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Small Business Success Index 5

Index Score*   Grade
73 marginal
Capital Access 67
Marketing & Innovation 65
Workforce 76
Customer Service 88
Computer Technology 75
Compliance 92
*Index score is calculated on a 1-100 scale.
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How Your Personal Credit Score Can Affect Your Business’s Loans

February 17th, 2011 ::

By Linsey Knerl

According to a 2009 report from the IRS, the creation of sole proprietorships is on the rise, meaning that many small businesses are actually a company of one.  While banks like to see businesses with established credit histories of their own, they’re willing to look at personal credit histories of the owners for new companies, especially for sole proprietorships. While there are many benefits to operating this way, there can also be some risk – especially if you are looking to secure financing for a startup or expansion.  Remember these common factors when shopping for your next loan:

Length of Credit History:  Someone with a more established credit history will likely be able to access a greater variety of funding for their small business than someone who is new to the credit game. Old accounts kept in good standing can increase a score overtime, so be sure to keep old accounts open, even if you never intend to use them again.

Age:  With the recent passing of the CARD ACT, young entrepreneurs who want to start a business and borrow money before the age of 21 will have a difficult time without a co-signature from a parent or guardian.  Since many of the brightest startups occur during the college years, this could have a negative effect on the business landscape as a whole.  Establishing a credit score for future loan activity will also be delayed.

Late Payments:  Just one or two 30-day delays having a significant impact to your personal credit score.  Since it takes years for these errors to fall off your history, it is always in your best interest to pay all accounts on time – even early, if you can.  It is recommended that you also check your free credit report annually from all three reporting agencies to guard against erroneous reporting.

Credit Utilization:  Having a number of credit lines available to you can keep your score healthy, provided you don’t use up too much of that credit.  Keeping the percentage of used credit to total available credit to a healthy amount (40 percent or lower) is recommended for maintaining a high score.  Anything above this can lower it to a level that could disqualify you for certain small business funding.

As the credit score rules change over time, the numbers may have new meaning.  A score that was considered “average” just four years ago has more borrowing power in this post-recession economy.  For those who have managed to keep their credit score above a 750 or even 800, the outlook for financing your small business may be a good one.

Linsey Knerl is a staff writer for CreditScore.net. She’s written extensively about personal finance topics, while raising five home-schooled children on a farm. Follow Linsey on Twitter @lknerl.

Photo courtesy: Karen Axelton

3 Interview Questions That Always Cause Trouble

January 13th, 2011 ::

When you’re an interviewing a prospective employee, there are simply some things you can’t ask. There are the obvious questions that can lead immediately to an accusation of discrimination (such as asking about religion or sexual orientation), but there are also plenty of more subtle questions that can land you in hot water. Even if your business isn’t large enough to have a big human resources department and a lawyer to offer advice on the hiring process, you have to avoid problem questions.

Don’t Ask About Family

The moment you start asking a job applicant about his or her family, you’re opening up a can of worms. You’re asking questions that can touch on all sorts of situations that can create an opportunity to accuse you of discrimination. Questions about family can lead to answers that involve sexual orientation, whether a woman or a man can do a job better and even religion, depending on how your applicant answers. They’re all dangerous territory.

It’s tempting to try to get a feel for whether an employee will be in a position to put in long hours — but you can only ask that specifically, not whether an applicant has kids at home that he’ll need to get back to.

Don’t Ask About Citizenship

With crackdowns on employers hiring illegal immigrants, it seems like you should be allowed to ask if a job applicant is a U.S. citizen — but it’s actually against the law. That’s because there have been cases of discrimination against people who can legally work in the U.S. but don’t actually have citizenship yet.

The closest you can come to asking about citizenship is asking whether someone is authorized to work in the country. Luckily, that serves the same purpose most of the time, because illegal immigrants simply don’t have authorization to work in the country.

Don’t Ask If They Need Certain Holidays Off

Scheduling is a big issue for many companies. There are many constraints on what you can ask a prospective employee about her schedule, though, down to whether she wants a particular holiday off. Asking if an employee will want Yom Kippur off from work is, in the eyes of the law, the same as asking her if she’s Jewish.

You can ask about scheduling — such as whether or not an employee can work with your required schedule — but that’s about it.

You Don’t Want Too Much Information

There are job applicants that will volunteer all sorts of information about themselves during an interview, but you really want to keep your information to a minimum. You only want to know if a given applicant can fulfill a job’s requirements to your expectations. You don’t want any information that can lead to an accusation of discrimination down the line. That means carefully choosing your questions and even cutting off an interviewee if they offer up more information than you actually want.

