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5 Finance Secrets to Make Your Small Business More Successful

By Melinda Emerson on September 13, 2011 in Cash Flow & Finance, Grow Your Business

Being an expert in finance is not usually a top priority for someone starting or running a small business. Here are five tips to make sure you’re handling your finances according to best practices:

1. Record-Keeping

There are two main reasons to keep track of the finances of your business. First, you need to maintain compliance with government and other regulatory agencies, like filing tax returns. Second, you need to use the information to measure your performance to manage the day-to-day cash flow of the business as well as find ways to improve your business.

Rather than learn how to do bookkeeping, buy an accounting program, and learn how to manage the detailed transactions of that system, start-up businesses should look to outsource their accounting to an outsourced bookkeeper who updates the books once or twice per month on their software, preferably hosted so you can access it whenever you like. You can often get this done for $200 or less per month.

2. Banking Relationship

The last time you walk into your bank should be when you set up you business bank account. Utilize online technology to do everything else, and you’ll save a lot of time and hassle. There is certainly some value in building a more personal relationship with your bank, but that only comes in handy if and when you need a loan.

3. Customer Payments

Make it as convenient as possible for your customers to pay you. Accept checks, credit cards, EFTs, and any other way that makes it easy for your customers to pay. Any barrier your customers face to figuring out how to pay you will result in lower sales and even lower collections. Stop worrying about the costs of some of these services and accept them as a cost of running a good business.

4. Taxes

Please pay them, and pay them on time. The government and other agencies are the wrong institutions from which to borrow. They charge huge penalties, usurious interest rates, and they usually have stronger enforcement rights that allows them to price any corporate or LLC veil you’ve put in place to try and separate your business and personal affairs.

5. Benchmarking

Do not operate your business in a vacuum. What are your competitors doing? How long does it take for them to collect from their customers? What are their gross and net margins like? How do you compare? You can get this type of competitive information and more from your bank or from other online resources and trade associations specific to your industry.

Ken Kaufman is the author of Impact Your Business: An allegory of an entrepreneur’s journey to clarity, cash, profit, family, and success http://cfowise.com/impact-your-business. Ken, an award-winning CFO, has over a decade of experience helping small business owners and entrepreneurs attain the clarity they need to maximize their financial success. His has credited with creating the Six Scoreboards Every Business Needs. In addition to serving as an outsourced CFO to eleven entrepreneurial ventures, Ken writes regularly for American Express OPEN Forum and teaches New Venture Finance at a local university.

Implementing these five things will put you on the path to building a financially healthy company.

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Do you have a Bank or a Banking Relationship?

By Melinda Emerson on August 21, 2011 in Become Your Own Boss Tips, Cash Flow & Finance, Grow Your Business

Many business owners have a bank, but what you need is banking relationship. Entrepreneurs with a bank just make deposits and withdrawals. Business owners with a banking relationship know the branch manager, the business banker and the head teller at the bank they use. The business banker has seen your business plan and is aware of any big contracts or awards that the company has received. The head teller knows you so you can deposit a check as cash based on your reputation. Why is this relationship important?

As a business owner, eventually you will need money. Once you have a track record in business with positive activity on your balance sheet, you can consider approaching a bank for a business line of credit. Business cash flow tends to be uneven; seldom do revenues and expenses arrive in a timely fashion and sometimes a short-term line of credit is just what you need. The problem could be a pre-season inventory purchase, an unexpected machine breakdown, or a delay in getting a payment from a big client. Cultivating a positive relationship with a bank prior to having a need for a line of credit is key. It could mean the difference between success and failure. Here are some points to consider:

Look local. Look first for a local bank that can address your needs. Preferably, deal with a bank with which you already have a personal relationship history. They will have a pretty good idea of who you are and it will give you an edge in creating a new business relationship. Visit from time to time so people know your face. Use these visits to keep senior-level bank personnel up to date on your business activities. If you don’t have a personal bank, look for institutions that focus on loaning to neighborhood or women-owned businesses, etc.
Do your homework. Know your credit history before you go for a loan or line of credit. In a tight credit market, it is essential to keep your credit score as high as possible. Banks will only make loans to clients with pristine credit. Even the SBA will not support your business if your personal credit score is below 650.
Be prepared. Banks will ask a ton of questions about your business plan, loan requirements, collateral and strategy for repayment. When applying for a bank loan, remember that 90 percent of the bank’s decision to loan is based on two numbers: your cash flow and current net worth. The remaining 10 percent of the decision is based on such items as credit history and continued business viability.
The importance of cash flow, defined as the difference between cash receipts and cash payments, it is a key indicator to your bank on how your business is doing. Your goal is to hold on to your cash as long as you can without getting a reputation as a business that does not pay its bills. You must make sure your business always has enough cash to function.
A word of caution. Make the decision to give a personal guarantee for your business loan only after you fully understand all the ramifications. You are now personally liable for the total value of the loan if the business cannot pay, regardless if the business is incorporated, a partnership, or a sole proprietorship. Banks may place liens against your personal residence as part of these guarantees and this can be done without your knowledge. Personal guarantees are a fact of life for the small business owner, so be prepared for them. But be certain you understand the worst-case scenario.
Get Help. Find your local Small Business Development Center (SBDC) or other small business non-profit that has a micro-lending program. Such groups often have loan packaging deals under $50,000 and more importantly, many have special relationships with financial institutions that will work hard to approve clients these groups send them.

For more tips on how start or grow your small business subscribe to Melinda Emerson’s blog http://www.succeedasyourownboss.com.

