Archive for the ‘Planning & Preparation’ Category
You have the best business idea in the world, with a product or service everyone is simply going to eat right up. Better yet, this great product or service can be provided from a home-based business, so you don’t have to figure out where to set up shop or deal with the associated overhead. There are 38 million home-based businesses in the United States, according to Business for Home, so you’re in good company as you start yours up. Just make sure to put the necessary legal and security practices in place to ensure you’re off to a great start.
Zoning laws are specific to your particular city or county, so talk to the local chamber of commerce or the zoning board to determine whether you’re able to have a home business at all. Some reasons your local zoning laws may prohibit home businesses is due to increased street and foot traffic, retail sales and employees within your home.
Once zoning is cleared, Startup Nation says to choose your business structure. Many home-based businesses use a sole proprietor structure for simplicity, as you do not need to do any additional registration. However, business structures such as LLCs and the various types of corporations offer a separation of your personal and business assets, which is useful in the event your business gets sued or goes bankrupt. Check into any appropriate state or federal licensing you need to operate your business, as well as any permits the zoning board requires you to have.
Chances are good you’re not going to have your own IT department on hand, so get familiar with the best practices to keep your network secure against cyber-attacks. Establish good security practices before cyber-attacks become a problem. Head off issues like phishing and trojans by being careful about the activities you do on your computer. Ensure the emails you open are safe by carefully checking outgoing links and email headers before downloading or logging into anything.
Put a security system in place to protect your home and business. The FBI reports 23.8 percent of property crimes in 2010 were burglary-related. Your computers and other business equipment have sensitive data and may be worth a great deal of money. Don’t protect your systems from cyber-attack and then leave them wide open to burglary.
Check your homeowners’ insurance to see if you have any coverage for home-based businesses. Bankrate cautions against hoping your homeowners insurance will cover any claims on its own. All it takes is one employee or customer getting hurt at your home-based business for you to have a major issue. Talk with your insurance company to add home-business insurance. Most homeowner policies are not going to give you enough coverage right off the bat to cover business loss and equipment.
There is a lot of advice out there about whether or not you should register a small business with governmental agencies and trade organizations. Whether or not you choose to join organizations is mostly a personal decision that heavily depends on your current circumstances and preferences. Let’s look at some of the pros and cons.
The Small Business Administration (SBA) is the federal agency that serves as the primary governmental advocate for small business. From the SBA.gov web site, a small business owner can find links to registration requirements. If you are doing business as a sole proprietorship, you will be working in your own name and subject to personal liability related to your business. As a sole proprietor, you will still need to obtain local business licenses, too. If being personally liable for your business activities doesn’t sound appealing, register your business with a state as a corporation or LLC and obtain a federal tax ID. Don’t forget to find out if there are any business licenses required for your business at the county and city level, too.
Agencies and banks for small businesses might offer loans, perks, or training to small businesses. For example, the SBA is currently partnering with the W20 group, which is a group of digital communications companies, to offer a social media webinar series to help small businesses develop their web presence. The SBA also offers special loan programs to veterans, minorities, and women. The loans are actually backed by the SBA and issued by participating banks, so don’t think the SBA directly offers loans, though.
State business organizations provide venues for members to network and share resources. Members can help each other by referring customers, or providing mutually beneficial services. Being registered as a small business increases your chances of being invited to events you might otherwise not know about.
Business organizations also can be an effective political group. As with anything, the louder the voice, the more likely you are to be heard. Therefore, joining a small business organization can be a good way to promote policies that would benefit small business owners. These groups are not necessarily partisan, but rather they can work together to support common business interests.
Although there may be fees associated with joining some business organizations, the dues are usually tax deductible.
Many small business organizations offer group discounts for professional and personal services, which can be a very nice perk.
While the SBA is set up as the main advocate for small businesses in the US, the definition of “small business” is rather broad. For example, some of the business categories allow businesses with over 1,000 employees to be considered a small business. As you can see, the definition of “small business” is wide and often, a truly small business of less than 20 employees may find some SBA benefits are not useful.
SBA-backed bank loans sound good in concept, but the loan requirements make the loans out of reach for many early stage companies and very small companies. If you don’t have at least two years of operating history and a year’s worth of revenues, then you are unlikely to qualify for any SBA-backed bank loans.
Like everything in business, professional and trade associations cost money. Just about every small business organization has some kind of annual fee and many charge a fee for joining in the first place. Such fees can add up over time, especially for a new business. Additionally, participation in the events requires additional expenditures.
Being an active member of a business organization can be a big time-consumer, especially if you’re involved in more than one or at higher levels of an organization. Most organizations have a monthly meeting, but for members of several organizations, a few monthly meetings can turn into what is essentially a meeting every week. As a business owner, your time is extremely valuable so spending significant amounts of time on professional organizations can turn into a huge distraction.
