How to build business credit, and why it’s so important!

A strong credit score can make all the difference on whether your business qualifies for financing. But while business owners typically understand how to manage personal credit, they may not realize they can also build business credit under a separate report. Not only does this make it easier to borrow money and at better terms, it can also protect your personal finances. Here’s how.

What Is a Business Credit Score?

A credit score is a three-digit number that represents how safe or risky someone is to borrow money, based on their past behavior. Someone with a high score has paid their bills on-time whereas someone with a lower score may have maxed out their credit cards or missed payment deadlines. If you need help remembering deadlines, check out how to put banking and credit card alerts to work.

You develop a personal credit score based on loans in your private life like your mortgage, student loans, car loans and credit cards. But if you own a business, you can also build credit under its separate tax ID number, called an Employer Identification Number (EIN). If you don’t already have one, you can apply for an EIN with the IRS.

Then when you apply for a loan or credit card, you can request to borrow under your EIN instead of your Social Security Number. This will create a new business credit report prepared by the rating agencies Dun & Bradstreet, Experian and Equifax.

Financial Benefits of a Business Credit Score

When you apply for a loan, the lender could ask if you have a business credit score. While you may qualify without one, having an impressive business credit report will help your chances.

A stronger application can also lead to lower loan interest rate. Since business loans can be for such a large amount of money, even a slightly lower rate could mean big savings. For example, if you’re looking to borrow $2,000,000 for your business, just a 0.5% reduction in the rate saves you $10,000 of interest per year.

Finally, a strong business credit score can help you negotiate better terms with your suppliers, like you have 30 days to pay for equipment and inventory rather than paying 100 percent on delivery. Once again, these trades terms are more common for businesses with established credit.

Protecting Your Personal Credit

When you build small business credit, you also protect your personal finances. Part of your personal score is based on how close you are to maxing out your credit cards each month.

If you’re running business expenses through a personal card, you could get close to maxing out each month which can hurt your personal credit score. This would make it more difficult to qualify for mortgages, car loans and other types of loans in your personal life. Setting up business cards or a line of credit keeps things separate.

Another benefit is that once your business credit history is strong enough, lenders may be willing to set up future loans completely under your business name, so you don’t have to secure the loan personally. This means that in the worst-case scenario when you can’t pay off the debt, the lender could only go after your business assets for repayment. Not your personal savings or belongings.

Building Your Business Credit Score

Chances are, you will not be able to take out a standalone bank loan for your business without an established credit history but there are other easy ways to build up your score. One option is to take out a business credit card under your EIN and pay off the balance each month. Every on-time payment adds points to your score.

You could also take out a short-term cash flow loan from an alternative lender. These loans are easier to qualify for since these lenders make decisions based more on your past business revenues and less on your credit history. You can use the loan to grow your business and develop business credit history at the same time.

One other option is to use equipment financing to buy a new asset for your business. These loans are secured by the equipment.  Therefore, once again, your chances of qualifying are better, even without a high credit score. And making the loan payments will build small business credit.

Even if you don’t need to borrow money for your business now, consider using one of these strategies to start building up your business credit score anyway as it does take time. By taking action now, you’ll be in a strong position to borrow when your business does need money in the future.

Small Business Management Lessons from Gordon Ramsay’s Kitchen Nightmares

Gordon Ramsay is a world-renowned celebrity chef who is perhaps best known in the U.S. for his high-octane cooking contest shows like “Hell’s Kitchen” and “MasterChef” – but he made his big breakthrough as a TV personality on a show called “Kitchen Nightmares,” a show that’s not just about restaurants, it’s about the right way to handle small business management.

In each episode of “Kitchen Nightmares,” Chef Gordon Ramsay tries to rescue a failing restaurant. He battles everything.  From indifferent owners, to stubborn or incompetent chefs.  To filthy kitchens and unsafe food handling practices. And overly complicated restaurant concepts with fussy menus and doomed marketing. Some of the “Kitchen Nightmares” have a happy ending.  But others end up going bankrupt despite Ramsay’s best efforts. No matter the industry you’re in, whether it’s restaurants or any other type of service business, there are many inspiring lessons about small business management in this show.

Here are a few of the biggest small business management lessons from Ramsay’s “Kitchen Nightmares:”

1. Have high standards for your business.

Many of the restaurants that call Gordon for help are struggling because the owners have fallen into a state of learned helplessness.  They are making all kinds of mistakes.  Some are in over their heads. They’re losing thousands of dollars per week. They’re risking bankruptcy and the loss of their homes and life savings.

A good restaurant is supposed to be buzzing with energy, but too many of the restaurants on “Kitchen Nightmares” are looking lifeless; they’re pushing out sad-looking plates of food to empty dining rooms. Many of the business owners and their employees look rudderless and oddly passive.  They’re defeated; like they don’t know or care anymore how to run a successful business.  And they’re just waiting for the bankruptcy filing to happen. You can see the failure and desperation in the air.

Gordon shows the business owners how to re-establish standards and re-claim their pride. “This is your business!” he says again and again. Sometimes it feels like Ramsay is the only one in the building who really cares.

2. Hire well – and fire when needed.

One of the most important ways to set a positive example in small business management is to hire great people – which is easier said than done! Lots of restaurants on “Kitchen Nightmares” are being dragged down by bad employees who have poisoned the culture of the company: arrogant chefs, incompetent restaurant managers, feuding executives who can’t agree on a shared strategic vision.

