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Category — Small Business Advice

The Legal Structure Of A Small Business

The Legal Structure Of A Small Business

Small businesses have a unique appeal in American life. The ideal of the self-made entrepreneur calls people to start over 600,000 small businesses each year. The Small Business Administration estimates that more than 627,000 businesses were started in 2008. (1) The downside of small business creation is that the majority of business fail the first year. In 2008 alone almost 600,000 firms failed. (2) According to the Commerce Department, only seven out of 10 firms last longer than two years. Only five out of 10 businesses survive five years. (3)

Starting a small business is a complex task and requires internal strength, diligence and persistence. The legal structure of the business plays a large role in determining funding and the level of taxation. The wrong legal structure can kill a business before it even opens it’s doors. Properly incorporating the business when setting it up can even potentially save the owner from bankruptcy in the long run.

Sole Proprietorship
The small business owner is the business under this legal set-up. The owner legally represents the company. This simple structure creates minimal tax complications, has much lower start-up costs and makes it easier to handle funds and profits. Unfortunately, since the owner and the company are legally one and the same, creditors can sue the owner for the debts of the business. There is no legal separation between the owner’s liability and the business’s liability. The owner himself will have to file for bankruptcy if he cannot meet his business obligations.

S Corporation
Under this plan, taxation is similar to a sole proprietorship. There is no corporate tax rate, which makes this structure very attractive. Profits and losses become part of the owner’s personal income and are taxed at the owner’s applicable rate. An S corporation also allows the owner to write off any losses incurred when starting the business. The biggest downside is the requirement of maintaining regular meetings between shareholders and keeping minutes from these meetings.

C Corporation
This is a more complex version of the S corporation structure. C corporations are the legal structure behind the popular image of a corporation. A board of directors decides company policy and shareholders own different classes of corporate stock. C corporations are taxed at a separate rate and their income is legally separated from the owner’s personal income. Owners cannot write off start-up losses. The complexity and responsibility of a C corporation is enough to persuade most small business owners of choosing another legal plan.

Limited Liability Company
A limited liability company (LLC) is probably the most ideal structure for a small business. The owners of an LLC are legally separate from the company. Consequently, the owner is not liable for business debts and creditors cannot sue him to recover them. Profits and losses pass through to the owner’s personal income. The operating costs of an LLC are much lower because no meetings, minutes or boards are required. The downside is that an LLC dies when it’s owner either dies or goes bankrupt.

References

(1) http://www.sba.gov/content/how-many-businesses-open-and-close-each-year
(2) http://www.sba.gov/content/how-many-businesses-open-and-close-each-year
(3) http://www.sba.gov/advocacy/7495/8430

May 18, 2011   No Comments

Saving Money In The Office

In order for any type of business to be successful, ways to reduce operational costs should always be sought. Even if a small business has a rather large budget to operate on, the more money it can save means the greater profit levels it will endure, which means the further it will be able to expand. Saving money on office supplies is an excellent way for all businesses to reduce their operational expenses, and best of all, there are several ways to save on office supply costs.

Save by Earning Cash Back
There are several office supply stores that offer its customers a cash back program. When joining this type of program, a business earns cash back on any purchases it makes at the participating store(s). This type of program enables a business to literally save money with every purchase it makes on office supplies. Most times, the cash back rewards are stored on a card that can be used during future purchases.

Use the Rebates
Rebates are often cash back rewards that many businesses tend to overlook. A large amount of money can be saved through rebates, especially when making large purchases. The best way to look for available rebates is by looking through local newspapers or conducting a quick online search. Most rebates will require the person to pay for the item upfront and then mail in a form; this form can sometimes be emailed. After mailing in the form, the person usually receives a refund check or a credit to their customer account card. Through rebates, small businesses have the ability to stock up on all kinds of different office supplies by paying a very little amount of money.

