Understanding Your Business – A Feasibility Analysis

Every business is unique. There is no single set of rules that apply to all. The challenge to survive and grow that business is a function of its market, its customer base, its competitors and its resources. Only by understanding where opportunities may lie for supporting, growing and expanding opportunities will the business be able to meet and overcome the enormous challenges that exist today.

(While understanding the competition is of extreme importance, it is beyond the purview of this article.)

Understanding the overall picture is vital. You need to understand your consumer and his relation to your product or service. What is the ‘value proposition’ that your product or service offers your customer?

Regardless of the type of product or service you offer, a major determinant of the success of your business will be the price you set. Price must cover the costs of production including overhead. To lower prices, you must lower your costs, so you must know the real costs of running your business.

The first step is to gain a thorough understanding of the internal workings of your business–you need to understand your critical business processes–all of the activities that are essential to providing quality products and services.

Work to understand your culture, processes, and technology. Start by analyzing your business using a process map to identify your bottlenecks and delays. Identify the activity owner of each business function. This is generally a manager or supervisor with overall responsibility for a particular business unit.

Rank the importance of each process as it impacts the performance of the business. The aim is to identify where the flow slows within your business. By documenting and analysing every interface between departments you will ensure that all business problems are addressed and reduce the risk of eliminating the benefits of existing processes.

Determine how effective the accounting procedures are in monitoring all your financial activities. Out of date or poorly prepared records can actually hinder the growth of your business. Evaluate how computers and software can improve efficiency.

Understanding your business inside and out will give you much better operational control. It will enable you to determine what processes and procedures need to be eliminated or added to ensure your survival and prosperity.

Understanding your business, and understanding what the risks are and what changes you have to make will be the key to whether the business succeeds or fails.

Four Tips to Funding a Business Start-Up on a Shoestring

Are you unsure about whether or not to start your business because of lack of start-up funds? Many small and home business owners face this very issue in the beginning. Do not get discouraged — there are lots of ways you can fund your start-up business on a shoestring.

The first thing to remember is that there are endless numbers of success stories of shoestring businesses making it big.

One of my clients, back when I was running a web hosting business, started a baby sling company from her kitchen table. She simply purchased fabric and thread and used a sewing machine she already had to create a sling that was comfortable for her, and her baby. She really did not even plan to start a business.

But after getting rave reviews from friends and strangers at the grocery store, she started selling her slings online.

Today, she is a well-known sling maker whose products have been in big box stores and who sells thousands of dollars a day from her website.

Be encouraged and know that you can build a successful business from scratch, but you have to be focused and never willing to quit.

The second suggestion that many who have been in your shoes suggest, is not to quit your job until your business begins showing a profit. All too often, new business owners are enamored with the idea of owning and running a business and quit their day jobs, only to discover that funds run short fast. Then they are forced to take extreme measures, or look for another job.

Next, you have to truly know your business inside and out. How much money will it cost to run your business? You should complete a business plan, which will tell you if your business idea will be a feasible one or not. Research similar businesses and find out what kinds of profits and losses they are seeing.

Finally, if you find that you still need some financial backing but you do not want to borrow money from a financial institution, find a few investors. Present your business idea, along with your prepared business plan and research to trusted friends and colleagues and request their financial backing for your start-up business. Many times you will be able to obtain this kind of monetary help from those who believe in your business and want to see you succeed.

Small Business Score – Are You Doing it Right?

A small business can be a good source of income for many people. Since the business is able to pay its bills and still make a profit, then it will have a good credit standing. Unfortunately in the business world, there are times when business can be good and other times when there is no money coming in. You have to be ready for this kind of situation.

If you have been in business for a while, you should have at least mastered the money making months and those that are not. When you do this you will be able to survive through the bad months using the profits of the good ones. You have to be organized and know how your business inside out. If you have no structure in your business, you may be caught unaware and find yourself in a difficult situation. This could stem from debts, or a certain need to expand your business.

Whatever the case may be if you have no savings, you may be forced to borrow money. When you approach lending institutions there are specific requirements they look for before they can give you funds. Your credit score is a very important aspect that is assessed by these institutions. If you have gone through a rough patch recently and you need funding, fear not. There are ways to improve and build your small business score. Ensure that you pay your bills on time. It will be evident to the lenders that the business is operating as it should.

Another way for you to build your small business score is to keep good financial records with a solid accounting structure in place. This way you will be able to keep track of money coming in and that going out. You will also be in a position to project any financial problems before they arise. This can cushion you from future financial disaster. This will reflect on your business score and lenders will be more inclined to give you money.

Tax Strategies for Home-Based Businesses

Why start a home-based business

Although the primary reason for starting a home-based business is to make money, there are a number of other reasons for starting your own business including:

Freedom

You have the ability to make your own schedule and not live by a time clock or be subjected to working hours that are not conducive to your family life.

No bosses

You never have to answer to anyone but yourself so no bosses will be hounding you or threatening you with your job if you don’t perform to their expectations.

Mobility

You’re never chained to a desk or stuck in some cramped cubicle.

Earnings potential

You get out of your business what you put into it, so your earnings potential is only limited by you – not the whim of the company or employer that you are working for.

Just be aware of the fact that owning your own business involves a great deal of discipline, maturity, and responsibility. The freedom involved with creating your own work schedule could also be a double-edged sword if you aren’t careful.

IRS and tax considerations

Despite the above advantages of having your own home-based business, there are other important aspects that need to be taken into consideration, namely tax planning. Taxation is a completely different animal when you own your own business because unlike having an employer that makes the deductions for you, you are accountable and responsible for handling this issue on your own. If you want to minimize your annual tax bill, tax planning is critical and needs to be an ongoing event.

Understanding the tax write-offs involved with home-based businesses The biggest mistake that many new home-based business owners make is that they focus on whether to start up that business inside or outside of the home. What they should be focusing on is the tax advantages involved. Surprisingly there are tax advantages when owning a home-based business that you wouldn’t be able to enjoy in a different endeavor. Learning more about your allowable deductions and the numerous write-offs you can take advantage of is the key. Here are a few aspects to consider:

To take or not to take the home office deduction – of all the allowable deductions and other numerous write-offs, this is probably the biggest decision that you will need to make. Even tax accountants debate over whether or not this is a smart idea. This deduction covers both the depreciation and the operating costs associated with maintaining your home office. The percentage of your home’s square footage that is dedicated to your office is normally deductible.

Maximizing the deductibility of your expenses – there are numerous legitimate expenses that may be considered for deduction over and above the ones mentioned in the prior paragraph. Home-based business overhead typically includes a variety of expenses such as advertising expenses, travel expenses, office supplies, equipment depreciation, etc. Chances are, you’re going to be surprised when you realized how many of your daily expenses are actually tax deductible.

Plan your errands with your taxes in mind – the first mile that you travel away from home is deductible so you want to incorporate a component of your home-based business into every trip you make away from home, even if you are running personal errands. For instance, if you have a PO Box set up for your business mailings, make sure that you fit in as many business cold calls as possible when travelling from your home to the post office and back.

Remember, the key to allowable home-based business deductions as well as any brick & mortar business deductions is thorough record keeping. I recommend consulting with your accountant.