business owners

8 Fundraising Steps for Building a New Business

Paul Michael — Wed, 13 Jun 2018 08:30:21 +0000

Perhaps one of the most exciting career moves anyone can make is to start a business. However, that rush of excitement and adrenaline often comes with apprehension, intimidation, and fear of failure. How are you going to get the money you need to make a go of this?

It's estimated that 50 percent of businesses fail within the first five years of operation. And while a lot of that has to do with lack of focus, motivation, and commitment, money is also an issue.

Once you've legally incorporated your business, here are some basics that will help you raise funds for your new company. Note that while angel investors, incubators, and venture capital companies are most often associated with Silicon Valley, some also work with non-tech companies.

1. Raise money in stages

You are not going to get all the money you need to operate your business in the first round. What you will do is go through different stages of funding, building up to greater amounts of money as the business becomes successful. Think of it like weightlifting. You would never go into the gym and start with the heavy rack; you work up gradually, making progress and using those gains to lift larger amounts.

The first stage will be a small amount of money you can raise through your own network. Then, you will move on to other sources of funding. In the venture capital world, funding for successful businesses usually continues through a series of investment rounds — A, B, C, D, and so on. (See also: 4 Ways to Fund Your New Business Without Borrowing a Dime)

2. Figure out exactly what you need to get started

What will it take to get your venture off the ground? This can't be some arbitrary figure plucked out of the air. It should be based on operating costs (including paying yourself a salary) for at least six months. Some expenses will be one-offs, such as purchasing manufacturing equipment, and others will be recurring. That all needs to be added into the mix. Don't forget utility bills, employee pay, and costs that can vary from month-to-month.

Consider how you will grow over that six-month period. You may need to buy a lot more inventory or supplies in month six than in month one, especially as demand booms. You don't want to be in a situation where you cannot fulfill orders or give customers what they want. Disgruntled customers will quickly move to another business.

3. Start with friends and family

It's unlikely that you're going to be able to completely fund your new business with money from friends or family. However, some new businesses have done this (it's known as bootstrapping), and it will all depend on the size and scope of your business, and just how wealthy your inner circle is.

Starting here is the best way to take your first tentative steps into acquiring the seed money you need, because these people know you, trust you, and want to see you do well. Of course, people also say that you should never mix business with pleasure, and it's true that doing so can cause problems.

If you decide to go this route, make it all official. Hire a lawyer to draw up the paperwork and the terms of the loan. You may give away shares in your business in exchange for the cash, or promise a return on the investment. Do not simply shake on it.

Also, be aware that money borrowed from friends and family does not come from accredited investors. Should your company ever get to the stage of doing an initial public offering (selling stock to the public for the first time), having money from non-accredited sources can hurt it. That is, of course, a long way down the line. (See also: 9 Times to Hire a Lawyer Immediately)

4. See if you qualify for a small business loan

Chances are, your business is in its infancy and does not need millions of dollars to get off the ground. Whether it's a restaurant or bar, a salon, a new product, or a service, you will usually be able to get it off the ground with a small business loan from a bank or credit union. However, qualifying for that loan is not always easy.

Most banks won't give you a loan backed by the Small Business Association unless you've been in business a few years, or can demonstrate experience and success in that industry. Even then, you will need excellent credit, and may be asked to secure the loan with your home or other collateral. (See also: 5 Ways to Build Business Credit When You're Self-Employed)

5. Consider a crowdfunding option

You are no doubt aware of crowdfunding platforms like Kickstarter and Indiegogo. These websites give you the tools to reach millions of potential investors around the world, and you don't have to rely on one or two "angels" (investors with deep pockets) to get your business off the ground.

Thousands of people can donate as little as $5, but you must have a product, project, or service that is compelling and innovative to make this work. Most businesses on the platforms are offering a great new gadget or device, and will give investors the chance to own it at a discount in return for getting in early and funding the initiative.

However, it's not all about physical goods. Music and movie projects have been launched via crowdfunding, as well as food products, art, and even comic books. If you have an interesting story to tell, and something tangible, you should do well. Just make sure you set a financial goal that is attainable, or your business will not get fully funded.

6. Look for "incubator" funding

Before you get to the angel investors and the venture capitalists, see if your startup would benefit from an "incubator." As the term suggests, these funds are designed to help nurture a fledgling business and help it grow. Entrepreneur defines an incubator, or business accelerator, as: "An organization designed to accelerate the growth and success of entrepreneurial companies through an array of business support resources and services that could include physical space, capital, coaching, common services, and networking connections."

Should you need it, you will be given office space at below-market rates, plus coaching and other assistance for the day-to-day operations of a small business, as well as many other advantages. Of course, all of this comes at a price, and that will usually be a chunk of equity. But if this kind of startup business model suits your needs, visit the International Business Innovation Association to learn more about incubators and accelerators in your area.

7. Find an angel investor

Unlike venture capitalists, angel investors work alone. They are independently wealthy people with a large amount of money that they want to invest. Angels are a better option than venture capitalist firms, because they bring with them a more personal approach to their investment. They will offer you advice on how to use the money, and will no doubt have a list of valuable contacts that you can tap into to help grow your business.

Angel investors want you to succeed, and not just because they will profit from it. But don't mistake their personal touch for a laid-back approach to their investment. They want you to have all your ducks in a row, and will want to know your plan. Not for the next few months, but for the next few years. Rich people don't get rich by slacking with their investments, so be buttoned up before you find one.

8. Pitch your business to venture capitalists

Venture capitalist (VC) firms will usually not get involved in your business unless it is worth their time. Venture capitalists want to invest millions of dollars and see a substantial return on that investment. Therefore, a VC is going to be an option for you once you have established your business and can show a healthy balance sheet and massive growth potential.

