Starting a Business in the Trucking Industry: Part One
Commercial goods and products will always require transportation to new locations. In a growing marketplace, this need presents a great opportunity for new transportation businesses – but the transportation industry in the United States is also highly competitive – particularly in the trucking industry.
The American Trucking Associations reports that in 2012, trucks moved 9.4 billion tons of freight, or about 68.5 percent of all freight tonnage transported domestically. Motor carriers collected $642 billion in revenues, or about 81 percent of total revenue earned by all domestic transport modes.
If you’re looking to throw your hat into the highly competitive trucking business, are some guidelines that will hopefully save you time, money, and energy.
Put simply, trucking companies operate by bidding on, winning, and fulfilling transportation accounts and contracts. Most trucking businesses operate in one of two forms, depending on how they acquire drivers to fulfill contracts:
Sub-contracted drivers: With this option, business owners use sub-contractors as drivers. While the business owner runs the business and receives the contracts, the drivers are not actually employed by the company. The up side? This option can cut down on start-up costs, insurance costs, and required equipment. The down side is that it also gives you less control over your drivers and can cut into your profits.
Privately-owned drivers: With this option, the business owner privately runs his or her business and all operations, using their own equipment, paying higher insurance prices, and hiring a fleet of private drivers who are employed by the company. This option gives you total control over your business and its employees, and promises the most return on profits. The down side for this option is more obvious, as it requires significantly more start-up capital and has higher operating costs.
As with any other business, it’s important to understand the basics of starting a business before researching the additional steps specific to your field of interest. Once you’ve determined which type of trucking business you’d like to start, you can follow these 10 Steps to Starting a Business for great tips on how to finance your business, hire employees, and ensure that you are complying with tax obligations.
You’ll also need to consider insurance requirements. The very nature of the trucking industry creates strict insurance requirements on businesses because you own and oversee the operation of commercial vehicles.
In addition to your insurance responsibilities, your employer responsibilities require you to comply with health and safety standards and regulations. The U.S. Department of Labor's Occupational Safety and Health Administration provides compliance assistance for the trucking industry to meet these expectations.
That’s all for today – tune in later this week for part two of this blog post, where we’ll outline the specific rules and regulations of the trucking industry.
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Sales Tax and Small Businesses – Part Two
Questions about sales tax are among the most frequent inquiries from small business owners across the country. In part one of our “Sales Tax and Small Businesses” post earlier this week, we defined sales tax, explored state-specific permit and sales tax requirements, and reviewed common situations in which sales tax does not apply. In today’s post, we’ll pick up where we left off with four additional lessons when it comes to small businesses and sales tax.
Lesson 5: When your business sells online
If your business sells goods and services online, you will likely still pay sales tax, but not necessarily on all transactions. E-Commerce tax laws can be confusing, but typically, you charge sales tax for customers located in states where your business has a presence. For example, if you only operate out of Virginia but sell your product to customers across the country, you would only collect and pay sales tax for customers located in Virginia. However, if you have your headquarters in Virginia, a warehouse in Ohio, and a distribution center in Arizona, then you would pay sales tax on any transactions that originate from those three states. Check out this article for more helpful tips on when to collect sales tax for online transactions.
Lesson 6: Time to pay your sales taxes
Depending on your state’s requirements, your business probably has an option to pay monthly or quarterly. Monthly payments may help you track your expenses more regularly and avoid a bigger tax bill to pay three times a year. Some states and localities may require businesses with larger tax liability to make electronic payment, while others do not have the infrastructure in place to support electronic payment. Regardless of which schedule and process you follow, make sure you know your state’s sales tax deadline to avoid costly fines.
In addition to paying the state sales taxes your business owes, you will likely need to file periodic sales tax reports to your state department of revenue. Most states now allow businesses to pay and report sales tax online – a great, time-saving feature – and some states also give a discount for prepayment of sales taxes. If you can swing it, it will save you money in the long-run to pay in advance.
