May 2022: Using your business credit
Set your credit as backup funding in your lowest cash flow times to sustain business operations. Leverage revolving credit line to finance operations during peak times, followed by account receivable collections in the following weeks to pay the line back down without incurring fees or penalties. If your business has an EIN, you likely qualify for a business credit card. Business credit cards are great at covering expenses, including office supplies and business lunches. Paying your bills on time will help raise your business credit score. Credit cards make bookkeeping easier. Most cards come with online record-keeping tools that you can use to manage your accounts, which certainly makes bookkeeping easier. The year-end account summary can be used to track, manage, and categorize your business expenses. If you are looking for a faster way to fund your business, it's better to use credit.
April 2022: Recordkeeping
The IRS requires you to keep books and records for your taxes. Without such records, you may lose out on legitimate deductions. However, recordkeeping is not just for the tax filing. Recordkeeping is a vital way to stay on top of what’s happening in your business. Good records enable you to know how your business is doing. Are you making or losing money? You may think you’re doing well because sales are rolling in, but without reference to expenses records, you may not know if you’re profitable or losing money because your costs are outstripping your revenue. Today’s bookkeeping software, such as cloud and mobile accounting solutions, make it easy and inexpensive for you to have complete records. Certain business records should be kept forever. These include, for example:
- A “doing business as” (DBA) certificate if you’re a sole proprietor who’s registered a business name with your city or county.
- Partnership agreements
- Limited liability company operating agreements
- Minutes of annual board meetings if your business is incorporated
- All contracts and agreements
March 2022: Self-employment tax
If you work for yourself, such as small business owners, freelancers, and contractors, your net earnings from self-employment are subject to self-employment tax. You must pay self-employment tax and file Schedule SE (Form 1040 or 1040-SR) if your net earnings from self-employment were $400 or more. Generally, use Schedule C to figure net earnings from self-employment. To pay self-employment tax, you must have a Social Security number (SSN) or an individual taxpayer identification number (ITIN). The self-employment tax rate is 15.3% (consists of 12.4% for social security and 2.9% for Medicare). As a self-employed individual, you may have to file Estimated Taxes quarterly. April 15 (January through March earnings), June 15 (April and May earnings), September 15 (June through August earnings), and January 15 (September through December earnings)
February 2022: Partnership marketing
A partnership marketing is a collaboration between two or more related small businesses with a goal to creating a mutually beneficial marketing campaign. Many small businesses struggle with their marketing efforts, as they simply don’t have the time, money or resources to dedicate to the marketing they need to grow. Instead of doing a lone individual marketing effort, working alongside another business on a specific campaign can be a cost-effective way for small businesses to develop brand awareness, customer acquisition and grow the business.
January 2022: LLC operating agreements
Many small businesses are formed as a Limited Liability Company (LLC). It is advisable that have your LLC Operating Agreement include the following. (1) How you organize your business, the owner, members, and the structure of ownership. (2) How you plan to manage the company and how the members vote on the rights and regulations of the company. (3) How the contributions were made by the members to create the LLC agreement. Each contribution may be compensated with a unit of ownership within the company. (4) How membership shares the company’s profits and losses. This could be money, property, or other assets. (5) How to add or change members and transfer their ownership. (6) The circumstances under which the company can be dissolved or disbanded.
December 2021: Getting a business loan
A few of the key criteria used by lenders are:
- (1) Credit History: Having enough credit or having little to no credit history. Typically, creditworthy borrowers are those who have FICO scores above 670.
- (2) Proper documents: Fill out the application correctly and provide all the necessary supporting documents. Among the documents required by most lenders are bank statements, tax returns, proof of business registration, business licenses and permits, financial statements, Employer Identification Number (EIN), and your personal and business credit reports. They may also require you to submit other documents related to your business, such as leases, contracts, permits, licenses, and corporate documents.
- (3) Collateral: Most traditional lenders require that you put down sufficient collateral before you can obtain a business loan.