Watch the Printer
Keeping an eye on printer settings can help a business save a large amount of money. While most printers have a number of different settings, most people do not take the time to see how each one can save ink and even paper. Anytime paper is being printed on, the printer should be set to a fast draft setting; this type of setting allows for the least amount of ink to be used. Some printers even allow the user to change font settings, which can save a person an enormous amount of ink, which ultimately saves the user money as well.

Do Not Use the Expensive Ink
Most businesses go through a large amount of printing activities, which of course consumes a large amount of ink. Businesses should not feel the need to buy expensive brand-name ink. There are plenty of other off-brand inks that can perform the printing job just as well. Look for wholesale printer cartridges here.

Use Free Computer Software Programs
Some companies feel like they need to purchase expensive software programs to be able to efficiently and effectively operate; however, the truth is, this is not true. There are a large number of software programs that can be utilized for free. This is especially true for virus and spyware software programs.

May 13, 2011   No Comments

Financing your small business

Small business financing has certainly taken a hit over the last couple of years. With banks, credit unions and other lending institutions limiting access to credit, or raising the cost of credit altogether, small businesses have been left to pick up the pieces. Faced with declining revenues, decreased customer demand and a client base taking longer and longer to pay its invoices, securing business financing has quickly become a going concern for today’s small business owner. However, what options are there for small businesses unable to secure the working capital their business needs? Surprisingly, there are a couple of simple, straightforward and easy-to-use strategies that improve a company’s cash flow position and expand its options on business financing. It involves going outside conventional lending options and adopting a more proactive stance to managing the company’s finances. So, what can small businesses do to resolve the financing issues facing them today?

1. Use the Liquidity Within the Company’s Assets

A number of small businesses have started to pursue Asset-Based Lending (ABL) options where they can tap into the value and liquidity of their existing assets in order to finance their day to day operations. These options have become increasingly popular over the last couple of years in response to the unwillingness of banks and credit unions to extend affordable business credit. ABL financing works because it allows small businesses to use the liquidity within their assets to secure a working credit limit with a financing firm. These assets include the company’s inventory, warehouse & real-estate holdings, receivables, machinery & equipment and even miscellaneous items such as its office furniture and computer equipment. Now, the intention is not to leverage these assets so much that the small business finds itself in a weakened position. Instead, the purpose is to use avenues like account receivables factoring to improve cash flow by not having to finance customer’s business waiting for them to pay their invoices.

2. Aggressively Manage the Company’s Finances

Improving the company’s finances means to be open to pursue new avenues and strategies. Those customers the competition has ignored because of poor credit means small businesses can tap into a relatively quick and easy sale. In addition, customers with poor credit are always required to prepay, which improves a company’s cash holdings. Pursuing discounts for early payment is also an option with vendors and creditors and should be pursued at those times when the company’s cash position is strong. In essence, it’s about being aggressive with the company’s finances and securing the long-term savings so vital to the company’s operations.

ABL financing options have increased in popularity over the years and have become a mainstay in business financing for all companies, regardless of size. Today’s economic climate only exacerbates the financing issues small businesses face, which ultimately makes enacting those plans for growth extremely difficult. Small business owners must be willing to pursue different financing options and be willing to work with vendors & creditors to lower the company’s cost of money. It’s about being aggressive with the company’s finances by becoming more proactive, instead of reactive.

May 5, 2011   No Comments

Put on Your Best Gloves

Wearing all the hats seems to be the fashion trend of many new business owners who are running a one-person business operation. You are busy marketing to, meeting with, or supplying clients with your goods or services. Sometimes wearing all those hats can be like wearing a concrete block. Your neck is tired from carrying the heavy load of all those hats. There comes a time when you need to take off all of the hats and put on your best gloves.

You need to decide what your best gloves are. And, since you only have two hands, you can only choose one pair of gloves. Take a careful inventory of the many tasks that you are doing. Choose only two that you really enjoy doing and give away some of those hats.

