Businesses

It’s a disheartening statistic to say the least, but the Bureau of Labor Statistic (BLS) reports that over half of all small businesses are forced to close their doors after just five years. While a small business can fail for dozens of reasons, high overhead expenses is often a contributing factor. Thankfully, though, there are ways to lower your small business’s overhead expenses and, therefore, increase its chance of long-term success.

Use Paperless Documents

How much money does your small business spend on paper documents. A report published by The Paperless Project suggests U.S. businesses spend over $120 billion on paper documents and forms each year. Regardless of what type of small business you operate, you’ll probably use paper documents and forms in your operations. Depending on the nature of these documents and forms, however, you may be able to switch to a digital format instead. Tax forms and pay stubs, for example, can often be sent to employees digitally, eliminating the need for paper.

Compare Rental or Leasing Prices

Not surprisingly, one of the biggest overhead expenses encountered by small business owners is renting or leasing a store or building. While you can’t eliminate this overhead expense, you can often lower it by shopping around. Explore several prospective locations for your small business, and when you contact the owner or landlord, inquire about the rental or leasing cost. With a little work, you may discover a better location for your small business that costs less than your current location.

Choose Highly Effective Advertising Tactics

Advertising is also considered an overhead expense, so you should choose your advertising tactics carefully. Avoid using mass-volume advertising tactics that expose your small business to a large, generalized audience. Instead, choose targeted advertised tactics that allow you to reach your small business’s key demographic of potential customers. Not only will you spend less money on targeted advertising; you’ll generate more revenue from it.

Cancel Nonessential Services

Go through your small business’s bank statements and credit card statements to identify any nonessential services. Maybe you’re paying for a landline that you rarely use, or perhaps you have two internet services when you only need one. Either way, you should consider canceling nonessential services to save money on your small business’s overhead expenses.

Have anything else that you’d like to add? Let us know in the comments section below!

Are you planning on launching a small business? According to the Small Business Administration (SBA), there are over 28 million small businesses operating throughout the United States. Unfortunately, though, statistics show that one in two small businesses fail within five years. It’s frustrating when you invest your time, money and energy into starting a small business, only for it to flounder. While there’s no foolproof way to ensure your small business is successful, you should take action to avoid making the following mistakes.

#1) Not Creating a Business Plan

Just because you’re starting a small business and not a medium- or large-sized business, you still need a business plan. A business plan offers a detailed roadmap your small business’s plan for success. Furthermore, many banks and lenders will request your business plan when seeking a loan or funding.

#2) Overlooking Goals and Objectives

Don’t forget to set goals and objectives for your small business. Without goals and objectives, how will you know if your small business succeeds? Far too many entrepreneurs dive headfirst into a new venture without taking the time to set goals and objectives. As a result, they place themselves at a disadvantage to their competitors.

#3) Using the Wrong Business Structure

Another mistake that entrepreneurs are guilty of making is using the wrong business structure. As you may know, there are several tax-based business structures from which to choose, some of which include sole proprietorship, LLC, corporation and partnership. Generally speaking, a sole proprietorship is the worst structure because it offers zero protection of your personal assets — home, car, personal savings, etc. — from your small business’s liabilities.

#4) Hiring the Wrong Employees

If you’re going to hire employees for your small business, you need to hire the right employees. Some small businesses hire the first candidates who submit an application. It’s only until later when they realize their mistake. Failure to selectively choose the most skilled and qualified employees will only hinder your small business’s ability to grow and generate sales.

#5) Taking on Too Much Debt

Your small business may incur debt during its initial launch stage — and that’s okay. However, you should be conscious of how much debt your small business incurs and take appropriate measures to minimize it. For example, consider using equity-based funding, such as venture capital or private equity, instead of debt-based funding like a bank loan.

Have anything else that you’d like to add? Let us know in the comments section below!

When seeking funding for your business, you’ll probably come across business loans. Offered by both government-backed banks and private lenders alike, business loans are among the most common type of funding vehicle used by businesses. You can get loans as small as $5,000 or as big as $500,000 — sometimes even larger. Not all business loans are the same, however, and it’s important to consider whether it’s secured or unsecured.

Unsecured Business Loans

An unsecured business loan is money loaned to a business that doesn’t require the business to use collateral. When you apply for an unsecured business loan, the lender will run a credit report to see if there are late payments or other delinquencies. Additionally, the lender may evaluate your business plan to further gauge your ability to pay back the loan. If you meet the necessary criteria, the lender will approve your application and give you the business loan.

