Starting a High-Tech Business? You May be Eligible for Government Funding

Caron_Beesley — Mon, 20 May 2013 12:40:39 +0000

Looking to start or grow your high-tech entrepreneurial venture? Need financing to help fund research and development (R&D) efforts and realize your business potential? The U.S. federal government can help!

In fact, in 2012, nearly 5,000 small businesses received over $1.8 billion in federal government grants and contracts to help them carry out the R&D necessary to develop and bring high-tech products to market.

So how can your small business get in on the act? Here’s what you need to know:

What Can the Government Do for the High-Tech Small Business Sector?

If you are starting or already operate a high-tech startup, high-growth or high-impact firm, you may be eligible for grants and contracts that help fund R&D and product commercialization under the federal government’s Small Business Innovation Research Program (SBIR).

The risk and expense of conducting serious R&D efforts are often beyond the means of many small businesses. But, by reserving a percentage of federal R&D funds for small business, SBIR helps small businesses to compete on the same level as larger businesses. In turn, SBIR helps the federal government meet its own R&D needs in areas such as defense, healthcare, environmental protection and more. Eleven federal agencies set aside a portion of their budget each year to fund the SBIR program, with the SBA acting as the coordinating agency of the program.

Companies such as Symantec, Qualcomm and ViaSat all got a kick start from SBIR funds in their early years.

How does the SBIR Program Work?

The federal government has specific scientific and technological R&D goals and priorities, all of which are reflected in these solicitations from participating agencies and federal grants (listed at Grants.gov or on individual agency sites). You can search and explore these solicitations and grant opportunities to see where your R&D efforts may align with the government’s needs. Then follow the application process described below (see “How Do I Get Started?”). Each agency reviews proposals based on technical merit, qualifications and potential benefits to industry and society. Once agencies grant awards to small business, they embark on the R&D process.

The Awards Process

SBIR awards are structure in three phases to reflect the R&D development cycle:

Phase I: These awards are usually below $150,000 and cover a timeframe of less than 6 months. During this initial stage, the small business and sponsoring agency explore the feasibility of the project in order to get a better sense of its commercial potential and technical requirements.
Phase II: These awards are only available to small businesses that already received Phase I awards. Phase II enables a longer-term commitment. Awards can be made for up to $1 million for two years. During this period, R&D is expanded and commercial viability can be assessed.
Phase III: During this stage, innovations transition from the lab to the market, and small businesses begin the search for private sector investment. Keep in mind that the SBIR program does not fund Phase III; funding comes from private sources or other government grants.

Who is Eligible for SBIR?

The eligibility requirements for SBIR are straightforward – your business must be for-profit, have less than 500 employees, be independently owned and operated and located principally in the U.S. It must also be majority-owned (51 percent) by U.S. citizens or permanent resident aliens and the principle researcher must be an employee of the company.

As you can imagine, SBIR is a highly competitive program. Check out this interactive directory of SBIR awards for a review of past awards, proposal abstracts and more.

How Do I Get Started?

SBIR.gov includes information for applicants, but, as mentioned above, the application process starts with research:

Check the list of open solicitations at SBIR.gov. Each solicitation explains the areas of R&D that agencies are interested in.
If you have questions, contact the individual agency. Refer to this contact list.
Register your business with SBA’s Company Registry prior to submitting an application.
Get tips and training on applying to the SBIR program.
Search for grant opportunities on Grants.gov.
Submit a proposal. Typically, an SBIR Phase I proposal submission package has the following components: a business plan, executive summary, cost and technical proposal.

Tip: Grants.gov is a good place to start looking for SBIR/STTR program opportunities. Just type "SBIR" in the basic search, and off you go!

Additional Resources

Turning Your Tablet into a Point of Sale System – Is it Time to Make the Switch?

Caron_Beesley — Mon, 13 May 2013 11:43:40 +0000

Considering upgrading your business’ point of sale system (POS) to one that runs on a mobile device or tablet?

Mobile payment platforms that turn your tablet into a credit card processing device have become increasingly popular with small businesses, thanks to offerings from companies like Square, Intuit and PayPal. But mobile POS is evolving beyond being a convenient way to swipe credit cards on-the-go. The next generation of POS systems will not only turn your tablet into a cash register, they offer fully-fledged business management tools including CRM services, inventory tracking, loyalty program integration and employee management tools – all made possible thanks to the power of cloud computing.

So what are the advantages of a tablet-based POS system for small business owners and what factors should you consider when making the switch? Here are some benefits and points to consider.

Cost Savings

Traditional POS systems typically involve an up-front fee of around $3,000, with some running as high as $50,000 (according to Street Fight magazine). In addition, you can expect to pay an annual software license fee per register and a yearly maintenance fee of 18-20 percent for upgrades. And, since costs are paid up front, chances are you’re stuck with the system you choose even if you don’t like it.

Cloud-based tablet POS systems, however, can be up and running for as little as $1,000 or less, with no upfront fee. Cost-savings also extend across the lifetime of the service – you pay a low monthly fee (which also includes instant software upgrades, support, back-up and upgrades) and can cancel at any time.

Easy Integration of Sales and Marketing Tools

In this age of ubiquitous information, many of us have come to expect instant, anytime, anywhere access to the data that matters most to us. Cloud-enabled tablet POS systems make this a reality with fingertip access to sales and inventory data – whenever you need it. Some also offer advanced integration with loyalty programs, accounting tools, as well as coupon and gift card generation options. You can even take advantage of marketing outreach features, such as auto-generated thank you emails to new customers and “poke” emails that encourage dormant customers to stop by. Other tools let you track sales volume by employees and manage inventory and restaurant seating. Others also offer integration with mobile card reader platforms such as Square and Intuit GoPayment.

Ease of Management

Not only does cloud-based POS cut the costs involved in managing your systems, it also streamlines their management. All the software upgrades are instant; trouble-shooting is taken care of by the system provider, and your applications and data are securely backed-up and stored within the cloud. No need to invest in additional service contracts or IT headcount.

If you think about the cost and time involved in managing your own POS and any downtime or system issues your run into – the appeal of a mobile POS system starts to catch on.

Things to Watch Out For

Benefits aside, there are some things to look out for when considering a tablet POS:

Migration – Migrating any system can be tricky. Put this on your due diligence list and screen providers to see what migration tools or services they provide. Many will be able to handle a simple inventory and customer data import from a spreadsheet.
Internet Downtime – You’ll need a good internet connection to process transactions and manage your data. If you are worried about outages, then this type of POS may not be for you. The good news is that some providers are offering off-line services that let you sync transactions when you come back online.

To help you in your research, check out Street Fight’s comparative guide – 7 Cloud-Based POS Systems for SMBs.

Related Articles

Image courtesy of Belal Khan, Flickr

More Than Just a Sales Portal – 5 Ways to Jazz up Your Online Store

Caron_Beesley — Mon, 29 Apr 2013 11:42:19 +0000

What does your online storefront look like? How are you attracting customers to purchase a product they can’t touch, feel or try until it arrives on their doorstep?

This is a common, yet often overlooked, problem for small business owners who sell exclusively online through their own site or a third party site like Etsy or eBay. You might sell the most exquisite artisan product, but if you don’t present it effectively, shifting inventory might be harder than you think.

The lynchpin of small business success, whether online or off, often comes down to your differentiators – things like your core values, customer service and responsiveness, unique products, and community involvement.

But without a physical storefront or face-to-face contact with customers, how do you weave all this into your online marketing strategy? Here are five ways to jazz up your online store.

1) Tell Your Story

One of the easiest ways to connect and appeal to online consumers is to tell your story. If you’ve planned your business and marketing strategy, then you should know enough about your target market to know what resonates and from there develop an online content strategy that they will respond to. For example, say you run an online store that sells organic cupcakes, sourced from locally produced ingredients; you could showcase the inspiration behind the business using the “About Us” section. You could also elaborate from there to showcase the vendors that you work with to source your ingredients.

Don’t forget to introduce yourself and the team behind your business. What’s your story/passion? What did you do before this? How did you get started? What are your goals?

Use plenty of images and videos if you can. For example, post a quick video intro or welcome message to virtually greet your customers.

2) Use Polished and Engaging Images

Images are an essential part of any online store. Consider hiring a professional photographer or even a friend who’s good behind the camera to take good quality photos of the products you sell. Spend some time ensuring the photos are user-friendly from a flow and lay-out perspective; that they can be easily shared on social media; and are truly representative of your brand.

What about your logo? What does it say about your brand? Is it memorable? Again, it’s worth spending time and money getting it right.

Check out this quick video from Google and SBA that shows how Harlem, NY-based small business – Make My Cake – transformed its website and increased sales through the use of stylish imagery.

3) Build Community

Use social media to extend your online presence. Go where your customers are and give them the opportunity to interact directly with you – whether it’s Facebook, Pinterest, Twitter, LinkedIn or online forums and message boards. Promote your social media presence on your website, in emails, etc. You can even branch out and extend your online store to Facebook. Read more in these blogs:

4) Ask for Feedback

Another effective way to engage with your customers beyond the transaction itself is to seek feedback. Online surveys, polls, and social media discussions all afford an opportunity to better get to know your consumers. Consider adding product rating or review options to your online store and keep an eye on your third party review listings (Yelp, OpenTable, Google+ Local, etc.).

5) Blog!

Blogs are incredibly important to online businesses – they improve your search engine rankings, personalize your website, give people a reason to keep coming back, and give you an indirect way to promote all that you do.

What should you write about? How do you get started? These blogs have loads of tips and are some of the most popular blogs on SBA.gov:

More Tips

For more tips for creating an engaging online experience, read guest blogger, SmallBizTrends’ Anita Campbell’s article: 8 Ways to Develop Online Content for Your Business – Even if You Hate to Write.

Greening Your Small Business – Which Steps and Investments Should Your Business Make?

Caron_Beesley — Mon, 22 Apr 2013 11:46:07 +0000

Interested in greening your business? Today is Earth Day 2013, so what better time to consider ways in which your business can play its part in saving the planet and reaping the cost benefits of operating more sustainably.

But where do you start and what sustainability measures are right for your company? With more and more consumers choosing to “buy green” and many of them willing to pay higher prices for it, environmentally friendly business practices are here to stay. For the savvy business owner, the trick is knowing which green initiatives will pay off for your business and which may not be worth the time or expense.

For answers, I turned to Michelle Goodman’s excellent article in Entrepreneur magazine from the fall of 2012, How to Determine which Eco-Friendly Changes your Business Should Make, and to tried and tested tips and information from the Environmental Protection Agency and Department of Energy’s joint venture – Energy Star.

Here’s what they suggest:

Start with the Obvious – Use Less of Everything and Track Savings

Using less of everything – water, electricity, fuel, paper, printer ink – makes common sense. Similarly, ask yourself some basic questions: Can I recycle? What about introducing a lights out policy in meeting rooms that aren’t in use and in the building at night? Does it make sense to let my employees telecommute?

As you look for areas where you can make savings and be greener, try it out for a month and compare your business expenses to previous months. If you can demonstrate clear dollar savings, then getting the entire company behind you is going to be a lot easier. You can also use the savings you’ve made to fund bigger sustainability improvements.

If you run a service business such as a hotel, implement a towel re-use policy or a key-card activated energy-saving system that powers down the room when a guest exits. These can reap huge savings.

Look for areas that make sense to your business. For example, can you dispose of less by buying re-usable versions of the same product? Goodman cites a California hair salon that switched from using disposable latex gloves worn by stylists to color hair – which set them back nearly $3,000 a year – to investing in heavy-duty reusable gloves at a cost of a couple of hundred dollars.

Check out these “Sure Energy Savers” tips from Energy Star for ways to realize quick savings now.

Invest Now to Save in the Long Term

If you lease a facility, then it may not make sense to spend money greening your building’s infrastructure, aside from easy-to-implement fixes like using energy efficient light bulbs or equipment. However, if you intend to be in the space for several years, then it’s worth crunching the numbers to see if It’s worth making longer-term green fixes such as upgrading your AC system. If you are going to be in a facility for five years and it will take two years to pay back, why not do it?

Even modest changes can make a big difference and be paid off quickly. Fixes such as improving insulation and capitalizing on natural light by using frosted windows instead of blinds has the potential to reduce your electric bill by up to 80 percent – a massive saving for small businesses.