Melinda F. Emerson, known to many as SmallBizLady is one of America’s leading small business experts.
As a seasoned entrepreneur, professional speaker, and small business coach, she develops audio, video and written content to fulfill her mission to end small business failure. As CEO of MFE Consulting LLC, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing. Forbes Magazine recently named her one of the Top 20 women for entrepreneurs to follow on Twitter. She hosts #SmallBizChat Wednesdays on Twitter 8-9pm ET for emerging entrepreneurs. She also publishes a resource blog www.succeedasyourownboss.com Melinda is also the author of the national bestseller Become Your Own Boss in 12 months; A Month-by-Month Guide to a Business That Works. (Adams Media 2010)

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Do-it-Yourself, In-Source, or Outsource Small Business Accounting

By Melinda Emerson on August 9, 2011 in Cash Flow & Finance, Grow Your Business

I have yet to meet a small business owner or entrepreneur who was excited to start their business exclusively so they could figure out how to do the accounting for it. We start businesses because of the problems we are going to solve for our customers. But we still need to keep track of the money-side of the business, the accounting of what’s happening in our business.

Do-it-Yourself

If you are generating less than $100,000 of revenue per year, it may make sense to keep track of your accounting yourself. Since you are involved in every day-to-day detail of your business, you may not even need to buy an accounting system and learn how to use it. But you shouldn’t try to do your taxes, so you’ll likely need to outsource this to a CPA each year by giving him or her copies of your bank and credit card statements with some detail about what each of the transactions was for.

Outsource

This option makes a lot of sense for most start-up and small businesses, and outsourcing the accounting functions can be very affordable. Businesses that are generating $100,000 to $500,000 of revenue per year can hire an outsourced bookkeeper to update the books once or twice per month and provide basic financial statements and other critical reports. By giving read-only access to your bank and credit-card accounts to your bookkeeper, they can quickly and efficiently keep you compliant and get you the basic information you need. Some outsourced bookkeepers will even have their own accounting software (meaning you don’t have to buy it) and they will give you access to it through the internet.

In-Source

Once your business exceeds $500,000 in revenue per year, it will likely make sense for some of the accounting functions to be done in-house. But those tasks should be the simplest and lowest cost items, meaning one of your employees could easily be trained to handle them. You will keep your outsourced bookkeeper in place to oversee this person’s work and perform some of their main duties, but you’re not paying the higher-cost bookkeeper to do it all.

Once your company exceeds $1,000,000 in annual revenue, you will be getting to a point where you may want to bring the bookkeeping function in-house with a full-time employee. Even in this scenario, it can still make sense to outsource some Controller and Chief Financial Officer (CFO) functions to keep your business on track.

Conclusion

Certainly the accounting needs of each business will be different, and that is typically determined by the business’ size, complexity, and trajectory. Taking those things into account, the right mix of Do-it-Yourself, Outsourcing, and In-sourcing can be put together to create the lowest cost but highest return scenario for your business.

Ken Kaufman is the author of Impact Your Business: An allegory of an entrepreneur’s journey to

clarity, cash, profit, family, and success http://cfowise.com/impact-your-business. Ken, an award-winning CFO, has over a decade of experience helping small business owners and entrepreneurs attain the clarity they need to maximize their financial success. His has credited with creating the Six Scoreboards Every Business Needs. In addition to serving as an outsourced CFO to eleven entrepreneurial ventures, Ken writes regularly for American Express OPEN Forum and teaches New Venture Finance at a local university.

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Increasing Your Online Sales Part 2

By Melinda Emerson on July 13, 2011 in Branding & Marketing, Cash Flow & Finance, Guest Articles

Last time, in Part 1 of Increasing Your Online Sales, we talked about 3 ways to increase your online sales, which had to do with building and managing your site properly. This post I’m going to share some great tools for doing testing yourself. I’ll also share some ways to collect information on your site and how to distribute your content better.

First, testing intimidates most small biz owners. It’s time consuming. It can be complicated. But these tools make it fairly easy and affordable.

Here are 11 free to low cost tools I’ve researched.

1. www.feedbackarmy.com
2. www.fivesecondtest.com
3. www.conceptfeedback.com
4. www.uservoice.com
5. www.usertesting.com
6. www.userfly.com
7. www.feng-gui.com
8. www.crazyegg.com
9. www.kissmetrics.com
10. www.usability.com
11. www.Clicktale.com

One last thing about design and testing, in general, whatever you want to be clicked, put it in the upper left corner. You can put it elsewhere, but so much research data, heatmaps, user studies, show people read in an F pattern and they scan the top two horizontal lines of the letter F first, then go down the left side. BUT, they start in the upper left corner. Hardly anyone puts their form or call to action right there. They put it to the right where it is less visible.
I’m not a fan of the so-called, Squeeze Page, where you give users/readers no choice but the back button to click out, but simplifying your copy and design to make it really clear is what I’m trying share here.

Create a way to collect customer information on your website

I’m amazed at how many companies don’t collect information. When they do, they have 20 fields they ask people to fill out. Stop. Research from MarketingSherpa and other expert firms show you should probably have only three to six (3 – 6) fields. Then, set up an autoresponder to immediately reply when someone completes the form. At the same time, have that autoresponder email a copy to the sales or marketing or customer service team to get someone engaged at your company. Automate as much as you can without losing the personal touch. I use Infusionsoft, but there are lots of webform companies out there and autoresponders like aWeber.

Distributing Your Content

Content is king, but location is queen and just about everyone listens to the queen… And the queen is keeping engaged with your customer’s problems, conversations, and challenges where they happen.

So, you start with your blog. Anita Campbell, well-known CEO and Publisher of Small Business Trends says you shouldn’t be a digital pauper living inside the castle walls of social media empires. You should have your own site, your own blog. Don’t neglect that. If one of the social media giants crumbles, where will you be?

After your blog content is consistent, then start publishing similar or excerpts of posts on Facebook and/or LinkedIn, then share those links on Twitter and at BizSugar. You can also publish your work on sites like Slideshare, Postling, and article repositories like ezinearticles, diymarketers, and many others. Create screencasts of some of your more educational content and share it on YouTube. The main goal is to use that content in different forms and point it all back to your blog or website.

Tell us how this series on increasing online sales will help you in your business.

