Who doesn’t want to run a business from their home and wear a bathrobe to virtual business meetings? Since the go-go days of the dotcom boom, the ideal of starting an online business has drawn many to try their business legs in the challenges of online commerce. And indeed, the statistics are attractive: Fifty-five percent of American households are wired for the Internet, and nearly a third, or 32 percent have made a purchase online, according to the US Census Bureau. There’s buckets of money being made online, but who’s making it and who’s not?

When one speaks of “making money online,” one creates an image of simply turning on a computer and getting money out of it as if it were an ATM machine. In fact, the Internet, and all the commercial features of it, are merely tools in the entrepreneur’s toolbox that should be used alongside other, more traditional tools. When you’re building a house, sometimes that high-tech, laser pointing thingamabob is great, but sometimes you just need a hammer. And so it is with online business, and supplementing all that high-tech with old-fashioned business, or in many cases, supplementing old-fashioned business with some high-tech, is what it takes to be successful. Success online comes not in replacing the old with the new, but blending them together.

With a few high-profile exceptions, most businesses that “make money online” successfully aren’t exclusive virtual sales companies, but instead, they use the Internet as just one of several sales channels. While people are buying things online, they enjoy having the Internet as an optionbut don’t want it to be their only option. More often, the Internet is used as a vehicle for researching products that will actually be bought in an actual brick-and-mortar store.
Creating a virtual business doesn’t mean that it should be exclusively virtual.

The most successful online businesses are those that have promoted themselves offline as well as on, through traditional media such as television and newspaper as well as via clickthroughs and email advertising. Yahoo! is an excellent example of a fabulously successful online companybut what do we remember most when we think of Yahoo!? The silly yodel from their television commercials.

Perhaps one of the most important things to remember when starting an online business, is not to get lost in the online mystique. The Internet revolution has, and continues to bring us all manner of useful tools and techniques for commerce, but if you want to get customers to visit your new online boutique, you have to actually change out of your bathrobe, get out of your den, and actually talk to some people face-to-face.

When Is The Best Time To Incorporate Your Small Business?

If you’re a sole proprietor, perhaps you’ve considered incorporating your small business or self-employment activity.

And so maybe you’ve been wondering, “When is the best time to incorporate?”

From a legal standpoint, any time is the best time. The sooner you incorporate, the sooner you make the move from the world of unlimited liability to the world of limited liability.

From a tax savings standpoint, any time is the best time. The sooner you incorporate, the sooner you will start putting more money in your own pocket and less in Uncle Sam’s.

But from a **tax reporting** standpoint, there is one time of year that stands out as best: January 1st.

Why is that?

Assuming you have a sole proprietorship (or other entity, such as a partnership) that is up and running as of January 1, and assuming you then incorporate that existing entity on any date other than January 1, you face the possibility of filing not one but two business income tax returns for that year.

Here’s an example to clarify this important point . . .

Let’s say you’ve been operating your sole proprietorship for a few years, and in early 2006 you decide to incorporate. In January you get around to starting the paperwork, but life gets in the way and you finally get it done in late February. By the time your state processes the Articles of Incorporation, the start date of your new corporation is March 1.

For 2006, you must file a Schedule C for the period of January 1 through February 28, when your business was still a Sole Proprietorship. And you must also file a corporate income tax return for March 1 through December 31.

Maybe that’s no big deal. Maybe you enjoy filing one business income tax return so much, filing a second one doesn’t bother you. And it may be that the inconvenience of filing two tax returns in 2006 is far outweighed by the legal and tax advantages of incorporating.

Keep in mind, too, that 2006 will be the only year you have to do this “double duty”. In 2007 you will only have to file the corporate income tax return.

But if you are thinking about incorporating, the best time to do it, from a tax paperwork standpoint, is as of January 1. Only then do you have a “clean break” from the old sole proprietorship to the new corporation.

This timing issue can also be relevant if you decide to make the switch late in the year. If the effective date of the incorporation is November 15, you will have to file a Schedule C for January 1 through November 14, and a corporate return for November 15 through December 31. In that scenario, you should ask yourself, “Do the benefits of incorporating outweigh the convenience of waiting until January 1?”

So before you decide when to incorporate, take a moment to reflect on the tax reporting consequences of incorporating on January 1 vs. any other date.

