Managing

5 Challenges for Family-Owned Businesses

By BarbaraWeltman, Guest Blogger
Published: April 16, 2018 Updated: April 16, 2018

SCORE found that of the 28.8 million small businesses in the U.S., 19% are family-owned businesses (any business in which two or more family members operate the company and the majority control lies within the family). These businesses employ 60% of the U.S. workforce and generate 64% of America’s gross domestic product (GDP). Yet these businesses face unique challenges. Here are five to consider, and what to do about them:

 

Setting compensation and benefits

Keeping things in the family can be a good thing, but paying the owner’s child for doing little work, no work, or bad work can create poor morale among staff members who aren’t relatives. If the business employs both relatives and non-relatives, it is important that salary and benefits be set according to the position and not according to the relationship.

Suggestion: Analyze the work that each person is doing and fix compensation accordingly, without regard to family relations. Make it clear to all that there is a level playing field for rewards for good work.

 

Company culture

The values of the owner’s family often become the values of the business. One research report* suggests that “clan culture” is prevalent in family businesses where loyalty and traditions are highly valued. This type of culture can make it difficult for outsiders to remain and thrive.

Suggestions: Communicate the company’s values to all employees (related and non-related). Review these values to stay relevant in the marketplace so that non-relatives don’t feel excluded from what’s going on.

 

Separate business from pleasure

Small businesses are often like family, with co-workers caring about each other. But when that family is actually family because of relationships by blood or marriage, special problems can arise. It can be challenging to make business decisions and operate without bringing personal feelings into the mix.

Suggestion: Because the family continues to get together at the dinner table and on holidays and events, it is essential to keep business problems in the workplace. Make it clear from the start that family members will be held to the same standards as non-relatives (e.g., being timely, working efficiently) and will suffer the same consequences for bad performance (e.g., reprimands, termination).

 

Generational problems

When there are different generations within the family participating in the business, this can be a wonderful thing. Having younger generations in the business brings in new ideas. For example, the idea of implementing the latest technologies may be spurred by younger family members.

But there can be problems, too. A parent who starts a business may view it as his or her baby and may be resistant to having their actual children make changes in how things are done. Younger family members may feel frustrated in being held back from moving forward.

Suggestion: Each generation has something to offer to the other. Practice “active listening” where you not only hear the words but also listen to the message. Mindtools* lists five techniques for learning to be an active listener.

 

Succession planning

SCORE also reported that only 30% of family-owned businesses survive from the first to the second generation, and only 12% from the second to the third generation. Yet 47% of owners expecting to retire in the next five years do not have a successor.

Suggestions: As the current owner of the business, decide what you want to do with it when you retire or what happens when you die. You aren’t legally obligated to pass it on to your children. And they may or may not want it; they may have other interests that they prefer to pursue.

If the business is to remain in the family, be sure that the younger generation is prepared to take over. Involve them now in the management of your operations and inform them about financial matters so they can be ready for their future responsibilities.

Your business is a valuable asset, so also address death tax matters. Fortunately, the federal estate tax exemption is now substantial ($11.18 million for someone dying in 2018, and essentially double that amount if married). However, a number of states have death taxes, and some of these do not align with the federal exemption amount. For example, in Massachusetts and Oregon, the estate tax exemption amount for 2018 is only $1 million. This means you need to be prepared for the payment of state death taxes in a way that won’t cripple the business. Work with an estate planning attorney who can advise on measures to minimize estate tax problems.

 

Conclusion

Princess Diana said “family is the most important thing in the world.” When you mix family and business, you have challenges you need to address.

 

*denotes nongovernment website

About the Author:

BarbaraWeltman
Barbara Weltman

Guest Blogger

Barbara Weltman is an attorney, prolific author with such titles as J.K. Lasser's Small Business Taxes, J.K. Lasser's Guide to Self-Employment, and Smooth Failing as well as a trusted professional advocate for small businesses and entrepreneurs. She is also the publisher of Idea of the Day® and monthly e-newsletter Big Ideas for Small Business® and host of Build Your Business Radio. She has been included in the List of 100 Small Business Influencers for three years in a row. Follow her on Twitter: @BarbaraWeltman.

Which is Better - Hiring a Web Developer or Using a DIY Website Builder?

By smallbiztrends, Guest Blogger
Published: March 29, 2018

Today, many small businesses get a website up and running in one of two main ways. They either:

  • Hire a web developer to build them a custom website, or
  • Build their own website using one of the do-it-yourself platforms (such as Jimdo, Wix, Weebly, SquareSpace, or GoDaddy Websites).