November 2021: Starting a business - Financial literacy
Starting up and scaling a business can be challenging for anyone. Many new entrepreneurs don’t know the steps to incorporate their companies, get a tax ID, or open a business bank account. Financial literacy is another critical aspect of formalizing a business. Understanding payrolls, payment terms, and cash flow make a business more sound by demonstrating its performance; debt; income, and access to cash.
- Your company’s Tax ID or EIN. Get one at IRS.gov
- Your articles of incorporation. Visit https://hbe.ehawaii.gov/BizEx/home.eb
- How will your clients pay you? Download and fill out your W9 form
- Do you have a Profit and Loss Statement? Work with your accountant to understand and create one.
October 2021: Have a Mission Statement
A mission statement states the purpose and values of your organization. It details what your startup does for its shareholders, including customers, employees, and owners, and how it plans to make good on its promises and connect everyone to your brand. This statement is usually brief, summed up in one sentence, inspiring, and uses inclusive language.
Start from the beginning when writing your mission statement. Detail who or what your business is, describe what the business does, and outline how the business does it. Answering these questions will allow you to define your “why” for being in business and allow you to better share your purpose. As you gradually define your purpose, you may find that your answers begin to express your core values. Write down the values that matter to you and your business.
For example, you would not simply say in your mission statement that you sell a plant-based snack food. You might emphasize that your snack foods are nutritious or made with cruelty-free ingredients. Or you may also wish to emphasize how these wholesome snacks are available for everyone to enjoy and that the business commits to a bottom line of sustainability. Focus on one or two core values for inclusion in your mission statement.
Sept. 2021: Preparing for the Holiday Season
Holiday Promotions - The key is to plan your holiday marketing now and be ready to launch in November. Add gift cards to your merchandise mix, whether online or in-store. Other extras that make consumers want to shop with you include free gift-wrapping services. For online shoppers, consider adding some gift wrapping to packages with over a certain amount of sales. Customers shop where they feel valued—and one way to do that is to reward them. Make sure you have a loyalty program in place that syncs online and in-store purchases.
Make it Festive - The holidays are a time to celebrate. So, decorate your store and your website appropriately. If you have a store, play holiday music, snacks (pre-packaged are best for COVID-wary customers). Think about extending your hours or operation. Be sure to promote your new holiday hours in your store, online, and in your Google My Business listing.
August 2021: SMS marketing for small businesses
Text marketing is rising. Retail is the leading industry when it comes to embracing text marketing. According to the survey, 88% of Americans say their phones are usually within reach, including 58% who say their phones are always with them. Text messaging can be used in multiple ways to engage and interact with different people on various topics. The vast majority of text marketing messages offer customers promotions and discounts, general notifications, customer support follow-up, payment and appointment reminders.
- Be clear about your CTA (Call to Action). Messages with a distinctly positive or serious tone and a specific CTA had up to three times more engagement than messages with a neutral tone.
- Keep messages concise. Concise messages also achieved significantly higher engagement. The optimal length for text messages is 20 to 30 words.
July 2021: Owner’s Draw method to pay yourself
If you’re a sole proprietor, a partner in a partnership, or a member of a standard LLC, you can pay yourself with an owner’s draw method. This is the most flexible payment method, allowing you to withdraw cash from your company’s equity account at any time.
You can take funds out of your business at regular intervals or anytime you needed by writing yourself a check, making a cash withdrawal at the bank, or transferring a sum from your business account to your personal one.
Planning ahead for tax time is also key. Any money you receive from your business in the form of owner’s draws will be taxed on your personal income tax return, at the self-employment rate of 15.3 percent. This means that for each cash withdrawal, you’ll need to set aside this percentage for your annual or quarterly tax payments to the IRS (most business owners pay their taxes quarterly).
June 2021: Intellectual Property
- “A” patent: This is singular. Only one patent may be granted for each invention.
- Useful: The invention must have a specific, substantial, and credible utility.