Of course this all depends on your location and other variables, but quick fixes such as these do have the potential to generate 15-20 percent in savings, green marketing consultant Shel Horowitz tells Entrepreneur magazine.

Get Help Ascertaining the Savings of Pricier Sustainability Upgrades

You don’t have to go it alone; there are many organizations that can help you determine which sustainability measure will help you reap the best return on your investment.

The Energy Star for Small Business website offers free information and technical support for small businesses, including a How To Guide for Analyzing and Upgrading your Facility, tips on preparing an energy strategy and more.
Call your utility provider. They can provide free surveys and help you determine what you can do differently.
Find out if financial incentives are available from your local or state government for installing energy efficient HVA systems, windows, appliances and lighting. Check out Energy.gov for links to tax credits, rebates and savings available by state.
Third party green certification organizations, like The Green Business Bureau and the Green Business Network, provide onsite and online assistance, marketing support tools, and certification confirming the credibility and authenticity of your green initiatives.

The Bottom Line

While green measures and investments can have both short- and long-term financial payoffs, the benefits aren’t just in dollars saved. If your company places a high value on green practices, the feeling that “we are all doing good” can really set you apart both to your employees, your customers and community as a whole.

Related Resources

SBA Green Business Guide – Includes essential information for greening and marketing your “green” business, including considerations such as green certification and eco-labeling, environmental grants and loans, and more.

Related Blogs

Managing Small Business Cash Flow – Answers to 10 Commonly Asked Questions

Caron_Beesley — Mon, 15 Apr 2013 11:38:01 +0000

Cash flow is the lifeblood of a business and critical in its growth. Small businesses are hugely dependent on their cash flow, and must either cut costs or scramble to find alternative funding when they are not being paid on time. With money tight and bank loans hard to get, a cash-strapped company can easily be pushed to the brink.

But what are the basics of good cash flow management? Are there any cash flow templates you can leverage? Where does your breakeven analysis fit in? And, what strategies can you use to ensure cash is flowing, whether you are in the startup stage or looking to grow an established business?

To find answers to these questions, I checked out an archived SBA Web Chat on – Cash Flow Management – hosted by Julie Brander a business consultant and mentor with SCORE.

Here are Julie’s answers to a series of cash flow questions posed by individual small business owners (but which are universal to us all):

Q: Would you recommend that a start-up venture in the early stages do a cash flow chart and why?

A: A cash flow is the single most important aspect of your business because it focuses on the actual cash that goes in and out of your company. Make a list of all the startup costs or one-time expenses, your monthly fixed and variable expenses, and project your sales to see if this business is feasible. Without knowing your costs and expenses, you will not be able to project your income needed to make a profit in your business.

Q: I struggle just coming up with a template to use to project out my cash flows. I use Excel, but don't use it well. I can look at last months and know where cash went, but I want to look out to the future...one week, one month, one year. Do any tools or templates work better than others?

A: Take a look at this Cash Flow Template from SCORE for a 12-month cash flow. There are other resources online; some are free and some are not. Look into accounting software for this feature as well.

(For more specifics on what to include and why, read: Projecting your Business Cash Flow, Made Simple)

Q: If you are unable to secure credit and credit has been cut or credit lines have been closed, how do you keep the doors open to your business?

A: You will need to sell the inventory that you have and pay cash for all inventory and services that you need until you can build up your credit again. Managing your money with your cash flow chart will help so that you are aware of all expenses. Cutting expenses and increasing sales is always the goal.

Q: How important is it for start-ups to calculate their break-even point and what is the easiest way for a non-financial person to do it?

A: Create a simple spreadsheet that lists all the income from sales each day, week, month and year and all the expenses that the company has to pay out. (SBA.gov has more information on this topic here: Breakeven Analysis.) There are templates online that you can use; for example, SCORE offers a free Breakeven Chart that you can use.

Q: I have a hard time getting clients to pay on time. If they don’t pay on time, I have a hard time meeting our expenses. Any suggestions on how to get paid quicker?

A: You can offer a discount for COD (cash on delivery) or net 10 days; it could be 2% off for paying more quickly. Otherwise, the only way to get paid quicker is to call weekly and remind your customer that money is due and offer to take a charge card over the phone. (For more tips, check out these blogs: Tips for Collecting from Non-Paying Clients and How to Get Paid Faster With a Better Invoicing Process.

Q: I am in the process of opening a coffee shop. How much inventory should I purchase for startup so that I do not overbuy?

A: With your financial projections, you can guess about how much you will be selling. Buy as little as possible to start—but make sure that you can get a quick delivery, as you never ever want to run out of anything. This is something that you will learn as you are in business.

Q: Is there a set percentage to mark up the prices for merchandise? Also, if I can get a discount from a vendor for purchasing a higher volume, do I sell it at a discount or should I sell it at the price I had before the discount?

A: A mark-up can vary depending on your overhead costs. Higher overhead would require a higher mark-up. Always sell your merchandise for as much as the market will bear. If there is a higher perceived value, people will pay more. The discount from the vendor means more profit in your pocket.

Q: What options do micro businesses (mom & pop) size have in obtaining periodic help needed with small loans to help with cash flow?

A: A line of credit is the easiest way to have money available as needed. You would have a limit and use it as needed and pay only for what you use. If you are not able to get a line of credit, you need to make sure that your sales increase to create cash flow. Give your customers incentives to buy more or offer discounts.

Q: At what point should you consider using a collection agency to help you collect on past due receivables?

A: Collection agencies take 30%, so try to collect on your own by calling and offering credit terms or returns or credit card payment. If the company does not have the money, you will not be getting paid so your only hope is to take back the merchandise if you can.

Q: What is the formula to determine how much cash reserves a business should hold?

A: Always have enough cash reserves to cover your slow months in business. You should be safe if you can have 3-6 months or more to cover all unknown or variable expenses that may come up. Always consider increasing your sales and moving your inventory as quickly as you can.

More Information and Learning Opportunities

For a full transcript of the web chat and answers to other questions about cash flow management, check out the complete chat session on SBA’s Learning Center.

Follow SBA on Twitter, Facebook and sign-up for weekly email updates to learn more about upcoming web chats and other learning opportunities.

What Home-Office Deductions Can Your Small Business Claim and How?

Caron_Beesley — Mon, 01 Apr 2013 11:38:03 +0000

More than half of all U.S. businesses are based out of an owner’s home, and with this year’s tax season deadlines fast approaching, you may be wondering if your business qualifies for the deduction.

To help business owners understand more about this important deduction, SBA sat down with IRS tax expert, Phyllis Grimes, about what is and what isn’t deductible. This interview is part of a series of short online videos hosted on SBA’s Small Business Learning Center, which offer tips and facts about all aspects of business financing.

Here’s what you need to know.

Evidence That Your Home is Your Principal Place of Business

In order to be eligible to claim the home office deduction, your home must be your principal place of business. If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction. For example, if you have in-person meetings with patients, clients or customers in your home in the normal course of your business—even though you also carry on business at another location—you can deduct your expenses for the part of your home used exclusively and regularly for business. You can deduct expenses for a separate free-standing structure, such as a studio, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of business or the only place where you meet patients, clients or customers.

Distinguish Between Personal Home Expenses and Home-Based Business Expenses

To claim the home office deduction, an area of your home must also be used exclusively and regularly for business use. This is an important distinction, because both conditions must apply. For example, consider this scenario – a home-based attorney uses the den of his or her home to write legal briefs or prepare clients tax returns but the family also uses the den for recreation. So the den is not used exclusively in the attorney’s profession so he or she can’t claim a business deduction for its use.

If, however, you have a separate room or blocked off area that is identifiable as being used solely for business purposes, such as an office space or work area (and you use it “regularly”), then this would qualify you for the deduction.

(Note that if you regularly operate an in-home day care, the “exclusive” rule does not apply. Find more details on this exception here.)

What Expenses Can You Deduct?

If you meet all the criteria to claim the home-based business deduction, you’ll next need to understand how the IRS permits eligible business owners to claim ordinary and necessary expenses related to the business. Essentially, an ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business (in the case of a home business, an ordinary expense could be an installation fee for a business telephone line). A necessary expense is one that is appropriate for the business (such as the cost of your email marketing software). Deductible expenses might also include the business portion of real estate taxes, mortgage interest, rent, utility, insurance, depreciation, utilities, painting and repairs. Refer to IRS Form 8829 for a complete list.

How Much Can You Deduct?

Generally, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities. To calculate this amount, you’ll need to calculate the total square footage of your home and then the total square footage of the space you use for your business. IRS Form 8829 also helps you figure out this calculation.

A common error is to deduct expenses for a portion of the home that is not regularly used or exclusively used for business. For example, the telephone service charge, including taxes, for the first phone line into a home is a nondeductible personal expense. However, charges for business long-distance phone calls on that line—and the cost of a second line used exclusively for business—are deductible business expenses.

How to File Your Home Office Deduction Claim

Use Schedule C Form 1040 to report income and expenses and the deductible amount for the business use of your home (which you calculate using Form 8829).

Additional Information

For worksheets and additional information on computing the allowable home-office deduction, check out these resources offered by the IRS and refer to Publication 587, Business Use of Your Home for a full explanation of tax deductions.

Which Tax Form Should You File? Schedule C or the (Easier) Schedule C-EZ?

Caron_Beesley — Mon, 25 Mar 2013 11:41:32 +0000

If you are a sole proprietor, any earnings you make or expenses you incur as a business owner are included as part of your individual annual tax return (Form 1040). To calculate exactly what to report on Form 1040, you must itemize all operational income and expenses on one of two forms – Schedule C or Schedule C-EZ.

But which one should you use and how do you file? Here’s what you need to know.

Who Should Use Schedule C?

Schedule C (Form 1040) Profit or Loss from Business is the federal tax form filed by most sole proprietors or one owner businesses. The form is used to report both income and losses during tax season.

Sole proprietorships are often considered new to business ownership. However, the truth is that over 70 percent of U.S. business are owned and operated by sole proprietors or sole traders.

Business owners who make very little, or even those who are trading at a loss, can also use schedule C.

What is Schedule C-EZ?

Schedule C-EZ is a simplified and abbreviated version of Schedule C (hence the “EZ” in the title) and can save eligible business owners time and trouble when reporting business income and expenses on the 1040 federal income tax form.

Should You File a Schedule C or Schedule C-EZ?

Businesses that are eligible to use the simpler Schedule C-EZ must meet the following criteria:

Your expenses are not greater than $5,000
You have no employees
You have no inventory
You are not using depreciation or deducting the cost of your home you can use Schedule C-EZ.

If you can check all these boxes, then Schedule C-EZ can make tax season a lot easier.

If you run a home-based business, to take advantage of the home office deduction you’ll need to use Schedule C. It may take longer, but the tax savings will be worth it.

What is the Process for Filing a Schedule C?

Start with good records – something you should be doing as a business owner from the get-go. Every expense, payment, receipt, tax form and loss needs to be recorded and kept separate from your own personal financial records (separate credit cards, for example, will ensure you can easily identify and track business costs).

Schedule C itself is filed annually as an attachment to Form 1040 – Individual Tax Return. The quickest and safest way to file is by IRS e-file—either online with commercial tax preparation software or through a tax professional who is an authorized IRS e-file provider.

Don’t Forget to Make Quarterly Estimated Payments

As a Schedule C filer, you also need to make quarterly estimated tax payments to cover your income tax (federal and state), social security and self-employment tax. This article explains the process: How To Calculate and Make Estimated Tax Payments.

Additional Information

These tips were drawn from the SBA Small Business Learning Center video series on financing topics (specifically Schedule C Profit or Loss from Business). Check out the Center for more free self-paced online training courses, quick videos, web chats and more to help small business owners explore and learn about the many aspects of business ownership.

Also check out SBA’s Filing and Paying Small Business Taxes Guide and the IRS Small Business and Self-Employed Center for more advice on tax matters.

Need Financing to Buy or Grow a Franchise? New Franchise Industry Programs Can Help

Caron_Beesley — Mon, 18 Mar 2013 11:33:42 +0000

The franchise industry, like all businesses, was not immune to the economic crisis of 2008 and the ensuing credit crunch. But the vital signs of a recovery are there. According to the International Franchise Association (IFA), many of the country’s business sectors currently starting to show growth mirror those sectors expected to be the leading drivers of employment in franchising this year. These include food service, health care, hospitality and construction—all sectors with a high concentration of franchise businesses.