There’s no right method for every business. For some businesses, the right answer will be to hire a web developer to build a custom website to your specifications. For others, the right answer will be the do-it-yourself approach. 

Which method you choose depends on a number of factors including your budget, needs, timing, and internal capabilities. Let’s take a look at pros and cons to help you choose the method of getting a website that’s right for your business.

                                                           

Hiring a Website Developer

 

Hiring a web developer is often the choice of businesses that already have a website.  Businesses like this are usually looking to upgrade. They need more than a basic five-page website. Their website may have proven return on investment already. So these businesses see the value of investing in a better website.

 

Here are some advantages of a custom website:

  • Your website will be exactly what you want, to your specifications. It may include advanced functionality.
  • A professional does the work for you.
  • You have someone to contact for ongoing changes and fixes. Most development firms provide support on an hourly rate or fixed-fee basis.
  • Use your own domain name. This is important for credibility.

 

And here are some downsides of a custom website:

  • Cost is significantly higher than a DIY website. A typical custom website price starts at $2,000 — and can go into five figures.
  • You have to spend time communicating your needs to your developer. If this is your first website, identifying your needs could be harder than it sounds because there are many things you’ll be thinking about for the first time.
  • Your business is responsible for hosting, upkeep, and protecting your site from breaches. This can mean your business will incur ongoing costs and a bit of complexity.

 

Using a Do-it-Yourself Website Builder Tool

 

Building your own website using a DIY website builder platform is often the choice for startups and entrepreneurs getting their very first site. This method is also a good choice for businesses in a hurry — you can literally have a website live in a few hours. And for those on an extremely tight budget, the DIY method is ideal as the costs are spread out with a low monthly fee.

 

Here are some advantages of DIY websites:

  • You get professional designs. Most also have mobile templates or responsive designs that display well on all screen sizes.
  • Inexpensive! It’s possible to get a “free” website, although you should opt for a paid plan as it won’t have ads and you can use your own domain address. Paid plans typically run less than $30 a month.
  • Content can be updated instantly – you can even switch designs on the fly. Simply log on to your DIY dashboard and make changes. No need to put in a request to your developer.
  • Hosting, security, and software fixes are handled by the platform.

 

But before you decide, consider the downsides of DIY websites:

  • The limited customization available may not meet your needs. Usually you get a package with pre-determined features or a few à la carte add-ons. 
  • The DIY approach is easy, but does require you to be hands on and takes time.
  • You may be limited to online help pages or email for support. Telephone support may cost extra — or may not be available.
  • If you stop using that particular DIY platform, you have to start over again somewhere else. You can’t take your site with you.

 

One final tip: try before you buy. Most DIY website builder platforms have a free plan or at least a free trial. It’s a good way to see if the DIY approach is for you.

About the Author:

smallbiztrends
Anita Campbell

Guest Blogger

My name is Anita Campbell. I run online communities and information websites reaching over 6 million small business owners, stakeholders and entrepreneurs annually, including Small Business Trends, a daily publication about small business issues, and BizSugar.com, a small business social media site.

Could a Semi-Absentee Franchise Opportunity Be Right For You?

By FranchiseKing, Guest Blogger
Published: March 29, 2018 Updated: March 29, 2018

Wouldn’t it be great if you could literally do two things at once?

Well you can, through franchising. I’ll explain.

 

A Typical Franchise Opportunity

Today’s typical franchise opportunity requires franchisees to be actively involved in running the business.

For example, if you owned a retail franchise business, you’d be involved in things like:

  • Ordering products
  • Inventory
  • Financials
  • Sales
  • Training
  • Hiring

And most of those duties require your presence on a daily basis.

In other words, you’d be working a lot of hours.

As a matter of fact, most franchise businesses need to have their owners on-site most of the time. But you knew that, right?

Be that as it may, what if there was a way to own a franchise, and not have to be there all of the time?

Keep reading.

 

An Unconventional Franchise Opportunity

I’m going to share a franchise opportunity that:

A. Doesn’t require long hours

B. Allows you to keep your job

The opportunity I’m referring to is a semi-absentee franchise.

Specifically, a franchise business that’s setup to have a manager in place-from day one. As opposed to a franchise business that requires the franchisee to operate the business from day-one, but who can eventually add a manager to assist her in the daily operation of the business.  

But here’s the deal: there aren’t a huge number of franchise opportunities available that are truly semi-absentee. 

