Posts Tagged ‘Work Your Biz Wednesday’


Should I Borrow Money from Friends or Family for My Business?

3-15 loaning friend money smallGetting your business started requires money, and while there are many sources for finding this funding, one often overlooked source is friends and family. On the one hand, a friend or family member may be able to offer you an interest-free loan that you wouldn’t qualify for at the bank, but on the other hand, money and the people you’re close to don’t always mix well. Family and friendship dynamics are delicate, so carefully evaluate your relationship with possible creditors before opting for this financing source. Use these five steps to ensure a successful outcome.

Assess the risks from the outset

Begin by having a blunt conversation with your future financier. Talk to her about the risks and pitfalls of this transaction. The idea is not to spoil her enthusiasm in investing in your business, but rather to confront the harsh realities that small businesses sometimes face. If, after this conversation, your benefactor is still ready to loan you money, you have done your part to let her know of the risks she’s taking.

Decide if it’s an investment or loan

Continue the discussion by assessing whether or not your creditor would like to come aboard as a partner and take equity in your company or simply loan you the money and stay out of operations. Be comfortable with the terms and the equity you give, and consider whether this person would be an asset as an advisor to the company or not.

Have a formal agreement

Even if you trust one another implicitly, having a formal contract for the loan or investment is still a good idea. You may not need a lawyer to work out the details, but if the amount of money is substantial, you’ll definitely need an accountant. If your benefactor wants to forego a formal agreement, it may still be necessary to discuss more precise procedures such as what to do in the event of default or bankruptcy. Never promise something that you cannot deliver.

Keep it professional

Treat your private creditor like you treat your bank. Pay on time or early if that’s part of your agreement, and keep track of every transaction. Don’t take advantage of your personal relationship to pay late or not at all. Being formal and professional ensures that you don’t blur lines between business and personal relationships.

Put everything out on the table

Create the habit of communicating with your friend or family member. Let her know regularly how business is progressing. Never make her pursue you for updates. Whether you have challenges or successes, keep her in the loop in the way you would other partners or investors. She will appreciate this and feel more vested in the success of your company.

Deciding to borrow money from someone you’re close to is a decision you need to spend time reflecting on. The last thing you want to do is jeopardize your personal relationship with that person, and money has a funny way of doing that sometimes. Keep the lines of communication open and make sure you properly manage your investor’s expectations.


How to Organize Your Business to Hire Your First Employee

"Staff Wanted" SignFrom your very first hire, you want to make sure you are attracting the kind of employees who will be an asset to your company. You want that first employee to be a hard-working, conscientious individual that you won’t break the bank to hire. But it goes deeper than that. Hiring your first employee requires plenty of planning and reflection to understand your staffing needs and your management style. Your first staff could be the freelancers you need to the full-time admin you need to offload some of your backend tasks.

Start with the Tasks You Need Help With

Before you write the job description that will help you attract the right people, start by simply brainstorming about the tasks you need help with the most. Initially, the list may be helter-skelter, with some admin tasks, some marketing, some finance, and so on. But as you complete the list, start to sort them into categories so you can determine what type of role you need to hire for. Then prioritize those job tasks so you can tackle the most important ones with your first hire.

It’s helpful to divide this list into the following categories. Each job description you put together will likely include some of each:

  • Critical tasks
  • Routine tasks
  • Occasional tasks

Consider Your Hiring Options

Full-time isn’t your only option here, and if your budget is small, it might be further down the road. You can also consider the following:

Part-Time Employee

A part-time staff member typically works 15-30 hours a week, and you aren’t required to pay health benefits for them, typically.  The perk to part-time is that you can adjust worker schedules to reflect the needs of your business. The downside is fewer people are looking for part-time roles.

Temporary Workers

Usually you hire a temp worker through an agency. They’re ideal if you need help for a few weeks or months, as you can let them go when your busy season is over. Another advantage of this option is if you don't like the worker, you can call and get another one.

