Market research can help small businesses in many ways. Learn how and find out about resources that can help.
Whether you’ve just launched a startup or have been in business for years, it’s critical to control your company’s overhead costs. Overhead expenses, the fixed costs (rent, insurance, etc.) of operating your business, have a tremendous impact on your bottom line. How effectively you manage them can mean the difference between profitability and extinction.
It pays to carefully review what you’re spending on overhead and find ways to reduce those costs. Not sure where to start? Consider the following ideas:
7 Tips for Trimming the Fat From Your Small Business’s Overhead Expenses
1. Explore sharing marketing costs with complementary businesses in your local area.
Brainstorm ideas with fellow entrepreneurs about how you can cross-promote each other and get exposure through collective efforts.
For example, a bed and breakfast that serves as a wedding venue, a photographer, and a florist could all save money by splitting the bill and running an ad featuring all three businesses in the local newspaper.
2. Keep a tight rein on travel and entertainment expenses.
Have a clear policy and budget for these expenses. Under some circumstances, it might make sense to hold business meetings that involve treating clients to lunch or dinner, but be judicious in determining when that’s necessary. Wining and dining costs can add up quickly when no guidelines or boundaries are in place.
3. Reduce the need for office space by having a virtual team.
As your business grows and you need to add headcount to your team, consider allowing employees to work remotely. This can help you avoid needing to lease or buy a larger office space, and it will help you reduce the costs of office supplies and utilities, as well.
4. Be selective about the memberships and subscriptions you maintain.
Besides the challenges of finding the time to participate in multiple networking groups and professional organizations, the membership fees can put a strain on your budget. Strategically choose the organizations you join by considering whether they provide ample opportunity to build relationships with your target customers and whether they are necessary for your professional reputation.
For example, the owner of a tour company would likely benefit immensely from a membership to the local visitor bureau whereas professional organizations not focused on the travel and tourism industry might not offer as much return on investment.
5. Pay the annual fee rather than on a monthly basis for cloud-based software.
Even though the lump sum annual cost may sound like a lot of money compared to the monthly fee for online software programs, paying for a year upfront can often save an appreciable amount of dollars over time.
For example, a subscription to Evernote Plus costs $3.99 per month with the month-to-month plan and the equivalent of only $2.92 per month by paying $34.99 for the annual plan—a savings of 27 percent.* Similarly, Hootsuite offers its Professional subscription for $14.99 per month, or you can choose to pay for an annual subscription for $119.88, which is the equivalent of $9.98 per month—a 33 percent savings.*
By switching from month-to-month plans to annual subscriptions for several or all of the software solutions you’re using, you may discover you’ll cut costs considerably.
6. Collaborate by phone and email when it can be just as effective as meeting face-to-face meeting.
With the high price of gasoline, it makes good economic sense to reduce how much you drive. While some business dealings require face-to-face interaction, many collaborative efforts can be accomplished through a phone call or email. When appropriate, suggest that you talk with customers and project partners via phone or exchange information through email. You might find that they, too, would rather converse that way. Not only does cutting back on driving decrease your mileage costs, but it also saves valuable time and wear and tear on your vehicle.
7. Leverage rewards programs.
Take advantage of free rewards programs that retailers, your credit card, airlines, and other businesses offer. From office supplies to business furnishings to discounted airfare to cash back, these programs enable you to get exclusive deals, rebates, and other incentives that can save your business money.
Where to Turn for More Tips on Running a Profitable Business
For more insight into how to manage your business’s overhead costs, contact a SCORE mentor for guidance. With experience in all aspects of starting and running a small business, our mentors can help you objectively review your spending and brainstorm ways to run a more profitable company.
*According to the company’s website on 8/30/2018
Many startups struggle with financing their small businesses. With the average cost of starting a business approximately $30,000, most entrepreneurs need to seek some source of funding beyond their own coffers. For some, borrowing money from friends and family may be their only option.
According to credit analyst and volunteer SCORE Portland mentor Matthew Buonopane, “The five Cs of credit are of primary concern to banks when lending to businesses. These C’s include: character, capacity, capital, collateral, and conditions. While character, capital, and conditions may be in place to the bank’s satisfaction, collateral and capacity, or a history of good operating performance, are often absent or difficult for small business owners to obtain.”