Hiring great staff for your restaurant or any other business is not always easy, but it pays to get it right. And don’t be afraid to fire a toxic employee before they drag down the morale of your entire team.

3. Simplify your strategy.

Many of the failing restaurants on “Kitchen Nightmares” have a bad, confusing concept. They’re offering pretentious food. They’re trying to serve multiple types of incompatible cuisine and doing none of them well. Or, their menus are otherwise overly complicated or outdated. Gordon shows them how to simplify and improve the restaurant menu and create a few signature dishes that the kitchen can prepare quickly and profitably at a higher level of quality, while often saving lots of money on food and overhead costs.

What’s the lesson for your business? Are you trying to do too many things, trying to be all things to all people? What if you could simplify your menu, and just offer the services or products that you can absolutely do best?

4. Your business is your livelihood – make it your passion.

On “Kitchen Nightmares,” Gordon Ramsay goes into restaurants that are facing dire situations and tries to find something to salvage – but often, it’s too late. The rot has set in, and the business has already lost too much momentum and squandered too much goodwill with customers.

Often, when a “Kitchen Nightmares” episode has a happy ending, it’s because there is a change of attitude at the top: the business owner needs to set the tone for the culture of the entire company. If the business owner cares deeply, has passion for the business, attends to details, and maintains high standards, then the employees will follow that positive example.

As a business owner, it’s easier to keep positive momentum going than to dig yourself out of a hole. This is why “Kitchen Nightmares” is so inspiring: it’s a reminder to business owners to keep the passion alive in their businesses, keep showing up, keep caring, and keep trying to make a difference every day for your customers.

Should I Stay a Sole Proprietorship?

Sole proprietorships account for the largest number of businesses in the United States. According to the most recent data from the Internal Revenue Service, nonfarm sole proprietorship tax returns totaled approximately 25.5 million. For comparison, C Corporation tax returns were around 2 million.

While extremely popular, every small business owner eventually has to answer the question: Should I stay a sole proprietorship or should I incorporate?

Sole proprietorships have several advantages, but they also come with a few significant disadvantages. Let’s run through both so you can make your own pro/con list to help you make the decision on whether or not to incorporate.

Advantages of Being a Sole Proprietorship

Simple to create– The business can operate in the owner’s name or a fictitious trade name. Creating a trade name only requires filing with the local government authority and obtaining the necessary business licenses.

No formal filings – Sole proprietorships do not need to hold corporate meetings, keep minutes or file annual reports. If you just start running a business – a landscaping business for example – you’ve become a sole proprietor without having to notify any government authority.

Owner control – The owner in a sole proprietorship has 100 percent control and makes all the decisions.

No unemployment tax – The owner does not have to pay an unemployment tax on himself. However, payment of unemployment taxes are required if the business hires employees who are paid regular wages.

Can comingle personal and business funds – Since the owner and the business are the same, one checking account can be used for both business and personal transactions. Although a single checking account is allowed, it’s still a good idea to separate business and personal transactions.

Owner keeps all profits – A sole proprietorship only has one owner;  and the owner reports all profits from the business on his/her tax returns.

Disadvantages of Being a Sole Proprietorship

Personal liability – The owner is personally liable for all the debts and contractual obligations of the business. This liability is unlimited. An owner could lose all business assets plus personal assets in the event of a loan default or adverse ruling from a lawsuit. The risk of losing a home, car, savings accounts and other personal possessions is the most serious disadvantage of a sole proprietorship.

Difficult to raise capital – Sole proprietorships cannot raise capital by selling shares of stock or interests in the business to attract outside investors. A business that needs to attract more capital to support growth will have to convert to a corporate form.

Harder to get bank loans – Banks prefer to make loans to companies with several years of business credit. Sole proprietorships must rely on the creditworthiness of the owner.

Survivability– Sole proprietorships rarely survive the death of the owner. Since the business is usually run entirely by the owner, there is hardly ever any management level person to take over the business. It simply ceases to operate.  However, with advance preparations, a business owner can pass on the business to their heirs.


Filing a tax return for a sole proprietorship is fairly simple. The only requirement is for the owner to include a Schedule C with the personal tax return.

Schedule C is a summary of the business’s income and expenses. Losses shown on a Schedule C can be offset against other income the owner might have from other sources.

Should I Stay a Sole Proprietorship?

As a business grows, the owner will eventually face the decision of whether to incorporate or stay a sole proprietorship.

The main issues that affect this decision are liability risk and the need to raise funds.

When a business starts to borrow money to expand or finance growth, the risk to owner’s personal assets goes up. If you find yourself in the situation where you need to raise capital to expand or for growth support, then that is the time to consider the change. In addition, if you are in the situation where you need to begin adding employees, you should consider incorporation. Employees can come with their own host of liabilities and incorporation can help you manage that risk.

Because they’re simple to form and don’t require filing complicated legal documents, millions of business owners use sole proprietorships to get started. But, once they begin to grow – and risks to personal assets begin to increase – it’s time to ask yourself the question: Should I stay a sole proprietorship? The answer: looking into incoporation is the right next step.