Image by Flickr user Pulpolux (Creative Commons)

Should a Telecommuter Get a Lower Salary?

January 11th, 2011 ::

As you consider letting members of your team telecommute or hiring new employees to work only on a virtual basis, it may seem that you could be able to offer them a lower salary. After all, they won’t need to pay for transportation into the office, a business wardrobe and all those little expenses that go with working in an office, right?

Well, that’s not necessarily the case — and if you try to offer a lower salary to a telecommuting employee, you may find that you have a hard time convincing them to take it. Telecommuters may not be paying for gas to drive into work, but they are paying to maintain an office in their homes, a cost you’re likely to have gotten out of handling in your own office.

A Question of Benefits

For most telecommuters, the costs of being employed remain the same even if they are no longer coming into the office. That means a lower salary is out of the question — but that doesn’t mean that your business won’t be saving money.

With many telecommuters, you’ll find that the draw on benefits is reduced. Where once an employee might not have felt well enough to drive into work, you’ll likely find that — rather than taking a sick day — your telecommuting employees will work from their couch on days that they’re feeling poorly. You’ll likely find that your telecommuting employees take less personal time, especially if they have a little flexibility in the hours they need to work.

The cost of any in-office benefits, from stocking a coffee station to a public transportation benefit, pretty much disappear if your employees aren’t coming into the office, as well. You may not be reducing how much you pay in terms of salaries, but with telecommuting, you’re likely able to cut back on certain benefits without any problems.

The Need to Telecommute

If you don’t offer a telecommuting program already, you may find some employees who have a driving need to work from home offering to take a pay cut, even where other employees would refuse. For such employees, the mindset is different — telecommuting is a perk or a benefit, making it worth giving up a little of their take home salary.

However, such situations are becoming more rare as more employees realize that they can likely negotiate for the opportunity to telecommute based on the overall savings to an employer without offering to take a pay cut. When an employer has the chance to move to a small office, use less resources to simply have employees at work and so on, there’s usually more than enough of an incentive that a pay cut simply isn’t necessary. Run the numbers for your office — you may be surprised by what simply offering the option to telecommute can get you.

Image by Flickr user slworking2 (Creative Commons)

Review: Why Your Website Sucks

January 5th, 2011 ::

When someone visits your website, he has some high expectations. Unless you’re offering something he absolutely can’t get elsewhere, he expects your site to be easy to use — and if it isn’t, he’ll go elsewhere. In such a situation, you’re left with visitors who aren’t particularly Web savvy and may or may not buy through your site. To make things worse, users are getting more Web savvy every year.

Your website simply can’t afford to suck. You have to more than meet visitors needs from the moment they land on your site. Most websites simply don’t reach that level, as Andy Hayes and Kelly Erickson point out in Why Your Website Sucks (and How to Fix It).

The ebook is a down and dirty guide to Web usability, meant originally for travel and tourism businesses. However, it’s full of concrete tips that work just as well for any other small business owner — especially if you don’t have time to learn all the details of Web usability, but you’ve got to make the changes to your website yourself.

Having an easy-to-use website isn’t just a matter of Web traffic. After all, there’s no reason to have visitors on your website if you can’t get them to buy anything. In their ebook, Hayes and Erickson don’t focus on usability for the sake of usability — which some other authors are notorious for. Rather, they focus on getting your website up to standards so that it can convert visitors to buyers as fast as possible. They walk through tricky topics like the buying cycle and show how a better website can take advantage of the process that almost every buyer goes through before sending in their money.

A good website convinces visitors to stick around after only three seconds (that’s how long it takes most visitors to bounce and go back to Google to look for something else). That’s all the time you have to impress a visitor enough to keep him on your site. Not every little detail has to be perfect — after all, how much will a visitor see in the first three seconds? — but you have to offer a solid first impression.

There is a lot of low-hanging fruit that a small business owner can go after, in terms of improving a website to the point that visitors actually stick around for a little while. The key is to find those potential changes and get them made. Unless you have a lot of time on your hands to learn the details of usability, a guide is indispensable.

If you’re at all concerned about the idea of paying $37.99 for an ebook, Hayes and Erickson have made a free chapter available to let you check out the guide before putting your money down. They’ve also upped the ante by adding a workbook and a recorded call with expert Naomi Dunford.