For example, should you be spending valuable time putting stamps on promotional material when you could be personally handshaking community members at local business event? Is it really beneficial for you to be spending hours on a computer trying to design a website when someone who is more qualified can take care of that for you?
Do you really need to make all of the telephone calls personally?

Many self- employed business persons confess that because they are independent thinkers, they cannot conform to a fixed corporate structure. They are accustomed to wanting to manage everything and find it difficult to delegate. Sometimes these excellent independent business people hide behind the word “expense”. While using the cost of assistance as an excuse, the final result is failure due to wearing too many hats. A former President called that being “penny-wise and pound foolish.”

The challenge for the small business owner is to find which two gloves he or she is going to wear. Some people are very talented and can do many things. If you are one of those persons, then perhaps the task of finding the best two gloves will be a bit more difficult.
Providing yourself with a time line of when one pair of gloves will be worn and then put away may be a solution. Changing your tasks on seasonal basis can provide you with a different approach of doing a former task.

There are many places that can help you succeed with your business and are willing to share the hat wearing. The Internet provides lists of sources that can assist you with advice about insurance, laws, advertising, and grant money. Community groups such as your local SBA can also provide a great source of ideas as well as networking opportunities. Contacting your alderman’s office, community association, alumni associations and librarian have also been helpful places for the one-person operated businesses.

Just remember, put on your best gloves, and then knock them out with your best product or service!

May 1, 2011   No Comments

How Are Your Internet Ethics?

If you’re doing business on the Internet, you have a whole new world of ethics to deal with. That means legal issues, copyright concerns, pricing guidelines, and linking to questionable sites. There aren’t any clearcut “rules” for dealing with many of these issues, but there are plenty of pitfalls, especially when you start dealing with social media sites such as Facebook and Twitter.

One big no-no is violating copyright laws. Just because something is on the Internet doesn’t mean you have permission to use it on your website. Let’s say you’re selling something, and the manufacturer of the product has some great information and photos on their website you’d like to have on your site.

Are you allowed to copy it? Most probably the manufacturer will be happy for you to use it, but you can’t make that assumption. Legally and ethically, you need the manufacturer’s permission, so ask first.

Or perhaps someone has interviewed you and written about your business in an on-line or print publication. If it’s a favorable article or a really great photo, you might want to reprint it on your website.

Stop! In most cases, either the author or the publication holds the copyright, and violating that copyright can lead to really big fines. Get permission, in writing, before you copy anything to your website, even something that someone has written about you.

If you write about a product or service on your website, be sure you can back up what you say. Consumer protection laws are clear: although you can put a marketing spin on what you write, whatever you say must be the truth.

Let’s say you’re promoting a new cleaning product. You can say something like, “We have the best product for getting your carpet clean.” But you can’t make a claim such as, “Guaranteed to remove 100% of harmful bacteria,” unless, of course, you have scientific evidence to back that up.

That’s a bit of an extreme example, but you get the idea: some “puffery” is acceptable and even expected, but don’t make a measurable claim unless you can prove it.

What about criticizing a competitor or competing product? The situation here is pretty much the same as with making a claim about a product. You can’t write anything that’s disparaging or dishonest about your competition. However, you can compare and contrast products, websites, or businesses, as long as you’re fair about it. Here again, don’t say anything that’s unfounded or that you can’t prove, because that can get you into trouble.

The important legal and ethical concept here centers on the word “deception.” Both legally and ethically, deception is when you purposefully misrepresent something in order to cause damage to someone else. Get permission before you use anything someone else has written, and be honest about what you write, and you’ll stay out of any ethical or legal trouble. It’s all about doing and saying the right thing.

April 29, 2011   No Comments

Brief Guide on the Anatomy of a Successful Business

Every day, more and more businesses are realizing the power of the world wide web as a means to find more customers. Setting up a web site takes little time and money, and in some cases, you can be online in a matter of minutes. Despite this, taking your business still requires planning in order to maximize its marketing value. Here are some key components you must incorporate to your small business website.