The Best Free Online Productivity Tools For Small Businesses

With the prevalence of digital productivity tools, you might expect businesses to be more productive than ever before. Yet, many business owners still list “improving productivity” as a top concern. Since new tools are coming on the market every week, business owners could find themselves wasting considerable time and money trying out option after option to find the tool that best meets their needs. To help cut through the clutter, we’ve assembled a list of the top 5 most versatile free online productivity tools for small businesses.

1. Wave



Regardless of your business structure, number of employees, and industry, you’ll need a way to track your business finances. Wave empowers small business owners to handle all aspects of their business funds, including building financial statements, sending invoices, processing payroll, reconciling bank statements, tracking income and expenses, accepting credit cards, and more. Even better, this freemium service offers personalized bookkeeping and accounting advice from professionals for a nominal fee.

2. MindMup


Source: Mind Map Facebook

As your business grows and evolves, you’ll need to keep on pace with new ideas for marketing, business development, and lead generation. Mind mapping tools were created for just this purpose, but MindMup is no ordinary mind map. Unlike many free services, MindMup doesn’t limit the number of maps you can create with their free plan. You can include photos, videos, spreadsheets, and other media directly into your maps.  You can also upload finished projects to the cloud for easy sharing.  In addition, you can download projects into a variety of formats, including PDFs and PowerPoints. Perhaps the best quality of this productivity tool, however, is its intuitive interface that allows you to quickly and easily capture all your ideas during brainstorming sessions.

3. Toggl



The creators at Toggl understand a fundamental truth about tracking time for small business owners – it is a necessary evil. They designed the browser-based app with a large timer button; toggle it on to start the timer and toggle it off to stop timing. If time tracking gets much more complicated than that, people won’t use it consistently. For users that want an easy-to-use application that still allows for some customization, there are simple point-and-click tagging features that allow for categorization by client and by project type. The Toggl team also recognized that business owners need fairly robust reporting capabilities, so they allow users to create reports by client, by project, or by specifying a preset or custom time period.




In today’s interconnected environment, we all use lots of tools, programs, and devices on a daily basis. Unfortunately, the multitude of digital applications vying for our time can be a significant time waster. IFTTT (If This, Then That) is a digital integration tool that allows your apps to work together, allowing you to do less work. The program boasts over 550 different “services” or connected applications that can be used to automate your daily tasks. Wish you could set up an automated reminder in Slack to prompt your team to submit their expense reports? IFTTT can handle it. Want your Whirlpool Smart Dryer to send you a text message when your laundry is done? IFTTT can take care of that too. With thousands of applets (or automated tasks) across hundreds of devices, your ability to improve your productivity and automate more of your workday is limited only by your creativity.

5. Canva



If this article were titled “The best programs your graphic designer wish you didn’t know about”, Canva would be at the top of the list. Canva’s drag-and-drop interface allows even the tech newbie to create professional looking documents in minutes. These aren’t your typical cookie cutter templates that look like they came from Office 2005. Canva has allowed thousands of business owners to build high quality promotional materials without hiring a professional graphic designer. The free software includes templates for everything from business cards and resumes to social media banners and infographics. While their design platform is a huge asset to your business toolkit on its own, the website also boasts a helpful learning portal that includes free classes on topics such as “Graphic Design Basics” and “Branding Your Business”.

When searching for free online productivity tools for small businesses, it’s important to consider how the tool will be used within your organization, which features are included within the free plan, and what additional costs will be incurred to get premium features if you decide to upgrade. Since each of these tools offer feature-rich services in a free package, they are a great starting point for accomplishing a variety of tasks within your business that would likely otherwise be outsourced to an expensive professional.

Key Financial Metrics for Small Business: The Numbers You Need to Track

Just as drivers watch the instrument panel on their cars when driving, small business owners should continuously monitor the performance metrics of their company. An owner needs to know what’s working and what’s not. That’s part of managing a business. Just like it’s part of driving a car.  A water temperature gauge that goes into the red zone needs immediate attention; same with a financial metric that indicates the company is running short of cash. Key financial metrics for small business fall into four primary categories:

  • Profits
  • Liquidity
  • Leverage
  • Efficiency

Within these four categories, there are seven core metrics that act as the most important key performance indicators when it comes to cash flow:

Key Financial Metrics for Small Business

Measures of Profits

Revenue – This may seem obvious, but without revenue, nothing else happens, especially profits. And all revenue starts with sales. So, the first metric to watch is your most recent sales number; it could be daily, weekly or monthly, depending on the type of business,

Are your sales at the level they need to be? Comparisons of sales figures to the budget will help to keep everyone on course to reaching the revenue goal.

Gross profit margin– The gross profit margin is an early measure of a company’s efficiency of operations. It shows how efficiently a company uses its raw materials and direct labor to make and sell a product or service at a price that produces a gross profit.

The gross profit margin must be enough to pay all fixed overhead expenses and make a profit. In some industries, a gross profit margin of 25 to 30 percent may be enough; others need a gross profit of 50 percent or more. A calculation of a company’s profit plan or break-even revenue level will determine the required gross profit margin for your business.

EBITDA – It’s nice to know you’re making a net profit, but the real test is EBITDA. That’s earnings before deductions for interest, taxes, depreciation and amortization. EBITDA reveals the true operational profits of a business without the effects of financing costs, taxes and non-cash accounting entries.

Monitoring EBITDA is important because it is an indicator of the cash flow from operations.

