Principles of Building Business Credit
Learn why your business credit matters.
Share with friends
Any business with the goal to expand should focus on building business credit from the get go. Even if you’re not ready to apply for business funding today, the time will likely come in the future. To qualify for business funding and manage your working capital, it’s important to build your business credit. There are several steps you can take to do so, no matter where your business is currently at in regard to its finances.
Here, we will break down the definition of business credit and share some ways to build business credit. This way, you can properly assess your working capital.
What is Business Credit?
Business credit is a measurement tool that is used to qualify businesses for financing methods. In the same way that people have credit scores, businesses too have their own credit history and credit score. Business credit bureaus like Equifax, Dun & Bradstreet and Experian keep track of a business’ debt records.
This credit report is likely to be used by creditors, lenders, suppliers and insurance companies when they need to evaluate your creditworthiness to approve or deny applications and deals.
How to Build Business Credit
While there are ways to access business loans for bad credit, it’s less than optimal. Instead, you can follow these recommendations to build your business credit along your journey.
Some of these tips can be performed from the outset of starting your business. Others may happen over time. Either way, if you consistently take care of the following, your business credit will grow.
- Become known: Once you start doing business, you need to let people know about it. We aren’t just talking about marketing and making sales. It’s important that you start to use your business name and establish its reputation. For starters, list your business phone number in a directory. Open a bank account in your legal business name.
- Separate expenses: Piggybacking on the previous point, use your business bank account and personal bank account accordingly. Separate the two and keep your business expenses and transactions solely within your business’ bank account. This one step will help overcome many hurdles, like dealing with taxes and monitoring your business expenses. It’s also a good idea to separate personal and business accounts because if anything is legally to happen to your business (like being sued), then your personal finances won’t be put at risk.
- Build good relationships: Some vendors and suppliers report to credit bureaus, others don’t. If it’s possible to do so within your industry, try to establish some relationships with vendors who do report to the bureaus. This way, you can build your reputation as paying bills on time and boost your credit history. For the vendors who do report to the bureaus, try to set up payment terms based on extending a line of credit. This way, you pay invoices on net-30 or net-60 terms and prove your creditworthiness (trust that you will pay what you owe).
- Pay on time: Never miss a deadline to pay a vendor or bill. The detriments extend further than having to pay interest. It also will tarnish your credit score and go against the grain in your endeavor to build good business credit. What’s more is that if you are able to pay early, you can even get some extra brownie points and potentially fast track building desirable business credit.
- Open a business credit card: Business credit cards will report to the credit bureau, so it’s worthwhile to open one or maybe a few. Just know that if you cancel a credit card, it doesn’t work in your favor. So, start with one and pay bills on time, or even early. Be sure not to overextend business lines of credit. Only use as much as you know you can pay back. A good rule of thumb is to try and only use less than 30% of available credit.
- Incorporate your business: Consider establishing your business as an LLC (limited liability corporation) or incorporating your business (Inc.). Just like separating your bank accounts, this aids in removing liability on your person as to being held responsible for the business should you ever face legal ramifications.
- Get an EIN: An Employee Identification Number (EIN) is like a social security number for your business. It’s your federal tax ID and it’ll come in handy when opening business credit cards, business bank accounts and incorporating your entity.
- Monitor your credit: Credit reports can be faulty. It’s up to you to monitor your credit history that’s stored with the aforementioned credit bureaus to remedy any issues that may come up. If you do happen to come across a mistake, be sure to notify the credit bureau and have it fixed.
- Use credit to assess cash flow: With good credit, you may qualify for lower interest rates when agreeing to business financing. This helps manage cash flow. It’s always best to seek business funding with the lowest interest rates that you qualify for because the interest rate is the cost of borrowing the money. With a credit card, you can leverage the grace period before interest rates accrue whereas lines of credit won’t offer that same perk.
Benefits of Good Business Credit
We’ve touched on some of the benefits of having good business credit already. But, to make sure it’s extra clear, here’s why it’s so important:
- Access to working capital: With good credit, you will automatically expand your options as to what kind of business financing you qualify for. Of course, there are business loans for bad credit or alternative methods of funding like merchant cash advances which won’t hold your credit against you. However, it’s always optimal to have broader options when it comes to financing.
- Lower interest rates: Business loans will assess your credit score to extend loans. The better score you have, the higher likelihood you possess to get loans with lower interest rates. This is because you present less of a risk of defaulting (not paying back loans) to the lenders.
- Better terms: Vendors obviously prefer to supply goods to businesses they can trust will pay them. With good credit, you can set up preferable trade terms with your vendors and suppliers.
Building business credit is a great approach to expand your access to business funding options. The type and amount of debt you take on affects your working capital, so it’s the best case scenario not to carry debt.
With good business credit, you will be able to secure the best loan terms and deals possible as your business will be considered trustworthy since you’ve built a history of paying what you owe.
10 Ways to Increase Sales Online
Cost effective methods to boost online sales.
Share with friends
Did you know that there are more than 20 million ecommerce sites?
The world of online retail is extremely competitive. As a business owner of an ecommerce website, there are many things, both big and small, that can help you gain a competitive edge and boost your sales.
Depending on where you are in your business cycle, you may need to rely on financing methods like taking out a short term business loan to fund your efforts. Or, if you have enough cash flow, then you can reinvest into your business to increase profit.
We will break down 10 useful, tried and true optimization tips to boost your online sales. Then, we will get into various financing methods should you need some quick cash fast.
10 Optimization Tips to Boost Your Sales
- Optimize your site: Website optimization happens in several ways. For starters, it’s been shown that over 30% of website visitors will exit your website if it doesn’t load within 3 seconds. Some estimates even peg that for every 100ms delay in a site loading, 1% of customers will drop off. This proves how important it is to have a site that loads quickly. While there are different methods to increase site speed, one of the first things to do is to optimize site images to be small enough so they won’t delay loading the page. Beyond optimizing site speed, you’ll want to make sure that your website is responsive. This means that it can be viewed across different screen sizes, from desktops to laptops and tablets to mobile devices. You can accomplish this by testing across different device types like Android and iOs, as well as screen sizes.