“For those Americans dealing with long-term unemployment or a lack of growth opportunities in their current jobs, franchise ownership offers a viable way to be in business for yourself, but not by yourself,” said IFA President & CEO Steve Caldeira.

The Franchise Industry Tackles the Credit Crunch Head-on

Despite these indicators, financing remains a problem for potential franchise owners. According to Entrepreneur magazine (January 2013), there’s still an 18 percent lending shortfall in the franchising industry. In a bid to boost franchise ownership, many franchisors are taking matters into their own hands and offering financing programs of their own. Meineke, The UPS Store, Gold’s Gym, Masasge Envy and Instant Imprints are just a few examples of franchisors now offering financing to qualifying first-time and multi-store franchise owners.

Want to know more? IFA President and CEO, Steve Caldeira offers the following tips (courtesy of Entrepreneur magazine) to would-be or existing franchise owners looking for an alternative to traditional financing options.

Which Franchisors Are Offering Financing Programs?

Approximately 75 to 100 franchisors are offering or working on offering creative financing programs for start-up franchise owners or those looking to expand. Programs range from zero-percent financing for a limited-term, lower license fees, reduced royalties and minority stake ownership by franchisors in multi-unit outlets. Each brand has its own offering, so down payments and collateral requirements will vary.

In addition, the franchise industry is also experiencing a growth in companies dedicated to helping franchise owners secure financing. Two such firms are BoeFly (which matches borrowers to lenders online) and Franchise America Finance (who provides custom lending solutions for franchisees and works with franchisors such as The UPS Store, Popeyes, and Jersey Mike’s).

Always Do Your Franchise and Financing Due Diligence

If you are new to franchise ownership, be sure to do your research and due diligence about the franchise system you’re interested in (get tips on that process here). Study the Franchise Disclosure Document (required by law) and speak to other franchisees about the brand and the financing program on offer. Next, try to understand what your financial responsibilities as a franchise owner will be. This blog offers some pointers on this: Buying a Franchise – How to Determine What it’s Going to Cost You.

Other Franchise Financing Options

Many banks and credit unions offer financing for franchise purchases, so be sure to compare any franchisor lending rates and terms with these. When you approach a bank, be prepared to disclose all your financial information. While your credit rating is important, you’ll also need to provide a personal financial statement, copies of tax returns and information about the source of your down payment funds.

You should also be aware that your choice of franchise will influence a bank’s decision to fund you. Franchises with strong brand names, a track record of consistent profits and cash flow—plus an ability to perform well across a variety of diverse locations—are going to stand you in good stead when you meet with your bank manager.

If your bank is hesitant about a particular franchise system’s performance, or your finances aren’t as strong as they could be, you might want to consider an SBA loan. SBA doesn’t lend to business owners directly; it provides a repayment guarantee to banks and lenders for money they lend to small businesses, making it less risky for the banks. Use this search tool to find the right SBA loan for you.

The Social Storefront – How to Sell Your Products and Services on Facebook

Caron_Beesley — Mon, 11 Mar 2013 11:12:49 +0000

Have you ever considered extending your small business storefront to Facebook?

According to The New York Times, small retailers are having more success than their larger counterparts when it comes to selling socially with Facebook storefronts proving to be a successful outlet for small businesses with less than $100,000 in revenue and fewer than 10 employees.

Yet Facebook storefronts present business owners with a number of challenges. For example, if you have a business page on Facebook, you do not own it; Facebook does, and as such, it is free to change the look, feel, security and functionality of your page when it sees fit. Furthermore, many consumers may be reticent about conducting financial transactions on social media.

If your small business is interested in exploring this new revenue stream, here are some tips to help you get started building your social storefront:

1. Build Your Facebook Storefront

Facebook storefronts are wholly independent of Facebook and are enabled by third party apps and services from companies such as Ecwid, BigCommerce’s SocialShop application and VendorShop Social. Alternatively, you can also have an app developer build you a custom storefront.

These apps offer a number of social shopping features that you can add to your Facebook business page. Some are free, with options to upgrade for increased functionality, while others charge a low monthly subscription fee. (Note: The Facebook store provider market is an emerging one with new start-ups popping up regularly. Furthermore, established players are increasingly targeted for acquisition. So do your due diligence on this one. Look for providers with a good customer service track record and try not to get locked into time-bound contracts.)

Whichever app you choose, getting started is quite easy. Once your app is installed, you can add product listings; a welcome page to showcase certain products and promotions; a shopping cart; and a variety of payment options such as PayPal. Some apps also include tools to promote your storefront to your fans, via email, your blog or website.

2. Personalize Your Storefront

Next, personalize your storefront to reflect your brand and appeal to the fans and customers you are hoping to engage with and sell to. Think about adding a human element to your banner image—this will help connect you with your potential buyers. To maximize your Facebook sales, look for ways to engage and connect—post tips that relate to your industry; share articles, images and blogs that might be of interest; and have a dialogue with your fans. Above all, inject some personality into your page—this is a huge differentiator for small businesses, so use it!

The New York Times also suggests pinning and tagging status updates and photos to attract fans and keep your page dynamic. For example, you could run a contest that encourages customers to tag your products in the photos they post on their Facebook page. In doing so, you’ll get free visibility on that person’s wall for all their friends and followers to see. You can also use the pin feature to highlight a product of the week or a special discount.

3. Be Social, Build a Community

Make your page an active one—treat it as you would your own bricks and mortar store. Meet and greet fans, and engage with them. Encourage them to post by asking open-ended questions in your status updates; comment on and like the interaction that follows.

You can also grow your community outside the confines of our own page. For example, follow business pages that relate to your products, industry or neighborhood and interact with folks on those pages (without being overly promotional). For example, if you own a retail store on Main Street, look around and find out who else is on Facebook—your local coffee shop, library, community newspaper? Give them a like (using your business page profile) and join in the conversation with other business owners and their customers. Your business will appear on their wall and help increase your visibility and likeability!

4. Don’t Put All Your Eggs in One Basket

It’s unlikely that Facebook will ever be your only sales channel. So test the waters before you set up your store and ask your fans and customers if they’d be interested in buying from you via Facebook. Then, once you are up and running, don’t ignore your website or retail location. Small businesses are known to get as much as 15-30 percent of their sales from Facebook, but remember that not everyone is on Facebook, and not all are comfortable doing business there.

5. More Reading

For some real-world examples of how small businesses are using Facebook storefronts, check out this article from The New York Times: Small Retailers Open Up Storefronts on Facebook Pages.

Buying a Small Business Overseas – 5 Tips for a Smooth Transaction

Caron_Beesley — Mon, 04 Mar 2013 12:42:51 +0000

Interested in buying a business overseas? Whether you’re looking to expand into new markets or are just planning on funding your retirement plans outside the U.S., there are a number of steps you should take to ensure your new venture goes smoothly. Everything from business practices; legal and regulatory requirements; navigating an international sale deal; and language and cultural differences will come into play.

Here are some considerations and issues to bear in mind as you go about buying a business in a foreign country.

Language

If English isn’t the first language in the country where you intend to buy a business, then learning the local language should be your first priority. If you can’t do this, then you will need to think long and hard about your motivation and determination for going the distance in this new territory.

Measure the Risks to Your Capital Investment

No matter how much capital you have, to lessen the risk, be sure to factor in the many variables that come from buying and running a business. Factor in cost overruns, delays getting started and unforeseen expenses. For example, don’t always assume that cheap labor is always going to be quality labor—you get what you pay for. You’ll also incur many of the employment expenses you incur in the U.S. such as benefits, taxes, sick leave, and social security.

Work with an Expert

As with any overseas venture, one of the most important things you can do when buying a business abroad is to consult an expert. Accountants, lawyers, tax attorneys, and real estate brokers, can all help you succeed with your cross-border purchase. To ensure the best representation, work with experts who have experience in the location and industry in which you are buying a business. But you’ll also need to find in-country experts who are familiar with business and regulatory matters in the country you intend to buy a business.

Do Your Research About Cross-Border Deals

It goes without saying that any business venture requires research, so here are some issues you should bear in mind:

Laws and Regulations – Legal and tax regulations overseas can be even more complicated than in the U.S. for business owners. Licenses and permits, for example, can take several months if not years to be granted. You’ll also need to understand how the country handles expatriation of taxes on profits on foreign business owners. Much of this information can be found online, but for more information, reach out to local in-country small business organizations, business leaders and chambers of commerce.
Understand the Buying Process – As you seek advice, be sure to ask about the negotiation and valuation process involved in buying a business. What’s included in the sale? You don’t want to be left with a hollow shell of a business when you thought you were getting furniture and fixtures too.
Pay Heed to the Competition – As an outsider, it can take a tough skin to make a success of a small business in a foreign location. Be ready for that—look for ways to test the waters of the community before you take the plunge. Also look to the competition to understand your market potential—is there a gap or untapped need that you think your business can serve?
Determine How You Intend to Manage Your Business – Will you re-locate yourself (that brings with it a raft of immigration factors), or will you manage it from the U.S. with on-site staff? Could you keep the current owner and hire him or her as an employee? Know your options before you hit the negotiation stage, and weigh the benefits of each.

Be Prepared to Connect and be Agile

Last but not least, buying and running a business—let alone an overseas business—requires tenacity, agility, and deep personal connections. So do your research, weigh the pros and cons, have a plan and heed laws and regulations. But above all, be true to your ambition and drive. Some of the best small business owners succeed not because they stick to the rulebook, but because they look for ways to take the initiative and forge a path for themselves.

SBA Small Business Learning Center: Training, Tools and Answers via Your Desktop

Caron_Beesley — Mon, 25 Feb 2013 14:12:40 +0000

Starting or growing a business? Owning a small business can be a fulfilling endeavor, but as you probably already know or are just finding out – it requires that you wear many hats. This of course leaves you with little time to take a deep dive into the many aspects of starting and growing a business. Instead, many business owners turn to search engines for answers when questions come up.

But what if you had access to a small business classroom that provided informed, accurate and always-available access to the advice and guidance you need?

Welcome to the SBA Small Business Learning Center.

Online Training and Tools for Small Business Owners

Launched in late 2012, the SBA Small Business Learning Center is an online portal that hosts a variety of self-paced online training courses, quick videos, web chats and more to help small business owners explore and learn about the many aspects of business ownership.

Content is filtered by topic, so no matter the stage of your business, or the kind of insight you need, you can quickly get answers.

For example, if you’re wondering how SBA loan programs work or just need a primer in accounting or small business taxes, check out these self-paced online financing courses and short videos. Or explore tips from the pros in these archived SBA Web Chats.

Other topics covered include starting a business as a young entrepreneur, an introduction to franchising, taking your business global with exporting, marketing 101, selling to the U.S. government, and much more.

Get More Help Offline

And if you can’t find the training or advice that you need, use the “Get Local Assistance” interactive map to find one of many small business counseling, assistance and mentoring organizations in your community.

Browse around, and let us know what you think about the SBA Small Business Learning Center!

A Guide to SBA Loan Programs - Just one of the self-paced online courses available in the new SBA Learning Center

5 Tips for Successfully Navigating the SBA Loan Application Process

Caron_Beesley — Tue, 19 Feb 2013 12:26:20 +0000

In the market for a business loan? Heard about SBA loans but not really sure how they work or how to go about applying for one?

The following are common questions that small business owners have about SBA loan programs and the loan application process.

1. How do SBA loans work?

While the SBA does offer numerous loan programs to help small business owners finance their businesses, it doesn’t actually lend businesses the money. Instead, a bank makes the loan, which is backed by the SBA. This allows the bank to take a little more risk than they otherwise might.

So this means that if you are seeking a business loan and don’t qualify for a traditional bank loan, perhaps because you don’t have the collateral or years in business to justify the loan, the government can help – although you still need to work primarily with a bank.

2. Who makes the decision that an SBA loan is right for my business?

If you’ve been turned down for a traditional bank loan, or are curious about SBA loan programs, where should you start? Should you go to the bank and ask for an SBA loan, or would they instinctively guide you towards one?

While your local SBA district office can help explain the available loan programs and determine your eligibility for them, you’ll need to find a local SBA lender to kick-start the application process. These banks and financial institutions can help you determine which loan program might be right for you, whether it’s a traditional bank loan or an SBA-backed loan. They are also your point of contact for processing your loan application.