Liquidity to Support Operations

Current ratio– Your current ratio is current assets divided by current liabilities. The timing of the cash flow cycle from inventory to receivables to cash is not perfect. Inventory can be slower to sell and turn over; customers can take longer to pay their bills.

On the liabilities side, expenses and bills to suppliers have specific amounts and due dates – there’s no mystery, there. For this reason, you need more current assets than current liabilities. A good, comfortable ratio is to have $2 in current assets for every $1 in current liabilities. Having less could indicate that you may begin to have problems paying bills on time.

Tracking the trend of your current ratio can provide advance warnings of upcoming cash flow problems, especially if the ratio drops below 1.5.

Financial Leverage

Debt-to-equity ratio – Some debt is good; it increases a shareholder’s return on investment. But too much debt can be dangerous. Lenders have strict schedules for principal and interest payments, and they expect to receive them, regardless of the company’s cash flow availability.

Efficiency of Operations

Accounts receivable aging – The accounts receivable aging metric keeps track of all unpaid customer invoices and/or credit memos. While most customers will pay their invoices before due dates, sometimes clients can run into problems – whether their own cash flow issues or poor record keeping – which keep them from paying you in a timely manner. You should try to track invoices in 30 day buckets (30 days overdue, 60 days overdue, 90 days overdue, etc) so that you can use this information to prioritize collections procedures.

Inventory turnover– Inventory represents a significant investment for most businesses, so turning inventory into sales quickly is important. Turnover is the number of times a company buys, sells and replaces its inventory in a year. It is calculated by dividing annual cost of goods sold by the average inventory level. Depending on the industry, inventory turnover rates can reach up to 10 to 12 times per year.

A decrease in turnover could be a signal that some products are not selling well, and prices should be marked down to move them out.

Owners who regularly monitor these key financial metrics for small business will have a good sense of the pulse of their business, while enabling them to quickly spot potential problems and take corrective actions before they become detrimental to the health of your business.

5 Key Reasons to Forecast Your Cash Flow

Projecting your cash flow can help you plan for the future, avoid unexpected shortfalls and even qualify for a small business loan.

Many overextended small business owners are weary of cash flow analysis. “Analysis” of any kind sounds difficult, and who has the time or energy to make future projections? More importantly, why bother to forecast your cash flow?

Consider that poor cash flow is the number one reason small businesses fail. An alarming 82% of companies fail due to cash flow issues. Convinced you don’t need to worry because your business is profitable? Think again. Profitable companies fail all the time for the simple reason that they run out of cash.

Beyond keeping your doors open, forecasting your cash flow can take the guesswork out of where you’re going. Having a good idea of your direction can help you make smarter business decisions. A little planning goes a long way, and it doesn’t have to be difficult.

These days, intuitive online tools can do the hard work for you, automatically generating cash flow projections based on your past transactions and financial history. No spreadsheets required.

There are myriad benefits to forecasting your cash flow, from avoiding dips into the negative to planning for growth. Consider these five ways that cash flow projections can improve your business.

Avoid Shortfalls

Unexpected shortfalls can be crippling, and it may take months (if not longer) to recover. Negative cash flow can creep up on you if you don’t consistently track the cash coming in and going out. Fortunately, shortfalls are often avoidable with a bit of foresight.

Projecting your cash flow will help you identify — and plan for — market swings, seasonal fluctuations and other business patterns that can lead to unpredictable cash flow. Forecasting can even help you visualize cash flow trends with the help of automatically generated charts and graphs.

Optimize the Timing of Accounts Payable and Receivable

On a more granular level, many avoidable cash flow issues are often a simple matter of timing. Significant lag time between invoicing your customers, or shipping out products, and getting paid can cause unnecessary strain on your cash flow.

Cash flow projections that are based on your financial history can help you anticipate when you’ll be paid by customers. This allows you to stagger or otherwise adjust outgoing payments to your vendors accordingly. In turn, this can keep you from dipping into the red.  And keeps you out of the uncomfortable position of not being able to pay your suppliers, or worse, your employees.

Prove You Can Pay Back the Loan You Requested

 When you apply for a small business loan, lenders will scrutinize your cash flow history in an attempt to answer one primary question: Can this borrower pay back the loan they’re requesting?

Asking for a loan of any amount without showing your plan for paying it back is a good way to land in the rejection pile. This is especially true if your current cash flow won’t clearly cover all of your regular operating expenses — plus your loan payment.

If you find yourself in this situation, cash flow projections can help strengthen your case by showing the lender exactly how you plan to use their funds to get to a place where you can easily make loan payments. This type of forecasting allows you to hand over a road map that can instill a lender with the confidence they need to approve your loan.

Anticipate the Impact of Upcoming Changes

Does your business plan to purchase new equipment? Launch a new product? Cash flow projections allow you to gain a complete picture of the ripple effect that these types of changes will have on your cash flow.

When your finances are synced up with FINSYNC, cash flow projections are automatically generated based on future invoices, bills due and payroll. You can then create “what if” scenarios, such as buying new equipment. Forecasting shows you how the cost will affect your bottom line.  It can also show the potential increase of revenue generated by the new machine.

Plan for Future Growth

In the same manner, cash flow projections can help you plan for future growth and expansion. Whether you’re expanding your team with new employees and need to factor in increased payroll costs, or ramping up production to keep up with increased sales, future projections help you see exactly where you’re going — and how you’ll get there.