However you get your money, spend it wisely

Cash is king in a startup. It's also one of the key reasons a startup will fail. Whether you get $5,000 or $500,000, your approach to the money should be the same. Get spending under control. Meticulously track money coming in and money going out. If you can afford it, hire an accountant to help you keep the books in order and flag possible concerns.

And whatever you do, do not look at just the profit you are making. It can be deceptive to see that number without context. Look at cash flow, and add in all of your expenses, debts, accounts payable, and inventory if applicable. Remember, inventory stockpiled on the shelves is not making you any money.

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This article is from Paul Michael of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

What Small Business Owners Can Learn From Top Forbes Entrepreneurs

Nick Wharton — Wed, 07 Feb 2018 09:31:07 +0000

Successful entrepreneurs come from a variety of backgrounds, and their journeys start at different stages of life. But nearly all have lessons about how to create success that we can learn from.

Forbes is continually shining the spotlight on individuals who have managed to overcome hardships and wind up on top. Whether you're starting out on your own entrepreneurial journey or just keen to know what goes into building a winning company, here are four lessons you can learn from top Forbes entrepreneurs.

Get your brand story right

Chris Pfaff, probably better known to MTV reality TV fans as "Drama" from his stints on two shows, followed an unusual path to entrepreneurial success. With no college education, no background in business, and no real idea of how to run a company, he started the streetwear clothing label called Young & Reckless. Launched on the TV show Rob Dyrdek's Fantasy Factory (Dyrdek is a professional skateboarder and Pfaff's second cousin), the line of T-shirts, tank tops, and accessories became profitable right away. (See also: 4 Best States to Start a New Business In)

Despite its rapid success, the company later experienced setbacks as Pfaff experimented with different marketing techniques. Customers had come to associate the Y&R name with the lifestyles of many of its early ambassadors: rappers, skateboarders, and BMX bike riders. But the company flubbed when it hired a celebrity who didn't have a story that fit the brand's carefree, "reckless" image. "There was nothing reckless to tell," Pfaff told Forbes. It taught Pfaff that the most important thing about marketing is making sure it embodies the spirit of the brand. (See also: How to Start Your Dream Business)

The take-away: Your customers buy into your story as much as the product or service you're offering. If a marketing idea doesn't embody the brand, don't do it.

Failure is part of the game

Adam Pisoni is a great example of someone who has picked himself up after stumbling. Pisoni, a high school dropout, says naive optimism led him to launch a web design firm called Cnation in 1995, when he was just 19 years old. That optimism, plus hard work — Pisoni put in 100-hour work weeks — paid off as the company grew to 30 employees and over $2 million in sales. Cnation made its name by designing websites for large brands like CBS MarketWatch, Fox Interactive, Nissan of Japan, and Honda, earning the latter a Clio award for interactive design in 1997.

But everything changed for Pisoni after the dot-com crash of the late '90s. As clients tightened their purse strings, he had to close Cnation — a devastating blow. But he used what he learned years later to co-found Yammer, a social networking service for enterprises. He helped grow the company, and in 2012 it was acquired by Microsoft for $1.2 billion. (See also: 8 Common Myths About Starting a Small Business)

Since then, Pisoni has continued to "bounce back," founding Abl Schools in 2015, a company that creates time and resource management software for secondary schools (and soon elementary schools). The young company has just raised $7.5 million in series A funding and has grown to 12 employees.

The take-away: Business and entrepreneurship comes with failures, but it's how you digest them that matters. Instead of allowing losses to consume you, take what you learn and implement your findings in future ventures. (See also: Top 7 Blogs for Entrepreneurs)

Generous, fair benefits policies help retain workers

While it's become common for tech companies to provide perks such as Ping-Pong tables, free food, and errand-running services to coders and engineers, few extend those benefits to the low-paid employees who work in their warehouses and fulfillment centers. One notable exception: Boxed, an e-commerce company that offers mobile ordering and bulk delivery of products such as toilet paper, pet food, and toothpaste.

Founder and CEO Chieh Huang treats all his workers the same. Not only do they get company shares and unlimited parental leave, Boxed also pays for employees' weddings and college tuition for workers' children. (See also: How to Hire Your First Employee)

Those unique benefits cost tens of thousands of dollars a pop. But they're important to Huang. His immigrant parents worked menial jobs when he was growing up, and he always promised that if he started a business, he would treat his employees well. There's a business reason for this largesse, too. Turnover is costly and common among warehouse workers. It can cost up to $28,000 to recruit and train one, according to Bloomberg.

The tactic may be working. Huang told CNBC that only 10 of Boxed's full-time employees have quit since the company was founded in 2013. That loyalty has helped build Boxed into a company worth over $100 million in revenue as of 2016. (See also: Best Small Business Credit Cards)

The take-away: Treating your employees well breeds loyalty that builds success for the whole company.

Bootstrapping is sometimes the best way to build a business

When starting a business, many entrepreneurs try to follow a familiar blueprint that they see as necessary for success. Come up with a unique idea, raise millions in venture capital funding, use that money to get the business on the map and, voilà, an initial public offering is just around the corner. But there are other ways to achieve this end goal, and not securing venture backing doesn't mean all hope is lost. (See also: 10 Smart Ways to Get a Small Business Loan)

Take Little Passports, the educational subscription service that delivers activity kits to kids. Founders Amy Norman and Stella Ma failed to secure any venture capital when they started the business back in 2009, yet they persevered. They bootstrapped the company with their own savings and contributions from angel investors. (See also: 35 Resources for Female Entrepreneurs)

Without generous venture backing, they were forced to be very disciplined about hiring, marketing, and facilities decisions. Now they believe this path was a blessing, as it allowed them to grow the business organically at a sustainable pace that wouldn't have been possible with millions of dollars in venture capital. Today, with millions of loyal subscribers and a revenue of $30 million, they've proved all of their doubters wrong.

