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Personal Finance from the Broke Perspective

What You Need to Know Before You Start Your First Business

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Starting your first business can be exciting because of the prospects that you have for success and freedom as far as finances go. That said, there are some things that you should know before you get started in order to increase your chances of succeeding. Outlined below are some of these things, so read them and improve your odds of doing it right.

Do Thorough Research

It’s important for you to start with thorough research into the different aspects of your business. From the niche you intend to get into to how you can scale up and what the competition is doing, there’s a lot that you need to do research about. This is going to enable you to know just how to proceed and the best decisions to make. Depending on the industry you’re in, you may be interested to learn that in 2017, business tort lawsuits accounted for less than 5% of the civil filings made in state courts.

Get the Relevant Licences

It’s important for you to operate within the confines of the law, and to this end, you should make sure that you have the relevant licenses. Find this out by conducting research on the internet and asking any legal assistants that you know for their guidance. This information is going to help you avoid being charged with costly fines and other interruptions. When you have the right business licenses, you’ll be able to operate freely and take advantage of any state and federal grants that come about.

Think About Marketing

Don’t forget to think about marketing your business, because this is how you’re going to reach a wider market. It’s mandatory to have a website and social media handles if you want to have a chance to get a piece of the market share. Keep in mind that at least 96% of beauty brands, for example, have a social media account that they use to push their brand into the market. Borrow a leaf from them and open social media accounts on the platforms that are the most relevant to your business. This is the first step for you to take when looking for a way to secure a share of the market as a new business.

Look Into Insurance

Don’t ignore the importance of getting business insurance as doing this is going to help you secure your business. In case of a disaster that you’re insured against, you’ll be able to spring back easily. Certain businesses are also required by law to have specific insurance coverage, so find these out early on and look for a good provider. When you do this, you’ll not only be making sure that you’re operating legally, but you’ll also have given your potential clients more trust in your business.

Seek Funding

Last but not least, you must secure your finances if you want to succeed in your business. This is going to enable you to keep operations going even if something happens to offset the cash flow that you started with. Do your best to minimize the amount of money that you have to spend out of pocket by seeking out financing early on in your business. When you don’t have to worry about money a lot, you may be free to work on your business much better. Financing will also help you to make fixes and improvements that you need to make for the continued goodness of your business. This includes things like replacing your business’s roof, of which an asphalt roof replacement will give you an ROI of 68.2%.

Keep these things in mind and you may have a better chance of succeeding in your business. With consistency, it will be easy for you to maintain the momentum with which you start.

7 Expensive Legal Mistakes You Should Be Avoiding

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Businesses are always looking for ways to save finances by cutting costs. They view legal services as a less important expense and use the internet to do their things instead of hiring a lawyer. This strategy could be costly and put their business at risk.

1. Not Documenting Agreements

Do you recall the last business strategy you discussed with your partner? You didn’t document it. Now you need to make a big business decision, and you can’t recall what you agreed on. That will become a big issue. Business owners need documented agreements. Oral agreements or handshakes can be binding, but it’s difficult to determine what you agree upon after months or years. You may be okay today, but resolving a disagreement can be costly. Less than 1% of civil lawsuits are estimated to go to trial.

2. Not Choosing The Right Business Entity

It is crucial to choose and set up the right business entity. You can choose a general partnership, a sole proprietorship, an LLC, or a corporation. All these entities have pros and cons and tax consequences. Choosing the right business structure and setting it up legally is important. If you don’t choose an entity or choose the wrong one, you could be held personally responsible for your business’s actions and face tax problems.

3. Handling Workers Incorrectly

The first step is to be sure you’ve classified team members correctly as employees or independent contractors. Misclassifying your employees can lead to worker’s compensation fraud and additional taxes for employees you treat as independent contractors. If you don’t know how to classify workers, contact your lawyer and ensure you have an employment manual with detailed policies and procedures. You may also be liable if you mishandle employees when drunk. California’s legal blood concentration limit is 0.08%.

4. Not Having an Advisory Team

Many small businesses avoid hiring attorneys to save finances. Some get legal documents online to represent themselves. This is risky because they don’t know if the sources are credible or if the documents are complete. If you enter into a legal agreement that doesn’t safeguard your interests, it could cost you more than hiring a lawyer and endanger your business.

5. Inadequate Intellectual Property Protection

Many businesses, especially non-tech ones, believe they have no intellectual property. They forget that maybe they have a website, trademark, or copies that need protection. A business may require legal assistance in copyright, product, and trademark disputes. If you ignore intellectual property, you’re not protecting your rights and property ownership. For instance, if your workers invent new technology, make sure the employment agreements state that the inventions will be assigned to you.