Forecasting is also an excellent goal-setting tool to help you plan out the financial steps your business needs to take to achieve targets. There’s power in cash flow projections and the insight they can provide your business. Fortunately, this competitive advantage comes with little effort when you leave the analysis to today’s sophisticated online tools.


Guest post by FINSYNC

HELP! Should I Pivot My Business?

6 Questions to Ask Yourself Before Pivoting Your Business

In business terms, changing the direction of your business is commonly referred to as a pivot. While it is most common to pivot your business in its earlier days, there is no reason why you cannot pivot your business at a later stage to respond to market forces.

If you are a business owner who owns a pizza shop that makes ice cream sandwiches, and you notice your customers spend more money on your ice cream sandwiches than they do on your pizza, you may consider re-inventing yourself as an ice cream sandwich company. But is this smart? Will people buy ice cream sandwiches in the dead of winter? If your product-market fit isn’t measuring up at any stage of your business, young or old, then you might consider pivoting.

How to know if you might need to pivot your business

One way to consider whether or not it is an appropriate time to pivot your business would be by running a SWOT analysis. If this a new term for you, SWOT stands for: Strengths, Weaknesses, Opportunities, and Threats. Here are a few key questions you can consider to help you think about your business and if a pivot may be in your future.


  • Which factors help you make your sales?
  • What is your company’s unique selling proposition?
  • How is your company better than any other company?

Remember: It is necessary to consider your strengths from your perspective, but also from the perspectives of both your customers and competitors.


  • What elements of your business need improvement?
  • How do you lose sales?
  • What do your competitors view as your weaknesses?

Again, remember to be realistic and factor in customer metrics you can track.


  • What interesting trends are forming or changing within your industry?
  • How can you implement technology to make your business more efficient?
  • What changes in social patterns may influence your business?

Be prepared to do some heavy research to look under the surface about how you can improve your business.


  • What are your competitors doing that you are not doing?
  • Are there environmental, economic or industry developments that may hurt your business?
  • What short, medium and long term obstacles to growth do you think you may face?

Again, being truthful about your position relative to others may be to your benefit.

Reasons Businesses Pivot

If you decide your business is at risk from competitors, technology, or changing consumer habits, here are additional questions to help determine whether or not to pivot your business:

1. Where are your sales slumping?

Look at which products or services are selling well and which are failing. Ask yourself why each is or isn’t working, and consider alternatives.

2. Are your competitors gaining ground? 

Imitation may be the sincerest form of flattery, but if you were first to market with a product or service, and now you have several imitators, it might be time to figure out how to solidify your position in the market.

3. Is new technology challenging your business?

Technology companies like Uber have been challenging traditional car services and taxis year over year. With most consumers using one or more screens a day, technology has the ability to rapidly change your business.

4. Are there any large trends with the potential to impact your business? 

Changing demographics and birth rates may affect your sales, for example, if you own a business focused on children. Economic forecasts, demographic surveys and industry insights may all provide data to help you plan ahead.

5. Are your costs increasing dramatically, decreasing your profit margins? 

In some cases, there may be little you can do to preserve your current business’s profits unless you find alternative products. For example, if you are an electric battery manufacturer and one of your primary supply ingredients is cobalt, and the cost of cobalt has increased 4X year-over-year, then you may have to increase your pricing dramatically or consider diversifying into other products.

6. Is your product-market fit appropriate? 

For example, if you own a yoga studio but your customers only want to pay $10 per class, even though you require them to pay $20 per class to be profitable, the business may not have an appropriate product-market fit.

Regardless of the reasons behind needing to pivot, you can successfully change up your business model. Just know that changes of this magnitude can’t happen over night. You need to spend time doing your due diligence and you need to be sure you keep an open mind – it can be hard when the business you originally imagined isn’t living up to your expectations. But take heart, because many big brands that you know today had successful pivots. These pivots took place, when the companies were small and or maneuvering through the lean startup world. It’s a pretty impressive roster! Starbucks, Twitter, YouTube, Suzuki, Avon, Wrigley. Check out their stories and get inspired!


Four Risks That Keep Business Owners Up at Night. And Your Defense Against Them.

Events like natural disasters, disruptions to your supply chain, legal issues, a cyber attack, or changing market trends aren’t entirely within your control. But, you can help mitigate the damage they might bring to your business with a proactive and strategic risk management plan.

Here are four common risks to your business.  Along with some simple ways to help manage how exposed your business is to each.

Risk: Business Interruption

Would you be able to financially survive the process of rebuilding your business if damage deemed it inoperable for months? Even with insurance coverage to protect against events like floods, fires or earthquakes, FEMA reports that about 40% of businesses disrupted by natural disasters are forced to close permanently.

Your Defense: Business Interruption Insurance

Business interruption coverage replaces business income lost if you’re forced to cease operations.  This insurance can be used whether the interruption is due to a natural disaster, cyber attacks, or a massive disruption to your supply chain. Often added as a rider to a commercial insurance policy, the Insurance Information Institute says business interruption coverage may pay for a business’ fixed expenses, financial obligations to creditors, and expenses associated with establishing a temporary business location.