Lesson 7: Relying on accounting software may not be enough
Your business may use accounting software, but it’s critical to also keep track of your accounting personally. An incorrect entry could mean not collecting enough tax from customers, yet still having to pay state taxes. While technology can be an incredibly helpful tool, make sure you also keep track of your numbers to give yourself a backup method for avoiding mistakes when technology is being less than cooperative. This planning guide outlines more helpful tips to keep your business on top of its numbers.
Lesson 8: Document in case of an audit
The word “audit” can strike terror into the heart of a small business owner, but if you have a reliable process for keeping track of sales taxes, it will serve you well in case of an audit. The current economic client has increased the chances of small businesses being audited as many states work to balance their budgets and locate unpaid taxes through audits. If your business takes the time now to review its process for keeping sales records, it could go a long way in minimizing your costs and time wasted in the event of an audit.
That wraps up our list of top lessons when it comes to small businesses and sales tax. Sound overwhelming? It can be – there are thousands of sales tax jurisdictions in the United States, which makes this topic a challenging one. Just remember that there are also dozens of resources available to help you with this process from start to finish.
Did you learn something new through part one or part two of this series? Do you have a great lesson to add to the list? Share your small business sales tax takeaways in the comments below.
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Why Your Business Needs a “Content First” Social Media Marketing Strategy
Social media marketing takes more than signing up for a free account and waiting for followers and fans to materialize.
But where do you start creating content that resonates with your audience on social media?
You need a content-first business. But while content-first usually refers to brands that develop content to build an audience before launching products or services, you can also think of the concept more widely to guide the development of your social marketing efforts.
Joe Pulizzi, founder of Content Marketing Institute, explained the steps of creating a content-first strategy in a recent SCORE online workshop.
Great social marketing starts with expertise and passion
Pulizzi’s first step in developing shareable, engaging content comes down to you as an entrepreneur. Think about your knowledge base and expert-level skills. In what topic areas do you have authority to speak as an expert? What aspects of your industry are you most passionate about?
Match your passion and expertise with what you know about your customers. What are they passionate about? What pain points can you help them solve? Together, these elements of your expertise and your customers’ needs create what Pulizzi calls the sweet spot – the basis for your content marketing.
Once you find the sweet spot, go beyond it to narrow your efforts. Go an extra step to determine your content tilt: the thing that makes you not just an expert, but a leading expert in some aspect of your line of work. “Everyone stops at the sweet spot,” Pulizza explained. “You have to tilt it to find your leading area of expertise, and differentiate.”
Once you’ve solidified your sweet spot and content tilt, it’s time to develop a brand content mission to guide the content you create and share. This mission can be brief, but it should outline your target market, what you’ll offer (ex: blog posts, a podcast, three YouTube tutorials per month), and the outcome for the audience – the value they’ll take away from the experience.
By narrowing your focus with the content-first method, you can spend less time wondering what to post on social media, and spend more time connecting with your audience in a meaningful way.
Pulizzi warns that monetization of the content-first marketing plan takes 15-17 months. But once your audience builds in support of your consistent, compelling content, you’ll see an increase in social media followers, customer engagement, and, of course, revenue. If your business is already selling products, you may see results quicker, but more gradually.
Put your content-first strategy to work
Once you’ve mastered your content strategy, it’s time to communicate! On Twitter, search for and follow other leaders in your industry or region. Accounts with overlapping audiences can offer content to share and respond to. On Facebook, you’re not tied to a character count, so feel free to ask questions, respond to customer queries, and solicit ideas for additional content. Create photo or video posts, or keep tabs on shareable content your colleagues and industry partners are making. Sharing relevant content from others bolsters your own content-creation efforts by offering new items to click and comment on during lulls in your marketing calendar. Sharing also strengthens your reputation as someone who pays attention to their industry – and appreciates their colleagues.
With a steady stream of great content, you’ll not only continue to excite your followers, you’ll also be prepared when social media channels change. Twitter and Facebook have evolved, and Instagram, Snapchat, and Periscope have joined them. Other tools, like Google Plus, have begun to fade out of daily use.
