Category Archives: start-ups / new businesses

5 Personality Traits of Born-to-Be Entrepreneurs

salim99In today’s challenging job market, many of the unemployed or underemployed are going into business for themselves. In many cases, entrepreneurship wasn’t something to which these people aspired, but tough economic times forced them to find a way of generating income –often by starting a business.

You may be considering entrepreneurship for yourself, whether you find yourself unable to regain footing in an area of former employment, or because you think you’ve got the next great business idea. Whatever your reason, it’s worth taking the time to see if you possess most (if not all) of the following traits of successful entrepreneurs. Without most of these traits, you may want to think twice before committing to a business of your own.

1. Decisive. Entrepreneurs can’t avoid making decisions. It’s something they necessarily do every day – sometimes on a moment’s notice, and often without anyone else to consult. You can’t be wishy-washy about decision-making when you’re running the show.

2. Organized. Research shows that many small businesses fail due to poor planning. Smart planning can only be done on a foundation of good organization. If your financials are a mess, if your inventory is a disaster and your schedule is consistently chaotic, you’re probably not in a position to do any strategic plotting for your business’s success. Organized people make better planners.

3. Fit. Entrepreneurship can certainly be a highlight of a lifetime, and the source of tremendous personal gratification. But it’s no walk in the park. Running a business requires physical and emotional stamina. Are you fit enough to put in 12-hour days, six or seven days a week? That’s often what it takes to make a business successful.

4. Self-Motivated. When you’re the boss, there’s no one telling you what to do and when to do it. Granted, that may be part of what appeals to you about entrepreneurship. But running a successful business means you must be capable of both telling yourself what to do, and doing it. Do you have the passion to keep moving on your own?

5. Easy-Going. Are you the type who easily lets things “roll off your back”? Minor annoyances, insults, difficult personalities. If you’re naturally inclined to keep stress at bay, you may be a good candidate for entrepreneurship. Being in charge of a business is a stressful position to be in. If you’re already good at keeping your cool, you’re at a significant advantage. Furthermore, you’ll be coming in contact with many different personality types while running your business – some more pleasant than others. If you can tolerate the trolls, you’ll be on Easy Street.

Feel like you’ve “failed the test”, but your heart’s still set on entrepreneurship? No worries. Most of these qualities can be cultivated. Set some specific goals towards improving the areas where you fall short, and you’ll be setting yourself up for smoother sailing in business, and in life.

For those of you whose small businesses are in New Jersey, you’ll find a wealth of valuable information in my book Straight Talk About Small Business Success in New Jersey: How to Maximize the Growth, Cash Flow, and Profitability of Your Small Business.

Until next time,

Salim

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Don’t Overlook The 5 Types of Records Required In Your Small Business

salim92In any small business record-keeping system, there are five essential types of records that must be kept.  Are you keeping all five of these in your business?  Take a look, and pick up some organizational tips while you’re at it:

1. Sales Records.  What are you selling, how much of it, and when? When organizing your sales records, do so by category.  This will make them easier to analyze later.  As an example, let’s say you sell both wholesale and retail.  You might consider organizing these records by region or some other market segmentation.  If you’re a service provider, you might choose to categorize your revenue records by the type of service you provide.

2. Cash Receipts.  Cash receipts represent cash actually received, in the form of sales as well as collection of accounts receivable from monies formerly owed to you.

3. Cash Disbursements.  This refers to monies actually paid on behalf of your business.  Cash disbursements may indeed be cash, but they can also be paid by check.  When recording cash disbursements, include these essentials: date, number, amount and purpose.

Small business purchases not paid for by check are generally paid for with petty cash.  Most businesses establish a petty cash fund from which small purchases are made as needed.  Funds are kept in a convenient but discrete location, and should be accessible only by a few.  Petty cash expenditures should be tracked in much the same way as cash disbursements.  Periodically, petty cash is replenished by totaling receipts for cash spent, then issuing another check to “Petty Cash” for the total amount of the receipts.

4. Accounts Receivable.  A good record-keeping system should provide you with a detailed report of accounts receivable, including current information on customers and a running balance of their accounts.  To maintain a good accounts receivable system, record credit charges on a regular basis.  It’s essential that you follow up on all late-paying and delinquent customers.

Accounts receivable should be aged at the end of the month.  This means organizing the accounts into those that are current, 30 days old, 60 and 90 days old.  This arrangement helps you take appropriate and timely action.

Some of the key information on your accounts receivable report would include:

–        Name of account

–        Account number

–        Invoice date

–        Invoice number

–        Invoice amount

–        Terms of invoices

–        Amount paid

–        Date paid

–        Balance

5. Accounts Payable.  An accounts payable schedule will provide helpful information about money you owe to others.  Do you have bills that are past due?  If so, you might rely too heavily on trade credit.  How do you manage your cash?

A payables schedule lists the amounts you owe to others.  Accounts payable schedules are generally prepared on a monthly basis.

While many businesses will also find it necessary to keep other important records – such as for payroll, insurance, and business equipment – the above five types of records are the most essential.