While access to such funds could be the difference between rebuilding your business post-disaster or closing it permanently, the Insurance Journal reports 66% of small businesses do not have business interruption coverage.

Risk: Loss of Intellectual Property

Your business’ intellectual property (IP) includes your business’ name, logo, products and services, taglines and any inventions you’ve created. Experts at Deloitte estimate intellectual property accounts for more than 80% of a business’ value.

If you have not formally claimed ownership of your intellectual property with patents and/or trademarks, do it ASAP.  Or, a competitor might (legally) steal your business name, inventions, likeness and ideas.

Your Defense: Secure Legal Ownership of IP

Make a list of all the elements that make up your business’ goods, services and brand identity and formally claim ownership of them with the United States Patent and Trademark Office. For a few a hundred dollars, you can file an online trademark application to secure ownership of brand assets. Securing a patent for an invention is a more intensive (and expensive) process.  But it’s critical if your business is based on a unique product, technology or solution that you’ve created.

If you hire freelancers or contractors to produce marketing materials, designs, or code for your business products, secure a signed work-made-for-hire agreement before projects begin. Unlike a full-time employee, you do not own contractor creations. A work-made-for-hire agreement should detail the scope of work and deliverables.  It should also state that you own the finished product a contractor creates.

Risk: Cyberattacks

Cyber criminals have their sights set on a target: 58% of breach victims in the past year were small businesses, according to the Verizon 2018 Data Breach Investigations Report.

Your Defense: An Internal Cybersecurity Action Plan

Protecting your business begins with identifying your business’ most important assets and systems. Because these “digital crown jewels” are most likely to be the target of any cyber attack on your business, the National Cyber Security Alliance (NCSA) says they should be the focus of your security efforts. Once you’ve identified them, the NCSA suggests creating a list of all the hardware and software your business uses.  This list should include the makes, models, serial numbers, and versions of software you are running.  You should also include on this list where you store your data. Use the latest version of security software, web browsers and operating systems.  Using the most updated versions will help protect against viruses, malware, and similar threats.  They can also activate automatic update features to keep you secure.

Perhaps most importantly, educate employees.  Train them on best practices for handling sensitive data.  And set clear parameters for how they are to use mobile devices and computers to do their jobs. Many cyber attacks originate from basic human error.  Clicking on an email attachment or downloading an app on an unsecured mobile device can make you vulnerable.  Using weak passwords also provides an easy in for hackers. Because they have dictionary-based systems that make it easy to crack passwords that include a word or name, cyber security company Symantec suggestspasswords be misspelled, “As much as possible, or insert numbers for letters. For example, if you want to use the phrase ‘I love chocolate’ you can change it to @1L0v3CH0c0L4t3!”

Risk: Cash Flow Problems

You can’t control your sales or the competitive environment.  But, you can manage their impact on your cash flow by ensuring you have access to cash before you need it.

Your Defense: Plan for Cash Flow Shortages Before They Happen

Retained earnings are like a business emergency savings fund, and they empower you to prepare for cash flow challenges. When these funds are readily available, you aren’t forced to borrow money, or default on your own business obligations. In addition to building your retained earnings, establish relationships with a few reputable funding partners so you know you have the financial support you need to maintain cash flow if sales decline unexpectedly. Risk is an inherent aspect of owning a business.  But, that doesn’t mean you have to be vulnerable to uncontrollable circumstances. Use these tips to help ensure your business is equipped to survive, despite any disaster that may strike

How to Stress Test Your Small Business

In the banking world, advisors often talk about stress-testing portfolios — determining the effect of different scenarios on an individual’s or business’s holdings. The same should be done for a small business.

How prepared are you if the economy changes, and you need to dip into your reserves? How will you manage your cash flow? Do you, as a small business, have the resources to survive heavy losses if the worst-case scenario happens?

Here are six ways to help stress-test your business if there is a downturn in the economy.

1. Solicit advice from key advisors.

Do you have an advisory board or a brain trust of reliable partners? SCORE, a nonprofit that is a resource partner of the U.S. Small Business Administration, offers a network of volunteers including retired C-suite executives, who can help mentor.

Find your local chapter, which is typically done on a county by county basis, and attend a workshop or listen to a live or recorded webinar.

You can search for a SCORE mentor online or have the local chapter pair you with an expert who can help mentor you on your business goals. Some mentors bring in additional mentors to help with various aspects of your business, such as preparing for a potential downturn.

2. Create a plan for worst-case scenarios.

One of the more effective ways to prepare for a sluggish economy is to forecast trends. Look at what a dramatic drop in sales or a dramatic uptick in expenses might do to your business. Ask yourself what would happen if you lost a major vendor, product or service. What might this loss do to your company? Then decide where you could trim expenses, potentially increase profits or diversify your client-base.

3. Identify all your best customers.

Not all customers are created equally. That’s because some are more profitable than others. Once you’ve pinpointed who your best customers are, begin nurturing those relationships by continually adding value for them. Build brand loyalty for them by making sure it’s easy for them to do businesses with you. If a change in the economy affects your business, loyal, high-value customers may help sustain you until the market changes.

4. Review your financial cushioning.

Although the general recommendation for businesses has been six months, Hal Shelton, a SCORE mentor and angel investor says to look at how much you cash you need. Ask yourself these key questions:

  • How much cash have you been using?