Who’s to say what social channel will be next? By focusing on your sweet spot and content tilt, you’ll have content that transcends specific social media tools, enabling you to adapt it to whatever social channel is all the rage on any given day.
Not sure how to turn your passion and expertise into a marketing strategy? A SCORE mentor can talk through your ideas and help identify a niche audience.
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7 Secrets to Making PR Work for You
Do you do public relations for your business? Many small business owners neglect PR because they think it takes too much time or requires hiring a PR person or agency. Others think their businesses just aren’t newsworthy or that they can’t write a good press release – so why bother?
The truth: PR is a great way for any business to get noticed – for free. “Earned” publicity – publicity that comes from a blog, newspaper, or magazine writing about your business – is far more valuable than “paid” publicity (that is, advertising). Prospective customers trust earned publicity more, and it has long-lasting results in terms of building your brand and your credibility.
The nuts and bolts of PR have changed a bit in recent years, with the advent of social media and the rise of the Internet, but the basic rules of PR still hold true. Here’s what you need to know:
1. Get to know your target. Just as in any type of marketing, understanding what your target market wants and needs is key to success. In this case, your target market is the media – journalists, bloggers, TV and radio reporters, etc. To find out what they need, pay attention to what they already write about. A local reporter who covers the retail industry is the perfect person to pitch your new store to, while the reporter who reviews restaurants won’t care.
2. Craft your pitch and press release. There are many websites that provide templates for pitches and press releases. PRLog.org is one my company uses, but PRNewswire and PRWeb.com offer useful tools, too. Following a template helps by suggesting how and when to use hyperlinks, photos, and other elements to add interest to your pitch or press release. Of course, format isn’t the only thing that matters when writing a pitch or press release. You need to find a “hook” – something timely, interesting, or newsworthy to the media person you’re pitching. If your retail store sells children’s toys, for example, a pitch about the “10 Hottest Holiday Toys for 2015” will get parenting magazines or mom bloggers intrigued.
3. Hit the target. Send your pitch and press release to your target media members. Email is the generally accepted method today; you can find most media members’ emails on their publications’ websites. Use an attention-getting subject line that clearly states what you’re offering without being boring.
4. Follow up. Develop a spreadsheet of media contacts with contact information to help you manage your PR efforts. After your first pitch, follow up if you don’t hear back – but don’t be a pest. I’ve noticed a disturbing tendency of PR people emailing me the day after (or even later the same day) I get their pitches to follow up. Give people some time to get through their emails before you hit them with a second attempt – but do follow up; emails often fall through the cracks.
5. Make an offer. Spell out what’s in it for the media if they take you up on your press release. Provide some useful data (such as statistics from a survey you’ve done), an interesting or compelling quote, an offer to serve as an interview source, or an invitation to your grand opening or other event.
6. Be active. If your business targets local customers, getting out into your community is a great way to get PR. Become an active member of local networking groups, Chambers of Commerce, and other business organizations in your area. Local media often reach out to these groups when they need quotes or interview subjects, so being involved gives you a better chance of getting press.
7. Make the most of it. Once you do get publicity, make the most of the attention by posting the article on your website, framing it in your store, and generally spreading the news about your 15 minutes of fame. Also be sure to thank the journalist or blogger for the attention – that helps build relationships and leads to more publicity.
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Choosing a Business Name: 5 Interesting Things to Know
There’s plenty of advice out there about choosing a business name, such as the need to do a name search in your state, a trademark search, register the name, and other key legal issues. Those are all important factors to consider as you choose a business name.
But I’d like to focus today on five considerations you should also be thinking about. These five things may be overlooked when choosing a business name (or thinking about a re-branding of your business):
Dot Com Domain Names Still Rule
Today’s small businesses depend on Web presence to generate leads. Prospective customers are researching businesses online before they buy, so being findable online is crucial.