The take-away: Disappointments can be blessings in disguise. Using your own resources and hard work gives you a scrappiness that can pay off as your business grows. (See also: 5 Business Lessons From Child Entrepreneurs)

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This article is from Nick Wharton of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Reasons Average People Should Consider a Prenup

Emily Guy Birken — Tue, 13 Jun 2017 08:30:17 +0000

Prenuptial agreements are pretty standard when the rich and famous get married. Considering the amount of wealth these high-profile couples have, it makes perfect sense why prenups are as common as their giant engagement rings.

But what about us common folk? Are prenups a good idea for people without millions of dollars to protect?

Depending on your finances and relationship, a prenup might be a good idea for you and your sweetheart. Here are six reasons why people without multimillion-dollar net worths might choose to sign a prenup before saying "I do."

1. If either of you have children from a previous relationship

As of 2013, 40 percent of new marriages include at least one spouse who has previously been married. Couples who have been down the aisle before are more likely to bring children into their new marriage, which adds a level of financial complication to their union. These parents often want to make sure children from their previous relationships will be financially taken care of in case of either death or divorce.

A prenup can help parents protect assets for their children, especially in terms of estate planning. For instance, state laws generally consider marital property to belong solely to a surviving spouse after one partner dies. A prenup could ensure that a portion of that property, or assets that the parent brought into the marriage, would go to the child of a previous marriage or relationship rather than the surviving spouse.

While wills can cover this same ground, having just a will that leaves your spouse less than an elective share of your estate (between one-third and one half) does not necessarily preserve assets for your children, since your spouse can make a claim against your estate for the elective share. Having a prenup that spells out what assets go to children of a previous relationship, along with a will that cements the terms of the prenup, will be a much more solid method of protecting your children.

2. If either of you has a great deal of debt

We tend to think of prenups as being a way of protecting our wealth, but they can also protect you from your partner's debts (or vice versa). If you are entering into a marriage with a great deal of individual debt, a prenup can delineate who has responsibility for the debt payments during the marriage, as well as how the debts will be handled in the event of a divorce.

3. If either of you is an entrepreneur

Figuring out the specific valuation of assets, such as closely-held business interests or stock options, can be tricky. These things can cause a messy delay in the event of a divorce. If either spouse is an entrepreneur or small business owner, drafting a prenup that spells out exactly how these kinds of assets will be valued will save you a great deal of heartache, time, and lawyer's fees if you ever need to split them up in a divorce.

4. If either of you plans to get an advanced degree while the other works

It's common for one spouse to financially support the family while the other gets an advanced degree or other higher education. The problem with this division is if the marriage does not survive.

The fallout can happen in a few ways. Maybe, for example, the degree-seeking spouse ends up much better off financially because their new education helps advance their career. Meanwhile, the supporting spouse may be stuck toiling away for a lower paycheck. Or, in another example, maybe the supporting spouse makes good money, but the degree-seeking spouse is unable to find a job or is crippled by student loans post-divorce.

A couple who knows that one partner will work to support the family while the other goes to school may want to draw up a prenup that will make sure both of them will be financially OK if the marriage does not last.

5. If either of you plans to be a stay-at-home parent

A spouse who stays home with the children may not be bringing in a salary, but he or she is certainly saving the family money. According to a 2016 Salary.com estimate, stay-at-home parents are saving their families over $143,000 per year by doing all of the work that would otherwise have to be contracted out.

Unfortunately, there is no real way to quantify those cost savings if a marriage dissolves, which can leave the non-paycheck-earning parent at a distinct disadvantage. A prenup can do a great deal to protect both of the spouses.

6. If you live in a community property state

In the nine community property states, which include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, everything purchased during the marriage is split 50/50 in the event of a divorce, no matter who made the purchase.

For most couples in these states, there is no problem with the community property laws. However, suppose one spouse purchases property on her own during the marriage? For instance, a real estate developer marrying someone outside of the real estate business might use her own funds to purchase properties as part of her business, even after they are married. If the developer wants to make sure those properties remain under her control should the marriage dissolve, then a prenup would be a good idea to protect that property.

Making sure your prenup is mutually beneficial

There is a stigma to prenups, which is part of the reason why they are often seen as just being for the uber-wealthy. We tend to think of them as proof that spouses are not committed to their relationship.

However, a prenup should be mutually beneficial, and it can be a way for you and your beloved to show your commitment to each other. You should both be satisfied that you will each be taken care of in case life doesn't turn out the way you planned.

This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Bedtime Routines of Famous Financial Gurus

Brittany Lyte — Mon, 05 Jun 2017 08:00:09 +0000

Whether you're Joe Schmo or Bill Gates, there are just 24 hours in a day. Of course, not everybody spends them in the same way. Let's face it: Some people are better at managing time than others. And in a world where time equals money, it's often those with the best time management skills who are raking in the dough.

It's not just how we spend our waking hours that counts — our habits pertaining to slumber also affect our income, stamina, success, and productivity.

Read on for our roundup of evening rituals of these famously successful people. Because who wouldn't want to sleep like the fabulously wealthy?

1. Read a book

Bill Gates, who reads around 50 books per year, reserves the last waking hour of his day for reading. Yes, even on the stressful, exhausting days, Gates always makes time before bed for a good book.

If you're wondering why someone like Gates has made this a priority, wonder no more: Not only does reading fuel creativity, it also helps a person de-stress while introducing new perspectives and expanding their knowledge. Hard up for something fresh to read? Here's every book recommendation that Gates, the richest man in the world, has ever shared publicly.

2. Unplug the phone

On the brink of slumber, Facebook COO Sheryl Sandberg checks her email one last time. Then she turns off her cellphone, signaling an end to the day. Unplugging this way can be "painful," Sandberg has admitted, but she conceded that she has found it to be the key to a good night's sleep. If the phone is on, she's said she is much more likely to be disturbed during the night.

This is a smart habit to take up for yourself. Not only can waking up to check your phone in the middle of the night reduce the quality of your sleep, it can also cause anxiety, according to researchers at California State University.