- Boost SEO: You’ve probably heard about Search Engine Optimization (SEO) before. Most people have, but many don’t become experts in the field. That being said, it’s good to know some basics. SEO is a ranking system by which search engines like Google notice your site and return it in the results when someone performs a search. It’s based off of an evolving algorithm, which is impacted by keywords and more. To boost your SEO, you can hire SEO or content creation experts, but you can also start with small things like making sure all your website pages have a meta description. You also want to make sure that your content is of high quality and actually represents what your business provides.
- Use social media: Whether you have funding or not, social media is a great way to build your brand awareness and communicate with customers. Social media also helps to add to your credibility and allows people to easily refer you to friends through word of mouth advertising and tagging your business pages. It’s recommended to remain active across social media platforms, so a good place to start is with a Facebook Business Page, Instagram Business Account and Twitter for Business.
- Free shipping: Free shipping falls into a choice your business can make within its pricing structure. There’s a psychological factor associated with receiving free shipping. It’s a big part of the appeal for why people are willing to pay for Amazon Prime. Even if the price is baked into the cost of the good or equal to a percentage off, more often than not, people will be more willing to buy from a business that offers free shipping. This can also play as a competitive advantage for your ecommerce site to help beat out your competition.
- Tailor CTAs: A CTA stands for call-to-action, and it’s a direction to a consumer to take a step or action. For example, this would be a button that reads, “Buy Now.” If you can customize your CTAs to speak directly to the person reading it, you can boost your conversion rates. While this doesn’t necessarily mean every single person receives a different CTA, it means that you can group people within categories in the sales funnel. This means that visitors, leads and customers all receive tailored messaging.
- Declutter site navigation: You’ll want to lead your website visitors to take the action you desire, like for them to add an item to cart. To do this, your website design plays a crucial way in the way they navigate the site. One thing to look out for is a cluttered page or navigation menu. Rather than overdoing the site navigation, be sure it’s an easy-to-use way-finding tool. This way, customers will be led to exactly where you’d like them to go.
- Trust data: In today’s business world, data exists at every turn. But, data is only as powerful as what you choose to do with it. Be sure to set up website analytics by using a tool like Google Analytics. You can better understand how visitors get to your site, what they do on the site, and how long they spend on each page. With this type of information, you can glean insights to make the user experience better to convert sales.
- Ask for feedback: One of the most important aspects of business is satisfying your customers! While every business owner knows this, they don’t all spend time listening to their customers. Solicit feedback from your customers via surveys, phone calls, emails or whatever method makes sense for your business. Many businesses will offer incentives like a discount code for their next purchase if a customer fills out a survey. This is a win-win as you boost customer retention, make a sale, and can use the feedback to make the customer experience even better for your prospective clientele.
- Email marketing: Email marketing can start as soon as you have a potential customer’s email, or a lead. Then, you can increase your email marketing efforts by segmenting your audience into their respective place in the sales funnel. According to Hubspot, marketers who segment their audience notice as much as a 760% increase in revenue. Part of this is playing into the tailored CTAs tip from above. You get to speak directly to your audience and offer solutions to their respective needs through segmentation.
- Partnerships: If you’re just getting started or rapidly growing your online presence, consider forming a partnership with a better known brand. With a partnership, you can easily expand your reach and increase brand awareness at a lower cost than other marketing efforts. Both businesses can form a symbiotic relationship. These kinds of partnerships make the most sense when your business offering complements that of another. Consider an athletic clothing company partnering with a gym or an outdoor adventure company, for example.
Finding Financing for Your Online Business
As an online business owner, you may find yourself in need of quick cash to finance your business costs. While traditional bank loans are an option, many new businesses won’t qualify because of the strict requirements. However, there are alternative forms of funding like taking out a short term business loan to get the capital you need to increase your sales.
What is a Short Term Business Loan?
A short term business loan is a type of loan that supports a temporary business capital need. Many businesses who aren’t approved for lines of credit will look to short term business loans. This attractive funding option tends to have a lower credit limit than a business line of credit, but they also provide businesses with funding fast.
They get their name from the repayment structure, which tends to be short term. Rather than paying back monthly or yearly, short term loans are often repaid on a daily or weekly term. It’s important to look at the annual percentage rate (APR) which affects how much you’ll owe back on what you borrow.
Quick Facts: Short Term Loans
- Loan amount: Most short term loans are for the amounts of $5,000 to $300,000 because they are meant to cover short term needs.
- Repayment: Short term loans tend to be paid back in 6 to 18 months. This could be considered a good thing because you won’t carry debt for long, or it could be a downside as you’ll have to secure the money to pay back the loan quickly.
- Eligibility: On the upside, the eligibility requirements are much more lenient when it comes to short term loans versus traditional bank loans. This is why it’s such a great option for many new businesses. The approval and funding time is also much more fast than traditional loans.
Types of Short Term business loans
There are a variety of different types of short term business loans, including:
- Term loans
- Invoice financing
- Customer advances
- Payday loans
- Lines of credit
- Business credit cards
At Uplyft Capital, our focus is on merchant cash advances, a type of short term business loan that can provide you with approval and funding in less than a day. A merchant cash advance’s repayment structure is based on your business’ credit and debit card sales over a period of time. This means, you borrow money and then pay it back with a percentage of credit and debit card sales. It’s a great source of funding for businesses who need cash fast, have steady sales and are looking for alternatives to traditional loans.
Ecommerce businesses have skyrocketed over the years. New ecommerce sites make their way into the digital world on a daily basis. These digital storefronts have a grand opportunity to boost their sales with a variety of approaches and actions. For many, this will require some upfront capital for their short-term needs. That’s where a short-term business loan like a merchant cash advance can come into handy!
Once you devise the strategy by which you will grow your online sales, you can estimate your need for capital (if cash flow can’t cover the costs). Then, you have the option to apply for any type of short term business loan you wish to finance your expansion!
5 Ways to Grow a Profitable Small Business
Want to make more money for your small business—who doesn't?
Share with friends
There are many ways to boost your bottom line.
From focusing on maximizing sales to minimizing costs, there are various methods you can try to find what works to fuel your growth the fastest. Depending on your strategy and goals, you’ll require different funding requirements and methods by which you can attain the capital.