Before you settle on a choice for a business name, go to your favorite domain registrar, and search to see whether the .com URL is available. The “dot com” version of a name is still the go-to address that most of the public thinks of automatically. So whenever possible, try to get the dot com version of your chosen name.
Otherwise, you may end up like me – buying that dot com extension at auction on the secondary market later –for thousands of dollars. After years of vainly trying to encourage people to use our chosen domain name (which was close but not exact), I finally caved in and purchased the one that matched my company name and that people tended to automatically think of, and redirected it to our company website. So now we no longer “leak” that misguided Web traffic, but it did cost us.
Newer Domain Extensions Can Be Catchy
Absent that – or perhaps in addition to a dot com – consider the catchiness of some other top level domain extensions. Today we have many more choices for domain extensions, to the point that they can become a clever part of your name.
Consider a name like Lesson.ly. The “.ly” extension is used as an integral part of the name.
Some of the new domain extensions suggest the type of business you may be in. For instance, a consultant might opt for a .guru domain extension, as in JohnQSmith.guru. A photographer might opt for a .photography domain, as in SuperSnazzy.photography or something similar.
There’s no rule that says you are limited to just one domain name. You can always have two or more using some for specific marketing purposes – just make sure they are directed properly to your website.
Will Trendy Names Stand the Test of Time?
Names, like fashion, go through trends. A number of years back, names with “crunch” in them were trendy. Think Techcrunch. Names with dropped vowels were also trendy for a long time - such as Unbxd. Or adding in extra letters was cool, such as the three b’s in Dribbble.
Consider, though, whether that trendiness will be difficult to spell or remember. Will the public remember to drop the right combination of vowels, or to add in that extra letter?
Catchy vs. Descriptive
There’s a trade-off when choosing a name. Go for marketing memorability? Or go for findability online or in yellow pages? Have you ever wondered why there are so many service providers named “AAAA Best Plumber of Skokie, Iowa” or “AAA Pest Control of Hunstville, Arkansas”? In the days when yellow pages ruled, businesses wanted to be first on alphabetical lists.
When the Web showed up, names shifted toward the descriptive terms that the public looked for in search engines (“Lima Oklahoma Used Car Dealer”).
But consider whether you’re letting the tail wag the dog. For many businesses, you want the public – buyers – to remember your name. A catchy, memorable name often trumps one that is designed to get people to find it when searching.
Of course, the best names manage to do both: make it easy to find when searching, yet are memorable. Or the business owner gets two domain names – one that matches the brand name and one that pairs up with searches.
The International Dilemma
The world is becoming a small place when it comes to commerce. The majority of companies that export are small businesses. Business owners who are thinking ahead have to consider not only how that name sounds or what it means in the United States, but how it plays in other countries and languages. Years ago, Chevrolet allegedly named a new car model the Nova – only to have it pointed out later that in Spanish, Nova meant “it doesn’t go.” That turned out to be an urban legend about Chevrolet that has now been debunked according to Snopes.com – but the lesson it represents is still valid. If nothing else, it’s wise to consider whether your business name will be pronounceable and spellable in countries you may plan to sell into. And consider whether there’s already a famous competitor in those countries with the same name.
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The Difference Between Benefit Corps and Certified B Corps (And Deciding What’s Right for Your Business)
Most people start a business with one key objective in mind – making a profit. Yet some companies seek out not only to profit but also to provide a tangible benefit to society and the environment. These companies, depending upon a few specific criteria, are classified as Benefit Corporations or Certified B Corporations.
Confused by the difference between the two? Didn’t even realize there was a difference? You’re not alone – it’s one of the most confusing aspects of a recent movement for companies focused on giving back. Benefit Corporations and Certified B Corporations have a lot in common, but there are a few key differences.
To date, 31 states as well as Washington, D.C. have passed laws creating a new type of corporation – the Benefit Corporation (often referred to as “Benefit Corp”). Benefit Corporation status involves a separate process available to companies in every state. These companies pledge to think about people and the planet in addition to profit (most are committed to a specific social mission), but Benefit Corporations voluntarily work against standards of corporate purpose, accountability, and transparency.
