Tips to a Lasting Small Business

Many business start-ups have no idea what they’re getting into. Partially due to the lack of research about the industry their business is entering. All small businesses need to be aware of risks as well as opportunities that could lie ahead.

There are some common reasons why so many businesses fail and it’s best to know what they are because that’s the first step to avoiding them.

Lack of Incoming Revenue

Sometimes small businesses, especially the self-employed, fail to get paid promptly. If the accounts receivable lacks activity then expect the business to go downhill and fast.

Partnering with the Wrong People

What can start as a harmonious business relationship because it’s a spouse, relative, or best friend, could result in a heavy dispute later on. That could be from not having a partner that complements your skills or no code of conduct was established.

How to Help Prevent Small Business Failure

The reasons a business can fail are all avoidable but it’s all about what is done as a business owner to prevent them. 

Be Ready For Expansion When Appropriate

When it’s time to scale up make sure resources are in place to do so. Make sure enough capital is put away such as cash-on-hand and credit lines to make the financial investment needed. Make a plan of how the business will expand and project their upcoming re-investments.

Avoid Giving One Client Focus

Aim to have multiple small and medium-sized clients instead of giving one big client all your attention. If a smaller client is lost all income is not lost. 

Have a Plan B

A business journey will never be a straight line. Things will happen in and out of an owner’s control. Having a plan B (or even C and D) can be necessary to continue to steer a business in the right direction. 

Stick to Your Core Values and Mission Statement

As a small business, starting with a good foundation is the only way to go otherwise it’s dealing with cracks in the foundation will be an issue later on. Continue to operate the business supporting your core values and clients will trust you.

Know Your Business Numbers

Management information should be something all business owners are on top of. Know what your break-even point is in addition to gross and net margins.

Ask For Help

Even self-employed small businesses need help sometimes. You never have to do it on your own and remember your attorney, accountant, and insurance agent is your business dream team. Sometimes you may not need a full-time employee but perhaps a freelancer. Utilize outsourcing tasks this way if capital is limited as well.

Accurate Bookkeeping

This where a good accountant comes into play. Knowing all financial information is key to maintaining and growing. Be able to also save on taxes and have numbers on hand for investors, creditors, and even buyers.

Maintaining Records

Some business owners are disorganized and have documents lying all over the place. Documents such as employee records, leases, contracts, insurance forms, and more should all be in an easy-to-find place. Also, someone else should know where they are in case anything ever happens to the owner.

Always Get Agreements in Writing

One of the main issues our firm keeps seeing is that business owners are making agreements and not putting them in writing. In addition to needing a written contract, an attorney should review them as well. This is because many of the contracts we have found that business owners already have do not spell out their rights properly. The contracts usually still put the client at a disadvantage.

Want to make sure your business is legally compliant and stay updated? A quick legal checkup could be what a business needs.

Steps of a Legal Checkup 

• Inspect the contracts

Contracts control the relationships with employees, contractors, service providers, manufacturers, distributors, suppliers, and most importantly your customers. All contracts need to be up-to-date and reviewed by an attorney.

If it’s been a while since the contract was created, considering reviewing those contracts again. If contract creation becomes time-consuming then consider a form contract when building new relationships. 

• Review of Insurance Policies

Any changes in your business could cause the need to look over your business insurance policies. If the business grew then the owner should expand the coverage. An umbrella policy can always be an option as it covers events not included in the business insurance policies.

• Seek Counsel from Advisors

The accountant, attorney, and insurance agent for a business are proactive and businesses should invest in having the right ones working with them. The last thing they want is to be pressured into choosing one because they need immediate help. 

Whenever your numbers aren’t matching up, an accountant should be consulted. When policies need to be updated or a claim needs to be filed, an insurance agent should be consulted. And for any legal matter, a business attorney is the go-to professional.

• If Applicable Review Your Company’s Collection Policy

If your business consists of payment upon completion of work, it’s likely to have a collection policy in place. All your clients should be aware of it and stick to it. A provision for recovering costs is necessary for any collection policy. Make sure to review or create a policy and it wouldn’t hurt to add incentives for early payment.

• Double Check Every Aspect to Avoid Litigation

Litigation can be an expensive process driven by emotion, ego, or revenge. If it doesn’t make sense to go through then an attorney can find a way out of it which could be a settlement.

Conduct a legal checkup on your business periodically or possibly quarterly but at least on an annual basis. The faster the growth of the business, the more often a checkup should be done.

Things can be learned from court cases with businesses involved. This particular court case shed light on the medical benefits of employees and a misconception when it comes to medical practices and religious beliefs.

