Entrepreneurial Series, Part 1: No Problem! (Just solutions?)

From the Archives

Originally published September 27, 2011

Do you have what it takes to own and operate your own business? Is this the right idea for you? Let’s explore these and other questions in the coming weeks as we break down the top skills (and others that readers suggest as we go along) that make for what the Pennsylvania Department of Revenue calls “the right stuff” in its Entrepreneurial Guide (Center for Entrepreneurial Assistance, 1).

This week we look at problem-solving, “exploring innovative ways to respond to opportunities” (CEA, 1). While there are many skills and traits that make for dynamic leadership and successful business operation, most of what owners and operators do involves solving problems, either the ones they create for themselves or the ones the business encounters over time. So what is a problem, and how do savvy business self-starters go about solving them?

In Business, 10th Edition, Pride, Hughes, and Kapoor define a problem as “the discrepancy between an actual condition and a desired condition – the difference between what is occurring and what one wishes would occur.” They further clue students and readers that a problem can be positive, in which case it may be viewed as an opportunity. Here’s how they describe the problem-solving process in their textbook:

  • Identify the problem or opportunity
  • Generate alternatives
  • Select an alternative
  • Implement and evaluate the solution

That’s the textbook version. It holds true, and becomes so automatic with enough practice, that problem-solvers rarely think of what they do in terms of “steps” or a “process.” Still, problem-solving is a process and this guide can help newbies make their way in business.

Let’s break down a real-world example. Some years ago, a client asked me about automating some financial operations for his young business. I suggested QuickBooks (QB) because I’ve used it on the job, in my own business, and with other clients. If ever the client would convert his cumbersome and error-prone paper system to QuickBooks, at least he’d be able to reach out to me for support and assistance if he needed it.
It took a few years of keeping after him and his wife, who handles office management for him, and this year the two called me in to convert their books to QB. Right away, there were problems. Well, there were a lot of questions, anyway. The questions each posed either a problem or opportunity for him and his wife in handling the company’s financial matters.

“Can we put all of our previous year’s stuff into QB so we can compare earnings from year to year?” “How can I see how much each job I do actually costs me?” “Can I see profit/loss per job?” “How do I do quarterly reports for my accountant?” “How?” “Why?” “When?” The questions amassed the more we talked about making this critical conversion.

Then I posed my own questions. “How much financial history do you want to make electronic?” “How much detail do you record in your income and expense accounts?” “Do you want to use classes (categories) for income and expenses?” “What kinds of reports will you want to run, either for your own records or for presentation to your accountant?” “How does your accountant work with you and your financial information?” Again, questions we asked each other posed problems or opportunities for his business growth.

This client and his wife are excellent problem solvers, as it turns out. They navigated my questions, found information I requested, and provided answers as thoroughly as anyone could expect. As a result, we turned a great number of would-be problems into creative solutions and otherwise-missed opportunities. The most challenging problem we encountered was inputting years’ worth of historical information in order to be able to make year-to-year comparisons, which the couple actually enjoyed being able to do. (In doing so, we even encountered a slight calculation error in the paper system that could have cost them a lot of hassles come quarterly tax filings.) Let’s break that latter problem down without getting too technical about it.

Identify the problem or opportunity
The client wants to start recording day-to-day transactions beginning the 2011 tax year. They also want to be able to be able to compare net earnings from year to year, but they don’t want to enter every receipt, invoice, bill, bank reconciliations, and other daily transactions for prior years. How can we input enough historical data without going into overbearing (read: daily) detail?

Generate alternatives
What are our choices when it comes to doing this? We could very well enter historical data (financial figures from previous years) into QB from paper records by month, quarter, or year. How can we make these entries? As actual invoices and receipts? No, we can simply create what are called journal entries, or general journal entries, for each period we decide to capture. Who will make them? Should the client figure it out on their own and hope not to create a mess? (After all, this is their first foray into electronic bookkeeping and their first real experience with QuickBooks.) Their consultant can make the entries, and the client can check everything out with their accountant when they meet with her again a few weeks after setting up QB.

Select an alternative
The client will continue posting daily transactions for the current tax year, but will post no new entries for prior years. The consultant will continue working on and posting general journal entries for the historical data, posting one year-end journal entry for each prior year and pulling records from the client as needed. The accountant will review everything once the main entries have been posted and verified.

Implement and evaluate a solution
We did exactly what we decided would be the best solution for this problem. We even reviewed and verified the numbers just after completing the entries, which is when we found errors in the paper system. We revised and revamped the strategy on the spot and made other corrections to clarify certain types of expenses from prior years. We checked our entries against their paper records again. We verified that the information matched what they had on paper and had used for tax purposes. We took a quick overview of some reports and printed some that they could share easily with their accountant. We made sure they could report the same kinds of information more easily and more accurately than in the past.

The thing about this client is that they were well equipped to handle this transition. Every problem that came up had an almost instant solution. They continue to prove themselves to be very adept at resolving issues almost as quickly as they come up. As the young contractor’s wife sheepishly tells me often, “I was going to call you, but I wanted to try to figure it out and answer some of my questions on my own first.” This is not a shameful trait; rather she and her husband are to be commended for the skill with which they approach each problem in the business, whether he in the field or she in the office.

That’s just the skinny of it. There is a lot that goes into problem-solving that we haven’t touched this week, and if readers wish, we can explore more this topic in the coming weeks, perhaps through comments or another article. In the meantime, evaluate your own problem-solving skills. On the ever-cliché scale of 1 to 10, 10 being most skillful, how do you rate yourself in this entrepreneurial area? If you’re not too bashful or shy, share your answers in comments and talk about ways in which you hope to improve in this area if needed. If you’re already a problem-solving expert, do you mind sharing what works for you? (May save me having to write a follow-up article to touch on it in more depth. Ha!) Hope this was helpful!