Don’t overlook these five common mistakes that most small business owners make when starting their first business. Use these guidelines to help grow your company into a successful business superpower.1. Unreasonable ExpectationsThere’s nothing wrong with small business owners setting challenging goals or having high expectations for their new company. In fact, a majority of entrepreneurs are born with these exact personality traits. Owning a small business and watching it grow from the ground up is definitely something worth getting excited about. This type of excitement is often a good thing to have, but sometimes too much of a good thing can result in bad situations. As a new business owner, be cautious not to let the rush of starting your own business get to your head. Oftentimes small business owners think their businesses will generate revenue much faster than is realistically possible. While in some cases this does actually happen, the reality is that the majority of small businesses take some time to grow. Think of your business as a delicate plant that takes some time and proper nourishment to flourish. There’s no need to try to rush the process or have unreasonable expectations of overnight riches. The successful business owners stay calm and collected because they know that watering their “plant” too much isn’t going to make it grow any faster and in some cases might even kill it. Take some time to plan and think about your small business and set realistic goals before you get started. In most cases, this is all it takes to turn your green thumb for business into lots of green cash.2. Mixing Personal and Business Bank AccountsIt’s always a good idea to keep your personal bank account separate from your business bank account. Small business checking accounts are fairly inexpensive and offer a variety of benefits for your business. Some popular banks even offer free business checking if you maintain a certain balance or make a certain number of transactions every month.Having a dedicated bank account devoted entirely to your small business makes it much easier for you to keep track of incoming payments and outgoing expenses. Separating the two accounts also makes it less likely for you to overdraft or underestimate your income and expenses which could result in additional banking fees. At first, it may not seem like you need a business bank account because you’re not making or receiving a large number of payments but in the long run the total number of transactions your business makes each month will grow alongside your business. You’re eventually going to need a business bank account that can handle a lot of activity so it’s best to do it up front to keep all of your expenses and payments tied to a single account. You don’t want to wait until you’re processing hundreds of transactions a month and then have to transfer all of your automatic debit card payments and revenues to another account.Another benefit that a separate bank account offers is the automatic organization of all of your transactions. Most banks provide electronic statements that list all of your transactions made with your account every month. These statements are very helpful in preparing your financial statements at the end of the business year. Organized records will help you avoid paying extra taxes and help you take advantage of business tax deductions.3. Failure to Budget ProperlyThis is one of the most common mistakes new business owners make. Despite the simplicity of keeping a simple budget, most business owners refuse to keep track of their business’ revenues and expenses. Take some time to write out a list of all your expenses and sources of income. Keep track of all your fixed expenses (fixed expenses are expenses that are the same every month, for example your rent) and your variable expenses (variable expenses are expenses that change with the amount of usage or output, for example your electricity bill). Compare these expenses with your income sources to see if you’re turning a profit every month. Writing these numbers out on paper will help you visualize how much money is entering and leaving your business every month. Keeping a proper budget is a continuous activity. Your expenses and income are constantly changing so it’s recommended you evaluate your budget at least once or twice a month. As mentioned in the previous paragraph, setting up a business bank account makes budgeting much easier than keeping track of everything manually. Often business bank accounts come with free services that help with budgeting and keeping track of your business records.4. Overlooking Government Tax BenefitsIf there were a hundred-dollar bill laying on the ground would you pick it up? Most people would. Free money is hard to come by these days but there’s plenty of it available for people who own their own business. Small business owners often don’t take advantage of the many tax deductions the government offers to all businesses. Tax deductible items include office supplies, furniture, office equipment, software for your business, any subscriptions you might have related to your business and even the space in your house that’s dedicated to your business if you work from home. Even some of the gas you use for your car is deductible if you’re using it to travel for business purposes. These are just a few of the things that are eligible for tax deductions and can decrease your taxable income on your federal income tax form. Current information on available deductions and how to take advantage of tax-deductible expenses can be found at the U.S. Small Business Administration website.5. Marketing MistakesThe key to generating revenue and profit is having a strong, effective marketing strategy. If you don’t devote some time to developing a marketing strategy for your small business then odds are you’re missing out on a lot of potential profit, if not ALL of your profit. Don’t make your business suffer by avoiding or skimping on marketing costs. The reality is marketing services aren’t always cheap. Before you spend a pretty penny on your business marketing services, make sure the services you’re buying will be an effective way to market your service or product. For instance, don’t advertise your video game review website in the newspaper…odds are your target demographic for that type of business doesn’t even read the newspaper.There are many different ways to market your business. Marketing methods range from the traditional business card, to paying for search engine marketing, to hiring a professional marketing firm. Do some research on the marketing methods that work the best for your line of business. If you’re short on ideas, look at how other successful businesses and competitors in the same industry are marketing their products or services. Keep track of how well various marketing methods work for your small business. Continue to use the methods that work well and cut out the methods that don’t work so well. Remember, marketing is a dynamic process that takes time to develop and become effective. Odds are you will make a few mistakes throughout your marketing process, but that’s okay. The biggest mistake you can make is not marketing at all, and you will far beyond that now.
