resources — but recognize that it can also be efficient to delegate some tasks. First, we’ll help you figure out how to decide whether to DIY or delegate. Then, we’ll offer tips for DIYing or delegating three common management tasks.
Questions to Help You Decide: DIY or Delegate?
You’ll find that each choice comes with its own unique considerations, but in the DIY vs. Delegate debate, it really boils down to two questions:
Question 1: Do you already have the expertise to handle this task?
This is the simplest one — it’s yes or no. If no, go on to Question 2. If yes, skip to Question 3.
Question 2: Can you gain sufficient expertise through your own research?
In the spirit of bootstrapping, you can always gain a bit more expertise by browsing the guides on SBA.gov, scouring the Internet for answers to your questions, and researching at the business section of your local library. But research takes time, and doing the task yourself will also take time. Which brings us to question 3.
Question 3: What are the trade-offs and opportunity costs?
A trade-off is what you give up vs. what you get. An opportunity cost is the cost of what you give up. Most often, the opportunity cost is time or money. Making trade-offs is intrinsic to life and business, and it sure isn’t easy. To help your decision-making, here’s a framework to consider:
Trade-offs for DIYing
You give up the time and energy of doing the task, and the time and energy of learning how to do the task if it isn’t your area of expertise. Plus your risk of error is higher if it isn’t your area of expertise. In exchange, you get to keep the money you would have spent paying an expert, and you have complete control over that task.
Trade-offs for Delegating
You give up money to pay an expert, and cede some control over the task. In exchange, you get to save time and energy and reduce the risk of error.
Opportunity Cost for DIYing
Let’s say it will take you three hours each month to complete a particular task. Now, think about alternative ways you might spend those hypothetical three hours.
Make a list of three to five tasks that are crucial to your business’s success. That might include collaborating with developers to strengthen your product or attending industry conferences to heighten your brand’s visibility. And because you’re a business asset too, include on that list an item that is important to your personal well-being, like having dinner with your family or getting to the gym once a week.
Then ask yourself: Are you spending enough time on these top-priority tasks, or would your business benefit if you spent three more hours each month on them? If you have enough time for these tasks, DIY may be right for you. If these tasks are being neglected, delegating may be right for you.
(Note: This thought exercise is adapted from Pricing Design by Dan Mall.)
Opportunity Cost for Delegating
Let’s say it will cost you $150 each month to outsource that task that takes three hours per month. Now, think about alternative ways you might spend that hypothetical $150 (or $50 per hour).
Make a list of three to five expenses that are crucial to your business’s success. For example, paying employees a decent wage (that includes yourself), paying for advertising, or purchasing equipment or software.
Then ask yourself: Are you spending enough money on these top-priority expenses? If you are, go ahead and delegate. If you aren’t, perhaps delegating simply isn’t in your budget — unless you decide that this particular task is urgent or important enough to take precedence over other tasks until you can afford to pay for all of them.
Follow Your Priorities
We all need somebody to lean on — even gritty bootstrappers can benefit from the occasional delegating. Whether you choose to DIY or delegate, the exercise of weighing the options provides an opportunity to reflect on your business priorities, and then act on those priorities.
Task 1: Choosing Your Business Structure
Know Before You Decide
In the U.S., there are several types of legal business structures, including a sole proprietorship, partnership, corporation, and limited liability company (LLC).
The most common business structure is a sole proprietorship. It’s the simplest and easiest option; you don’t need to fill out any forms or pay any fees (of course, you do have to pay taxes, but that applies to any business structure).
However, another structure may better fit your needs. For example, if your venture entails high risk, the protection granted by an LLC may be worth the cost and effort.
How to DIY
First, do your research, starting with these articles:
- Choose Your Business Structure (Small Business Administration)
- The Complete Guide to Choosing Your Business Structure (Bplans)
- Choosing the Best Ownership Structure for Your Business (NOLO)
- Learn About Business Ownership Structures (NOLO)
- Choosing a Business Structure (IRS)
Then, complete and submit the paperwork. The Small Business Administration (SBA) has guidelines and links to the the applicable state and federal paperwork for the following structures: sole proprietorship, LLC, cooperative, corporation, partnership, and S corporation.
How to Delegate
Consult with a tax lawyer, small business lawyer, or certified public accountant (CPA). They can help you decide the best business structure for your needs as well as assist you with the applicable paperwork.
Task 2: Registering Your Business Name
Know Before You Decide
If your business is a sole proprietorship and you choose to do business using only your own name, you do not need to register a business name. But if you use any other name, even if it’s as simple as “Jane Doe Consulting,” you’ll need to register the name as a trade name or trade mark.
There is a difference between a trade name and a trademark. As defined by the SBA website, a trade name is “the official name under which a company does business. It is also known as a ‘doing business as’ (DBA) name, assumed name, or fictitious name. A trade name does not afford any brand name protection or provide you with unlimited rights for the use of that name.”
A trademark is “used to protect your brand name and can also be associated with your trade name. A trademark can also protect symbols, logos and slogans. Since your name is one of your most valuable business assets, it’s worth protecting.” For a detailed comparison of trade names and trademarks, read more at the SBA website.
How to DIY
First, do your research. Consider starting with these articles:
- Register Your Business Name (SBA)
- How to Register Your Business Name (NOLO)
- The Complete Guide to Registering Your Business Name (Bplans)
(You may notice that doing your research is always the first step when you DIY, and it’s a good idea when you delegate too.)
Then visit the SBA’s list of registration requirements for businesses with state agencies.
How to Delegate
Consult with an intellectual property (IP) lawyer, particularly if you are interested in obtaining a trademark for your business name or other elements such as a logo or slogan.
Task 3: Managing Cash Flow and Taxes
Know Before You Decide
Make sure to maintain accurate, consistent, and organized financial records from the start. Balancing actual checkbooks may be a thing of the past, but with a small business, you’ll always need to track and balance your income and expenses — it’s the key metric for the health of your business.
Accurate records are also important for when it’s time to prepare your tax returns. And April 15 isn’t the only deadline you’ll need to remember, because many businesses are expected to pay taxes quarterly. (However, if your business does not make enough money to owe $1,000 in taxes that year, you can pay taxes annually. Consult a CPA if you’re not sure.)
How to DIY
First, do your research to understand cash flow and tax liability. Consider starting with these articles:
- Developing a Cash Flow Analysis (SBA)
- Managing Cash Flow Workbook (SBA)
- Track Small Business Cash Flow without Spreadsheets (Xero)
- Five Rules for Managing Small Business Cash Flow (Xero)
- Filing & Paying Taxes (SBA)
- Quarterly Taxes, The Basics (SBA)
- Five Essential Online Tax Tools for Small Business Owners from IRS.gov (SBA)
- New Small Business? Five Things to Know About Federal Income Taxes (QuickBooks)
Then, take your pick of the many cloud accounting software options available. (This article by Xero offers guidelines for choosing a cloud accounting provider.) Popular options include FreshBooks, Xero, Zoho Books, and QuickBooks.
How to Delegate
Hire an in-house accountant, or outsource to a virtual accountant or local CPA. Some accounting services also use cloud accounting software so that you can easily access and share information.
Your Next Steps
Schedule some time to plan your management tasks. In addition, you may include other routine tasks that apply to your business, such as maintaining a physical space for your business. Then, use the series of questions above to determine whether it is more efficient to DIY or delegate each task. For tasks you plan to DIY, schedule time on your calendar to complete those tasks. For tasks you plan to delegate, ask friends for recommendations and start reaching out to potential consultants.
Next week, we’ll cover how to conduct market research and build your brand.