Look at your “net burn rate,” the rate at which you spend your cash holdings. For example, if you are bringing in $10,000 but you are spending $4,000 in expenses, your net burn rate is $6,000

  • How much cash do you plan on using in the next 12-to-15 months?

Be conservative, but look at your monthly budget or the financial forecast in your business plan. Separately, look at actual cash expenditures as well as the cash in (sales) and cash out (expenditures).

  • What stage is your business?

If you’re a start-up, or ramping up your business and going to have big expenditures, that’s different than being in the middle of a more-established place.

  • How long will it take you to get more cash?

For many businesses, this is an unknown factor. Getting a loan from a bank, if they are willing to lend, can take several months. It usually takes at least a month to find a bank who might be willing to lend money and another month to fill out the paperwork. That’s contingent on already having a bank-ready business plan and an already established relationship.Shelton says pitching and presenting to potential angel investors takes significantly longer, usually at least six months or possibly nine months to a year.

5. Consider your borrowing options.

You don’t want to have to borrow money when you desperately need it. You want to borrow money before you anticipate you might need it, or at least have a good enough financial footing to be able to secure a line of credit or a business loan. Stephen L. Nelson a CPA in Redmond, Washington, offers some tips on how to forecast 12 months out using excel workbooks.

Shelton’s advice is to “Seek cash when you are in a position to explore options and negotiate from strength.” Then ask yourself: Can you still operate if your funding disappears?

6. Consider alternative funding options.

Besides traditional term loans, you may consider opening a business credit card or a business line of credit. There’s also equipment financing and grants for small business owners. If you have less than perfect credit or if you need money quickly as a business owner, a short-term loan may you be your best option.

By stress-testing your business’s finances and proactively planning now, you may help mitigate potential problems down the line.

Keep your customers by supporting their healthy lifestyle changes

If you own or run a food or restaurant business, you know how food trends may boost sales. While some trends last for a few weeks and are simply fads (fondue, foam, and food with added caffeine), others become more mainstream and last a lifetime (sushi, huevos rancheros, or anything organic). In urban areas, healthy trends remain important for much of the world’s population. This is especially the case in the first few months of the year as people work toward achieving their New Year’s resolutions.

Here are five healthy food trends data shows are likely here to stay, as customers have purchased an increasing number of these products in recent years:

1. Faux Meat Offerings

As the world becomes more environmentally conscious, alternative protein sources have become more popular. Both startups and established companies are perfecting ways to make faux meat tastier. All of which is helping to fuel this trend. There are two leading providers of high quality and tasty faux meat in the United States, Impossible Foods who makes the Impossible Burger, and Beyond Meat. These products have already gone mainstream. The Beyond Meat Burger is now available at all 469 TGI Fridays restaurants in the United States. For business owners, faux meat is easy to cook and easy to substitute into your existing dishes.

2. Hemp and CBD products

As marijuana has been legalized in nine American states, other products derived from the marijuana plant that don’t contain psychoactive or mind altering substances are now being incorporated into food products because of the potential health benefits they offer. You can incorporate CBD oil into a variety of products ranging from coffee to cookies to juice to tea. Treats made with this oil are known to be stress and anxiety relieving. Hemp has several properties considered beneficial to health, including its ability to balance hormones, improve mood, and assist with both pain and sleep. Even large chain stores like 7-11 are joining in: hemp-derived CBD products are now available in up to 4,500 stores.

3. Seaweed and other deep sea snacks

The oceans are rife with plant life consumers are finding both tasty and nutritious. As harvesting methods have improved, so have their snack byproducts. Healthline reports that there are many benefits to consuming seaweed snacks, including that they:

    • Are a good source of vitamins and minerals, including iodine and tyrosine.
    • Contains a variety of antioxidants.
    • Provide fiber and polysaccharides to support gut health.
    • May help lose weight by delaying hunger and thereby reduce weight.
    • May reduce heart disease risk.

If you own a restaurant, you can easily add some crispy seaweed snacks to your menu as a starter. And if you own a store, stocking seaweed snacks is as “simple” as creating some extra counter space. The Japanese have been seaweed aficionados for centuries.  So, if this trend is anything like sushi…well, it’s not going away anytime soon.

4. Fermented foods

Whether you’re a fan of Korean kimchi, new age kombucha, or good, old-fashioned American pickles, fermented foods are likely here to stay. Filled with probiotics to help make diners’ guts strong, fermented foods make for tasty side dishes, replacing foods like fries. Another benefit of fermented foods is that they are easy to make and may be stored for long periods.

5. Plant-based frozen treats

As dietary restrictions around New Year’s resolutions can curb traditional dairy ice cream consumption, chefs are finding other natural ways to create frozen desserts. Instead of classic milk-based ice cream, these chefs are using ingredients like plant-based milks and frozen fruits are sweetening frozen treats and not sacrificing taste! Here are nine dairy free vegan friendly recipes to get you introduced to the world of vegan frozen treats.

As a food or restaurant business owner, you can be inventive; you can test out a new recipe based on these emerging trends without taking on much risk. If it sells out quickly, you know your customers want it. And while fads like juice cleanses may come and go, these emerging trends may make your offerings more appealing to customers throughout the year.

3 Issues Women-Owned Businesses Should Be Watching Closely

For women-owned businesses, there are three potential challenges to keep in sight as we move throughout the year.