Author Archives: schatzi
15 Easy Steps to Starting Your Own Small Business
The title is a little tongue in cheek, because starting a business is never easy. It takes a lot of hard work, commitment, enough capital, and paying attention to details in order to get a business off the ground these days. When I decided to start my custom home planning and drafting business, I tried hard to find a good startup guide that would lay it all out for me in a logical order. I couldn’t find anything in the library that had all the steps clearly listed without a lot of confusing fluff and filler. So, motivated mostly out of frustration, I decided to write one good article on this subject based upon my experience and make it available to others. So far, I think I’ve only just scratched the tip of the iceberg and composed a bare-bones outline at best, but I hope it will accomplish what I intend, which is to help others get pointed in the right direction.Before you spend one dime on starting any business, talk to a few experts first and decide if entrepreneurship is right for you, especially in the field in which you intend to go. Go to your local library, or do a Google and Yahoo search on your business on the Internet. Be thorough and research every aspect of starting a new business in your chosen classification. This will give you a good basis from which to decide if you want to pursue it. Starting out, there is usually more money going out than coming in, and generally, you work long hours without a steady paycheck. Make sure you include your spouse in this decision. If you both are not passionate about it, and are just seeking a steady paycheck, then think again. The bottom line is that you need to like what you do, and you have to be dedicated and focused, or you will fail.Evaluate yourself honestly and make a pro-and-con list of business ownership. What do you share in common with successful entrepreneurs? Are your financial reserves large enough to carry you for the first year? Do you have access to capital from banks or investors to carry you through the rough times? Do you possess the technical and management skills necessary to operate the business? Can you handle your customers and your employees? Nobody can cover all the bases, so consider all the ways you will have to compensate for your weaknesses by outsourcing these things to competent subcontractors or employees. Maybe you are a good artist, rather than a sharp business person, so team up with someone who can handle the left-brain things, or visa-versa.Since I live in the United States, this guide is intended to address the procedures required in this country. If you live in Canada, Europe, South America, or elsewhere in the world, this article may not be very relevant to your exact situation, or address the specific conditions in your local area. In that case, please use this as a general planning guide to become familiar with some of the tasks and obligations most businesses require to launch a successful venture in this country. Chances are good that if you can start a business in the U.S., you can start one anywhere. Select the relevant information that applies to your business and disregard the rest. For example, the sequence of steps laid out in this article is in perfect order for most businesses, but you might find your business varies from the norm under your particular circumstances. You may even be able to ignore some steps altogether, but overall; most of them should be helpful in the order that they are listed to plan your enterprise.Assuming you’ve done your due diligence, self-evaluation, and you are still passionate to start your business, here is how you need to go about it.1. Conduct a detailed feasibility study of your planned business. Describe your typical customer profile, your product or service, and the competitors in your local market area. Identify your suppliers and their credit requirements. Determine your pricing, employee requirements, and labor rates so you are competitive. Include your banker and any loan criteria and credit score in your evaluation. Prepare a marketing plan listing all advertising, media, and promotional costs and how your budget will allow you to use them to reach your market. Think of clever ways to get the word out without breaking your bank account.2. Write, or outsource, a complete and detailed business plan using the information you acquired from the feasibility study. Write your vision down and make it happen. Select key management personnel and list their skills and responsibilities. Build your team. You will need a good attorney, accountant, banker, insurance agent, office supply store, an Internet service provider (ISP), and a reliable vehicle. Take the time to personally meet and interview members for your team and develop a network of supporters from their friends and acquaintances. Include as much detail as possible in your business plan to describe your company and its operations, its management team, its goals and objectives, its resources, core values, products or services, the competition, market share, financial information, and realistic projections on cash flow, sales, and servicing debt obligations. Be as detailed as you possibly can; the better your planning, the better your chances will be in securing financing and manifesting your dream. A well thought out business plan is essential to any successful endeavor.3. A key part of your business plan must address your financial situation. List all the initial, and reoccurring costs, you will need to pay when you open your doors. This will include office supplies, rent, accounting, utilities, a coffee maker, perhaps a water cooler, desks, chairs, cubicles, conference room furniture, garbage containers, computer work stations, reception area, telephone system, security system, etc. There are lots of ways to finance your business startup, from using your personal credit cards, from your savings, to securing bank loans, personal loans from friends and family, or lines of credit. If you can work from a home office for the first few years, which I recommend, then your startup costs will be much less, and you could have more tax write-offs and available cash to