Rob asks,

I have a first child on the way. I need to buy an SUV, but I put all my money back into my business. Is there a way to use my business to write off the SUV?

[You can ask your question here]

I answer:

Since I’m not an accountant or a lawyer and more to the point, I’m not YOUR accountant or lawyer I don’t know enough to advise how the rules apply in your situation. What follows is not advice, but education.

The general idea is any cost you incurr in order to do business is a write off. That means if you have to travel on business you could fly coach, fly first class or charter your own plane. The IRS won’t tell you which choice to make as long as you pay fair value and it’s a business expense. (Fair value means it won’t work to pay your wife $10,000 to make your travel arrangements if she books a flight for $350 and takes the rest as “commission”).

Even if you could write off any of those expenses, and chartering your own plane is a bigger write off, you’d have more money in your pocket if you fly coach for the reasons I explain below.

For example, if you have a business that makes $100 profit. You’re in the 40% tax bracket (including state income tax etc) so you pay $40 in tax and put $60 in your pocket. If you spend $10 on something (that you can’t write off) you end up with $50 in your pocket.

But suppose you could write off that $10. Then you only make $90 profit. In the 40% tax bracket you pay $36 in tax and put $54 in your pocket.

Bottom line: $54 in your pocket is better than $50 but worse than $60. What does that mean? It means if you spend money you weren’t going to spend anyway – even if it’s a write off – you end up worse off. ($54 instead of $60). But if you’re going to spend the money anyway, you’re better off if you spend it in a way that you can write it off ($54 instead of $50).

There are detailed rules about how much you can write off if you have a vehicle you use for business and personal use (same with a computer or a phone line for that matter – though the rules may differ). And there are rules regarding how much travel you can write off if you combine business and personal. And no, it won’t work to charter a plane to go to Hawaii for a week and spend 2 hours (or even 168 hours) that week talking business with your wife over lunch. There has to be a business reason that you have to talk in Hawaii.

Are there ways to arrange things so that you spend money you were going to spend anyway and get a write off? Sometimes. But you better get specific advice for your situation, from someone who knows this year’s tax law.

Do people break the rules and get away with it? Yes, but it’s not a risk I like to take. The penalties run from very costly to jail.

Takeaways:

• Write-offs are not a profit center.
• Do get the right advice and write off as much as you legally can.
• After that, it’s better to put your energy and inventiveness into making more money rather than gaming the system.
• The good news about paying a lot of taxes is it means you’re making even MORE money than you’re paying Uncle Sam. Poor people don’t pay a lot of taxes.

“When you’re up to your eyeballs in alligators, it’s hard to remember that you set out to drain the swamp.”

Many clients come to me in that situation. And they feel paralyzed with so many emergencies they don’t see how to get ahead. I’ll make this short for those of you who have to get back to your latest brush fire.

A useful distinction: Urgent vs Important.

All of the things that demand your time are urgent. Only some are also important. But some important things are not urgent. (doing your will, training your managers to manage better, hiring that new assistant). So those always get put off when there are too many “urgentcies”. The irony is that most of the important things will actually prevent or reduce the urgent interruptions if you’d only have time to do them.

Takeaway:

• At the start of the day, ask yourself this: What one thing could I do today that is most critical to achieving my desire? Write it on a 3×5 card and carry it around. Just one. Make sure you do at least that one thing.

If you do that each day, you’ll get 5 things done a week. Many of them will be the important things that are not urgent, and they’ll reduce emergencies in the future.

Bonus Takeaway:

• When something demands your attention, ask yourself if it’s important or merely urgent. Try saying no to a few of the non-important ones.

I don’t mean what you hope to accomplish, or the status you get from being the person who does what you do. I mean do you love doing it?

Hugh McLeod has a great post about this. I agree with a couple of the comments that there’s more to life than work – but I strongly agree with his point – that what you do for work should be meaningful and fun.

PS Hugh is the source of these wacky drawings done on the back of business cards and given away for free.

Being a leaders means people follow you. That’s all. If you look historically at the leaders that people followed fiercely, you’ll find some of the most destructive, self-serving, and vicious leaders in government, religion and yes business. Hitler was Time Magazine’s “Man of the Year” in 1938 and Joseph Stalin was picked twice (1939 and 1942).

Having said that, I know you can’t run a company without getting people to work together in ways that multiply the effectiveness of each individual. Management is required for that. Management without leadership will do better than leadership without management. But leadership (though overrated) is also part of running a company well. And it’s the topic of this post.