Using funds from relatives and friends comes with unique risks and benefits, so carefully consider the pros and cons before asking Aunt Jane to float you a loan.
- Borrowing from friends and family may give you quicker access to cash. They probably won’t demand as much documentation about feasibility and your business plan before helping you financially.
- You may have more flexibility in setting the payback arrangements so you’re not feeling strapped or overstressed as you start and grow your business.
- When friends and family invest in your business, you may find they have an abundance of enthusiasm about your endeavors. Having their moral support and encouragement can keep you motivated and optimistic.
- If your business fails or hits hard times, you risk hurting the financial security of those you love if they extended themselves to support you.
- Borrowing from loved ones may cause your relationships to become strained if your near-and-dear lenders feel—since they loaned you money—they have a right to tell you how to run your business.
How Can You Borrow To Build Your Business Without Breaking Trust
First and foremost, be upfront about the risks and challenges involved in starting a business so your friends and family know what they’re getting into.
Also, consider these other tips before you accept funding from them:
- Conduct research and do your due diligence before asking for money. Do you feel confident your business will succeed? Ask yourself, “Would I invest in this business if someone asked me to?”
- Be realistic when considering what funds your business will require. Get a good handle on the costs your business will have to cover so you’re asking for an amount of money that’s in line with your needs.
- Determine if the funding will take the form of a loan or a share in your business.
- Craft a contract and lay out a payment plan. This will ensure you and your friend or family member are on the same page and have the same expectations.
Get Help In Considering All Options
Even though you may think borrowing from friends and family is your only option, there may be other viable funding resources that you’re not aware of. By contacting SCORE and setting up a time to meet with a mentor, you might learn about alternative financing opportunities. Reach out to us today. Mentoring is free of charge, and our mentors have experience in all aspects of starting and growing a small business.
Whether your New Year’s resolution is starting a new business or you want to grow your existing one in 2017, you’re smart to seek expert guidance and resources that can help you. That’s exactly where SCORE , a national non-profit offering free, confidential mentoring and business education comes in.
For more than 50 years, SCORE has helped entrepreneurs like you navigate the challenges of launching and building their businesses.
As a local chapter, we at SCORE Portland Maine find that not all small business owners in our community are aware of how we can help fuel their success. You might say one of our New Year’s resolutions is to change that!
SCORE Portland Maine’s services include:
- FREE mentoring – That’s right. For absolutely no charge, you can consult our mentors for as many sessions and for as long as you feel you need to. Our volunteers come from diverse professional backgrounds and collectively have knowledge and expertise in every aspect of starting and managing a business. You can meet with mentors in person, by phone, by video call or receive counciling via email.
- FREE Workshops – We offer several workshops to guide you through the steps of starting a business and help you learn how to more effectively run a business. From digital marketing to financial projections, our workshops offer something for everyone.
How can SCORE services help your small business succeed in 2017?
- You can share your business concept with a trustworthy, objective third party who can help you see if your idea is viable.
- You can learn how to develop a business plan to guide your efforts.
- You can get valuable input and feedback to help you make smarter business decisions.
- You can learn about best and worst entrepreneurial practices, which can help set you on the right path and avoid disaster.
- You can access small business resources recommended to you by your mentor.
- You can gain an understanding of how financial reports work and how they measure the health of your business.
- You can learn about tried-and-true and cutting-edge marketing and advertising tools and tactics to generate leads and boost sales.
- You can learn management and leadership skills from experienced professionals.
- You can count on getting a realistic picture of the benefits and challenges of entrepreneurship. SCORE mentors are honest and won’t sugarcoat the hard work it requires to build a sustainable business.
Ready to get your New Year off to a stellar start?
Contact us and set up an appointment with a SCORE Portland Maine mentor. And don’t forget to check out our upcoming workshop offerings. Whether you’re in the beginning stages of exploring entrepreneurship or you have an existing small business you want to take to the next level, we’re committed to helping you succeed.
Choosing the right legal structure for your business is one of the most important decisions you’ll make. It affects how your company is taxed as well as the level of liability protection.