Contractors

Working with freelancers or 1099 employees can help with short-term needs, such as getting your website designed or handling your virtual admin needs. You don’t pay social security or payroll taxes for contractors. One perk is that you can test out contractors to see how you like them, and then hire them full-time if they are an asset to your business.

Interns

A cost-friendly staffing option is the intern. Look to a local college to find a low or no-cost intern who’s studying a field that you need help in. Once the semester is over, however, you lose your cheap labor. Still, if you like their work, you can always hire them.

Next, Write Your Job Description

Now that you’ve defined the tasks you need your first employee to tackle, organize them into separate jobs.  This is important so that you’re not trying to recruit an amazing admin who not only can file but can also file your taxes, manage your social media, give you a manicure, and run your IT department!. Now, it’s time to organize your thoughts into a job description.

The more detailed your job description, the more likely you will be to find exactly the right fit for the role you need to fill. I like to write down everything that employee could possibly be asked to do so that there are no surprises down the road.

Start Your Search

With that job description, look in as many places as possible to maximize your search. You can (and should) open your job search up to:

  • job boards
  • recruiters
  • social media
  • your network

Let everyone know you’re hiring, since referrals are an excellent source for great employees.

If you’ve spent the time up front to clearly identifying the type of employee you need, you should be rewarded with one who will help you take your business to the next level.


7 Lies About Starting a Business You Shouldn’t Believe

4-1 Lies about starting a biz smallWhen it comes to becoming your own boss, there are often some misconceptions floating around. Let’s banish a few of the ones that you might be told so that you’ve got the right picture of what to expect as you launch your own business.

Lie #1: You Don’t Need to Be an Expert in Your Field

Yes, you do. Don't start a restaurant because you like to eat, make sure you know how to run a food establishment. Being well-versed in your industry is important, otherwise you will learn many expensive newbie lessons. You must be eager to learn, no one can know everything, so invest time in learning the business before diving in.

Lie #2: You Don’t Need Tons of Money to Start a Business

The money to start your business will come from your personal resources. You need a solid financial base to start a business. The average start-up requires roughly $25,000. Start by creating a budget for both your business and personal expenses for the first year. Make sure you have an emergency savings account too. It takes on average 12-18 months to breakeven in a small business, so err on the safe side, set aside enough money to cover both for a year or two.

Lie #3: There is a Perfect Time to Start a Business

The fact is: there’s no perfect time. You will always have an excuse about why now isn’t the right time. Ignore the naysayer in your head and just do it! You can work out the kinks (and there will be some) later.

Lie #4: Your Need to Quit Your Job to Start a Business

You don't need to quit your job and dive into entrepreneurship, there is another way. 

Become a side hustler. You can start your business on the side while you continue to earn a paycheck. Then, once your company is financially viable, you can cut the cord from Corporate America and devote yourself to your company full time.

Lie #5: All You Need is Passion

If all you need is a dream or the passion to start a business, then everyone would do it. Passion is overrated. Yes, it’s important that you do something you enjoy, but you need to make your passion has a profit center. Your success will depend on your business plan and ability to identify a niche customer, and repeat business.

Lie #6: Marketing is Expensive

So many entrepreneurs make the mistake of not marketing their businesses because they think that it’s too complicated or costly. The truth is, there are a lot of marketing tactics you can do yourself, like blogging, using social media, or sending email marketing campaigns. A little effort goes a long way, and many of these tools are even free.

Lie #7: There’s Nothing Left to Learn

Once you launch your business, you’ve likely read every book, blog, and magazine on starting a business known to man. So you’re done, right? Wrong. You will need to continue to learn, as there’s always new information coming in, especially as technology changes your industry. Staying sharp means staying competitive.

There are a lot of opinions out there about what you need to start a business. Others will tell you what starting a business is like, but the truth is: you have to find out for yourself. Everyone’s journey is different, just remember you must grow yourself to grow your business.


Developing Your Marketing Plan

Stock3-25 creating a mktg plan smallMarketing is one of the most critical components of your business’ success. You may have a fantastic product or service, but if customers are not aware it exists, there’s no point in continuing the line of work. In order to make sure your product is exposed to your target customers, you need to develop a robust marketing plan. Once you’ve spent time identifying the four Ps, start adding some elements and details to your strategy. Let’s look at the areas you should focus on when developing your marketing plan.

Validate the Market

How do you know you have a great product that will be of value to your customer? Answering this question is part of the validation process. You want to validate the market or make sure there’s a need for it. Here are a few questions to answer in order to help you do this.

  • How large is the market locally, nationally, and globally
  • How often do people buy your type of product?
  • How many customers are “in market” at any given time?
  • Will your customers buy daily, weekly, monthly, annually, or every five to ten years?

The answers to these questions will: 1) tell you if you have a sustainable product, and 2) help inform your marketing plan and tactics. After you’ve validated the market, start delving deeper into your target market or customer.

Define Your Target Market

In order for your product or service to sell, you need to answer the question: who is your target market? And the answer is never, “anyone.” The best way to be successful is to develop a customer profile with as much detail as possible. Answer the following questions:

  • How much income do your customers make?
  • Where are they located?
  • Are they male or female, or both?
  • How old are they?
  • What is their level of education?
  • What jobs do they hold?
  • Can you see the face of your customer? What do they physically look like?

Remember, the better you know your customer, the better your chances of making the sale. Once you’ve identified who the customer is, it’s time to articulate what makes them buy.

Create Customer Value

So many marketers and business owners are great at explaining what their product is and why it’s great. But very little know how to explain the product in a way that illustrates value to the customer. This is extremely powerful because if you can help the customer achieve a goal, the product sale will follow.

To do this, start by identifying what qualities your customers value most and least about your service. You must build your marketing strategy on customers’ perceptions of your product’s value to them. This approach is called WIIFM, or What’s In It For Me? It’s critical to keep your marketing plan customer-focused. By doing so, you are on the path to setting yourself apart from the competition.

Identify Your Competitors and How to Deal With Them

In today’s economy, it’s rare to find a product or service that has no competition. Your competition is targeting the same people you are, and as such, your message can easily get lost in advertising clutter and spam.

To avoid this, define what makes you special to your customers. Why is your product or service different and better? What is your competitive advantage? What do you offer that the company does not? Why should a customer hire you? Perhaps you offer a longer warranty than your competitor. Or you have proved results that another business does not. If you’re struggling with identifying your competitive advantage, the best thing to do is ask your customers why they bought from you.

Validating the market, identifying the target audience, creating customer value, and identifying your strengths from your competitors are the components that will shape the rest of your marketing plan. Once those steps are completed, it’s time to define the tactics you’ll use and determine your marketing budget.


How to Hire an Accountant

Rubber stampTax time is fast approaching, and hopefully you have your financial records in order, but in case you don’t here’s some advice on how to hire an accountant. While there are many aspects of your business that you can handle on your own, accounting is one worth turning over to a professional. Accounting goes far beyond simply sending invoices and tracking expenses; a good accountant can also help you with your taxes, as well as find ways to keep cash flowing.

First: Understand Your Needs

In addition to accountants, there are also bookkeepers and Certified Public Accountants that provide slightly different services from one another. A bookkeeper will set up your accounting software and enter receipts and invoices into the system weekly or monthly. She can also handle payroll data and quarterly taxes, as well as create monthly financial statements like balance sheets and cash flow statements. If your needs are simple and you don’t need help preparing your tax return, a bookkeeper may fit the bill.

An accountant, on the other hand, takes on more of the day-to-day bookkeeping needs of your company. An accountant can do everything that a bookkeeper can, with the addition of being able to prepare business taxes. Accountants are typically trained to interpret and analyze financial data, and you’ll pay more for the privilege.

And finally, a Certified Public Accountant (CPA) is an accountant who has passed a rigorous state exam. They’re the only ones of the bunch that can certify an audit. They also provide tax planning, and are highly qualified experts. Naturally, they’re the most expensive option.

Narrow Down the Selection

Ideally, the accountant or bookkeeper you end up working with will have experience with both small businesses and your industry. If you are unfamiliar with accounting terms like depreciation, chart of accounts, and cost of goods sold, you’ll want an accountant who will be patient at explaining it all to you. Remember: even if you hand your finances over to a professional, you still need to understand them. A good accounting partner will be communicative about her process, and will be willing to teach you.

You can hire an individual that works for several companies as a consultant, a smaller accounting firm, or a larger practice. I tend to go with one of the first two options, since they’re more affordable and service tends to be more one-on-one with smaller practices and solo practitioners.

Getting a referral from a colleague or contact can help you find someone faster. Check with others in your industry to find out who they use. Take into consideration your needs, your budget, and their offerings, then whittle your list down to your top three choices.

What to Ask

Interview each provider or firm, just like you would if you were hiring a full-time employee. Some of the questions you should ask include:

  • What accounting software do you use?
  • Do you provide software setup?
  • Do you provide monthly bookkeeping?
  • What is your hourly rate?
  • Can you provide three small business references?
  • Do you work onsite at the client location?
  • What industries do you specialize in?
  • Do you also prepare business taxes?

You want to find an accountant who you can trust with your finances, and who will be with you for years to come. Don’t overlook how important the selection process is, and spend enough time on it to find the best fit for your company.


How to Make Your Business Appealing to Angel Investors and Venture Capitalists

3-11 funding for SB smallSmall businesses and investors can go together like ice cream and apple pie. It is definitely a vote of confidence when someone provides funding that can take your business to the next level, yet there are trade-offs that come with accepting investor funding. If your idea is so big that you know the only way to bring it to success is with the support of outside resources, then angel investors or venture capitalists might be the right fit for your company. However, remember that this class of investor is looking for a good investment. They weight talent first and ideas second, so make sure you understand how to position yourself for this level of funding.

What’s The Difference Between Angels and VCs?

Keep in mind that angel investors and venture capitalists are very different types of investors. Angel investors are usually private individuals who have some money and are keen to use it to get a return, but they may want very little to do with the day-to-day running of your small business. They may fund businesses with lower growth rate projections and be more interested in firms that create value in the community in ways other than high profits.

Venture capitalists, who usually work as a collective firm rather than individuals, have deeper pockets, but desire larger and faster returns. They usually will require a much larger stake of your business to entice them to partner with you and may even take over management of your business as active backers. However both types of investors will become your partners and require a piece of equity in return.

There are many ways to appeal to angel investors and venture capitalists. The main thing to keep in mind is that you will have to work very hard to interest them and have conclusive evidence that your organization brings substantial value to the table. Here are five ways to make sure that you’ve got what it takes to encourage this level of investor.

1. Build your business (and your personal brand)

There is no way to avoid it: building your business takes hard work. One great way to make sure you succeed in this task is to become an expert in your field. Dig deep to build those skills. You may want to look for a mentor or networking group to ensure you continue to grow in areas like public speaking, marketing, or management. Consider this an investment in both you and your company.

2. Solve a problem

Make sure that your business solves a problem for which your customers need a solution. You need to be able to convey to an investor that you understand this problem, as well as how and the why your company is the best solution for this problem. There is no room for feebleness here. You must be on point. Rewrite your business plan if you have not yet fine-tuned this aspect of your business.

3. Have an amazing team

In short, your team must work together effortlessly and complement one another’s skills. Trust me, venture capitalists will go through your roster with a fine-tooth comb. They want to see your team in action and know that you can withstand whatever challenge comes your way. Always hire candidates who bring a variety of hard and soft skills to the table so that you can create a culture of success from the outset.

4. Have a phenomenal pitch

Your pitch must be persuasive, thoughtful, and farsighted. It will go hand and hand with your business plan, but you must be able to convey in confident and concise speech the essence of that plan. There is an art to delivering a pitch, so make sure the right person delivers it.

5. Always have the big picture in mind

If you have your eye on the big picture, you are guaranteed to keep things in perspective. Be honest with yourself about your venture and its challenges, so that you anticipate market changes that affect your industry before they arise.

Investors want humble founders who know the industry, the competition, the technology, the business climate, and regulatory issues. In short, they want to see someone who has their feet in reality, but is reaching for the stars. If you can be that person, you’ll find the right investor to help your business grow.


Lease vs. Buy: Which is Right for Your Small Business?

3-4 lease or buy equipment smallCongratulations! You’ve secured an office space and are ready to begin setting up shop in your new small business location. But before you can start welcoming clients and customers through the door, you need to fill your office with furniture and equipment. This component of business ownership can be an expensive part of the process. One way to keep costs low is to look at leasing equipment rather than buying it outright. Which approach is best for your small business? Let’s look at the advantages of leasing and buying.

Advantages of Leasing

  • Better Cash Position: There are several advantages to this strategy, the most important being an improvement in your cash position. A loan to purchase equipment requires at least 25 percent of the loan in cash up front. Other than a refundable security deposit, equipment leases require no money down. This saves you considerable cash that you would be spending if you purchased it instead.
  • Easier to Secure Funding: It’s also easier to secure financing for leasing over buying. Leasing companies typically want a year or less of business credit history before approving a lease of furniture or office equipment. Capital equipment loans, on the other hand, require three years of financial history.
  • You Won’t Be Stuck with Obsolete Equipment: Another advantage leasing offers is the ability to change out equipment every one to two years. This is important because, seeing how quickly technology changes, it’s important not to be stuck with an antiquated machine when something faster and cheaper is available. Always see if you can negotiate a “modern equipment substitution clause” that lets you trade up for the latest technology.
  • Leasing Helps the Bottom Line: Your accountant may be able to re-categorize some assets on your balance sheet if you lease equipment, which can make your business’ debt-to-equity ratio look much healthier, as will your earnings-to-fixed-assets ratio.

Advantages of Buying

  • Less Expensive Overall: Over the long-term, leasing equipment is typically always more expensive than buying it outright. The reason is because you are paying for the item and monthly interest on the lease. So while you may be expending less cash each month, you are paying more over the course of the multi-year lease loan.
  • Ownership: With a lease, you are paying for items that you are only borrowing from someone else. At the conclusion of the payment cycle, you are not left with anything you own and are forced to start anew by expending more cash. Buying, on the other hand, provides you with an asset you can sell.
  • Tax Advantages:  Small businesses often miss out on the substantial savings that can be made by claiming business expenses. The office equipment you purchase for your business is tax-deductible, which can make a significant impact on your expenses and overall income when it comes time to pay taxes.

When furnishing your office with equipment and furniture, it’s best to review your financial plan before making any decision. Always run your numbers first to determine what you can afford and whether it makes more sense to buy or lease items. 


How to Choose a Bank for Your Small Business

2-25 Choosing a bank smallOne of the first things you need to do on your path to becoming your own boss is to open a business checking account. Now, you might think it’s best to keep your business account with the same bank where you have your personal accounts, but it’s better not to. Should your business fail and you have both business and personal accounts at the same bank, you risk losing everything because the bank can seize your personal assets to satisfy your business debt.

What You Need in a Bank

Your business needs a banking relationship not just a bank. It isn’t just a place to put your money. It’s a place you have a relationship with a partner that should be interested in helping your business succeed. Not every bank has great personal relationships with its business clientele, so keep that in mind when beginning your search.

While you might only start out opening a business checking account, there may come a day when you want to apply for a small business loan through your bank, so make sure the banks you consider offer a variety of small business services that can support your company as you grow.

Where to Start Looking

Ignore billboards, online ads, and commercials when choosing a bank. You’re better off asking other entrepreneurs for referrals, since they will know which banks are small business-friendly (not all are).

It’s a good idea to narrow your choices down to three, and then schedule time to sit down with a branch manager from each. These questions can help you gauge which is the best fit for your business’ needs:

  • What percentage of your customers at this branch are small business owners?
  • How fast are checks cleared to my business account (both in- and out-of-state)?
  • Is there a dedicated small business banker on your staff?
  • What kind of customer service do you provide for small business?
  • Are loan decisions made locally?
  • Does the small business banker have any influence over the loan decision process?
  • How many SBA loans did your bank process last year?

The point of these questions is to see how much energy a bank puts into managing and developing its small business clientele. You want to feel like a welcome and cherished customer, especially since you will be trusting this bank with your hard-earned cash!

Also consider what you’re looking for in a bank. Do you need to easily get to it to deposit cash each day (if you operate a restaurant, this is a must)? Would you prefer to be able to access your accounts through a mobile app?

Developing the Relationship Over Time

You may have little need to visit your local branch, especially since many banks allow you to deposit checks with a few clicks on your phone. But make a point to stop in and visit your branch manager or small business banker every few months and update them on what’s happening with your company.

Ask if there’s anything new service-wise with the bank. You might find out they’ve got a new banking program that’s perfect for your needs at the moment. Keeping that dialogue going will help you both find ways to work together for the success of your business.


4 Tips to Achieve Your Personal Finance Goals Before Starting a Business

2-18 personal finance smallBefore you can commit to funding your new business, you need to take care of your own personal financial goals. You need to move into starting a business with a strong financial record, as well as money in the bank. This makes it easy for you to qualify for a small business loan, if you need one down the road, and keeps you from stressing over not having the funds to cover your expenses while you’re waiting to turn a profit.

1. Eliminate Personal Debt

Don’t start your business weighted under credit card debt. The average American household has about $15,000 in credit card debt, a staggering number if you want to bootstrap your own business.

Having zero debt frees up your credit capacity, so work on zeroing out credit card balances and paying off your car so that you can focus only on basic expenses such as your mortgage, phone, gas and electric, cable, and food. The leaner you run, the more you’ll have to put into your business.

2. Improve Your Credit Score

There will come a time in the all-too-near future when you need credit, be it in the form of a store credit or just credit from vendors you work with regularly. If your credit score isn’t good — say, under 750 — you might not get that credit or pay a much higher interest rate. Since your business will have no credit history to begin with, they’ll look at your personal credit score, so you need to focus on cleaning up your number if it’s less than ideal.

Don’t know your credit score? You’re entitled to one free credit report a year from one of the big three indexes. Get your copy here and start your plan to improving your score.

3. Set Aside 12-24 Months of Household Expenses

You will not make a profit instantly, so you’ll need to keep paying those household expenses in the meantime (another reason to lower your debt: you’ll have less to pay in expenses!). Having 12-24 months’ worth of money to cover expenses may sound drastic, but it’s better to have more than enough than to find yourself unable to pay bills in 6 months.

If you don’t currently operate with a budget for your household, now’s the time to create one. If, in the process, you find places you can reduce your expenses, such as cutting the cable cord, go for it.

Remember: if you’re quitting a job with health benefits, you’ll also need to factor in the cost for your health insurance. It will be significantly higher than your employer-sponsored plan.

4. Have Your First Year of Working Capital

In addition to your personal expenses, you’ll need to be able to cover your business costs until your business gets going. A year’s worth of capital should be sufficient. Again, start with a budget (even if you’re using guesstimates at this point) so you know what expenses you need to plan for.

Since you’ll have a pretty sizeable chunk of money in savings for your personal and business needs, consider opening a money market account or high-yield savings account so that you can earn a little interest while it’s sitting there.

If you get your money straight before starting your business, that will be one less things stressing you as you start your small business.




 
Nextiva Logo

phone-icon Sales phone-icon Support
Nextiva
Nextiva is the leader in Business VoIP Services. Copyright 2015 Nextiva, All Rights Reserved,
Terms and Conditions, Privacy Policy, Patents, Sitemap