TJ McCue is founder of TechBizTalk which does independent web-product reviews and offers a Simple Website package to help small business owners get online fast and inexpensively with a $99 website. http://simplewebsite.techbiztalk.com

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Increasing Your Online Sales Part 1

By Melinda Emerson on July 12, 2011 in Branding & Marketing, Cash Flow & Finance

Sales is about trust and transparency, right? With all the media conversations about how Twitter and Facebook are impacting small business owners, that may be obvious. But with all the discussion about conversation, don’t lose track of the direct paths to sales. Don’t get soft and focus on conversation for its own sake. You can be trustworthy and transparent and still be about the sale.

Just about every time I’m asked about the best way to increase sales on the web, these three points are always my initial answer. These are part of having a quiver full of arrows.

What are you asking your customers to do?

A clear call to action is essential. Are you telling your audience what you want them to do next? They don’t have to follow your request, of course, but you should take the opportunity to guide and be unafraid to say, “Click here…”

Rather than having a weak collection of copy or signage that never asks, never tells, never guides a busy, busy prospect, you should suggest what they might do next. Amazingly, people will often follow the directions. You don’t want to miss that opportunity.

This is going beyond the old marketing maxim of tuning in to radio station WIIFM – answering What’s In It for Me. That’s important, but you have to also tell them what you want them to do next. We sometimes spend so much time on bullet point lists of the benefits that we forget to share some simple courteous directions.

So the first little known tip is to change your website or landing page so that when a prospect lands there, he or she knows what to do.

Leverage Pay-per-click (PPC)

Second point — test out pay-per-click as another way to drive traffic to your site and business. Here are FIVE things about PPC and using Google Adwords:

Run short campaigns: 30 days or less. Running a shorter campaign duration means you’ll watch it closer and tweak it more often. I recently heard a Google small business spokesperson state that campaigns are most effective in the first 30 days.
Place lower bids so that you’re not showing on page 1. Why? One, you can better control the costs as you figure out how PPC works. If you’re paying someone else, well some of this won’t apply, but it might. You won’t show up on page 1 of the search results if you underbid, but you’ll show up on page 2 and, for some people, that’s good enough.
Use the Content Network. It is a less-commonly used approach, but takes more work. You can also run display ads in this part of the Google Ad network. Google also built a great tool for you and I to be able to build simple display ads.
Put a phone number in your ad URL. Hardly anyone does this, but it is a super low-cost way to get people to call you and in some cases they won’t click the ad, which reduces your PPC spend.
Build a custom landing page for each PPC ad, if possible. As part of your PPC, rather than try to revamp or rebuild or refocus your website, just build a custom landing page for each ad (hopefully you’re not running tons of ads). It is a faster way to get moving on your PPC campaign. You can then test these different landing pages by building two versions and leveraging another free Google tool called the Website Optimizer (free tool from Google).

Side note: Lots of small biz owners are testing Facebook ads in small bursts. I think its a great platform to test, but you still want to stay diversified. The real power in FB ads is that you can target down to a very focused audience or customer profile. One guy I read about did a test where he targeted to just his wife! And she missed the ad, which had a photo of their baby in it!

Analytics: Start Using It to Understand Your Website Visitors

Your website visitors reveal tiny insights into what they find useful and valuable. And the answers are in just about every site via Google Analytics (or some other default analytics program running on your server). Analytics is underused. Period.

If you don’t look at your analytics, you’re missing out on the data points that will help you improve your site, your content, and your sales. Every day you can have the analytics report emailed to you and save your self time and effort. Plus, it points to holes in your sales funnel. It points to places where people abandon your site and that allows you to fix the broken spots. It reveals more than most small business owners realize. I’m presuming that nearly every small biz owner reading this is using Google Analytics, since it is free.

Once you start understanding your data, you can build similar versions of the same page and test them one against the other (a/b split with the above-mentioned Website Optimizer).

You think that one page or one document or one photo will pull better than another? You load the simple experiment into Google’s Website Optimizer (and tie it to Google Analytics) and you have a little test running that over time will yield good insights into what your customers prefer. When you look at the data and results, do more of what achieved those results!

Closing Thought

In real life, you can assess how its going in a conversation with a customer by the nonverbal and verbal cues. In web life, you have mostly virtual data points. So you have to design your site with instructions that give your customer some “nonverbal cues” and then you have to test those cues with analytics.

But when it comes to traffic, you want to be as diversified as possible, so don’t just work on organic results (although it is super important) because if Google changes it algorithm (which it does frequently), you can watch your traffic plummet. So you need social media, you need pay-per-click, you need worth of mouth and maybe even printed materials or direct mail.

Powerful sales results are only possible when your quiver is full of different ways to nurture and encourage the sales conversation.

Do you have any tips to increase online sales? We want to learn about them below.

TJ McCue is founder of TechBizTalk which does independent web-product reviews and offers a Simple Website package to help small business owners get online fast and inexpensively with a $99 website. http://simplewebsite.techbiztalk.com

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The Minority Entrepreneur Accelerator Program Could Be Your Answer

By Melinda Emerson on June 8, 2011 in Become Your Own Boss Tips, Branding & Marketing, Business Inspiration, BYOB2011, Cash Flow & Finance, Customer Service, Featured Post, Grow Your Business, My Recommendations, Social Media, Technology, Your Small Business

Comcast Interactive Capital, the venture capital affiliate of Comcast Corporation, one of the world’s leading media, entertainment and communications companies, today announced that is has partnered with DreamIt Ventures (“DreamIt”), the leading technology accelerator for entrepreneurs, to provide seed funding, training, mentoring and other benefits to five minority-led startups through DreamIt’s accelerator program. The partnership with DreamIt, entitled the Minority Entrepreneur Accelerator Program (MEAP), is Comcast Interactive Capital’s first investment initiative from the $20 million fund created by Comcast as part of the NBCUniversal transaction that is committed to expanding opportunities for minority entrepreneurs.

