It's advisable to follow the habits of businesses that have survived the odds. The tips below apply whether you're a real estate agent, website designer, hair stylist, or dog walker!
1. Establish Your Business Structure
Should you be a sole proprietor, or are you going to incorporate? Do some research and decide what's best for you (click here to visit this topic on our website). Talk to an attorney or your tax preparer. This will help you understand how to handle the books, which is mentioned more in Step 2 below.
2. Properly Setup Your Accounting & Banking - Don't Commingle Funds!
Keep your business separate from your personal finances. This means you should have a separate bank account for your business. Deposit all business income into that account. For any expenses that require you to write checks, use checks from this same business account. Also, have separate debit/credit cards solely for business transactions. Only charge business items on those cards. Did we mention you should keep business items separate?!! Do NOT commingle funds. It'll make like much easier come tax time, or in the even of an IRS audt!! Click here for a "Business Tax Accounting Checklist" to help with your accounting process.
3. Understand Income Tax Implications
As a small business owner, you likely receive pay differently than regular employees. This means no deductions are taken out from the money that comes in; which can surprise those who aren't prepared for the corresponding taxes. This is why business owners make estimated tax payments on a quarterly basis. We also highly suggest learning more about "self-employment" taxes.
4. Understand The Deductions Available To You
Do you use your vehicle for business? Do you have a uniform you can deduct? Do you have a cell phone that doubles for personal and business use? Do you understand depreciation for assets you use in your business? It pays to understand the different deductions you can use to offset income and lower your taxes. Also, click here to access helpful worksheets to log these expenses (home office, business use of vehicle, etc.).
5. Learn How To Budget Irregular Income
Owning a business means you likely don't receive regular paychecks like you do as an employee. How you handle your business income largely determines if your business will survive. Click here for a practical guide on handling irregular income.
6. Don't Go Into Debt
This means funding your start-up and ongoing costs with savings, not debt. We highly suggest that you don't use credit cards or home equity on your primary house to run a business. We mentioned how statistically most businesses will fail. If you unfortunately end up joining that group, you don't want to find yourself with $50,000 in credit card debt. Or worse, you don't want to lose your house!
It's okay to start small; after all, if you're reading this article you're likely a "small" business owner. This means you have to think about every expense. Consider printing your own letterhead and labels first. You don't need to buy in bulk while you're still making constant changes in branding, etc. It's no fun throwing away 10,000 sheets of letterhead because your address changed!
More on this: reconsider constantly taking people out to "business" lunches to establish credibility and grow, especially if you're doing so because you get a tax deduction (it isn't as much as you might think). Out-of-control expenses will ruin a business faster than anything. All businesses begin somewhere. Walmart, Home Depot, and Apple each started in garages.
7. Be Realistic With Profits & Money-Making Potential
Can this business truly earn the money you need to survive? We recommend most small business owners keep their "day job" until their small business is sustaining itself financially. Don't blindly chase a pipe-dream without doing diligence!
8. Prospecting Is King
Without sales, nothing else matters. If you know how to cure cancer but nobody else is aware of it, your knowledge is useless. Enough said!
9. Have A Professional Website, But Don't Go Overboard
Most websites don't drive sales, they simply give credibility. At a minimum, you need a site that doubles as an expanded business card. Provide contact info and testimonials. Give visitors a glimpse into your personal life. Don't forget to share what your business does and how it can help the reader. Consider including a blog. You don't have to pay $10,000 to have your website designed. Contact us if you would like a referral to an awesome web designer/branding specialist.
10. Know Your "Why"
We may have saved the best for last here. Why are you in business? Is it to change lives by making finances simple for people? (Okay, you caught us...that's actually our "why"!) Is it to have freedom from a regular 9-5 job so you can be at home more with your children? Knowing why you are in business will get you through those tough times. Write your "why" down; and check it often!
1) Read the book "E-Myth Revisited" by Michael Gerber. It will guide you through many pitfalls that crush most business owners.
2) Don’t “play office”. This is a tough one. It is so easy to get caught up with beautifying your website and “making contacts” on Facebook. Focus on getting business! (see #8 above) With that being said, personal development is always critical. We recommend reading books like "E-Myth Revisited", as mentioned above and “Entre-Leadership” by Dave Ramsey. Constantly learn from others!
You will notice several of the above tips involve finances. Most businesses fail because the money is not managed properly. If outflow exceeds inflow, your business will eat crow!
Let us know if you have questions or comments...we're to help!!