Alisa A. Mitchell CPA PARunning a small business is often about taking and managing risks. Market risks are normal but business and tax risks are another thing altogether. Most business and tax-related risks can be managed as long you know about them. Here are seven small business risks you will want to make sure are covered.
1. Best Choice of Entity
Are you operating as a corporation, limited liability company, partnership, or sole proprietor? More importantly, is the entity you are operating under providing you with the greatest tax benefits and separation from personal liability? If not, you might want to explore the alternatives to make sure you’re taking the amount of risk that’s right for you.
2. Employees or Contractors
Are your team members properly categorized when it comes to the IRS’s rules about employees versus contractors? Unfortunately, it’s not about what you and your team member decide you want. If you decide to hire contractors and the IRS determines they are employees, you could owe back payroll taxes that can cripple a small business. So you’ll want to do the right thing up front and make sure you and the IRS are in agreement, or be willing to take a future risk.
3. Insurance
If you’d like to protect yourself from possible losses through a disaster, theft, or other incident, insurance can help. There are a lot of kinds to choose from, and you’ll likely need more than one. At the minimum, make sure you’re covered by:
- Business property insurance, renters insurance, or a homeowners rider to protect your physical assets.
- Professional liability or malpractice insurance, if applicable, to protect you from professional mistakes including ones made by employees.
- Workers compensation insurance, to cover employee accidents on the job.
- Auto insurance or a non-owned policy if employees drive their car for work errands.
You may also want personal umbrella insurance, life insurance, and health insurance. Check with an insurance agent to get a comprehensive list of options.
4. Sales Tax Liability
Are you sure you’re collecting sales tax where you should be? As the states get greedier, they invent new rules for liability. For example, if one of your contractors lives in another state, you may owe sales tax on sales to customers who live there even if you don’t live there or have an office there.
Nexus is a term that describes whether you have a presence in a state for tax purposes. Having an office, an employee or contractor, or a warehouse can extend nexus so that you’d need to collect and file sales tax for those states. If you’re in doubt, check with a professional, and let us know how we can help.
5. Underpricing
Most small businesses make the mistake of underpricing their services, especially when they start out. If you started out that way, it’s awfully hard to catch up your pricing to a reasonable level. Knowing the right price to charge can make the difference between whether the company last six months or six years. You can mitigate this risk by getting cost accounting help from your accountants who can help you calculate your margins and determine if you’re covering your overhead and making a profit.
6. Legal Services
Legal services can be expensive for a small business, so sometimes owners cut corners and take risks. Attorneys are needed most when it comes to setting up your entity, reviewing contractual agreements such as leases and loan agreements, settling conflicts, advising on trademark protection, and creating documents such as terms of service, employment agreements, and privacy policies. Just one mistake on any of these documents can cost a lot, so be sure it’s worth the risk.
7. Accounting Services
Doing your own accounting and taxes can be risky if they’re done wrong or incomplete. You could end up paying more than you should if you leave out deductions you’re entitled to. Worse, if you do your books wrong, you could end up overpaying taxes without realizing it. A common bookkeeping error results in doubling sales, and while it might look good, you certainly don’t want to pay more than what’s been truly received.
How did you do with these seven risks? If you need to reduce your risks in any of the areas, feel free to reach out for our help.
Most small businesses need help with cash during certain stages of their growth. If you find that you have more plans than cash to do them with, then it might be time for a loan. Here are five steps you can take to make the loan process go smoother.
1. Make a plan.
Questions like how much you need and how much you will benefit from the cash infusion are ones you should consider. If you don’t already have some version of a budget and business plan, experts recommend you spend a bit of time drafting those items. There’s nothing worse than getting a loan and finding out you needed twice the cash to do what you wanted to accomplish.
2. Know your credit-related numbers.
Do you know your credit score? Is there anything in your credit history that needs cleaning up before it slows down the loan approval process?
Take a look also at your standard financial ratios. These are ratios like your current ratio (current assets / current liabilities) and debt-to-equity ratio. If these are in line with what your lender is expecting, then you are in good shape to proceed.
3. Research your options.
Luckily, there are many more options for financing your business today than there have been in the past. Traditional options, such as banks, still exist, but it can be difficult to get a bank loan for a small business.
Here are some online loan sources where investors are matched with borrowers via an online transaction:
- Kabbage
- OnDeck
- LendingClub
- FundBox
- BlueVine
Or you can go to Fundera and compare which loan is the most economical.
