We have just started a new year, 2010.  We cannot help but be thankful that we have survived all the years past that we have been on the planet and we can only hope that we can find the courage to persevere and to have a future that gives us all the desires of our hearts.   Those desires are not possible if we cannot make right decisions –but we must be righteous in our thinking and in our acting.  Remember all things are possible, but we have to believe.   Many of us are willing to make decisions without first understanding the need to have information that can help us prevent costly mistakes.

Making a decision – big or small – is important.  Once made, we have to stand by that decision – right or wrong – and bear the consequences.  Blaming someone or something for the outcome of a decision is a sign of weakness.  It is so important to get necessary information, study the risks involved, and look at all possible outcomes before making any decision.  Sometimes, we have a lot of time and sometimes it can come down to a split second.  As entrepreneurs, we have to train ourselves to make decisions that we can be proud of.  This means we must be constantly seeking the information that will help us take our businesses and ourselves to higher levels.  We must surround ourselves with wisdom and understanding so we can have the information we need, we must acknowledge that when we are ignorant of anything we must humble ourselves, be teachable and/or be willing to learn.  We have to know that because we don’t have the knowledge about something doesn’t mean that it doesn’t exist or is not true.  Knowledge is endless and we can never learn everything that there is to learn; we can only be open to learning every day.  The more we learn is the more we grow.  Sometimes we will suffer through our learning; we refer to those times as mistakes – but we have to overcome and go on to higher heights.

Most entrepreneurs fail in the first year of doing business.  There are so many reasons for this, but mostly because people are not willing to admit they are ignorant of the knowledge they need and sometimes when they do realize this ignorance, they are not willing to get the best help.  It is almost like people suffering with high blood pressure and self-medicating.  The stress levels do not change, the diet does not change; but they self-medicate and think they can successfully overcome the disease without professional help.

A business owner who is focused on having a successful enterprise that can help mankind – by offering great products or services and by giving jobs to people – is remiss if he or she does not do everything possible to make this success happen.  Sometimes, sacrifices are in order.   Sometimes we have to give up something we like that may be a big part of our lives (but insignificant in the long run) in order for us to grab hold to success.  Many of us are like an embryo in the womb that develops and should be birthed but refuse to come forth because we are not willing to stand our own, we refuse to let go of the “cord” that binds us to the “zone” we operate in.  We want to operate like someone birthed (learning everyday to grow strong, falling down but always getting up) but we are still holding on to the “cord”.  We operate in fear and live a lie, but we lie to ourselves.  Anyone who operates in fear cannot make right decisions.

How can growth, or change or living occur when we cannot make the right decisions that will take us to a level of success where we can achieve the desires of our hearts?  Righteousness will give us the desires of our hearts.

Please let 2010 be the year that you can let go of all fear and be willing and able to push yourself to the pinnacle of what you now see.  Believe me, when you get to that pinnacle, you will see how much further you can go.  You cannot have that view when you stay at the bottom of the mountain, be willing to climb, be willing to be inconvenienced on that journey, be willing to let go of some loads you are carrying.   You will soon get to the top and you will see what else you can conquer – if you can make the right decisions.

People start businesses for various reasons which may include, loss of a job, boredom on a job, an idea they believe may be a money-maker, etc.  Whatever the reason that businesses are started, people start businesses with the expectation of success.  Many of these business owners become frustrated after a few months and by the end of the first year, a large majority of the businesses are gone.  If entrepreneurs are not passionate about their businesses it will be difficult to stay persistent and motivated.  To be passionate means loving the creation of the product or the act of serving in a particular field so much that they willling to give the product or service away.  It is important to them that the customer is happy and the relationships they form are more important than the profits they make.  Passionate business owners will tell you that getting paid for what they do is the icing on the cake. 

Frustration sets in mainly when sales are not up to expectation and the owners feel powerless to make change happen.  It seems that whatever they do just does not work.  Why is this?  This happens because most entrepreneurs have a good understanding of the products or services they want to sell but they have no understanding of how business really works and all the details that must be attended to.  Since a business owner wears many hats or must be adept at all the functions that are necessary for a business to succeed, sometimes it is extremely difficult for the entrepreneur to excel at all functions that must be done.  It is then necessary for them to admit they can go no further on their own and get help. 