Comcast Interactive Capital and DreamIt are now accepting applications and will select five minority-led startups to participate in DreamIt’s three-month accelerator program taking place in Philadelphia this fall. The deadline for applications is July 8^th and the program will commence on September 9^th.

Kerry Rupp, Managing Director of DreamIt, said, “We are thrilled to have Comcast Interactive Capital as a partner and are looking forward to working with them. DreamIt is proud to provide assistance and opportunities to help entrepreneurs grow, and we know that Comcast will provide invaluable expertise and partnership to this process.”

MEAP will provide minority entrepreneurs with the opportunity to engage in an intensive, company-building experience. Applicants who are accepted into MEAP will be a part of DreamIt’s broader Fall 2011 initiative in Philadelphia and will be offered the opportunity to learn from, and be mentored by, recognized experts in marketing, brand building, business development, financial modeling, business plans, distribution and customer acquisitions. In addition, they will be provided with office space, working alongside the other startups selected and be provided with donated legal, accounting and administrative help. At the end of the three-month period, the startups will have the opportunity to pitch to venture capital and angel investors at a demo day in Philadelphia to secure further funding to create a sustainable business.

For details on how to submit an application for the Comcast Minority Entrepreneur Accelerator Program, please visit the DreamIt website atwww.dreamitventures.com/about/Comcast-MEAP.php.

For more tips on how start or grow your small business subscribe to Melinda Emerson’s blog http://www.succeedasyourownboss.com.

Melinda F. Emerson, known to many as SmallBizLady is one of America’s leading small business experts. As a seasoned entrepreneur, professional speaker, and small business coach, she develops audio, video and written content to fulfill her mission to end small business failure. As CEO of MFE Consulting LLC, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing. Forbes Magazine recently named her one of the Top 20 women for entrepreneurs to follow on Twitter. She hosts #SmallBizChat Wednesdays on Twitter 8-9pm ET for emerging entrepreneurs. She also publishes a resource blog www.succeedasyourownboss.com Melinda is also the author of the national bestseller Become Your Own Boss in 12 months; A Month-by-Month Guide to a Business That Works. (Adams Media 2010)

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Cash Vs. Accrual Accounting

By Melinda Emerson on June 7, 2011 in Become Your Own Boss Tips, Cash Flow & Finance

Three Reasons Small Businesses Need to Know Both

While it makes sense for most small business owners to avoid the day-to-day details of accounting, there are two concepts about the structure of their accounting records that every business owner should understand. In fact, you may have already heard the terms cash-basis and accrual-basis from your tax CPA, banker, or others. After giving a quick explanation of both, I will present three reasons it makes sense to do both and the best way to make that happen.

Cash-Basis

There are generally two ways to report on the financial performance of your business–cash or accrual. Generally speaking, cash-basis accounting counts income and expenses when they flow through your bank account. If you invoice a customer today and the customer pays you 60-days later, you would recognize the income in 60 days, not today.

There is one main reason small businesses need to keep track of their finances on a cash basis–taxes. Most start-up and small business file their taxes on a cash-basis, primarily to avoid paying taxes on uncollected receivables that, in some cases, are never collected at all. For example, if your company has $25,000 in receivables due from customers at the end of your tax year, filing your tax return on a cash-basis means you don’t have to pay taxes on that $25,000 in that tax year. With a few industry-specific exceptions, every business must switch to paying taxes on an accrual-basis once it hits a certain size, usually $5 or $10 million in annual revenues (averaged over the last three years).

Accrual-Basis

In contrast to cash-basis, accrual accounting strives to recognize revenue and expenses when they are earned/incurred, having no correlation to when they flow through your bank account. If you ship your product today and send an invoice to your customer today, you recognize the income today, even if your customer waits another 60 days to pay.

This type of accounting follows what’s called the matching principle, which tries to match all costs directly related to generating revenue to the revenue it actually generates. This means that accrual accounting is actually a more accurate way to portray the performance of your company, which is one of the two main reasons a small business should keep their records on an accrual basis. The other reason is that it is the best opportunity for you to put your best foot forward with your bank. Cash accounting usually understates performance, whereas accrual shows how you are really doing.

How to do Both

So, we have one good reason to keep the books on a cash basis and two good reasons to follow the accrual accounting principles, which means you probably should do both. But how can a small business afford to keep two sets of books when it takes so much time and resource to just do it one way now. The answer is simple–you keep your books on an accrual basis, and then your tax CPA will convert your numbers to cash basis each year when he or she does your taxes.

Conclusion

While your tax CPA may encourage you to keep your books on a cash-basis only, he or she is incentivized to give you that advice. Knowing your true performance each month and being able to put your best foot forward with outside professionals is far more important and needs to be the highest priority when you decide on the accounting basis of the financial records your keep for your business.

Ken Kaufman is the author of Impact Your Business: An allegory of an entrepreneur’s journey to clarity, cash, profit, family, and success http://cfowise.com/impact-your-business. Ken, an award-winning CFO, has over a decade of experience helping small business owners and entrepreneurs attain the clarity they need to maximize their financial success. His has credited with creating the Six Scoreboards Every Business Needs. In addition to serving as an outsourced CFO to eleven entrepreneurial ventures, Ken writes regularly for American Express OPEN Forum and teaches New Venture Finance at a local university.

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Finding Alternative Funding Sources for Your Small Business – Q&A with Tom Gazaway

By Melinda Emerson on June 2, 2011 in Cash Flow & Finance, Featured Post, Q & A Interview, Q & A Interviews, SmallBizChat

Tom Gazaway is the President of Hawkeye Management. Tom is a certified Business Finance Consultant. He was personally trained by the #1 credit expert in the United States, John Ulzheimer. Tom is an advocate for entrepreneurs and small business owners. His company, Hawkeye Management, provides loans & lines of credit to help business owners start, build, and grow their businesses more effectively through having access to loans and lines of credit.

