Tag Archives: New Jersey small business

Buying an Existing Business: Pros and Cons

salim98Thinking of buying an existing business? The evidence is clear: your chances for success are best when you purchase an existing business or franchise resale. However, I encourage you to review the following list of pros and cons, as taking over an existing business is not ideal for every would-be entrepreneur.

The pros of buying an existing business:

1. The business is already up and running
2. The business is likely to have an existing base of customers, employees and suppliers
3. There exists a tried-and-tested business formula, one that you can emulate (or at least a baseline to improve upon)
4. The previous owners are likely to lend support and goodwill
5. Generally speaking, the chances for success are better than starting a similar business from scratch
6. It may be easier to obtain outside financing because of an existing track record.

And now for the cons:

1. A large investment is often required
2. The loss of an owner or manager may lead to a disruption of operations
3. There are costs associated with business transfer: solicitors, surveys, accountants, etc.
4. It will take time and possibly travel to research available opportunities
5. You might inherit inept employees, or employees who are loyal to the previous owner, but not you
6. The present location might be limiting. You may be locked into existing policies and practices of the business, at least for the foreseeable future.

Purchasing an existing business could very well be the smartest thing you’ll ever do. Just be sure to arm yourself with plenty of knowledge going in. It’s what any savvy business person would do – and I’ve got a feeling that’s you.

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Regards,

Salim

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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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How Small Businesses Can Harness “Social Proof”

How small businesses can harness social proofWe live in a time when social proof has more power to sway consumers than ever before.

Once upon a time, personal opinion only traveled so far.  A consumer might tell friends or family about a notable experience with a local business, and only a handful of privileged journalists could rightfully call themselves “reviewers” – whether they offered movie and book reviews in the newspaper, or product reviews in consumer magazines.

But the internet has democratized a lot of things.  Ordinary people like you and me now have the power to sway the opinions and influence the choices of millions of our fellow consumers.

When we shop online, we can offer up commentary, ratings and reviews for almost anything.  Some online retailers allow customers to rate the products being offered – everything from coffee makers to novels to vacation destinations.  Other web sites exist solely to provide consumers with a place to report on their experiences — good or bad — with service providers, including chiropractors, contractors, babysitters, plumbers, tax preparers…you name it.

And if you think people aren’t paying attention to one another’s feedback, think again.  Did you ever shop for reading material on Amazon.com and decide to purchase one book over another based on the posted reader reviews?  I do it all the time.  A good friend of mine never books himself into a hotel without checking the reviews of other consumers online first.  My assistant just bought a washer and dryer in a retail store, but not before consulting the internet first, where she accessed “star” rankings of various models and brands posted by other buyers.  Those rankings influenced her final decision.

These are examples of what’s known as “social proof”.  Most people are more comfortable opening their wallets for a particular product or service if they know other people have taken a risk first, and been satisfied.

Marketers have been using quotes from happy customers on brochures and sales materials for years.  But I believe our unprecedented access to the opinions of others has made us more reliant on – and attentive to – social proof.  In other words, I think the effectiveness of those old-fashioned testimonials has been “amped up” because we’ve become so used to leaning on consumer reviews.

As a small business owner, you can harness the power of social proof.  In fact, I think it’s crucial that entrepreneurs take an active role in cultivating “good” social proof for their own businesses.  It’s too easy for one or two disgruntled customers to ruin your business’s rep.  One way to soften the effects of any bad (or even mediocre) consumer feedback is to balance it with plenty of praise.

You should never engage in creating fake reviews or testimonials.  Instead, you want to collect real ones, from real customers.

Then what?

Use them.  Let the world see what people think of you.

You might include testimonials on your website, on marketing materials or in sales letters.  Quote your happy customers on your company’s Facebook page, or tweet them on Twitter.  Post them on your company’s LinkedIn profile.  Brainstorm various ways you can use your business’s social proof.  How can you make sure your potential customers read these rave reviews?  Where can you print or publish them?

So, you’re sold on using social proof to build your business, right?  Great.  Now, how do you go about getting all these fabulous testimonials?

Quite simply, ask for them.

I know.  Some business owners feel awkward soliciting feedback, but believe me, it’s perfectly acceptable.  You might have already noticed other businesses soliciting customer feedback that they can use later as social proof.  Ever see these techniques out in the world?:

Comment Cards.  In restaurants, these cards are often distributed with the bill at the end of the meal.  In shops and offices, you may have seen them in a stack next to a “comments box”.  Sometimes, there’s an incentive for completing a card (a discount, a free gift).

Survey Link on the Receipt.  Retailers love this one.  The cashier hands you your receipt and points to a web address printed at the bottom.  She asks you to go home, get online, and fill out a survey about your shopping experience.  When you complete the survey, you’ll be entered in a drawing to win a prize.

Survey by Snail Mail.  Some service providers will mail a survey or questionnaire on paper to their customers, along with a self-addressed, stamped envelope.

Survey by E-mail.  If you collect customers’ e-mail addresses, you can solicit participation in a survey on questionnaire online.  Provide a direct link in the e-mail to an online form.

Social Media Engagement.  Some businesses maintain a lively social media presence.  For example, your brand or company might have a Facebook page, where you offer regular content to consumers.  Here, too, is a place to solicit feedback.  Ask your fans to write commentary about your product or service right there on your Facebook page.  Have fun with it.  For example, your message might read, “Hey, fans!  Complete this sentence: The best reason to shop at Smith’s is _____!” Ask customers to submit video testimonials, and post them on your YouTube channel and on your website.