There is also crowdfunding, which is very different from a loan. Crowdfunding is a way to raise cash from many people who invest a small amount. Top sites include GoFundMe and KickStarter, where you can find out more about how it works.
Other ways to get cash include tapping into your personal assets: using credits cards, refinancing a house, and borrowing money from family and friends.
4. Create your loan package.
Most lenders will want to know your story, and a loan package can provide the information they need to decide whether they want to loan you money or not. A good loan package includes the following:
- A narrative that includes why you need the loan, how much you want, and how you will pay it back. A good narrative will also list sources of collateral and a willingness to make a personal guarantee.
- Current financial statements and supporting credit documentation, such as bank statements and credit history.
- A business plan and budget, or portions of it, that cover your business overview, vision, products and services, and market.
- A resume or biography of the business owners and a description of the organization structure and management.
While it takes time to put together a great loan package, it’s also a great learning experience to go through the exercise of pulling all of the information together.
5. Execute!
You’re now ready to get your loan. Or not. Going through these five steps helps you discover more about your business and helps you make an informed decision about whether a loan is still what you want and need.
Throughout the process, you may have learned new information that tells you you’re not quite ready for a loan, or that in fact, you are. At any rate, preparing for a loan is a great learning process, and the good news is there are lots of avenues for small businesses to get the cash they need to grow.
Spring denotes new growth, fresh starts, and spring cleaning. Why not apply these ideas to your sales so they can blossom along with spring flowers? Here are six ideas to put the spring into your sales.
1. Spring Cleaning Sales
Get rid of old inventory by having a spring sale that will clean out your closets and put some money in your account. Look through your items for sale and find the ones that haven’t moved like you expected. Mark them down and move them out.
2. New Items and Services from Customer Ideas
Now that you’ve gotten rid of the old stuff, you have room for new. If you’re not sure what your clients want or need, ask. Use Survey Monkey to find out what your clients can use. If you don’t have what they want, make it, buy it, or partner with someone who does. Then let everyone know, “based on popular demand” of course, that you have new items for sale just in time for spring.
What questions should you ask in your survey? Try questions like these to draw out your customers’ needs and wishes and to discover any shortcomings you might have not known about:
- What items/services are on your wish list that you’d like us to stock/provide?
- How do you currently use our services/products?
- What do you wish our items accomplished that they don’t now?
- How would you recommend we expand our selections?
- What do you wish we did better?
3. The Old “Fries with Your Burger” Upsell
Waitpersons offer desserts and appetizers, office supply staff offer cables and accessories with hardware purchases, and software vendors offer the next level package. Almost every business practices a form of upsell these days, so if you don’t, you’ve got a new opportunity right here.
Dust off your old upsell procedures and try these ideas to rejuvenate your upsells:
- Re-visit your inventory to pair complementary items for upsell potential.
- Retrain your staff for upsell language at the time of sale.
- Re-package like items to offer more bundles and groups.
4. New Prices
When is the last time you’ve raised your prices? If it’s been a while, then it’s a great opportunity to increase revenue with little additional effort.
5. Spread the Word with Spring Samples
Samples can help get your product or service into the hands of many potential buyers. Buyers can better experience your product and reduce their perceived risk.
Not all businesses can provide samples, but there is always the next best thing. Where your product is not consumable, you can sometimes provide a portion of the product, such as a carpet sample, wallpaper swatch, or floor tile. With retail clothing, pictures will have to do. With books or courses, you can provide a sample chapter or a demo video. And with services, case studies or proof of concept will suffice.
6. Offer a Customer Reward Program
Put together a program to reward your most loyal clients and to make them even more loyal to you. Some of the perks could include monthly gifts, priority service, an exclusive event, and/or discounts. The price can be structured as a membership fee, retainer, or package price. Increasing contact, benefits, and communication with these clients is always a good investment.
Try one of these six ideas to put the spring in your sales this season.
A 2014 Global Fraud Study conducted by the Association of Certified Fraud Examiners (ACFE) estimates that the average business loses five percent of their revenues to fraud. The global total of fraud losses is $3.7 trillion. The median fraud case goes 18 months before detection and results in a $145,000 loss. How can you avoid being a fraud victim?
The first step is to become more aware of the conditions that make fraud possible. The fraud triangle is a model that describes three components that need to be present in order for fraud to occur:
- Motivation (or Need)
- Rationalization
- Opportunity
When fewer than three legs of the triangle are present, we can deter fraud. When all three are present, fraud could occur.