Sometimes it may make sense to wait a few weeks (as in the second example), and sometimes it makes sense to “do it now”, especially when January 1 is nearby.

Why Your Customers Buy: 3 Motivators Small Business Owners Should Know About

Whenever you go into a shop or pick up the phone to place an order, something has prompted you to take action and buy. Have you ever stopped to consider what that prompt was? What thought went through your mind, which led to you putting your hand in your purse or wallet?

Its all down to motivation what motivates you to buy. Understanding your customers motivation will help increase sales and profits! So, lets spend some time examining what motivates people to buy and how you can apply this knowledge to help make your business more successful.

Motivation 3 basic drivers

Any purchase boils down to satisfying a need, want or desire. These are 3 distinct stages. You usually have to satisfy your needs before you can progress up to wants and desires. Lets have a look at each of them in turn.

Needs

Abraham Maslow, in his work on needs, highlighted that at the basic level, before we can consider bettering ourselves, we have a set of requirements that are essential to survival. The most basic of these needs include food, water, heat and shelter. This is mass-market appeal, from the big supermarkets down to your local corner shop. Sell into the needs category and you are looking at high volume, low margin.

Other than the odd special promotion, you rarely see the local shop advertising; they know that they will always get a core trade because they are satisfying needs (a bottle of milk at 9 oclock at night!).

Unless you have a huge market penetration, you will never make a fortune just satisfying needs. Find another market if you want a high-living lifestyle!

Wants

Youre getting warmer now! You are getting into the realms of people who have satisfied their basic requirements and can afford to step up the ladder to satisfy their wants.

These are nice-to-have items not essential but they make life comfortable. A car, a TV, a CDDVD player generally a decent standard of living. To capture the market of satisfying peoples wants you will have to work a bit harder on two fronts.

Firstly, the customer can take it or leave it. He may not really need it at the end of the day, so you have to clearly highlight the benefits. Secondly, there is always someone else offering the same product. In this day and age you could argue that wants, to many people, have become needs, so there is an element of mass-market selling in this sector. You are up against many other businesses offering your product; you have to advertise, make people chose you over your competition.

You will make a decent living and create a decent business. But you should want more than this! To achieve greater success, you have to find a product that satisfies desires!

Desires

Desires spring from emotions. Big, profitable sales are achieved on the back of emotions. Why? Because if someone has a burning desire to satisfy, then logic more or less flies out of the window! Someone buying on emotion will pay a high price excellent profit for you.

If you are in the business of satisfying desires then you are probably selling niche products or services, something, which doesnt have mass-market appeal. You are focused on people who are happy to pay a premium to get what they want. A businessmans heaven!

Understand the real motivator

Having identified the 3 buying motivators, the next step to sell effectively to these groups is to see what the underlying need, want or desire is. Getting an idea of what drives your customer to buy means you can tailor your sales message accordingly.

The need motivators

To eat and drink to stay alive!

To stay warm

To have shelter

To be healthy and clean

To avoid pain

To ensure general security and protection

The want motivators

To be sociably acceptable everyone has one

To look and feel good sex appeal!

To save time or money

To improve general comfort levels

The desire motivators

Although some of these can be similar to the want motivators, desire motivators are more driven by emotion and so the need to achieve is more passionate money is almost no object.

Sex appeal

To improve social standing not just keeping up with the Joneses but to be better

To demonstrate love

To gain prestige or to impress

To be popular

Regaining a forgotten youth

You can see by comparing the various motivators that selling to the desire group can be easier and more profitable. They have more money and so you dont have to try hard to sell your product. All you have to do is uncover which motivator is pressing them to consider purchasing and exploit it! Theres nothing better than being in a niche market.

Steps to take

In summary, here are the steps you can take:

Identify which of the motivators you are out to satisfy needs, wants or desires

Speak to your customers and find out which of the specific motivators is driving them to buy

Tailor your sales and advertising pitch to match

Spend some time thinking and studying your customers motivation and you will be richly rewarded.

New ecommerce entrepreneurs can find them confused and confounded by the tax and accounting requirements of their venture. And thats a shame: If someones spotted a great new category and successfully built a web presence, heck, that someone shouldnt find themselves bogged down with the accounting minutia. The entrepreneur should focus on increasing traffic, expanding margins, and growing cash profits.