3. Track your sleep

In complete contradiction to Sandberg's routine, business magnate Elon Musk uses his cellphone to track his sleep. His nightly sleep count averages about six hours, he admitted in a 2015 Reddit AMA. In preparation for this shut-eye, Musk, an avid consumer of coffee and Diet Coke, cuts himself off from caffeine six hours before bedtime.

There are a number of smartphone apps that can help you track and understand your sleep cycles. Experts recommend seven to eight hours for most adults, though the true number is individualistic and likely depends on genetics. Getting enough sleep is critical to a satisfying social life and a high performance career. Here are a few top-rated sleep app options: Sleepbot, Sleep Cycle, and MotionX 24/7.

4. Treat yourself to quiet time

Oprah Winfrey designates 20 minutes at the end of her day for meditation and silent reflection. By allowing herself a regularly scheduled window during which she can decompress, Winfrey says she has reaped more benefits than she ever imagined. "The results have been awesome," she said. "Better sleep. Improved relationships with spouses, children, coworkers … Greater productivity and creativity all around."

We all know how to sit quietly, but meditation takes a little bit more know-how and guidance. That's where a meditation aid can be helpful. Try the smartphone apps Sattva or Buddhify. You can also find guided meditations on YouTube.

5. Skip the wine — soak in the tub

Entrepreneur Arianna Huffington's nighttime routine is ceremonious, and it comes in two stages. The first is simple: Skip the nightcap. Booze before bed can certainly help a person fall asleep, but the quality of that sleep will suffer. Instead, Huffington, who says she endeavors to clock seven or eight hours of shut-eye each night, indulges in a candlelit bath with piping hot water and Epsom salts. Then, after she gets under the covers, she takes a moment to count her blessings.

"I pause to think about the things that I'm grateful for in that moment," she wrote for The Telegraph. "That way my blessings, not my worries, get the closing scene of the night."

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This article is from Brittany Lyte of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

10 Surprising Ways Real Estate Cuts Your Taxes

Damian Davila — Fri, 24 Feb 2017 10:00:13 +0000

Once you own property, you may be eligible for a long list of tax breaks, whether you use it as your primary home, for rental income, or sell it for profit. Let's run through familiar benefits, such as the mortgage interest deduction, and also the various (stunning!) tax breaks real estate investors, landlords, and homeowners enjoy.

1. Mortgage Interest

This is the most familiar of all deductions and one of the very few times that you can use the interest that you're paying to reduce your tax bill. Besides deducting mortgage interest that you're paying for the purchase of your primary residence, you can also deduct mortgage interest from a second mortgage or a home equity line of credit (HELOC).

You can deduct up to $500,000 ($1 million if married filing jointly) in all mortgage interest used to buy, construct, or make substantial improvements in your first home (and second, if applicable). You can't, however, deduct any mortgage interest for purchases on a third home and so on. You can also deduct up to $50,000 ($100,000 if married filing jointly) from all home equity debt for reasons other than to buy, build, or substantially improve your first or second home.

2. Mortgage Interest Credit

Recipients of a mortgage credit certificate (MCC) by a state or local government under a qualified mortgage credit certificate program could be eligible for a federal income tax credit of up to 20% of their annual mortgage interest. Figure this credit on Form 8396. The best part is that the remaining 80% of your mortgage interest is still eligible as a deduction!

3. Points

Charges paid by a borrower to secure a mortgage (also known as origination fees, maximum loan charges, or discount points) can generally be deducted. However, if you were to pay points to refinance an existing mortgage, you would amortize the points over the life of the mortgage. When you refinance a loan, your lender will send you a Form 1098 listing the points that you paid, but in the event that they don't, look for your points in your HUD-1 settlement sheet.

Page 6 of IRS Publication, 936 Home Mortgage Interest Deduction provides a useful diagram to determine whether or not your points are fully deductible for this year.

4. Real Estate Taxes

You can deduct real estate taxes, including state, local, or foreign, you paid on real estate you own that wasn't used for business. Tally only taxes paid to government institutions and don't include itemized tax charges for services to specific property or people, such as a gardener or trash collection service. If you were to sell your property and receive a refund or rebate of real estate taxes, you would reduce your deduction by the amount of the refund or rebate.

5. Mortgage Insurance Premiums

You can deduct eligible mortgage insurance premiums provided by government authorities, including the Department of Veterans Affairs, the Federal Housing Administration, and the Rural Housing Service, as well as private mortgage insurance (PMI) issuers on loans issued after December 31, 2006. (See also: What Is Private Mortgage Insurance, Anyway?)

In 2017, you can't deduct your mortgage insurance premiums if your adjusted gross income is more than $54,500 ($109,000 if married filing jointly). If your adjusted gross income falls between $50,000 and $54,500 ($100,000 and $109,000 if married filing jointly), your deduction is limited and you must use the Mortgage Insurance Premiums Deduction Worksheet to figure your deduction.

6. Capital Gains Exemption

Eventually, you may sell your real home. Depending on several factors, such as years of ownership, substantial improvements, and neighborhood developments, your home may have appreciated by several thousands of dollars. To lessen the tax hit on taxable capital gains from the sale of your property, the IRS may exempt up to $250,000 ($500,00 if married filing jointly) of that gain from your income.

In general, you qualify for a capital gains exemption as long as you have owned and used your home as your main home for a period aggregating at least two years out of the five years before its date of sale. Consult Publication 523, Selling Your Home for more details. The beauty of this tax break is that there is no restriction as to how many times you can use it!

7. Investment Interest

Real estate investors also get a tax break on interest paid on money they borrowed that is allocable to property held for investment. Such investors need to use Form 4952 to figure out their investment interest expense deduction.

Despite its name, this investment interest deduction doesn't cover interest gained from passive-income activities or securities that generate tax-exempt income.