3. How do I determine which SBA loan is right for me?

The SBA offers numerous loan programs depending on your business profile, financing needs, growth plans and so on. There are a number of ways to identify the right loan program for your business.

If you are in the early stages of exploring your financing options, check out the SBA’s Online Loans and Grants Search Tool. Answer a few quick questions about your business and the tool will suggest government financing programs for which you might qualify.

Once you’ve done your research, consult your local SBA District Office and ask them to steer you towards a few SBA lenders in your area so that you can be sure you’re getting the right loan program for your business – and the right bank!

4. How should I prepare for my meeting with the bank?

Preparation is key and it’s important to understand some of the criteria that might influence your eligibility for an SBA loan. These include credit factors – such as making timely debt payments (payment on existing credit relationships, both business and personal, is considered an indicator of your ability to repay a loan), cash flow projections and your debt-to-worth ratio. Collateral and working capital are other factors that may impact eligibility.

SBA offers guidance on all the factors that lenders look at here.

You’ll also need to ensure you are in good standing with your state treasury and the IRS (i.e., you’ve paid all taxes owed).

And don’t forget the most important document – your business plan with at least three years of financial projections; a view of what you’ll do with the proceeds of the loan; and solid proof that you know your industry and target market. This is particularly important for start-ups that don’t have a financial history. The bank will base its decision on your industry experience and future plans.

If you don’t have a business plan, check out SBA’s Build your Business Plan Tool – a step-by-step guide to help you get started. You can save the plan as you go and download it when you’re done.

5. What do I need to complete my SBA loan application?

An incomplete loan application won’t do you any favors with the bank and could slow down the entire loan process. Familiarize yourself in advance with the key components of the loan application – from the right forms, to the necessary background information. Refer to this SBA Loan Application Checklist to ensure you have all your i’s dotted and t’s crossed. SBA also offers a free online training course: How to Prepare a Loan Package.

Additional Resources

The Bigger Financial Picture – Is it Time to Hire a CFO and Where Should You Look?

Caron_Beesley — Mon, 11 Feb 2013 12:34:55 +0000

So, your business is growing. While you may or may not have an accountant on hand, what about your bigger financial picture? Is it time to hire a Chief Financial Officer?

More than just a bookkeeper, payroll administrator or keeper of P&L and cash flow statements, a Chief Financial Officer (CFO) can help you plan, model, forecast and make better business decisions. A CFO looks at your business holistically–this includes people, processes and systems–and ensures that together you have accurate financial information to plan for the future.

A CFO will also work with you or your accountant to understand the drivers for business performance. They’ll pick up on signals that might indicate a problem (such as a potential cash flow issue down the line), and help you make informed decisions about reaching your business goals.

Are You Ready for a CFO?

We all have sleepless nights worrying about the direction of our business; when cash flow will take a turn for the better; or where our next higher margin client is coming from. And being a small business owner, wearing all those hats, it isn’t easy to step away from the day-to-day details and look at your business as a whole.

A CFO can help with these worries–and needn’t break the bank in the process.

How to Cost-Effectively Hire a CFO

If your business is growing fast, then you could consider hiring a CFO on a part-time or as-needed basis and start delegating some of that financial angst. Management consulting firms often offer this type of service. If budget really is an issue, consider the volunteer services of SCORE.

SCORE is a nonprofit association dedicated to helping small businesses get off the ground, grow and achieve their goals through education and mentorship. SCORE mentors deliver free, confidential, valuable advice for your business needs across diverse industries and business functions including finance, marketing, operations, technology and more. Connect with a mentor here.

Not Quite There Yet? Consider an Accountant

If you are still in start-up or growth mode—or feel you’d benefit with the help of someone to take care of your daily financial obligations such as account payables and receivables, payroll, taxes, and make sound judgments to benefit your personal and business finances—then you should really consider hiring an accountant. If you already have one, consider leaning on their services a little more.

An accountant can save you time and clear up much of the confusion that you experience when it comes to managing your finances. This blog offers tips on finding and interviewing potential accountants: How to Find an Accountant Who Can Help Your Small Business over the Long Haul.

How to Take on Venture Capital Without Losing Control of Your Start-Up

Caron_Beesley — Mon, 28 Jan 2013 12:42:44 +0000

Considering options for funding your start-up? Wondering if now is the right time to seek venture capital, but worried about losing control of your business?

Here are some tips for weighing your funding options, finding the right venture capital firm for your needs, and working with them once you’ve received your first injection of seed money.

Is Venture Capital Right for Your Small Business?

If you are looking for funding under $200,000, smaller angel investors (this could include borrowing from family and friends) or peer-to-peer lending or crowdfunding might be better options than a larger VC firm. Other alternatives include SBA loans. SBA doesn’t provide the loan; instead, they provide a repayment guarantee to banks, removing much of the risk of lending to small businesses. If your business is engaged in a high-tech industry or R&D, another option is a Small Business Innovation Research Grant. These federal funds support the critical start-up and development stages of small businesses.

Finding the Right VC Firm

If you have a proof of concept and are ready for a significant investment to fund your next stage of growth, then venture capital (VC) might be for you. But how do you find the right VC firm with which to align your business?

Given that a VC firm is going to be involved in your business’ funding and management, choosing one that provides a good match for your business is critical. Look for companies that have experience with businesses and industries like yours. Since a VC is going to be actively involved in your business, other factors such as its personality and core values are also important. A VC that is located close by might also be important.

So where can you find potential VC investors? If you have a good network then there’s a strong likelihood you can pinpoint potential investors via this route. Start locally and extend your search from there. Here are some tips and resources that can help:

Start in your Community – If you are involved in a local Chamber of Commerce or other small business group, start your search here. Talk to experts and business peers alike. Small Business Development Centers (SBDCs) and Women’s Business Centers may also be able to help introduce you to local investors. Find a center here.
Talk to Your State Economic Development Agency – At the state level, State and Local Economic Development Agencies may be able to help refer you to investors in your region.
Consider Trade Associations – Most industries are represented by a trade association, this is another great place to expand your search and meet potential investors. You can also look into national and local investing and venture capital groups like the National Venture Capital Association and the Angel Capital Association.

Your next step is to present any potential investor with a business plan. SBA’s online Build a Business Plan tool can help you create one.

How to Maintain Leadership Control of Your Company

Many small business owners are reticent to invite VC funding because they’re concerned about losing control of their business. While it’s true that a VC firm will insist on controlling more than 50 percent of an early-stage entrepreneurial enterprise—does this mean you actually relinquish control of your business? Not necessarily. VC deals are structured around mutual incentives and milestones that are beneficial for all, and are rarely about one-sided control. VCs want business founders to aspire to grow and succeed, and they structure the financing deals to ensure this. For example, the terms of typical VC financing dictate that the investors don’t realize a profit until management does (assuming that they’ve already seen a return in capital invested) and vice versa.

Another emerging trend, as reported by the New York Times, is that VCs are increasingly putting a premium on young, visionary entrepreneurs who grew up with the Internet, social media and mobile technologies. With this clout behind them, these young founders are becoming more assertive in funding rounds, securing better terms and even cashing out their investors before an initial public offering.

That’s not to say your VC can’t move to replace you if your business isn’t performing or hitting key milestones. Some other things you can do to ensure you retain some level of control include the following:

Insist on an Employment Contract – This can minimize the risk of founders getting fired by their board of directors. Negotiate this before any seed money has exchanged hands.
Hire Stellar Employees – Poor staff will compromise the success of your business and jeopardize your position on the management team. By hiring right, you’ll ensure key milestones are understood and met, and profits are realized.
Collaborate with your Investors – In addition to funding, investors bring a wealth of experience. Capitalize on this and treat your VC as a partner—not as a threat.

For other tips, read Surprising Ways to Maintain Control of Your Business with Investor Approval from Yahoo Small Business Advisor.

Has your business sought VC financing? What best practices can you share for working with VCs? Leave a comment below.

Business Loans – What Lenders Look for and Tips for Winning Them Over

Caron_Beesley — Tue, 22 Jan 2013 12:31:20 +0000

Securing small business financing can be challenging. Whether you are just starting out or looking to grow, banks and lending institutions can be rigorous in their lending review practices.

For example, businesses with few assets to their name may find it hard to secure a traditional loan. Other business owners may not be able to provide the reassurance that lenders seek to alleviate their concerns that your business may fail and the loan won’t get repaid. So when you approach a lender, it’s just as important to understand the basis on which loans are made as it is to stack up your financials and business plan.

So what are lenders looking for in a potential loan applicant? Here’s what you need to know.

Loan Applicants Need to Check off Several Boxes

What are loan officers looking for when approached about a loan? Here are some basic “must-haves” that the ideal candidate might be expected to evidence:

That you have sufficient assets, financial reserves and personal collateral to endure business fluctuations (and still pay off your loan)
As an existing business owner, you’ll need to show that you have solid cash flow, sufficient to repay the loan
New businesses need to evidence that they have a track record of profitability and success in a similar business endeavor

Let’s face it, that’s a tricky list for any prospective or existing small business! So what are your options? Proving your creditworthiness is still possible, with some planning and preparation.

How to Prove Your Creditworthiness

Bankers need to make money, and while they may have an ideal candidate in mind, even they have to compromise—this is where your opportunity lies. The trick is to demonstrate, using other means, that you are a creditworthy business owner. For example, if you are new to this business, can you show success in managing a similar business another field (even if you weren’t the owner)? Perhaps you’ve owned or managed a profitable business in a different industry? Lending officers might be more agreeable to your application if you can show that you supplement your own experience with that of someone who also has success in the field.

Putting yourself in the lender’s shoes is a good starting point. It’s much like a job interview, where you form an understanding of the type of candidate the employer is looking for and prepare your application and anticipate questions accordingly. Ask yourself: “Why should this lender think my business can succeed where others have failed?” and have a thorough answer prepared, plus a detailed explanation of how the money will be used and your plan for paying it off.

Step Back and Prepare

Key to this preparation is a solid business plan, good personal and business credit, and some expert help. The following SBA resources and tools can help guide you down this preparation path:

Build a Business Plan Online Tool – Putting pen to paper to write a business plan isn’t the easiest of tasks. Check out this new tool from SBA that guides small business owners through the process of creating a basic, downloadable business plan—and offers pointers on essential elements like cash flow and financial projections. The great thing about this tool is you can build a plan in smaller bites, save your progress and return at your leisure.

Clean Up Your Credit – Business credit is an asset and considered an economic resource that makes up the financial foundation of a company. Lenders look for assets. SBA guest blogger Marco Carbajo blogs regularly about how to build your business and personal credit to help secure financing. Check out his article, How To Build Business Credit For Your Start Up, and view more of Marco’s articles here (you’ll need to log into the SBA Community to follow this link).

Consult an Expert – Whether you need help finding the right loan for your business or a guiding hand that can help you through the application process, don’t feel that you have to go it alone. Local Small Business Development Centers, Women’s Business Centers, and SCORE (a mentoring organization for small businesses) can help you through the process. Find one of these groups in your community.

Can’t Get a Business Loan? Consider Alternative Financing from SBA Loan Programs

If you or your lender decides that you aren’t the right candidate for a traditional business loan, you still have options. Consider an SBA Loan Program. The SBA doesn’t lend businesses money; instead, these programs take the risk away from the banks and encourage them to make loans to small business owners by guaranteeing part of the loan.

Check out these additional online learning resources that can help you navigate the SBA loan process:

How to Prepare a Loan Package
Video interviews with successful entrepreneurs who share the lessons they've learned about owning a small business and securing an SBA loan

How to File and Provide W-2s, W-3s, & 1099 Forms – Plus Important Updates for the 2013 Reporting Season

Caron_Beesley — Mon, 14 Jan 2013 12:43:10 +0000

It’s that time of year again—W-2, W-3 and 1099 reporting season.

The Affordable Care Act has changed things a little this year in terms of the information you must provide your employees on their W2s. Read on for an update and a refresher of other reporting obligations and how to file the right forms.

Reporting Employee Wages and Taxes – What’s New on Form W-2

If you paid an employee any amount in wages in 2012, you must issue an annual W-2 form to report the wages, income tax, and FICA tax withholding, along with certain other employment-related payments. You should provide this information to both your employees and the Social Security Administration (SSA).