Some business owners may opt for a short term business loan. Short-term business loans are a capital funding method used for a business needs like working capital, buying equipment or expanding. If you’ve been denied business loans because of your credit history and financial status, you need to know that there are ways to find funding through business loans for bad credit.
Before we jump into the logistics, let’s take a look at some of the most common ways by which small businesses can transform into profitable powerhouses.
5 Tips to Grow Your Small Business
- Retain existing customers: You’ve probably heard this one before, but it costs 5x more to attain a new customer than retain an existing customer. That’s why it’s so important and vital to your business’ growth to take care of the customers who already support you. In action, this means that you will want to invest marketing dollars and strategy toward engaging with customers who have already purchased from you. Whether this is by sending emails about new products or updates, offering incentives and promotions, giving them gifts, building a rewards program or asking for feedback, you can leverage a variety of methods to help satisfy current customers.
- Cash flow is king: While funding methods are helpful, you will still be paying a price of carrying interest. One of the best ways to reduce your interest, or the cost of money you borrow, is to borrow less. But, to do so, you’ll have to have a strong cash flow. Some ways to increase cash flow are: set up retainers, shorten your payment terms, or expand payment options to ACH or mobile payments to get paid more quickly.
- Create a referral process: Happy customers like to spread the good news about your business. When you are able to satisfy your customers, then they will tell their friends about the good experience. In fact, 83% of people trust recommendations that come from those they know. One of easiest ways to get people to want to refer others to your business is with an incentive or reward for doing so.
- Trust your timing: As you grow your business, you’ll need to hire employees. For every employee, there is a cost greater than just their salary to onboard them and bring them up to speed. That’s why it’s crucial that you trust your timing of when you hire new employees. The upfront cost will need to be made possible with either increased production/sales or business funding, like a short-term business loan.
- Optimize operating procedures: The ultimate road to efficiency is paved by lowering expenses and boosting profits. One way to increase profits is to try cross-selling and upselling products. At the same time, you should look to reduce expenses by investing in automation tools, clearly outlining processes for efficiency, and consider using part-time contractors over full-time employees until your finances are in good standing.
Have Bad Credit? Business Funding Options Still Exist
Options for business funding are plenty. If you have bad credit, then you may need to consider business loans for bad credit or short term business loans.
- Alternative lenders: Traditional lenders are institutions like banks. Many small businesses, especially those with bad credits, will be denied loans from banks. One of the next places they can look for financing is to alternative lenders. Alternative lenders have less strict requirements for loan approvals as compared to banks. They generally work by reviewing an application, approving it and supplying funding shortly thereafter. When banks dole out loans, they often ask for collateral in exchange to secure that even if they are not paid back in cash, they will be able to access assets, like real estate or equipment. Alternative lenders often disregard collateral and base their lending decision on the business’ creditworthiness.
- Co-signer: A co-signer is another party that accepts partial financial responsibility for any contracts signed. You can increase the odds of receiving a business loan with bad credit when you have the aid of a co-signer.
- Credit unions: Credit unions are not-for-profit organizations that look for ways to help their community prosper. That’s why they are likely to provide small loans to local businesses.
- Merchant cash advance: At Uplyft Capital, our mission is to provide small business owners with bad credit a clear and simple way to receive quick business funding. By filling out an application with some background information and telling us about your needs, you can be approved in the same day for capital financing. In exchange, you’ll pay back the capital over time through a portion of credit card sales. The amount you pay back can be proportional to you credit card sales, which will protect you in the event of a slow month of sales.
Growing a profitable small business won’t happen overnight. It’s useful to conduct research in your respective industry to figure out customer demand. Based on needs and funding options, you can outline a plan to run your business efficiently. This way, you can satisfy customers while maximizing profits and minimizing your costs.
The aforementioned strategies are just a few ways that small businesses can boost their bottom line. It could require a short-term business loan, an alternative funding method, or finding business loans for bad credit to make your dreams a reality.
Top Reasons Why Small Businesses Fail
The business world can feel like the Hunger Games.
Share with friends
As small businesses enter respective markets, their first goal is to survive. The truth is that many won’t make it. However, from the massive amounts of businesses that don’t keep their doors open for very long, there have been a lot of lessons to learn from to become one of the ones that do.
According to the Small Business Administration, two thirds of businesses that have employees will survive at least two years. Only about half make it to lasting longer than five years. Within the first year alone, 20% of businesses have to call it quits.
No matter the industry you’re entering, as a small business, you will have an uphill battle to protect against your fragility. We aren’t here to scare you out of trying. In fact, we want you to finish reading this article, equipped with the knowledge and power to be one of the businesses that defy the odds.
Reasons For Failure
- Poor Management: No matter how many people make up your leadership team (at this stage, it could just be you), it has to be buttoned up. This means that decision-making happens in a timely manner, there’s staff to oversee processes and people, and everyone is aligned with the same vision. If you have a partner or executive leadership team, it’s vital that everyone is on the same page. Even if people do disagree with one another, your employees should only be able to witness leaders as being unified.
- Tips for success: Meet with a mentor, conduct your own research, learn and study how to lead. You can also look to companies you admire and learn about their leadership style and company culture. Ask your team for feedback, as well.
- Insufficient capital: A lot of new business owners are unaware about how much capital they’ll need to operate. If you underestimate your funds or misunderstand your cash flow, you may find yourself in a tight spot needing cash. Make sure you have enough cash to cover your costs until your sales will be high enough to sustain the business.
- Wrong Location: Real estate’s value is based on location. This, too, stands for your business. Depending on what service and product you’re going to provide, your customer base may exist in different locations. Of course, if you can conduct your business online, then this point can be moot for some. However, many businesses have an omnichannel model – with a brick and mortar storefront and ecommerce. When you sign a real estate lease, you need to make sure that you’re choosing a location with high foot traffic and a community that wants your product/service. You should take the following into consideration when deciding where to open: your target customer, competitors’ locations, warehousing distance, local incentive programs, safety, and the overall community feel.
- Tips for success: Conduct market research before opening your first location. If you found an area that you think is perfect for your needs, get on the ground and see how the community reacts to you being there. This could be with a pop-up shop or sampling your product in the community.