1. The Lead Capture Page

As the name implies, the lead capture page is the place where you attract potential customers to buy into your business. Often, a lead capture page will include a short sales copy that provides a detail of what your business does and how it can help your customers. Also, and more importantly, it should include a sign-up form asking for the name and e-mail address of the potential client. The purpose of the sign up sheet is for you to update clients on the latest news, tips, and other pertinent information related to your business. In online marketing lingo, this is called E-mail marketing. Many consider E-mail marketing as a powerful tool for businesses because of its ability to maintain clientele relationships.

2. Blog

Any business with an online presence will need a blog, regardless if its hosted on the mother website or on a separate server (i.e. Blogger.com blogs). Like e-mail marketing, blogs help businesses establish and maintain ties with their clients. In addition, it is considered cost-effective because it allows businesses to cut their expenses on some things, such as customer service. Businesses can use blogs to answer common queries about their products and services without having to pay too much on customer service representatives. The ability of blogs to capture comments and suggestions provide businesses with a good idea of what their client base needs.

3. Social Media Widgets

With millions of people wired to social networking accounts, it is no surprise that social media has taken on such a powerful role in the online marketing strategy of many businesses. Social media builds communities and provides businesses with a loyal base of customers. Often, social networking sites will have ready-made html codes that you can copy and paste onto the code structure of your website.

4. Mobile-Friendly About Page and Contact Information

Improvements in the integration of Internet technology with mobile devices has resulted in the increased influence of cellular phones in driving the engines of E-commerce. As a small business owner, you can capitalize on this trend by creating mobile-friendly webpages. Forget the fancy pictures and the elaborate designs on your contact page. Just stick with the basics. All you need are a few simple information such as your business, a phone number, email, and address.

The components listed above are just the basics. If you can, get creative. The web is filled with all kinds of tool tools which you can use at your disposal to create a more powerful and personalized online presence for your business.

April 28, 2011   No Comments

Marketing your small business utilizing social media

Social media is now one of the primary platforms to get the word out about your business. Most social media accounts such as Facebook and Twitter are free to set up and the target marketing campaign through Facebook is rather inexpensive. This is a great way to test your marketing message and get your marketing campaign rolling.

Often, small businesses are face with challenges in adequately marketing their business. We are inundated with information and distractions from our various media devices. We live in the days of spam and useless information so people crave valuable content. By educating people about your industry, rather than having a direct advertising angle, you will be set apart from the rest. If you blog, tweet and share information about topics relevant to your industry, you can attract viewers to your web page and establish credibility in your market.

Whether you are selling candles or computer applications, you more than likely have a great deal of information and expertise that can be shared with potential clients and customers. You can author how-to articles or create educational videos about your products or services and market them online. Keep in mind that each and every bit of content that you create and post online has the potential to create awareness about your brand and drive search engine results and traffic to your site at an unbelievably low cost, if any cost at all.

Sites like You Tube are often overlooked by small business owners. In reality, You Tube is an excellent platform for creating high impact content at a low cost. Typically the only investment that may be required is that of a quality camera and editing software. With proper preparation and time to learn the basics of video creation and editing, you can create a video that could lead to big time exposure.

Social media has changed the medium and message for small business owners. Years ago, the most common form of advertising a small business was print advertising. Unfortunately, this form of advertising is also costly. Unfortunately, many small businesses failed because they were unable to afford to get their message to their market. Now, you are able to not only get your message out, but can also use social media to maintain control of your company’s image. The key to getting the word out about your business is by cultivating super users and targeting your market. Super users are individuals who are already fans of your brand or product and are interested in sharing their positive beliefs on the web. It is possible, on Facebook to create a fan page, where you can attract potential super users. From your Facebook fan page, you can provide valuable information about your business and also add in a call to action to prompt all those interested to contact you or view your page for further instruction and information.