In New York City and other cities around the United States, entrepreneurs can get help for their businesses through complimentary workshops that are sponsored by Small Business Development Centers, government agencies, or get complimentary advice from various non-profit organizations.  This complimentary help may be all some entrepreneurs need to get them going down the road to success; but it may be limited and not be sufficient for many entrepreneurs and it may then be necessary for them to pay for professionals to guide them.  For example, entrepreneurs may be given complimentary advice on writing a business plan but may not be able to write a solid plan after all the advice and these centers or organizations do not write business plans.  Also, some law firms may give pro bono advice in many areas like leases or contracts but will not do specific work in those areas without pay.  The entrepreneur must be able and willing to admit that they need help that they may have to pay for. 

The business owner have to be persistent in their efforts to succeed and must be careful to make the right decisions.  Owners may decide not to budget for marketing and decide to use whatever money remains after all the other expenses are paid.  This may be a mistake since the marketing campaign done with the left-over funds may not be the right fit to reach the target customer of the business.  For example, if research proves it is best to reach the target with a 3-minute video on the internet, it will be a mistake to hand out flyers on the street. 

Setting reasonable and challenging goals are a must for every business.  Research on past behavior and to some extent “gut feeling” helps the owner set these goals.  Staying persistent and motivated rely on setting both short-term and long-term goals.  It helps motivation if short-term goals must be achieved within three months.  If goals are set, the business owner must constantly ask the question, what am I doing right now to ensure achievement of the goals?  At least one of the long-term goals may decide where the business should be by the end of the fifth year of operation and short-term goals will be the steps taken to get to that point.  Understanding that every journey begins with the first step and doesn’t end unless one keeps moving, will help the entrepreneur take all necessary steps to reach that prize. 

Businesses that do not have written goals with the systems that must be used to achieve them have a hard time surviving.  When situations occur that can adversely affect the business, they have a hard time deciding on how to react since they do not know where they should be heading and most times, this failure to react promptly leads to failure of the business.  For instance, if a restaurant has a goal to sell $2,000 every day, and there is a water main break that keeps customers away and that takes three days to fix; the owner has to decide quickly what must be done to catch up when the break is fixed.  Not making that decision quickly can have adverse effects on the cash flow of the business and may have a negative ripple effect for the business.  Imagine the business without such a goal; this business does not even know what sales should be achieved on a daily basis in order to grow the business and will not know what the right decision should be to catch up. 

Achieving the business goals translates into reaching the personal goals of the business owner.  How hungry the owner is to reach those goals will determine how persistent and motivated the owner will be in attaining them.  A goal may be compared to one taking a journey to a particular place; when one gets to the end of the journey and sees all there is to see at that place, one then starts thinking about getting to another place.  Goals are not written in stone and must be adjusted regularly to meet the needs of the business.  All business have needs but not all business owners have written their goals or understand how to achieve them.  Staying focused on the journey and where it may end will keep the entrepreneur doing everything necessary to attain success. 

Businesses that succeed are persistent in their efforts and the rewards of achievement keep them motivated.

You have a great idea, a wonderful vision, a fantastic dream – and you are trying to figure out how to bring it to fruition.  This could just be legacy you will leave for your children.  You have found the path you must travel to gain the ultimate freedom.  You must now avoid the mistake many others have made – deciding on how to operate without first understanding what the operation is going to be.

Many entrepreneurs are fully cognizant of the fact that they know what they want to do but don’t fully understand how to do it.  They go to professionals they trust for advice and, unless those professionals understand the dimensions of a successful business, they are often misled.  You will be misled if you do not know which questions to ask.  It is a good idea that you be fully acquainted with your needs before you seek advice.

Those professionals that give advice about the right entity for an entrepreneur to choose must know, at the very least, the average annual taxes that the business is projecting to pay over the next few years and how much growth is anticipated for the future.

The usual entities that entrepreneurs choose are (1) Entrepreneurship (2) General Partnership (3) Limited Liability Company (4) S Corporation and (5) C Corporation.  These entities differ in various ways including the deductions that are allowed and how taxes are paid.  For the first four entities, taxes are paid through their owners and are like payroll taxes.  The C Corporation pays its taxes separate from its owners.  For payroll taxes, the more income a person declares to the government is the higher the tax bracket that person is aligned to.

The owners of some of the first four entities end of paying close to 50% of the taxable profit while some C corporations with the same taxable profit pay 35% in taxes.  Get the information you need before you make a decision and get it from a professional who understands all the dimensions of a successful business.  It is sad, but true, that many of those professionals that give this type of advice to entrepreneurs do not know how to successfully develop their own companies – yet they are giving advice.

It follows then, that unless you know your numbers, you cannot decide which entity you will be choosing to operate under.  This means you should have a well-written business plan.  If you are under the impression that a business plan is only written when someone is looking for loan or equity financing, you should readjust your thinking.  You need a business plan for your own use as a roadmap to guide the development of your business.  You will be proactive rather than reactive when situations occur that ordinarily could be detrimental; and you will be more likely able to overcome them instead of giving up in frustration and desperation.

Of course, deciding on the entity will take several factors into consideration including

·         How much profit the business will declare for tax purposes

·         How many partners, shareholders or members will be liable for the taxes

·         How many expenses the entity will have to deduct

These are examples of some of what the business owner has to be aware of.  As a responsible business owner, you will seek advice from the best sources.  You will be willing to give up time and money to get whatever you need to make the best decisions to grow your business.  A business that is not growing is dying.  After first determining if there is a need for your product or service; after developing and writing your business plan, you will then determine the best entity to operate under.  There are no shortcuts to this determination.  Doing it backwards can cost you thousands of dollars in taxes.  If you decide on the entity before you understand your numbers can put you in a hole that may take precious time and money from you as you struggle to get out.

Deciding how to operate will take research on your part, since there are different entities of operation under the law.  How much taxes you pay will be determined by the business entity you operate under.  You have to understand your business plan and therefore know which entity best serves your business goals.  In order to legally operate your business, you must, at the very least, complete a d/b/a (doing business as) form, which you file with the County Clerk at the Court House in the county in which you live.  This allows you to operate as a Sole Proprietor or if you have a partner as a General Partnership.  You can then apply for a Federal Employer Identification Number (FEIN), and open a bank account in your business’ name.

With respect to taxes for the Sole Proprietorship or General Partnership, you simply attach a Schedule C to your 1040 Federal Tax Form and outline your income and allowable expenses, the balance can either increase or decrease your taxable income.  There is no difference between you and your company and therefore, no protection from liability.  This is why you are a d/b/a; for example, Susan Smith (your name) d/b/a Bright Stars Company (your business name).

You can also incorporate your business as a “C” corporation and file a Certificate of Incorporation with the Department of State.  A corporation is a legal entity separate and distinct from the individual(s) who compose the business. It has rights and abilities similar to those of a natural person.  Principal features are perpetual duration, limited liability and easy transferability of interests.  Your business can then carry the suffix “inc.” which shows that it is an incorporated entity.  You can also incorporate as “pc” (professional corporation) if you are in the profession of law, medicine or education (check Title VIII of the Education Law).  Before filing taxes as a “C” corporation, you can complete Form 2553 and instruct the IRS to tax you as an “S” corporation.  “S” corporations not treated differently from “C” corporations by New York State except in the way they are taxed.

With respect to taxes for the “C” corporation, this entity pays its own taxes separate from the shareholders or owners of the corporation.  Funds must be kept separate – no co-mingling.  Any money the shareholder or owners take from the corporation is always liable for income tax even after the corporation has paid its taxes; hence the term “double taxation”.  If you choose this entity, it is prudent that you pay yourself and leave the corporation’s money intact as retained earnings to be used for growing the company.

You may also want to operate as a Limited Liability Company or a Professional Service Limited Liability Company (if your business meets the requirements) and file Articles of Organization with the Department of State.  Owners are members; not shareholders.  Within 120 days of the effectiveness of these articles of organization, you have to publish a notice of formation in two newspapers designated by the County Clerk in the county in which the office of the LLC is located.

You may also want to operate as a Limited Partnership by filing a Certificate of Limited Partnership with the Secretary of State.  If you are an attorney, counselor-at-law, licensed physician or an educator under Title VIII of the Education Law, you may want to operate as a Limited Liability Partnership.

The forms for incorporating under any of the entities mentioned above (except sole proprietorship) can be downloaded from the NYS Secretary of State website, www.dos.state.ny.us.  All information with respect to forms, filing instructions, responsibilities, and fees are also available at this site.

Except for the “C” corporation, all entities (including the sole proprietorship) pay taxes through their owners.  After filing appropriate tax forms to outline income and expenses, any profits of the entities increase the taxable income of their owners and any losses reduce the taxable income of their owners.  Note that tax rates are normally higher for the “C” corporation (around 35%) than for the other entities, unless your taxable income from your income and the entity you form put you in a higher tax bracket.  You pay income taxes once per year, unless your accountant recommends you pay them quarterly.  If you have employees, you pay your payroll taxes quarterly.  If you are a retail establishment or collect taxes from your customers for services, you pay these taxes quarterly.

You should get as much information as possible to be sure you are making the best tax decisions for your business.  You should always start with a complete business plan as your guide.

In order to overcome anything, you first have to be intimate with it. You cannot overcome anything that you do not know. Whether it is fear, drug abuse, selfishness, alcohol abuse, greed, etc., you must first have an understanding of what it is you have to overcome. Once you get to know it for what it is, you will leave it alone.

You must realize that while you are still in the grips of whatever it is that is causing harm to you, your family, or your business, if you do not recognize it, you will go to the point of denying its existence. People deny truth every day. Until you realize that the pain of truth will set you free, you will forever be in bondage.

Once you have overcome, you will not or should not allow it to be in your space ever again. It is always one day at a time for overcoming. One by one, you must overcome all that create setbacks for you, until you are totally free to fulfill your destiny. It is impossible to know and fulfill your destiny when you are possessed by negativity in any form, whether it is fear, gluttony, greed, drug or alcohol abuse. Understanding the negativity will free you from its control. Remember, you do not possess the power to change anyone but yourself. People can be influenced by your words and your actions but they make the decision to change their lives, so it is with you. No one is to blame for anything in your adult life but you – you may have to overcome making excuses for failure by laying blame on others. Only you are responsible for your success or failure.

Many people know what they should be doing, but waste precious time doing something else because of negative influences in their lives. The “something else” is making them miserable and dis-eased and keeping them poor.

Time is more precious than money. With time you can get money, but money cannot buy you time. A life without fulfillment is a wasted and unhappy life.

Your gifts and talents can take care of all your needs. No one was put on this earth, even under the most extreme conditions, without being given the means to take care of their needs. We hear stories all the time of people who succeed under the most “impossible” situations. Why were they chosen amongst all who were called? What stops you is what you need to overcome, but first you must know it and become intimate with the power it holds over you and what negative influence it has over your life and your dreams. Once you know it in its entirety, now you have the power to overcome it. Not knowing everything you need to know, can cause you to step back into its grips.

Our greatest achievement is overcoming because it continuously takes us to a higher level of understanding. To overcome you must recognize the problem, become disciplined to confront it, become accountable to the goal you must reach – which is, overcoming to succeed.

—–Written by Patricia Warner (copyright pending).

Businesses should know who they are targeting and why before they can develop marketing or sales strategies to convince consumers to become customers.  You must first be clear on whether or not there is a need for your product or service.  You must clearly understand the priceline at which you plan to enter or penetrate the market and know the consumer you are going after by understanding how and why their particular demographics, geographics, psychographics, and other factors fit into your business plan projections.

There are many different strategies that can be implemented and a few are outlined below:

Excellent telephone and interpersonal skills

Clients must be able to hear the smile in your voice.  Good telephone etiquette is key to your success and you must never hang up before your clients do.  In today’s fast moving world we tend to forget to bring the personal touch to many of our transactions.  We are all creatures of habit and we buy with our emotions.  Being pleasant, having a great attitude at all times, smiling, being helpful beyond the call of duty, under-promising and over-delivering instead of the opposite are all great tools amongst others that can be used to increase sales and improve customer relations.

Exceptional service

This should be a vital part of any business.  Operating with excellence all the time regardless of the circumstances will send a message to your customers that they are important to you and not only because of how much they spend.  As business owners, we have to deal with many different personalities and we must never make the mistake to serve those personalities based on their differences.  We must give equal exceptional service to everyone.  This can lead to priceless positive word-of-mouth advertising for our businesses.

Measuring the Success of Marketing Strategies 

Every business should have a good marketing plan that is strategic to its target.  After implementing the plan, the results must be measured to access whether or not they are working effectively and efficiently.  One must be able to measure how much sales are derived and in how much time from the particular media that are used to get the attention of customers.  Not measuring the success of your marketing strategies may cause you to waste marketing dollars and thereby lose sales that may have been gained by simply changing the strategy or the media.

New Media Marketing

We live in a world when New Media [Internet] Marketing is now the norm.  No longer are we dependent on newspapers, magazines, radio and television as much as we are dependent on the internet to get the word out.  Consumers first look to the internet and search engines when they are looking for products or services; therefore, it is imperative that small businesses have a website that effectively sells their products or services to those that seek them.  There are so many search engines and social sites to choose from; however, we still have to be creative to get and keep our target customers’ attention.  We may sometimes have to use Old Media like radio, television, newspapers or magazines along with direct mail to get the word out about our websites, but we must use such media effectively.  We have to focus only on those audiences that fit the criteria for our target to get the best results.  Remember, everyone is not your customer.  Put your target in the bullseye and don’t focus on those in the rings outside.

Setting time aside for Marketing

Marketing is not sales and sales is not marketing but we need great marketing if we want to be successful at selling.  Marketing is like fishing with a line and sales happens when the fish bites and is caught on the hook.  Business owners must set aside some time everyday or every week exclusively to market their products and services.  You should never be in a position to say “I have enough customers”.  History has taught us that customers come and go as much as we want to keep them only to ourselves.  We live in a capitalistic society and competition drives our economy.  Businesses are constantly looking for ways to take market share away from their competitors by using their differential advantages.  Marketing is key to a business’ success and should never be an afterthought.  Many businesses neglect marketing and pay the price with low sales and negative cash flows.

Gift Certificates and Discounts

Gift certificates and discounts may be another way to increase sales.  However, you must be sure that you run your numbers to determine if any or both of these tactics are cost effective and how soon you will get a return on your investment.  Understanding your business’ cash flow and turnover will help you determine if using gift certificates and discounts will be useful to you.

Personal contacts

Never underestimate the power of networking.  Personal contacts that we make every day may be useful to us when trying to increase sales.  Stay in touch with contacts that complement your business or even those that are your competitors.  We can make and get referrals to and from those that complement our businesses and we can learn from those that are our competitors.

Fifty percent (50%) of small businesses fail within the first year because they fail to have a plan which they can implement to guide their operations. Many have never done a break even analysis and they continue to struggle, in many instances supporting the business from outside sources when the business should be supporting itself.

A break even analysis is essential to a successful business and will tell you exactly how much you must earn to pay all your expenses and leave your with zero profit. This is your starting point to making a profit. Let’s break this down.

The first step in breakeven is knowing all your expenses, direct costs and indirect costs. Direct costs are all those costs that are directly related to your sales; in other words, the cost of your sales or the cost of the products you sell. Your indirect costs are other costs that are not directly related to sales, for example, rent, insurance, salary, payroll taxes, and depreciation. Whether you have a sale or not, these are expenses that must be paid and are therefore indirect costs also known as fixed costs since they do not normally change from month to month.

Remember that your expenses include your salary. Some small business owners wait to see what is left at the end of the month after expenses are paid to take a salary. That is so wrong. If you want to develop a successful business, paying yourself a salary should be an integral part of your plan and the business has to develop sales to cover that cost. The profits of your business are not your salary.

If you make it a habit to take whatever is left from the business, you are not building a viable business, your cash flow will be negative, your income statement will show a net loss and your balance sheet will not show any growth in net worth for your business. Why be in business if your goal does not include growth? The very essence of being in business means consistent growth.

Once you are aware of all your expenses, i.e., every single item down to the paper clips and the coffee, you now know how much sales you must have in order to breakeven or have a zero profit.

Knowing your breakeven point helps you develop your sales strategy and your pricing point.

Look for these topics later on our blog.