- Process, machine, manufacture, the composition of the matter: This is a description of the subject matter, and categories, eligible for patenting.
- Whoever invents or discovers: The inventor is the only person who may obtain the patent.
A patent helps protect the mechanisms, principles, and components of an invention. The term for a small business patent starts on the date its application is filed with the USPTO. Generally, this lasts for 20 years. Patents tend to be filed less frequently than trademarks and copyrights within small businesses. However, this is still a necessary form of intellectual property protection for inventions.
May 2021: Where to go for funding
In today’s lending universe, there are many capital sources available to small business owners. Here are few sources:
- Traditional lenders like national/regional banks and local credit unions
- Nonprofit lenders like VestedIn and Accion
- Crowdfunding like Kickstarter or RocketHub
- Online lenders like Funding Circle or Ondeck
- Lending matching sites like SBA Linc and Dundera
- Invoice financiers like BlueVine or Fundbox
April 2021: Home-based business
The best type of business to start and run from home is any business that you’re passionate about! Focus on something that you are excited about because you’ll likely be working nights and weekends as an entrepreneur. Balance your passion, work, and family life. The best small business to run from home is the one that highlights your talents, resources, and priorities, such as freelancing. For example, someone with young children might look for a business that can accommodate varying days and hours of work without jeopardizing business operations.
March 2021: Keep Your Door Open
Periods of crisis are difficult, tiring, and stressful for small businesses. Although every business is unique and different, there are general solutions that can keep small businesses going during a crisis.
- Keep your customers happy by such as offering loyalty discounts to repeat customers, giving customers extra bonuses with orders (like product samples).
- Cut down on the unnecessary by looking at your current and past budgets.
- Keep communicating with your employees open and approach potential business problems together.
- Reach out for help. Weathering a crisis is difficult for everyone - but there is support available. Contact your local SCORE.
- Bring your business online. Consumer behavior changes during crisis periods, meaning that people often resort to shopping online.
February 2021: Present Your Business Plan to Investors
Let’s say you’re planning to rely on outside investments to launch, develop, and grow your idea from concept to reality. As an entrepreneur, it is important to build relationships with your key stakeholders and investors. One of the best ways to build a good relationship is to ensure that you’re communicating your message in the very best way; that you’re presenting your business plan in a way that attracts attention, gets investors excited about you and about what you do, and that puts you both on the same page. While you may be offering something unique, investors can’t always see how you differ from the rest.
The secret to standing out, to attracting attention, is creativity; presenting your business plan in an innovative and creative way that not only lets you communicate your idea and share your message but also ensures you’re heard and understood. Both the traditional business plan and the more condensed lean startup business plan are highly effective ways to get your ideas down in a structured, valuable way.
January 2021: Proactive Communication With Your Customers
The year 2021 is here, but there are still uncertainties regarding the COVIT-19 impact on your business. In such a time, it is important to be in proactive communication with your customers. Whether you are temporarily changing your mode of operations or business hours, notify your customers using (1) text messages, (2) Emails, (3) your website, and (4) Google My Business platform.
You can inform them about the steps you have adopted for the mitigation and safety of the environment and employees. Many customers have taken to Google to find what's the latest status of their favorite businesses. To be more specific, they have referred to a business's Google My Business (GMB) profile for up-to-date information.
December 2020: Year-End Tax Planning
- Organize receipts, bills, and invoices, and enter all financial transactions for the year you haven’t yet logged.
- Follow up on accounts receivable and accounts aging by following up on unpaid customer invoices or tackling your own unpaid bills before the end of the year.
- Verify that your inventory stock is up to date, especially once the holiday rush dies down.
- Reconcile each of your financial accounts, including bank accounts, credit cards, loans, and any other sources of funding.
- Create end-of-year financial documents, especially cash flow statements, profit and loss statements, and balance sheets to review your business’s annual performance and start planning for the new financial year.