pay as you go.4. Decide how you want to structure your business. Visit with a tax attorney to review your options, and then choose the one that best fits your needs. Budget an amount for this expense because it is essential to your business tax liability and should not be overlooked. There are basically three choices: sole proprietorship, partnership, and incorporation. Each one has its own advantages and disadvantages in terms of liability and tax consequences. Starting out, you can operate as a sole proprietor for the first few years and later take on a partner, or incorporate. The limited liability corporation (LLC) structure seems to be growing in popularity for many entrepreneurs these days and is easy to implement. You may be required to complete a fictitious name filing with your state and secure a city business license too.5. Select a good name for your business and then check on the name availability for a matching domain on the Internet. Also do a Google and Yahoo search to see if you have name competition in your market. You can do a newly upgraded automated name search (NUANS) report as well, which will compare your name choices against a vast database of other business names to verify its uniqueness. Any reserved name is usually only valid for ninety days. If you intend to incorporate later, then check with the state Department of Commerce where you intend to incorporate for your name availability as well. Identify the best category listing for your Yellow Pages, and if you want to be at the top of the competition, select a name that alphabetically gives you a placement advantage in the top of the list, especially if your business depends on phone contacts.6. You can choose to incorporate in whatever state you wish due to tax and privacy reasons. Delaware and Nevada have become quite popular among startup companies because of their privacy laws and lower costs. If you want to do business in Canada, you will have to register in each province, as well, which will increase your costs. Although an attorney is not necessary to do this for you, it is always a good idea to consult with one in the planning stages to make sure you are making the right choice for your business. There are many online resources to help you gather legal information such as legalzoom.com, do-it-yourself-legal.com, etc. The proper forms can also be sent, or faxed to you, from the state office or downloaded from the Internet in most cases. Some forms can be completed and registered online, and usually there is a small filing fee due, but it is usually easy to do and convenient.7. Contact the Internal Revenue Service (IRS) office in your area, or online, to apply for an employee identification number (EIN), if you plan to have employees. This will not be necessary if you operate as a sole proprietor. Your accountant or bookkeeper can better advise you on the details of this step, but chances are good you will have to make quarterly estimated tax payments for both federal and state taxes. Make sure you anticipate these, and any other periodic expenses in your cash flow projections.8. If you anticipate collecting sales tax on your products or services, check with the appropriate agency in your city or state about the correct procedure and registration process. Once again, your accountant or bookkeeper can better advise you on this when you set up your record keeping and books. Choose a good accounting software program if you plan on keeping your own books, preferably one that will be compatible with your accountant’s software. You can save money if you keep your own books and then have your accountant complete your quarterly reports and tax returns.9. Most larger municipalities require business licenses and occupational permits, especially if you operate a business from your home. Cities and counties often have strict requirements regarding parking, fire protection, handicapped access, and zoning regulations that address how your business may impact your neighborhood. If your business is done by appointment only, and doesn’t rely on walk-in traffic, you are better suited for a home based business operation.10. Develop a basic marketing package for your business according to your business plan. This should include your Yellow Pages listing, a company identity brochure with a rate sheet, a press kit, voice mail with a lady’s voice, and a professional web site with search engine optimization. Your company identity package includes business cards, letterhead stationery, and a logo. Your press kit should include current press releases, head shot photos, letters of introduction, testimonial letters from satisfied customers, business leaders, and suppliers, articles, business journal photos, your biographical sheets and statements of qualifications for your key management personnel. You need to establish a positive image and presence on social networking sites like Linked-in, Twitter, Google Plus, and Facebook. Your web site has to be polished with great content, easy navigation, and a squeeze page to build a list of visitors. You will need to purchase and fund an autoresponder service to build your list and conduct promotional campaigns to build repeat business.11. Set up a separate checking account for each profit center in your business, and a savings account linked to each checking account. For example, if your business has a retail product sales division, and an installation service division, keep them separate. Never co-mingle private funds, or revenue from separate ventures, with your regular business funds; have your personal bank accounts in another bank. Your bank will require your state fictitious name registration, your business license, your contact information, your social security number, your EIN number, or your corporation by-laws and documents. Your savings accounts should hold your tax money set aside for your quarterly payments, plus a small reserve to cover overdraft protection.12. Purchase adequate liability and property insurance. Consult with your insurance agent and review the optimum coverage you will need for your particular business. Perhaps you will need key man insurance for essential management personnel, or bonds, or completed