Secured Business Loans

A secured business loan, on the other hand, is money loaned to a business that does require the business to use collateral. Some lenders are skeptical of loaning money to businesses, especially if those businesses have bad credit or no credit. Rather than rejecting their application for a loan altogether, lenders may require the use of collateral to secure the loan. Collateral is essentially something of value that the lender can use as a financial recourse in case the business is unable to pay back the loan. Common examples of collateral include real property, business equipment or even accounts receivables.

Which Should I Choose?

Now that you know the difference between unsecured and secured business loans, you might be wondering which funding vehicle is right for your business. There are advantages and disadvantages to both types of business loans. Unsecured loans don’t require the use of collateral, so you don’t have to worry about losing those assets if you fail to pay back the loan. On the other hand, unsecured loans are more difficult to obtain because they have a higher risk for lenders.

Secured loans are easier to obtain, and in many cases, they are the only option available for new businesses that are just getting off the ground. The problem with secured loans, however, is that you may lose any assets used as collateral if you don’t pay back the loan.

Have anything else that you’d like to add? Let us know in the comments section below!

Cash flow is an important metric to look for when analyzing your business’s finances. Defined as the movement of money — income and expenses — it provides an accurate overview of your business’s ability to pay liabilities. If you spend significantly more money what you make, this suggests that you won’t be able to cover debt and other liabilities. You can increase your business’s cash flow, however, by doing the following.

Explore Different Insurance Solutions

According to LegalZoom, insurance is the single biggest expense associated with running a business. Regardless of the type of business you operate, it probably needs insurance. Rather than choosing the first insurance company that offers you a deal, shop around and get quotes from multiple providers.

Go Digital

There are certain documents that can (and should) be stored in digital format instead of printed. U.S. businesses spend millions of dollars each year on printer paper, most of which is discarded in the trash. Before printing a document, ask yourself if you really need to print it. Perhaps you can save it on your computer to save money on stationary and increase your business’s cash flow.

Invest in Marketing

You have to think of marketing as an investment: It costs money, but like any smart investment, it can help your business make more money in the long run. A study conducted by Neilsen found that the average return on investment (ROI) for marketing was 9%. This means for every $1 you spend to promote your business, it will yield $1.09 in sales. Of course, certain marketing channels offer higher ROIs, and you can optimize your marketing campaigns so that they reach your business’s specific audience. The bottom line is that you should invest in marketing to increase your business’s cash flow.

Collect On Outstanding Invoices

Does your business have one or more customers who haven’t paid their bill? Outstanding invoices such as this are a common problem for businesses that accept post-service payments. By performing the service upfront, the business is counting on the customer to pay the bill. And if the customer doesn’t pay, the business will have to write off the bill as bad debt. To prevent this from happening, you should proactively contact customers with outstanding invoices to request payment. If a customer can’t pay the full bill, discuss a payment plan that can fit his or her budget.

11

Have anything else you’d like to add? Let us know in the comments section below!

Regardless of what your business does or sells, you’ll probably need capital to fund its operations. While some business owners use their own personal money for business-related expenses, most seek loans or lines of credit from a lender. But if you’re thinking about applying for a loan or line of credit, you should focus on improving your business credit. Without good credit, you’ll struggle to get approved. So, consider the five following tips to improve your business credit.

#1) Check Credit With 3 Major Bureaus

First and foremost, you should check your business credit with the thee major reporting bureaus: Dun & Bradstreet, Equifax and Experian. These are three most commonly used bureaus for business credit. Go to each of their respective websites and create an account for your business to view your business credit. If you see any false information listed, file a dispute to have it removed.

#2) Use Credit to Pay for Expenses

Don’t use your business’s checking account to pay for business-related expenses. Rather, use a line of credit. Like personal credit, your business credit will grow the more you use it. If you use your business’s checking account, on the other hand, it won’t offer any benefit to your business credit. Always use credit to further build your credit.

#3) Pay on Time

Of course, it’s important that you pay your pills on time, every time. Some business owners neglect to pay their bills on time, believing they’ll incur nothing more than a late fee. While most lenders and creditors charge fees for late payments, they may also report these late payments to the three aforementioned credit bureaus, thereby hurting your business credit. If you can’t pay a bill on time, contact the creditor or lender to see if they’ll allow an extended grace period.

#4) Keep Balances Low

Try to keep your credit balances as low as possible. You want to have low revolving credit with high limits, as this indicates to other creditors and lenders that you pay your bills. Rather than paying the minimum amount due, make larger payments to keep balances low.