If you don’t thrive on working with others or mixing business and social events, business organizations may not be for you. These organizations often combine social activities with things like networking or seminars, which is great for a lot of people, but there are many people who do not like to combine those aspects of their lives.
If you decide that registering your business is right for you, check out the US Small Business Administration for information about how to register a name for the business and find state agencies.
This has been a guest post by Angie Picardo, a writer for NerdWallet, a financial literacy website dedicated to helping consumers leverage their own business and set better personal financial goals.
Whether you need to lease commercial office space or retail space, it’s important to take the decision seriously. If you’re like most start-ups, your rental space will be a significant investment – both in up-front deposit costs and in monthly commitments. So before you rent that space, consider these six factors:
1. Location, location, location
Obviously, location is particularly important for retail businesses. The closer you are to your customers, the more business you’re likely to get. But location is important even if you’re renting office space and will rarely see customers in your own office.
Think about your employees or potential employees, for example. A luxurious office in a less-than-desirable part of downtown might turn off otherwise excellent employment candidates. And, of course, your own commute to your office is important to consider, if possible.
2. How much space you really need
Too many small business owners with big dreams end up in an overly-large office or retail space. Take some time to carefully consider how much space your business actually needs, and don’t get any more than that.
Also, think about what you may be able to do to cut down on the space you need. Can you store some files at home or in a small off-site storage unit? Can you use all your vertical space to avoid needing extra storage room?
3. How much you can afford to pay in rent
Obviously this is going to be one of your number one questions, and it’s one that you should really consider extra carefully. If you can’t afford to pay your lease for a month, your business could take a huge financial hit. So look at your current or expected earnings, and lowball the estimate. Don’t forget to factor in the related costs, such as insurance, utilities, and even hidden costs in the lease, such as the landlord’s ability to pass on increases in taxes or other operational costs.
Often, your ability to rent a place can be limited by your creditworthiness. If you’re just beginning, you may want to get some leverage by building credit with a business credit card. In addition, having a credit card or line of credit on hand as an emergency fund can help if account receivables don’t come in on time to pay your rent, as you’ll have some sort of short-term backup plan in place.
4. The nitty-gritty of the lease terms
Unless you’re a lawyer, it’s probably a good idea to hire one to review the lease terms with you. Again, this is one of the most important decisions you’ll make as a small business owner, so it’s worth putting the time and money into having an expert check over your lease.
According to the Small Business Administration, some things you should check for on your lease include:
- Expenses you might incur beyond rent
- Maintenance and repair terms
- The ability to sublease
- Flexible lease terms
- The ability to lock in the rental cost for a long period of time
5. Potential extra costs
As noted above, one thing you should look for in your lease terms is potential extra costs. For instance, unlike an apartment building where the landlord is usually responsible for maintenance, you may be responsible for a good portion of the maintenance of your commercial space.
You’ll also want to look into how much you can expect to pay for utilities. If possible, negotiate to have utilities included in your rent payment, which can at least make them a predictable extra cost.
6. Other options besides renting
Finally, before you sign a contract, look into other options that you might have besides renting. It’s a huge commitment, and can be a very expensive mistake if you don’t do it right. Most small business owners are better off working at home, meeting clients at coffee shops, or even selling products through distributors rather than renting their own space.
Another increasingly popular option right now is co-working. A co-working space allows you to rent a small desk space or even an office where you can meet with clients. This gives you the opportunity to work with other entrepreneurs, to get out of the house, and to rent at a minimal cost.
As with every business decision you make, you’ll want to walk into this one with both eyes wide open. Plan for the worst, but expect the best, and your first business space rental will be great.
Why do so many New Year’s Resolutions fail after the first six weeks? People fail to achieve their goals for lots of reasons, but we’re not focusing on excuses here. We’re focusing on solutions.
The typical day of an entrepreneur or small business owner is crammed with surprises and distractions, and the long list of longer term, strategic, goal-oriented activities often gets pushed to the following day, then again, until so many days slip by that those big goals become completely ignored. This is akin to treading water instead of swimming and wondering why the shoreline fades in the distance.
One useful tactic to help you get back on track with your goals is to create a List of One.
Each day, amid the minutiae and distractions, focus on completing one goal or one milestone toward a larger goal. You can have a larger list, but each day, just pick one key milestone and make material progress. If you complete your List of One, then create another List of One and apply the same focus and tenacity to completing that task. One step at a time.
Yes, the process is as simple as it sounds, and you’ll find that more gets done when you chew one bite at a time of the metaphorical elephant we call building a small business.
What’s on your List of One today?
Capital-starved entrepreneurs eagerly await the dawn of a new capital market called crowdfunding. ActSeed is glad to support the Crowdfund Bootcamp and its mission to prepare us all for the opportunity to tap a major new vein of investor capital.