Smallbizlady: What would you say are the biggest challenges small businesses face today with credit & financing?

Tom Gazaway:

1 – Knowing their options

2 – Credit Challenges

3 – Borrowing the RIGHT way

4 – Choosing the correct lender(s)

Smallbizlady: Please explain the 2 ways you can raise capital for a business?

Tom Gazaway: Yes. You can only raise capital through debt or equity. Explain each briefly.

Smallbizlady: Credit is still really tight. What are the lending solutions for small business owners in today’s economy?

Tom Gazaway: At this point, there’s nothing new about credit being tight. Loan options for small business owners are primarily a function of credit, collateral, and the revenue and profit of the business. Of course, it does eliminate a lot of people if you need lots of revenue, good profit, valuable collateral, and great credit so this is a big reason why banks deny approx. 90% (or more) of the applications they receive from small business owners.

If you’re part of the 90% that won’t get approved by the bank then you’ll want to find someone who works with small business owners on non-bank financing solutions.

Smallbizlady: In my book, BYOB stands for Be Your Own Bank, but give me your opinion, Can a start-up get a loan?

Tom Gazaway: We do financing for start-ups all the time but that doesn’t mean it’s easy. HELOC’s used to be the most popular form of start-up financing and now we’ve seen that dramatically shift to credit cards. According to the Meredith Whitney Advisory Group 82% of small business owners use credit cards. The problem is that most people end up using those credit cards the wrong way and they miss out on several benefits. Keep in mind that 30% of our FICO scores are determined by the balances on our personal credit cards so if you use your credit cards the wrong way like most people do then you’ll hurt your credit scores, miss out on tax benefits, increase your risk of losing your credit lines, and pay too much in interest.

Smallbizlady: How can a small business obtain an unsecured loan?

Tom Gazaway: Your best bet for unsecured money is either through credit cards or a peer to peer loan. Some banks offer unsecured personal loans but the one’s that are approved (less than 10%) are usually for less than $10,000 so they are pretty small.

Smallbizlady: What credentials should a small business owner have in place to qualify for loan?

Tom Gazaway: It does depend on the kind of loan they are looking for but it does go back to understanding your lending options and it’s normally pretty important to either have good credit or to work on making it better. Credit is such a foundational component of most small business lending solutions that I can’t emphasize its importance enough.

Smallbizlady: What is a conventional business loan vs. a line of credit and how should they be used?

Tom Gazaway: A loan is a fixed installment loan that you can only use once and a line of credit is something you can use over and over again. Loans are generally for long-term purposes of 2-5 years and lines of credit are traditionally best for short terms purposes (30 days to 12-18 months).

Smallbizlady: Your niche is getting loans and lines of credit for businesses without collateral and – many times – without financials? How is this done?

Tom Gazaway: For us we’ve worked with hundreds of small business owners and we’ve done thousands of applications with all the top banks across the country so when you do this you learn what’s best, what works and what doesn’t, and you learn to match people with the lenders that are best for them. We have found some good ways to get people between $25k – 100k with good terms and without needing collateral or financials.

Smallbizlady: There’s lots of scams out there so how can small business owners find a trustworthy vendor to help get them secure financing?

Tom Gazaway: First of all, you should check out any companies thoroughly before dealing with them. Check out their record with the Better Business Bureau and also, be careful if they charge up-front fees.

Smallbizlady: I’ve heard of programs where you can buy a shelf corporation or build your business credit separate from your personal credit and you can obtain loans and lines of credit without any personal guarantees…is that real?

Tom Gazaway: No. We have never sold a Shelf Corp and we’re intimately familiar with the strategies involved in building business credit. Although I would love to be proven wrong, it’s just not a reality to think that you can have or get a “cash line of credit” as a small business owner without a personal credit check and without personally guaranteeing the loan. The exception to this are the vendor tradelines…explain.

Smallbizlady: What are the biggest challenges you face in dealing with people who are looking for financing?

Tom Gazaway: It’s kind of tough to answer because we get so many applications from so many good people all around the country. There’s the obvious answer of some people not having good credit but for the 75% of our Pre-Quals that we can work with I would say that the answer has to do with what I call the “trickle-down effect”. Let me explain. We all know that we’re in a tough time with the economy. We also know that the credit and lending markets are right at the heart of the challenges we’re facing. Lending has not shut down but it has seriously slowed down compared to a few years ago. We are offering a pretty nichey solution where people can get between $25-100k in loans or lines of credit and we can do it without collateral and without financials. There are sometimes 2 extremes that we face with this. One, is that some people who realize how tough the credit markets are simply don’t believe we can even do it. We simply tell them that we can, we do it all the time, and remind them that we don’t charge any up-front fees so if they only have to pay our fees after they get their approvals then what is there to lose? Then the other extreme are people who sort of long for the “good-ole days” and they think that it should be easy to get the money since they have such good credit. I remind these people that the pendulum has swung from one side to the other side and that until we get the pendulum somewhere in the middle that we can only pursue the options that we have as of today. Let’s not be-labor the point and do what we can in todays economy, move forward, and position ourselves even stronger for the future when we hope the lending markets will open back up a bit.

If you found this interview helpful, join us on Wednesdays 8-9pm ET follow @SmallBizChat on Twitter. Here’s how to participate in #Smallbizchat http://bit.ly/S797e

For more tips on how start or grow your small business subscribe to Melinda Emerson’s blog http://www.succeedasyourownboss.com.

Melinda F. Emerson, SmallBizLady, is one of America’s leading small business experts. She is an author, speaker and small business coach whose areas of expertise include small business start-up, business development and social media marketing. As CEO of MFE Consulting LLC, Melinda develops audio, video and written content to fulfill her mission to End Small Business Failure. She publishes a resource blog, www.succeedasyourownboss.com and hosts a weekly talk show on Twitter called #Smallbizchat for emerging entrepreneurs. Forbes Magazine named Melinda Emerson one of the Top 20 Women for Entrepreneurs to follow on Twitter. Melinda has been featured in the New York Times, Wall Street Journal, The Washington Post, Fortune and Black Enterprise. She’s the author of the bestselling book “Become Your Own Boss in 12 months; A Month-by-Month Guide to a Business That Works.” She writes a column for www.secondact.com, and is an instructor for the Black Enterprise Small Business University.