5 New Year’s Resolutions for Your Business

December 30th, 2010 ::

Making resolutions when New Year’s comes around is a fairly common practice — but when’s the last time you made any resolutions for your business? Sure, you probably set goals fairly regularly, but it’s worth taking this time to reflect on what your business could do just a little bit better. You may not need to get your business exercising on a Stairmaster, but there are always a few leaves that can be turned over at the beginning of a new year to boost your business success.

  1. Keep your bookkeeping up to date: No business owner likes to admit that you haven’t taken care of all those receipts sitting in a shoebox somewhere, but it’s not an uncommon problem. If keeping your books is something that is an issue, now is the perfect time to explore ways to improve the situation.
  2. Lose some dead weight: If you’ve noticed a lag somewhere in the way your business operates, it’s often easier to just say that you’ll deal with it later. Well, with the New Year almost here, maybe it’s time to make the decision to fix whatever is slowing you down.
  3. Learn something new: One of the best ways to keep your business competitive is to keep looking for new methods and tools. Make time in your schedule for you or your team to learn more about what’s out there and how to implement new techniques into your business.
  4. Find a mentor: If moving forward with your business has been tough lately, one way to start figuring out what else could help you is to talk to a mentor — someone who has already been through this stage in a business’ development — so you can get some tips and speed up the process.
  5. Expand your network: Considering how heavily most businesses depend on networks to find both new customers and new vendors, it may be worth revisiting your network and building upon it. Going to new networking events isn’t enough, though. Strengthening your existing networking and getting outside of the groups of people you regularly network with are equally important.

Of course, these are just examples of resolutions you can set for your business. With 2010 ending and 2011 beginning, you have the opportunity to look at your business and see where you can really improve things. Even better, the end of the year is a perfect time for transitions because there are a few that you’ll probably have to make anyway.

No matter what resolutions you choose, make them reachable and measurable — if you can see how you’re going to reach them, resolutions are easier to work on, just like any other goal. Something as simple as writing your business’ resolutions down can make them much easier to reach. After all, what’s the point of making a resolution if you aren’t going to work on it?

Image by Flickr user Sally Mahoney (Creative Commons)

5 Tips to Phase Yourself Out of Your Business

December 28th, 2010 ::

At the end of the day, you probably don’t want to work on your business for the rest of your life. Maybe you have other projects you want to work on or maybe you just want to retire — either way, at some point you’ll want to get out of the day-to-day grind of running a small business. Whether you want to sell or you’d prefer to bring in a manager, you’ll need to make sure that you have phased yourself out of your business and you don’t actually need to be present.

  1. Delegate everything: Even if it’s just on a trial basis, you need to make sure that someone else in your business can handle every detail that comes along. If you need to be at your desk for even one thing everyday, you will have a harder time selling your business or leaving it. A trial run can help you identify potential problems early on: maybe you need to provide a matrix for making certain decisions or a checklist to ensure that a certain process is followed closely.
  2. Separate your business’ brand from yourself: If your name is on the door, but you aren’t in the office, customers may just walk away. It’s easy for a small business owner to tie her company’s brand to her personal image — especially if you are running a service-based, it’s easy to point out that one of your selling points is that you (personally) are good at whatever you do. But that sort of close tie means that it’s much harder for the business to keep going if you are no longer in it.
  3. Look for other service providers: Assuming you run a business that requires you to perform a specific service for clients in order to get paid, you absolutely have to find someone else who can provide that same service. Depending on the service and the credentials necessary, that may not mean just hiring someone — it may require you to bring someone on it what amounts to a junior partner position.
  4. Plan for a manager: In the early days of a small business, the owner is likely the manager (as well as the receptionist and janitor). But one of the keys to being able to phase yourself out of your business is having someone else who can make decisions without any guidance from you. By creating a managerial position, you’ll be training an employee to take over those decisions. A full-time manager can require a big jump in payroll, but if your goal is to be able to let your current business run itself while you go on to something else, it’s absolutely necessary.
  5. Create clear priorities: There may be certain tasks you do in a very specific way. You may be reluctant to hand those tasks over to someone else because no one else will handle them in exactly the same way you do. But you need to check just how important it is to get things done in such a matter. If it’s a certain style of filling out forms, maybe it isn’t quite that important — the way someone else handles it will be adequate. If it is something crucial, though, perhaps offering some specific training will get you the results you want without your needing to handle each step yourself.