- Rapid growth: Going too fast can also cause failure. Many new businesses hit the ground running and see success. With the newfound success, they start to over expand and grow too fast. Some major problems can stem from over expanding. Firstly, you may not be able to fulfill customer demand. Additionally, you can over-invest in inventory and overestimate the strength of the demand. Then, if sales begin to cool, you have put a lot of your working capital into stagnant inventory. Both these situations can lead to a shut down.
- Tips for success: Strategically plan and manage your day-to-day operations. You can find automation and management tools that help to forecast your future sales based on data. With better information, you can make smarter decisions. Keep in mind that you may need to seek more funding even if your business is profitable.
- Marketing failures: We’ve touched on this before. You have to invest in marketing to succeed. But, this doesn’t mean throwing dollars to a marketing department with no results. Instead, it requires the adequate management of budgets and campaigns. You need to define your business goals and measures of success, or key performance indicators (KPIs). You’ll use these KPIs to track your success of each marketing initiative.
- Tips for success: Perform research so that you can invest your marketing budget wisely. Look at criteria like prospect reach, capital needed, and conversions. Take your time so that you can apply realistic projections and targets to track. Importantly, be adaptable. If you see a campaign that isn’t performing as well as you’d hope, fail fast and pivot to try something new.
The Bottom Line
Every business has their own fair share of hurdles. What works for one may not be the same formula for another. That’s why it’s so important that you understand your market and customer’s needs. The first step for a small business’ success resides in its value proposition. Be clear and communicative about why you start your business and the value you will bring to your customers.
When you care about your quality and service, you can take care of one of the biggest business challenges – retaining a loyal customer base. Besides this crucial piece of business, you’ll have to maintain strong leadership, obtain the right capital funding, open up shop in the smartest location, grow steadily and oversee your marketing plan closely.
The SBA’s data has shown that a business’ survival rate is somewhat independent of the economic situation. So, don’t be afraid to start something new if the economic environment is less than optimal. Your small business’ survival is more in your own control than you may think.
The 4 Stages of Business Growth and Relevant Resources
What are the stages of business growth?
Share with friends
The stages of business growth can vary, but most experts will define either 4 or 5 stages of business growth. As someone looking to start a business or someone looking to grow a business, it’s useful to understand the general life cycle of a business so you can take the right steps at the right time to boost your chances of survival.
The world of business is ever changing and shifts along with supply, demand and consumer preferences. To establish a startup as a powerhouse and well-known brand, you will have to take calculated risks. Let’s take a look at the four main stages of business growth and things to consider during each step along the journey.
Some people will consider a business a startup at the inception of the idea. Others will only see a business as a startup when funding has been established and there’s some semblance of a customer base. No matter when you define the beginning of your startup phase, you have a minimum viable product (MVP) to work with and should turn your focus to:
a. Talent: The people you hire in the beginning of your business will set the stage for the company culture. While there is a cost to bring on a new hire, it proves to be worth it when you can find the type of people who are willing to do whatever it takes to make the business successful. Some traits to look for in your first employees include: flexibility, adaptability, desire to problem-solve, a willingness to learn and take on new jobs as needed.
b. Process establishment: The next business stage is scaling. But, before you scale, you want to have well-defined processes so that as you expand, control and quality do not fall behind. You need to make sure that processes are clear and iterative so that as the business grows, the processes will continue to work for you and not against you.
c. Customer service: As the holy grail of most businesses, customer service should always be at the top of your mind. Invest time, money and energy into supporting your customer base, especially those who are with you from the beginning.
d. Early adopters: Early adopters are those who are first to use a new product or service. To attract this customer base, you have to clearly define your target audience. Rather than spreading a lot of money across a wide net to attract people, focus on your core audience and let them help you build brand awareness through word of mouth. This will help to lower your customer acquisition cost and promote brand loyalty from the get go.
Every company has a different timeline for when they become profitable. But, once you move past the break-even point, then you’ll look to scale the business. At this point, you may look for additional business funding or reinvest your profits into the business.
a. Executives: At this point, it’s worthwhile to invest in at least one or two executives with experience in your industry. They can help to sharpen your go-to-market plan and optimize efforts.
b. Define roles: Since you recruited your team in the startup phase, you may not have clearly defined their roles since everything was getting up and running. Now, you’ve probably been able to better clarify what each person is responsible for doing, and if need be, you can bring on more team members who are experts in their respective roles.
c. Marketing: To boost your brand awareness, it’s the right time to invest in marketing and branding. From establishing a strong brand identity to communicating your value proposition to an audience, this is the time where you will begin to see your business take off.
Once your brand is established, your team is in place and your profits are growing, expansion is the next to do. The goal is to grow your market share. This can be done by:
a. New opportunities: Explore new opportunities for revenue. This may be by offering new products or services, expanding markets, creating up-selling features or growing brand equity in existing markets.
b. Stay focused: Hopefully, things are looking up. But, it’s important to also remain vigilant and aware that your product and services must retain their original (or better) quality or your success will be threatened.
c. Key aspect is cash: You’ll likely need cash on hand to expand. This is especially true if your expansion plan entails adding new products or services. There are several ways to receive business funding, but two common methods are by taking out a business loan or applying for a merchant cash advance.
How do you know you’ve made it? If your brand has become a household name or your market share is maximized, you’ve likely hit the maturity stage. You’re no longer focused on establishing your brand identity or expanding your markets, but rather, you are in the business of retaining customers and in it for the long haul.
a. Build customer loyalty: More than half of business’ sales generally come from existing customers. That’s why it’s so important to retain your customers and continue to provide them with the value you’ve always promised.
b. Organizational structure: While your organizational structure is solid, it’s useful to consider how you can innovate and try new ideas. In most instances, this type of culture can be generated and supported by the organization’s leaders so that everyone feels like they can contribute ideas and be heard.
The Bottom Line
Business moves fast. It takes agile business owners who are up for a challenge to make their business last in an overly competitive landscape. While every business and industry has their fair share of nuances in terms of business structure, communication and goals, these four stages of a business cycle have become somewhat universal.