Benefit Corporations have a corporate purpose to create a positive impact on society and the environment, and are required to consider the impact of decisions on workers, the greater community, shareholders, and the environment. And while Benefit Corporations are required to provide an annual benefit report that is available to the public, benefit corporations do not have to be audited or certified.
In addition to 31 states and Washington D.C., five additional states are currently working on laws for benefit corporation status. You can explore your state’s Benefit Corporation law status here, but as always, it’s best to consult your tax advisor or attorney if you’re considering transitioning to Benefit Corp or Certified B Corp status.
Certified B Corps
Certified B Corporations are similar to Benefit Corporations but not identical. Certified B Corporations (also referred to as “B Corps” or “B Corporations”) are for-profit companies that pledge to achieve social goals as well as business ones and are certified by the nonprofit B Lab to have met rigorous standards of social and environmental performance, accountability, and transparency. It’s similar to USDA’s certification for organic milk or a LEED certification for a green building, with one key difference – a B Corp certification evaluates the entire company (environmental footprint, community involvement, governance structure, worker engagement, etc.) rather than just a single aspect like a building or a product in the examples above.
The broad evaluation is key because it helps to distinguish the companies that are focused on doing good from companies that just happen to do good marketing. There are now more than 1,000 Certified B Corps in the United States, including well-known companies like Ben & Jerry’s and Patagonia. All of these companies share a similar goal in that they are working to redefine what business success is – they are hopeful that companies will continue to compete and do what is best for the world around them.
B Corps are for-profit companies and are taxed the same as any other corporation - but to become certified, your business may need to amend its governing documents or adopt benefit corporation status (see above) to meet the legal requirements for certification for your state of incorporation and corporate structure. And as with any restructuring, your business should engage key stakeholders, legal counsel, and investors about the usefulness and implications of adopting these legal changes for raising money, selling your business, and directors’ liability. If your business is a corporation, you’ll need to file your amended articles with your Secretary of State within one year.
The belief that businesses exist solely to make a profit can have an impact on how companies operate. Focusing on your business’s positive impact on society and the environment comes with benefits. Here are a few to consider:
- Benefit/B Corp status can help companies attract and retain top talent and customers
- Millennials, which represent half of the global workforce, want work with meaning – a recent study by Intelligence Group found that 64 percent of millennials would rather make $40,000 annually at a job they love and care about than $100,000 at a job they find boring or less meaningful
- According to BBMG, 73 percent of consumers consider the company, not just the product, when making a buying decision
- Consumers often align purchases with their values – 86 percent of consumers are more likely to trust a company that shows the impact of its cause efforts, according to Cone Communications
There are also some drawbacks to consider if you’re exploring the pros and cons of Certified B Corp/Benefit Corp status:
- If you have shareholders, you will also have expanded reporting requirements in order to provide shareholders with enough information to determine if your business is achieving its stated purpose
- If you have shareholders, they can bring charges against the company for not carrying out its social mission (just as they could sue directors of traditional companies for violations of fiduciary duty)
- These designations are fairly new as far as legal entities go, so it’s not entirely clear how courts will interpret mandates to not only seek profits, but to consider potential benefits to society. As such, the impact on raising capital and on how angel investors and venture capitalists could react is still unknown
There are a few legal requirements to consider when thinking about Benefit Corporation or Certified B Corp status. When it comes to your company name, Benefit Corps and Certified B Corps do not need to make any reference to benefit status within the corporate name. You won’t need to alter the name you’ve chosen for your business, nor would you need to tailor your name brainstorming any differently than if you were considering a standard C Corporation. You will be required, however, to state your Benefit Corp/B Corp status in your articles of incorporation, and you may want your articles to highlight a specific purpose (like benefitting the arts, improving public health, etc.)
