Protecting Your Small Business

Here are several areas for you to consider to protect your business and reduce the risk of operating a small business.

1. Insurance. Many starting businesses don’t have enough insurance. You should consider liability insurance to protect yourself and your business from large claims or lawsuits. Think also about equipment insurance if you have a large investment in fixtures, equipment or inventory. Think about what all could go wrong and determine if insurance protection is sensible for your needs.

2. Company structure. Many small businesses are sole proprietorships, where the owner operates the business under his social security number. While this keeps things simple, it does introduce risk that some other business structures do not have. Limited Liability Corporations (LLCs) for example have some of the benefits of sole proprietorship with some of the personal protection of a corporation. If your business has any element of personal risk to your employees or customers, you may want to consider some kind of structure other than sole proprietorship or partnership. Although more work and cost is required to set up and maintain an LLC, the protection benefits may be to your benefit.

3. Taxes. As a business, you may be responsible to pay sales and use tax, your own self-employment (Social Security) and medicare tax, as well as payroll and other employment taxes. In many cases, you may need to file and pay taxes quarterly to avoid penalties from underpayment of Federal and other taxes. Check with an accountant for information on taxes.

4. Business Name and Trade Marks. You may have some risk of using a business name that already exists, or having someone else start a business after you with the same name. You may also have issues with your trademarks, logos, taglines or other elements of your marketing tools. At a minimum you may want to do some web searching on your business name and see if anything else is out there. You may need legal assistance to declare and protect logos, trademarks and company names.

5. Web Protection. Photographers, musicians and others who offer their products on the internet need to be careful about theft. Many people who wouldn’t steal from a grocery store will think nothing of ripping off music or images from the internet. Photographers and others who display images should consider the use of flash based websites and watermarks on images to prevent unauthorized use. Authors may want to consider only publishing excerpts of their works, and periodically checking the web for key words that appear in your works to see if they have been copied. Musicians may wish to sign up with a streaming-only service or sign up with an independent online seller to encourage legitimate purchase of your works. You may also want to consider licensing your music for royalty-free use, where the user pays considerably more for the music with the right to use it in their products.

6. Customers. Winning and keeping customers is key to the success of small businesses. Make sure that you are aware of any possibility for your customer records to be accessible to competitors. Note also that employees or contractors could become your competitor next week. You may need to have some kind of non-compete agreement that your employess or contractors sign to keep them from intruding on your customer base after your business relationship ends. If you will be using customer images or testimonials in any promotion, make sure that you have release documents signed by adults. And make sure you have effective and simple customer contracts and agreements to avoid legal and customer satisfaction problems. Note also that anything you post on your website or blog will be read by your competitors and they are free to adopt your ideas.

7. Retirement. If you depend solely on your business for your livelihood, you know how hard it is to have good benefits. There are investment plans for small business owners, and more health plans are showing up to which small business can belong.

8. Information. Make sure your website is secure, particularly any customer and payment data. Back up your business files weekly at a minimum, and store copies away from the computer. Consider service contracts for your computers and other electronic equipment. Spend some time writing down a process that you will follow to establish a working backup system. I recently lost a computer, and fortunately I had a recent backup and was able to reconstruct the core of my business in 24 hours on a new computer. I made a list of 25 actions to rebuild my system. This list kept me focused and productive.

9. Cashflow. It is tempting to get lines of credit or use your personal credit to fund a business. But you can put your entire family’s well-being at risk by extending yourself and your business. Consider running a self-funding debt-free business, where you only invest what you reap from the business. Your growth may be slowed, but the peace of mind you will get from having no business or personal debt tied up in the business is worth more than the money. There are a number of great resources for debt-free business operations. I recommend starting with Dave Ramsey.

These don’t address all of the areas of risk, but hopefully you have increased your awareness of the risks inherent in small business operations, and can make some clear actions to reduce and manage your business’ risk.

An Overview of Local Start Up Business Grants and Where How to Get Funding

Grants come in a wide array of sizes, for a broad array of purposes, from a myriad of sources. While most grant information rests at the Federal level, there are plenty of other sources of funding for a business startup out there. This article will focus on getting grants from your local community.

First, there are sound reasons for your local chamber of commerce and better business bureau to offer grants for businesses to start up – businesses employ people, and boosting the local job market is one of the important things your city government does. Even if your business just employs two part time shipping clerks, it still makes sense for your local business development center to host a grant program to help new businesses start out.

Likely candidates names for your local municipality’s business development center will be Chamber of Commerce, Economic Development Council, or Small Business Development Corporation. In addition to grant proposals, most of them have extensive libraries on things like local tax regulations, federal and interstate and state regulations you need to concern yourself with, local labor laws, and how to get your jobs listed in the want ads and local unemployment center. There are also organizations run by retired businesspeople that offer classes in starting a business, including step by step instruction on how to set up a business plan, how to handle your first two years taxes (where the capital put into the business can offset the revenue generated) and more. You can find out more about what resources your local area has for instructing small businesses and incubating them by going to the public library, or checking out your city’s web site.

To get a local grant, you’re going to have to demonstrate a mixture of enthusiasm and hardheaded business sense. Passion counts, but so does a demonstrated ability to plan, as does focusing attention on how your business needs will tie to local suppliers and supply chains, and will provide jobs for local people. Many municipalities have something analogous to the Community Development Block Grant Loan Program. How this works is that the municipality or county applies for a grant (called a block grant) from the Federal Government to do local spurring of business development, and then uses that funding as seed capital to make low interest or short term loans to local businesses to help them start out, provided they hire low income people from the area.

Many larger cities have programs like the one in Seattle, where for businesses that will employ more than 100 people, and will need new construction, can get grants for new construction if the buildings are Green, or LEED certified, minimizing construction waste and power usage.

Many grants are tied to non-profit organizations. You don’t have to be a non-profit organization to benefit from such a grant; you can work with a local NPO to get the grant, under an agreement where they’ll use your firm for goods and services – this represents a triple win for the underwriting grant agency. It helps a non profit organization work on a project that ameliorates a problem they’ve been assigned money to fix, it helps you, by giving your company contracts for work to be done, and it helps the community by allowing you to hire more people to get the job done. The local restrictions on this sort of partnership are varied and numerous, and it’s worth it to talk to someone at the local city hall to see what can and cannot be done without conflict of interest or collusion complications.

The last place to dig for grants (or the first one in some situations) is a local trade organization. If you’re in a field with a vital services niche, and it’s going unmet, it’s not unreasonable to get grants from a business organization to open the type of business they support; it helps bring their profession into a higher profile, or represents moving into an untapped market to them.

All of these should help you find local grants that help you achieve your goals.

Top Tips For Starting and Growing a Business

Starting a business can be the best thing that ever happened to you. However, like anything else in life, it can also be a disaster. Both new and established businesses fail every day for reasons ranging from mismanagement to changing market conditions. While it is impossible to accurately predict the success or failure of any individual company, there are things that you can do to maximize your chances of success. Gathered from a variety of sources, presented here are tips to starting and growing a business across a range of fields.

The Idea
Every successful business begins with a great idea. Perhaps you already know exactly what you want to do. Or maybe you have only a vague notion of the general area you would like to address. If you need inspiration, look deep within yourself. What do you love? What genuinely excites and motivates you? What do you know a lot about?

Too often, people go into business for reasons that have little or nothing to do with passion for an idea. They believe that they will get rich. They believe that they will not need to answer to anyone else. They believe that they will have more free time. While these factors and many more may play a role in your decision to start a business, they should not be your primary motivation. When times are tough, business is lean and you are on the edge of financial disaster, it is your true love for your idea and your company that will help you find the will to persevere.

A great business idea is not necessarily a brand new product or service. More often, it is a unique twist on an already existing idea. Figure out what you want to offer, and then figure out how to make it different from the competition. This process will involve market research, determining what is already available and what additional features customers feel are important. Plan to spend some time on this phase of idea development.

The Preparation
Once you have identified a saleable product or service and narrowed the focus to a practical level, it is time to begin your preparations. Many people are bursting with entrepreneurial ideas, but never make it through the preparation phase of starting a business. Here is what you can do to make it successfully through this stage.

Write a business plan – Although this can be a frustrating experience, it is an absolutely essential stage of the preparation process. If you plan to raise money, a detailed business plan is a requirement. Even if your business is self-funded, however, a well-crafted business plan will serve as a guide on which you can base current and future company decisions. Download a business plan template and work your way through the steps. Help with writing a business plan can be found online for free. If necessary, you can hire professionals to assist you with the process, although these consultants may charge a high fee.

Discuss your idea with others – Consider joining a trade group. Contact your local small business advisory council. Speak with any successful entrepreneurs that you know. Also discuss your idea with potential customers. The goal is to solicit valuable feedback that can help you refine your idea and turn it into something practical that will meet customers’ needs and expectations.

Test market – If you are debuting a product, start a very small scale test run of items that you sell at a craft market or event. Ask customers to fill out a short survey that includes such items as quality, price and customer service. Also ask for extemporaneous feedback by asking such open-ended questions as “What could we do to improve?”

The Financing
Many small businesses fail due to financial issues. It is easy to overestimate the money that will be made in sales while underestimating the cost of startup. If you have written a detailed business plan, you will have fairly accurate financial projections in place. However, it is critical to ensure that your initial funding is sufficient and reliable, or you may never reach the point of financial forecast.

Most banks are reluctant to loan money to startup enterprises with little or no collateral. Therefore, many small business owners turn to alternative sources of funding. Try to provide as much of your own funding as possible. Credit cards are a risky option, as the high interest rates can suck much-needed capital from your company’s budget, extending the time that it takes for the business to become profitable. Some entrepreneurs choose to use second mortgages and home equity lines of credit, but this should only be done if you are certain of your success. Failure to repay a loan that is tied to your home can result in losing your home if the business fails.

It is much less risky to use only money that is free and clear. Invest your own savings. Sell shares of the company to trusted friends and family. Look for an angel investor or venture capitalist that is willing to buy into your idea. Be careful, however, not to inadvertently sell off control of your company. Always have contracts reviewed by an attorney and be certain that you understand how your business and personal interests are protected.

Promotion
It does no good to open your doors for business if the public is not aware that you exist. Marketing and advertising are extremely complicated and can be cost-prohibitive for new business owners. Therefore, you must think creatively to develop your own lost-cost means of self promotion.

Never leave the house without a few business cards and perhaps a sample of your work. You never know who you will meet that could be a potential customer. There is a fine etiquette line that must be walked when self-promoting, so be careful not to turn people off by talking too much. However, you can keep your eyes and ears open and comment on your business when it is appropriate.

Also consider investing in magnetic signs for your vehicle. This is a low-cost means of getting your company’s name out to the general public. Be sure that the signs clearly state your company’s name, telephone number and website address. Also make sure that it is clear what your company actually does, especially if the business name is non-descriptive.

Build a website. In today’s internet age, shoppers expect to get at least basic information from the internet before making buying decisions. Your site need not be complicated or elaborate, but it should give basic information about your company and your product, as well as your contact information. A secure online storefront is a bit more difficult to create but can generate a new stream of revenue.

Controlling Growth
Only rarely does company growth occur in a slow, predictable manner. More likely, your company will experience fits and starts of rapid expansion interspersed with periods of slowdowns and loss of business. Prepare for fluctuations by learning to predict when they are likely to occur. Research your field to stay ahead of seasonal changes. Keep up with industry forecasts to help predict market-driven fluctuations.

Maintain a long-range plan to help contain growth during periods of extreme upswing. It is easy for a company to get out of control during a phase of expansion by expanding in directions that do not mirror the company’s actual goals and objective.

It is also important to develop a long-term strategy for dealing with downswings. It is common for inexperienced business owners to panic and go to extreme lengths to try to turn things around. Stay focused on your goals and avoid drastically cutting prices or expanding into territory that does not mirror your objectives. Consider ways to make your company more visible and add value to your product or service rather than lowering your prices.

Starting a business is extremely challenging but ultimately quite rewarding. There are never any guarantees of success or failure in a business venture. However, remaining positive, following a clear cut plan and learning to weather changes can help increase your chances of success.