8. Expenses for Business Use of Homes

Freelancers, independent contractors, and small business owners can deduct expenses for business use of their homes. With Form 8829, you can claim the area used regularly and exclusively for business to allocate a deductible portion from a wide range of expenses, including utilities and depreciation.

If your deductions for home business are greater than the current year's limit, you can carry over the excess to 2017! This carry-over will be subject to the deduction limit for that year, whether or not you live in the same home during that year.

9. Tax Credits for "Green" Improvements

To encourage more energy efficient home improvements, the IRS provides tax credits for qualifying expenses. Here are two examples:

Windows, doors, and skylights that met the ENERGY STAR program requirements and were installed between January 1, 2012 and December 31, 2016 at the homeowner's primary residence may grant you up to $500 in energy efficiency tax credits.
Solar energy systems provide a tax credit of 30% of cost with no upper limit through December 31, 2019. The credit will decrease to 26% in 2020, drop to 22% in 2021, and goes away in 2022.

To learn about other tax credit opportunities from energy efficient home improvements, visit EnergyStar.gov.

10. Deductions From Rental Income Activities

Rental real estate provides several tax breaks to landlords. For example, landlords could potentially deduct:

Local transportation expenses to collect rental income or to manage, conserve, or maintain rental property;
Expenses for managing, conserving, or maintaining rental property from the time it was made available for rent;
Depreciation expenses for the wear and tear of rental property;
Local benefit taxes for maintaining, repairing, or paying interest charges for the benefits;
Legal and professional fees directly related to operating expenses; and
Prepaid insurance premiums.

To learn the full list of rental expenses and guidelines for deduction, consult Publication 527, Residential Rental Property. If you use some of your rental properties for personal purposes throughout the year, then you should hire a tax pro to appropriately deduct expenses for rental income. Hiring an accountant to report income from your rental activities is itself an eligible deduction, after all! (See also: 4 Times You Should Splurge and Hire a Pro)

This article is from Damian Davila of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Best States to Start a New Business In

Damian Davila — Fri, 13 Jan 2017 11:00:10 +0000

America is the land of entrepreneurship. The dream of quitting the 9-to-5 rat race and becoming your own boss is alive and well: There are an estimated 54 million independent workers out there today.

Regardless of their generation, many Americans are becoming entrepreneurs, freelancers, or small business owners. Baby boomers are starting 50% of new business and 66% of Millennials would like to start their own business.

As with everything else business-related, the old maxim of "location, location, location!" also applies to starting a new business. Improve the odds of your business surviving its first years and thriving throughout all of its life by choosing one of the best states to start a new business in.

1. Utah

In 2016, the Beehive State topped Forbes' annual ranking of the best states for business across 40 business metrics. And it has done so for the sixth time in the last seven years of this survey. With 93.5 startup businesses per 1,000 business firm population, Utah has the third-highest density of startup businesses.

One of the top reasons that Utah is so friendly to business is its track record of showing entrepreneurs the money. In 2015, business owners in Utah held the most Small Business Administration (SBA) guaranteed loans per 100,000 people in the nation, with an average SBA loan size of $278,754. In 2014, Utah companies raised over $800 million in venture capital, more than twice the $316.2 million raised the year before. With a population of just three million, Utah is able to outrank major states, including New York, based on venture capital dollars raised per capita.

Key hotbeds for entrepreneurial activity in Utah are Provo and Ogden. The Provo metro area offers Camp 4, a collaboration between the public and private sector to help startup tech businesses with office space and other resources, and Brigham Young University's Innovation Academy, a small business incubator for university students. For its part, Odgen starts off Utah's well-known ski corridor that has been dubbed "Silicon Slopes."

2. Texas

Everything's bigger in the Lone Star State, including entrepreneurial spirit. While Texas came in fourth place on Forbes' 2016 list, the state makes it up by being home to four of the top 10 metro areas to start a business in America, according to CNBC. With its city of Austin taking the top spot in the nation, Texas also offers Houston, Dallas, McAllen, El Paso, and San Antonio as attractive alternatives for would-be business owners.

Austin has consistently drawn Internet companies, including the recruiting site Indeed.com, digital coupon site RetailMeNot.com, photo-entertainment site TheChive.com, and technology investments, such as Google Fiber in 2013.

Affordability is a major force enabling entrepreneurial growth. A combination of no state tax on personal and corporate income, a median home price below the national average, and an overall lower cost of living compared to other states in the nation allow Texas to provide a cost of doing business that is 10% below the national average. Many small business owners are taking note of the business-friendly Texas climate because the number of SBA loans per 100,000 grew by 41.90% during the 2012–2015 period.

3. Colorado

Since 1993, the nonprofit Kauffman Foundation has been providing educational resources for U.S. entrepreneurs, working to accelerate metro-area entrepreneurship hubs. Through its indexes of startup activity, main street entrepreneurship, and growth of entrepreneurship, in 2016 the Kauffman Foundation provided a positive outlook for potential and current business owners in the Centennial State:

8.56% of adult residents list business owner as their main occupation (highest in the nation);
70.28% of firms 10 years or younger that started small grew to employ 50 people or more by their tenth year of operation;
87.2 startup businesses per 1,000 business firm population;
47.93% of small businesses remained in operation throughout their first five years.

Colorado also fared well on Forbes' list, ranking #5 for the best states for business. Three key factors contributing to Colorado's high ranking are its young and highly-educated labor force (38% of adults have a college degree, a figure behind only Massachusetts), robust current economic climate, and expected second-fastest job growth in the nation over the next five years.

One key area in Colorado that is experiencing extraordinary growth is the Denver metro area, in part due to the legalization of marijuana in 2012. The legal marijuana industry has been estimated to be worth $1 billion per year since 2014 and created more than 18,000 full-time jobs in 2015.

