business success tips

The way you structure your business will provide guidance as to how soon you need to begin paying taxes on your earnings. Though there can be twists, the general rule is that if you operate as a sole proprietorship, you dont need to begin immediately paying taxes. Going by the letter of the law, if you make more than the de minimus amount of $400, youre supposed to file taxes quarterly, says Williams. But there are no penalties if during the year you shift from being an employee to being self-employed and you dont make quarterly tax payments.Thats not true if youve formed a corporate entity. Those entities must begin filing taxes on income as they earn it, says Williams. If you as an entity make money, you have to report it quarterly.

One of the first questions every small-busines owner must consider is whether to operate as a sole proprietorship or as a corporate entity. You automatically start out as a sole proprietorship, says Certified Financial Planner David M. Williams, founding director of Business Enhancement Associates LLC in Cordova, Tenn.Operating as a sole proprietor costs no money because you dont have to pay to create corporate documents and tax returns. Whether you should continue to operate as a sole proprietor, however, depends on your business and personal risk tolerance.We always strongly urge people to set up a corporation because it gives you some legal protection, says Don Mazzella, chief operating officer and publisher at Information Strategies Inc., a Ridgefield, N.J., provider of publications for small businesses. Youd be suprised at the liability you can engender when you set yourself up as a business owner. People may come at you with litigation or try to dun you for bills. If nothing else, it protects your personal credit rating.

But Williams isnt convinced a corporate entity is necessary for everyone. I wouldnt say you should run out and form a corporate entity until you know you can be in business for yourself, he says. Its expensive, but its also a waste in both time and money. Once you know you can be successful, if youre doing consulting work and are truly the sole proprietor of your company, staying a sole proprietorship is probably best. If theres more than one person with capital involved whether thats cash or sweat equity form an entity that spells out how much is owned, who is responsible for what, and whether taxes should be paid at the corporate or individual level.Cost shouldnt be the driving factor in structuring your business. Many online sources allow you to create a corporate entity for just a few hundred dollars, says Allen Bostrom, CPA, president and CEO of Universal Accounting Center in Salt Lake City, which trains accountants, tax preparers and bookkeepers. You just put in your information, and theyll create templates. Just a few are Legalzoom.com, The Company Corp., SCORE and Incfile.com.

When youre an employee, your employer withholds roughly 15.3 percent of your income to fund Social Security. You pay half out of your pocket, and your employer covers the other half. When youre self-employed, you shoulder the entire amount. You dont have to make quarterly payments to cover the tax, but you can avoid getting stung at tax time by setting aside funds to cover those taxes.

Few startups have extra capital to spend on insurance they dont really need. Can you save a buck by going without? In general, you dont need insurance until you hire your first employee, and then youll need a lot of insurance, says Mazzella. If youre working out of your home and your only liability is someone tripping and falling during a visit or losing your office equipment in a fire, you can make sure your homeowners insurance covers that. If youre operating outside your home, youll want a minimim of insurance on your office and assets.

What about liability insurance? That depends on your business. If youre a service provider whos unlikely to get sued no matter how poorly you perform, such as a proofreader or graphic designer, you probably dont need insurance. We tell our bookkepers that every insurance agent will tell them they need errors and omissions insurance, says Mazzella. But weve never heard of bookkeepers being sued unless they stole from the business or committed fraud, and no insurance will cover that.If you sell products, you again have to evaluate your risk. If you sell bottle corks, your liability would probably be limited to replacing bad bottle corks, says Williams. If you mass-produce cherry jam, you have the liability caused by people getting sick on your jam or breaking their teeth on a cherry pit. You wouldnt want to self-insure that liability. Youd want product liabliity insurance.

What good is being your own boss if you dont get paid for your work? Wherever possible, collect 10 (percent), 15 (percent) or 25 percent of your fee upfront, says Bostrom. Your clients reaction to that request will tell you a lot about whether theyre capable of paying you.Always use contracts, recommends Alan Siege, president and CEO of Small Business Management Consulting in Brooklyn, N.Y. Specify clearly what the deliverables are and what and when people will pay you and make people acknowledge it. By having a contract, youre saying that you play for real and that youre someone whose business people need to take seriously.

Too often, people jump into a business built around a product or service they think will be successful, rather than one that is already proven to have a market.What do I mean?Instead of creating and selling a new sports shoe with the latest trendy design and materials, youd be much better off from a business perspective to focus on shoe category generally (a proven category because which people buy shoes every day) and then focus more specifically on the niche of high performance sports shoes, (which you may even sell in a section of a shoe retail outlet). Better to have a small slice of a large category than a large slice of no market at all.

Cash flow is the lifeblood of business, and is absolutely essential to feed bottom-line profits. So you need to find ways to jump start cash flow immediately.How do you do that? In a professional services business, you can ask for deposits on work up-front, with balances due on delivery.You can do the same in retail, especially on high-ticket or specialty item and position it as an added value and a way to insure delivery by a specific date.You can also add value to generic items by creating private labels, and develop continuity programs where customers pay an up-front monthly fee to insure delivery or availability of items they will buy on a repeat basis. Of course, the key is to make sure there is little or no gap between when you pay for labor, stock inventory and when you actually get paid. Ideally, youll find ways to get money up front, and your cash gap will never be an issue.

All the cash flow in the world is worthless if its not positive cash flow, which means you have to bring in more cash than you pay out.To do this, you need to keep your costs and expenses low. Weve touched on this before, especially in terms of outfitting a startup. The main idea is to never pay retail , and look for used or gently used items to furnish your office or your retail space.Paying vendors up front also gives you leverage for negotiating better prices. Especially in this economic environment, where credit is at a premium, vendors are more willing than ever to find creative ways to finance transactions, and that is a trend will likely continue over time.So do some extra work and research now to discover how owners and vendors are finding ways to work out deals, and you just may hit on whole new ways of doing business.

In business, nothing happens until a sale is made. From the jump, youll need to find a good way to get leads, convert leads into sales, and make sure you keep getting repeat sales from your customers.The way to do this is to find or create a marketing and sales funnel system that you can work, test, measure; one that anyone in your company can utilize.Too many entrepreneurs focus on getting their brand right before they start to generate leads. That is exactly the wrong way to go about business. Leads are always more important than your brand, so dont waste money getting your brand right at the expense of spending that same money to buy new customers.Soon, youll discover you can build your brand from the ground up, versus spending years and hundred of thousands of dollars building it from the top down. Dont presume youll even survive that long, because without leads, you wont!

In business, there are five drivers that impact profits. If you can master them while keeping your costs in check, you will run a successful business.Its as simple as getting more leads, converting more leads into customers, increasing the number of times those customers buy from you, increasing the average price point of your sales and increasing your profit margins.Do any one of those, while also keeping costs down, you will see more profits. Do all of them and you will see your business really take off.