This new way of funding emerging businesses is shares a name with a donation-based funding model in use today, but is very different than offering a t-shirt or other memento in return for contributing a few dollars to a cause.
On April 5, 2012, the “Jumpstart Our Business Startups Act” or “JOBS Act” became law. A new game in the world of early stage business funding was created. The Act calls for the US Securities and Exchange Commission to now define the rules of this new game. It’s expected that the rules will be defined sometime next year and entrepreneurs will begin pursuing crowdfunding equity investments.
This “new game” is designed to increase participation in the investment process beyond existing restrictions. It’s designed to help flow more capital into the primary engine for economic growth and jobs growth: small businesses.
While the general parameters of this new capital market are defined in the law, the coming specifics from the SEC must curb fraud while encouraging participation.
Numerous crowdfunding web sites are popping up almost daily – all hoping to become a thriving “new millennium stock exchange”. Each site will serve as a mini-exchange, with SEC-compliant rules for what company information an entrepreneur must share with investors and how it must be shared. The rules are supposed to be less onerous on small businesses while still protecting both the capital-seekers and capital-providers. Of the hundreds of aspiring crowdfunding sites, most will likely fail or consolidate with other sites. Crowdfunding will spawn cottage industries of support services and trade advocacy. Insurance companies, law firms, accounting firms, PR firms and trade organizations will specialize in crowdfunding activities.
So, as an entrepreneur trying to figure out what this all means, who the players are and how to prepare your company to raise capital through crowdfunding, where do you start?
We recommend the upcoming Crowdfunding Bootcamp conference, which will be held October 9-11, 2012 in Henderson, Nevada (just outside of Las Vegas). Write the word ‘ticket’ in the promotional code box and they will knock 5% off of the already-reasonable event fee.
The early bird gets the worm. The second mouse gets the cheese. Nobody has a saying for the ones who arrive third or beyond. JOBS Act Crowdfunding is coming soon, and entrepreneurs who know what to do will be the first to benefit.
Starting a new business venture is an exciting time full of hope and dreams. Unfortunately, the formation of a new business entity is also filled with complicated, bureaucratic formalities that can confuse and frustrate even the most experienced entrepreneur and add unneeded additional startup expenses.
When to Incorporate? One major expense that often arises when starting a new business are the legal fees associated with incorporating. One primary question that many entrepreneurs do not ask themselves or their partners prior to forming a corporation is, “Do we really need to incorporate?” Without any doubt, forming a corporation has many advantages, but is it a vital expense that is necessary when starting a new business?
The beginning of a new business venture is an experience filled with thoughts and emotions that it will grow into the next Apple or McDonald’s, but until that happens, do you have the money to spend on incorporating? More importantly, will your organization financially benefit enough to offset the formation expenses? Apple was in business for almost a year and McDonald’s was in business for over fifteen before they were formally incorporated.
Where to Incorporate? In addition to the normal expense for forming an entity, incorporating in the wrong state can also have a significant impact on your business. Different states have different tax benefits for incorporating in that state. Just because your business is physically in Minnesota does not mean you can’t incorporate in Delaware of Nevada where there are benefits may be more advantageous.
When to File for Incorporation? Another commonly overlooked detail is when to form an entity. Incorporating just before or on December 31 can be costly. For example, some states, California being one of them, requires all entities to pay an $800.00 yearly fee. I have seen clients come in December 30 wanting to setup an LLC before the December 31 and then after it was formed, they could not understand why they had to pay the state $800.00 when they were only in existence for 2 days. Furthermore, the company will have to go to the expense of filing tax returns for an entire year even though they were only in existence for two days. Remember, closing an entity is more complicated than opening one so it’s important to get it right the first time.
Compliance. Compliance of Federal, State, and local laws can also financially burden a business. If not found and resolved quickly, business and corporate compliance issues can be very costly to any organization regardless of size. Professionals, such as lawyers and accountants, who usually bill their time by the hour, derive a significant portion of their income from answering questions and fixing mistakes or “messes” made by their clients. Many of these mistakes can cost a client hundreds if not thousands of dollars. What makes matters worse is that so many of these costly errors could have been avoided with some forethought.
For example, many of us drive our cars for business purposes and deduct the gasoline, maintenance, etc. for the car. However, if the vehicle is not properly titled in the name of the business, the tax deductions could be disallowed. Your CPA or tax attorney will spend a time reviewing the latest case law or IRS regulations looking for a strategy to get the deduction. All the time expended by your attorney or CPA is usually billed by the hour and could have been avoided had the vehicle been properly place in the name of the business from the outset. Most attorneys and CPAs will tell their clients that it costs a lot less to prevent problems than it does to fix them.
