Annotated Secondary Research for Report
Financing Your Small Business
Unless you're running a solo business from a
home computer you already own, it's likely that you'll need some financing to
start your business as well as periodic infusions during slow periods or when
your company is growing.
Cultivate
sources of capital, such as friends and relatives, and develop relationships
with banks.[AB(1]
Assess your own capacity for financial risk. There aren't any right or
wrong answers as to the right amount of capital to put up, but you'll be
well-positioned if you have a clear sense of how much you're willing to invest,
and of how you'll regroup financially if things don't go as planned.
Develop a plan for paying back what you borrow. Lay out a schedule, and
understand how much your business must earn to succeed at this plan.
Quality of Life
There are laws against exploiting employees, but no
laws against exploiting yourself. Many small-business owners work grueling
schedules, and struggle to find a work-life balance.[AB(2]
Know your limits. Understand how much you're
willing to work to keep your company successful and where you'll likely draw
the line. Your willingness and capacity may change over time, such as if you're
emotionally prepared to work every waking hour for the first year you're in
business, but that you expect to take regular vacations once your company is
established.
Communicate clearly with your loved ones about
how your business will affect your home life. Understand their level of
tolerance and understanding, and enlist extra help, if necessary, such as child
care for your family, or additional employees for your business.
Write a business plan, any
business plan
You have a passion, and you'd like to make it your profession. No matter
how enthusiastic you are about your small business, though, it won't
be successful unless you have a plan in place for how you're going to start and run it.[AB(3]
It doesn't matter how long or detailed your plan is, as long as it
covers a few essential points. Most successful small businesses will need to
have a break-even analysis, a profit-loss
forecast and a cash-flow analysis. A cash-flow analysis is especially important
since you could be selling your products like hotcakes, but if you won't be
paid for six months, you could still run out of money and have to close your
doors.
A business plan is essential because it allows you to experiment with
the strategy for your business on paper, before you start playing for keeps.
Profit is, after all, the ultimate goal of any successful small
business. You should examine your business' expenses (rent, materials, employee
compensation, etc.) And then figure out how much you will need to sell to cover
those costs and start generating a profit. This is known as a break-even
analysis.
Many small business owners cover
their start-up costs entirely through loans, with the expectation that
they will begin paying back the loans with the profits from their new business.
New businesses can take months or years to generate a profit, however, and loan
payments can really become a millstone around the neck of a fledgling
operation.
If you can save up as much of the start-up capital yourself before you
open your doors, you will help ensure that loans won't sink your new business.
Remember, also, that there's an outside chance that a lender will call a loan
or add unfavorable terms if your business isn't as successful as you initially
planned. If you provide as much of the start-up money as possible, it will
lessen the odds of a nasty surprise like this hindering your business.
Protect yourself
Most small businesses are sole proprietorships or partnerships. While
these types of businesses are nice and easy to form, they also expose their
owners to liability for business debts and judgments. Creditors and judgment
holders can come after the owners' personal assets, like savings accounts and
homes, once the business' money is depleted.
While insurance can reduce this liability
somewhat, it's worth it to consider forming a corporation or limited liability corporation (LLC). These business
structures will shield owners from personal liability, but there are more rules
and requirements associated with them.
Everyone wants their small business to be successful, with multiple
locations, lots of employees and loads of revenue, but you have to learn to
walk before you can run. Don't spread yourself too thin or take on too many
expenses at the beginning, especially if your income might take a while to
catch up to your ambitions.
By starting small, you ensure that you can survive the inevitable
hiccups associated with running a small business. Those entrepreneurs who begin
with modest operations can recover and learn from their mistakes without taking
on a lot of debt. Starting small will help your small business grow into a
successful enterprise.
Get it in writing
While, it's nice to do business with a handshake, there's no substitute
for a well-written
contract. Indeed, many contracts are not valid unless they are in written form.
The exact number of this type of contract varies between states, but here are a
few common examples: Sales of goods worth more than $500, Contracts lasting
more than a year, A transfer of ownership in copyrights or real estate.