#5) Don’t Close Credit Accounts

Finally, avoid closing your credit accounts. Even if you rarely or ever use them, keeping them open will strengthen your business credit. When you close a credit account, other creditors and lenders will see that you have less open credit, which could hurt your efforts to get approved for a new credit account.

If you’re a self-employed worker, you should take advantage of certain tax write-offs. Since you aren’t classified as an employee, you won’t have access to federal and state-required benefits like minimum wage, overtime pay, paid vacation, etc. However, you will have access to tax write-offs. And taking advantage of these write-offs can save you big bucks on your income taxes.

#1) Home Office

Assuming you use a dedicated part of your home for business-related purposes at least 50% of the time, you are eligible for the home office tax deduction. The Internal Revenue Service (IRS) offers a simplified and regular format for home office deductions. The former uses a fixed formula of $5 per square feet (up to 300 square feet maximum), whereas the latter uses an itemized formula that includes factors like mortgage/rent, electricity and more.

#2) Phone

You can also deduct the cost of your phone from your federal income taxes, assuming you use it for business-related purposes. Of course, this is a smaller deduction compared to the home office, but it’s still extra money that you can save. Keep in mind, however, that the amount of which you are eligible to deduct varies depending on the cost of your bill and how much time you actually spend using your phone for business-related purposes.

#3) Vehicle

Do you use your vehicle for business? If so, you can deduct this expense from your federal income taxes. It’s not uncommon for ride-hailing drivers to deduct their vehicle from their taxes, for instance. Because they rely on their vehicle to perform this work, they are eligible for this deduction. But even if you use your vehicle for other business-related purposes — driving to job sites, meeting with clients, etc. — you can still deduct it from your taxes.

#4) Health Insurance

With the average cost of health insurance now exceeding $321 per month, many self-employed workers struggle to cover their premiums. The good news is that you can deduct the cost of your health insurance premiums from your federal income taxes.

#5) Internet

If you use your internet for business-related purposes, you can deduct it from your federal income taxes.  According to Chron, eligible deduction amounts vary depending on the percentage of time that you spend using the internet for business-related purposes. If you use it half for business and half for personal purposes, you can deduct half the cost from your taxes. Of course, you should consult with tax professional to learn more about these and other deductions for self-employed workers.

With cyber crime at an all-time high, it’s important for business owners to take a proactive approach towards securing their data. According to Security Magazine, cyber crime costs businesses an average of $11.7 million a year. Regardless of the industry in which your business operates, you should follow the tips listed below to secure and safeguard your data from cyber threats.

#1) Strong Passwords

Don’t underestimate the importance of using strong passwords. Your login credentials are your first line of defense against cyber threats. Using a weak password will open the doors to hacking by making it easier for unauthorized individuals to access your data.

#2) Beware of Phishing Attempts

In addition to using strong passwords, you should also familiarize yourself with the signs of phishing attempts. Hackers, for instance, often send emails to business owners and employees that look like legitimate messages. As a result, the recipient clicks a link or downloads an attachment, only for this action to deploy malicious software on the user’s computer. To prevent this from happening, verify the sender’s identify before opening any links or downloading attachments.

#3) Update Operating System

One of the most common security vulnerabilities affecting businesses is the use of outdated operating systems. Whether your computer runs Windows or Apple iOS, you should update it as soon as a new version is released. When developers identify an exploitable vulnerability, they’ll release a new version to fix it. However, you’ll only be protected from such vulnerabilities if you update your operating system in a timely manner.

#4) Create Backups

Hopefully, your business’s data isn’t compromised, but if it is, you should have a backup copy ready to restore it. Creating regular backups of your data is an important step in protecting against cyber threats. Granted, it won’t stop someone from infiltrating your system and accessing your data. It will, however, allow you to get your business back up and running.

#5) Use Secure Accounting Software

Finally, you can protect your business’s data from cyber threats by using secure accounting software. Quickbooks Online, for instance, uses a variety of cybersecurity solutions to protect data from prying eyes. This includes security features like Audit Trail, Always-On and Activity Log, as well as multi-level permissions to store data. Quickbooks Desktop is also a highly secure accounting solution, featuring many of the same safeguards as its cloud-based counterpart. Whether you choose Quickbooks Online or Quickbooks Desktop, however, you can rest assured knowing that your business’s financial data is safe and secure.

Have anything else you’d like to add? Let us know in the comments section below!