All of these steps have elements that you can consider from the day you open your doors. If you build your business so that, one day, you can leave it, the process will be significantly easier — even if you aren’t sure where your path will take you right this moment. By phasing yourself out of your business, you make selling it easier, as well as simply taking a vacation.

Image by Flickr user Grant Laird Jr. (Creative Commons)

The Serial Entrepreneur: Benefits and Drawbacks of Changing Tracks

December 27th, 2010 ::

For some business owners, the thrill wears off after a business is established and going well. Once a new venture reaches that point, it’s tempting to hand it off to someone else and start a whole new project. That line of thought leads directly to the path of serial entrepreneurship.

The Benefits of Serial Entrepreneurship

For certain types of business owners, the enjoyment and fun of small business ownership isn’t necessarily the final product or business. Rather, it’s how you got there. It’s certainly not true of everyone, but for those people who feel that way, it’s far more fun to keep starting up new projects.

With that approach comes certain benefits. For one, if you do have the skillet necessary to be a good serial entrepreneur, you’ll probably have a business you can sell at the end of every new venture, making it much easier to fund the next project. You will likely also build up a network that supports new businesses very well, getting better connections for your efforts with each new business you start.

The Drawbacks of Serial Entrepreneurship

Creating one new business after another isn’t exactly a situation filled with sunshine and puppy dogs, however. A huge amount of work goes into creating a new business and you’ll constantly be in that stage of a business’ growth where you feel like you have to work every hour in the day to get it established. If your business isn’t your key priority, that approach may do more harm than good.

It’s not uncommon for a serial entrepreneur’s main focus in life to be building new projects, rather than family or other priorities. It’s a potential issue that is crucial to keep in mind.

The Balance of Serial Entrepreneurship

Like most paths, there are both benefits and drawbacks to becoming a serial entrepreneur. Even if you’re sure that you’ll enjoy the somewhat-hectic lifestyle that goes along with building multiple businesses, it’s important to dig deep and consider how it will impact other things you want to do. The drawbacks may not be enough to tip the scale against becoming a serial entrepreneur, but they do offer up considerations that you should look at before making a decision.

It’s also worth keeping in mind the fact that, though you’ve started one or two businesses, you don’t have to keep handing them over to someone and moving on. Perhaps you want to try out businesses until you find the right fit for the long haul. Or perhaps you find something that you aren’t looking for — a business worth holding on to for any number of reasons. No matter what else happens in an entrepreneur’s career, he has to be open to new opportunities and changing course. Find what works for you and go for it.

Image by Flickr user Rob (Creative Commons)

When Should You Hire Your First Employee?

December 16th, 2010 ::

By Thursday Bram

For small businesses interested in hiring employees, there are two opposing temptations: First, you may want to put off hiring your first employee as long as possible to limit your payroll expenses. Second, you may want to get an employee into the office as soon as possible to help you grow your business. Balancing between these two considerations is crucial, especially when you’ll be bringing in the first employee your business will have.

The Financial Aspect

A good general rule to decide if you’re financially ready to hire an employee is to consider whether you can afford to pay that employee’s salary for the year — without digging into the money you, as the owner, need to take home. Are you going to be able to pay your employee even if there’s a slow time in your business? Considering that there are so many ways to bring in temporary or contract employees to cover gaps, without making that sort of financial commitment, it’s not unreasonable to wait until you can be sure that paying an employee won’t be a problem.

Once the money is in line, though, the temptation to wait a little longer may still be present. If an employee is necessary for you to continue to grow your business — and your business is in a good financial position for bringing in an employee — waiting can actually hurt you. You may wind up limping along, trying to continue your company’s growth without the human resources that are really necessary.

The Timing Aspect

There are times that are certainly better than others for bringing in a new employee. After even a short time in business, you’ll likely notice cycles in your business. They can be big cycles — maybe the time around the holidays tends to be slow for you — or small ones — you just can’t seem to land new customers on Mondays — but they are present. Taking a look at the those cycles can help you decide when the best time to hire an employee may be.

While a slow time may seem less than ideal or hiring a new employee from the cash flow point of view, it is worth remembering that you may have more time for training a new employee and bringing him up to speed if you choose a slower point in your business cycle. This, too, can be a question of balance: you may want to shoot for the end of a cycle if your business goes through longer cycles, rather than the beginning.