 

An Example Of A Semi-Absentee Franchise

 Fitness franchises such as 24 Hour Fitness are attractive to prospective franchise owners, because in most cases, you can open one of these fitness franchises without having to leave your job.

The reason you’re able to keep a full-time job when you own a fitness franchise comes from the ability for franchisees to hire part-time fitness coaches to help oversee things, and to signup new members.

In this case, the ultimate goal as a franchisee is to own several of them, and leave your place of employment when enough income’s coming in. (And buy even more units if you can.)

 

Other Semi-Absentee Franchises

Here are several other franchise types that are usually semi-absentee.

  • Frozen Yogurt/Ice Cream franchises
  • Hair Salon franchises
  • Tanning salon franchises
  • Vending franchises
  • Car Wash franchises

 

Qualifications Needed

As attractive as semi-absentee franchise ownership sounds, it’s not for everyone.

For example, you’ll need to have above-average financial resources.

That’s because multi-unit franchise ownership is almost always required with these franchise opportunities. For example, if you commit to 3 franchise units, your total outlay could be $500,000 or more. (Over time.)

Secondly, you’ll need to have a good job. As in, well paying.

That way, you’ll be able to meet your personal obligations as your new business ramps up. Plus, you may find it easier to obtain loans for your future locations.

Going forward, a trend I predict* will be that more and more franchisors will start offering semi-absentee ownership options. Especially if our unemployment numbers remain low, as people won’t want to leave their jobs-but some of them will still be interested in starting businesses. 

*Non-U.S. Government link

About the Author:

FranchiseKing
Joel Libava

Guest Blogger

The Franchise King®, Joel Libava, is the author of Become a Franchise Owner! and recently launched Franchise Business University.

4 Ways Mom and Pop Businesses Can Outshine Their Bigger Competitors

By bridgetwpollack, Guest Blogger
Published: March 8, 2018

March 29 is National Mom and Pop Business Owners Day—a day to celebrate the value that family-owned small businesses bring to their communities. These days, Mom and Pop businesses face many challenges as they compete against larger retailers and service providers with expansive budgets. But Mom and Pops have some strengths bigger companies don't. By leveraging them, they cannot only compete successfully but also excel.

Here are 4 advantages small businesses have over big businesses:

First-name Basis

This brings to my mind some lyrics from the theme song for the television show, “Cheers.”

“Sometimes you want to go where everybody knows your name…”

I think we all can relate to how wonderful it feels when we walk into businesses where the owners or staff call us by name and make us feel valued.

Unlike many large corporations, mom and pop businesses have opportunities to really get to know their customers—and vice versa. It's not just business; it becomes personal as small business owners and their employees develop friendships with the people within their communities. Customers that know and like the people running a business will naturally be more inclined to visit again and again.

How can you make the most of this strength? Make an effort to learn about your customers. Do your best to commit to memory their preferences and key bits of information they give you about what's happening in their world. So, the next time they stop by your business, you can deliver personalized service and show you care by asking them about how their child’s school play went or what adventures they’ve had with their new puppy. Acknowledging your customers as individuals builds trust and goodwill—and can lead to referrals.

Nimble and Flexible

Large corporations often have a lot of red tape and tiers of buy-in to get through before launching new products or services and making improvements in answer to customer feedback. In contrast, with their simple management structure that allows for fast approval, mom and pop businesses can respond to market demand and customer needs more quickly.

And with no messy hierarchy and bureaucracy to navigate, mom and pop businesses can more adeptly cater to special requests from customers and offer more than customers are expecting. With their quick decision-making capabilities, mom and pop businesses are well positioned to nurture customer loyalty, earn repeat business and gain referrals.

How can you make the most of this strength? Treat every buyer interaction as an opportunity to gain valuable knowledge, improve your offerings and enhance the customer experience. Critical to the process is keeping a close eye on trends in your industry and what competitors are offering. Also, seek to learn—and closely listen to—what your customers like and dislike about your products and services. Industry blogs, joining your local chamber of commerce, staying tuned into your competitors’ social media accounts and issuing customer surveys can help you recognize the changes you should consider acting on. 

Also, listen to your customers' needs and go above and beyond to deliver personalized service. If you have employees, empower them to make decisions to do a little something extra when a prime opportunity for building customer loyalty presents itself. For example, think of the goodwill a mom and pop coffee shop might generate by giving its employees the authority to extend an occasional on-the-house cup of Joe to busy professionals who visit your location before work every morning.