With that in mind, I offer up the following tax and accounting tips:

Tip #1: Dont Incorporate

A true corporationwhether a C corporation or an S corporationsaddles your business with more complicated tax accounting and a bunch of state filing requirements. You dont want to deal with this redtapeor at least not until youre profitable.

Instead, operate your business as a sole proprietorship. If youre concerned about legal liability protection, note that you can setup a one-owner limited liability company, or LLC. A one owner LLC is treated as a sole proprietorship for income tax purposes.

Tip #2: Start Your Business Before Making Investments

Expenditures you make before youre actually in business-in other words, before youve got a business license and before youre selling or trying to sell your stuffarent very deductible.

Specifically, you can probably deduct the first 5,000 of these expenses. But any amounts in excess of the 5,000 must be amortized over the next fifteen years.

What this means is that you want to start your business before you start spending money on advertising, training, web development, accountants and lawyers and so on.

Tip #3: Automate Your Bookkeeping & Accounting

By lawand some people dont know thisyoure required to maintain an accounting system that lets you clearly measure your income. As a practical matter, this means you need to use a product like Quicken or QuickBooks.

But you ought to go one better than simply using desktop accounting software. Make sure that youre taking advantage of online banking and bill payment features which integrate your accounting system with your banking. As much as is possible, for example, you want to be able to move money from PayPal to your bank to QuickBooks simply by typing a few keys or clicking your mouse a few times.

Tip #4: Hire a Payroll Service Before Hiring Employees

Many successful ecommerce business owners can run their operations without employees. And if thats true for you, hey, congratulations. If and when you do need employees, however, dont try to handle the payroll yourself. Oursource the payroll to one of the large payroll service bureaus like ADP, Payroll, or QuickBooks.

These services are expensive. Figure 1000 to 2000 per year. But the services let you avoid the bookkeeping nightmare called payroll and prevent you from getting into payroll tax trouble.

Tip #5: Consider S Corporation Status After Youre Profitable

Ive written and talked much about how S corporations save taxpayers money and how the right way to set up an S corporation is first create a limited liability company and then ask the IRS to treat the LLC as an S corporation for tax purposes.

Let me review the basics here again, however. Suppose that youre making 90,000 a year off your web site. If you just treat your business as a sole proprietorshipor an LLC treated as a sole proprietorshipyou might pay 12,000 in income taxes on the 90,000 and then another 15.3% self-employment tax, or roughly 13,500 on the 90,000.

If you set up an LLC and have the LLC treated as an S corporation, youll still pay the same 12,000 in income taxes. But youll only pay the 15.3% self-employment tax on that portion of the profit that you categorize as wages. If you categorize, say, 50,000 of the profits as wages, youll pay 7,500 in self-employment taxes. (The other 40,000 in remaining profits, by the way, gets paid out as a dividend-like distribution.)

Note, then, that the S corporation saves you roughly 6,000 every year. Sweet, right?

As small businesses expand in size and geographic scope, they often find it difficult to make technology available to employees in all locations. Today, however, many are finding that by installing small-business servers, they’re reaching more people in more places. They’re also increasing productivity, profitability and efficiency while decreasing costs.

A small-business server can store all of a company’s documents, e-mail, calendars and images in one location, where all employees can access them from computers connected to the server. Files on the server can be downloaded anywhere in the world when the server is set up for Internet access.

One of the many benefits of a small-business server is that it allows companies to increase communication efficiencies. For example, the combination of e-mail capability and calendar functions enables executives to view any employee’s calendar, then send an e-mail meeting request that is automatically entered onto invitees’ calendars.

Outside the office, employees can e-mail co-workers through hand-held devices such as cell phones and personal digital assistants. Employees working in distant locations also can access their office computer remotely and use it as if they were at their desks.

For example, Atlanta-based CCM Homes LLC, relatively new to computer technology, used 14 stand-alone computers to run its home-building operations. These computers helped streamline many of the company’s business processes, but sharing data was difficult due to varying PC configurations and software. In addition, a lack of centralized data affected the company’s ability to accurately price its finished homes.

CCM Homes resolved these problems by installing Microsoft Windows Small Business Server 2003. Employees can now work from outside the office without relying on co-workers to hunt down information for them. In addition, security has improved, communication has been transformed, and the company expects to save $100,000 each year as a result of more accurate budget forecasts.