Some important takeaways for business owners include: remember why you started, continue to prove your value to your customers, invest wisely by taking calculated risks and understand your business financing options at every step of your business’ life.
Understanding Small Business Taxes
You’ve heard it before - nothing in life is certain except death and taxes.
Share with friends
When it comes to running a small business, the big and small decisions more often than not end up relating back to money. From sourcing funding to managing finances and paying taxes, there’s a lot of information to know. Of course, many businesses rely on financial advisors and accountants to manage their books, but it can literally pay you to understand the basics about small business taxes.
That’s why we’ve made this guide to outline the main aspects of small business taxes, from the kinds of taxes you may have to pay to the considerations to take when structuring your business.
What is a Business Tax?
The types of small business taxes that you will end up paying will depend on the way you structure your business (we’ll get to that later). But, the three main types of business taxes are:
- Income Tax: Every business must file an annual tax return. For corporations, they pay the corporate rate whereas pass-through entities pay an individual tax rate.
- Estimated Taxes: If you’re an independent contractor or freelancer who is expected to pay at least $1,000 in taxes, then you’ll be expected to pay estimated taxes on a quarterly basis. If you miss these deadlines, you may face penalties. The deadlines for quarterly estimated taxes are as follows: July 15, June 15, September 15 (in 2020) and January 15, 2021.
- Self-employment Taxes: Self-employed individuals pay Social Security and Medicare taxes. You are expected to pay this if you make more than $400 in net earnings or if you work for a religious affiliation that elected an exception.
Types of Small Business Taxes
Besides the aforementioned taxes, you may be required to pay these too:
- Sales Tax: Most states in America have their own defined sales tax rate. This is a tax that customers pay at the time of purchase of goods or services. The business owner is then responsible for both collecting and reporting these taxes to their state and local government.
- Excise Tax: Some goods and services are privy to being taxed, but it doesn’t get passed on to the consumer. Instead, it comes in the form of an excise tax, as with cigarettes, liquor and gas, for example.
- Payroll Tax: Even if you don’t have employees, you will have to pay a payroll tax. For sole proprietorships earning more than $400 in net earnings, it’s just called the self-employment tax (see above). If you have hired employees, then you have payroll tax withholdings and obligations. From an employee’s wages, you have to withhold federal taxes and FICA taxes (a 6.2 percent Social Security tax, a 1.45 percent regular Medicare tax (and a 0.9 percent Medicare surtax when the employee earns over $200,000).
- Property Tax: When you own a commercial property, you will have to pay property tax to the city or county in which the property is operating.
Business Structure Options
The way by which you structure your organization legally will undoubtedly affect your tax rates. Here’s a look at the types of businesses you can run and their respective tax implications.
- C Corp: Traditional corporations fall under the category of C corps. C corps consist of: a board of governors, directors, employees, and officers. When this comes to mind, you probably think of large businesses, but it could be that you structure your small business as a C corp. C corps pay taxes on the company level (they are the only legal structure that fits this bill). The flat and current corporate income tax rate is 21%. Shareholders have to pay taxes on their dividends received from C corps.
- S Corp: Unlike C corporations who face double taxation on the company and shareholder level, S Corps pass income to shareholders to avoid the double taxation. To set your small business up as a S corp, you must adhere to these stipulations: have no more than 100 shareholders, all shareholders are U.S. residents and there is only one class of stock. The S Corp is one of the most popular options for small businesses to elect because there is more tax flexibility and S corps may be eligible for a 20% tax dedication. Additionally, shareholders report their business expenses, deductions and income on their own personal tax returns.
- Sole Proprietorship: When you are the only owner of a business that is unincorporated, you’ll default to being considered a sole proprietorship. This is the most common type of small business that exists in America, but it’s also the riskiest. As a sole proprietor, your personal and business finances and legal obligations have no separation. However, taxes are the most straightforward because you would file your individual income and losses on your personal tax return (Form 1040 through a Schedule C). Sole proprietors can deduct 20% of net income from taxable income, thereby immediately lessening tax liability.
- LLCs: LLCs are limited liability companies and boast two tax advantages, namely: deductible business losses and no double taxation. LLCs are taxed on the individual level, in the same way that it occurs with an S corp or sole proprietorship. The term associated with this process is the “pass-through” tax treatment. With an LLC, you can have as many shareholders as you want, but you have to assign ownership percentages for each member. If you have an LLC with multiple members, you get to choose to be taxed as a C corp or partnership. Going down the C Corp route will result in double taxation. If you’re a single-member LLC, then you are taxed like a sole proprietorship. To set up your business as an LLC, you have to pay a certain amount of state taxes each month, no matter what your profits or losses amount to.
What Counts as Deductions?
When you run a business, you’ll have to keep track of income and expenses. Expenses get deducted from your revenue as pre-tax so that your tax liability is then lower based on profits (instead of revenue). To write off expenses, here’s a list of common ones that can be deducted:
- Hiring freelancers
- Business travel
- Depreciation of assets
- Business property utilities, repairs and insurance
- Vehicle expenses
The best way to find out what you can write off is to consult with your accountant or CPA. In most instances, small business software for taxes like QuickBooks will help to itemize expenses for you.
Also note, you can write off startup costs before you are fully operational. You can deduct up to $5,000 in startup expenses and up to $5,000 in organizational costs. This holds up as long as your total costs to get going is less than $50,000.
Taxes can surely get complicated. That’s why it’s so useful to know the basics when you’re setting up your own small business. If you have the opportunity to consult with an expert, it’s definitely advisable. As you can see, the way you set up your business as a legal entity will greatly affect your taxes. So, be sure to perform research before jumping right in.
Once you’re getting going, you may realize you need some help funding your small business. Don’t forget that’s what we are here for at Uplyft Capital. Whether we can provide you with a cash advance or not, we invite you to leverage our Marketplace to get connected to the best small business loan for you.
The Cost of Hiring a New Employee for Your SMB
Businesses are made up of people. Hiring new employees come with more costs than just their salary.
Share with friends
When you start building your small business, a big question pops up early on. You’ll find yourself asking, “Is it time to hire a new employee?” Whether the answer is yes or no at any given time, it pays to know how much it’ll cost you to bring on a new employee.