4. North Carolina

Ranking second on Forbes' list (and in the top five overall for 11 straight years), the Tar Heel State generated $2.7 billion in foreign direct investment and 5,300 jobs in 2015. Key reasons for these numbers are that North Carolina's business costs are 11% below the national average (fourth lowest in the nation) and only 3% of the state's workforce is unionized.

In 2016, the Kauffman Foundation provided the following key details about North Carolina:

49.28% of small businesses remained in operation throughout their first five years;
75.5 startup businesses per 1,000 business firm population;
0.33% of adults became entrepreneurs in a given month (fourth in the nation).

Key hotbeds for entrepreneurial activity in North Carolina are Charlotte and the tri-city region of Durham, Chapel Hill, and Raleigh (known as the Triangle). Over the past few years, attracted by fairly low property taxes, affordable home prices and living costs, and low tax rates (5% for corporate tax and 5.75% for personal income tax), many Americans have been moving into these two areas and looking to establish businesses of their own.

This article is from Damian Davila of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Ways to Protect Your Business During a Divorce

Carrie Smith — Tue, 01 Sep 2015 09:02:44 +0000

Getting a divorce can be one of the most emotionally devastating times in your life. Combine this with running your own business and next thing you know, your life has become extremely stressful. I know, because I've been there.

If you're going through the a divorce, here are some important financial steps to take to protect yourself and your business.

1. Get Organized

The first step when dealing with a divorce as a business owner is to get organized and find a lawyer who can help you take the right steps.

Gather all your financial documents, business and bank statements, agreements, and other information that pertains to your business and marriage. Any debts and assets you and the business owns will have to be calculated and divided up. Examine all the bank accounts and documents, as you don't want to be out of the loop in a situation like this.

Depending on the state you live in, and whether or not you signed a prenup, you and your spouse could be forced to split the business profits — and everything else — 50/50. If you and your spouse work in the business together, the operating agreements should outline directions for each spouse to protect themselves during a divorce or other separation.

2. Fill In the Details

What assets or savings did you bring into the relationship? How much do you have personally invested into the business? What are the balances of your personal, joint, and business accounts, investments, credit cards, and loans?

Work with your spouse (or a lawyer if you need help mediating) to fill in all these details. Put the information on paper, or in a spreadsheet, so you're both on the same page. Ask your accountant for all the financial reports, profit and loss statements, and balance sheets for the business, too. Everything needs to be accounted for.

3. Protect Yourself

The next step involves dividing up the assets and agreeing on whether to sell the business, dissolve it, or keep it up and running. If you jointly own a home, the mortgage will have to be refinanced into your or your spouse's name, unless you both agree to sell it.

By the end of the divorce process you want all of your assets divided fairly. Leaving joint accounts after a divorce can lead to credit reporting inaccuracies and even fraud.

Take steps to protect yourself and your business during this process by separating all joint accounts, assets, and debts. Until a property is sold or refinanced into your name, you're still liable for the entire mortgage or rental payment — whether or not your spouse helps split the bill.

4. Keep a Paper Trail

Any conversations you have with your spouse need to be in writing. Save all your emails, notes, and text messages. This is especially important when it comes to figuring out the important details of how you'll handle the business together.

In the event that you and your ex can't discuss things in a calm fashion, you'll need written proof of what each other has agreed upon so you can move forward with the divorce. Keep a paper trail of all the bank accounts you've dissolved, assets you sell, debt settlements, loan refinances, and any other financial paperwork. You may need written proof of these transactions in the future.

5. Start Fresh

Continue protecting yourself as you move forward and rebuild your life. This means opening up new bank accounts in your name only, for both personal and business, and making a plan to get back on track.

Check your credit report using a secure site like annualcreditreport.com, to make sure everything is accurate. If you see any incorrect accounts, numbers, or names, reach out to the top three credit bureaus and get it corrected.

When my divorce was finalized I was left with over $14,000 of consumer debt that we accumulated during our marriage. I had to find a new job and start making a plan to pay it down. Our credit was also conjoined since we had shared accounts, and these took some time to separate. It was rough to say the least.

You don't have to lose your business just because you and your ex aren't on speaking terms. Work with a legal representative you trust and make sure everything's in writing.

Have you ever gone through a divorce as a business owner? What was your experience?

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This article is from Carrie Smith of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

250+ Tips for Small Business Owners

Amy Lu — Fri, 29 Apr 2011 10:36:09 +0000

It's not easy owning and running a small business, but Wise Bread can help. Here, you'll find expert tips for sales and operations, taxes and recruitment, tools and hacks, and more! Be sure to check out Wise Bread's Small Business Resource Center for more helpful articles.

Starting Out

How 16 Great Companies Picked Their Unique Names — Ever wonder how companies like Google, Lego and IKEA found their names? Were they complete accidents or results of savvy marketing? The answer may surprise you.

8 Great Business Ideas You Can Start Today — Become an environmental consultant and teach companies how to make themselves more green.

How to Write a Business Plan — It's helpful to break the planning process down into separate topics, and then look at how they fit together in the overall plan.

How to Get a Business Line of Credit — As with any loan, you must present reasonable financial documents that follow standard accounting practices to obtain a line of credit.

Tools and Hacks

7 Essential Small Business Tools to Save Money, Time, and Space — With EchoSign, contracts can be filled in and signed, verified and secured, and a PDF copy distributed to everyone in no time at all.

Save Time and Money with Business-Friendly Smartphone Apps — The iPhone, Android, BlackBerry, and other smartphones are changing the way we do business. There are numerous apps for these devices that enable you to perform activities while on-the-go, which can save you both time and money.

Cyber Security on the Road — CrashPlan has a free option that lets you back up your data to other (remote) computers. The data is encrypted while being transmitted, and is easily recoverable should you need to access it.

14 Travel Hacks and Airfare Saving Tips — Be sure to check out what the smaller regional airports can offer. Regional airports often cater to business travelers, so the quality of travel and service can be superior.