*New for the 2012 Tax Year* – As a result of the Affordable Care Act, businesses that provide health insurance to their employees are required to report the cost of coverage on employee W-2s. However, in order to allow businesses to update their payroll systems to support this requirement, most small employers are exempt from this requirement for the year 2012. The criteria are as follows:

If you filed fewer than 250 W-2 forms in 2011, you are not required to report the cost of coverage on 2012 forms (filed with the SSA in early 2013). You do have the option of doing so, if you wish.
If you filed more than 250 W-2s, you will be required to comply with the new reporting requirements starting with the 2012 Form W-2.

If you are required or choose to report, the amount you report should include both the employee and employer contribution to the healthcare premium so your employees have a view of the true cost of this benefit.

How to File Form W-2 and W-3 With the Social Security Administration

As an employer, you must file Form W-2 and W-3 with the SSA by February 28, 2013. If you file electronically, the deadline is April 1, 2013. Here’s how to file:

Electronic Filing – If you have less than 20 employees, you can file your W-2s online and print copies for employees. You’ll also need to file Form W-3 form at the same time showing total earnings and taxes withheld for all your employees. To avoid errors, you can verify names and SSNs online to ensure your records align with SSAs.
Paper Filing – Follow these instructions for filing a paper W-2.

Provide Your Employees with W-2 Forms

In addition to filing Form W-2 and W-3 with the SSA, you’ll need to give your employees a copy of their W-2s with a postmarked data of January 31 or earlier. If you filed your W-2s online, these employee forms can be printed out automatically or you can download paper versions from IRS.gov.

Ask your employees to check that all the information on the form is correct. Any errors can be corrected using Form W-2c and Form W-3c.

For forms and updates about W-2 filing requirements, check out this W-2 Wage and Tax Statement Guide on IRS.gov.

Report Payments Made to Independent Contractors on Form 1099

If you used the services of an independent contractor in 2012 (i.e. non-employees), you’ll need to report compensation of $600 or more to the IRS on form 1099-MISC (downloadable here) and provide a copy to independent contractors by January 31, 2013.

Got Questions?

Always consult a knowledgeable tax advisor in matters of business taxation, as errors and mistakes can result in costly penalties.

Calendar or Fiscal? Which Tax Year is Right for your Small Business?

Caron_Beesley — Mon, 07 Jan 2013 12:51:16 +0000

Did you start a business last year? No? Are you planning to start one this year? Did you know you can choose the tax year you intend to operate under? Choose well, because there are pros and cons for either method.

A tax year is an accounting period for which you must report your taxable income and business expenses, and the law requires you to operate according to a consistent tax year. The most common is the most obvious: the calendar year. However, businesses can also report based on a fiscal tax year and a short tax year.

Here are some tips for choosing the right period for your small business.

1. Calendar Tax Year

This is a simple and intuitive method adopted by many small business owners, requiring you to track and report income and expenses to the IRS much like individual tax payers do: on an annual basis from January 1 to December 31.

Whether you should use this method is typically determined by how your business is legally structured. For example, if you are a sole proprietor, there is no separation of your business and personal taxes, so a calendar year method is typically required. Likewise, business partnerships or limited liability companies (LLCs) also will generally use the same tax year most business owner(s). S corporations and personal service corporations will also use a calendar year in most cases.

Generally, anyone can adopt the calendar year. However, if any of the following apply, the IRS requires you to adopt the calendar year:
You keep no books or records
You have no annual accounting period
Your present tax year does not qualify as a fiscal year
You are required to use a calendar year by a provision of the Internal Revenue Code or the Income Tax Regulations

Read more about the tax implications of your business structure.

2. Fiscal Tax Year

Many corporations and larger firms operate on a fiscal tax year basis – a period of 12 consecutive months ending on the last day of any month that isn’t December. For small businesses that might not have the accounting expertise on-hand to keep everything reconciled, a calendar tax year is easier to manage. But there are exceptions where it may make sense to consider a fiscal year. For example, if you operate a seasonal business, reporting income by calendar year could split your season and give a distorted view of income and expenses.

Likewise, if your business shows most of its expenses in one year and income in another, it may be worth looking into a fiscal tax year so that both periods are included in the same 12-month set.

3. Short Tax Year

Technically, a short tax year (less than 12 months) is not an annual accounting period; instead, it applies to businesses that didn’t exist for the entire tax year or those that changed their tax year period during the year.

If you started your business any time during the tax year, you still need to file a tax return for the time you were in existence. Requirements for filing the return and calculating tax owed are generally the same as the requirements for a return for a full tax year (12 months) ending on the last day of the short tax year.

Can You Change a Tax Year?

Once you’ve adopted a tax year, you may need to get IRS approval to change it. Typically, businesses that change their legal structure may wish to shift from a calendar year to a fiscal year method. In these cases, you will need to file Form 1128, Application to Adopt, Change, or Retain a Tax Year.

4 Tips for Hiring Your First Employee in 2013

Caron_Beesley — Mon, 31 Dec 2012 13:09:19 +0000

Are you turning down work because you simply don’t have enough time or hands on-board to take it on? Thinking of hiring your first employee? Congratulations – your business is doing well!

But before you advertise for a new employee, proceed with caution. Hiring staff is a commitment to the future, and should be made in the context of your long-term growth plan and whether you really want to be an employer. Here are some points to consider, plus some tips for determining whether you can afford to hire your first employee.

1. What is your vision for your business?

When faced with too much work, solopreneurs are often encouraged to hire up, but is that what you want for your business? Is it your goal to become a larger business or remain a sole proprietor? Could you farm off work to independent contractors or outsource certain functions to take some weight off your shoulders? Could you team with other businesses to complement your services? For example, a graphic designer or web designer could “partner” with a marketing consultant to offer customers a range of full-service solutions.

Virtual assistants are another non-hire staffing option and can help you with administrative and even basic sales and marketing tasks. Temporary workers might be a short term option, but be aware: many laws and regulations that apply to full-time employees also apply to seasonal or part-time employees.

The following articles offer some tips for alternative sources of labor:

2. Where do you need help?

If you’ve decided to bring an employee on board, your first step is to project your business workload and identify areas where you need help. What does your workload or pipeline look like for the next 30 days, 90 days and six months, and which jobs do you need help with? What are you doing now that you could offload or have an employee augment? Perhaps you need skilled labor out in the field, or a sales rep to help you grow your business. Or, maybe you simply want to free up your time to concentrate on bringing in and fulfilling business orders.

3. Can you manage people?

Don’t overlook this important consideration. If you’ve managed employees in another occupation, how successful were you at making good hiring decisions? How many bad ones have you made?

4. Can You Afford It?

Working out whether you can afford to hire is a common stumbling block. Start by building a realistic picture of the costs and overheads that your business will incur. These include:

Wages
Unemployment Tax – State unemployment taxes vary by state, so check with yours. Federal unemployment tax is 0.8 percent on each employee's first $7,000 of earnings.
Workers Compensation Insurance – For new employers, this figure depends on your industry and the job performed. Again, check with your state about your expected rate.
Medicare and Social Security Taxes – Currently, Social Security tax is 6.2 percent on wages up to $113,700, and Medicare tax is another 1.45 percent.
Recruitment and Training Costs – These can run into the thousands, but, you can reduce them by using networking and referrals to uncover candidates.
Benefits – Optional!
Payroll Costs – It takes time and money to administer payroll and calculate taxes and withholding. Examine the cost of payroll software that can help streamline this task.
New Equipment – Computer, desk, other tools.
Software Licenses and Phone Data Plans
Insurance for Company Vehicles

Next, look at last year’s income and expenses and factor in the projected annual cost of an employee and the extra income one might make possible. Then, consider your pipeline and cash flow. Can you afford to live with reduced profitability for a few months as your business ramps up? Calculate what you can put into generating new business if you are freed up.

You don’t have to do this all on your own. Organizations like SCORE, Small Business Development Centers and Women’s Business Centers have resources and experts on hand to help small business owners navigate this process. Find assistance in your community here.

Additional Resources

Steps to Hiring your First Employee – Explains the tax, legal and regulatory steps required by law.
4 Interview Questions That Get to the Heart of a Candidate’s Potential

Why and How to Implement a Health and Wellness Program for Your Employees

Caron_Beesley — Mon, 24 Dec 2012 13:30:51 +0000

As you look forward to a new year and new business opportunities, is the health and wellness of your employees at the forefront of your 2013 business plans?

According to a new study of more than 1,000 small-business owners by Humana and the National Small Business Association (NSBA), 93 percent of small businesses consider their employees’ physical and mental health to be important to their bottom line, and 54 percent say it’s “extremely important.” But despite that, only a third of respondents are confident they can manage employee health care needs, citing gaps in information and employee interest.

(Note: This survey defined health and wellness programs as initiatives to encourage employees to make healthier choices, such as getting preventative care, eating right and exercising.)

So what health and wellness issues are small business owners concerned about?

High employee stress is the number one concern for small business decision-makers, especially at smaller companies, with stress levels rating more than triple other employee well-being concerns.
Employees working when they are sick is second – 57 percent reported that their employees show up for work when they should be taking a sick day.

As this study shows, health and wellness programs can be a win-win situation for small businesses, fostering healthier people and healthier profits. So what’s holding small business owners back from implementing programs?

Employee Interest

A key factor in whether or not to introduce a health and wellness program rests with employee interest. For example, start-ups (many with younger employees) lead the way in providing wellness programs and their employees prefer it this way. In fact, 85 percent of start-ups say wellness programs are worth the investment and 63 percent are already adopting such programs. Interestingly, these start-ups say these programs aid in recruiting and retaining employees.

So with employees actively seeking health and wellness benefits, these programs are likely to become an increasingly important part of any small business owner’s hiring and personnel management strategy.

Employers Need More Information

More than half the small business owners surveyed maintained that insufficient information is available about introducing health and wellness programs at a small business. This is something healthcare insurance providers are increasingly aware of and are seeking to correct by providing tools and resources to help small business owners develop health and wellness programs. The reward for both is healthier employees and a healthier bottom line.

Tips for Implementing Health and Wellness Programs in Your Small Business

So how can you go about planning and implementing a program that makes sense for your business, with the limited resources available to you? Health and wellness plans don’t have to break the bank. With a bit of creativity there are many things you can do to keep employees health and happy.

Here are a few tips:

Talk to your employees. Find out what aspects of an employer-sponsored health and wellness plan they would value most. It could be discounted gym memberships, quarterly sponsored walks/runs, or employee-led healthy cooking workshops. maybe it’s just more awareness of free or low-cost preventative care options covered by your healthcare insurance plan.
Get ideas for your wellness program. This blog from former SBA guest blogger, Dawn Rivers Baker, offers some creative and engaging ideas for a low-cost or no-cost employee wellness program.
Get help structuring specific programs. The Centers for Disease Control provides some great online tools to help you design and structure your wellness programs. For example, CDC LEAN Works is a free web-based resource that can help employers design effective worksite obesity prevention and control programs, including an obesity cost calculator to estimate how much obesity is costing your company and how much in savings your company could reap with different sorts of workplace interventions.
Consult your healthcare insurance provider. Many now offer tools and resources to help employers develop programs. Familiarize yourself with the types of programs that make sense for your business.
Get help from small business assistance groups. Check in with your local Small Business Development Center or Chamber of Commerce. They may have resources or seminars that can help you build the right program for your business.

Have you implemented a wellness program? Has it improved your bottom line? Have any tips for other small business owners? Leave a comment below.

Related Blogs

How to Reduce the Cost of Providing Health Care Coverage for Your Employees

What Your Small Business Needs to Know About Charitable Giving This Holiday Season

Caron_Beesley — Mon, 10 Dec 2012 11:54:00 +0000

During the season of giving thanks and giving gifts, charitable giving can make a big difference to those in need and also shine a favorable light on your small business. But what’s the best approach and how do you claim that all-important tax deduction? Here are some tips for developing a charitable giving strategy and claiming the right deduction.

Giving Back is Good for Small Business

Research shows that giving back is not only important to small business, but also important to your customers. According to a 2010 philanthropic study by Cone Communications, 85 percent of consumers have a more positive image of a product or company when it supports a cause they care about. Ninety percent want companies to tell them how they’re supporting causes. So more than 278 million people in the U.S. want to know what a company is doing to benefit a cause.

