Ah, yes, the dreaded work comp audit. That exciting time each year when you get to find out if you financed your insurance carrier or if they have financed your business.

The best you can hope for is that they owe you money in which case they just smile and credit your account. The worst case is that you owe them money and they send you a bill labeled ‘due upon receipt’. You MAY be able to get them to spread out that audit balance over the next few months, if you are lucky.

My frustrations with work comp go back a few years. In ’04 I was a small company in my first year. My premiums were based on a very small payroll. In ’05 we took a pretty large jump forward and my labor increased so we adjusted but not enough. I got my audit that year and I had a balance due of around $2,500.00. I got that paid and we moved into ’06. The year of 2006 was my biggest year and my payroll went way up. In the busyness of that year it never even crossed my mind to get my work comp estimates updated to a higher rate of payroll. This was the year that my insurance carrier really hit me. First I couldn’t get them to adjust my personal classification. I’m an outside sales and office management only owner. Not even my own agent was able to get this company to fix my status. Because of this I got a bill for over $8,000.00! Since then I’ve had a couple of audits that did actually come in less than estimated and of course I didn’t get that money back. It sure would have been nice to have that extra cash on a monthly basis during the down years.

The irritation in all of this is that your monthly work comp payments aren’t real time. They are just based on what you think will happen this year, and that’s based on what happened last year. Can we all agree that no two years are alike when you are self employed? Can we agree that no two months are alike? Can we agree that no two weeks are alike? Okay, I think I’ve made my point.

Let’s get to a solution here. Work comp doesn’t need to be like this. You can have a pay-as-you-go service with workers compensation insurance. By doing this you ELIMINATE audits. I recommend using the QuickBooks Assisted Payroll service (I’ll post about this soon). Next you will hook up with an insurance provider that integrates with QuickBooks. I use The Hartford. They have you install this small program into your Windows sys tray that reads your QuickBooks file weekly and sends a report to The Hartford. The Hartford then just debits your checking account the amount due.

I’ve been using this for a few months and I LOVE IT. I have a sweet rate from The Hartford. It’s 5.21% and each week they pull the amount due from my account. It’s a cash flow dream as I don’t get a big bill at the end of the month. Also, because of the way I bid my work it’s easy to know ahead of even doing payroll what that week’s payment will be.

I’m going to be putting together a list of insurance carriers that offer ‘pay as you go’ work comp plans. Please feel free to contact me to get this list from me.

james@bluecollarliving.com

Work comp audits can really hit you hard. Let’s get your company away from any kind of estimated bills.

I would like to thank Jason Fried, co-author of ReWork for this inspiration.

There is a lot of talk in business about failure and the ‘advantages’ of experiencing it. You will even hear about how much you can learn from your failures. While I understand what is meant by that I’m not sure it is being translated very well. Yes, you are not a reject if you fail. Yes, it’s even okay to fail. It’s not acceptable though. It’s not a badge of honor to be displayed for all to see. Some kind of pat on the back with the words, “Hey, at least you tried” is just simply patronizing.

I’ve got some great friends that are in the early years of owning their own businesses. I’m pretty sure neither Justin Lukasavige or Andy Traub have some twisted plan to crash and burn on their first attempt at running their own company. I’m sure that many successful business owners that failed on their first attempt would have been just as happy to not have experienced the pain of a failed company.

I’ve made mistakes, and failed. It wasn’t the failure itself that I have learned from. It was the realization that I couldn’t do it alone and then the people I plugged in to after. I’m happy to say that my first business venture is still here (believe me, it shouldn’t be here at all). It’s here because of all the help I’ve gotten in the last two years and the fact that I just refuse to accept failure as an opportunity to learn something. The only thing I will learn from a failed business is that it hurts, bad.

Let’s do this. In stead of all this ‘failure is the pathway to success’ talk let’s push the need for mentoring in the world of startups. Let’s get the message out there that before you ever start your own company you need to get hooked up with someone that has been a success. If you crashed your last company how about you go and find someone who is running a successful business and get them involved in your next attempt? And please, make sure your mentor has a business that is at least similar to yours? Don’t get an accountant to help you run your construction company.  That’s a bad plan.

Failure, by default, only teaches you how to fail. It’s getting help from the successful that will really teach you something.

Nothing frustrates me more than getting emails that have a subject line that makes no sense.

I received this email today from an organization regarding an upcoming project.

Notice that the subject is ‘this project’?  How am I supposed to search my email client for this information later?  Currently my Google Apps Email account has over 9,000 items in it.

Let’s take a look at a second example.

Isn’t that better?  I will easily be able to search for this email in the future.

Thank you Linda for making my life easier!

The blue collar business owner is pulled in so many directions.  We wear a LOT of hats. We are the marketing and sales department. We answer the phone and swing the hammer, usually at the same time. We do all the hiring and firing.

We take what we do very seriously.  We want to be the best AND look the best.  We want the nice truck.  We want the fancy showroom. We want to appear successful because we worry that if we don’t come off as successful no one will want to use our services.

We have got to ask ourselves a question.  Who am I in business for?  Am I in business for myself or my banker?  I’m sorry but we don’t ask ourselves that question enough.  It’s no wonder, though.  Read the news. The entire earth has a culture of ‘borrow to fix your problems’. It’s no wonder that us blue collar business owners try to do the same thing.  That’s what’s being modeled for us. I’ve tried it. It’s taken me over 2 years to recover and I’m not even half way there yet. I’m paying the price big time.

You aren’t in business to buy trucks, or fancy tools. Hopefully you are in business to do what you love and make money at it. If your solution to every problem you run into is to borrow your way out of it then I’m sorry, you aren’t self employed. You work for your banker. Now, not all bankers are bad, but the days of a bank only loaning money to you because they are positive you can afford it are simply over. Banks these days will bury you in debt, especially if you use a small town bank. One that knows you well and doesn’t use a reporting agency. Yeah, there are still plenty of those out there.

Ok, so, I do still have the responsibility to answer the opening question. When is it ok to borrow money in your business?

When the payment on the job will eliminate the balance.

There, now you have your answer. I bet that seems ridiculous to you doesn’t it? If you look to a bank to save you at every corner you will cripple yourself and your business. You are going to make mistakes. Don’t get stuck with payments on those mistakes. Quit borrowing money every time you run into a problem. We need to remain creative inside our business. It’s my belief that to become creative in your business you need to stay away from the loan officers desk. It’s the thoughtless unimaginative way out. It holds you back.

Don’t believe the lie that says the only way to run a successful business is to borrow your way there. It just doesn’t work.