In the movie “You’ve Got Mail”, the sub-plot aside from the love angle is that the heroine (played by Meg Ryan) was forced out of business when the big-time bookstore owner (played by Tom Hanks) moved into town.

Meg’s character owned a quaint little bookstore which she inherited from her mother. Although the prices of her books were a little steep, she makes up for it in service. She packs the books in a specialized bag, and she knows all of her customers by name.

Tom’s character, on the other hand, moved into town to build a branch of a big chain-bookstore which offered discounted prices and a huge building, as compared to Meg’s little bookshop on one corner of the town’s streets.

In the end, Meg was forced out of business because her customers went to Tom’s monstrous bookshop.

Nowadays, this situation will not hold true anymore.

More and more small organizations are paving the way and giving big businesses a shot of their own medicine.

In the movie, the reason why Meg Ryan was forced out of business is because she cannot profit anymore. Her prices are steep as compared to the other big business’ discounted rates.

Her only edge is that she gives personal service, she knows her customers by name and she has a very small staff, about 2 or 3 employees.

As a small organization you may turn around and have these qualities as your edge to compete against the big sharks in business.

Here are some tips on how you can hold your own against a big business:

1. Small businesses have big competition.

This means that you need to know how to survive out there.

No matter what nature of business you have, it is better to learn about the competition so that you will be able to survive.

Here are some tips on how you can survive the big competition:

>Keep your business alive.

When it seems as if your cash flow is in a downward slope, keep a tight rein on your budget.

Do not spend on unnecessary business purchases and always balance your books.

If you are one to buy on impulse or if you are the type to listen to those who sweet-talk you into purchasing “necessary” items, control yourself.

Get a second and third opinion if possible, as these impulsive buys may lead to the end of your small organization.

>Do not be afraid to seek professional help.

The fall of most small businesses start with decisions on problems which are not carefully analyzed.

Although you think that you already have a contingency plan, make sure that you have foreseen the results of a certain business decision.

In the long run, it is better to seek professional help rather than embark on a plan that could start the downfall of your business.

>Keep your books straight.

The better option is for you to hire a professional outside accountant to figure the returns of your investment and handle the other financial aspects of your business.

>Take advantage of every free business counseling whenever available.

This does not just help widen your knowledge, but it will also give you an idea of how other businesses are ran by small-scale owners.

>Know exactly where your business is headed.

In your day-to-day operation, make sure that you know where you want your company to be 5 or 10 years from now.

Be always aware of the trends in the industry that you are in, practice good money management and learn how to recognize potential problems before they arise.

2. Learn how to market your small organization.

Marketing is not about trying to sell your products and services to everyone.

It is about knowing who to market your products to.

In marketing, it is good to remember these fast facts:

> Know about your customers.

>Communicate with your customers.

>Build a good and personalized relationship with your customers.

This will be a great edge for you to have against the bigger companies.

They might offer discounted prices but it is harder for them to keep track of customers on a more personal basis.

>Do not stop the marketing process.

As a small organization, you need to routinely review the markets that you need to pursue so that you can better reach out to your customers.

Remember, small organizations are big businesses these days so do not be afraid to work hard for the company that you have – not matter how small.

If you work hard, make wise business decisions, learn how to market your small business and personalize your customer interaction, your small-scale business is sure to rise to the top.

Studies have shown that successful entrepreneurs possess these characteristics:

1. Self-confidence

This is that magical power of having confidence in oneself and in one’s powers and abilities.

2. Achievement Oriented

Results are gained by focused and sustained effort. They concentrate on achieving a specific goal, not just accomplishing a string of unrelated tasks.

3. Risk Taker

They realize that there is a chance of loss inherent in achieving their goals, yet they have the confidence necessary to take calculated risks to achieve their goals.

Entrepreneurs are people who will make decisions, take action, and think that they can control their own destinies. They are often motivated by a spirit of independence which leads them to believe that their success depends on raw effort and hard work, not luck.

So which of these three main characteristics is the most important? Believe it or not, it has to be self-confidence. Without self-confidence, nothing else is possible. If you don’t believe in your abilities, then the first challenge that arises may knock you off the path to achieving your goals. Here are a few things to keep in mind for maintaining a higher level of self-confidence.