Charitable giving is also great for employee morale because it brings employees together to support good causes that are separate from their everyday work-life. From a marketing perspective, it can also give your business an opportunity to reach out and connect with members of your community on a different platform.

Of course, there’s also the tax deduction – more on that at the end of this post.

Making it Happen

Despite the benefits, charity isn’t always easy for small businesses. Finding the time and resources for meaningful activities can be challenging. And how do you determine which charity is the right fit for your business and your community?

As with all aspects of managing your business, it’s important to have a plan that is clearly tied to your goals. Connect your business purpose to a particular charity. For example, if you are in the restaurant trade, support a charity that collects food for the homeless or organizes military care packages for our troops. Lawyers could support charities or non-profits that work to provide low-cost legal support for low-income individuals.

If you can’t find an appropriate charity, simply pick one you’re passionate about and that will resonate with your employees.

For some other ideas about getting your small business involved in giving back, read this blog from SBA guest blogger Anita Campbell on SmallBizTrends.com: 5 Steps to Giving Back: Charitable Giving and Your Business. Anita’s tips can help you:

Determine what causes you want to help
Involve employees
Investigate the organization
Decide how you will help
Get your customers involved

Claiming Your Tax Deduction

Most charities or non-profits operate as tax-exempt 501(c)(3) organizations and donations made to them are tax deductible. Donations that are eligible for a tax deduction include cash, volunteered services, sponsorship of local charity events or the donation of inventory or services.

Be sure to check the tax status of the charity of your choice either directly with them or with this online search tool from the IRS for a quick look-up of tax-exempt organizations.

So what tax benefits can charitable giving provide?

Charitable contributions can qualify as tax deductions against your business’ annual tax liability. Generally, you can deduct up to 50 percent of your adjusted gross income. However, the IRS tax code is complex and it’s important to note that not all contributions can be deducted.

Cash contributions – You can claim a deduction for cash or other monetary contributions as long as they aren’t set aside for use by a specific person. Make sure you make the contribution within the current tax year to be eligible for the deduction, regardless of the accounting method your business uses. Use Form 1040, Schedule A, to itemize deductions on your return.
Property or inventory donations – These are tax deductible, although you’ll need to assess their fair market value. Use Form 8283 for donations over $500.
Volunteering – This is a popular form of giving, and while you can’t deduct the value of your service, you can deduct some of the expenses you incur such as the cost of buying a uniform or even the costs of hosting a fundraising party.
Benefits you receive as a result of your giving – If you get something in return for your donation you can only deduct the amount of your contribution that is over the value of the benefit/prize you receive. Suppose your company got involved in a charity auction and you placed a winning bid. If you bid $500 and the fair market value of the prize was $200, you can deduct the difference of $300.

It’s always a good idea to consult your accountant or tax advisor for information about what constitutes a charitable tax deduction and how to properly file your claim. Check out this IRS Guide to Charitable Contributions, too.

12 Last-Minute, Low-Cost Holiday Marketing Tips for Your Small Business

Caron_Beesley — Mon, 03 Dec 2012 12:39:13 +0000

The holiday season is crunch time for all of us – whether you’ve got gifts to buy or gifts to sell.

If you’re a small business owner facing the busy holiday shopping and dining days ahead, here are some last-minute tips to help you maximize your holiday sales.

Fine Tune your Holiday Online Campaign

‘Tis the season of countless email offers, but there are still last-minute steps you can take to stand out from the crowd. Here are a few tips for an effective “holiday countdown” online marketing campaign:

Make it easy for consumers to find holiday gift lines – Organize your website by categories such as “Gifts under $50,” “Gifts for Him/Her,” “Popular Items,” etc. If you can’t do that, use emails, social media and e-newsletters to group and highlight inventory along the same lines.
Offer gift suggestions – Start offering up gift ideas and suggestions early in December. Buying gifts for family, friends and business acquaintances is hard work – make it easy for your customers this year! If you want to introduce a special offer early in the month, make sure it is bound by a time limit.
Use shipping deadlines as a motivator – Clearly state shipping deadlines on all emails and on your website. Use this as an incentive for customers to take action ASAP.
Get creative – Use the 12 Days of Christmas or the eight days of Hanukkah to engage with your customers. This is all about raising your brand profile during a busy time while promoting action. For example, send out daily riddles on social media and reward winners with a special offer. Another option is to promote a “catch of the day” deal on each day of your campaign.
As December 25 and other holiday deadlines approach, offer upgrades on shipping services – For example, 5-day shipping orders placed on December 17 could be upgraded to 2-3 day shipping at no extra cost.
Build urgency into your subject lines, Tweets and Facebook posts – The week before Christmas or other gift-giving days build some urgency into your messaging. “There’s still time…,” “It’s not too late…,” etc.
Offer ideas for those last minute impulse purchases – Whether it’s a gift for a party hostess or an office “Secret Santa” party, start giving your customers gift-giving ideas in the last week before Christmas.
Drive customers offline and into your store – As shipping deadlines, use your email and social media presence to remind people of in-store deals and keep feeding them gift-giving ideas.
For those absolute last minute shoppers – On December 23 and 24, reach out to those who are still looking for gift ideas but have missed shipping deadlines by spreading the word about gift cards or downloadable e-gift cards.

Don’t Forget Super Saturday

The last and busiest Saturday for buying gifts is December 22 this year. Mark your calendar and plan accordingly – this is the time to offer targeted promotions and incentives. For bricks and mortar retailers, why not do a little more to entice your customers to come in during the last few shopping days before the holidays, perhaps a warm glass of apple cider or a free shoulder massage for your frazzled holiday shoppers (or their spouses)!

Restaurants and Food Service Businesses – Target the Holiday Crowd

Restaurants can do a roaring trade during the holidays, but there’s always room for more! Here are some ideas for boosting your share of holiday profits this year:

Work on attracting last-minute office parties or lunches – Many smaller companies wait until the last minute to treat their staff or customers – think of ways to entice this crowd. Talk to your regulars, train hostesses and servers to mention your party services when they speak to customers on the phone or in person. Promote special incentives for parties that make bookings on quiet days/nights.
Target the New Year’s Eve crowd – Offer incentives for customers to come and dine outside and either side of peak hours so you can maximize bookings throughout the night. You could also offer an incentive to New Year’s Eve revelers to move to the bar after they’ve dined with you.

Good luck and happy holidays! For more tips check out this transcript of the SBA web chat: "Holiday Marketing Tips and Ideas".

Related Blogs

6 Business Tax Credits and Deductions to Take Advantage of Before New Year’s Day

Caron_Beesley — Mon, 26 Nov 2012 11:57:44 +0000

The end of the year is fast approaching, but there’s still time to take advantage of a variety of business tax credits and deductions – some of which are new for 2012.

Here are just a few to consider, plus some best practices for maximizing your claims.

Take Advantage of 2012 “Section 179” Deduction Limits

Under the American Recovery and Reinvestment Act, Section 179 of the tax code provides tax benefits for equipment purchases made before the end of the year. Typically when you purchase an item for your business, you can claim a tax deduction for it. But fixed assets are not counted in the year of purchase. Instead, they must be depreciated over a number of years. Section 179, however, allows you to fully deduct the cost of assets such as computers, furniture, certain business software, vehicles, manufacturing equipment and more in the year of purchase – up to a certain amount.

Section 179 deduction limits change each year. Here’s what’s new for 2012:

For 2012, the limit for any individual piece of equipment is now $139,000, as long as total purchases in either year do not exceed $560,000. This means that if you buy or finance a piece of new or used equipment, you can deduct the full purchase price (up to $139,000) from your gross income.
For expenditures above $560,000, the amount you can deduct is reduced by a dollar for each dollar over.
A “Bonus Depreciation” provision allows you to deduct 50 percent of the cost of certain property after you’ve taken the Section 179 deduction and in addition to the standard depreciation deduction.

Review your inventory and equipment. If you find you need to replace obsolete or aging assets, this may be the time to do so. Be sure to talk to your tax advisor or accountant for more specifics on qualifying purchases and read more from the IRS about deducting business expenses. To deploy this deduction, the equipment being purchased must be in place on or before December 31, 2012.

Get a Tax Credit for Hiring a Veteran before December 31, 2012

Late last year, President Obama signed into law specific tax credits for employers who hire unemployed veterans before December 31, 2012.

Under the Vow to Hire Heroes Act of 2011, employers who hire a veteran who has been unemployed for at least four weeks can claim a credit for 40 percent of the first $6,000 in wages (up to $2,400). If you hire a veteran who’s been unemployed for at least six months, the credit goes up to 40 percent of the first $14,000 of wages (up to $5,600).

If you plan to hire new employees before the end of the year, check out this employer-friendly plain English guide for more information on the skills veterans can bring to your company, and how to apply for the tax credit.

Start a Business in 2012? Keep Good Records to Claim Start-Up Deductions

If you started a new business in 2012 you probably incurred costs before you even opened your doors. Unfortunately, non-operational businesses can’t deduct business expenses. Instead, you must wait until you are operational and generating income. Only then can you deduct a portion of qualifying start-up costs – up to $5,000 in the year the business was launched. Any amount over and above that must be amortized over a period of 18 months.

If you started a business this year, or are planning to open your doors in 2013, make sure you keep good records of your start-up costs so you can leverage the deduction on your 2012 tax return. Read more about How to Write Off the Expense of Starting Your Business.

Log and Capture Business Travel Costs

There are numerous deductions you can claim over and above the current $0.55 per mile business mileage deduction. For example, the cost of laundering clothes on a business trip is also deductible! For tips on what constitutes a business travel or entertainment expense while on the road, read How to Deduct Business Travel Expenses.

Other expenses to record include advertising/marketing costs, educational expenses, banking fees and health insurance premiums.

Set Up or Grow your Retirement Plan

One of the best tax write-offs for the self-employed is to set up a retirement plan or, if you already have done so, contribute pre-tax money to reduce your 2012 taxable income. This year, self-employed individuals can contribute $17,000 as a 401(k) deferral, plus 25 percent of net income. Check with your plan administrator for limits and deadlines for different types of plans.

Contribute to Charity

With the holiday season upon us, now is a good time to consider making a business charitable contribution and benefit from the tax deduction. This blog explains more about what you can and can’t claim.

How to Price Your Small Business’ Products and Services

Caron_Beesley — Mon, 19 Nov 2012 12:54:40 +0000

The goal of business is to make a profit. Many small businesses fail at this because they don’t know how to price their products or services, but pricing is the critical element to achieving a profit, a factor that all firms can control.

If you’re a startup or are revisiting your pricing strategy, here are some suggestions from industry experts and small business owners to help you get the price right.

1) Understand service costs and their impact on pricing

Every service has different costs. Many small service firms fail to analyze their services' total cost and thus fail to price them profitably. By analyzing the cost of each service, prices can be set to maximize profits and eliminate unprofitable services.

The Iowa Small Business Development Center offers a useful cheat sheet on How To Price Your Products and Services, which includes tips for analyzing your total costs. Components to understand and analyze are:

Material costs
Labor costs, including, but salaries plus benefits
Overhead costs. Any cost not readily identifiable with a particular product is overhead. Taxes, rent, insurance, marketing and transportation are all overhead. Part of the overhead costs must be allocated to each service performed or product produced and must be adjusted annually.

Tip: To help you calculate your gross margin and understand its impact on pricing, read Understanding Gross Margin and how it Can Make or Break your Start-Up.

2) What are your competitors charging?

Pricing isn’t just about making a profit and covering your operating expenses, it’s also about where you want to position yourself in the marketplace, explains Scott Gerber, host of Inc.com’s Ask Gerber. Where do you want your brand to be in the grand scheme of things? Perhaps you want to be the high-end competitor to someone who’s at the low-end of the market, or the reverse. The key, as Gerber suggests, is figuring out what’s going to get you the best penetration in the market as fast as possible, and broadening your client base according to what your competitors are not doing with their pricing models.

Useful Tools: Check out SBA’s SizeUp tool to help you assess how your business stacks up against the competition.

Tip: Do not try to compete with a large store's prices. They buy in larger volumes and their cost per unit is less. Instead, highlight other factors, like customer service.