- Payroll taxes are a big deal, and paying the wrong amount will come back to haunt you come April. As you wrap up your books, double-check your payroll tax payments to ensure you’ve paid the right amount this year.
- If you used a PPP (Paycheck Protection Program) loan to cover employee paychecks this year, review how PPP loans impact payroll taxes.
November 2020: Business Credit
When you’re trying to get a business loan, establish payment terms with a new vendor or get any type of business credit, your business credit report can be a major factor in your success. Dun & Bradstreet, Experian, and Equifax are the “big three” business credit bureaus that generate business credit reports. However, each commercial credit bureau looks at the information they gather in a slightly different way. Dun & Bradstreet report primarily on how a business interacts with vendors and other suppliers. Equifax transforms data collected by the Small Business Finance Exchange (SBFE) into a report. Experian collects credit information from suppliers and lenders.
October 2020: The Coronavirus Real Estate Market
Every state has different Covid-19 guidelines for the various aspects of your business, like open houses or home tours. What’s more, because of the fluctuating nature of the pandemic, those regulations often change. Be clear on what you’re allowed to do in your city and state to show your sellers you’re not taking this lightly while you bring them through the home buying process during a pandemic. For example, you may need to advise sellers to open all doors and cupboards to prevent exposure to high-touch surfaces. It’s also critical that you understand how the current state of Covid-19 can impact other elements of the home buying and selling process.
September 2020: Online selling tips
Ecommerce platforms are the backbone of any online retail enterprise, allowing the front-end and back-end of an online shop to work together efficiently. An eCommerce platform should give you all the features you need to start, scale, and manage your online business. In the world of online shopping, people aren’t going to type their card number into a website that features shoddy images and poorly written product descriptions. Invest in a reputable web developer to help build your website that works cohesively with your eCommerce platform of choice. Make sure they take the time to find professional product images, write some great content, and upload them onto your website in a way that is aesthetic and user-friendly.
August 2020: Re-open and stay open
Whether you’ve already reopened or will be opening this summer, this is the ideal time to assess what you have experienced already and develop a plan for the rest of the year.
- Create a pro forma Profit & Loss statement as a basis for planning the next 12 months
- Minimize costs and maximize revenue through market positioning
- Develop strategies for dealing with capacity limits, especially in a restaurant context
- Consider how to plan for a potential second wave as well as long term changes in consumer behavior
- Analyze options for dealing with lease issues
July 2020: Re-open in COVIT-19 environment
Over the last two months, state economies have begun to gradually reopen, with businesses across the nation emerging from prolonged closures to take in much-needed revenue. Deciding if your business is ready to reopen will depend on your responses to the following questions:
- Is there sufficient consumer demand for my products or services at this time?
- Will I take in enough revenue to meet expenses while operating at a limited capacity?
- Do I have the protective equipment my employees need to stay safe (if they are in close contact with the general public or each other)?
- Does my location allow for social distancing (at least 6 feet between customers and employees)?
For some small business owners, it won’t make financial sense to open their doors to a limited revenue stream. For others, resuming a basic level of operations might be necessary to stay afloat. It’s clear that a complete return to “business as usual” may not be in the cards anytime soon.
June 2020: "COVID-19 impact on marketing strategy"
Most brick-and-mortar events like fairs, flea markets, conferences, workshops, and trade shows scheduled in the second quarter of 2020 have been canceled or will be virtual. Additionally, consumers hunkered down at home to avoid contracting coronavirus are turning to online shopping for products that they traditionally bought in stores. Even if you are not selling your products online, it is a good idea to consider digital marketing as a plausible scalable engine of growth for your company. This engine of growth is made of many cylinders, each representing a digital channel. The purpose of your digital marketing strategy, such as Google My Business, is to channel traffic to your website, engage your target audience, and convert them to leads and sales.