Of course, everyone’s job titles and salaries vary. But, there are associated (and often hidden) costs to hiring a new employee. In fact, Deloitte has shown that the average cost of a new hire is $4,000, but the price may likely vary.
Here, we will break down everything you need to know about the hiring process, how to hire the right person, and the total cost of hiring a new employee for a small business.
Recruiting Has a Price
It would be great if the right candidate naturally showed up at your door when you are ready to hire. The truth is that there are many surefire ways to find the right person, but they take time and as such, have costs.
The first step is to write out the job description, which will include a summary of the position, line items or bullets of their job responsibilities, and the required experience and/or education to fulfill the position. You can post the job description on job boards (there are likely to be fees for this) or across social media (can be free unless you pay to sponsor the post). Another option may be to hire a recruiter. However, this may be a more costly option than you are ready to take on. The average cost of a headhunter is $20,283.
The Costs of Training
It’s no Denzel Washington movie when it comes to training day. Once you’ve recruited the perfect new addition for your team, you’ll have to invest resources like time, money and effort into preparing the new hire for their role. Training actually turns out to be one of the most expensive pieces of the new hire process.
You could and should think of training as an investment. You are putting money upfront to hopefully reap dividends in the future, if all goes according to plan. On average, the cost of training a new hire is just north of $1,200 per employee. This number is calculated by quantifying the hard materials cost, as well as the time it takes a manager and fellow employees to get the new hire ready to go (to the point of 100% capacity).
The Price Behind Paperwork
Along with on-boarding comes the process of submitting paperwork and documentation, including but not limited to: health insurance, annual salary, benefits and the like. You’ll have to set up an approval process for the new hire to receive necessary paperwork and it to be properly reviewed. Many big businesses have this managed by a Human Resources department or have outsourced an HR team. As a small business, you may want to take this on by yourself to minimize the costs. If you do so, there are plenty of options for automated human resources management software on the market.
The Cost of Turnover
In business of any size, customer satisfaction tends to be a top priority. Equally as important is employee satisfaction and retention. Just like it costs more to acquire a new customer than retain an existing one (5x more in fact), the cost of turnover is like throwing money out the window. You invest time and resources into getting a new hire up and running so that they can hit the ground running. Remember when we said this is an investment that will only pay out if the employee reaches maximum potential? If an employee quits shortly after being hired, all the costs associated with on-boarding can be considered sunken. Corning Glass Works has found that an employee who attends a structured orientation program is 69% more likely to remain with the company for at least three years.
The Obvious Costs: Salary and Benefits
As a small business hiring a new employee, you probably have spent most of your time calculating a new hire’s costs based on their salary and benefits. Beyond their salary, you should also factor in the price of benefits like: medical and dental plans, retirement contributions, disability coverage, life insurance, tuition reimbursement and so on.
When Do Costs Even Out?
The break-even point for bringing on a new hire tends to take place by month six, at least for mid-level managers (according to Harvard Business School). This is based on the employee reaching their full potential by that time, as training, salary and cost of lost productivity even out.
How to Decrease Hiring Costs
The cost of hiring is not a one-size fits all calculation. Naturally, the salient costs like one’s salary varies greatly by location, hours of work, experience level, etc. But, as a small business, taking on any new costs is an important consideration. However, new hires may not be a cost you can fully avoid because at some point, the benefits of hiring someone to help boost productivity will outweigh the costs of not having a valuable team member. Here are some tips to help reduce the cost of new hires:
- Advertise job descriptions on social media to maximize reach without incurring more costs
- Automate the HR process with software
- Leverage your network to try find the right candidate
- Find a cost effective provider for background checks
- Introduce a referral benefit scheme
- Leverage alumni networks and job fairs
- Be as detailed as possible in your job description and requirements
Make Your Money Work
Small business owners have a lot to manage. That’s why the consideration of hiring a new employee is one to take seriously. Devoting the right time and resources to find the perfect candidate can save you money in the long run.
While the hiring process isn’t always the most quick piece of business, it often ends up being one of the most important. Give time to figure out the exact job description, necessary base salary and benefits, on-boarding process, training environment and overall employee experience. The goal is to find the right person who also feels you offer the right opportunity for growth and maximum potential.
How to Run a Business from Home
Starting a business from the comfort of your home isn’t always comfortable.
Share with friends
But, if it is something you’re passionate about, it can afford you both a living and more flexibility than a standard job in an office. Before you get started running a business from home, there are legal factors to take into consideration, as well as financial aspects that are necessary to understand.
Working from home is much different than running a business out of your home. Here’s everything you need to know!
The Legal Aspects of Running a Business From Home
When you start a business from your home, there are various legal considerations. These laws vary by state and locality, so it’s important you can define the type of business you plan to run. Then, it’s best to check that you are allowed to legally run your business from your home.
- Licenses: You most likely need a license to run your business. For certain types of businesses, like a hair salon for example, you may need additional licenses or permits. The same goes for daycares that are run from homes. Get in touch with your state office for business registration to find out more.
- Variance: In some instances, your business may be illegal to run from your home in your area. Your best next step for action is request a variance, which is a government exception. If you’re a small business that won’t have people coming into your home or affecting traffic in the area, then you have a higher likelihood of receiving a business variance.
How to Run a Home-Based Business
No matter your reason for starting a home-based business, there are some tips and steps that look the same for every at-home entrepreneur. From the inception of the idea to marketing the new business to the world, you’ll want to touch base on each of the following steps in your process of building.
1. Brainstorm Ideas: After checking in with your localitlie’s business registration restrictions, it’s best to start by brainstorming various ideas for your business. You can run a salon, daycare, e-commerce business, service-based business like tutoring or another type of business from home.
2. Combine Talent and Skills: The optimal way to go when deciding upon the business you’ll run from home is to pick something that combines both your talents and skills. This will help to ensure you are passionate about the work you will be performing day in and day out. Some people have the education and experience they already need to run a business from home. If you have more to learn, don’t be afraid to take online certification classes, attend trade school, rely on a mentor, read books or ask people in your network questions.