Before jumping into the social media scene, you must be sure you have an effective website for your business. Your website should describe your product or service. Once your website is complete, you will need to attract as much traffic as possible. In addition to sites like Facebook, Twitter and You Tube, you should also consider setting up a blog. Small business owners who blog have realized they can attract a new audience by writing in a style that exposes the human side of their business. Pod-casting is also new and simple technology that will help you build credibility and awareness of your brand. For some, a voice, rather than target words can convey the personality they need to become interested in your business.

As you can see, there are unlimited methods that can be used to market your small business. They key to success is having a well thought out marketing plan where your target market has been clearly identified. Once you have identified your market, you can use the many forms of social media to inexpensively and effectively build your business and obtain success you never imagined possible.

April 13, 2011   1 Comment

Mobile Apps for Everyone

I’ve just spent thousands on my website, and now I need a mobile app? Small business owners once balked at the costs and necessity of developing a branded mobile application. Smartphones and mobile commerce pace the digital parade. And, until recently, bootstrappers weren’t invited to the party. The explosion of mobile apps have driven developers to level the playing field with an affordable solution – in some cases, free.

A simple strategy and a nominal investment can extend any business into the hands of today’s educated and discriminating buyer. Ideating, building, and growing an app is not cost prohibitive. And just like your website, mobile apps will soon become an integral part of all digital marketing plans.

Pick a Platform

Two options exist: open the vault and hire a developer, or side step sunk costs by using a shared platform. Your business can invest heavily – up to $100K – in original programming and support from a custom shop, or choose a “do-it-yourself” application, with less functionality, from a myriad of online software programs. Plan B’s speed-to-market and enormous cost savings gentrify the decision.

Simple programs requiring no coding experience reduce start-up costs and development windows. Scan the market and align your app needs with a worthy software partner. Some are free, while others charge a monthly fee. This do-it-yourself avenue represents a strategic approach for testing the mobile market, with minimal investment.

Find Your Functions

The best mobile apps adopt a “less is more” strategy. Focus on two key functions core to your business and maximize their impact. A simple, elegant interface screams “user-friendly” and is more likely to be adopted. Formulate and strategize your mobile app like a new product launch.

Canvass your customers and uncover pressing needs, wants, and desires for engaging you outside the office. Sketch a plan around your products, people, and vision, broadcasting your story to a wider audience. Isolate a customer service pain and fix it with a function. Then, strike a balance between fun and utility and you’ve got a stealthy marketing tool.

Techie Talk

This new model – easy and affordable – also packs a punch. Browser-based programs transfer web content and social media feeds, driving your message directly to the source, the smartphone. Some offer interactive media platforms capable of audio, video, and motion graphics. Mobile ad integration allows small business to quickly monetize their app. Pick your functions and OS options and then launch your app. Development is measured in hours, not months.

Three distinct OS platforms battle for supremacy: Apple, Android, and Blackberry. Apple pioneered the app world and gate-jumped the competition. Android, Google’s contribution, has swiftly closed the gap, using its industry leading smartphone to ignite mobile app sales and downloads. Blackberry’s RIM OS is losing the race, but not backing down. If possible, get your new app approved by all three.

Mobile apps are like a virtual street team, finding new customers, nurturing existing ones, and evangelizing your brand. Now you can afford one.

April 8, 2011   No Comments

Small Business Startup Tips

All small businesses have some financial hurdles they have to overcome. But by following these proven tips and techniques, most every small business owner can start to save substantial amounts of money in operating his business.

Establish an Online Business Presence

No matter what type or small business an individual is involved with, whether it’s product or service oriented, he needs to immediately establish a strong website to make potential customers aware of his very existence and to help increase sales. Even a brick-and-mortar shop needs to establish a powerful online presence. The best way to do this is to have a website professionally designed. If money is tight, there are many very low cost sites online that easily walk the website owner through a streamlined process of building a website. Make it look as visually attractive as possible with nicely worded text and attractive, colorful icons.