May 2020: How "Social Media" is used
April 2020: "COVIT-19 financial aid"
The Economic Injury Disaster Loan Program (EIDL) and the CARES Act: The U.S. Small Business Administration (SBA) provides Economic Injury Disaster loans that offer small businesses up to $2 million due to the COVID-19 pandemic. The recently-passed Coronavirus Aid, Relief, and Economic Security (CARES) Act created major initiatives, such as Paycheck Protection Program.
The Paycheck Protection Program (PPP) provides loans to employers to maintain their workforce. SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. Starting April 3, 2020, small businesses and sole proprietorships can apply through existing SBA lenders. Starting April 10, 2020, independent contractors and self-employed individuals can apply. Apply as quickly as you can because there is a funding cap. The Paycheck Protection Program will be available through June 30, 2020. For more information:
Paycheck Protection Program Application for Borrowers (apply through a participating SBA lender)
March 2020: "Women-owned business"
There are two types of woman-owned business certifications. The Women’s Business Enterprise (WBE) certification is for businesses wanting to do business with the private sector, nonprofits, state governments or local governments. For those wanting to work with the federal government, your goal is certification from Women-Owned Small Business (WOSB) or Economically Disadvantaged Women-Owned Small Business (EDWOSB). To be eligible for the women’s contracting program, your business must:
- Be a small business
- Be at least 51% owned and controlled by women who are U.S. citizens
- Have women manage day-to-day operations and also make long-term decisions
February 2020: "Businesses targeting homeowners"
Are you in one of the home products or service industries? Do you want to start a business in one of those industries? Homeownership is popular among Americans. Their happiness is due to “an improved lifestyle and the variety of hobbies” that come with homeownership.
There are a number of business opportunities tied to homes and gardens. Some include selling appliances, home décor, kitchen or gardening supplies, or homes themselves, or are in the home services business (plumbers, roofers, contractors, etc.), it helps to know who today’s homeowners are and what they want.
January 2020: "Provide a better customer experience"
Positive customer experience can help bring in more customers, increase sales, and create customer loyalty. Digital tools and services that simplify the shopping experience are important motivating factors for consumers when deciding where to shop. According to our research on the digital transformation of small and medium businesses. Some small business owners agree that innovative new ordering or payment services will have a positive impact on the business's bottom line.
In 2020, the trend is a far greater number of small business owners providing digital-related services such as the ability shop in-store and online, buy online and return in-store, order ahead online, and free or same-day delivery in order to stay ahead of the curve as it relates to the future of commerce. Beyond these online services, the adoption of custom digital dashboards for expedited automation and information share, accounting technology integration, and payment and spend controls will be integral to a modernized approach to running—and sustaining—a small business.
December 2019: "Digital marketing"
As companies like Amazon continue to set buyer’s expectations for customer experience, it has become necessary for small businesses to adapt in order to keep pace. Successful small businesses in 2020 will increasingly adopt technologies and practices that help support an ‘always-on’ customer communications strategy. Through a combination of automated support chatbots, 24/7 social media responses, and spreading staff hours to monitor email and phone lines beyond a standard workday, small businesses will appear always-on and always-there. Small businesses that are able to meet these expectations—whether through seamless customer experiences, persistent accessibility, immediate responses, and more—will be most likely to build a loyal following.
This will become particularly important next year as we see a counter-current of online shoppers looking to purchase unique items or to do business with smaller local merchants that share their passions, social, or environmental alignment, or who work in support of pet projects and causes. This niche consumer mindset creates an opportunity for small businesses to connect with customers on a deep, personal level and to create differentiation in both products, services, and service delivery.
November 2019: "Developing a market strategy"
Every business is different, and what works for one may not work for another. That goes for your marketing plan too.
- Define your business goals
- Identify your target audience
- Attracting your target customer
- Identify the problems you solve for your customers
To be successful, your marketing must be true to your vision and your business — and true to your customers.
October 2019: "Social Media Marketing"
You need to get the words out to potential customers that your business is now open. Use of social media is one of the ways to do it. Watch the video here.
September 2019: "Establishing Your Business Entity!"