Positive Thinking

Well, it all starts with a positive attitude, doesn’t it? Believing that something good will happen is the first step. Negative thinking simply is not allowed. You must truly believe that there are no circumstances strong enough to deter you from reaching your goals. Remember too, that positive thinking can be contagious. When positive thinking spreads, it can open doors to new ideas, customers, friends, etc.

Persistent Action

Now all of the positive thinking and believing in the world is useless if it is not applied towards a goal. You have to take action, no excuses are allowed. This action must also be persistent. Trying once and then giving up is not going to be enough. Keep at it one step at a time. If you can’t get by a certain step, then find a creative way to try again or just go around it.

At the beginning of this article we identified a few traits that are common among successful entrepreneurs. You should be able to look ahead and see yourself where you want to be. Now just maintain a strong belief in yourself and your skills, stick with it, and don’t give up. If you can do that, you’re already half way there!

Unsecured Start Up Loans For Small Business Is It A Good Idea?

First-time small business owners usually are chary of unsecured start up loans. This is because the time frame for making a profit is not definite whether or not there is a properly thought out and lucrative business plan in place for the future business.

When profits or revenues do not materialize per plans, as in most cases, there is danger of default on loan repayment. When this happens credit rating of the person involved gets degraded as unsecured loans are granted on the basis of credit and borrowing history of the business owner.

And if there is bad credit history behind, heshe can very well forget that small business loan. Lets discuss some more aspects of unsecured small business start up loans.

Some Facts

If the credit history of to be small business owner is good, unsecured start-up business loans are easier to avail as compared to other business loans. But it is better to go for secured loans against property or equipment affiliated with the business.

Secured loan not only keeps personal credit rating intact but poses lesser risks for the business owners, because they can use the hypothecated equipment to generate a profit for the business. As a result the loan can be paid back on time. Not just that, secured loans are for longer tenure and come with lesser interest rate burden, thereby lowering the cost of loan.

But if you have decided to apply for unsecured small business start-up loans, you should be careful about the requested amount. Remember, the more you owe on the loan (including interest), the more will be the money which you have to repay.

If you are not exactly sure how well the business will do in the first year and want to keep your credit rating good, it is best to request a small amount for your unsecured start-up business loan. This will make sure that repayment installments are small and if you are punctual in repaying, you can always ask for more, which will be gladly given.

Some Advice

Before you apply for an unsecured business start-up loan, there are several things that you should keep in mind.

First of all, you will need to convince the lender that it is a good decision to issue the loan to you. Since unsecured loans are based on your credit and repayment history, you will have to convince lenders that you can handle your personal finances in an organized fashion. Good credit record will put lenders at ease since they will be able to see your repayment history on your credit report.

Since lenders will be looking at your credit report, you should maintain a positive report as far as possible. If you know that you owe certain lenders, you should try to settle these debts or set up a payment plan with your creditors. This will be visible on your report.

Before you make any final decisions about unsecured start-up loans for business, be sure to speak to an accountant or a representative from your local bank. This will make sure that you are applying for the right loans which would help your business to develop quickly and steadily. You must not take a decision unless you are convinced.

Small Business Start Up Costs: How Deep Are Your Pockets?

One of the challenges of planning and getting a new business off the ground is to establish what your start up costs are going to be. At best, its going to be a stab in the dark or a wild guess, but there are some specific steps you can take to make your costings more realistic.

Why Estimate Your Costs?

But, before we look at where you can get help, we should consider why you need to get your estimate of start up costs to be as close to reality as possible. Firstly, if you are seeking bank finance the dreaded Business Plan is required! The Bank Manager is not going to be impressed by a comment such as, I think my start up costs are going to be around 10,000 but hey, who knows!

Secondly, you need to go into any new venture with your eyes open. You have to be as sure as you can on how much its going to cost to get your new business started. There is nothing worse than getting 90% of the way there, only to fall at the last hurdle because you didnt cater for one major expense.

Lastly, as a start up you are likely to only have a limited pot of money available. You have to prioritise which costs are essential and which can be delayed until the business is more established. You can only do this if you have researched and understand what your costs are going to be.

Where Can You Go For Help?

Its easy to think that you have a good idea of what your start up costs are likely to be, but do you really? Once you think about it, a whole can of worms starts to open! But there are sources of help you can turn to, which will ensure that you dont face oblivion within the first few weeks.