For those of you with small businesses in New Jersey, you’ll find a wealth of valuable information in my book Straight Talk About Small Business Success in New Jersey: How to Maximize the Growth, Cash Flow, and Profitability of Your Small Business. 

Regards,

Salim

Start-Ups: 5 Tips for Smarter Accounting (Even When You’re a Sole Proprietor)

salim85When you’re starting up a small business – even if you’re a sole proprietor working in a home-based business – good accounting keeps it humming and flourishing.  Here are some easy tips for accounting success in start-up businesses:

1. Choose the Right Legal Structure.  There are several legal business entities to choose from.  The structure you choose will depend on various factors.  For example:

– Do you have partners or investors?

– Do you have employees?

– Do you work with independent contractors?

– Do you have substantial customers with big orders?

Each entity has its tax and legal benefits, as well as drawbacks.  Making the right choice at the very beginning is of the utmost importance.

2. Keep Good Records.  Why?  Two reasons.  One, so you can easily comply with tax requirements, and two, so you know where you stand financially.  A separate accounting system must be set for the business.  There are various accounting software programs that can help you do so, and very efficiently.  Consult with a competent CPA before choosing accounting software.  Inputting records might have to be done daily or weekly, depending on the volume of transactions.

3. Set Up a Business Bank Account.  This account should be separate from any personal accounts, even if you’re working alone from home.  It will help you manage your cash flow better, and the records will also be separate from your personal ones.  Choose a bank that’s conveniently located.  Some banks have computerized check deposits for a minimal fee that could save you time.

4. Be Careful Extending Credit.  Your cash flow is your life blood.  Avoid extending the payment term on any extended credit to more than 30 days.

5. Send Invoices Immediately.  The quicker you send the bill, the faster they can pay you.  If you can manage to get prepayment before the work is done or shipment is delivered, that’s even better

6. Outsource Payroll.  Penalties and interest can be steep for late filing of your payroll tax returns and remitting the appropriate taxes to various authorities.  Letting a professional handle your payroll can be a real weight off your shoulders.

For those of you with small businesses in New Jersey, you’ll find a wealth of valuable information in my book Straight Talk About Small Business Success in New Jersey: How to Maximize the Growth, Cash Flow, and Profitability of Your Small Business.

New Year, New Jersey, New Business? Read This First.

New Year, New Business, New Jersey? Read This First. Will 2013 be the year you finally start that dream business in New Jersey?

Good for you, and more power to you!  I love watching passionate startups take flight.

However, I sincerely want you to be in the strongest possible position to succeed.  That’s why I hope you’ll read the following questions before you launch that new business (or, if you’re already on your way, read them before you take another step).

I’ve been helping to guide new entrepreneurs for years, and I see many of the same problems occurring within that first all-important year in business – problems that could easily have been avoided if only the client would have considered the pros and cons of entrepreneurship first.

By pointing out the pros and cons, I’m not trying to scare you away from entrepreneurship.  On the contrary, I want to give you an “edge”.

Why not be that rare small business owner who can honestly say, “My first years?  Mostly smooth sailing.  I’ve never regretted starting my own business.”

It’s entirely possible.  Start here by acknowledging some of the harsh realities of entrepreneurship, so you can be clever enough to succeed in spite of them:

– If you want to be successful, you need a clever idea, potential customers, and knowledge of business management, finance and marketing.  Got all that?

– 75% of new businesses fail within the first year, according to the Small Business Administration.  And 25% of those that survive the first year will fail in the second.

– Most new businesses are undercapitalized – typically because they’re financed with the owner’s money.

– Running a business is a lot less structured than working for someone else.   You must be good at motivating yourself on a consistent basis.

– In the first couple of years in business, be prepared to work long hours – at least 60 – 80 per week.  Make sure your spouse and family are prepared, too.

And now, let’s get a taste of the upside.  Remember these good reasons why you wanted to start your own business?:

– New businesses are exciting because they’re creative in nature.  You’re giving birth to something that didn’t exist before.

– You call the shots!  Finally, you are your own boss.  And maybe you’ve seen how similar businesses are doing it “wrong”, and you can’t wait to finally get it right.   You’re the (wo)man!

– What’s more satisfying than being able to say you did it yourself?  Owning a successful small business gives an incomparable sense of achievement.

Looking to increase your chances of defying the odds?  I’ve identified a four-step process that can reduce the risk of starting a new business. You’ll find it described in detail in my book Straight Talk About Small Business Success in New Jersey: How to Maximize the Growth, Cash Flow, and Profitability of Your Small Business. For the price of a paperback book, you’ll find a wealth of valuable information – 360 pages of it, to be exact.  Give it a read, and let me know what you think.

Until next time,

Salim

Don’t Be That Guy Who Chooses the Wrong Business Structure

Don't be that guy who chooses the wrong business structureFailing to choose the right structure for your business can cause some very unfortunate consequences down the line – tax consequences, legal complications, and can even cause problems when it’s time to exit your business.   That’s why it’s so important to get professional advice on the best option for you.