Buy Items in Bulk

All small business owners in order to save money must learn that one of the best ways to do so is to buy all of their products in bulk. Buying the products on a small, individual scale is very costly, so it’s necessary to find bulk suppliers of the type of product the business owner sells. He’ll find that the price per item will be dramatically reduced in terms of his cost when he buys in bulk as opposed to buying in small retail batches. All businessmen can obtain excellent value and prices when buying inventory at bulk purchase rates. Shipping rates overall will also be much lower when buying items in bulk.

Establish Orders on Credit

To conserve cash, which is usually in limited supply for new small business owners, simply try to establish credit orders from all the vendors that the small businessman deals with. It can be something as straightforward and common as 30 days net payment after delivery. Buying on credit buys time to utilize the cash for other business aspects such as payroll and overhead operating expenses such as rent and utilities, which businessmen can’t pay on credit. That’s why it’s essential to get credit extended on every single vendor a businessman is involved with, from his major product suppliers to his advertisers. Most companies will be very open to this because they also want to increase their revenue share of their target market.

Shop at Discount Supply Stores

Another superb way to conserve cash is by spending much less for a businessman’s products at major discount chain stores. These are the major shopping clubs that have physical locations around the country. They have such a wide variety of products in stock for sale that the small businessman can even purchase and save on office supplies such as printer cartridges and reams of photocopying paper. These discount houses stock everything at the lowest possible prices, including electronic products, apparel, technical devices, food supplies, and even a wide range of pharmaceutical products that the small businessman can purchase for him and his family at tremendous savings so specific business funds don’t have to be used for that.

April 6, 2011   2 Comments

Who’s Got The Time?

Every small business owner and home based business owner dreams of being an international bigwig with offices in Cairo, Sydney, London and Rome. In his dreams, he sees himself talking on three phones simultaneously, buzzing his personal assistant for a mocha latte while having his hair trimmed and notifying his pilot of a trip to the Bahamas in the company Leer. Time management won’t affect him at that level of business, but it sure does affect him in the beginning. When will he find the time to manage his accounts, reply to clients’ emails, blog himself into the bigtime or even grab a sandwich for lunch?

Luckily for this business owner, there are resources on nearby pages for doing just that. Time management in the beginning is crucial to the small business owner and the home based business owner. Making a list at the beginning of the business day is essential for keeping organized so that little details don’t fall by the wayside. Those little details, such as emails, outsourcing some of the workload, managing vendors and clients and such are the difference between staying in business and losing his clients. Software is available for such organization, as well as automated response software, outsourcing software, customer relationship software and much more.

No business owner can handle all that himself or he’d be in the office 24/7. That’s where time management skills come in. Trusting the software to handle the nitty gritty every day is easier to do when he understands what it is, what it does, when it does it and what the results will be. Tutorials on just such software are available along with pricing and hardware requirements. When the business owner chooses the right software for him and the level of his business, he can better manage what’s left to do, such as marketing, follow-up and vendor relations.

Not only that, but this business owner has a life, or at least that’s the theory. When will he have time to take his wife to dinner, see the kids play lacrosse or indulge in his hobby on his basement worktable? The small business owner and the home based business owner needs time to himself to unwind from the pressures of work or he’ll be no good to anyone. A relaxed, smiling business owner is attractive to his clientele which will bring them in more often, making his business better.

In today’s economy, small business owners and home based business owners are the example others try to emulate. Since we’re all in this together, providing a good example to those who, through financial necessity, look to begin their own business, means showing them how good time management works. Success breeds success, which will lift this economy out of the pits and back up where it should be. And then, who knows, maybe all the small and home based business owners can meet up in the Bahamas and learn how to manage some leisure time with those little umbrellas in drinks.

March 30, 2011   1 Comment