A good starting point is your countrys government support and business advice agency. These are government funded organisations which are there to provide free and impartial advice on all aspects of running a business.

Call and book an appointment to see an advisor. They will have a wide range of material and experience which will give you a good grounding in the costs you will have to cover. The service is usually free, so thats one cost you wont have to worry about!

Chamber of Commerce or Local Business Club/Group

If you have a local arm of the Chamber of Commerce or any formal or informal business group, then they are a good source of knowledge and information. Within the group you will find a wealth of experience and people who have been through it all good times and bad times! You may be lucky enough to attend a meeting when a speaker is there on just the topic you are looking for.

Colleagues and Other Business Owners

If you dont have a club or group you can attend, then seek out business people yourself. Ask all your contacts to tell you about their start up experiences. What costs they budgeted for; what costs they didnt budget for; where they overspent. Genuine business people are usually happy to share their experiences and give you advice. Listen to what they have to say and take note.

If you dont have a circle of business contacts, put the word out to all your personal friends. A few of them will have friends or relatives who are in business on their own. Ask for an introduction or referral. This will warm them up before you ask your searching questions.

Bank Business Guides

Many Banks provide comprehensive brochures on starting up in business. They usually contain a Business Plan template which will include a section on start up costs. Some go further and produce guides for specific industries and sectors. They provide in depth analysis about the business, the market, the competition and estimated start up costs. Call in to your local Bank and ask to see the Small Business Manager/Advisor.

Suppliers

If you are looking to cost your raw materials or partly finished stock for buy in then, as a key part of your financing, call your potential suppliers and ask for quotations. Tell them that you are starting up and they should be more than helpful, after all you could be a potential customer!

Examples of Start Up Costs

If you havent got the time to try any of the above (and theres no reason why you shouldnt find some time!) here are some of the key costs you will have to cover:

Equipment

Fixtures and fittings

Installation

Initial stock

Advertising

Decoration

Legal and other professional fees

Licenses

Specialised computer software

Up front rental payment

Initial cash float

Cash to cover trading for the first month or two until the payments start rolling in

The list is by no means exhaustive but it will provide you with the first step to finding out how much it will cost you to start up.

Who Said It Was Going To Be Easy?

Getting a new business off the ground is difficult enough, even if you fully understand what its going to cost you. Doing it with no idea is not a recipe for success. Devote some time to this exercise and you will be amply rewarded.

Studies have shown that successful business entrepreneurs possess these characteristics:

1. Self-confidence

This is that magical power of having confidence in oneself and in one’s powers and abilities.

2. Achievement Oriented

Results are gained by focused and sustained effort. They concentrate on achieving a specific goal, not just accomplishing a string of unrelated tasks.

3. Risk Taker

They realize that there is a chance of loss inherent in achieving their goals, yet they have the confidence necessary to take calculated risks to achieve their goals.

Business entrepreneurs are people who will make decisions, take action, and think that they can control their own destinies. They are often motivated by a spirit of independence which leads them to believe that their success depends on raw effort and hard work, not luck.

So which of these three main characteristics is the most important? Believe it or not, it has to be self-confidence. Without self-confidence, nothing else is possible. If you don’t believe in your abilities, then the first challenge that arises may knock you off the path to achieving your goals. Here are a few things to keep in mind for maintaining a higher level of self-confidence.

Positive Thinking

Well, it all starts with a positive attitude, doesn’t it? Believing that something good will happen is the first step. Negative thinking simply is not allowed. You must truly believe that there are no circumstances strong enough to deter you from reaching your goals. Remember too, that positive thinking can be contagious. When positive thinking spreads, it can open doors to new ideas, customers, friends, etc.

Persistent Action

Now all of the positive thinking and believing in the world is useless if it is not applied towards a goal. You have to take action, no excuses are allowed. This action must also be persistent. Trying once and then giving up is not going to be enough. Keep at it one step at a time. If you can’t get by a certain step, then find a creative way to try again or just go around it.

At the beginning of this article we identified a few traits that are common among successful business entrepreneurs. You should be able to look ahead and see yourself where you want to be. Now just maintain a strong belief in yourself and your skills, stick with it, and don’t give up. If you can do that, you’re already half way there!