Before discussing the main topics of this article, it is important to point out that there is a free mentoring service available to you from SCORE to address business startup and operational issues. SCORE offers individualized mentoring service as well as workshops to help entrepreneurs who are pursuing business startup or already running a small business. You can seek support from SCORE organization by registering your request for mentoring at SCORE web page (https://www.SCORE.org). The SCORE organization has many experienced volunteers who can answer your questions and help guide you in achieving your business startup and operational goals.
In starting a small business, most everyone agrees that it is a must to have a good business idea. To vet and validate such an idea, most people starting a business would conduct some research and investigation. Given that such investigations showed promise of success, you are now ready to develop and write a plan, which is your Business Plan. With a plan in place, you are now ready to execute it to commence business operations to ultimately make your dream come true!
Before we get too far afield, it is important to emphasize that the first part of executing your plan should be to legally establish your entity and complete other related activities which are required before starting your money-making operations. These activities are pretty common no matter where your business is to be established and operate. The following shows the “Steps to Starting a Business in Hawaii” and this article will focus on step 4, which is establishing a legal entity and completing necessary activities so that you can start your money-making operations:
Steps to Starting a Business in Hawaii:
1. Fully develop the business idea
2. Conduct research and investigate
3. Write your Business Plan
4. Execute the initial stage of your Business Plan
a. Establish your company Legal Structure
b. Register your Business Name
c. Apply and obtain required permits and licenses
d. Understand applicable tax information for your business
e. Understand legal requirements to hire and retain employees
5. Execute remainder of the Business Plan
Let’s discuss the issues involved in establishing your legal entity and completing other related activities described in step 4 above. It is important to understand that your choice of business entity can affect your personal liability, management of your business, tax filing responsibilities, and your estate planning. A caveat is that legal entity you choose at this stage can be later changed; however, such change can be expensive and time-consuming so it is preferable to choose an entity that can best fit your business needs. For legal advice, you can attend a free legal clinic at Business Action Center in Honolulu located on Nimitz Highway (held on Thursdays from 11 AM to 1 PM; call to confirm at 808-586-2545) to have some of your immediate legal questions answered. Of course, you should have on your team legal and accounting experts to answer specific questions that apply to your business situation.
Some common business structures are:
- Sole Proprietorship (SP)
- Limited Liability Company (LLC)
- Limited Partnership (LP)
- Limited Liability Partnership (LLP)
- Limited Liability Limited Partnership (LLLP)
- General Partnership (GP)
- S Corporation
Many small business startups select SP or LLC format to commence their business operations. As an SP entity, the business tax filing is made with IRS Form 1040 (on Schedule C among others) and all your business earnings will be taxed by federal and state tax entities at your marginal income tax rate as well as payroll, Medicare, and other associate taxes. If your total marginal tax rate is low, then SP entity may be simpler and more manageable choice than other entities; however, with SP entity, personal liability is a concern as the liabilities arising from your business activities become the responsibility of the owner. With Limited Liability entities, the legal liabilities arising from business operations revert to the business and not to the business owner(s) and their personal assets.
For more information on legal entities and how to file, recommend visiting Hawaii State web page for further information (http://cca.hawaii.gov/breg/legalinfo/legal_info/). For completing IRS filing, you can visit the IRS web page to obtain your Employer Identification Number and establishing your tax filing status (https://irs-ein-tax.com).
Along with choosing your business structure, you will also need to give your new enterprise a business name. This registration process in Hawaii is conducted through the Business Registration Division of the Department of Commerce and Consumer Affairs, abbreviated DCCA (http://cca.hawaii.gov/).
Since your name selection needs to be unique to your business, it is necessary that a search should be performed to ensure your name selection is available to you. You can perform this search function at the DCCA web page sited in the above paragraph. If your selected name is available, you can register it and start to use it as your business entity name, brand it, and even trademark it with a logo.
Permits and Licenses
Depending on the type of business you are starting, your business may or may not require licenses or permits. Some licenses that come to mind are state tax license, liquor license, nursing and home care license, street vending permits, health department permits, firearms permits, and some others. The Business Action Center (1130 N Nimitz Hway, Rm A220, Honolulu, HI 96817; 808-586-2545) can provide information about various business permits and licenses so a visit there might be of interest to you. Following are information about the state departments with various licensing and permitting responsibilities:
- Department of Taxation: Tax License
- Department of Agriculture: Importing plants, animals, and microorganism to Hawaii
Exporting plants and livestock
Quality Assurance (commodities and measurement standards)
- Department of Commerce and Consumer Affairs: Professional & Vocational Licensing
Real Estate Licensing
Transportation-related licensing and permits
Utilities related licensing and permits
Also, there may be special permit and license requirements put in place by the four county governments (Hawaii, Honolulu, Kauai, and Maui); so make sure your research is completed to ensure you have covered all permit and license issues before going forward with your business startup.
It is recommended that you review tax issues with your CPA and/or accountant to determine and clarify your business obligations regarding the Federal, State and City/County tax requirements. IRS has Small Business and Self Employed Tax information site (https://www.irs.gov/businesses/small-businesses-self-employed) which explains business owner responsibilities in filing Federal Taxes. For Hawaii tax information, a similarly established web site (http://tax.hawaii.gov/) will provide information for state tax filing requirements. As well, for retail establishments in Hawaii, it is required that the General Excise Tax (GET) license be obtained to conduct local business operations.
For businesses having employees, there is the state requirement for the business to register with the Hawaii Department of Labor and Industrial Relations (HDLIR). Many small businesses with few employees often elect to retain an independent HR firm to manage this state registration requirement. Details about the registration requirement and other legal responsibilities are explained in the Employer’s Handbook (https://labor.hawaii.gov/wp-content/uploads/2013/03/New-Employer-Packet-3-14-13.pdf).
With your business entity selection and legal name filing completed, you are now ready to proceed to execute the remainder of your Business plan. At this stage, you may have already retained a free SCORE mentoring service. If not yet signed up to the service, you may consider doing so at this stage by visiting SCORE.org web site. As well, it is recommended that you consider attending SCORE workshops to broaden your base of business knowledge. Good hunting!
August 2019: "Why Start and Own A Business"
Starting and running a business of any kind by entrepreneurs are not easy endeavors. It is highly risky to say the least and most of us elect to find a job and try to make the ends meet and put forth efforts to save and invest for our future needs, including toward retirement. However, for many American workers, making sufficient income to maintain a reasonable lifestyle while supporting their family and meeting own needs has become more difficult.
These are some basic trends in our economy that are restricting labor earnings growth:
- Computational and internet-based digital innovations in our economy are reducing direct labor needs through automation and other means
- Globalization is exporting many high paying manufacturing jobs to lower labor rate countries
- The increasing cost of living in some sectors (education and healthcare in particular) is far surpassing the rate of hourly wage gains
- Government economic and tax policies have benefitted higher net worth individuals and businesses
- Nature and types of high paying jobs are drastically changing with different educational requirements and many workers are not prepared with right skill sets (lacking STEM education)
A graph of US government labor statistics below lays out the basic disparity in unit productivity gain vs labor wage gains from 1948 to 2015. It is clear from this graph that the divergence between productivity and labor wage gains began around 1973 and is continuing.
If you are working as an hourly employee in the USA today, your projected wage gains into the future years probably will be tepid at best. The question we may ask is “who benefitted financially from the productivity gains from 1973 to today?”. The answer may be seen in the graphs below.
In 1989, the “Holding of Family Wealth” graph shows 73% (22 trillion dollars) of wealth was owned by the top 10% of the US population. In 2013, about 80% (over 50 trillion dollars) of wealth was owned by the top 10 percent, a gain of 7%. In 2017, President Obama reported in his State of the Union speech that wealthiest top 1% of the US population owned 40% of the nation’s wealth.