operations insurance; there are many different types. If possible, place all vehicles and property under a million dollar, or larger, umbrella policy to get the best value and protection. If you intend to have employees, you will need Worker’s Compensation Insurance and unemployment insurance as well. Depending on your business, you may wish to cover yourself even if you have no employees. Be careful not to over-insure your business and create a large expenditure when you are just starting out. Be prudent, and carefully assess your risk initially, because you can always add more coverage later as your business grows.13. Contact all potential suppliers and creditors and set up accounts with the most favorable credit terms and payment options. Provide documentation that you collect sales tax so you only pay net retail, or wholesale, prices on products and services. Take advantage of all special discounts and sales whenever possible from whatever source. Clearly understand the return policy of each vendor and supplier.14. If you need a brick and mortar storefront for the proper image, and decide not to operate out of your home despite the tax advantages, you will need to select a prime location. Consult with a good real estate salesperson in your area and shop for the best deal for a building or office space. Lease your business’ space for the best tax advantages. Make sure you have adequate parking, good access, high visibility, solid waste disposal services, and that your structure meets building, fire protection, and zoning codes, and all other local ordinances. Your personal and professional image may be important to your business as well, so “dress for success” as they say, and budget for a tasteful wardrobe if it is necessary. In business, you never get a second chance to make a first impression, so make the proper effort to dress appropriately, give a firm handshake, and make proper eye contact.15. Purchase office supplies and equipment on an as needed basis initially. Don’t stockpile large supply inventories in the beginning until you are sure you are going to stay. Lease desks, chairs, cubicles, filing cabinets, vehicles, conference room furniture, the telephone system, and computer work stations whenever possible. This will allow you to experiment, prioritize, evaluate, and try before you buy expensive furnishings and fixtures. Security services should start out at a bare-bones level too, enough to cover basic protection, and increased as the business risk, exposure, and inventory grows.So congratulations! You are now aware of what you need to do, and all that is left is for you to go out and do it. If you follow this brief guide, then you will avoid a lot of pitfalls, and hopefully develop a successful business that will prosper, and serve you for many years to come.
Networking in Construction
Let’s face it, it’s easy to be commoditized in any industry. Before a client has visibility into customer service or on-time/on-budget delivery, you’re just another guy offering the same service.What a lot of sales experts will tell you is that trust makes the difference-and I have to admit, I think they’re on to something. If you’re given a selection of GC #1 and GC #2 and they both provide the exact service for the exact amount of years with all the same certifications, the only difference between the two is simple: relationship. After work is performed, what becomes clear is that maybe GC #1 is always late on deadlines, or GC #2 has a client-first attitude. But how does a construction manager/general contractor get themselves through the doors of that difficult-to-reach executive while you’re in the phase of “just another face in the crowd”?Without giving away my company’s secret sauce-it’s no secret that networking is key. Even for a subcontractor/materials supplier trying to become a preferred resource for a GC, it’s all about building the initial rapport, then gaining the business that will allow you to positively represent yourself.So does this mean that construction managers and subcontractors have to break the bank and attend every premier trade show in a 100-mile radius? Absolutely not. As awesome as large-scale events and conferences can be, there are FREE events always happening in the community where you’ll come across great connections, and surprisingly enough, have a great time doing it.While I’m being perfectly honest, at first it’s hard. You’re out of your comfort zone and know absolutely no one. But then you continually go out there and raise the bar so that eventually – you’ll enjoy the opportunity to meet a new connection that potentially can throw you some new business one day. Whether you’re in a sales capacity or not, raising the bar of your comfort zone is a practice the most successful people encourage. If you are in a sales capacity, that face-to-face interaction is golden time to be more than a name on a voicemail.Why is this of particular importance in the construction world? I can demonstrate with the case of a brick supplier. Every brick supplier will give you pretty comparable materials at remarkably similar price points. However, it’s not about the bricks. It’s about coordinating a project’s needs with someone who’s organized and easy to deal with-as opposed to a company that is overwhelmed and incapable of time/resource management. These positive referrals come from relationships and other people who have seen the benefit of a strong supplier firsthand. It’s that type of door that networking opens-and also why I highly encourage it.Although not every networking event is going to be your perfect match, the only way to gain a sense of what’s out there is to test the waters. Learn what organizations offer events that gather your ideal target and frequent those with an open mind. You’ll start to see familiar faces and gain valuable practice in presenting not only your “30 second commercial” but ultimately, yourself.If you need any recommendation on what networking events/associations I’ve found to be great within the area from a construction perspective, feel free to connect. It’s always great to have a new addition to a group, especially if there is some way our businesses can help each other.