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Bootstrapping Your Business From the Ground Up!

By Melinda Emerson on May 3, 2011 in Cash Flow & Finance, Guest Articles, Your Small Business

There is no doubt that starting a business is exciting! Whether it is something that you’ve dreamed about for years or life led you in that direction, it is undeniably gratifying to know that you are building something from the ground up. It is exhilarating, fulfilling, time-consuming and let’s not forget costly. Yes, we can’t forget the numbers. Even if it is something you absolutely love doing, as long as you plan to approach it as a business, it will come down to the bottom line.

So how are you going to manage your money?

There are many sources of funding out there; and it is best to weigh the options, develop a strategy and determine what will work best for your business. You can get grants or business loans and even funding from angel investors or venture capitalists. And of course, there is the option of reaching into your own pocket and funding your venture yourself.

Let’s focus on the latter, often called bootstrapping. Bootstrapping is essentially taking a self-sustaining approach and maximizing available resources without having to reach out externally. So with this option, you’re getting your business off the ground with your own capital and reinvesting your profits into your business as it grows.

Of all, this is probably the most gratifying approach because it taps into every business owner’s desire to not just survive, but to thrive. It pushes you to make every dollar count and to also think about your return on investment. How are you going to sustain and generate new business? How can you turn your $100 into $1000? How can you cut costs so that you breakeven? When the going gets tough and you are personally vested, you will find a way!

Putting all accounting jargon aside, a business exists for the purposes of generating profit and you generate profit by maximizing your revenue and limiting your expenses. Three things are essential if you are bootstrapping – generating cash flow, saving, and being a penny-pincher when it comes to expenses.

Here are some ways you can maximize your bootstrapping efforts:

Big picture thinking. Before you step forward, always step back and think. In business, you want to think about the details, which are important, but you also want to think about the “big picture.” Your business is a unit. Your expenses aren’t mutually exclusive from your revenue streams so think about the effect that aspects of your business have on others. In fact, you may need to spend money to make money. So force yourself to think about your business as a cohesive unit at all times.

Get creative. What can you do yourself that you can avoid spending money on? Marketing and advertising are two key areas where you can cut down your expenses. These days, you don’t need an ad in the newspaper or a billboard to get the word out about your budding business. You can create a Facebook Page and get a Twitter account in a matter of minutes; and they are both free! Certainly these are in-line with your cost-cutting initiatives. An added bonus of online tools is that they help you expand your business’ reach beyond your local community. So what can you roll up your sleeves and do yourself? Maybe create your own business cards using Microsoft Word or PowerPoint. Maybe using a blog to connect with your customers instead of snail mail.

Differentiate your product or service. Taking the time to focus on your work product and your customers will go a long way. The truth is, maintaining a repeat customer is a lot cheaper than finding a new customer. Not only does finding a new customer involve money, but it also involves your time. Repeat customers will not only be your largest customer-base over time, but they will also bring you new customers via word of mouth at no cost to you. Yes, this means free publicity. This too is in-line with your cost-cutting initiatives. So make that extra step with each of your customers. Go the extra mile in giving them a personal experience and value. And be sure to follow up, because the sale doesn’t end with the actual transaction. Find out how they like your product and ask for their feedback. If there are ways that you can improve, they will know best.

Barter. Be keen to your strengths and be honest about your weaknesses. You can’t physically do it all. So when another business is also looking to keep their expenses low, create opportunities to work together. Maybe bookkeeping is their expertise and they’ll be willing to help you with that in return for your service. Keep track of the people in your network and make a list of the areas in which they excel. And if you’re unsure of what you have to offer, ask! There is no exchange in money but quality service will be exchanged, resulting in a win for everyone.

Visualize the numbers. At the end of the day, you will need to look at the numbers. You have to keep track, and you need to see what your money is doing. Cash flow management is so essential when you are bootstrapping so if this isn’t your expertise, leverage tools that make it easier for you. These days, you can track revenue and expenses with your phone or online without having to be in the details yourself. Whether you’re hands on with this or not, make sure you’re armed with enough knowledge that you can accurately assess your financial situation. Evaluate your results and be creative about incorporating additional cost-cutting measures.

Dasanj Aberdeen is an entrepreneur who embodies the combination of left-brain logic and right-brain imagination as a businesswoman and artist. She founded TheAfter5Edge.com as a platform for encouraging others to optimize their potential by discovering and leveraging their strengths to obtain their competitive edge. She is a graduate of the Wharton School of the University of Pennsylvania. Follow her on Twitter at: @TheAfter5Edge.

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What Small Business Owners Need to Know About Attracting Funding

By Melinda Emerson on April 26, 2011 in Cash Flow & Finance, Guest Articles, Your Small Business

“Where am I going to get money?” is a common question that small business owners have and it’s a real concern. If you are not in a position to be your own bank, you’ll need to find another source. When you are ready to start pitching banks or investors you might want to keep a few things in mind.