6. Starting a Competing Business While Still Employed

You shouldn’t start a competing business while you’re still employed. If you plan to compete with your current employer, do so in a way that protects you if you’re sued. Check your employment contract for non-complete provisions. If so, consult a business attorney to ensure you aren’t violating them. If you start a competing business, get insurance to mitigate your financial losses if you are sued.

7. Not Having the Correct Type of Insurance

You need to protect your business finances by knowing what insurance you need. You need personal and business insurance and life and disability insurance. Agents get their pay through commissions, so they can convince you to buy more insurance than you need. Insurance coverage protects your business if you are caught on the wrong side of the law. A DUI in California can result in six months of license suspension, but if you’re a business owner and are caught drinking and driving in a company vehicle, these penalties can be a lot worse, not to mention the detriment to your business’s image. Consult a reliable agent to help you choose the right insurance.

Starting a business can be overwhelming. Getting startup finances and managing business affairs. Dealing with legal affairs is probably the last thing an entrepreneur wants to handle. They don’t see the need until it’s too late. The truth is that legal mistakes can ruin your business.

3 Ways To Avoid Small Business Bankruptcy

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We talk a lot about personal financial advice but the truth is that business and professional advice often factors into personal finance. Especially given that we’re in the middle of a pandemic that is dramatically hurting the economy and eviscerating small businesses around the country, it’s important to consider how freelance contractors, entrepreneurs, and small business owners can keep their financial houses in order during this unprecedented environment.

Maybe you’re trying to reset or put your business on pause until the economy reopens. Perhaps your business went under and you’re considering your next steps. Or maybe you want to persevere and open a new business.

Regardless of your situation, there are a few time-tested ways to get yourself back on track as a business owner weathering tough years.

Remain educated on your supply chains

The supply chain refers to raw material planning, purchasing, inbound logistics, and manufacturing. It is the strategic lifeblood of a company. Unfortunately, global supply chains in many different industries have been severely tested and damaged during the pandemic.

Without sound financial planning, production lead time management, risk assessment, and operational efficiency, your business will not survive long. This means you need to get a hang, first and foremost, of how best to maintain your business’ cashflow. For instance, by using tools that provide you with the company credit rating of any potential supplier, you can make informed decisions on who to partner with based on their legitimacy and the speed in which they will pay for any outstanding invoices. This can be a step in the right direction to ensure that your business’ cashflow remains healthy and you do not find yourself without adequate funds midway through the month. 

Also, look into demand forecasting, which includes both qualitative and quantitative analysis of your most critical business assets. This method allows you to effectively plan and streamline your activities by assessing emerging technologies and product lifecycles, as well as thoroughly understanding your own specific financial data like sales revenue and website analytics.

If this sounds complex, don’t get overwhelmed. Once you absorb your own numbers and data, you will learn to love it. But in the meantime, it’s important to start getting a handle on how supply chains can make or break a small business.

Don’t stretch yourself too thin

Many small business owners make the mistake of trying to diversify and expand too quickly. While having multiple revenue streams and market opportunities is a good thing, if you try to stretch your business into uncharted waters too quickly you might just sink.

Make sure you’ve mastered one product or service first and are generating consistent revenue and operational efficiency on it before moving on to others. And make sure you have thoroughly situated yourself in one market before trying to branch off and tap into others.

Customers these days have many, many options to choose from on just about everything – quantity, therefore, is less important than quality in this kind of business environment. Build a loyal following in one niche market before outspending yourself on moonshot ideas that haven’t been fully thought through and analyzed.

The time will come for diversification and expansion, but first you have to be smart.

Invest strongly in your online brand presence

These days, online activity is the most important part of growing a business. Ecommerce sales have transcended brick-and-mortar revenue and without a strong brand presence online, you will be completely covered up by the bigger companies.

The days when you could survive without a highly functional, user-friendly website and social media marketing are long over. Companies don’t last long without a robust brand presence and right now brands are built and maintained online.

Your best investments for this purpose will be: hiring a developer to build you an incredibly responsive, well-designed website; putting together a stellar social media team on platforms like Facebook, Twitter, Instagram, etc.; and outsourcing the assistance of a search engine optimization (SEO) agency to make sure you rank for certain keywords on search engine page results.

If this sounds like a lot, again, don’t stress. A single business owner can not do all this stuff alone. You have to assemble a team that can manage it so that you can focus on raising and streamlining your capital, loans, partnerships, investors, supply chain, and logistics.

However, you do need to be able to clearly articulate to your team what your brand stands for and who you’re trying to reach. This requires you doing your due diligence and research.

Running a business is one of the hardest things to do, especially during a pandemic and economic recession. But if you build strategically from the ground up and lay a solid foundation, you can flourish. And there’s no greater feeling than earning a living from your own business success.