30 Easy Ways to Go Green in the Office — U.S. citizens alone throw out over four million disposable pens — daily. Consider stocking reusable pens instead and only buy refills for these pens.

Cash Flow and Funding

How to Raise Money on “Crowdfunding” SitesCrowdfunding enable entrepreneurs in artisanal and creative businesses to collect small donations from friends, family, and acquaintances to bring a project to fruition.

How to Think Like a Bootstrapper — Good management practices are far more important to your success than big piles of cash are. Here are a dozen tips to help you start and grow your business with little or no money.

5 Ways to Earn More Every Week — Use your social media pages for market research. They can be great places to float ideas for new products or services, so you can act on them quickly.

40 Tips to Accelerate Your Cash Flow — Offer several convenient payment methods. Customers should never have an excuse for late payment related to your lack of convenient payment options.

5 Budgeting Ideas for Any Small Business — Be as realistic in your cash-flow projections as possible. It's better to underestimate your potential business income than to overestimate when you come to budgeting.

27 Money-Saving Tips from Successful Small Businesses — Next time you put up a job ad, eliminate the line that says, "Must have X years of experience," and replace it with "Recent graduates welcome to apply." Experience isn't everything, and it costs more.

Taxes

31 Small Business Tax Deductions — Not deducting all of the expenses that you are allowed leaves money on table. Use the following checklist of rules to reduce your taxable income as much as legally possible.

When Is Lunch Deductible? — There are many situations in which your lunch isn't deductible, even if you're eating it at your desk. Knowing the difference can make a big difference in your tax burden.

6 Tax Penalties You Can Easily Avoid — Pay the tax on time, even if this means requesting an installment payment agreement on Form 9465 or by charging the outstanding amount to a major credit card.

8 Invitations to an IRS Tax Audit — Be especially careful to report all your income. If you've received a 1099, so has the IRS and their computers will notice if they don't match up.

How to Choose an Accountant for Your Small Business — The role of an accountant doesn't have to be limited to tax preparation. He can be a valuable adviser for your business year round.

Hiring

6 Steps to a Good Hire — Calculate your revenue per employee, and compare where you stand with your historical performance and with others in your industry. This metric, more than any other, will let you know when you should hire, fire, or hold.

10 Tips to Landing the Right Freelancer — Know what skills are required. If you're not sure, you probably need to think more carefully about what you want to accomplish before you go looking for help.

Independent Contractors vs. Employees: Keeping Them Straight — For the IRS, telling the difference between a contractor and employee is a matter of determining just how independent the individual is from the company he's working for.

Sales and Customer Service

16 Simple Ways to Keep Customers — Present carefully-selected merchandise, broad enough to cover a range of needs and style preferences in key categories but not overwhelming in choices.

5 Ways to Make Your Customers Feel Warm and Fuzzy — Retaining customers is easy when you treat them well. Use these easy, low-cost ideas to make your customers feel extra special.

10 Examples of Shockingly-Excellent Customer Service — Some companies actually go above and beyond the call of duty to provide excellent customer support. Here are a few recent examples of companies that have decided to put consumers first.

Get Rid of Bad Customers — Bad customers are costing you more than you realize. Here are some types of bad customers and techniques to get rid of them (without alienating your good customers).

Please check out our Small Business Resource Center for more articles on small business and leadership.

This article is from Amy Lu of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Apps for Business Owners on the Go

Michael Dykstra — Fri, 17 Sep 2010 12:00:06 +0000

If you're a business owner, chances are you have a smartphone. Whether it is a Droid, iPhone, or BlackBerry, these high-tech handheld gadgets are essentially on-the-go computers, able to perform numerous advanced automated tasks. There are hundreds and hundreds of apps out there, many of which help businesses move more efficiently. Here's a list of five great smartphone apps for business owners on the go.

WorldCard Mobile

Business cards almost seem obsolete in today's expansive online environment, despite the fact that they are still a staple for most working professionals. But where does one store all those business cards? When you're not near your desktop drawer, but you need to find a business contact, this app allows you to conveniently store your contacts on your phone — where most of your business takes place, anyway. By snapping a photo of a business card on your iPhone, WorldCard's scanning technology reads the text and inputs the information to the proper fields on your phone. You can edit the information if need be and even add a photo of the person, which is then automatically stored in your phone's address book. WorldCard is available for $5.99.

ProOnGo Expense with Receipt Reader

Tracking business expenses can be a tiresome chore. Filing away receipts and invoices can be time consuming and amounts to unnecessary clutter. But with the ProOnGo app, it no longer needs to be. Customizable charts and graphs nicely organize your different expenses all from your phone. You can simply snap a photo of your receipt from your iPhone camera and the information is automatically imported into your expense sheet. From here, you can also easily export your expense chart as an Excel spreadsheet or upload it to Quickbooks. ProOnGo is available for free.

Evernote

The versatility and simplicity of Evernote means you can easily store and retrieve important bits of personal data. Any entrepreneur knows good business ideas can come at any time, and having a place to write these down is important when you're busy multitasking on the go. Write a quick note, snap a photo and write a caption, or leave a voice note to be retrieved for later. Whether text, audio, image, or any other file type, Evernote gives you the possibility of making your smartphone wholly unique to you. Evernote easily synchs back to your laptop and other web devices for access and convenient compatibility. Evernote is available for free and also with paid options.

XE Currency

It truly is a global economy today. With the speed and reach of the Internet, the pace of business continues to accelerate. As more business deals and partnerships are established across borders, the need for international business travel is high. If you happen to be a frequent international business traveler, this app's for you. Most countries use their own form of currency, and with this app, you get real-time updates and conversions with international markets. You can easily switch your base currency and monitor up to 10 currencies at any one time. This app will also appeal to anyone working in international trade, finance, and futures. XE Currency is available for free.

Battery Go!