3. Funding: Like any type of business, you’ll have to have funding to get it off the ground. There are a variety of kinds of funding methods you can rely on for capital. Some of the most popular funding methods include: business line of credit, merchant cash advance (particularly fitting for commerce businesses even if you have bad credit), small business loan, or crowdfunding. While it is sometimes possible for a startup to self-fund, it requires extra disposable income or being okay with going into debt. However, if you are confident you will be making sales as your business gets up and running, then a merchant cash advance can give you quick funding upfront for a promise of a portion of your future credit card sales for repayment.
4.Write a Business Plan: Running a business requires planning and organization. Writing a business plan can help you stay on track to achieve your goals. It is also a necessary piece of documentation to have if you plan to apply for business loans or investment. A business plan typically includes: an executive summary, financial planning, marketing strategy and a budget.
5.Separate Personal and Business Finances: Importantly, you’ll want to separate your personal and business finances, especially when working from home. A lot of your personal life and work life will overlap when it’s all taking place in the same location. As such, it’s even more important to separate your finances. This begins with opening a separate business bank account and tracking business expenses separately from what you spend personally.
6. Insure the Business: Whether you rent or own your home, you will likely already have renter’s or home insurance. When you open a business in your home, you should ensure that you have the right home-based business insurance protection. This typically requires both general liability insurance and professional liability insurance. You could even want a Business Owner’s Policy (BOP), depending on what industry you’ll operate in.
7. Understand Tax Deductions: Business owners who work from home can claim tax deductions for certain portions of the business activities that take place inside their home. For example, you can deduct a portion of your rent (based on the percentage of space you use for your “home office”), utilities, repairs, maintenance and real estate taxes.
8. Create Your Business Identity: Once you have all your financial plans and logistics figured out, you can get into the fun work of building your brand. With enough brand awareness, people will hopefully be able to recognize your logo and know what your business is. To get to this ideal place, you must begin with creating your business’ assets, which include: a logo, typography, color palette, packaging, a business website, and marketing materials, to name a few.
9. Designate a Workspace: You’ll want to designate a workspace inside your home that is dedicated to the business. For some, this means having an office or studio for work. For others, it may be cornering off a part of your living room for business activities. It doesn’t matter how big the space is – the importance is being able to step into it and knowing you’ll be productive. It’s also nice to be able to limit distraction in this portion of the home so you can set your work hours when you’re spending time in that location. Again, this also will play a role in your tax deductions as you can accurately estimate the square footage used for the business versus living.
10. Get the word out: After you’ve set up all the behind-the-scenes factors to ensure your business can run smoothly (i.e. finances, funding, brand identity, etc.), you can step into the spotlight! Oftentimes, this is one of the hardest parts of any business. Building your brand and marketing your value will entail preparation, funds, and time. While you can do it alone, it’s recommended to rely on experts in respective fields like social media, paid advertising, SEO, influencers and the like. If you can commit to providing a product or service of quality with great customer service, then word of mouth can become your best and most useful tool for marketing.
The Bottom Line
Running a home-based business has a lot in common with running a business from an office space. Some things that overlap include building a brand, writing a business plan, sorting out business funding and applying a marketing plan. Some things that make it different are the extra considerations around what’s legal and illegal to do from inside your home, as well as the implications for your business taxes.
Having a home-based business can offer benefits like flexibility and lower overhead costs. At the same time, it can require extra coordination, organization and motivation to get up and get to work, since you’ll be tempted to go relax on the couch or stay in bed. But, if you know there is a home-based business you want to try that can glean profits, then follow the aforementioned steps and get to working. Go big and stay home!
A Guide to Taking Your Business Online
If there’s ever been a time when online business is important, it’s now.
Share with friends
Whether you’re doing it out of choice or necessity, taking your business online can boost your brand awareness, expand your clientele and help you build your bottom line. Running an online business takes work, but if you set it up properly, it can be easily sustainable.
Here, we will outline the basic steps you should consider when building your business online. From the seemingly obvious to the more nuanced details, be sure to read and share this guide with anyone who wants to transform their business to be digitally-focused.
Starting an Online Business - The Basic Steps
Taking your business online or starting a new online business isn’t something that looks the same for everyone. In the same way that everyone finds business funding that works for their needs, business owners create online stores according to goals.
In any event, there are some common steps that are worth exploring and sticking to, including the following:
- Fill a need: First things first, you should aim to fill a need. If you have just 10 people who vigorously believe in your brand and vision, you can grow exponentially. It all begins by defining your intended customer, or target audience. Then, you can outline what value, whether it be products or services, that you will deliver to them to fill a need they have.
- Write good copy: Once you have your value proposition, you need to inform the public and your website visitors of who you are and what you do. Your words matter and so does your communication style. Your brand tone of voice should reflect your brand values and be consistent throughout every form of communication you have, including: your website, your social media, your advertisements, products, and direct messages to customers.
- Build your site: Your website is your digital home, and people will come and go very quickly. In fact, if your website takes longer than 3 seconds to load, you’ll lose about 40% of visitors. Along with a speedy site, you want to design your website to be user-friendly and navigate people to take the action you’re hoping for. In technical terms, this is called a conversion – moving a window browser to a customer. You can build your own site with the help of platforms like Shopify or WordPress, or you can hire an expert web designer and developer to do it for you.
- Use SEO: In a world web of websites, you will need to build your website traffic. Along with marketing efforts, part of your strategy should include search engine optimization (SEO). This is so that search engines like Google return your site as an option when people search for your offerings. SEO involves keywords, content and data analytics to get right.
- Customer-first approach: Like all businesses that succeed, putting your customers at the heart and center is necessary. To do so, you’ll want to build reliable customer support and offer many avenues by which customers can get in touch with your team. This could be in the form of phone calls, email, online chat support and just overall good customer care.
Build Your Marketing
Once you have funding for your business, the next step is allocating where and how you will spend the capital.
Don’t ignore marketing. More specifically, invest in marketing!
It’s usually a hard pill to swallow because you won’t be able to see the results right away.
But, once you are up and running, you’ll see the ROI. Some aspects of marking you should familiarize yourself with include:
- Organic traffic from search: Once again, SEO plays a role here. You can grow your organic traffic from being ranked highly in search engine results. This will take time to build and requires some expertise in understanding keywords. You’ll want to implement keywords in your website copy and your blog posts to maximize their benefits.
