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Clockwork: Design Your Business to Run Itself 

Renee Daggett • January 30, 2019

What does clockwork mean? Clockwork is a mechanism with a spring and tooth gear wheels. Clockwork in business is the mechanism of having a process that runs smoothly, easily, and repeatedly.

I recently read a book by Mike Michalowicz called “Clockwork: Design Your Business to Run Itself.” Mike is also the author of “Profit First.” I have heard him speak many times and in May 2018 had a short, quiet conversation in person with him when he told me about a book he was writing. Pick up the book, or better yet, download the audible version, which is fantastic because it shows off his personality.


Owning your own business is exciting and fun! Yep, that’s not the whole truth. Owning a business is also difficult; there are long hours, challenges, sacrifices, and it can be draining emotionally and financially. Mike provides fresh ideas and good reminders of specific things that a business owner can implement in their business to make it run more efficiently and effectively.

Mike lays out a seven step plan:

1. Analyze the 4D mix

2. Declare the corporate queen bee role

3. Protect and serve the queen bee role

4. Catcher systems

5. Balance the team

6. Make the commitment

7. Become a clockwork business

Step One

As a business owner, you need to step away from doing all the work and focus more on designing the flow of your business.

There are four phases:

- doing the work

- deciding what and how the work gets done

- delegating the work

- designing the vision and flow of business

Take some time to figure out how much time you spend in each of these phases. What work can you delegate? What work keeps bouncing back to you to make decisions? The business owner needs to move more of their time from doing to designing . Then, analyze each employee’s time to make sure each person is working optimally.

Step Two

Every honey bee has two things to do. First, they must protect the queen bee. Once the queen is protected, the honey bee can do their primary job. The author encourages every business to identify the most important role. What is the one thing that is so important that the success of your company is dependent on it? In his book, Mike outlines a nine step process on how to determine what this is for your business.


Step Three

This step focuses on the process and delivering you’re most important service or “widget.” Imagine a circle which is the queen bee role. Then in your mind’s eye, I draw lines away from the circle which will represent tasks that are completed in your business. Mike suggests looking at each task to determine not only how long each task takes, but also which task is furthest away from the most important role. Once you have this mapped out, you can determine whether to trash the task, transfer the task, or trim the task down.

Do you have the most skilled people doing unskilled work? Consider a doctor…do they file papers or empty trash? No! Their job is to identify the medical issue and prescribe a course of action.

Step Four

Businesses either have none of their processes documented or they have thick, huge binders of endless pages printed out. Many of us are now out of date. How do you capture systems and keep them fresh and current? Mike recommends documenting the process using videos, which is like a “show and tell” rather than a written script.

Create the videos while you are training your next new employee. Store them in an online portal, organizing the folders by content. If you forgot to include anything on the video, have the new employee make the next video with the improvements.

When training employees, empower them to make their own decisions. Tell them, “We hired you because you are smart and driven. We hired you to find answers. Come back to me with your best answer and we will discuss it.” The only time to intervene is if you see them making a decision that will have extreme and dire consequences. Failure should be embraced and rewarded. The only true failure is in idleness.

Step Five

To have a business run like clockwork, you need to have the right people doing the right things, in the right portions, in the right way.

When to hire? The owner cannot do the work by him or herself. Would you rather make $50 an hour doing the work yourself or for $5 an hour doing no work at all into infinity?

Who to hire? You want to hire people with a great, get it done attitude. Someone with high energy, high intelligence who is a strong cultural fit and who has a desire to do the work.

So what is the issue? Business owners have a fear issue: they have a hard time trusting others to run the business. Hiring is like marriage. You need to date, spending time learning about each other.

Typically, there is usually a courtship season before people are married. The same should be true in business. In order for your company to run like clockwork, your team must be aligned and balanced. Everyone must understand your purpose and corporate mission. Mike’s purpose is to eradicate entrepreneurial poverty. AdminBooks has a mission to educate people with financial options that will make a difference in their business and in their life!

Step Six

Set a piece of paper outside in the sun and it will sit there unchanged. Take a magnifying glass and concentrate the sunlight on the paper and you will start a fire. All the power in the world is useless if it is not focused. In order to have your business run like clockwork, you need to concentrate on a commitment. Fill in the blanks: Our commitment is to serve (whom) by (how). In the spirit of Mike’s infectious personality, I challenge you to state your commitment out loud right now. Your business must have consistent delivery of your service offerings. It must be predictable and not waver in the process.

Who is your best client or customer? In the book, there is a story of a business owner named Gary. He identified his best client and said, “Give me a dozen of this type of client and my profits will skyrocket!” I have seen many businesses be more successful when they are very clear on who they serve.