Part of the Community

Mom and pop business owners have many opportunities to demonstrate their sense of social responsibility in supporting causes within their communities. And with 55 percent of consumers willing to pay more for products from socially responsible companies, giving back can have a direct result on a small business’s bottom line.

How can you make the most of this strength? As someone who lives and works within your local community, seek to be a part of making life better for those in need in your area. Keep a pulse on the causes that matter to your customers. Coat and food drives at your location not only serve a social need, but they also make your store a destination for new customers. You might also consider donating a portion of your profits for a limited time to a chosen charity. Other ideas include sponsoring a charitable event or a local sports teams. And giving your time to lend a hand at a nonprofit event can give the organization some much-needed assistance while strengthening your business’s reputation.  

Small and Local

“Shop Small” and “shop local” have become prominent mantras across the United States, raising awareness of small businesses' contributions to their local communities. Mom and pop businesses often provide unique artisanal products and offer one-of-a-kind experiences that draw visitors from other locations. Also, family-owned businesses account for 64 percent of the U.S. gross domestic product and 78 percent of new jobs created each year. Cognizant of small businesses’ impact on the local economy, people have a renewed interest in doing their part to keep their dollars in the local community.

How to make the most of this strength: The American Express® Small Business Saturday website offers many tips and tools for promoting your local business year round. It also provides ideas for how you can use Small Business Saturday (which falls on the Saturday after Black Friday) to boost customer motivation to buy from local businesses as the holidays arrive. You can also leverage the Shop Small® movement by partnering with other local mom and pop shops in your community. By recommending each other to customers and cross-promoting each other’s products and services, you can all gain more exposure and make more revenue.

Need help with Your Mom and Pop Business?

SCORE mentors have experience in all aspects of starting and running a business, and mom and pop business owners anywhere throughout the United States can take advantage of their insight and guidance.
 

About the Author:

bridgetwpollack
Bridget Weston Pollack

Guest Blogger

Bridget Weston Pollack is the Vice President of Marketing and Communications at the SCORE Association. She is responsible for all branding, marketing, PR, and communication efforts. She focuses on implementing marketing plans and strategies to facilitate the growth of SCORE’s mentoring and trainings services. She collaborates with SCORE volunteers and develops SCORE’s online marketing strategy.

8 Business Plan Myths That Can Hurt Your Business

By Tim Berry, Guest Blogger
Published: March 2, 2018 Updated: March 2, 2018

The need for good business planning is as strong as ever, and the potential benefits are as important as ever. Every business owner ought to have a business plan. But the best strategies for business planning are different than they used to be.

With that in mind, I’ve identified 8 pervasive myths that stand between you, the business owner, and the planning your business ought to have.

1. A business plan has to be long

Not necessarily so. A business plan can take whatever form is most useful, even if that’s just a few lists and tables.

2. A business plan is hard to make

It doesn’t have to be. List your key strategy points and key tactics, and a few important major milestones (like deadlines, tasks, the new launch or new website, and necessary hires). Include projected sales, costs, expenses, and cash flow. Voila! You have a business plan.

3. Nobody creates business plans anymore

Well-run businesses use business planning the right way. They keep a simple, lean plan up-to-date and refreshed. The review and revise it monthly. In straw polls I’ve taken for years at management workshops, the best 20% or 30% of the companies represented have a management process that includes a lean business plan as well as regular reviews and revisions.
 
Smart startups use basic business planning to help them see starting costs, projected early sales and spending, cash flow, and key strategy points and milestones before they launch. Then, they review these monthly.

4. Business plans are for only startups

True, well-run startups generally use business planning to help figure out which steps they need to take, and which resources they need. But that doesn’t mean mature businesses can’t use business planning to constantly set milestones, strategy reminders, and forecasts. Mature businesses keep a business plan up-to-date, and review and refresh it often. The more a business grows, the more it can benefit from good business planning.

5. You can’t plan because change comes too fast

In the real world, a good business plan manages change. It isn’t voided by change. You keep the plan current by making revisions as real events unfold.
 
It’s like dribbling in basketball: if you plan to go a certain direction, and the other team blocks you, then you go a different way. Having a plan means that you’ll have the information you need to make quicker, easier, and more natural revisions.  

6. Business plans require market research

I read and review lots of business plans from mature businesses that don’t include fancy market research. Business owners have to know their market, and taking a step back to review your market is a good idea. But with good planning process in a business, you can stay on top of your market. You don’t need to include market research in every version of your business plan.
 
Only in special cases will you need market research to prove your market to outsiders. For example, startups looking for investment, or businesses applying for loans, might need market research. Mature businesses know their market and plan without the research requirement.