Let’s take a look at the common legal structures you might consider for your small business:
When you are the sole owner of your business and don’t elect a specific formal business structure, you will by default be a sole proprietor. Many home businesses operate this way. As a sole proprietor, you as an individual are your business. From an income tax standpoint, your business profits and losses flow through to your personal income tax return. One potential downside of a sole proprietorship is the lack of liability protection it provides. If someone sues your business and your company doesn’t have funds to pay the legal fees or creditors, your personal assets are at risk. The upside to operating as a sole proprietor? Simplicity and cost effectiveness. Aside from needing to file a DBA (Doing Business As) if you’re using a fictitious name for your business and securing a business license (if required for your type of business), you avoid the formation paperwork, costs, and ongoing compliance that come with other legal structures.
When your business has multiple owners and the owners don’t elect a specific formal business structure, the business will by default be classified as a general partnership. As with a sole proprietorship, a general partnership’s profits and losses flow through to the owners’ personal income tax returns. And as with sole proprietorship, owners’ personal assets are not protected from legal action brought against the business.
Corporation (C Corp)
C Corporations operate as separate legal entities from their owners and offer limited liability protection to their shareholders, directors, officers, and employees. C Corps are subject to two levels of taxation: one at the corporate level and another at the shareholder level. The C Corp structure offers the advantage of raising funds through sale of stock (either privately or through the public markets) to an unlimited number of shareholders. Delaware C Corps are the preferred entity of venture capitalists and other sophisticated investors. The startup costs are higher with a corporation and you can expect more compliance formality and less tax flexibility than with LLCs and S Corporations.
S Corporation (S Corp)
S Corp is not a type of corporation but a type of tax status available for eligible C Corps. S Corps are identical to all other corporations except for their tax status. S Corp taxation is popular for many small business owners because it offers one level of tax at the shareholder level and some relief from the self-employment tax burden of owners of LLCs that have not elected to be taxed as S Corps, sole proprietorships and partnerships. Only an owner’s reasonable wages/salaries are subject to self-employment (FICA) tax while profits distributions to the shareholders are not. Shareholders’ distributions are assessed tax at the shareholders’ individual income tax rates. Like C Corps, S Corps may raise capital though sale of stock to shareholders, although limitations apply.
Single-Member Limited Liability Company
This structure, which is available to businesses with one owner, provides the limited liability advantages of a corporation and the flexibility of a sole proprietorship. It reduces owner liability without the formation complexities and compliance requirements that come with corporate structures. Typically, taxes are handled as for sole proprietorships (pass-through taxation to personal income tax returns) or you can opt for C Corporation or S Corporation tax treatment. With “LLC” at the end of a business name, customers might perceive a company as more credible than a sole proprietorship.
Multi-Member Limited Liability Company
When a limited liability company has multiple owners, it’s classified as a multi-member LLC. By default, a multi-member LLC is taxed as a partnership, but owners can instead elect for their business to receive S or C Corporation tax treatment.
Which Legal Structure Is Right For Your Small Business?
According to attorney and SCORE mentor Chris Dargie, entrepreneurs should begin the process of determining the best legal structure by considering three core questions:
- What is the company’s purpose and business plan?
- Who are the owners and what is their level of involvement in the business?
- Will the company require outside capital, and if so, what type? (For example, to obtain venture capital, you would likely need to form, or convert to, a Delaware C Corporation before venture capitalists would consider investing in your business.)
Pitfalls To Avoid
While it is possible to change a business’s entity type at any time, doing so midstream can involve expensive tax consequences. Therefore, tax is a crucial consideration when selecting an entity.
The most common mistake Dargie sees with small businesses is the failure of sole proprietorships to convert to at least LLCs for liability protection. “There is rarely a reason for a single-owner business to operate as a sole proprietorship,” said Dargie. “Single-member LLCs are simple and cheap to form and maintain, and they offer liability protection for the owner at a cost that is much cheaper than commercial insurance. They’re really a no-brainer.”
Another common mistake Dargie sees is multi-member LLCs that lack basic operating agreements. “Most entrepreneurs understand that an entity offering limited liability protection to the owners is desirable, and the default entity type these days is the LLC,” explained Dargie. “However, LLCs with multiple owners present serious traps for the unwary. Anyone starting a business with others and intending to form an LLC should get some basic legal advice about the risks.”