In spite of what you hear from people who want to sell you seminars and books, leadership comes in all kinds of styles and personalities. Some leaders are not at all charismatic. (Dwight Eisenhower was also Time’s Man of the Year – in 1944). What all leaders have in common is the ability to communicate their vision clearly and consistently. How can people follow you if they don’t know where you’re going? If they could see the vision without you, they wouldn’t need you to lead them. You do have a vision, don’t you? If the word “vision” sound too much like consultant-speak, substitute “a direction you’re leading the company in”

Hint, “More sales and bigger profits for me!” is usually not a very inspiring vision, at least to other people. But there’s probably some reason you chose to look for profits in this particular company at this particular time. For most entrepreneurs there’s some passion there (god knows it’s not logic that keeps us going all the time). That passion can be inspiring to others. Tap into it for your vision/direction.

Don’t get discouraged if you feel like you’re repeating yourself. In fact, if you aren’t bored hearing the same things come out of your mouth again and again, you aren’t repeating yourself enough.

Takeaways:

• Figure out what direction you’re leading people – it usually comes from some passion
• Discover how to communicate that vision clearly
• Communicate it over and over and over and over

I’ve been asked whether management is one or the other. How we ask a question often blinds us to a useful answer. Management, like most aspects of running a business involves both.

My quick distinction is that the science of running a business includes the rules that apply to everyone (like take in more money than you spend, and provide value for customers). They generally keep you from exploding in some dramatic fashion. In a restaurant, these would be the health department regulations.

But to succeed takes more than not breaking the rules or keeping your food the right temperature and the kitchen free of bugs. You need some emotional appeal. That’s art. I guess you could survive without it, but you probably won’t be successful. Why? Your business depends on people. Customers are people, employees are people, you are people. And people don’t always behave in predictable fashion according to the rules. People are affected by emotion.

This distinction is more dramatic in small companies. Larger firms can’t talk to people individually and draw conclusions they can make decisions from. Small companies can. So large companies depend on statistical analysis and averages. That’s why in almost every industry the good stuff comes from the smaller companies not the large ones who are, well, average.

Takeaways:

• Don’t ignore the science – it will keep you from dramatic failure
• Most people don’t know the science of business intuitively – you have to learn it
• Don’t settle for the science, push for the art – it will bring you success
• Science / Art it’s not “either or”. It’s “both and”.

One frustration I have with my clients is that we talk about things that are important for them to do and they won’t make time in their schedule to do them. They won’t say no to the urgent so the important gets put off. I understand this attitude.

We entrepreneurs are motivated, make that inspired, by the possibility, the new idea, creativity. Typically we hate the boring, the routine, the predicable. Just think what I could miss if I scheduled 2 hours every Tuesday to review reports! I could miss a call from an important client. A employee might have a question that only I could answer. I might get a new idea for a whole new product.

The problem is these things do happen, but not on schedule. So Tuesday gets taken up with annoying interruptions and questions others should be answering. And the reports never get reviewed and problems never get solved because you want to stay available to whatever might happen.

Can you imagine raising kids like this? We won’t plan dinner time because who knows when anyone will be hungry or get an idea for a really inspiring meal. Bed time? No way. What if some great idea occurs at 10pm. Time to get up? No! People will be too tired from staying up waiting for that great idea. School? Too regimented. We’ll home school them so we can teach them exactly when they’re curious and ready to learn. If you ran your house that way, you’d never even be able to schedule a vacation.

The truth is, as much as we hate to believe it, some routine, some schedule actually opens up more space to be creative and accomplish more. Schedule routine meetings (short and frequent) with your key people and the interruptions will go down. More time there. Block out time to review reports regularly and you’ll see (and solve) problems when they’re small. That helps you accomplish more.

What if a client calls or an emergency comes up while you’re in a meeting or some other scheduled even? It’s actually rare that something comes up that you can’t put off for a few hours, and when one of those things can’t be delayed, you’ll know it.

Creativity? You can’t schedule that. But you don’t have to drop everything just because you had an idea. Figure out a way to capture those ideas (carry note cards and a pen or a mini-voice recorder) and schedule time to work on them later. You may find out that by waiting the good ideas improve, and the bad ones become more obvious and waste less time.

Takeaways:

• Schedule between a third and two thirds of your time each month. Really – that much.
• Half of that scheduled time will be with other people – half will be alone to work on projects.
• Plan short, frequent routine meetings with your key people
• Read relevant reports on a regular basis
• Plan time to develop systems and reports
• Let people know your schedule to avoid interruptions
• Carry something to capture ideas – then review them later