Make social proof work for you.  Take an active role in collecting your own social proof and use it to bring confident new customers flocking to your door.

Stay in the loop.  Follow The Omar Group on Twitter!

Light a Fire Under Sluggish Employees

Light a fire under sluggish employeesDo you feel like getting your employees to accomplish even the simplest things is like pulling teeth?

What’s going on with your people?  Why is everyone so apathetic?  What are you doing wrong?

Your business might be suffering from mediocre employee morale.  And yes, there are things you can do about it — without investing in expensive corporate retreats or turning into a stand-up comic.  Here are just a few:

Applause and Fanfare.  When somebody does a great job, acknowledge them publicly.  Show that you’re the kind of business owner who notices exceptional effort and appreciates it.

Love Letters to Home.  Send a thank you note or gift to your employee’s family at home.  Tell them how fabulous you think the employee is.  Send a gift home on the employee’s anniversary with your company.

Stay in TouchMeet with each employee on a regular basis.  For some employees, an absent employer equates to an employer who doesn’t care.

Openness and Honesty.  Insist on being direct, truthful and constructive with your team, and tell them you expect the same from them.

Accentuate the Positive.  Follow a personal policy of refusing to engage negativity.  If you have a concern about an employee, praise what they’re doing right, and focus on finding solutions for what’s wrong.

Be the Party.  Provide opportunities to celebrate with your staff off-premises.  Consider hosting regular lunches, after-work refreshments or activities like mini-golf or bowling.  Don’t forget to acknowledge employee birthdays!

Shake things up.  Wow your people with positive changes.  And most importantly, be consistent.  For employees who’ve been discouraged for a long time, it might be tough convincing them that things have really changed.  Give them time to see that you really mean it, and watch the life return to your business.

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Shield Your Customers from the Competition’s Holiday Seductions

Shield your customers from the competition's holiday seductionsThe holiday season is already in swing, and for many small businesses, that means an opportunity to win new customers.  However, it can also mean that your customers will be seduced away by the aggressive holiday marketing and advertising of your competitors.

How will you keep the fans you already have from spending their holiday dollars elsewhere – without spending a fortune on ads and marketing campaigns?

Try these techniques:

  1. Surpass Their Needs.  Providing trouble-free service isn’t always enough.  Go above and beyond.  Give them what they paid for, and then some.  Imagine your customer is Queen Elizabeth and you are the official designated provider of your product or service to Buckingham Palace.  How would you make life easier for your  very important, very busy customer? How could you make this customer’s use of your product or service as pleasant as possible?  Think of  how you can do that for all your customers.
  2. Show the Love.  Don’t take your customers for granted.  Make sure you communicate to them that you truly appreciate their business.  Collect contact information and send thank you notes, postcards or e-mails.  Not only does this serve to express your      gratitude, but that follow-up contact keeps your business top-of-mind.
  3. Reward Loyalty.  Thank you notes are great for new customers, but what about the customers who give you repeat business?  They deserve even more gratitude.  Send a gift that will remind them how happy they are to do business with you.
  4. Be a Mind Reader.  Don’t wait for customers to come to you.  Anticipate their needs.  Put yourself in your customer’s shoes and try to imagine what else they might need when seeking your product or service.  Is the picture truly complete?  What’s missing?

Small businesses at every level can benefit from these simple steps.  Think about it: how can you make it unimaginable to your customers to consider going to your competition?

Need a gift for a New Jersey entrepreneur?  They’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.

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!

Top 10 Bookkeeping Mistakes Made by Small Businesses

Top 10 bookkeeping mistakes made by small businessesHere’s a checklist you’ll want to print, share and use.  You already know that bookkeeping is essential for ongoing recordkeeping, legal protection and accurate tax filing in your small business.  But are you making a mistake that could bite you in the butt later?  Here are the ten most common bookkeeping mistakes made by small businesses.  See how your business fares:

  1. Poor Receipt Recordkeeping.  Many business owners keep accurate records on larger receipts, but fail to do the same for expenses under $75.  Not only will maintaining accurate records save you money on your income taxes, but it provides much-needed documentation in the event of an audit.
  2. Lack of Professional Help.  Never fail to recognize the importance of hiring a professional to manage your bookkeeping.  He or she probably stays abreast of legal changes that can affect your capital better than you do.
  3. Sloppy Expense Tracking.  Too many business owners pay expenses out of their personal funds, then fail to keep track, whether the expenses are reimbursed or not.  Sound like you?
  4. Improper Employee Classification.  Some businesses use a combination of independent contractors and employees.  Be sure to properly classify your employees for tax purposes.
  5. Bad Communication.  Many reporting and other financial mistakes are avoidable, simply by ensuring open communication between employees and bookkeepers.
  6. Lack of Regular Reconciliation.  It’s vital that you reconcile your financial records on a monthly basis.  Errors are more likely when you drag your heels.
  7. Failing to Back-Up Records.  Every business should back-up their data to avoid crucial losses.  Are you protecting your digital records?
  8. Poor Sales Tax Reporting.  Be sure to report sales tax and account for your sales tax accurately.
  9. Bad Petty Cash Management.  It’s common for small businesses to operate with a modest sum of petty cash, but many lack a system for tracking it.  Set up a system to account for how on-hand cash is used.
  10. Improper Expense Categorization.  Business expenses should be properly categorized for proper tax reporting.  Formal bookkeeping practices can help reduce the likelihood of error.

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