The landmark Supreme Court Case in the matter of Burtwell v. Hobby Lobby brung up corporations being exempt from certain laws due to religious belief if a less restrictive option is available. There are already exceptions to federal laws in place for small employers defined as businesses with under 50 employees. Exceptions are also in place for religious employers such as churches. Hobby Lobby was founded by self-made Evangelical Christian billionaire David Green, an arts and craft company with over 21,000 employees. 

Green believed that life begins at conception, specifically fertilization, and objected to providing health insurance coverage to his female employees for four specific FDA-approved contraceptives. He believed that since contraceptives prevent the implantation of a fertilized egg that it was equal to abortion. The case was consolidated with a case by Conestoga Wood Specialities, a furniture company owned by the Mennonite Hahn family who holds the same beliefs. 

The intent of the ruling was only to recognize a for-profit corporation’s claim of religious belief if it is considered to be a closely-held corporation. According to the IRS website, a closely-held corporation isn’t a personal service corporation and has limited shareholders holding more than 50% of outstanding stock.

Green and the Mennonite Hahn family wanted Hobby Lobby to be classified as a closely-held corporation to be exempt from some of the mandates in the Affordable Care Act. The court interpreted the Religious Freedom Restoration Act (RFRA), a 1993 federal act that aims at preventing laws that substantially burdens a person’s free exercise of religion. The contraceptive mandate was overturned entirely which was a regulation adopted by the US Department of Health and Human Services (HHS). The mandate in the Affordable Care Act required employees to cover specific types of contraceptives for female employees.

The court determined the mandate was not the least restrictive way to ensure access to contraceptive care, noting a less restrictive alternative is already being provided for religious non-profits (who are already exempt from the mandate). 

What Can be Learned From This Case as a Small Business Owner?

• As a small business with a small number of shareholders, understand what federal guidelines you must abide by 
• If there are some legal exemptions your small business can claim, do so if it’s in the best interest of your business and it’s core values
• This is why it’s important to be up to date with your insurance policies and informing employees upon hiring

Referencing older court cases could have some valuable knowledge to help determine the best way to run your business. Look at those cases as resources and combine that with the use of good online tools like Google.

Microsoft Outlook is a tool for a calendar, email, and contacts. Microsoft programs have been used for documents, powerpoints, and spreadsheets. However, Google Apps allows users to do all those things in one space.

Google Apps allows users to use Gmail, Google Calendar, Google Docs, and Google sites, all hosted on their servers. You also have the option to use your custom domain name for your business email and you can purchase one directly from Google at a low cost. Having your domain name for business email is great for marketing and branding influencing others to visit the website. Even if you do not have a website, the custom domain can redirect visitors to a Facebook page or a platform where you sell your products or services.

Not only is the price point low but any computer can be virtually turned into an office. Just login into Google Apps and you’ll have everything right there in front of you. You can share your files with anyone inside or outside your organization making collaboration easier.

Here are some of the many apps on Google that your business could use to replace various other applications that have or is becoming obsolete:

• Google Docs (alternative to Microsoft Word)
• Gmail (alternative to Outlook, Yahoo, etc.)
• Google Sheets (alternative to Microsoft Excel)
• Google Meet or Google Duo (alternative to Skype, Microsoft Teams, etc.)
• Google Drive (alternative to computer storage, USB storage, etc.)
• Google Forms (alternative form creation applications)

There are more applications like Google Classroom, Google Assistant, and Google Tasks, and you can find their list of applications here. To sum it up, leverage the Google platform to make it a one-stop-shop for running your small business.

As a small business owner, one of your greatest assets is the business itself. Therefore, it’s important to plan for how you can monetize your business without being present as well as plan out your retirement in detail. 

Planning for Retirement

First things first, you’ll need to decide if the business will be handed down to a relative or employee, close out the business, or sell your ownership. If you have a business partner, are they interested in taking over if you retire? If you decide to sell the business, specify if you want to keep a partial stake in the company. 

Writing out policies and procedures are essential in this process. Procedure manuals should be in place for employees so they can reference them when running the business in the owner’s absence. If selling a business or partial ownership, a buy-sell agreement should be drafted as it helps prepare the sale of the business.

Knowing How Much It Will take to Retire

It should be clear how much money it will take to comfortably retire. The best estimate of what the living expenses will be like after the owner stops working needs to be calculated. If looking forward to money received in the sale of the business then understand it will take time. Hence why exiting a business involves planning for it.

Small business survival can be a challenging thing especially during these times with the world facing a pandemic. Get a good hold on your operations, stay on top of legal matters, utilize tools that make running your business more convenient, and plan for one day exiting or selling your business.