7. Investors don’t read business plans

I was in an angel investment group for eight years. We didn’t read business plans for all the proposals that came in. We rejected many on the basis of summaries alone. For those that interested us, we invited them to present their pitch decks. From there, we narrowed the list down further.
 
For those that remained, the business plan was a vital part of due diligence. And for all of them, they should have had their bare-bones business plans made before they wrote their summaries and pitch decks. Without the business plan, the pitch and the summary are like movies made without scripts. Ultimately, seeking investors without a plan doesn’t work.

8. Nobody needs a business plan

Does every business need a plan, strictly speaking? No. But every business would benefit from good business planning.
 
People, even experts, still say nobody needs a business plan, but only because they are locked into the decades-old mentality of the big business plan document. If we redefine the business plan the way it should be, as a flexible record of key strategy points, tactics, milestones, and essential numbers, then all those experts would agree with me – that every business deserves a business plan.

About the Author:

Tim Berry
Tim Berry

Guest Blogger

Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 46 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including his latest, 'Lean Business Planning,' 2015, Motivational Press. Contents of that book are available for web browsing free at leanplan.com .

5 Things to Know about Year-End Bonuses

By BarbaraWeltman, Guest Blogger
Published: December 7, 2017 Updated: December 7, 2017

According to Bank of America’s Fall 2017 Small Business Owner Report, 35%of small businesses plan to offer year-end bonuses. These bonuses are an important way to retain good employees, especially during this increasingly tight job market. The size of these bonuses varies by industry and company, as well as the way they are figured (tied to performance or a flat amount) and when they are paid to employees (this year or next). Here are 5 things to know about year-end bonuses.

 

1. Be fair, be clear

Unless an employee has an employment agreement spelling out any required bonus, it’s within the company’s discretion to give a year-end bonus. These holiday-time rewards are an expression of gratitude by the employer for a job well done. Companies want employees to be happy about receiving bonuses and not grumble that payments to some workers are unfair. Consider:

  • Giving all employees the same type of bonus (e.g., a week’s wages).
  • Fixing bonuses to performance. Be sure that employees understand how this works.
  • Paying bonuses based on longevity with the company (e.g., a dollar amount per year of employment).

 

2. Pay what you can afford

Not every small business is giving bonuses this year. But with profits up for many companies, it may be easier this year than in recent years to give bonuses. Because bonuses are discretionary, companies don’t have to put themselves in the red just to be generous at holiday time. But with that said, don’t overlook the real cost of giving. In addition to the gross amount of the bonus, don’t ignore:

  • Employer’s payroll taxes. Depending on what the total payments to the employee for the year have been, the employer share of FICA can be 7.65% of the bonus amount (e.g., $765 on a $10,000 bonus).
  • Employee benefits keyed to compensation (e.g., employer contributions to a company’s qualified retirement plan)

 

3. Factor in payroll taxes

Bonuses are taxable compensation subject to income tax withholding and FICA. They’re treated as supplemental wages. This means employers can:

  • Lump the bonuses in with regular pay and figure withholding in the usual way
  • Withhold at a flat 25% (no other rate is allowed). However, for bonuses over $1 million (not likely in a small business), the flat withholding rate is 39.6%.

The rules for payroll taxes on bonuses are in IRS Publication 15.

 

4. Withholding for the additional Medicare tax

If a year-end bonus puts taxable compensation to an employee over $200,000, the employer must withhold for the 0.9% additional Medicare tax on earned income. This is so regardless of the employee’s marital status or whether he or she will ultimately owe this tax when the income tax return for 2017 is filed.

 

5. Declare now, pay later?

Calendar-year companies that are on the accrual method of accounting can declare year-end bonuses by December 31 and pay them later. As long as bonuses to rank-and-file employees are paid by March 15, 2018, they’re deductible on the 2017 return. But bonuses to owner-employees have different rules. For S corporations, bonuses aren’t deductible in most cases until actually paid (i.e., when owners have to include the bonuses in their income).

 

6. Conclusion

Are you a Santa or a Grinch? At this time of the year, small business owners can show appreciation and generosity to their staff in ways other than bonuses. Consider giving employees time off, closing the office, increasing compensation for the coming year, or any other tangible or intangible benefit you can offer at holiday time. A big, genuine thank you is always welcome.

About the Author:

BarbaraWeltman
Barbara Weltman

Guest Blogger

Barbara Weltman is an attorney, prolific author with such titles as J.K. Lasser's Small Business Taxes, J.K. Lasser's Guide to Self-Employment, and Smooth Failing as well as a trusted professional advocate for small businesses and entrepreneurs. She is also the publisher of Idea of the Day® and monthly e-newsletter Big Ideas for Small Business® and host of Build Your Business Radio. She has been included in the List of 100 Small Business Influencers for three years in a row. Follow her on Twitter: @BarbaraWeltman.

Small Business Owners Share Challenges of Hiring Employees and Gig Workers

By bridgetwpollack, Guest Blogger
Published: December 5, 2017

Small businesses employ almost half of all workers in the United States and have been responsible for much of the post-2008 economic recovery through their hiring efforts.

Over the past year, hiring activity has been on an upward trend for small businesses, with plans to add workers hitting the highest level since 1999.

SCORE’s latest Megaphone of Main Street Small Business Jobs Report surveyed more than 1,700 small business owners to rate their hiring experiences of employees and contractors.

 

Difficulty filling positions

More than 50 percent of small businesses said it was very or somewhat difficult to fill open positions, with about 55 percent of micro businesses, or those with 0 to 4 employees, in agreement.

Twenty-seven percent of openings went unfilled in the past six months, which was consistent across different small business sizes and locations. Business owners cited problems finding skilled, qualified applicants as a primary reason for not filling positions.

Offering competitive wages and salaries is another common challenge, along with a lack of healthcare and other employee benefits. Hiring takes time, too — about 18 percent of all small businesses said it was too time-consuming to hire qualified workers - they’ll just do the job themselves.

Small businesses use job-posting sites, recommendations from other business owners, networking groups and online platforms drive hiring efforts, but by far, recommendations from other workers proved most fruitful in finding new employees.

Our infographic, “The Megaphone of Main Street: Small Business and Employment,” identifies more hiring challenges faced by small businesses.

 

The gig economy and small business

The area of largest hiring growth among those surveyed was in one-time project or gig workers at 37 percent.

Eighteen percent of businesses reported replacing employees of any type with contractors over the past six months.

Of those business owners, 50.8 percent reported choosing a contractor or temporary worker for the benefit of their specialized expertise. Forty-one percent reported only having seasonal or temporary needs; 35.1 percent said they preferred hiring a contractor over needing ongoing cash reserves for payroll. The costs and complexities of offering employee benefits like healthcare and retirement plans also drove the decision to hire a contractor.

Forty-seven percent of solopreneurs reported hiring other people for part-time help running their businesses. Their firms had an average of 3.2 workers, including the owner.

Contractors are most likely to be called in to complete technical, accounting, bookkeeping and marketing tasks. Other important roles for contractors include manufacturing, sales, business planning and logistics.

When respondents noted their reasons for hiring an employee over a contractor, consistency of work and commitment to the company were primary. Having the same person in a position rather than a rotating contractor was another major factor, as was the ability to direct work tasks and schedule work hours.

Some business owners commented that their concerns about correctly following IRS regulations— and dealing with related paperwork — guided their decisions whether to hire a contractor or an employee.

For more insight on the growth of the gig economy, see our infographic “The Megaphone of Main Street: The Gig Economy.”

How does your experience hiring qualified employees and contractors fit in with our findings? Meet with a SCORE mentor about how to ensure you find the best talent for your growing small business. 

About the Author:

bridgetwpollack
Bridget Weston Pollack

Guest Blogger

Bridget Weston Pollack is the Vice President of Marketing and Communications at the SCORE Association. She is responsible for all branding, marketing, PR, and communication efforts. She focuses on implementing marketing plans and strategies to facilitate the growth of SCORE’s mentoring and trainings services. She collaborates with SCORE volunteers and develops SCORE’s online marketing strategy.

What Makes a New Business Forecast Realistic?

By Tim Berry, Guest Blogger
Published: November 21, 2017 Updated: November 21, 2017

This is the second of two parts. The first was What Makes an Ongoing Business Forecast Realistic. I’ve written before about about why to forecast basic business numbers and how to forecast better. I write about the value of realistic forecasting in those posts and others. So for these two posts I want to address what makes a forecast realistic. How can we tell? What do we look for?

I separated this into two parts because they are so different. For established businesses, realism is boosted by past results. For new businesses, however, there are no past results. Realism is a matter of transparent assumptions and comparisons to similar situations.

What we all want to avoid, for new business forecasts, is the complaint that comes up way too often: “How can I forecast a new product if I don’t have past data?” That’s not a reason to not forecast. A new business needs a forecast even more than an established business, because the uncertainty level is higher, and the risks are higher. So just because it’s hard doesn’t mean you can’t do it. Millions of others have done it before you.

Focus on sales drivers

Most businesses have some key factors that drive sales. It might be traffic, channels, stores, leads, pipeline, or something else. A realistic sales forecast breaks down into drivers. Here are two examples.

  • A sales forecast for a subscription-based web business that shows estimated web traffic and conversion rates looks more realistic than one that just shows subscriptions as if they came from nowhere. And another increase in realism is to breaks traffic into sources of traffic, such as organic search placement, pay-per-click advertising, and email marketing.
  • A sales forecast for a product business selling through traditional retail channels might include estimates of stores carrying the item, and monthly unit sales per store. It might be even more realistic if it breaks the monthly sales assumptions into categories of stores.

These examples are illustrated below.

visual representation of a chart with a web Business sales forecast

Realistic assumptions make realistic forecasts

Even new products and new businesses follow established patterns. Modern technology gives us enormous resources for educating our guesses, even on new things, by what’s normal for existing things.

For example, that web business doing the sales forecast above can find out, with some web searches, what might be normal expectations for traffic for new sites, as a function of factors like type of site, type of business, and marketing budget. And that product business ought to be able to find data on sales per store for some existing products.

A new business forecast can anchor its assumptions with data from existing businesses. When a key assumption for something new is based on actual results for something similar, that adds credibility.

With expenses, too, new businesses can find a lot of data. Average salaries by job type, for your market, are available. Average marketing spending, for your type of business, as a percent of sales, is available for most businesses. Average square feet of office space per person, for your type of business or one similar to yours, is something you can research and estimate. Average rents for office space, or retail location, by type of location and square footage, are available.

Review and revise often

Remember, forecasts aren’t supposed to hold up to time. Forecasts are meant to be reviewed often, and revised. The point isn’t accurately guessing the future; it’s getting information you can use to manage.

About the Author:

Tim Berry
Tim Berry

Guest Blogger

Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 46 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including his latest, 'Lean Business Planning,' 2015, Motivational Press. Contents of that book are available for web browsing free at leanplan.com .

Why Hire Veterans?

By BarbaraWeltman, Guest Blogger
Published: November 8, 2017 Updated: November 9, 2017

The month of November is a time to celebrate Veterans Day. This year Veterans Day falls on Saturday, November 11 (Friday, November 10 is the federal holiday to celebrate it). There are more than 19 million veterans, and one or more of them may be a good fit for your company. Here’s what veterans offer to employers:

 

Continuing pool of workers
Approximately 230,000 to 245,000 service men and women leave the military* each year. Given the increased tightening of the job market, these individuals are available for work in the private sector and offer much to employees (as explained below).

 

Skills
Veterans may have the skills and education you’re seeking for your company. There are “hard skills,” such as technology skills they’ve learned that can translate in the private sector. And there are “soft skills,” such as leadership and decision-making, that are also valuable to a company.

 

Reliability
As a rule, you can count on veterans to display a good work ethic by showing up for work on time to do their jobs. What’s more, you probably don’t need a background check once you verify their service; the government has essentially vetted them for you.

 

Tax credit
You may be eligible for a work opportunity tax credit for hiring certain veterans. A qualified veteran is a veteran certified as being any of the following:
  • A member of a family receiving assistance under the Supplemental Nutrition Assistance Program (SNAP) (food stamps) for at least 3 months during the first year of employment.
  • Unemployed for a period totaling at least 4 weeks (whether or not consecutive) but less than 6 months in the 1-year period prior to the date of hire.
  • Unemployed for a period or periods totaling at least 6 months (whether or not consecutive) in the one-year period ending on the date of hire.
  • Entitled to compensation for a service-connected disability and hired not more than one year after being discharged or released from active duty in the U.S. Armed Forces.
  • Entitled to compensation for a service-connected disability and unemployed for a period totaling at least 6 months (whether or not consecutive) in the 1-year period that ended on the date of hire.