There’s no hard and fast rules about hiring your first employee, of course. Every business is different and what works for one company may not work for another. The more understanding you have of your business’ financial situation and what sort of cycles your business goes through, the better positioned you will be to make decisions about bringing in your first employee.

Image by Flickr user Quinn Dombrowski (Creative Commons)

A VA’s Point of View: What Wanda Green Can Do For You

December 8th, 2010 ::

The tough part of bringing a virtual assistant into your organization is figuring out just what he or she can do to help you get more done. To make things more complicated, many VAs offer a wide variety of different services — you can just as easily find one who specializes in bookkeeping as one who works on social media projects. But a good VA can give you some guidance on what tasks he or she can handle.

Wanda Green is both a virtual assistant and a certified bookkeeper. In this interview, she offers a little insight into what she does.

Getting Started

When Green begins working with a new client, she starts with a
conversation with the client. It may be via e-mail or by phone, but
it’s extensive and helps to nail down exactly what the client needs
and how Green can help. For certain projects, such as tax
preparation, she needs to go beyond just a conversation: “Again, it
starts with a phone conversation, and then a questionnaire via e-mail
that the client must answer [and] usually an e-mail with a scanned copy
of last year’s tax return, payment [PayPal or Google checkout] and we
go from there.”

Green makes sure that the process is easy for a new client working
with her. The crucial point is making sure that both sides understand
what the virtual assistant can and is expected to accomplish. “There
is always a clear understanding of all that is to be accomplished with
the virtual working relationship,” says Green.

The Services Available

While the services that the average virtual assistant offers can vary
dramatically, Green has focused on some of the more standard services,
along with offering help with bookkeeping and tax preparation. Her
services include:

  • Telephone reception
  • Bookkeeping
  • SEO (Search Engine Optimization)
  • Tax preparation
  • E-mails (response and preparation)
  • Sales (inquiries and sales and adjustments and just general questions)
  • Whatever a company needs

Because Green keeps the process simple, her clients are pleased with
her work — driving home the point that a small business owner in
search of a VA needs to know just what sort of approach that virtual
assistant takes to work before setting an agreement in stone. If you
want a VA who touches base at each step of the project, that’s OK —
but there are also VAs who operate with little communication. Green
notes, “The business owner just needs to realize that there can be as
much communication, or as little, as needed. They are always pleased,
because they just did not realize how easy the process is. They do
have to trust and show a little faith.”

Paying for Your Workforce’s Education

December 2nd, 2010 ::

If your team can learn new skills and methods that are valuable for your business, you can wind up with much more effective employees. Your employees can become more efficient, take on bigger projects and generally become better at their jobs. The question that a small business owner faces, however, is whether that sort of ROI is worth paying for part or all of the education your employees need to improve.

Of course, as an employer, you’re under no obligation to pay for any training: you can throw employees into the deep end of the swimming pool and let them figure things out for themselves. But even a small amount of training can go a long way — most businesses have at least some in-house training for new employees for exactly that reason. No matter whether there is any obligation to do so, it’s worth considering how you can help your employees move forward.

Levels of Training Matter

It’s easy to think of education as something very expensive: it’s easy to start thinking in terms of helping an employee finish a degree or a similar level of education. In some cases, a college degree may be the best way for one of your employees to move forward. But in many cases, you may be looking at far less intensive (and expensive) levels of education. Maybe there is one particular class or workshop that will make a world of difference for your team. Maybe just buying a couple of books and passing them around the office will help your employees significantly.

You have to look at the specifics of the situation and your goals for your business, to really identify the educational opportunities that will help your team the most. It’s only at that point that you can really consider the cost of such education and find room in the budget for part or all of it. It is worth noting that different levels of education provide different opportunities for handling costs, as well. Buying a book is probably something you should simply do as a part of the business, but if an employee wants to pursue a degree, it’s not out of the question to offer to pay only a portion of those costs.

Keeping the Employees You’ve Helped

Simply offering a budget for training and education that is higher than the next guy’s can help keep some employees from looking for new jobs. However, it is a real concern that, if you invest in education for an employee, you’d like some level of guarantee that they aren’t going to use that additional expertise to land another job elsewhere. There are many different strategies to handle such concerns — contracts that lay out the requirements to get educational help, bonuses upon completion of a certain amount of work after completing training, etc. — but the most important factor to keep in mind is that your employees need to understand that you value their efforts and education. If education makes it possible for an employee to do more work and handle more responsibility, their salary should also demonstrate that fact.

Image by Flickr user dave_mcmt (Creative Commons)