Step Seven

In order to know the health, the owner needs to have a watchful eye on a dashboard that shows metrics of how the company is doing. If the company is inefficient, it will be in one of 4 areas.

1. Attract - The company must attract prospects.

2. Convert - Leads mean nothing until there is a sale.

3. Deliver - If you cannot deliver, he will not stay in business.

4. Collect - If you do not get paid, the company will be in trouble.

This is the ACDC method of watching the business.

If you have a bottleneck, the solution is to work on one step at a time. If you try to tweak multiple things at once, you may cause additional problems.


In November 2018, I had an atypical schedule where I was traveling for five weeks straight. I flew to Nashville to speak to a group of business owners. Then, I attended a QuickBooks conference to speak to accountants. My oldest son, Andrew, got married out of town. Finally I flew to Texas to sit on a Tax Council.

Was I nervous about being out of the office that long? Of course!

Many times I felt disconnected. Did the office and team run perfectly? Absolutely not! The best thing was I realized I trusted my team to implement the process we have in place to provide clients with the utmost of care. They all are rock stars! While we are constantly innovating our processes, the firm is running like clockwork!

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audit
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Navigating an IRS audit can be a daunting prospect, but understanding the reality behind common myths can help demystify the process and reduce anxiety. Here are some prevalent myths and the truth behind them: Myth 1: Only Wealthy Individuals Get Audited Reality: While higher-income individuals and businesses are often scrutinized more closely, audits can happen to anyone. The IRS uses random selections and computer screenings, meaning taxpayers from all income levels are subject to audits. Myth 2: Filing Electronically Will Prevent an Audit Reality: Electronic filing can reduce errors and potentially lower audit risks, but it does not eliminate the possibility. The IRS uses sophisticated algorithms to flag discrepancies regardless of the filing method. Myth 3: Audits Are Always Lengthy and Complicated Reality: Many audits are resolved through correspondence and don’t require face-to-face meetings. However, complex cases can take longer to resolve, especially if significant issues are found. Myth 4: You Can Handle an Audit Without Professional Help Reality: While it’s possible to handle simple audits yourself, having professional representation can be crucial for complex cases. AdminBooks provides up to 10 hours of audit support, handling correspondence and document preparation to help achieve a satisfactory resolution. Myth 5: The IRS is Out to Get You Reality: The IRS's goal is to ensure compliance with tax laws, not to penalize taxpayers unduly. Working with professionals like AdminBooks can help clarify and resolve issues efficiently. Myth 6: Amending a Return Will Trigger an Audit Reality: Amending a return to correct errors does not automatically trigger an audit. In fact, it can sometimes prevent one by addressing discrepancies before the IRS notices them. Myth 7: All Audits End in Owing More Money Reality: Not all audits result in additional taxes owed. Sometimes, audits can even uncover errors that favor the taxpayer, potentially resulting in a refund. How AdminBooks Helps Representation: We represent you before federal and state tax authorities under a power of attorney, ensuring your case is handled by experts. Issue Resolution: Our team works diligently to resolve any issues that arise during an audit or inquiry. Document Preparation: We manage all necessary correspondence and preparation of documents. Audit Support: We offer up to 10 hours of audit support, giving you the peace of mind to focus on your business. Please note, to receive our audit defense services, you must be a current client of AdminBooks at the time of the audit. For more information on how AdminBooks can protect you during audits, contact us at support@adminbooks.com or 408-782-9640. Visit our Audit Defense Services page for details.
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Tax season can be a significant source of stress for many small business owners. The sheer volume of paperwork, the pressure to meet deadlines, and the fear of making costly mistakes can make it a daunting period. However, by dedicating just one hour a month to tax preparation, you can significantly reduce this stress and ensure you're always ahead of the game. Here’s a comprehensive guide to help you get started: 1. Organize Your Documents The first step to stress-free tax preparation is organization. Create a dedicated folder, either digital or physical, where you can store all your tax-related documents. This folder should include receipts, invoices, financial statements, and any other documents that are relevant to your taxes. Make it a habit to add new documents to this folder at the end of each month. This practice will save you countless hours of searching for documents when tax season arrives. Pro Tip: Use apps like Evernote or Google Drive to scan and store your receipts and documents digitally. This makes them easily accessible and reduces the risk of losing important papers. 2. Track Your Expenses Accurate expense tracking is crucial for minimizing your tax liability and ensuring you claim all eligible deductions. Use accounting software like QuickBooks or a simple spreadsheet to keep track of your expenses. Categorize them correctly, and update your records each month. This monthly habit will prevent a massive backlog and reduce errors when you file your taxes. Pro Tip: Set a recurring calendar reminder to update your expenses at the same time each month. Consistency is key! 3. Review Your Income Ensuring all your income is recorded accurately is essential for avoiding discrepancies and potential audits. Compare your bank statements with your accounting records each month to ensure all transactions are accounted for. This practice not only helps in tax preparation but also provides a clear picture of your business’s financial health. Pro Tip: Use bank reconciliation features available in most accounting software to streamline this process. 