Something else that Dargie has seen adversely affect business owners is when they’ve unknowingly created a general partnership. As an example, let’s say you’ve started a cleaning company and asked a friend to help you clean a few homes. Rather than putting your friend on payroll and compensating via an hourly wage, you instead agree to share a portion of the profits you make on the jobs he helps you with. By doing so, you’ve potentially made him a partner, and you’re potentially legally obligated to follow the legal and accounting requirements of a partnership.
Other common mistakes Dargie sees include commingling personal funds with business funds and the failure of companies to maintain adequate company records. “Owners should always treat their business entities as separate from themselves. Failure to do that can result in loss of liability protection and serious tax headaches,” shared Dargie.
With so much affected by the legal structure you choose, you need to do your homework and be as informed as possible. Be sure to consult with both legal and accounting professionals so you’re fully aware of how each structure will impact your taxes, liability risks, and ongoing compliance obligations. As you’re working through the process, remember that our SCORE mentors are here as a resource to direct you to trusted and reputable professionals in your area who can guide you in making this important decision.
Chris Dargie is a full-time attorney / director / shareholder at Perkins Thompson in Portland, Maine. He started volunteering with SCORE in January of 2014.
Please note that this article is for informational purposes only and should not be considered a substitute for professional legal or accounting advice.
With the end of summer closing in and fall just around the corner, now is a perfect time to pause for a moment and assess what’s working and what isn’t for your business. Although most of the year is behind you, you still have time to make adjustments that could save costs, drive more revenue, and improve profitability for 2016.
Time for a Small Business Checkup
By performing this end-of-summer checkup, you’ll assess where you might have fallen behind, so you can take action and get your business back on track this fall and winter.
- Evaluate your sales efforts. If you’re behind on revenue, it might be because you aren’t reaching out to as many prospects as you need to, or you might not fully understand the needs of your potential customers. No one ever said selling is easy. It’s hard work and it demands a willingness to recognize, accept, and fix weaknesses in the sales process.
- Review marketing tactics and initiatives. Look carefully at the collateral you’re presenting to customers, the marketing channels you’re using, and the brand message you’re communicating. Is your brand image consistent across all fronts? Are you seeing results in the way of brand awareness and revenue generation from your tactics and strategies? Review and assess how your website, social media, and print marketing materials are performing, so you can identify where you need to make changes.
- Improve customer relationship nurturing. Customers who feel they’re appreciated and wanted will always be more likely to stay for the long term. By making customers understand that they truly matter, you increase loyalty and satisfaction. A stellar customer experience drives existing clients to buy more—and it prompts them to happily refer others to your business. If you haven’t been making an effort to nurture your customer relationships through post-order phone calls or emails, periodic check-ins to ensure they’re happy with your services, updates about what’s new and exciting, and other efforts—it’s time to start.
- Find ways to streamline operational and administrative processes. Wasted time prevents businesses from growing to their potential. When excessive paperwork, duplicated work, and inefficient systems slow processes down rather than improve productivity, you need to find a better way. Carefully look at the various systems and processes (such as accounting software, project management apps, customer data management, lead generation, etc.) you use in your business and look for ways to streamline activities and save time.
- Evaluate expense habits. Your business’s spending habits directly affect your bottom line. While it’s important to stay on top of your expenses year-round, it’s especially critical as the year is winding down. If your profit and loss statement doesn’t look as favorable as you had hoped it would by now, dig into what you’re spending money on and identify what you might cut back on.
With the kids back to school and summer vacations now just memories, now is the time to get back to business and back on track to reaching your goals. By doing an end-of-summer checkup, you’ll have a head start in finishing strong when the year is at its end.
If you need guidance to help you keep your business on the path to success, contact SCORE about our free mentoring. Our mentors have knowledge of every aspect involved in starting and running a small business.
As a startup entrepreneur, you’ve likely heard and seen the terms “business model” and “business plan” in conversation and online.
While they sound nearly the same, they’re distinctive in their structures and purposes. When used together, they can help you keep your small business focused and on the path to success.
The Big Picture View: Your Business Model Canvas
A business model canvas is a one-page diagram of the essential components your business needs.
A business model should answer important questions, such as:
- Who are your customers?
- What do those customers expect and what do they value?
- What is your value proposition? What problem are you solving?
- How will your business make money?
- How do you intend to deliver value to your customers while making a profit?
