Posts Tagged ‘Work Your Biz Wednesday’


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.


How to Hire an Attorney for Your Small Business

Lawyer handing over legal document at  a meeting in a cafeEvery business needs the services of an attorney. Having access to one can help you navigate complex areas like patents, trademarks, copyrights, and contracts. They can also help you choose the best business structure for your company and create employment contracts and nondisclosure agreements, if you need them. Some attorneys specialize in helping small businesses and can be reasonably priced, even for the smallest budget.

Start by Identifying What You Need

Beyond identifying the areas you need legal expertise in, you’ll also need to determine what type of lawyer you need. Some can help with general small business tasks, while others specialize in trademarks, patents, and copyrights. If there’s a specialist for what you need, seek him out. You wouldn’t go to a general practitioner if you had orthopedic issues.

If you have no need for copyrights or any complex legal advice, you can probably get by taking care of your needs on your legal questions with a general small business attorney. If, on the other hand, you want to patent your intellectual property or need several different complex contracts drafted, you’re better off hiring a professional with that expertise.

Ask Your Network for Referrals

Before you do an internet search for an attorney, see if anyone you know is acquainted with a small business lawyer. A referral can go a long way toward helping you find the right person for the job, and it will cut down on the time you spend vetting different options.

If no one you know can refer a lawyer, check with your local SCORE or Small Business Development Center to see what leads they can offer. You might even find one that partners with the local bar association to offer pro bono advice to startups!

Do Some Research

Once you’ve got your shortlist of possible attorneys to work with, dig into their qualifications online. You can review each one’s credentials on your state bar’s website or here. You want to ensure that your attorney is licensed and admitted to practice before the courts in your state. It may also be helpful to see if he has ever been reprimanded or involved in illegal activities (red flag).

Interview Your Top Three Choices

Starting a relationship with a lawyer is something you want to do carefully, because the right fit could make for a long and fruitful relationship. Always ask for business references (and check them), as well as questions like these:

  • Do I need to provide a large retainer to get started
  • What is your fee schedule for routine and non-routine services?
  • Will you provide itemized bills?
  • What is your typical response time?
  • What is the best way to reach you?
  • Have you worked with any businesses in my industry?
  • Can you give me an example of how you have helped clients secure business opportunities?
  • Can I call you on any legal problem?

Not only should the right lawyer give you satisfactory answers to these questions, but you should get a good feeling from her. You need to be able to trust your attorney with your business, so it’s important you listen to your gut in the interview.


Marketing 101: 5 Key Marketing Terms to Know

2-4 Mktg 101 smallWhen you start a business, it is extremely important to have a marketing plan. A marketing plan is essential in helping you develop an understanding of what actions you can take to bring success. When people look at statistics about small businesses and see that only about half of all small businesses make it to their fifth birthday, it can be daunting to jump into such cold waters.

However, if you take the steps to prepare for entrepreneurship, you have given yourself a boost over the hurdles that plague the small business owners who become just another statistic. Your marketing plan establishes how and to whom you promote your product or service. Before your write your marketing plan, let’s review some crucial marketing terms to help you have a clear idea of what this approach entails.

1. Marketing

The term marketing encompasses a large range of behaviors undertaken by businesses to communicate their brand message with their customers. In a nutshell, marketing presents products or services in ways that make them desirable. Your advertising, website, social media profiles, and newsletter are all part of your marketing efforts, and are the efforts you undertake to persuade potential customers to become paying customers. Marketing uses both emotional and rational appeals to attract customers and encompasses a wide variety of actions and components. Creativity in your marketing is vital, and the returns can be enormous.

2. Market Research

The term market research may seem overly dry or academic, but it is extremely important. In short, market research tells you who is your customer and why they could buy form you. It also can tell you how many potential customers exist for your market. You may think that everyone will want what you offer, but your market research will tell how likely that scenario is.

For example, the cost of your product may eliminate much of the potential market, or your product may be too specialized to attract enough customers to support your costs. It is important to not just examine the current market, but look ahead to the long-term as technological or cultural changes might transform the market. Good market research gives you solid ground on which to begin your endeavor.

3. Advertising

Advertising is another broad category of marketing focused on bringing attention to a product or service in order to create a sale or build awareness. Product placement in movies is a form of paid advertising, as are pay-per-click ads online. Branding is a key component of advertising. You can use advertising to build brand awareness via media, such as a placing a Facebook ad. Your market research will tell you where, how, and when you should be advertising.

4. Sales

The culmination of all your efforts is sales — that moment when you have convinced your audience to take action and bring out that plastic to make a purchase. Sales is the goal where your marketing, market research, and advertising all lead. Sales activities include direct marketing, selling (including in person, via the Internet, phone, or networking) and trade shows. Any action that results in an exchange of goods or services for money or an equivalent is a sale. How much you sell and when you sell all factor into your bottom line.

5. Profit

Profit is how you measure your success in purely economic terms. It is the amount of money you’ve made after you deduct all your costs of doing business, such as direct and indirect expenditures. Pricing directly impacts your profit! A completed business plan gives you insight in how your specific profit model works. Remember, if you are prepared from the outset, you have strengthened your chances of success in the future.

Understanding these key terms and applying them in your marketing plan ensures that you have a solid plan for what you are selling, how you will sell it, and to whom you will sell. Marketing is the umbrella under which you will execute your marketing research, plan your advertising, make your sales, and calculate your profit. Social media — and media in general — is the means by which you take your message to you audience, but a tight marketing plan is meant to guide your messaging and help you identify the best channels for it.


5 Strategies to Bootstrapping Your Business

1-28 Funding Options SmallAs you prepare to become your own boss, you need to get your finances in order. You’ll need enough money to cover 6-12 months of business and personal finances before you even launch your business. That being said, you have a few options to consider in terms of where that money comes from.

1. Savings

If you’re lucky enough to have a well-padded savings account, kudos to you. This should be your first option for funding your business. Note: don’t jeopardize your own future by taking the money out. If you have a savings account to cover “rainy day” home repairs, the last thing you want to do is take that money out, and then find you need a new roof!

Consider leaving your money in your savings or money market account, and just taking what you need. That way, your money continues to earn interest.

Benefits: Using your savings account keeps you from having to take out a business loan, which many entrepreneurs are reticent to do. If you have less than stellar credit, you can purchase a Certificate of Deposit and use it as collateral for a loan while earning interest.

2. Bank Loan

The Small Business Association (SBA) is set up to help businesses get the money they need to start a business. There are banks that cater to small businesses just like yours that can help you find a great rate. Start with your own bank, or look for one that does small business lending.  Look for alternative lenders as well, such as Women’s Business Loans. Note: banks don’t lend to startups, so you’ll need to be in business two years prior to applying for a traditional bank loan.

Benefits: The SBA provides a guarantee for business loans, which means applicants with challenged credit score still have an opportunity to get funding.

3. Your Retirement Fund

You can borrow against your 401(k) to start a business. With this option, you essentially use your own money to fund your company, then pay yourself back. Just make sure you pay it back! Sometimes there can be penalties for borrowing funds, so you want to make sure you are aware of them before you take this option.

Benefits: 401(k) financing actually has lower risk than an SBA loan. If things go badly, you still have to pay for the loss, but the 401(k) provides before-tax money, reducing the effective cost. Plus, there are no credit implications and your house is not on the line as collateral.

4. Home Equity Line of Credit

If you own your home, borrow no more than 80% of your home’s value through a home equity line of credit to avoid having to purchase private mortgage insurance.  You’ll increase your chances of getting approved for one if you have great credit and good payment history. Make sure to pay attention to what current interest rates are before deciding on this strategy. And remember: you’re putting your house on the line, so if your business fails, you risk losing it if you can’t pay the loan.

Benefits: Funds are easy to access once you’ve been approved. The interest is tax-deductible, since it’s mortgage interest.

5. Friends and Family

Having a friend or family member who’s willing to invest in your business idea is a real boon. Some may want to be involved in the business in exchange for the investment, while others may hand you a check and say “pay me whenever.” Either way, make sure you’re clear on payment terms (and offer interest) and how willing you are to have someone involved in helping you make the business decisions.

Benefits: If you have a family member who can afford to loose the money they invest in your business, this means they could be more patient with letting you build your business.


Is Your Passion Enough to Start a Business?

1-21 passion into business smallPassion is an overused term in business. You keep hearing “do what you love,” but you need to be thinking about whether your passion is truly sufficient enough to start a successful business. To create a business you must provide a product or service people are willing to pay for. Maybe you love knitting baby booties, and want to make millions doing so. I’m sad to tell you: unless you employ about 10,000 other baby-bootie knitters, you will likely never reach that financial goal.

It’s important that you assess whether your passion has a profit center before you start that business. By making sure you can actually make money you’ll ensure that your business will be able to weather an economic crisis and other bumps in the road. You also need to be able to scale that profit center beyond what your own two hands can create.

Assess Your Passions

Start by looking at what you’re passionate about. Your list will likely include things you can quickly mark off your “possible business” list, like “watching WWE fights or The Food Network.” You simply aren’t going to be able to build a business around that!

Maybe you’re an avid bike rider who’s passionate about taking kids on long cross-country bike treks. Or you love animals and have a knack for training them. Maybe you are good at helping friend pull together a killer look or update their wardrobe. These are passions you can build a business around.

But go beyond those obvious passions, like what you enjoy doing in your spare time, and look at the abstract. You might enjoy working with small teams, or planning events. You might love closing a sale, or have an eye for home design. Some of these passions may be worth considering starting a business around, while others may simply be useful as you develop your business.

Consider Your Goals

Going back to that baby bootie example. If you’re content knitting 25 hours a week and making enough cash to take a vacation, leaving you ample time to spend with your kids, this could be a sustainable business model. You have to look at your resources (at this point, that’s just you, the knitter) and determine whether you can accomplish what you want with them.

Maybe you’ve got money squirreled away, and could hire your knitting club to triple your production of booties. Now you’re talking! You could create a virtual network of knitters (say that 5 times fast) and grow your business from there.

Passion is a great place to start in becoming your own boss, but it’s not the only factor to consider. You also need to be able to make enough money to hit your goal, while maintaining the type of lifestyle you desire. Profit is how we keep score in business, so just make sure you are honest with yourself about whether or not your business concept can actual make money.




 
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