The graph above represents the Dow Jones Industrial Average of the past 100 years (the average aggregate stock price of selected major US companies). In 1970, the average value was somewhat less than 1,000 while the value in 2019 has exceeded 27,000. So if you invested $1,000 in Dow Jones portfolio in 1970, the value of that investment today would be over $27,000 (>7% annualized gain). This annualized Dow Jones price gains since the 1970s represent fundamentally the corporate profitability gains enabled by both the productivity gains and the flat labor rate which are shown in the Wage and Productivity Growth graph.
To participate in this productivity and flat labor-based economic gains, the entrepreneurial endeavor is a real option. That is by starting and operating successful businesses, the owners can benefit from the productivity gains of our economy energized by low growth in the cost of labor. This economic environment provides a good basis for starting your own business given that you have a good idea, sufficient resources, and a good execution plan! In life, it is often said that “nothing is ventured; nothing is gained”. You have everything to gain in chasing your American Dream by starting your own business.
July 2019: "Life and Death of New Startups"
Like any living thing, a business has a life of its own, imbued with life from its human owners/operators and its customers. As we humans are all mortal, so are businesses we start. A graph from smallbiztrends.com shown below describes the percent of businesses continuing to operate after each of their first six years of operation. It shows at year six, only 40% of businesses are operational. From various studies over the past years, this statistic is holding pretty firm. The overriding questions each entrepreneur should ask before starting a business is “why the 60% failure rate?”.
Most entrepreneurs are a typically optimistic lot, and probably the last thing they worry about is a business failure. If this statistic is any guide, many realists and most pessimists will not start a business. So if you are considering starting a business of your own, the first thing you need to recognize is that you are probably an optimist. Being an optimist is a good thing because if we are all realists and pessimists, much will not be ventured in this world and our lives would be pretty static and boring. So the question is “why businesses fail?”. Fundamentally, businesses fail because it runs out of money. Even for non-profits, not having the cash to operate is a death knell to their operations. So before starting a business, good business planning, including solid financial forecasting is highly recommended. The key point I stress in my Business Planning class is the need to validate assumptions about your product/services, market, pricing, competition, costs, and profits. Before committing large resources into starting an enterprise, a small resource should be allocated to allow for the study of your business of interest. Conducting market research, proof of the principle experiments, running a product test with prototyping, and small scale sales activity with your typical market would be prudent. The key is the validation at a reasonable cost and that is an area for a whole new discussion. Regarding the surviving 40%, they are obviously generating cash to remain operational! The information from the graph does not tell us about their profitability, however.
June 2019: "Sales & Distribution Plan"
Your business plan should include a section describes how you intend to get your product to customers and how you’ll measure the effectiveness of those methods. For example, once you figure out where you’ll be selling your product, such as online, at a retail outlet, door-to-door, etc. determine the type of sales activities you’ll need and how you’ll implement them.
In terms of distribution, think about how you’ll actually get the product or service into the hands of the customer. Ultimately, you’ll want to sell your product or service in as many ways that make sense for your business: online, at a retail outlet, via house parties or mail order, or through other companies. Initially, however, focus on selling through just one of these channels so you can build your business before comfortably extending to others.
May 2019: "Set up a website"
Your website doesn’t need to be fancy, but make sure it professionally reflects your business and contains the information customers generally need to know, such as how to contact you, business hours, a menu of services (or menu for a restaurant), etc. There are a variety of services that will help you create a simple but professional looking site; if your needs are more extensive, you may need to hire someone to create it for you.
While you’re at it, don’t slap up pages that say “under construction” or “coming soon.” Even if your site is a single page, make it look professional. You can always add more pages later. You don’t get a second chance to make a good first impression—even in business. A few businesses get away with not having a website, and instead, use a Facebook business page or even an Instagram account. Think carefully about adopting this strategy, however. Almost anyone can access a website, but not everyone is a Facebook or Instagram user. And when you rely on a third-party platform, you lose some control over your prospects’ and customers’ experiences.