3) Take advantage of front-end, back-end and/or tiered pricing

This is a common tactic for structuring your pricing model. Gerber suggests thinking of a car dealership. A sales rep knows he has multiple options for generating revenue from every customer who walks onto the lot. So the rep has the advantage of not only locking the customer down on a price for a car (the front-end pricing), but can also be pretty sure that the customer is going to pay more on top of that price for financing options and other add-ons – whether they anticipated this or not. Consider this the back-end pricing option. Bundled together, they equate what is also known as tiered pricing.

Tip: Think of ways you can tier your small business’ pricing structure to sell people early on the notion of a price, and then add options that ultimately will help you increase your bottom line.

4) Understand your conversions and metrics

Make sure you know how much you’re actually making on a particular product or service so you can figure out if that’s the right fit for that product. As an example, Gerber explains, if you’re selling only one out of 10 customers on a certain product, maybe that’s a sign that you’re pricing it too high. Consider the merits of dropping it by maybe 10-20 percent; you could increase the conversion rate by three or four times. The money you make on aggregate sales would be more than you’re making now on that one product. The bottom line is never assume things are okay as they are and can’t be done differently and perhaps more profitably.

5) Price higher than you think you would

An owner of a local fencing and decking contractor recently surprised me by admitting: “I always unwittingly underprice my services.” This wasn’t sales speak; he was simply recognizing that although he’s the best at what he does and has plenty of business, he doesn’t make enough money on the jobs he quotes.

Not charging enough is a common problem for small businesses simply because they often don’t have the operational efficiencies of larger companies and frequently find that, whatever they sell, their costs are higher than they anticipated. Small businesses do have one advantage, though, and it’s one that justifies charging a higher price – service! Here are two blogs that offer tips for leveraging service as a value proposition and revenue generator:

Tip: Other differentiators can help you justify higher prices or selling above your competition. including:

Satisfaction in handling customer complaints
Knowledge of product or service
Helpful and friendly employees
A convenient or exclusive location
Exclusive merchandise

6) Pricing below the competition

If you decide you want to adopt a low-end competitive pricing strategy, remember that your profit margin per sale is going to be less so you’ll need to focus on reducing your costs. The Iowa SBDC recommends several best practices for this approach:

Obtain the best prices possible for the merchandise

Locate the business in an inexpensive location
Closely control inventory
Limit product lines to fast-moving items
Design advertising to concentrate on "price specials"
Offer no or limited services

Tip: While some businesses can be successful with this strategy – think online retailers who can take advantage of cost-cutting like drop-shipping – it can be difficult to maintain this approach. Why? Because every cost component must be constantly monitored and adjusted. It also exposes a business to pricing wars. Competitors can match the lower price, leaving both sides out in the cold.

What pricing strategies have worked for your small business? Leave a comment below or discuss them on the SBA Community Discussion Board.

6 Things You Need to Know About Your Tax Responsibilities as an LLC

Caron_Beesley — Tue, 13 Nov 2012 12:18:02 +0000

Do you operate a single “owner” or member limited liability company (LLC)? Thinking of forming a multi-member LLC? Either way, you’re likely to have questions about how your business is, or will be, taxed.

Here’s what you need to know.

The Basics of Tax Law for LLCs

First, it’s important to understand how an LLC is structured according to tax law. Unlike a corporation, LLCs are not taxed as a separate business entity. Instead, all profits and losses "pass through" the business to each member of the LLC. LLC members report profits and losses on their personal federal tax returns, just like the owners of a partnership. The business does not pay federal income taxes, although some states do apply an annual tax to LLCs.

Depending on the number of members in your LLC, the IRS will treat your business like a sole proprietorship or partnership. However, certain LLCs are automatically classified and taxed as corporations by federal tax law. LLCs not automatically classified as corporations can choose their business entity classification. To do so, an LLC must file Form 8832. Refer to this guide from the IRS for guidelines about how to classify an LLC.

Income Taxes for Single Member LLCs

If you operate single member LLC, then the IRS will treat your business as a sole proprietorship (unless you elect to be a corporation) – meaning that the LLC itself does not pay taxes. Instead, you report all profits and losses of the LLC on your personal income tax return on (Schedule C) and file it with your 1040 tax return.

Get forms and read more from the IRS about single member LLC tax responsibilities. This page also explains when you should file using your social security number and when you should use your Employer Identification Number (EIN).

Income Taxes for Multi-Member LLCs

If your business has multiple owners, the IRS will treat your business as a partnership, unless you elect to be taxed as a corporation (read this blog from SBA guest blogger Barbara Weltman for more on this). Again, the business doesn’t pay taxes, but each owner is taxed on their share of the profits via their personal tax returns (attaching Schedule E). How a multi-member LLC shares profits is defined in the LLC Operating Agreement. Although not required by law in most states, this agreement structures your LLCs financial decisions, including how profits and losses are distributed.

You’ll also need to file Form 1065 (as all partnerships do) with the IRS. This form helps the IRS determine that each member is reporting income correctly. The LLC also must give each partner a Schedule K-1, showing each member’s share of partnership income, credits and deductions. Each member then reports this on their individual Form 1040 and Schedule E. If the LLC is a corporation, it should file Form 1120.

Read more from the IRS about an LLC filing as a corporation or partnership.

If your LLC splits profits and losses in a manner that doesn’t match each member’s percentage interests, you’ll need to request a “special allocation” from the IRS – something you ought to consult about with an accountant or tax lawyer.

Paying Estimated Taxes

LLC owners and members are self-employed and therefore aren’t subject to tax withholding, so each member must pay estimated taxes and self-employment taxes (Medicare and Social Security) quarterly to the IRS and their state tax office. Read more in How To Calculate and Make Estimated Tax Payments.

If you have a multi-member LLC with an owner not actively involved in the LLC (i.e. they invested in the business but don’t participate either through providing services or making management decisions), then that owner may be exempt from paying self-employment taxes. Your accountant or tax lawyer can tell you if your business meets the specific requirements of this exemption.

Sales Tax

Sales tax is a point-of-purchase tax imposed by state and local governments. The purchaser pays it and, as a small business owner, you assess it, collect it and pass it on to the appropriate authorities within the prescribed time. Rates and laws vary from state to state, which often leads to confusion, especially if you sell to customers in more than one state. To understand when sales tax applies and how to pay it, read Sales Tax 101 for Small Business Owners and Online Retailers.

State Taxes

If you operate an LLC, you’ll typically pay taxes to your state in the same way you do to the IRS – through your individual returns. Some states charge an LLC tax on income earned by that LLC, on top of the members’ income tax paid. Other states charge an annual LLC fee, unrelated to income, also known as a franchise tax, registration fee, or renewal fee. It’s a good idea to check the tax and business law in your state before you form an LLC.

Useful Resources

How to Change the Structure of your Small Business

6 Tips to Rein in Spending and Be a Lean Start-Up

Caron_Beesley — Mon, 05 Nov 2012 12:38:36 +0000

The average cost of starting a business is $30,000, according to a 2009 study by the Kauffman Foundation. But whether your cash comes from savings or financing, watching how you spend your money is critical to the success of your venture. This means establishing boundaries and habits that ensure you spend your money wisely and operate as a lean start-up.

Here are six ways to rein in spending as you start and grow your business:

Work from Home, Co-Working Spaces or Serviced Office Space

This one may sound obvious, but not all new businesses need to jump into a commercial office lease right away. Setting up a home office is a low-cost alternative (and can save you tax dollars). If you find you need a more social setting, consider a co-working space. These facilities are available in many cities and offer great opportunities for you to mingle with like-minded entrepreneurs. These workspaces are often also a lot cooler than any space a new start-up could ever afford. Talk to your local Small Business Development Center about co-working spaces in your area or hit up Google.

If you really do need your own office space, consider renting a serviced office or executive suite. Usually located in busy business districts, these premises are fully equipped and managed by a facility management firm. The rental agreements are often more flexible than commercial leases and give you the option of easily scaling up if you need to. Typically, a serviced office broker can help you locate the right space.

Buy Surplus and Barter

Save money by buying used equipment and office supplies. Check Craig’s List or eBay or buy government surplus equipment (a little-known but very cost-effective way to equip your business).

Bartering – exchanging goods and services directly with another party – is also an underutilized business practice among start-ups. Think about ways you could barter to reduce costs. For example, if you run a painting business and you need to purchase a business vehicle, could you barter a discounted price from the dealer in exchange for a new coat of paint in his showroom? Read more about bartering from SBA guest blogger Barbara Weltman.

Don’t Hire Employees Until You Can Keep Them Busy

Offer interns work experience or hire independent contractors or even friends and family on an hourly or project basis to keep your costs low. If you need them to work alongside you in an office space, introduce a hot-desking policy so that your workers can share a space on a rotating basis without you needing to lease more space. For more tips, read “Chief Everything Officer” No More! – 6 Options for Staffing your Growing Business.

Be a Budget-Conscious Marketer

Invest in marketing and promotion thoughtfully and have a game plan. Think about low-cost tactics (you’ll find some here) and don’t overdo it on the glossy marketing materials – are they really necessary? If you and your staff have a clear elevator pitch and can engage and follow up enthusiastically with targeted prospects, there’s a good chance you’ll get a similar return on investment as the big guys with their glossy slicks and advertising budgets.

To help you stay on track, create a plan for the year or quarter and calendar it out. This way you’re more likely to follow through, stay on-budget and be less burdened by the need to come up with last minute marketing tactics. Don’t forget to monitor ROI to help you make informed decisions about what works and what doesn’t. This can be as simple as asking and tracking how customers heard about you.

Check these blogs for more tips:

Safeguard Your Personal Assets

If you think you are likely to incur debt during your start-up phase, consider forming a limited liability company (LLC) to protect your personal assets – your finances, car and house. Forming an LLC will ensure you are not personally liable for debts or judgments brought against your business as a result of a lawsuit.

Don’t Be Afraid to Negotiate

Whether it’s a contract with a supplier or a new customer, you should master the art of negotiation. Many new business owners skip this important best practice in their early years, but practicing negotiation early will help you establish relationships that save you money now and over the long haul. Just be sure not to nickel-and-dime the fair offers that come your way, and work to build relationships with these vendors through repeat business and referrals. Get more tips in 6 Tips for More Seamless and Fruitful Business Negotiations.

How to Avoid Losing Money on Your Next Coupon Campaign

Caron_Beesley — Mon, 29 Oct 2012 11:42:42 +0000

Think you can build your business with coupons? Think twice.

Coupons have their place for many businesses, but they also carry the irksome problem of attracting the wrong kind of buyer. We all know them – the over-eager coupon clipper who stalks only those businesses that offer a special deal. This customer is often a one-time buyer and not the kind of consumer who is going to help you build your business. Even worse, you may incur couponing losses.

So when is couponing right for your business? How can you protect yourself against extreme couponing? Here are a few simple guidelines that can help protect your business.

Are Coupons a Good Fit for Your Business?

in themselves coupons are not money-makers for your business. However, they can be useful to help you build awareness of your in new markets and to new customers. Build awareness and you can hope to up-sell and generate repeat customers. Here are some other considerations:

Is your business a good fit? – Coupons work best for location-based, product-oriented businesses where local customers can realize quick and easy savings. Good matches are restaurants, hair salons, hotels, spas, pet grooming services, yoga studios and so on.
Can you scale quickly? – Can your business scale up to meet the potential demand surge the coupons may trigger? Whether you operate online or street-side within four bricks and mortar walls, it’s important that your staff is trained and your operations can scale quickly and seamlessly to deal with a jump in new foot traffic.
Can you afford the discount? – Make sure you can afford the discount for the duration of its validity. Weigh your long-term goals and how coupons can benefit them. Do you have enough profitable business coming from other product lines or time periods to overcome the costs of offering a discount or special offer? This is a top consideration, especially if you are exploring social or group-buying coupon sites that typically take 50 percent of the revenue you get from your advertised offer.

Develop a Firm Couponing Policy so You Don’t Incur Losses

Once you’ve weighed the pros and cons of couponing and determined that special offers have a place in your marketing strategy, be sure to develop and communicate a coupon policy. This will help keep you from being a slave to coupon clippers, losing money and undercutting your brand value.

Entrepreneur magazine offers these excellent tips from Bob Phibbs, author of The Retail Doctor’s Guide to Growing your Business, for doing just this:

Don’t Allow Combined Promotions – This is a biggie and one that many larger brands have clamped down on. The biggest to avoid is accepting buy-one-get-one-free promotions (also known as BOGO) combined with other coupons. Accepting multiple combined coupons simultaneously is a huge risk for small business owners who may find they are literally giving merchandise away.