While contracts can be valid when orally made, they are much harder to
prove and enforce. Make sure you get all agreements in writing -- it will save
you headaches down the line, and could even save your business.
Keep your edge
There are many ways to gain a competitive edge over other businesses in
your industry: you could have a better product, a more efficient manufacturing
or distribution process, a more convenient location, better customer service,
or a better understanding of the changing marketplace.
The best way to hold onto your competitive edge is to protect your trade
secrets. A trade secret is that information that isn't known to others that
gives you a competitive advantage in the market. There are many kinds of trade
secrets, and trade secrets receive legal protection as long as their owners
take steps to keep them secret. Those steps could be anything from marking
confidential documents to requiring partners and employees to sign nondisclosure
agreements.
Another way to hold onto your competitive edge is to stay proactive. If
you know that your business is going to face challenges or encroachment by a
competitor, don't wait to react -- plan ahead and you'll stay ahead.
Hire the right people
Don't just hire the first person to come along with the basic
qualifications you need. Look
for someone with motivation, creativity and the right kind of personality to make
it in your industry and fit in with your business. Then, once you've found that
person, treat them well, engage them and make sure that you create the
environment that they will thrive and give their all in.
Make sure you create the
right kind of employee relationship
Lots of businesses try to save money by hiring people as independent contractors rather than full-time
employees. The IRS will impose large penalties on businesses that do not
withhold and pay taxes for workers that it considers full-time employees rather
than independent contractors. Here are some things the IRS will look at to
determine whether a worker is an independent contractor or a full-time
employee: the worker performs tasks that are essential for your business, the
worker only works for your business, the worker works 40 hours a week, or
nearly 40 hours, the worker receives instructions and training from you, and
you exercise control over how the worker does their job.
Also be sure to create an "at-will" relationship with your
employees. Employers can terminate at-will employees for any reason, which is
essential if an employee isn't working out. There are many ways to make it
clear that the employment relationship is at-will, including in employee
handbooks and through offer letters. Don't make any promises to employees about
the length or terms of their employment, as these could become binding on you
later.
Pay your bills and taxes on
time
It should go without saying, but it's important to pay what you owe --
especially when dealing with the IRS. The IRS can impose harsh penalties and
even come after a business owner's personal assets if the owner doesn't remit
payroll taxes on time.
It's also important to pay your regular debts in a timely fashion. If
you get a reputation for stalling on a debt, you could find it difficult to
form business relationships in the future. Plus, if you stay current on your
debts and pay them as you incur them, it will help you avoid being overwhelmed
by cash flow problems if several debts come due simultaneously.
Focus on Customer Service [AB(7]
According to
a survey conducted by American Express, 78% of consumers have cancelled or not
made an intended purchase due to poor customer service. Other studies have
shown that it takes several positive customer experiences to make up for one
negative one.
Given that loyal customers are much easier to
sell to, make good customer service a priority. Examine your current customer
service and make the changes that need to be made to ensure that your small
business is providing service superior to that of your competitors, whether it
be investing in staff training, revamping your return policy, or basic
improvements such as responding promptly to voice mail or email from customers.
Build Word of Mouth for Your Business
Whether you
operate your business in a small community or in a large urban center, word of
mouth is more important than ever for business. Most consumers turn to the net
to search for reviews of businesses before deciding where to shop, so building
a good reputation is vital to the success of your business.
How do you get positive word of mouth? By
providing good, professional service, building and monitoring your local (and
online) reputation, and gaining publicity by giving back to your community by
supporting/sponsoring local organizations and charities.
Expand Your Marketing Efforts
Effective marketing is key to increasing
your sales, but you don't have to break the bank to promote your business.
There are many inexpensive ways to market your products and services,
including:- Creating and using a promotion kit.
- Sending out promotions with your invoices.
- Joining professional and/or business organizations.
- Involving the newspapers in your grand openings, moves, or charity events.
- Giving free workshops or classes related to your products/services.
- Developing business partnerships and doing cross-promotion with complementary businesses.