Here are 7 tips on attracting funding to your small business:

Dare to be different – Starting out, it’s vital to choose to operate a business where you already know something about the industry, or you have experience having worked in the field. Nobody wants to invest in a business where you’re reinventing the wheel, so use the knowledge to innovate something different in your field before you forge ahead.
Bootstrap like there’s no tomorrow – With no debt and no investors, you’re free to take your company in whatever direction you see fit. Rule #1 for the small business owner should be to self-fund for as long as is humanly possible – then look to external sources for funding.
Be more attractive – The #1 most attractive trait? It’s not being a blonde or driving a Maserati – it is being profitable! If you’re not there yet, have a clear, well-thought-out plan in place that shows your company’s path to profitability. This will enable you to at least negotiate some of the terms of third party investments.
Show your growth – For most businesses, funding in the early stages of a company’s launch is incredibly difficult. As the business owner, your #1 priority should be growing your business, in terms of customers and infrastructure. The best way to do this is to focus all of your energies on your core function and outsource what you can – the cloud offers ample opportunity to save time, effort, and money. Even early stage companies that show solid growth will be attractive to investors.
The impetus behind increments – The first step is to decide how much money you need. And no, “a lot” doesn’t count! When you’re talking to potential to investors, they’re going to ask you the size of the increments you’ll be offering (i.e. $1 million raised in $100,000 increments). Pick the largest increment size you think you can get investors to match. You can always split and quarter your increments, but some investors will take “one” no matter the size, and the fewer investors you have, the more control you’ll have over your own business.
VCs can be costly – My best advice is to avoid VC (Venture Capital) funding in your company’s early stages. When there is little you can offer them in terms of value, many VCs will “offer” to take a controlling stake in your business in exchange for the funds you seek. If you take them up on their offer, you will likely end up with a group of “bosses” that tell you what to do with your business to ensure a quick return on their investment. Once you’ve built a team and an infrastructure, and you’re profitable – that is the right time to go after VC funding.
Consider other options – Many times there are alternatives to VC funding including local angel groups, private investors and – surprise! – friends and family. In fact, the easiest money to raise is from friends and family – friends will follow other friends and, if you’re willing to let your family invest in your business, most will consider the investment sound. Try to evaluate what your venture realistically needs to succeed and first look for funding and strategic support close around you – you may be surprised at the interest and advise you’ll find!

Bill Grodnik is a CEO of Davinci Virtual. www.davincivirtual.com As CEO of Davinci Virtual and Davinci Meeting Rooms, Bill Grodnik is responsible for overseeing the growth and marketing strategy of both companies. Bill also earned a B.S. in Business from Arizona State University.

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How to Use the Four Types of Income to Your Advantage

By Melinda Emerson on April 19, 2011 in Cash Flow & Finance, Guest Articles, Your Small Business

“The poor man’s budget is full of schemes”. – Proverb

“The definition of insanity is doing the same thing over and over and expecting different results”. – Albert Einstein

How are your budgeting strategies doing?

As a small business owner, it can be far too easy to get stuck in a bad budget rut. We set lines and parameters; we stick to them; and, after a while, we get so engrossed in our new budding business that we forget to check up on our budgeting health once in a while.

Let’s talk about the four kinds of income:

1. Work income: You work in the pizza store, and that’s work income – money you’re paid for the hours worked.

2. Transactional income: When I come into the pizza store and buy a piece of pizza, I give you money and you give me pizza. The deal works for both of us. I may come back; I may not. The transaction is finished and a one-time deal.

3. Renewal income. This income renews itself; one real-life example may be a magazine that you continue receiving, renewing every year when the notice comes. This is much better than the other forms of income because you don’t have to keep looking for new people. The same people come again and again–repeat business. Most people will continue getting the same magazine they like.

4. “Till forbid” income. Every single month, money is charged to your credit card or deducted from your bank account–until you say stop, whether it’s a membership site online, or any other form. For example, business magazines automatically charge your card at the current rate. GoDaddy, a popular company for registering domain names, provides this service for the small amount of $7.49. Unless you choose otherwise, the domain name will automatically get renewed every year. When they do it automatically, as opposed to giving you a notice that your domain is going to expire, you will be charged $7.50 (or more, depending on the current renewal rate). That may not sound like much unless you have 50 or 100 domains, or if you just don’t like wasting money you realize they’re really getting you. All subsequent years, your rate will be billed at the non-discounted rate which is currently of $11.99. After the first year at a special rate, the automatic renewal is at full base price. Another example: NEBS is a company that sells blank checks and stuff like that. When you try to order from them the first time, you get what’s called a mail code, which gives you 50% off the price. You’re getting a steal of a deal. You get 1000 envelopes for pennies. However, when you reorder, there is no mail code.

GoDaddy and other online registrars work the same way. They are not exactly giving you the perceived “steal of a deal”; their real money is made on the automatic renewal at a coupon-free, full price. This also works well because by artificially raising the prices, you think of the “true retail price” as being discounted and you feel so slick about having found a coupon code online- while, in all honestly, you are actually paying the “true retail” price.

In business, you really want to try to get one of these forms of income. Work income, once you stop working, you don’t get this anymore. Transaction income, if you’re closed for the day, you don’t get any more income. And out of the two remaining incomes, the “Till forbid” income is the much better income than renewable. You can automatically charge your customer’s credit card every month until they cry, “Stop!” – and the potential for profit triple, because many people may forget to cancel.

What’s my bottom line? Funnel your income into the most profitable type possible. If you can increase the amount of repeat income, you can increase the value of your business tremendously.

Rabbi Issamar Ginzberg is often called “the marketer for marketers”, a strategy and marketing advisor, ideas generator and action planner, experienced mentor and friend consulting to independent professionals and businesses large and small worldwide. For more info visit: www.issamar.com or reach him on Twitter at @RabbiIssamar . Find secrets like these and more at his blog: www.issamar.com/strategy

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Where to Find the Money to Start Your Small Business

By sss4success on April 18, 2011 in Become Your Own Boss Tips, Cash Flow & Finance, Starting A Small Business, Your Small Business

One of the most common questions that I get as SmallBizLady is about start-up financing. ”Do I know where people can get a grant to start their small business?”. Now Hear This: BYOB doesn’t just stand for Become Your Own Boss! BYOB also stands for Be Your Own Bank! There are NO grants! When you are starting out in business you must come up with your own money to invest into your brilliant idea. You also need to have resources to maintain your household while you are building your business. You are your business’s credit and debt. Now there are micro-loan programs when you may be able to borrow up to $25,000, but you better have a great business plan to get it.