It should also identify:
- Customer segments
- Customer channels
- Revenue streams
- Key vendors and partners
- Cost structure
- Value proposition
- Key activities
The Roadmap For Staying On Course: Your Business Plan
A business plan is meant to help you navigate to where you want to go in your business. As important as it is for starting a business, it’s also a valuable tool for managing and growing a business.
A business plan includes:
- Your business opportunity
- Your products and services
- Your marketing strategies
- Your financial projections
- Your staffing needs
In relation to your business model, a business plan defines how you intend to operate your business. The length of your business plan can vary—it just depends on the size and complexity of your business and the depth of information investors ask for.
Together, a Business Model Canvas and Business Plan Provide a Strong Foundation to Build Your Business
Having a business model canvas and a business plan can help you operate your company with purpose so you stay on track to accomplish your objectives. If you have one without the other, you might put time, effort, and money toward resources and initiatives that won’t sustain or grow your business. And when you do that, you risk missing out on opportunities, falling short of goals, and losing morale.
If you’re worried about the time it takes to develop a business model and business plan, relax. You don’t have to tackle them in one fell swoop. Work on them in smaller bits and pieces and set aside time on your schedule for them. To help you structure your business model and think through your business plan, consider using the Business Model Canvas. Also, explore the various business plan templates and software available online.
And remember, our SCORE mentors have experience in helping small businesses of all types start and run their companies. Contact us today to schedule a free mentoring session. We’re here to provide you with expert guidance as you work on your business model and business plan.
No matter how small or large your business, you need branding.
Branding, according to Entrepreneur Magazine, is “the marketing practice of creating a name, symbol or design that identifies and differentiates a product from other products.”
For any solopreneur or small business owner, creating a memorable brand stands as a cornerstone for success. Behind the exceptional services and products you offer, you need a strong brand presence in your market to attract new customers and make you top of mind.
Branding involves instilling in prospects and customers a sense of what your company is all about. Branding, through your logo, business name, taglines, signage, website, print collateral, etc., sets expectations and drives people to feel a certain way when they see and recognize your company.
What Should a Small Business Consider When Establishing A Brand?
According to SCORE Portland Maine mentor and digital marketing specialist Lauren Guite, small business owners find few things more difficult than distilling their businesses into imagery, colors, and a few words. But that exercise is important for creating awareness and building a customer following.
“My advice to folks starting this process is to start big, putting everything down on paper,” shares Guite. “Have many brainstorming sessions with your trusted network of family and friends—with the people who get you and your business. Explore how you feel about your business and how you want your customers to feel—emotion is the strongest tie to your customers.”
Do’s and Don’ts of Branding for Small Businesses
If you’re at the start of your branding process, Guite suggests that you:
- Do research to understand how certain colors and fonts resonate with people.
- Do test your ideas before making a final decision! What your customer base thinks matters most.
- Don’t over-explain. Less is more! Keep branding simple to make it memorable.
Small Business Branding Help
Not all small business owners feel comfortable with or capable of making the right branding decisions. At the over 320 chapters of SCORE across the U.S., you’ll find mentors (like Guite at our SCORE Portland Maine Chapter) who have marketing and branding expertise. SCORE mentoring is free of charge, and many chapters also offer low-cost workshops and seminars that cover the topic of branding. You can also find webinars and articles relevant to small business branding via the SCORE national website.
If you would like some marketing and branding guidance for your small business, contact us!
More about SCORE Maine Mentor Lauren Guite
Lauren Guite is a digital marketing specialist for Environmental Defense Fund where she considers social sharing strategies and audience needs while implementing a content marketing strategy. Wanting to give back to her home state, she started volunteering for SCORE in November of 2013. After many years in Washington, D.C., she’s glad to be home and helping local businesses with their marketing challenges.
Starting a successful business requires much more than a great idea. Can you define your innovation in the market?
Most people start with a predefined idea in their head about what they want to sell. The reality is the world may not be waiting for your product or service. Define what you will you do, what value will you create that makes you different from similar businesses? Identify exactly what benefits you are delivering: better service, more convenient location, innovative design, hands on training? The process to determine your product involves testing, searching and reacting to feedback provided by your target customers. Never assume you know what your customer wants. unless you have asked. Invest time upfront asking questions to potential customers. Data driven decisions will beat guesswork every time.