The credit is 40% of eligible wages, which for a qualified veteran is limited to the following amounts:

  • $6,000 for a qualified veteran certified as being either (a) a member of a family receiving SNAP assistance (food stamps) for at least a 3-month period during the 15-month period ending on the hiring date, or (b) unemployed for a period or periods totaling at least 4 weeks (whether or not consecutive) but less than 6 months in the 1-year period ending on the hiring date.
  • $12,000 for a qualified veteran certified as being entitled to compensation for a service-connected disability and hired not more than 1 year after being discharged or released from active duty in the U.S. Armed Forces.
  • $14,000 for a qualified veteran certified as being unemployed for a period or periods totaling at least 6 months (whether or not consecutive) in the 1-year period ending on the hiring date.
  • $24,000 for a qualified veteran certified as being entitled to compensation for a service-connected disability, and unemployed for a period or periods totaling at least 6 months (whether or not consecutive), in the 1-year period ending on the hiring date.

There’s no limit to the number of veterans with respect to which you can claim a credit. But when hiring a veteran, be sure that he/she completes Form 8850 so you can submit it to your state employment security agency (SESA) within 28 days of starting work. If you don’t, you can’t claim the work opportunity credit even if you are otherwise entitled to it.

 

Conclusion
There are many other good reasons to hire veterans. You can find them in the Veterans Employment Toolkit from the U.S. Department of Veterans Affairs.

About the Author:

BarbaraWeltman
Barbara Weltman

Guest Blogger

Barbara Weltman is an attorney, prolific author with such titles as J.K. Lasser's Small Business Taxes, J.K. Lasser's Guide to Self-Employment, and Smooth Failing as well as a trusted professional advocate for small businesses and entrepreneurs. She is also the publisher of Idea of the Day® and monthly e-newsletter Big Ideas for Small Business® and host of Build Your Business Radio. She has been included in the List of 100 Small Business Influencers for three years in a row. Follow her on Twitter: @BarbaraWeltman.

What Makes an Ongoing Business Forecast Realistic?

By Tim Berry, Guest Blogger
Published: November 2, 2017 Updated: November 21, 2017

I’ve posted here before about about why to forecast basic business numbers and how to forecast better. I write about the value of realistic forecasting in those posts and others. So for this post I want to address what makes a forecast realistic. How can we tell? What do we look for?

As I do, I’ll look at two important variations. First, business forecasts for an existing ongoing company. Second, business forecasts for a new company, not started yet, in the planning stages. Both cases are different. In this post we look at realistic forecasts for ongoing. Next month we’ll look at realism for startups.

Align your types and categories and units

Start with the obvious: coordinate your forecast with your past results. Make sure that the types, categories, and items you put into your forecast match the types, categories, and items you get reports on from your bookkeeping. Specifically, if you think of a forecast in a spreadsheet view with labels in the leftmost column and months across the top in the top row. Way too often people set up forecasts using different categories than what they get in accounting reports. Keep past and future aligned.

Example of financial forecasting chart

As you develop forecasts, think about metrics. For example, you could forecast sales as broken into units, average price, and sales; or just as sales, in dollars. What you want is metrics you can act on, to make decisions. Tracking by units and price helps you manage your business by understanding whether your results varied in unit sales or average price.

Align your projections with the recent past

How well do projections match the recent past? Real life is full of gradual changes. Real life is full of things for which the recent past is the best predictor of the near future. Weather, for example. Kids grades in school. Business success. And your business’s sales, costs, and expenses.

So, concretely, project reasonable logical change as you move forward into the future. For a quick test, draw or think of a line chart that takes any specific business number – sales, sales of a specific product, expenses, some specific category of expenses – and projects it as a line in a line chart that has money on the vertical axis and time on the horizontal. Have it draw a continuous line including results of the last year, and forecast for the next year. Suspect abrupt changes as lack of realism.

A gradually sloping line with some curve is a more realistic representation of ongoing changes in businesses

Understand what drives changes

Please don’t think I’m suggesting that forecasts always extrapolate the past into the future. No, of course; it’s not that simple. Changes happen. Your business launches new products or services, or new marketing or sales promotions. You expand to new markets. You want your business to grow and separate itself from the past, with sharp changes in curves. I’m a business owner too, I understand. We all want that.

What I am saying is that realistic forecasts understand and incorporate the drivers of change. You don’t just project better results next year for doing the same thing you’ve always done. Your improvements are linked conceptually to causes. You take the past, project it into the future, and then adjust it for changes you can predict.

The more you understand the causes of change, the more realistic the forecast.

Review and revise often

Remember, forecasts aren’t supposed to hold up to time. Forecasts are meant to be reviewed often, and revised. The point isn’t accurately guessing the future; it’s getting information you can use to manage.

About the Author:

Tim Berry
Tim Berry

Guest Blogger

Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 46 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including his latest, 'Lean Business Planning,' 2015, Motivational Press. Contents of that book are available for web browsing free at leanplan.com .

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