The Three Most Important Items For Small Business
Starting a business can be an incredibly time consuming venture. The three most important items required when starting a new business is 1) money, 2) time, and 3) more money. This is not an exaggeration since no matter how much time a business can suck out of you it can suck at least twice as much money from you.
Businesses and especially small business have huge potential growth rates. Some businesses can experience thousands of percent growth each year, which means that you really don’t want to starve your business for the time and money it truly requires. The real problem is even though business growth can be huge the chances of failure are equally large and this is what banks and other sources of standard financing will be looking at.
This means that as best as possible you should be trying to structure your company to exist on cash. The less you have to borrow for your business the lower your chance of forced failure. Forced failure can often occur due to the extremely high interest rates that small businesses can and are charged for borrowing money. The higher your reliance on borrowed money the higher your chances are that your business will not be able to become cash positive.
So what can you do to ensure you are operating in a cash positive territory. Firstly look for smaller sales rather than bigger sales. Small sales usually take far less time to close and that will ensure you are earning money more effectively. Also loosing a small sale will not affect your business as dramatically because your financial investment in the sale is much lower. Once your small sale process has been streamlined you should then begin targeting larger and larger sales. The other benefit of smaller sales is once you begin targeting larger prospects you will have a hopefully sizable base of customers upon whom you may be able to request references or referrals.
If a sale is going to require a cash investment from your side at the time of a PO, you should either ensure the deal has sufficient payment upfront (ex. half up front) or make sure you build in the cost of borrowing against a PO which can have very high interest rates. Playing too cautious with a sale can often be killer but not being cautious enough is a killer to your business so make sure you are always investigating your customers and suppliers. Those who are not reliable for payment or delivery can cause major financial difficulties and should either not be relied upon or terminated before they cause your business irreparable harm.
As always, let your gut and business instinct guide you. If something seems fishy it likely is so make sure you follow up and keep working on your business to achieve ultimate success.
Three Young Success Stories
A few days ago I posted about learning from other peoples failures. Using other peoples failures is a great way to ensure your own success because it will keep you from making their mistakes (you’ll make different ones).
The problem with just concentrating on failure is you don’t feel sufficiently motivated to build a successful enterprise. Success stories are quite useful to ensure you will be sufficiently motivated to keep up with your new enterprise.
I just stumbled across this interview where they are talking to 3 of the youngest and richest entrepreneurs in the United States. These people started out young and without the assistance of millions of dollars. Founding successful companies because they worked hard, had great ideas and the focus to see them through.
Business Use Of Home Services
Lately I have been in the middle of switching service providers for my phone and Internet service (whole series of articles brewing in there) and the whole process has gotten me thinking about the services you use and how they apply to your business.
When running a small business you often do work from home (or only do work from home). This means that various services such as your phone and Internet are used for both personal and business use. When using something for both personal and business use it can become tricky to decide how much of the original price of the service to charge to your business and how much you will pay yourself.
Business Purposes
The first step to determining how much you can write off as a business expense is to determine if the service can be considered a business expense. Fortunately using the services for a business purpose is usually enough to actually consider an expense as valid for a business expense. If you only use the service very rarely for a business purpose you may not have a case for this being a deductible expense though. Make sure you are actually using the services for business before attempting to claim as an expense or the tax department may disallow it.
As a general rule of thumb you should make sure you have a definable usage amount for the expense. If you can define that you use the service a certain number of hours a day or some other regular use then it becomes easy to expense it, otherwise occasional use is much more difficult to correctly define an expense.
Business Expense Amounts
If you can define a percent amount of a service for business use then defining exactly how much can be expensed is very easy. When you cannot define the percentages you can use some alternative means to try to calculate the amount. One alternate calculation that could be applied (if appropriate) is the business use of home calculation. Basically you could use the percentage of the home that is your office space as the percent to use for phone or Internet service. Make sure the calculation is technically correct for the quantity of use actually being applied.
Alternatives
One way to avoid the difficult business expense calculations is to install a separate phone line for business purposes. This helps to avoid all the sticky situations where an expense can be denied. The same can be said for any other service you use for your business at home. As long as you follow a good receipt keeping process you should be fine with any expense as long as it is for exclusive business purposes. The other option is usually less enjoyable and that is to not claim an expense as a business expense if you have insufficient evidence of it being for business purposes.
Conclusion
When running a business from home there are several services that you use regularly for your business. Since you use these services for a business purpose it means that you should be able to claim at least a portion of the expense as a business expense. Knowing what and how much to claim ensures your business money will go further.
Finding Success Inside of Failure
When trying to build a business there are a number of major items that could make you fail. Failing to plan for an audit, not keeping your receipts, not taking time off, taking all your time off. One of the most helpful items to ensure you smooth out your business is to find out how other people have failed.
Success stories fuel our desires to head out into the unknown and discover great wealth. Only the most successful people become the stories we tell ourselves to keep motivated. The people who have that golden touch who succeed where everyone else had failed.
The problem with success stories is there isn’t much useful to learn from those who succeeded. Usually trying to copy them is basically a direct line to complete failure. The reason people succeed is timing, skill, and often previous failures. The problem is the story doesn’t tell of how many times they failed.
The road to success is usually through failure. The most effective route to success is to learn from the failures of others. Rather than having to experience each failure first hand you need to seek out failures. Learn from their mistakes and turn their failures into your success. Each new failure is another way to ensure you manage to succeed.
Failures are actually quite hard to find. They hide in the shadows and try to pretend that it didn’t happen. Unfortunately most failures end up being very costly mistakes and getting up to try again isn’t usually an option. For you to have the best of success you need to find those who had the worst of failure. These life lessons will ensure you do not need to learn the same lesson twice.
Learning from other peoples failures is a means to an end, not the end itself. Always ensure that those success stories are around you as well, failure can beget failure. To balance failure with success should ensure an ultimate recipe for success.
Finishing school doesn’t dismiss us from leaning it just means that the learning is going to be more hard to win. Don’t stop learning, just like you need to keep trying. Success is just turning failure into a lesson for success.
Taking Work With You – Skype
When you run a small business there are times where you may want to keep in contact with others. Communication with people can be one of the most important parts of a business. When you are traveling or otherwise not in your normal place of business it can be more difficult to maintain your normal methods of communication.
Your cell phone is obviously one of the first go to tools for mobile communication. Unfortunately most cell phone plans can have huge extra costs attached when you use it in a non-normal fashion. While this cannot always be avoided there are other options available for communication should you be aware of these options.
One of the most popular IM (instant messaging) and communication tools for personal use is Skype. This tool has become incredibly popular in Europe and is slowly gaining popularity in North America. While the popularity of Skype is gaining quickly in the personal use it is also gaining use in the business world.
Skype is free for use when calling from Skype to Skype user. They also offer incredibly cheap flat fee calling rates for North American calling. Skype can be considered a cost effective alternative to most long distance calls. It can also be used as a very effective way of enabling various teams to collaborate over distances of a city block to half a world away.
I use Skype on a day to day basis to facilitate the communication between myself and my customers. The number 1 feature I like is the sound quality provided. The quality provided is actually significantly better than the sound quality from a conventional cell phone or land line.
Skype is a rather useful tool for a business person. It will help cut down on long distance charges, and assist with increasing the communication between teams of people.