Finally, the share certificates of a Benefit Corporation must specifically state the benefit nature of the corporation. Certified B Corp and Benefit Corporation legal requirements may vary between states, especially when it comes to provisions relating to shares and their transfer, so be sure to research your local laws.
For entrepreneurs, business owners, workers, and consumers, the introduction of Certified B Corps and Benefit Corporations is an exciting development, because it enables community- and environmentally-minded business owners to preserve their social goals without sacrificing the ability to make a profit.
Are you using your small business as a force for good?
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Nonprofit Success Depends on Your Business Mindset
Running a nonprofit takes passion dedication, and a big heart. Whether you’re working to save endangered animals, slow climate change, or help your neighborhood prosper, it’s easy to let your mission take center stage. After all, tirelessly serving that mission is key to your nonprofit’s success.
But are you looking at your nonprofit like a business?
While the mission-focused work of your organization is essential, that on-the-ground progress simply won’t happen unless you’re in a business mindset. Money, paperwork, and procedures all add up to help your daily work have a greater impact on the causes you care so much about.
As you put plans in place to launch your nonprofit, keep these three essential business components in mind:
When you start a nonprofit, you have to start separating your automatic association between “making money” and “profit.” You’re not in this business for the millions, but cash flow can make or break your meaningful work in the nonprofit sector.
Along with good money management, responsible funding at a nonprofit leaves room for reinvestment. If you’re planning to receive grants or other funding specific to particular projects, you may not be able to plan for “extra” money in the bank. But it’s wise to think of ways to put money back into your nonprofit, just like you would think about how to invest revenue back into a flower shop or consulting firm.
That reinvestment might come in the form of launching a new program, boosting a social media campaign, or budgeting to give a dedicated employee a raise. By keeping costs in check, your nonprofit can manage its funding to go the furthest possible distance.
Nonprofit executives can get a bad rap for taking large salaries. But try not to think about the extreme cases of poor fiscal responsibility. Think about the people who work with you, and the tasks you rely on them to perform. Who takes care of your annual reports, IRS form 990 filings, and audits? Who oversees marketing so that your organization gets the word out about your efforts?
A team of entry-level staffers may be eager to work, but in many cases it’s worth the higher price tag for a seasoned professional. When you review job descriptions, make sure that your team is making salaries comparable to their colleagues in the private sector. Providing healthy compensation for those professionals who are essential to your nonprofit mission builds the strength of the entire organization, while keeping your staff excited to come to work each day.
Don’t leave yourself out of the salary equation, either. As much as you we might wish and hope, passion alone can’t pay the bills.
You may not be expecting huge returns like a for-profit business, but your nonprofit will need a plan for growth. A complete business plan for a nonprofit should cover your cash flow -- including how you intend to raise money to support your work -- along with realistic salaries and anticipated rent or lease costs. Don’t forget administrative expenses, and the little things like copy paper that add up quickly.
When it’s time to apply for grants or reach out for other forms of funding, that business plan can help you make a solid case for your nonprofit.
But no good business, whether for profit or a worthy cause, was magically built overnight. Many SCORE mentors across the country have worked in nonprofits, as executives or as founders -- and sometimes both.
Your local office can match you with a mentor that can help with your specific needs, or you can browse email mentors who are versed in the nonprofit world.
So go ahead, kick your feet up onto your desk and start thinking of the big picture for your nonprofit. How can you apply for-profit business lessons to your work for the greater good?
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Let’s Pop the Bubble on Startups, Ideas, and Investments
Maybe it’s because business schools teach it that way. Maybe it’s because it’s easier to write about. Maybe it’s because of the dream and the glamor involved. Whatever the reason, there is widespread misunderstanding about the reality of business ideas, startups, and investors.
This misunderstanding results in a stream of questions on social media, blogs, and entrepreneurship sites. They come with different wording around these core concepts:
I have a great new business idea, but no money. Where do I find investors?
I want to start a business but I have no money and no contacts. Where do I get investors?
I have a great idea for an existing company. I don’t have the resources. How do I sell it to them?