Battery life, or lack thereof, is a regular complaint with many smartphone users. As a business owner, it's crucial that your phone doesn't die while you're on an important call or project. Battery life depends largely on what phone capabilities are being utilized. For instance, watching video and Wi-Fi web surfing are going to eat up more battery life in shorter time spans than listening to music and talking to business associates. This app breaks down your iPhone's specific energy usage lifespan so that you'll have a much better idea of what activities you can actually do on your remaining charge. While the app suggests, "the times should be used only as rough estimates and not as exact fact," it's clear that it's much more useful than the standard default battery meter. Battery Go! is available for $0.99.

What smartphone apps do you use for your business on the go?

Guest Post Blurb:

This is a guest post by Michael Dykstra. Michael is an expert writer on phone systems based in San Diego, California. He writes extensively for an online resource that provides expert advice on purchasing and outsourcing decisions for small business owners and entrepreneurs such as VoIP service at Resource Nation.

This article is from Michael Dykstra of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Six Tips to Good Business Management

Nora Dunn — Wed, 16 Apr 2008 22:29:47 +0000

You don’t have to be a fortune 500 (or even a fortune 500,000) company to take advantage of these tips for good business practice. In fact, some of the best small businesses have evolved and succeeded by implementing some of these principles.

I will be using the restaurant industry as anecdotal examples throughout this article, but you will see that the principles below apply to any industry. Maybe you will identify some restaurants in your area that aren’t following these tips. Watch them struggle for business, and ultimately close down as a result.

Know-How is Not Enough.

Just because you’re an expert in your field doesn’t mean that you have what it takes to be a business owner. When you hang out that open sign on day one, it is unlikely that customers will flock to you right away just because you know what you’re doing. You’ll need marketing and administration (at the very least) to grease the wheels of your company.

How many chefs or self-professed foodies have you met or known to open a restaurant because they love food and cooking, only to have it close down months or years later because people weren’t beating a path to their door when they opened? Making good food isn’t enough; people have to know about it to experience it. You also have to run a tight ship financially, which requires the advice of tax and financial experts, and ultimately an experienced general manager at the helm.

Hire the Right People.

If you are technically proficient in your field but lack marketing knowledge and expertise for example, then be prepared to hire the right people to fill in the blanks. This will start the trend of people beating a path to your door. The next trick is to keep them coming back and referring their friends.

Don’t Hire your Friends!

This may seem obvious to some, yet I’ve seen it done over and over again. Not only can it compromise (and in some cases destroy) a perfectly good friendship, but it can do the same to the business.

Sometimes, it works. But hire with caution, and a heck of a lot of communication (both in the friendship and business). Be prepared to wear different hats while at work and after work.

Don’t Make Snap Decisions. Planning Strategy is Everything.

I have an acquaintance who recently stepped in as part-owner of a restaurant. The restaurant is well-situated and ultimately successful, but with a slow-down in businesses in the area, they have to work extra hard to keep enough customers walking through the door and keep them leaving happy.

After one particularly harrowing night when everybody in town decided it was the place to dine and not enough wait staff were scheduled, their patio was drowned out with rain, and one of their head chefs walked out, the owners made some snap decisions during the aftermath. One of their decisions was to double the number of wait staff on shift all the time. It is my feeling that they didn’t truly see this idea through to conclusion before implementing it; they now characteristically have way more wait staff than necessary on shift. The hourly wages paid out are increasing exponentially (and unnecessarily). Each servers’ share of the tips has significantly decreased, and often a number of them get cut before the night is over. The restaurant will likely lose their best servers because of this.

You may say “so? Big deal. Hire more servers,” but servers are the front lines of a restaurant. Poorly trained or inexperienced servers can be the death of a perfectly good restaurant; retaining the good ones is crucial. This was a snap decision may be a critically detrimental one.

Hiring/Promoting From Within isn’t Always Good.

Although promoting from within encourages staff to “reach for the stars” and gives certain personality types something to work for, it isn’t a good idea to categorically hire from within. Sometimes the skill sets just aren’t there within the existing employee base.

A bar/restaurant I know of only hires bartenders from within. If a server has proven themselves with blood, sweat, and tears, they may be so lucky to be promoted to bartender. Sadly though, servers and bartenders are not one and the same. The skills are not transferable, and not all servers understand the finer points of tending a busy bar. Hence, their bartenders are more often than not under-skilled and unprepared for being in the trenches. They don’t have mixology knowledge at their fingertips, they can’t make drinks quickly, and they don’t have the rhythm to manage a fast-paced bar when it gets crowded. They are simply thrown into the fire and made to survive by trial & error or go down in flames, ultimately quitting or being fired.

They are losing business because they insist on promoting servers from within to become incompetent bartenders, instead of hiring proficient bartenders to begin with. And when you’re running a busy bar, a good bartender is an essential element to make things run smoothly.

Good Business is in Consistency.

This could be the very key itself to good business practice. If you do nothing else, be consistent. E-Myth is an excellent book by Michael Gerber centered around this crucial concept.

Consistency is what franchises are built around. McDonald’s pioneered and epitomizes this idea. When you walk into a McDonald’s anywhere in the world, you know exactly what you are going to get when you order a quarter pounder, right down to the exact ingredients, quantities, and order of toppings.

A fledgling restaurant I worked for many years ago liked to think it was fancier than it was. The chef often played around with both presentation and ingredients for their standard entrees, thinking that he was adding variety and constantly improving upon the dish. Unfortunately when I ordered the salmon I never knew how spicy it was going to be, what it came with, and even how it was prepared. You don’t create a loyal clientele or repeat business with discrepancies; you do so with dependability and consistency.

With consistency, professionalism, proper planning of strategies, and alignments with the experts, you can run a top-notch successful business. Don’t reinvent the wheel, or ever find yourself saying “my business is different, I don’t have to follow that rule”. Because the wheel is pretty darn efficient, and I’m sorry to say, your business just isn’t that different. Good business management equals good business. Period.

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This article is from Nora Dunn of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: