5 things you MUST do to start your own business

Trying to start your own business can be exciting, but it’s also really scary. It’s a whole bunch of mixed emotions and sometimes those emotions can be so overwhelming that you never even start!

We have dreams when we’re young and as we get older, those dreams change. We start out wanting to take on the world.

Singers, actors, astronauts and doctors, soon become public servants, office workers and tradesman.

While there’s certainly nobility in ANY workplace, the question remains, when did our dreams change?

For some, the dreams is simply to start your own business, but at some point in time, you deviate from this plan.Maybe it was the risk involved, or your circumstances changed. Or maybe you’re thinking about starting a business but haven’t really pushed yourself over the edge yet?

Well starting a business isn’t hard and doesn’t have to be any more complicated than you make it out to be.

Here’s 5  simple things that might give you enough push to start your own business.

1. Follow your dreams

If there’s one thing that’s guaranteed for an entrepreneur, it’s failure. But with failure, comes strength and knowledge.

It takes failure to reach success, because of the many lessons you’ll learn along the way, but unfortunately we’re not built to accept failure easily.

It’s not easy to get back on the horse after you’ve fallen off. In fact it’s very tough! Entrepreneurial spirit is strongest now than it ever has been, but many dreams are never realised because we aren’t confident of our own abilities.

Trying to start your own business can be overwhelming but there’s always someone who can talk you through the obstacles and challenges you might face.

- Friends

- Family

- Networking events

- Mentors

The obvious key to starting a business is to simply start. And if you don’t know where to begin, then look to the resources around you. If you can’t be resourcesful, how do you expect to succeed?

2. Be savvy and minimise costs

With technology advancing faster than it ever has before a lot of savvy small business owners are starting to look at low cost solutions to starting a business. Choosing to rent everything in the office from the reception (Outsourcing to another country or to a virtual office) is a great way to save on expensive overheads when you’re starting out.

It means you can stay up to date with technology without the high upfront costs associated with it. It also allows you better control of cashflow, which is the number one reason most businesses will fail in the first 12 months.

Think about ways to minimise costs, but dont cut costs. There’s a big difference.

- Try the Phillipines for a good quality, low cost, Virtual assistant. You can expect to pay between $5 – $7 per hour for a reliable outsourced worker and if you research the market, you can find one perfectly versed in english, with graphic design and IT skills to complement the service.

- Cross capitalize with another small business start up. Split office space with a non-competing start up business. Advertise in the local paper or online. You’ll not only limit your overheads, but also share a space with someone as motivated as you are

- Create strategic partnerships. Does your business, product or service offer something valuable? Trade that service with someone offering a product or service that YOU need. Bartering is a great way to minimise spend and save money for cash flow purposes. Cash is king

- Rent out un-used space. If you have space in your office, rent it out part time. Make the most out of any opportunity to increase your capital. Work smarter, not harder.

3. Get a good work-life balance

Starting a business takes a lot of work and it won’t stop once you’re up and running. If anything, it will get harder before it gets easier.

But this isn’t a reason to quit or to never even start at all!

It’s important for you to be happy, and if you spend all your time in the office, it’s very unlikely you will be. Even if you’re just starting out.

We’re in a position now where we can capitalise on tools to access our computers and work stations for anywhere we want. Invest in good, low cost internet solution and spend one day a week working from your favourite park.

Or take a spontaneous trip. Taking a break over the weekend doesn’t mean you have to completely forget about work – Keep you smart phone close and your laptop closer.

4. Think about your strategy online AND offline

Most small business owners are guilty of letting the ball drop online. They fail to realise the potential that’s out there for online businesses.

Social media allows you to compete alot more evenly with bigger corporations and businesses because you can reach your consumers directly. Sure it might take you a lot longer to develop such a large userbase, but that’s the only advantage they have.

You might spend hours obsessing about the layout of your store, but what about your online presence?

How are you going to build an audience, convert customers and keep engaging with these customers in the digital space? A good starting point to help you think about this are the online insights tools that you can find for free on the internet.

Whether your business is online OR offline, the most valuable thing to you are customers. Before you even think about beginning, you need to think about HOW you’re going to get customers and secondly, HOW you’ll be converting them.

5. Don’t give up

Not everyone will have as much faith in your business as you will.

There’s an old saying that says “Don’t listen to what anyone has to say about how silly your business idea is. Because right now, there’s some millionaire walking around who invented the pool noodle”.

And how true is this??

While it’s always important to heed the advice of others, (your critics can actually be the most helpful) if you think it’s a brilliant idea then you can make it work. What ever the mind can believe and concieve, it can achieve.

Success is about the journey, NOT the destination, and their are plenty of other routes available for you to take. If you find one road’s closed, then simply take another.

Success is about learning and consistently improving and growing. You’ll definitely get setbacks, but prepare yourself for them.

Source: http://thesuccesssoup.com/startups/start-your-own-business

How to Ask Friends to Invest in Your Business

I have always believed that the best way to finance a business is through self-financing. It has a number of advantages, if you can afford it. The most important one is that you have complete freedom to run your business as you see fit. You don’t owe anything to anyone.

As a matter of that, that is how I financed my startup a decade ago.

Unfortunately, this doesn’t always work for everyone. Sometimes, your business needs more money than you can afford to invest. Or, you simply have no money to invest whatsoever. Your only alternative is to look for outside financing.

Personally, I am not a big fan of asking friends and family to invest in your startup. It puts your relationships at risk – and that is too high a cost for me. However, if you are going to do as friends for money, might as well do it the right way. I am going to give you some tips on how do this effectively and in a way that tries to preserve the friendship.

The big question: Debt vs. Equity

This first question you want to ask yourself is whether you want to raise money by getting a loan or by selling equity. This is not an easy choice. Both have their pros and cons.

Getting a loan gives you money without having to give up any ownership in the business. Your friend lends you money, which you pay back according to a prearranged schedule. Since your friend doesn’t have an ownership stake in the business, they have no say on how it’s run – at least in theory. And, they have no right to future profits.

Loans can affect your cash flow due to the repayment schedule so consider them carefully. Also, they can encumber your personal assets. I like to think of a loan as being expensive upfront but cheap in the long run if your company succeeds.

Selling equity allows you to trade an ownership stake in your company for money that you don’t have to pay back. In exchange for their money, the investor now gets a share of the future profits and (usually) a say in the company. I view equity injections as cheap upfront and that is expensive in the long run if you succeed.

Assuming the business allows it, my preference is to use a loan rather than selling equity. Loans have a specific end date which gives you and your investors a clean exit.

Get advice beforehand

Before proceeding, consider getting advice from a CPA or an attorney – preferably both. This will be money well spent. They will give you specific advice on how to set up the loan or equity transaction in an effective way. Don’t avoid this step. Yes, it’s expensive but necessary.

Ask your colleagues or friends to refer you to a CPA / attorney that understands entrepreneurship. They all claim they do, but that is not always true.

How to ask friends to invest in your business

Raising money from friends should be no different than trying to get a stranger to invest in your company. Actually, you will have a better chance of succeeding if you treat your friends as you would treat a potential investor you have never met before.

1. Be professional

Above all, treat your friends the same way you would treat a professional or angel investor. It doesn’t matter if they are your drinking buddies or if you have known them since grade school. Separate your personal life from your business life.  And when it comes to business, treat them professionally without exception. This should set the tone for the rest of the professional relationship.

2. Be honest

Create an investors presentation and give them an honest appraisal of the business. Make sure they understand the benefits and the risks of investing in your business. This includes the risk that the business could fail and they could lose all their money. This last point is key. However, many entrepreneurs avoid saying it because it’s uncomfortable.

Take the time to develop an accurate business plan and show them realistic sales forecasts. Never lie to them. Lying will get you in trouble and will jeopardize your friendship for ever.

3. Choose investors wisely

Never ask for money from friends that cannot afford to invest in your business. If you don’t think they can afford it, don’t ask them. Period.

If you are selling equity, consider asking only friends that can bring something extra to the company. This could be management experience, industry contacts, ideas, or just plain work. The last thing you need is a co-owner who has no idea on how to operate a business and brings nothing else than money.

4. Create a compelling presentation

Just like regular investors, your friends don’t have the time or inclination to read a 50-page business plan. At least, not initially. Instead, create a compelling investors pitch that outlines all the important details of your business. Spend some time doing this and practice your presentation before showing it to your investors.

By the way, having a business plan may come in handy later on. Savvy investors will want to read it before investing.

5. Have a lawyer create documents

Hire a lawyer to help you draw up professional loan or equity sale documents. You may be able to save some money by downloading a template from the internet and having the attorney modify it to fit your needs. This may be expensive but will protect you and your friends. Do not skip this step.

6. Honor your commitments

Once you have an executed financing agreement, follow it to the dot without exception. Meet all contractual expectations and make all loan payments on time.

7. Provide regular updates

Consider providing your investors with a regular update on your business. You will have to keep them up to date anyways, so it’s best if you formalize this process.

Use a prearranged schedule, such as every quarter or twice a year. Formalizing this step will also help ensure that you give each and every investor the same information.

8. Give them a chance to say NO

Don’t pressure or guilt your friends into investing in your business. Give them the option to say no and exit gracefully. Don’t hold any grudges if they decline to invest.

How to take no for an answer gracefully

You can expect that some – or even all – of your friends will decline your investment offer. This can be a painful experience for many entrepreneurs.  You feel they are rejecting your dream, and therefore, you. Don’t take it personally. Your friends have their own reasons for not investing and you have to respect them. For example:

1. They may not be able to afford the investment
2. They may be saving money for something else
3. They may not be comfortable investing in startups
4. They may not be comfortable investing in your business
5. Their adviser may have told them not to invest

Respect your friends right to say no. If they decline the opportunity to invest, thank them for the chance to present the business to them and move on.

Are there better options?

Before asking your friends for an investment, consider other options that don’t have the risk of jeopardizing friendships. There are a number of alternatives that don’t require involving your friend in your business. Good luck!

Source: http://factor-this.com/financing/how-to-ask-friends-to-invest-in-your-startup

Top 10 Small Business Trends in 2014

R.E.M. once sang “Change Is What I believe in.”  That has to be the credo for small business owners.  Here’s what’s on tap for 2014.

1. Certain uncertainty

The economy is always in flux, and political changes overseas don’t help anything. Ripple effects from the Affordable Care Act only add to the uncertainty.

2. Increasing competition means more focus

Some of the major retailers, including Amazon and Wal-Mart, are adapting and offering an unprecedented battery convenient services such as increased personalization, same-day delivery. This means the table are turned and it is now small businesses that will have to adapt.  Here are some strategies: offer a highly-specialized or customized product or service, focusing on an tight niche, building an engaged community of customers, and cooperating with other local businesses to save expenses and cross-promote.

3. Using virtual assistants and contractual workers

 The small business community as a whole is hedging its hiring plans. According to the February 2014 Small Business Economic Trends survey, just 12% of respondents reported plans to hire in the early part of the year.  One reason for this is that respondents answered that the net economic conditions over the next six months would be worse.

When there isn’t the optimism to consistently hire at a growth rate, the demand for VA’s and contractual workers rises.

4. Difficulty attracting talented employees

There’s plenty of talent out there, but it’s hard to snag for small businesses.  Particularly in tech fields, the talent is going to big companies in a rich-get-richer scenario.  Talented employees have no more reason to be optmistic about the economy than business owners do, and signing up with a small company can appear risky.

5. Possible Raises of Minimum Wage

The city of Seattle just approved a hike of its minimum wage to a slightly dramatic $15.  This particular raise is actually good for small businesses, because it affects only owners of large businesses.  We’ve seen McDonald’s employees clamoring for raises in the minimum, usually involving an increase along the lines of $14 or $15 per hour.  Small business owners need to be up to date on laws in their state or city, even before the laws pass.  Some hikes will apply to them and some won’t, and planning accordingly, taking into account all the strategic factors, is key.

6. Need for Rep Control

Consumers are increasingly empowered to share their opinions, thanks to online product reviews, social media and viral video both good and bad, about the products and services they use. This means that small business owners must be vigilant in monitoring their online reputations.

7. Mobile business monopoly

The developing trends in mobile business include  mobile marketing, mobile payments, and mobile-friendly devices. These demand responses from small business owners–tools and services are out there and relatively affordable.

In addition to using these technologies, there’s the matter of linking them to customer interactions, by linking mobile payments, mobile marketing, and location-based services, to customer loyalty programs.

8. Skepticism Toward Social Media

Social media have been around for a while now.  Many small business owners are aware of tools and metrics for quantifying the ROI of particular social marketing campaigns.  In 2014, we’ll probably see small business owners mounting a backlash and getting rid of social marketing campaigns that don’t work.  Two to three years ago, you were a dinosaur if you weren’t using social media.  We’re now reaching the other end of that cycle, in which people are stepping forward and admitting to unacceptable ROI when these are the case.

9. Visually-simple web designs

You’ve probably noticed spare web designs, with few frames and many pictures.  We’re also seeing increasingly- sophisticated data visualization, the process of turning complex data sets into easy-to-understand visual material.

10. Growth of alternative finance

Scrappy small business owners will, in the last months of 2014, continue to turn to alternative financing, such as microloans, , peer-to-peer lending, accounts receivables factoring and crowd funding, to help regulate cash flow and sustain growth and expansion.

So, there you have the top trends for the balance of the year.

Source: http://frugalentrepreneur.com/2014/08/top-10-small-business-trends-in-2014

8 Tax Mistakes to Avoid

Here are some tips to help you avoid mistakes oft made by small business owners and others classified as self-employed.

Reality: small businesses owners and the self-employed are increasingly pressured to fully comply with tax legislation and reporting requirements. In order to bridge to so “tax gap” (tax dollars actually collected versus what is owed), the IRS has announced increased vigilance on this slice of the tax-paying pie.

If you want to increase your chances of avoiding an audit and of getting your return as quickly as possible, you need to make an extra effort to prevent some common reporting errors:

1. Not reporting all of your income

Part of the IRS’s new vigilance is a crackdown on pre-tax income reporting.  Be sure to archive any Form 1099-K’s that you receive. The new form records payments received in via credit card or through payment tools like PayPal. Be thorough and mistake-free here.

2. Not filing supporting documentation

Deductions are a big part of everyone’s tax returns.  They all need to be documented.   This means receipts or other documentation for medical expenses, property taxes, all brands of  interest and business expenses.

3. Not understanding tax changes

The U.S. tax code isn’t a model of simplicity, and it’s always changing. For this reason, it’s crucial to learn which tax legislation changes will affect you and your business. You can do this by consulting with a qualified tax professional or by using official government web sites with the relevant information.

4. Claiming too many deductions

One red flag to the IRS is a person claiming deductions that are a bit large for her or his income.  Similarly, claiming exorbitant business expenses for a side business that earns low revenue is likely to earn an audit.

5. Filing too quickly

Whatever the motivation for getting that return in fast, it’s a mistake to rush the process.  A likely outcome is missing out on tax savings, perhaps taking a standard tax deduction when you could benefit from some of the deductions mentioned above.

Although the filing deadline is April 15, you can leverage some extra time by filing for an extension with Form 4867, Of course, if you owe a taxes, you’ll have to send the payment by April 15 or face late-payment penalty charges.

6. Inaccurate information, miscalculations, and omissions.

Double check all your information to combat against these common miscalculations and omissions:

• Incorrect filing status or exemptions- This can be an innocent mistake encountered in situations such as unmarried taxpayers living together with children, parents living with their adult children, etc.
• Mistakes in figuring taxable income (make sure all your W-2s and 1099s are in your possession); withholding; estimated tax payments;  or Earned Income Tax Credit
• Entering incorrect account numbers If you are due a refund and requested direct deposit, review the routing and account numbers for your financial institution.
• Forgetting to sign the completed tax form This will, of course, slow down your return, and in worst-case scenarios can flag you for an audit, since sometimes purposely leave their return unsigned as a way of avoiding paying.

7. Ignoring AMT 

Sometimes, the amount you owe, the Alternative Minimum Tax, is actually more than you think you will if your deductions go through.  Find your AMT and calculate it, and be sure not to file a report that will get you a tax bill thinking you’re getting a refund.

8. Not working with a tax professional

You’re an entrepreneur so you know that skimping on necessary expenses isn’t the way to go.  If tax codes were simpler and static, you may be able to go it alone.  But this isn’t your E-Z form from your first job down at the Radio Shack.

All in all, it’s important to be informed, and perform your due diligence.  Always simplify, never making things more difficult than they need to be.

Source: http://frugalentrepreneur.com/2014/08/8-tax-mistakes-to-avoid

Even the Wealthy are Broke

Upper-middle income Americans aren’t saving much money says a report from the Federal Reserve. Only 45% of upper-middle-income Americans reported saving any money in 2012. This doesn’t come as such a surprise to anyone paying attention to the personal savings rate in America. The rate, while somewhat improved since 2005, is below its historical mean by 3.1 percentage points at only 5.3%.



 

Another sad statistic from the Fed report shows that 68.6% of Americans feel as though their financial well-being is about the same, worse, or much worse than in 2008. For those with cloudy memories, 2008 was the year the economy went belly-up. Again, for anyone paying attention to consumer sentiment, this isn’t so surprising. While sentiment has improved greatly from the days of deep recession, a quick look at the University of Michigan consumer sentiment survey shows readings still below historical mean. That’s not the picture of a strong recovery.

 Source: http://www.youngresearch.com/researchandanalysis/personal-finance/even-wealthy-broke