If you are ready to start your business, you must develop a plan for yourself to save more money and become debt free. Now, I am not talking about paying off your mortgage, but I do mean everything else. I am talking zero debt—meaning no credit cards, no car payments. Basic living expenses only. Eliminating your debt will allow you to always make decisions that are in the best interest of your business. You also need to establish zero debt to free up your credit capacity. When I realized that I wanted to leave my job to start my first business, I took out a home equity loan (which you need to do while you are still working and can prove income) and paid off every bill I had, even my car. I used home equity because you can write off the interest paid against your income taxes.

Getting your house in order financially will be one of the first milestones on the road to starting your own business.

To find the money to start your business, take these steps:

Develop a plan to eliminate all debt. Make a list of all debt, the balance owed and the interest rate. It is best to start with the credit card with the lowest balance, while you continue to pay the minimum fees on the others cards to keep them current. By starting with the card with the lowest balance you will boost your confidence about your personal finances. Next, should be the card with the highest interest rate. Keep working your way down the list.
Make of list of what you need at the store. To avoid impulse buying, take a list with you to the all stores and do not deviate from it! Be careful not to go grocery shopping when you are hungry. It is very hard to stick to your list that way.
Keep driving your car. Drive you car until it stops running. As a new business owner, you will no longer be able to afford to upgrade your vehicle every two years. Buy a reliable car and take care of it, so you can ride without a car payment as long as you can. (I still do this! My car is more than five years old).
Cut back on trips to Starbucks, Dunkin’ Donuts, and cut your cable bill. The money you spend each month on unnecessary extras can really add up. Treat yourself once in a while to a pay per view, but the pay channels need to go. You’ll be shocked how the money you save will add up.
Check out the library. You can borrow books, magazines, and the latest DVDs from the library. You can also make requests and they will order things for you. If you’re a serious book junkie like me, find a good used bookstore or buy used books on Amazon.com. The books will still be new to you.
Drink at home. Stop drinking alcohol in bars and restaurants. If it’s beer, wine, or mixed drinks that you like, they are much cheaper when you pour them yourself. Pick up a six-pack or a few bottles invite over some friends and hang out at your home.

You will start your business if you develop the ability to control your spending and cut costs. Follow this advice. I promise you will find money you never realized that you had. You cannot kick your addiction to your paycheck all at once. It will be a gradual step-by-step process, but you can do it!

Do you have any other cost saving suggestions for start-up entrepreneurs?

Melinda F. Emerson, known to many as SmallBizLady is one of America’s leading small business experts. As a seasoned entrepreneur, professional speaker, and small business coach, she develops audio, video and written content to fulfill her mission to end small business failure. As CEO of MFE Consulting LLC, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing. Forbes Magazine recently named her one of the Top 20 Women for Entrepreneurs to Follow on Twitter. She hosts #SmallBizChat Wednesdays on Twitter 8-9pm ET for emerging entrepreneurs, and publishes a resource blog at: www.succeedasyourownboss.com. Melinda is also the author of the national bestseller Become Your Own Boss in 12 months: A Month-by-Month Guide to a Business That Works. (Adams Media 2010)

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Ask @SmallBizLady: How to Develop an Effective Sales Strategy

By Melinda Emerson on April 8, 2011 in Ask Smallbizlady, Cash Flow & Finance, Grow Your Business

Every Friday, I answer your small business questions in a video blog segment called Ask Small Biz Lady.

This week, we are taking on the question: How to develop an effective sales strategy for your small business?

Here’s the answer:

Know your target customer!
Determine your 30-day sales goal.
Determine your weekly sales goal.
Determine your sales activity action plan to generate your monthly and weekly sales goals.
This will also help your figure out your monthly marketing budget.

If you have a question for Melinda Emerson, Small Biz Lady, leave a comment on this blog using the contact us page or send me a note on Twitter @SmallBizLady, on Facebook at www.facebook.com/smallbizlady or you can hit me up on LinkedIn: www.linkedin.com/in/melindaemerson

I’m always here as a resource.

P.S. Want an “I [heart] #SmallBizChat t-shirt? It’s available! for $20.00 plus s/h sizes M-L-XL-2X

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Now Read This: Small Business Taxes Made Easy

By Melinda Emerson on April 6, 2011 in Cash Flow & Finance, My Recommendations, Your Small Business

I like this book Small Business Taxes Made Easy: How to Increase Your Deductions, Reduce What You Owe, and Boost Your Profits by Eva Rosenberg (@TaxMama).

It is great no-nonsense tax-advice! Eva is passionate about helping small business owners pay the least business taxes legally possible, but she also provides information (however tough it may be to read) on how to make your business more profitable. This book is full of effective business tax strategies that are good at tax time and throughout the entire year as you are running your small business. I conducted an interview with her to ask her more information about her book. Check out her other tax resources at www.taxmama.com

SmallBizlady: What are the tax characteristics of successful business owners?

TaxMama^®: They take the time to do three primary things for their business.

Foundation: They take the steps outlined in Chapter 1 of Small Business Taxes Made Easy to get the proper licenses, file with the proper government agencies, get the minimum requisite insurance coverage, and find the best advisors, vendors and resources for their business.
Prosperity: Successful business owners have business plans. They look at the big picture relative to their business goals, tying them in to their personal and family goals. Not only is this essential for building a good life, it ensures the business becomes ever-pro profitable, and protects them in the event of tax audits.
Tax Planning: They meet with their tax advisors, and perhaps their advisory team, at least twice a year to lay out a tax plan and to rebalance it as the year’s profits or losses emerge.

o This avoids the complaint one talk show host got from a local CPA. His client complained that his CPA wasn’t letting him take the medical and health care insurance deductions that TaxMama^® said his business should have.
o Why couldn’t he use those deductions? Simple. He had never taken the time to call his CPA to do the planning to establish the written plan his business needed in order to claim those deductions. Continue Reading →

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