Motivation
Financial pressure at home is an example of when motivation to commit fraud is present. The fraud perpetrator finds themselves in need of large amounts of cash due to any number of reasons: poor investments, gambling, a flamboyant lifestyle, need for health care funds, family requirements, or social pressure. In short, the person needs money and lots of it fast.
Rationalization
The person who commits fraud rationalizes the act in their minds:
- I’m too smart to get caught.
- I’ll put it back when my luck changes.
- The big company won’t miss it.
- I don’t like the person I’m stealing from.
- I’m entitled to it.
At some point in the process, the person who commits fraud loses their sense of right and wrong and their fear of any consequences.
Opportunity
Here’s where you as a business owner come in. If there’s a leak in your control processes, then you have created an opportunity for fraud to occur. People who handle cash, signatory authority on a bank account, or financial records with poor oversight could notice that there is an opportunity for fraud to occur with the ability to cover the act up for some time.
Seventy-seven percent of all frauds occur in one of these departments: accounting, operations, sales, executive/upper management, customer service, purchasing and finance. The banking and financial services, government and public administration, and manufacturing industries are at the highest risk for fraud cases. (Source: ACFE)
Prevention
Once you understand a little about fraud, prevention is the next step. To some degree, all three points on the triangle can be controlled; however, most fraud prevention programs focus on the third area the most: Opportunity. When you can shut down the opportunity for fraud, then you’ve gone a long way to prevent it.
While we hope fraud never happens to you, it makes good sense to take preventative steps to avoid it. Please give us a call if we can help you in any way.
Providing great service can make a huge difference in a small business. For companies like Zappos, Nordstrom, and Southwest Airlines, customer service is a differentiator from their competitors. Done right, good customer service can bring lots of referrals that lead to increased revenue. Here are five tips to improve service to your customers.
1- “Welcome Home” Greeting
Consider your business as your home and your customers as invited guests. No matter how they come to you, whether by phone, email, or in person, greet them like you would a guest. If your business has a storefront and customers walk in, have your employees greet them immediately with a welcome message that ends in “Please, make yourself at home.” If your prospect or customer calls you, greet them warmly with “I’m so glad you called.” If a customer or prospect emails you, personally email them back (no autoresponders) to let them know you received their message and when you will be replying.
A warm welcome every time your customer contacts you will make them feel important.
2- Throwback Thank You Cards
Be old-fashioned for a change and handwrite thank you cards to your top clients. You can get blank folding cards with matching envelopes from your local printer or paper shop and have your company logo printed on them. If you don’t have time for that, consider SendOutCards.com.
3- Apologize
Things are bound to go wrong. Be quick with a heartfelt apology whether it’s your fault or not. If your customer struggled with anything – your website, shopping cart, store display, out-of-stock item, and so on – teach your employees to apologize first, then own the problem and get it fixed for all future clients. You can also teach them the language, “thank you for giving us the opportunity to fix this for all future clients.”
4- Mystery Shop
Periodically hire a mystery shopper to evaluate the customer experience at your business. These customer service experts will provide you with a list of suggestions, from your initial voice mail recording to paying your bill. Everywhere your business touches a client should be streamlined, easy, and sealed with a smile.
5- Listen
Your customers can be the best source of ideas for your next new revenue stream. Listen to their feedback and incorporate their ideas into your business.
Try these customer service tips to delight your customers, and watch your revenue grow.
If you want 2016 to be better than 2015, you have to do something differently in 2016 than you did in 2015. It’s a simple but profound realization. Change brings the opportunity to make things better; it can be scary yet exciting at the same time.
Ask yourself what you are going to do differently to have your best year ever. Here are some questions and exercises to consider:
Clarify Your Vision
What does the world look like after it’s consumed your product or service? A vision statement for a company helps to keep everyone on track and seeing the bigger picture of what they’re accomplishing day after day. How is the world smarter, more beautiful, happier, healthier, or wealthier after they’ve left your business?
If you haven’t written your business vision and mission statement, consider this exercise for 2016.
Create New Habits
What habits are holding you back? Which ones are propelling you forward? Choose one habit that’s costing you the most and make a commitment to drop it from your 2016 repertoire. Conversely, identify the habit that is brining you happiness and wealth and multiply it.
Let Go
Sometimes we need to let go before we can move forward. What do you need to let go of? Are there customers or employees in your life that sap your energy or your bank account?