Other legal and tax expenses that can be avoided are:
Annual Minutes: Not preparing these can be a real issue as annual minutes are reviewed by other parties for business loans and other activities. No minutes? No loan.
Loan Documents: One benefit to owning a corporation is the concept of loaning money to a shareholder as a tax strategy. This is a perfectly legitimate corporate benefit, but if the corporate documents to do not accurately reflect the loan, the IRS could disallow the loan and convert that money into taxable income.
Timely Filing of All Documents: Failure to file everything from taxes to various Federal and State government reports can be very costly and you may also incur penalties for late filing. Again, this is east to avoid.
The formation of an entity is a process that can be confusing, arduous, and costly if not handled properly. Don’t rush into it lightly or recklessly. Using the services of a company like Legalzoom or other companies may only impede your decision and cost you more in the long run. Do your own due diligence and seek the guidance of a licensed attorney and CPA before you form any entity. The money you invest in their time should save you needless headaches and let you focus on the future and not wasting time cleaning up the past.
[NOTE: Thanks to Michael S. Duell for this guest author contribution. Mr. Duell is the Director of Business Operations at Ruyle & Ruyle, a firm that includes small business corporate law as one of its specialities. If you are looking for a good boutique law firm that caters to small businesses and startups, consider Ruyle & Ruyle.]
Make sure this book is in your own entrepreneurial library.
This book explains how the good steak can sizzle without leaving you with just an aroma. “Marketing that Works” was written by some of the best minds in startup marketing who have held prominent positions in blockbuster startups, idealab!, Wharton and venture capital: Howard Morgan of First Round Capital, Leonard Lodish of Wharton and Shellye Archambeau, former president of Blockbuster’s e-commerce division.
This book includes practical approaches (not just theoretical!) to developing business ideas, pricing, market validation, distribution and channel strategies, product launches and more.
To buy a paper copy or download a Kindle version from our bookstore partner, Amazon.com, click here.
Many entrepreneurs are “allergic to the numbers side of the business”. Part of the high failure rate of small businesses is due to avoiding and ignoring basic financial principals.
Ken Kaufman’s book explains the essentials of small business finance and how to easily apply them through the use of allegory. In other words, he uses “good ol’ fashioned story-telling” to make even the most finance-phobic business owner learn and appreciate the need for quantitative, financial management.
This is not just a story about Steve, a man struggling as a small business owner, a husband and a dad. It is a guide penned in a way we can all identify with. It goes beyond merely being clever about teaching financials.
For example, in Chapter 23, the protagonist (Steve) starts to see, from his own experiences, how anxiety and clarity are negatively correlated. This is a non-financial lesson we all must learn and respect. This book is full of well-articulated insights that we all face as business owners.
The first time you read it, Kaufman’s book is an enjoyable story that “hits home”. Then, it becomes a very useful reference guide for the next hundred times you’ll take it off your bookshelf.
David Ronick has penned a winner.
If you’ve never drafted a business plan (and need to), “Hit the Deck” is a great investment.
The title of Chapter 1 is “You Need a Business Plan. (Yes, This Means You)”. We absolutely agree, so we read further.
We’re glad we did. Ronick really “cuts to the chase” about what a business plan of the 21st century should look like and why it’s important not only for pursuing investors, but even more for the entrepreneur to set a solid foundation to enter the marketplace and complete.
Lots of step-by-step guidance and examples.
If you’re new to investing, it’s a great book for you to read as well; here, you can learn what you should be understanding and what you should be seeing from the entrepreneur pitching you an idea.
The days of a business plan looking like a 48 page master’s thesis are gone. David shows you how to craft a solid plan quickly and with both internal and external impact. Again, it’s a book you should add to your library, a quick read, and won’t set you back more than $15 or so.
“You can tell a story in a sentence; you can tell a story in a paragraph; and you can tell a story in a 20-minute pitch. Startups need to do all three.”
– from “Pitching Hacks” introduction
I’ll try to be as concise in my post as the book is in guiding you toward successful fund raising.
Nivi and Naval have a storied career with startups, both as fund-raising entrepreneurs and as investors, not to mention facilitators for other entrepreneurs and investors.
I’ve authored more business presentations, projections and plans than I’ve read about how others do it. But I’ve read a few books, and “Pitching Hacks” is the most concise, the most pragmatic and the most useful.
If you are about to “walk the fundraising gauntlet” – even if you’ve lived on Sand Hill Road before – read this book. For the first-time entrepreneur, it’s a gold nugget of guidance. For the seasoned startup veteran, it’s a superb refresher.
As authors Nivi and Naval say: “Investors don’t invest in businesses. They invest in stories about businesses.“
To buy this incredibly affordable book (<$19), go to the Amazon-powered ActSeed Marketplace (or if you prefer, go directly to Amazon)!