Eliminate Identical Coupons – Suppose a customer walks into your restaurant with four $5 off coupons – how do you deal with this? Or perhaps that customer chooses to use the coupons over several visits? Either way, you’re going to lose money on that customer. There are a number of ways for dealing with this:

Limit the number of identical coupons that a consumer can use per purchase.
Limit the number of identical coupons per customer.
Limit the number of identical coupons that a consumer can use over a certain time period (although this can be harder to track).

If you can, use your point-of-sale system to track coupon code usage, and don’t forget to advertise your policy and the expiration date on the coupon

Accept Your Competitor’s Coupons Cautiously – Many large stores such as Walmart, Home Depot, Petco and Staples gladly accept competitor’s coupons. If you accept other retailers’ coupons, make sure you develop a policy outlining limits for their use at your store. For example, are you going to match the coupon or tighten up the conditions? Always check expiration dates and other limitations that your competitors may have placed on the coupons to ensure you don’t get burned by out-of-date or invalid offers.

Post Your Policies and Educate Your Staff – Make sure you advertise your couponing policy on the coupons themselves and at the point of sale. This can help deter extreme couponing practices before they happen. Educate and train your staff on these policies and how they should deal with potentially over-zealous coupon clippers.

For more tips on using coupons in your small business and how to build a coupon-based campaign, check out my earlier blog on coupon practices as well as How to Build Exposure for Your Small Business with Social Coupons.

Are the Holidays Your Off-Season? Stay on Top of Business Seasonality With These 7 Tips

Caron_Beesley — Mon, 22 Oct 2012 11:45:47 +0000

All indicators point to a solid 2012 holiday season for retailers. The National Retail Federation points to one key indicator, its Global Port Tracker report, which showed a strong increase in imports for August, September and October – the three key months of the year when retailers buy the bulk of the merchandise they will sell during the holiday season.

Good news! But what if the holiday season is not your big selling season? For many businesses, particularly summer-seasonal businesses, the winter holiday season can bring a dive in sales and cash flow issues.

Here are seven tips for making the most out of the holiday season by effectively planning and managing cash flow – while ensuring your business stays top-of-mind as well.

Have a View of Cash Flow

If you operate a seasonal business, it’s important to include a cash flow projection template as part of your financial planning process. If you can, plan your cash flow over a year. Use historical reports from previous years to forecast your revenue, your busiest months and your estimated sales for each month. You’ll also need to consider your fixed expenses (rent, utilities, etc.) and your variable expenses (salaries, inventory, taxes, etc.) as well as when these variable expenses will be expended.

This blog offers some quick tips for simplifying the process: Projecting your Business Cash Flow, Made Simple.

Once you have a view of your revenues and outgoings, you can develop strategies to manage cash flow throughout the year.

Optimize Your Invoicing Process

Unfortunately for small business owners, the wait to get paid is only getting longer. According to a 2012 Wall Street Journal survey, 64 percent of small businesses had unpaid invoices over 60 days old while 20 percent say the problem is worsening.

Modifying your invoicing policies will help ensure off-season cash flow. This blog offers tips on how to do this: How to Get Paid Faster with a Better Invoicing Process.

Get Help Financing Your Seasonal Working Capital Needs

If you need help meeting your short-term and cyclical working capital needs, you might want to consider a short-term loan or line of credit such as SBA’s CAPLines Program, which provides advances against anticipated inventory and accounts receivable to help businesses with seasonal sales fluctuations. The program was streamlined this year to make it easier for small business owners to get financing even if collateral is tight. Read more about the program or talk to your local SBA Office to learn more.

Negotiate Flexible Payment Terms from Your Suppliers

Just as you want to expedite the flow of cash in, you should also consider negotiating extended payment terms from your suppliers. This is especially useful if your busy season ramps up again after the holidays because you are likely to be incurring most of your variable expenses (inventory, marketing, etc.) now. The trouble is, you won’t see any immediate returns on those investments until your revenues kick in, so an extended payment plan can help ease the pain of these pre-season costs.

Continue to Market Your Business

If you run a seasonal business, your off-season should be one of your busiest marketing seasons. Capture customer emails (use drawings, surveys, and other sign-up incentives), send updates year-round (entice them to come back next year) and use social media (check out this “Ultimate Guide to Social Media Marketing for Small Business”) to put out teasing content and updates all year long!

Offer time-limited promotions or incentives that drive customers to sign-up for your services now, and secure a percentage down-payment in advance.

Find Alternative Sources of Income

Earning income from alternative sources or diversifying your products or services to include ones that will be popular during your off-season is a great way of keeping cash flowing and your business on customers’ minds. Don’t forget to check whether you need any additional business licenses or permits. SBA.gov's Business Licenses and Permits Tool can help you find the paperwork you might need.

Use Your Downtime for Planning

Use your off-season wisely. Regroup, review and plan ahead to ensure a profitable busy season. How did your business perform against its plans? Did your marketing campaigns pan out as well as you’d hoped? What new products and services can you introduce in the new season? What’s the competition up to? How can you position yourself against them?

How to Get Paid Faster With a Better Invoicing Process

Caron_Beesley — Mon, 15 Oct 2012 11:12:39 +0000

Tired of chasing down one too many unpaid invoices?

Death and taxes may be two of life’s certainties, but if you are a business owner, then in all likelihood you can go ahead and add delinquent receivables to the list.

Unfortunately for small business owners, the wait to get paid is only getting longer. According to a 2012 Wall Street Journal survey, 64 percent of small businesses had unpaid invoices more than 60 days old while 20 percent say the problem is worsening.

The trickledown effect of unpaid invoices is particularly taxing to small business owners – impacting hiring, investments in business and product development and your ability to pay bills.

There are a number of measures you can take to prevent and deal with non-paying clients such as agreeing on payment policies and enforcing late payment fees, but perhaps one of the less obvious tactics is to optimize your invoices for faster payments. Here’s how:

Give Clients What They Need

While your invoice should always include standard information such as your billing address, date and other necessary line items, don’t forget that some clients may require additional details. Details like a contract number, purchase order, tax ID or account number all can help expedite payments. Check with new clients before invoicing them to make sure you are giving them the details they need.

It might also be a good practice to attach your work order, statement of work, contract, or other document that outlines exactly what you agreed to provide. It’s even better if these documents are signed. This will let your client’s accounts payable team know who to contact internally to get the invoice approved and paid.

Invoice Promptly

If your processes can support this, invoice as soon as the work is complete rather than waiting until the end of the month. This will help alleviate delays and ensure you have a steady stream of cash coming in throughout the month.

Invoice Online

You may already be emailing PDF invoices to clients, but another option for reducing the mailing and processing cycle is to invoice your clients online. There are many commercially available online billing systems to consider, many of which integrate online payment options too. To help determine the right platform for your small business, read Going Beyond the Spreadsheet – Automate Your Billing Process with Online Software.

Consider Online Payment Options

Avoid mailing delays and help your client process payments with ease by offering online payment options. Amazon Payments, PayPal and Intuit all offer online payment services that can help you get paid on time. Some of these also offer easy integration with your online billing system and business finance software.

Depending on your industry, you may even be able to find trade-specific online payment services. For example, my pet sitter uses a system designed exclusively for professional pet sitters. Ask around and do your research before signing up for one of these services – and of course, check that your clients are ok with processing payments online.

Related Resources

8 Tips for Training your Small Business Employees on a Budget

Caron_Beesley — Tue, 09 Oct 2012 11:08:42 +0000

Well-trained employees are essential to the success of your business. Unfortunately, in a bad economy, a business’ training budget is often the first thing cut. It may make sense at the time, but the long-term implications can far outweigh the immediate costs saved.

Over time, a lack of training may reduce motivation levels and business inefficiencies and, most detrimentally, result in staff turnover – which in itself can be costly. According to a 2008 article in HR Management, replacing a worker costs on average 100-125 percent of an employee’s annual salary in lost productivity, recruitment costs and new hire training.

But how can you train your employees well without breaking your budget? Here are eight tips.

1. Join Associations or Trade Groups

Many industry associations offer training programs for members at annual events, online, and at seminars. Check out your trade association website or newsletter for training opportunities that may be included in your membership.

2. Find Trainers Within Your Organization

Got someone in your organization who has strong communication and interaction skills and the patience to help others learn? Consider appointing them as a trainer. Have them attend classes and come back prepared to share what they’ve learned. You can also buy training materials and use them to equip your trainer

3. Host Weekly or Monthly Brown-Bag Lunches

These are a great way for team members to get involved in new things and help educate the wider team about how each employee contributes to the business. Ask employees to come prepared to talk about a topic. You’d be surprised how little the different teams know about what the others do and how it benefits everyone. A sales rep might present an overview on the sales process, and how important each business function and individual is to ensuring a happy customer. An employee who is exploring a new way of doing business can also share it over lunch.

4. Use Online Training Courses

Online courses are a great way for employees to learn at their own pace and select from a wide variety of courses, some of them free or at low-cost. Organizations such as Learning Tree, Dale Carnegie, BizLibrary and the Business Training Institute all offer a large selection of online classes.

5. Cross-Train Employees in the Workplace

This is common practice in businesses that need an agile workforce ready and equipped to take on other roles should business requirements change. You can do this by looking at different jobs in your organization as hands-on training opportunities for others. Give employees new roles or responsibilities. Have them shadow someone who is already doing these tasks for a few days, until they are ready to try the new role on their own. Rotate roles frequently so your employees are continuously learning and challenged to achieve new things.

6. Start a Mentorship Program

Consider partnering new or less experienced employees with mentors. For example, an up-and-coming sales rep might benefit from sitting in on sales planning sessions or attending important off-site customer meetings with a more senior employee.

7. When You Need to Bring in the Pros

These options can all be fulfilled at a low cost, but what if you need to solve very specific problems? You may need to invest in an off-site training program where employees benefit from fewer distractions and an interactive class room environment. If you are training multiple people, a more cost-effective and time-saving option might be to bring a trainer on-site.

Ask other business owners or your local Small Business Development Center or Women’s Business Center about courses and classes that fit your needs and your budget.

8. Set Goals and Measure Success

Lastly, before you embark on any training or mentoring program, be specific about what you and your employees want to achieve. Use annual performance reviews to gauge competency gaps as well as your employee’s desired areas of improvement. Then put specific training goals in place for each employee. Let your employees know that you will assess the impact the training has had on their overall job skills and performance on a six-month and annual basis.

Related Blogs

The IRS Small Business Tax Calendar - A Handy Tax Planning Tool for All Business Owners

Caron_Beesley — Mon, 01 Oct 2012 11:39:54 +0000

Need reminders about key tax filing and reporting dates? Have questions about business taxes in general? Then you might want to check out the IRS’ free Tax Calendar for Small Businesses and Self-Employed.

Navigating the tax year as a business owner is no small feat, whether you are a freelance, start-up or growing small business. The tax landscape is ever-changing with new legislation and tax provisions impacting small businesses year-round.

Updated frequently, the IRS Tax Calendar for Small Businesses and Self-Employed contains useful reminders of key business tax dates you may need to be know. In its printed form it provides an essential business tax management tool for small business owners.

The calendar is available in a variety of formats:

Online – Simply bookmark the link and it will load information in Spanish or English for the current month. You can also skip through tabs for previous and upcoming months, as well as view last year’s key dates. A filter option allows you to sort and view tax dates. For example, employers can view the very specific requirements they must comply with, such as depositing payroll and FUTA taxes, reporting tips, and furnishing 1099 and W-2 forms.
Desktop App – This version of the calendar can be installed directly to your desktop so you can access it while offline. Updates are installed automatically the next time you connect to the web.
Wall Calendar – Perhaps the most colorful guide that the IRS produces, this glossy calendar offers the same key dates and reminders as the versions above, plus user-friendly tips and guides that help explain key elements of business taxes and tax law. The calendar is free, and you can preorder it here. It will be available on a first-come, first-served basis!
Outlook Add-On – For even more ease-of-use, you can also download the calendar and incorporate it into Microsoft Outlook.

More Tools from the Tax Man

Other helpful IRS tools offered specifically for small business owners include online video tutorials on a wide variety of tax issues, a retirement plans navigator and more. This earlier blog has the scoop – 5 Essential Online Tax Tools for Small Business Owners from IRS.gov.