- Social media: Social media gives you the opportunity to build your following organically or through paid advertising. Running social media accounts is timely, but it can pay off, especially as social media platforms integrate more with e-commerce platforms. It’s another channel to boost brand recognition, gain a loyal customer base and push products.
- Content strategy: Running an online business comes with having a content strategy. Content can be in the form of the written word, webinars, videos and more. Whatever content you choose to produce, it should have a measurable goal in mind. You may be looking to boost brand awareness or drive sales. Your strategy will depend on your goals. Additionally, you’ll want your brand tone of voice to be consistent because your brand has a personality. Consistency is key when content is king.
- Email marketing: For any online retailer, email marketing plays a major role in keeping customers engaged and up-to-date on offerings. It’s best practice to employ an email marketing automation tool to manage drip email marketing campaigns. Along with audience development and segmentation, your email marketing will act like your silent salesperson.
- Data-based decision making: Above all, everything marketing related should be measurable. This is so you can quantify your ROI and allocate funding according to what is giving you the most bang for your buck, as they say. There are marketing agencies that can do this for you, but you can also leverage software tools and systems to help you keep track of your key performance indicators (KPIs).
Plan Your Online Business
Online businesses pop up daily. There are so many reasons why starting an online business or converting your current business to operating online makes sense. Not only will you have low overhead costs, but you can also reach a global audience and quickly adapt to the changing needs of customers.
With a digital business, you can follow trends and adjust your website accordingly.
From branding to content to marketing, there are a few key ingredients to running your online business efficiently. Be sure to line up your process and plan before jumping right in.
Top 3 Tips to Build a Successful Business
Have you been thinking about starting your own business?
Share with friends
Does the thought of actually doing it and everything that it entails stop you in your tracks? You’re not alone.
Starting your own business can be scary and may feel impossible, but with the right tools and guidance, you too can build your own successful business. Here are some basics to get you started:
Tip #1: Business Financing
The financial aspect of building a business is usually the most intimidating piece, especially for those who haven’t been saving up to do it or who don’t have extra money laying around. Let us start off by saying: do not let this stop you! There are many ways that you can get the financial support you need to move forward in your business plan; we will share just three. Some first steps are a business line of credit, traditional business loan, or merchant cash advances.
To start, a business line of credit is geared towards small businesses as a more flexible loan than a business loan. It works similar to a credit card in that you can borrow up to a certain amount of money and pay interest accordingly. Just like with a credit card, you can use and repay at your discretion as long as you don’t exceed your limit. .
The next option is your traditional business loan which is fairly easy to get since there are many lenders out there looking to partner with business owners. You’ll most likely need a credit score of 720 or higher, a stable source of income, and a business plan (it doesn’t have to be perfect, don’t worry). One of the biggest pluses of a business loan is that if the business fails the loan doesn’t have to be repaid *in most cases. This should give most borrowers a sense of relief. When applying for a loan, it’s important to make sure you read the fine print – there are usually early repayment penalties that come with a loan, so finding the right loan for you is crucial.
Finally, you have merchant cash advances (MCA) which isn’t exactly a loan but rather a cash advance that will be repaid according to a percentage of the credit card sales deposited into your business’ merchant account. The benefits of a MCA is that you can apply for one and have funds appear in your business checking account within 24 hours upon approval! The application process is a bit different than from a lender or banker in that a MCA provider will evaluate your daily credit card receipts to assess risk.
Tip #2: Human Resources
A successful business cannot operate without a successful team. You’re not expected to do it all (and you definitely shouldn’t). Begin by figuring out your strengths and weaknesses so that you can see where you’ll need more hands on deck. That said, utilizing recruiting companies as well as securing a solid Human Resources department are vital for success.
It is important to remember that when hiring staff, you want people who will stay and grow with your company. Your team members should have the same goals and values, and even more importantly should be as dedicated to the success of the business as you are.This comes hand in hand with building a culture for success. This means making your employees feel valued, respected, and trusted. How do you do this? Establishing company norms such as team building activities, whole company meetings, weekly happy hours, and other unifying experiences. A team that likes and trusts each other is bound to thrive!
Tip #3: Invest in Marketing
In today’s age, word of mouth is the biggest marketing agent. People look to the internet for customer reviews first, using platforms such as Yelp, Facebook, and other online forums. For this reason, customer service and satisfaction are critical. Utilizing free social media platforms like Facebook, Instagram, Twitter, and Yelp can build your clientele as well as your credibility tremendously. They are also ways to engage with your customers and provide quality customer service.
You’ll need a basic website to direct your customers to, even if it just states the minimum about your company: who you are, your mission, contact information, and product or service details. Email subscription is another great way to keep your customers up to date on products, services, and anything else going on at your company. You can also add news and other updates about your company to invoices that are emailed to customers.
There are many free ways to market your product or service, but you’ll also want to set aside a marketing budget for some paid advertising, which will definitely increase your visibility.
Money Tips to Remember
Keeping track of where you’re spending money can be tiring, but it’s extremely important. If you find that you’re spending too much time and energy doing this, you may want to look into online tools and apps for expense tracking; finding the right one could be a game changer. Having a specific budget will ensure that you aren’t dipping into other funds or spending money on things you don’t need. Pay attention to what is and isn’t working so that you aren’t spending money where you don’t have to.
You can do this by:
- Outlining business goals: Having a clear goal will eliminate any excess or unnecessary spending.
- Determining Key Performance Indicators (KPIs): These can be both financial and customer focused and they set the criteria for measuring your company’s performance and success.
- Monitoring your Return on Investment (ROI): This is a performance metric used to measure the probability of gaining a return from an investment. In other words, ROI can be used to gauge an investment’s profitability.
- Being adaptive to change: Change is inevitable so it’s important that you have an open mind and are ready to shift gears when necessary. Make sure you’re following trends and staying current with the times so that you aren’t blindsided when you have to adjust accordingly. Remember: change can be good!
Building a successful business certainly sounds easier than it is (if it sounds easy at all), but following the right steps can help drastically.
Your first step is to figure out the right funding for your needs, and once you’ve done this, you’ll be able to get moving!