4. Set Aside Tax Payments One of the most stressful aspects of tax season is dealing with a large, unexpected tax bill. To avoid this, estimate your tax liability and set aside money each month. By doing this, you ensure that you have enough funds to cover your taxes, and it helps in managing your cash flow more effectively. Pro Tip: Open a separate savings account specifically for your tax payments. Transfer the estimated amount to this account each month. 5. Consult with a Professional Taxes can be complex, and the rules are constantly changing. If you’re unsure about any aspect of your tax preparation, don’t hesitate to consult with a tax professional. They can provide valuable advice, help you maximize your deductions, and ensure you’re compliant with the latest regulations. Pro Tip: Schedule a quarterly review with your accountant to go over your financials and address any questions or concerns you may have. Quick Monthly Checklist Here’s a quick checklist to help you stay on top of your tax preparation each month: Sort and file new tax documents Update your expense tracker Reconcile your income records Set aside estimated tax payments Consult your accountant (if needed) By taking these small, manageable steps each month, you’ll breeze through tax season without the usual stress. Remember, consistency is key to staying organized and prepared. Tax season doesn’t have to be a nightmare. By dedicating just one hour a month to tax preparation, you can significantly reduce your stress and ensure that you’re always prepared. Implement these steps, stay consistent, and you’ll find that tax season becomes just another part of your business routine. For more tips on tax preparation and small business management, visit our AdminBooks Blog and follow us on Facebook or Instagram for regular updates. Feel free to reach out if you have any questions or need further assistance!
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Mid-year is the perfect time to take a closer look at your business's financial health. By evaluating your financial position now, you can make informed decisions to guide your business toward success for the remainder of the year. Here are 8 detailed steps to ensure you're on the right track: 1. Check Financial Reports Review your financial reports and compare them with last year’s data to spot trends. Look at your income statements, balance sheets, and cash flow statements. Identify patterns in your revenue and expenses, and analyze which areas have shown growth and which ones need attention. This analysis will help you understand how your business is performing and identify areas of growth or concern. 2. Review Budget Examine your budget to see where you spent more or less than planned. Compare your actual spending against your budgeted amounts for each category. This review will highlight any discrepancies and help you adjust your budget for better accuracy in the future. Consider reallocating funds to areas that need more resources or cutting back on non-essential expenditures. 3. Check Cash Flow Ensure you have enough money to cover your expenses. Review your cash flow statements to track the inflow and outflow of cash. A positive cash flow is crucial for meeting obligations and funding future growth. Monitor your cash flow regularly to avoid any financial shortfalls. Consider implementing cash flow forecasting to predict future cash needs and plan accordingly. 4. Update Goals Adjust your financial goals as needed for the rest of the year. Whether it's increasing revenue, reducing debt, or expanding your market, revisiting your goals will keep your business focused and driven. Set specific, measurable, achievable, relevant, and time-bound (SMART) goals. For instance, if your goal is to increase revenue, specify the target amount and the strategies you'll use to achieve it. 5. Cut Costs Identify ways to save money by reducing unnecessary expenses. Conduct a thorough review of all your expenses and categorize them into essential and non-essential. Look for opportunities to negotiate better terms with suppliers, eliminate redundant services, or switch to more cost-effective solutions. Streamlining operations and cutting non-essential costs can significantly improve your bottom line. 6. Estimate Taxes Calculate your tax liabilities and make any necessary payments. Review your financial records to estimate your tax obligations for the year. Staying on top of your tax obligations can prevent penalties and interest, ensuring your business remains in good standing with tax authorities. Consider setting aside funds each month to cover your estimated taxes and avoid a large payment at the end of the year. 7. Review Payments Ensure you’re billing clients and paying vendors on time. Review your accounts receivable and accounts payable to identify any overdue invoices or bills. Timely invoicing and payments are essential for maintaining healthy cash flow and strong business relationships. Implementing automated billing and payment reminders can help ensure timely payments. 8. Make a Plan Talk to an accountant. Get professional advice and create a solid action plan tailored to your business’s needs. An accountant can provide valuable insights and help you navigate complex financial situations. Schedule a mid-year review with your accountant to discuss your financial health, tax strategies, and any potential challenges or opportunities. Taking these steps now can help you avoid surprises later and set your business up for success. Stay proactive and keep your financial health in check! By regularly monitoring and adjusting your financial practices, you'll be better equipped to handle challenges and seize opportunities as they arise. Remember, a healthy business is a successful business. Keep these steps in mind as you navigate through the rest of the year, and watch your business thrive!
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