Posts Tagged ‘Entrepreneurship’
Credit markets are tight, and a lot of new businesses are getting creative with financing. Are you having trouble getting the capital you need to start your business? It may be time to forgo the recession-weary banks and look into some less well known options. Here are a few you may not have considered:
Microloans. Websites like Kiva, which allow lenders to pool microloans of as little as $25 for startup opportunities abroad, are relatively well known. But did you know that Kiva also offers microloans to entrepreneurs in the U.S.? There are other micro financing institutions out there, too, like ACCION USA. And smaller banking institutions, like HOPE, offer loans of $2,000 to $25,000 to help small business owners get started.
Angel investors. An angel investor is a wealthy individual who provides capital for a new business. There are some angel investors who provide this capital with no strings attached, but many do so in exchange for ownership equity in your business or convertible debt, which is a type of bond that can be converted into shares of common stock in your company at a pre-determined price. GoBig is a good place to get started with your research into angel investment networks. If you’re a minority entrepreneur, try the Minority Angel Investor Network.
Venture capitalist firms. Venture capital is a type of private equity given to companies in the early stages of growth which investors believe show great potential. Venture capitalists generally offer this capital in the interest of generating a return through the sale or initial public offering of the company (when a company issues common stock or shares to the public for the first time). Much like angel investors, venture capitalist firms are betting on having a stake in your company’s future success. Here are some of the country’s top venture capitalist firms, according to Entrepreneur Magazine.
Franchise. If you want to start a business with a proven track record, franchising may be the right route for you. Many franchisors, like Instant Tax Service, offer financing to qualified candidates. Minority and veteran applicants may also receive special discounts.
Friends and family. This one’s last on the list only because borrowing from friends and family can be tricky. Be sure that if you approach friends and family for funds, the terms of the loan – or gift – are spelled out in writing. Wealthy friends and family may be happy to send you a gift, but – more often – they will want to know when they can receive a return on their investment. Some may also want to charge you a small percentage of interest. Be sure you agree on all the details before accepting any money from friends and family for your business.
At Instant Tax Service, we love finding new ways to share information. Podcasts are just one more way to get the word out about great business investments and opportunities.
Wondering where to stash your money while the market recovers? Have you considered starting a business? Investing in a franchise? Check out these top 5 podcasts for entrepreneurs to start generating ideas about how to invest in your financial future.
Venture Voice
A podcast “that explores how entrepreneurs build their businesses and their lives.” Tips, advice, and interviews.
Jenerous
Interviews with entrepreneurs and marketers. No longer updated regularly, but still a great resource for quick tips, advice, and inspiration from incredible entrepreneurs in a variety of industries.
Entrepreneur.com
Regular podcasts about marketing, financing, and general business from one of the industry’s leading magazines for entrepreneurs.
Duct Tape Marketing
A great marketing podcast for busy entrepreneurs. Learn all about how to leverage twitter, “be more interesting,” and generate buzz for your business. Bonus interviews with entrepreneurs and marketers abound.
DSM Buzz
Interviews with successful entrepreneurs.
Check out some of the newest markets we’ll be in this tax season here.
Did you know that as a small business owner, you’re more likely to be audited by the IRS? It’s true. 1.5% of all tax returns submitted with a Schedule C are audited, compared to just 1% of those filing with W-2’s only. This is largely due to the widespread misuse of the Schedule C to report losses on a “hobby” business while employed at a “regular” wage or salaried job.
So, how can you minimize your risk of being audited? You may already be at an increased risk, but following some of the steps below can reduce that risk and ease your audit experience if the tax man does decide to pay a visit.
1) Hire a professional. A professional tax preparer or personal accountant is an invaluable resource in helping you navigate your tax burden. They’re aware of common tax mistakes that the IRS looks for, like incomplete tax returns, unreported or suspiciously low income, round numbers, or disagreements between your state and Federal tax returns. They can work with you to correct these errors before your tax return is filed, reducing your risk of an audit.
2) Document all income sources. You should be reporting these sources of income on your Schedule C. All four quarterly employment tax returns should be kept and filed in case they’re needed to support deductions taken for salaries and wages paid to employees. For the same reason, be sure to keep copies of all form W-4 and W-2 for your employees.
3) Take only deductions you can substantiate. This goes with tip #2. If you keep accurate, meticulous records of your deductions, you have every right to take them. Just know where your paperwork is.
4) Know what the IRS is looking for. Are you writing off business entertainment expenses with clients? In addition to keeping your receipts, use a spreadsheet to record the date, place, amount spent, the name of your guest, and your business relationship with the guest. Do the same with any items you buy for your business. Keep your receipts, and record the date, place, amount spent, and how you are using the item for your business. Physical inventory sheets, canceled checks, receipts, and information or figures concerning the costs of the inventory will also be useful.
5) Be honest. Don’t try and fudge your numbers. Just don’t. It always comes back and bites you in the end. Report all income and seek the advice of a qualified tax professional if you’re feeling overwhelmed.
Every small business needs funding. Unless you’re independently wealthy or incredibly lucky, yours business is probably one of them.
One of the first questions you ask should be: how much should you budget in startup costs? Every business is different, but there are a couple of startup cost calculators here and here. These calculators give you a very simple, high-level look at what your business startup costs may be.
A good rule of thumb is to make sure you have enough financing to cover not only your startup costs, but your first year of expenses. There are a few lucky businesses that achieve profitability their first year, but most take 2-5 years to start generating real returns.
So how much do you have to make before you start making money? Remember that just because you generated $10,000 in sales this month, it doesn’t mean you made $10,000 in profit. If it costs you $8,000 to acquire, distribute, and sell those goods, you’re only actually making a $2,000 profit ($10,000 – $8,000 = $2,000).
You can calculate your breakeven costs by identifying your variable and fixed costs and applying a simple formula. Click here for a basic online breakeven analysis calculator.
Now that you have an idea of the costs involved in starting your business, how do you plan to fund it? There are lots of options. Young entrepreneurs just getting started might rely on friends, family… and credit cards. For most – especially if you’re looking at a business with high startup costs – this isn’t going to be enough to get your business off the ground.
There are two basic types of outside funding you can get: debt financing and equity financing. Debt financing means you’re taking on debt that you’ll have to pay back. This is financing from traditional outlets like banks. Equity financing, on the other hand, means gathering investments from venture capitalists. Venture capitalists are people who will invest money in your business in the hopes of seeing a profitable return.
The big drawback to equity financing is that you may lose some control over your business – many venture capitalists seek to have some sort control of your company, especially if your business is underperforming. You will also be sharing a portion of your profits with a venture capitalist. Of course, when debt financing, you may also offer up your business, house, or other collateral to the bank if you are unable to pay back the loan (depending on the terms of the loan). So either way, you’re beholden to someone else until your business starts to cash out.
If you decide to open a franchised business, you may also have the ability to tap into the franchisor’s funding resources. This could range from simply getting the franchisor’s backing when applying for a loan to taking out a loan from the franchisor itself. At Instant Tax Service, we offer a variety of funding options to qualified candidates.
At the end of the day, funding your small business requires a lot of research and sweat equity on your part. Be sure to pursue all the options open to you before deciding what kind of funding options are right for you. Many entrepreneurs find success by mixing and matching debt financing and equity financing paired with generous contributions from family and friends. There’s no “right” formula – just whatever works for you and your business.
For more small business funding tips, visit SBA.gov.
It takes a lot of hard work to create small business success, especially in this rough economy. Here are some tips on how you can create your own success story!
1) Start small, think big. Keep your business manageable up front. If you can only afford one storefront, open one storefront. Test your concept. But no matter how small you start… keep your bigger goal in mind. Creating small business success has more to do with the scope of your dreams than the size of your first office.
2) Continuous improvement.“But that’s the way we’ve always done it!” is the fastest way to put your company on the road to stagnation. If you’re turning a profit, great, but don’t stop there. Look for ways you can improve your services – and your bottom line. Whether it’s a more specialized staff member, a technological tool, or improved customer service script, smart entrepreneurs know that continuous improvement puts them on the road to small business success.
3) Listen to your customers (and your franchisees, if you’ve got them)! As a busy entrepreneur, you sometimes have so much of the big picture in mind that you can forget the details. When your customers (or franchisees, if you have them) come to you with a complaint or suggestion, listen to them! They can see areas of improvement you may have missed.
4) Innovate! Change doesn’t have to be scary. Keep up with the latest technology tools and gadgets, industry news, processes, and procedures. Have a look at what other people in your industry are doing – and improve on it.
5) Surround yourself with the best. And listen to them! If you want to create small business success, surround yourself with experts in your field or areas of expertise you may not feel as strong in. Ask for their advice when you need it… and listen to it! You and your employees, friends, and advisers may not always agree, but having them on board means you won’t have to re-invent the wheel every time there’s a crises. In fact, having trusted legal, financial, HR, and public relations advisers on board may help you avoid a crises!