I have a great business idea but I don’t have experience or resources to execute. How do I sell my idea?
Let’s look at reality in this area. Consider this a reality check.
1. Very few startups get outside investors.
Only two or three of every 100 real startups get outside investment from angel investors, and about one per 1,000 get venture capital in the beginning. That’s a hard number to track down because statistics vary and they depend on definitions. The SBA reports about half a million startups with employees per year, but there are about five times more businesses without employees than those with, so I figure anywhere from half a million to two million startups per year in the U.S. alone. The Angel Capital Association says there are only about 75,000 angel investments and 5,000 venture capital investments per year, and many of those are duplications, second and third rounds, or new investments in already-existing companies.
Those numbers make sense to me. After all, outside investment is a special case in startups, related to the best of the best, normally only startups with a lot of potential growth, experienced teams, and product-market fit. Investors need companies that aren’t just likely to succeed, but likely to succeed and sell out within five years or so.
What doesn’t make sense is how many people think the natural, normal process of starting a business involved getting somebody else’s money. That’s the exception. The rule is elbow grease and shoe leather, struggling to get the first customers, focusing on a subset of the larger vision, starting with what you have, not what would be ideal. This is the realm of the normal, in which entrepreneurs turn to friends and family for help, they borrow from house equity, and they work their startup in their spare time. And sometimes, when they have a business plan and some minimal startup resources, they go to their local banks and get an SBA-guaranteed loan through the bank.
For those who complain that they can’t get startup investment, as if that were a natural right, I say welcome to entrepreneurship. Nobody is entitled to startup investment. Build a startup that’s a good investment, and you’ll get investment. Do the work.
2. Nobody invests in business ideas.
No offense, but your idea, no matter how good, has no value. What gives it value is the work involved in getting started. You develop the idea, gather a team, do a product prototype or minimum viable product, and prove the concept with actual users, subscribers, customers, distributors, or whatever consists of traction in that business.
You don’t even own that idea. If it’s an invention, you have to design and describe and win a patent to own it. And patents don’t always protect against imitations. You can own a creative work with copyright, which covers books, software, pictures, and art. You can own commercial words, images, sounds, and such with trademark. But you don’t own a business idea.
Companies don’t buy ideas. They don’t even listen to idea-holders wanting to pitch ideas.
3. You have to do the work.
A business idea doesn’t make you an entrepreneur. It doesn’t entitle you to investment. It puts you in the same boat as the rest of us, facing the journey of execution that turns an idea into a business of value. You aren’t entitled to financing; your business has to earn that with milestones met and progress made.
Does that sound daunting? Here’s the good news: If you’re there, at the start of the journey, you’re in good company. Millions of entrepreneurs have done that already, the vast majority of them without somebody else’s money to help. Solve a problem, give value, make the world better for your potential customers, and you can do it. Do the work.
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5 Reasons a Business Revolving Line of Credit May Benefit You
Many businesses at one time or another may have cash flow challenges. One popular option to obtain short term funding is to secure a revolving line of credit. This not only helps with basic day to day operations, such as meeting payroll, purchasing supplies, increasing working capital or obtaining extra inventory; it also provides many other benefits.
What is a revolving line of business credit?
In basic terms, a revolving business credit line refers to a bank or merchant offering a specified amount of always available credit for an undetermined amount of time. The debt is repaid periodically and can be borrowed again once it’s repaid. There is no set monthly payment, but interest accumulates and is capitalized like any other credit. As a business makes payments on the revolving credit line, those funds become available for borrowing again. The credit limit may be used again and again as long as you do not exceed the maximum limit.
Having access to a source of funding is an essential part of success in business, but not all forms of financing are created equal. Unlike other kinds of lending, a revolving business credit line offers a number of advantages over other types of funding such as:
1) Flexible Payment Terms – Traditional term loans require set monthly payments that can potentially present a challenge to the growth of a start-up business. On the other hand, a revolving credit line offers flexible repayment terms. Unlike a term loan, if a business has a slow month it can pay the minimum amount due.