- Joining professional and/or business organizations.
Build Your Online Presence with a Business Website and Social Media
I always
feel like I’m shouting into the wind when I write this, but your small
business really needs a website. I know, I know – you don’t have time.
But creating a professional looking website can be quick and
easy nowadays and your small business needs to be in the online space;
Surveys by Ipsos mediact and Accenture indicate that more than 70 percent
of consumer’s research purchases online before buying in a store (The Globe and Mail).
A simple website that describes who you are,
what you do, and how to contact you will suffice for many small businesses. At
a minimum, your site should contain:
- Your logo
- Your business name
- A summary of what you do - your products and services
- Your contact information
- Your address, including a Google Map link
- Your mission, e.g. "We make the best pizza in town...."
- Testimonials from customers
Depending on your target market, social media
can be a great way to promote your business. To get started with social
media see How to Create a Social Media Plan.
See also Create a Facebook Page for Your
Business, Tweet about Your Business on Twitter, and Introduction to
linkedin Social Networking Service.
Cut Your Business Costs
Despite
government claims of "low inflation", business costs for everything
from office space to vehicle expenses seem to be always on the rise, so keeping
expenses in check is a crucial task for business owners.
Keeping track of expenses is time consuming
and tedious, so wherever possible use technology to make the job as easy as
possible. For example, there are a number of mobile apps for expense tracking,
including some of the newer cloud-based accounting
applications that allow you to automatically add expense information
into your accounting system by snapping pictures of receipts with your mobile
device.
Annually or semi-annually review your major
costs, such as office space, business insurance, staffing, and vehicle
expenses. If you are in an area with abundant available commercial space, think
about relocating, or if you don't need a storefront convert to a home-based
business.
Review your major supply costs regularly and
always look for discounts or ways to pool supply purchases with other
businesses to save money. Make reducing expenses part of your job description,
and involve your employees.
Go Mobile
If you do
nothing else mobile-wise this year, you need to make sure that your online
presence, including your business website, is mobile friendly, as
ever-increasing numbers of people are surfing and searching with their phones –
even when they’re at home.
But there are two other trends that your
small business could really profit from. The first is mobile marketing. There’s
a whole range of mobile-specific strategies you could be using to reach your
target market with great effect, from text message advertising and mobile
display ads through having an app designed for your own business.
The second is mobile payment systems. The
choices for your small business are really expanding as Apple Pay and Google
Wallet join the field previously dominated by Square, Intuit gopayment and
paypal. Even Canadian Tire is getting into mobile payments. Using phones
to pay is a significant convenience to customers but your small business could
also realize considerable savings from being able to use a mobile POS system.
Update Your Business Plan
You did make a business plan before starting
your business, right? Right? A business plan is vital for startup businesses
for many reasons, including testing the viability of your business idea and
securing debt or equity financing.
If you
haven't made a business plan it is not too late. Successful established businesses
update their business plan annually to review accomplishments (or lack thereof)
and decide on new goals or directions.
The financial health of your business is
summarized by the income statement, the cash flow projection and the
balance sheet, which are contained in the financial section of the business
plan. From these you can determine ways to make your business more profitable
by increasing sales and/or reducing losses or cutting expenses. If you want
your business to be more successful you need a plan for how to get there.
[AB(1]This
is good and something we should look at doing in the future.
[AB(2]More
commitment is required, people need to take any job that comes our way.
[AB(3]Something
we definitely need to get better at is creating working plans and sticking to
them, and most importantly making sure the plan has everything we need in it.
[AB(4]Maybe
through the use of branching out and opening more avenues to make money.
[AB(5]Something
to do in future, spend your own money at the start to take the weight off your
shoulders trying to do lots of jobs to bring money in.
[AB(6]Starting
small can be good, especially if you are just starting out and haven’t got a
lot of experience, doing lots of smaller odd jobs can also help to bring in
early customers.
[AB(7]Customer
service is just as important as the end product, how you interact with your customers
can mean the difference between getting paid and not.
No comments:
Post a Comment