1. Continued interest rate hikes

The Federal Reserve has maintained a steady course of raising interest rates to keep pace with economic growth. The Fed hasn’t made any firm commitments – yet.  But, further adjustments to the federal funds rate may be on deck for later this year. That could be costly for female business owners seeking financing.

Women already face a tough business lending environment. According to the latest Private Capital Access Index (PCA Index) from Dun & Bradstreet and Pepperdine Graziadio Business School, just 18 percent of women entrepreneurs were able to get bank loan financing during the third quarter of 2018. Fifty-seven percent of women said the current business financing environment is hindering their business growth, compared to 42 percent of all business owners surveyed.

Twenty-four percent of women said additional rate hikes would restrict their growth further.  In addition 15 percent believe that rising rates would make raising capital more difficult. Women entrepreneurs who are considering a loan in 2019 should be watching Fed policy and rate movements closely. Additionally, they may want to explore bank loan alternatives, such as revenue-based financing or factoring to meet financing needs.

2. Midterm election results

The 2018 midterm elections resulted in some historic wins for female lawmakers, with nearly 120 women in Congress this year. That could be a boon if newly elected senators and representatives promote initiatives designed to advance female-lead businesses.  Business owners should keep their ears open and listen out for new grant and lending programs or policy shifts that increase the number of government contracts awarded to women are on the horizon.

The midterm elections may also have a broader impact for all business owners in terms of how Congress may shape trade, tax and healthcare policy moving forward. Businesses may still be adjusting to the latest round of tax and healthcare reform but the possibility of further changes should be firmly on their radars. The imposition of new tariffs could also result in higher operating costs for businesses that rely on imported goods.

3. Changing economic conditions

While the economy is still going strong, 2019 may bring a slowdown in the pace of growth. That, in turn, could directly affect business owners, particularly women.

According to the Private Capital Access Index, women business owners are more likely to struggle with cash flow compared to other businesses. Twenty-eight percent reported issues with receiving payments from customers, versus 23 percent of small businesses overall. A slower-growing economy could raise that figure higher if vendors or customers are sluggish in making payments because they’re dealing with cash flow issues of their own.

As we move through 2019, women business owners may want to revisit their invoicing and payment policies. Shortening payment terms, imposing late fees or accepting a broader range of payment methods could help speed up payments and avoid cash flow lags. Being prepared for these kinds of bumps can help make 2019 a smoother, more successful year for women-owned businesses.

Get Your Construction Business Ready for the Spring

If you’re a contractor or own a construction business, you’ve likely been wondering what the this year will bring in terms of revenues and opportunities for growth. While many forecasts are calling for a slight economic slowdown in 2019, construction starts are still expected to hold relatively steady. As you look ahead to warmer months, here are three things to review as you prepare to ramp up your business this spring.

Update your tech

Smart technologies, AI and automation continue to expand their influence on the construction industry. Some new opportunities to update your business technology include:

  • Streamlining project management by using cloud-based solutions.
  • Utilizing drones for site planning and survey data enhancement.
  • Investing in smart safety equipment, such as wearables to track worker movements and fatigue levels.
  • Updating your inventory tracking software to reduce materials waste.
  • Using building information modeling software to streamline project design.

While some of these options are more hi-tech (and big-budget) than others, if you run a smaller firm, consider tech upgrades that can deliver a solid return on investment without a large outlay of cash. For example, updating your company’s website is something you may be able to do for a few hundred dollars, and up-to-date information and a fresh look might help attract new customers.

Review expenses and pricing

Construction materials didn’t get cheaper in 2018. Through July, prices had risen by nearly 10 percent over 2017’s figures, according to Associated Builders and Contractors. With uncertainty surrounding tariffs and foreign trade policy, materials such as lumber and fuel might become more expensive.

Higher prices means a higher cost of doing business and a potentially smaller profit margin. When planning for the busy season, consider how rising prices may impact revenues and cash flow, in both the short- and long-term.

Specifically, think about whether you’ll need to adjust your pricing to accommodate a jump in material costs. Would a price increase allow you to remain competitive in your local construction market? How would that price increase be received by clients? Will you enhance the value you provide as your rates rise?

At the same time, look for areas where you can reduce costs. Reach out to suppliers to ask for a discount or renegotiate terms. Recycle and repurpose materials whenever possible. Consider whether it makes sense to keep maintaining older equipment or replace it with something newer to reduce repair and maintenance costs. These kinds of changes may add money back into your cash flow and create a healthier bottom line.

Assess your capital needs

With interest rates projected to rise again this year you may want to pursue financing sooner instead of later. The lower the rate you’re able to lock in, the less your financing will cost over the repayment term.

Get clear on your needs and what type of financing may work best. For example, you may want to buy a new fleet of work vans or invest in a new backhoe. Or, you may just need cash to cover everyday operating expenses during the winter months if that’s your slower building season. Equipment financing might be more appropriate in the first scenario, while a working capital loan may be better suited for short-term funding.

Remember the ROI and the overall cost when considering financing for your construction business. Before taking out a $1 million equipment loan or a $100,000 working capital loan, estimate the potential payoff, either in preserving cash flow or increasing revenues.

You also need to be sure that the payments for an equipment loan, or any other type of financing, fit your business budget. And of course, review the interest rate and fees charged by different lenders to help you secure the best deal.

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