2) Personal and Business Separation – One of the challenges many business owners face is keeping personal and business expenses completely separate. The benefit of a revolving business credit line is that it enables you to streamline and track your business expenses since your credit line is dedicated solely for business.
3) Access to Cash on Demand – Unlike a traditional loan, a revolving credit line enables you to source funding before your business actually needs it. Because of the cyclical nature of business, you may find yourself wanting to borrow money to take care of your company’s short terms needs. By being able to access funds on the credit line at any time you can keep your business running smoothly, day in and day out.
4) Builds Business Credit – Businesses need to establish ratings with the major business credit reporting agencies. Using a business revolving line of credit allows you to build a positive payment history that appears on your company’s business credit report. This will allow you to potentially obtain future credit for your business based on your company’s creditworthiness.=
5) Flexibility of Usage – A closed-end loan is for a particular use whereas a revolving business credit line allows you to decide what to spend your cash on for your company. Since the credit line is revolving a business can use the cash for multiple purchases compared to a loan that can only be used for one purpose.
A business revolving line of credit provides companies the flexibility needed to meet their short term funding needs. When the need for cash is there, funds are there. By having access to cash on demand, you can take your mind off of money and focus on running and growing a successful business.
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Tips on Buying an Existing Small Business or Franchise
The dream of owning a small business doesn’t always mean starting from scratch. You can skip the headaches of creating a startup and jump to buying an established company. Purchasing a franchise offers another path to entrepreneurship. With either option, someone has already developed a solid foundation for a company. Here are some resources to help you decide if buying an existing independent small business or franchise is right for you.
Research Your Options
Even if a business seems successful on the outside, a closer inspection before purchasing is critical. In the SCORE podcast, “Buying a Business,” mentor Norm Silverstein details how to thoroughly examine an existing company.
When you acquire an established business, you inherit important intangible assets, such as a customer base and brand recognition. Risk is potentially lower than owning a startup because you will have immediate cash flow. Also, the previous owners have hopefully ironed out the kinks in the beginning stages allowing you to focus on the future.
After finding an affordable, promising business, Silverstein recommends using a “due diligence” process to determine if the company is a right fit. Some of the financial factors to investigate include:
- Profit and loss statements from previous years
- Projected financial statement
- Last three years of tax returns
- Cancelled checks
- Lease conditions
You want to learn as much as possible about the business beyond what the seller tells you. An attorney, accountant and a SCORE mentor can advise you during this intensive process.
Ready to Purchase?
You found your dream business, which passed a thorough investigation. Now what? You must decide whether to purchase the business entity or its assets. These are the major differences:
- Buying the “business entity” entails buying the corporation or limited liability company (LLC). You inherit the assets and contracts but also its debts. You may not know what is lurking beneath the surface, such as tax liens or unpaid loans.
- Buying the “assets” means you are buying the tangible items like equipment and property. However, you must create a new company with new loans, leases and contracts as if the seller’s business no longer exists.
For more details on the types of purchases, read the entire “Buying a Small Business: Assets vs. Entities” article.
Buying into a Community
Another road to small business ownership is purchasing a franchise. Bob Melberth, a franchisee coach, details the pros and cons in the SCORE podcast appropriately titled, “Franchising.”
What exactly is a franchise? An entrepreneur buys the license of a larger trademarked company to sell its products or services. The new offshoot is backed by a well-known brand name, training and support from the larger company and fellow franchisees. Melberth says, “You're in business for yourself, not by yourself,” highlighting the community aspect of owning a franchise.
With this established business structure, the success rate of a franchise is usually higher than an independent business. You don’t need to be an expert in all aspects of running a company because the franchise provides specific guidelines to help sell their products. Even though it’s a franchise, it’s still your business.
Finding your ideal business can be a lengthy, involved process, but remember that you don’t have to do it alone—a SCORE mentor can help you along the way. After thoroughly examining the foundation, you may find an existing independent company or franchise is the answer to your small business dreams.
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