Build Your Support Structure
Are you short-staffed? The way you manage your time has everything to do with your success or the lack of it. If you are taking up your time with a lot of low-dollar tasks, it’s going to be hard to boost your income and get ahead. Surround yourself with support to do everything that can be delegated, including personal tasks such as grocery shopping, housekeeping, cooking, and lawn maintenance as well as tasks such as filing, bookkeeping, appointment scheduling, and routine customer service.
Make a list of areas where you could use support, and fill these gaps. In today’s world, you don’t need to hire full time people to fill these slots; you can simply get responsible contractors, other small businesses, and virtual assistants to build your support team.
Focus
What project or task would make a huge difference in 2016 if you could pull it off? Focus on the high payback projects and commit to one, even though it might be out of your comfort zone. Imagine the difference in your business once it’s completed, and get inspired to get started.
Choose just one of these areas to start your 2016 out with hope, intention, and excitement.
You may have heard that Google has rolled out a new search algorithm that ranks mobile-friendly websites higher than sites that are not mobile-friendly. You don’t need to worry too much about this unless you rely on website leads for new clients to build your business.
If you do rely on website leads for new business and your leads have dropped off over the summer, the reason could be that your site is not mobile-friendly and has been ranked lower because of it. Here are three steps you can go through to determine the status of your site.
Take a Free Mobile-Friendly Test
Go to this link and enter your domain name.
https://www.google.com/webmasters/tools/mobile-friendly/
It takes about a minute or two to find out whether your site is mobile-ready.
If your site passes, you’re done! You don’t need to do anything. If it doesn’t, then go to step 2.
Contact Your Webmaster
Ask your webmaster for an estimate to get your site mobile-ready.
Take Action
Google started making changes to the search algorithm the week of April 20, 2015 has now implemented it worldwide. To benefit from mobile traffic and a higher search ranking, make plans to get your site mobile-friendly sooner rather than later.
Time is money as they say, and if you can save time, you’re also saving money. Since your time is limited to 24/7, both personal and business time saved is profitable. Here are eight ways to save time (and money) for your consideration. Go through all of them with an open mind, and see which one might work best for you.
1. The trip to the grocery store
If you’re making several trips to the grocery store throughout the week, this one is for you. Cut down on those trips by taking inventory of your kitchen and seeing what you’ll need for the week (or longer). Shopping once a week will save precious time throughout the week.
Better yet, have your groceries delivered. Some shops will also pick and bag your times so your selections are ready for pickup. Even better, hire an assistant to shop for you so that your refrigerator and pantry is stocked when you get home.
2. Appointment scheduling
Automate your appointment scheduling and you’ll free up weeks of admin time for either you or your staff. There are dozens of apps, many industry-specific that can help you save time making appointments. Once you’ve set it up, send the link to the people you’ll be meeting and voila, it will appear on your calendar.
Here are a few to check out:
- https://acuityscheduling.com/
- https://10to8.com/
- https://www.flexbooker.com/
- And so many more: Google “appointment scheduling” to find more
For field service companies in the home repair or maintenance industries that serve commercial and residential customers, Google “field service scheduling” to get the right software for your business.
3. Office supplies
Order your supplies online and have them delivered.
4. Email interruptions
Turn off automatic send and receive in your email software to get rid of that nasty interruption. Mark your calendar to check and answer your email three to four times a day. You’ll go home happier and feeling more in control of your work with this one change.
5. The commute
If you can manage it, working from home one to two days a week can save you commute time. You may also be able to avoid rush hour by altering your work hours if you have some flexibility. After all, it’s your business.
6. Those errands
Batching your errands all into one day will save precious start and stop time on your other work days. Better yet, choose one day a week for outside errands and personal appointments so that you can get into the habit of this for the long term.
7. Takeout
Do you go out for lunch every day? You may need the break or you may need to have that power lunch with a new business partner or client. But on days you don’t, have takeout delivered so you don’t have to waste time ordering and standing in line.
8. The bank
Are you going to the bank constantly? If so, you can avoid it in a number of ways:
• Take credit cards, and have clients pay online.
• Ask your bank about remote or mobile check deposit options.
• Hire a company to transport your cash deposits – Google “Cash logistics” to find companies with armored car services. It won’t hurt to find out how much it costs and you might be surprised.
Did you get an idea on how to save time? If so, it’s your turn to implement and reap the benefits.