Your business’s ideal structure depends on many different things, including the exact nature and size of the business, the source and type of income, the number of family members, etc.  In 95%  of cases, I will recommend one of two business structures:

  1. An S corporation; or
  2. An LLC (limited liability company)

With an S corporation structure, you avoid the 15.3% self-employment tax.  With both the LLC and the S corporation, you protect your personal assets from business activities that go awry.  You also get to offset the losses of those early years with other earned income.

Here’s an example.  Years ago I met a business owner who was operating a C corporation.  Sadly, he’d been running losses – to the tune of a net operating loss of $150,000.

As a C corporation, he had to keep pouring money into the business, but never got to benefit from the company’s losses.  Even worse, he had been taking a salary from the company.  That meant he had income from the C corporation that he had to report, when there was actually a loss in the company.

Here’s what it all boiled down to: having the wrong business structure cost him over $80,000 in taxes he shouldn’t have had to pay.  He would’ve been better off as an S corporation or an LLC.

Choosing your business structure is not something to address lightly.  Get advice from a savvy pro right from the start.

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Get Money to Start Your Dream Business

Get money to start your dream businessFor years now, you’ve had this idea in the back of your head.  A business of your very own.  In reflective moments you’ve tried it on in your imagination, and you actually think it could work.  Maybe you’ve even gone so far as to pinpoint your target market, and you have a storehouse of imaginary launch plans.

If only you had the money.

How do people like you get the money to start businesses, anyway?

The three most common methods are self-funding, debt financing, and equity financing.

Self-Funding.  Here, aspiring entrepreneurs scrape together the money themselves.  How?

–        Personal savings (note: assets purchased this way can be used as collateral if you need a business loan in the future)

–        Proceeds from a home equity loan

–        Borrowing against your own whole life insurance policy

–        Credit cards (but those interest rates will kill you)

–        Borrowing against your IRA (but it must be repaid within 60 days, or it becomes subject to ordinary income tax and a 10% penalty)

Then, there’s Debt Financing.

This means securing a small business loan.  If you have good credit, this may be the way to go.  The interest you pay is tax deductible.

Where can you go to get a loan?

–        Banks

–        Trust companies

–        Credit unions

–        Government agencies

–        Other financing organizations

Different institutions may offer different types of financing, including demand loans, lines of credit, term loans, and leasing and supplier credit.

Finally, there’s Equity Financing.

Unlike self-finance and debt financing, equity financing can affect the ownership of your business.  When you opt to use equity financing, you agree to share ownership of your business in exchange for the money.

The Pros?  Some business owners like it because they don’t incur debt.

The Cons?  You risk losing control of areas of your company.

That’s how most businesses get started – with the entrepreneur’s money, borrowed money, or potentially sharing a piece of the pie with someone else with money.

Did I get your wheels turning?  Maybe you’re ready to move from small business daydreaming to digging around for details on your favorite financing method.  I think I sense you moving a little closer to making your dream a reality.

By the way, are you on Twitter?  If so, you’ll benefit from a daily stream of small business intelligence by searching #njsmallbiz.  Courtesy of The Omar Group.  Be sure to follow us, too!

The Wrong Kind of Debt for Small Business

Every blossoming company may need to take on some amount of debt to fund their growth.

But are you amassing the wrong kind of debt in your small business?

Choosing the wrong kind of debt for your business – or having too much debt – can be detrimental to its success and lifespan.

So what might we consider the “wrong” kind of debt?

Here are just a few:

–        Credit card debt

–        Vehicle loans and leases from car dealerships

–        High mortgage balance

–        Personal loans at high rates.

Really, the wrong kind of debt is any debt that’s either:

A)   Not necessary; or

B)    Can be refinanced at more favorable terms.

Eek.  Does your small business have bad debt?

You’re not the only one.  Not by a long shot.  But you can get smart right now and start doing things differently immediately.

Start with a plan to remove bad debt from your business.  Take a rainy Saturday to systematically review every outstanding loan.  For each, find a way to either pay it off (without compromising growth, of course) OR refinance at a lower rate.

If you have expensive debt (such as credit card balances), you should work to determine what other financing options are available to your business.

If your company is profitable — or is showing strong signs of coming profitability — it’s likely that lenders will work with you to refinance at a lower rate.  You should consider this particularly if you have expensive debt such as credit card balances.  Work to uncover other financing options available to your business.

But when asking lenders to refinance to get you that lower rate, don’t think of it as them doing you a favor.  Instead, think of it as good business for the lender.  Financial companies are in business to make money from loans. If you bring to the table a good credit history and a viable business record, they’ll seriously consider lending you money and getting you out of those unnecessarily high payments you’re making. Doing so will make your company all the more profitable.

On an annual basis, you should address the debt your business is carrying.  Set a reminder to take a look at this same time next year.  True, it will save your business money on an annual basis.  But it can also save you money in the long-term, when you’re seeking capital financing or even a potential business sale.

Yes, it will take time to organize your debts and search for options that are more attractive to your business.  But will it pay off in the long run?  Absolutely.

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