When applying for business loans, credit cards, or other lines of credit, lenders put your credit scores in the spotlight. Credit scores tell lenders at a glance how responsible you are when it comes to borrowing money and paying bills. But just how important is that 3-digit number? Here's what you need to know about the highs—and lows—of credit scoring.
Credit Score Ranges Explained
Credit scores operate on a range, with a high end and a low end. The most popular credit scoring model for consumer scores is the FICO score. It's the one used by 90% of lenders for credit approval decisions. Note, these scores are different from business credit scores.
There are different FICO score variations, but the typical score range you're working with is 300 to 850. VantageScores, which are an alternative credit scoring model, work along the same lines. The current VantageScore version also ranges from 300 to 850.
What Is Good vs. Bad Credit?
Where you land on the credit score range depends largely on the information in your credit reports. FICO scores, for example, break down like this:
Payment history: 35% of score
Credit usage: 30% of score
Credit age: 15% of score
Credit mix: 10% of score
Inquiries for credit: 10% of score
VantageScores don't use that exact same formula, but they do factor in many of those same things. In terms of what your score translates to, a 300 would be the very worst score you could achieve on the FICO or VantageScore models; an 850 is considered a perfect score for either one.
That range leaves a lot of gray area in-between where you have different levels of credit. For example, here's how FICO breaks down its credit score ranges and grades:
800+: Exceptional credit
740 to 799: Very good credit
670 to 739: Good credit
580 to 669: Fair credit
<580: Poor credit
Understanding where your credit score measures up is important if you're planning to borrow money.
Why Credit Scores Matter When Seeking Financing
Credit scores matter for several reasons when you're applying for loans and other lines of credit. For example, say that you're using your personal credit score to apply for a business loan. Lenders will use your score to determine how likely you are to pay it back.
A FICO score in the excellent range virtually guarantees that you'll be approved, whether you have a perfect 850 credit score or not. In fact, lenders typically don't distinguish much between a score of 800 or 850. Either one sends a strong signal that you're a low-risk borrower, based on your past payment history and credit usage.
Having a credit score in the poor or fair credit range, on the other hand, could make it much more difficult to get approved for loans. You may be limited to certain borrowing options, such as a secured loan or line of credit. Generally, the lower your score, the riskier you appear in the eyes of banks and lenders.
Your credit score also counts when it comes to how much you pay for a loan. As a rule of thumb, the higher your credit score, the lower the interest rates you can qualify for. Getting a low rate is important, whether you're taking out a loan for your business or any other purpose because it means less money you have to pay back over time.
Is Aiming for a Perfect Score Worth It?
Reaching a perfect 850 credit is certainly an achievement, as very few people find themselves in this territory. But working toward a perfect credit score won't necessarily give you more of an edge when it comes to getting approved for loans or getting the best interest rates if you had an 800 score instead.
With that in mind, it's helpful to work on improving your score as much as possible, particularly if you plan to borrow money to fund your business. If your credit score isn't as high as you'd like it to be yet, here are some of the smartest things you can do to get it on the right track:
Pay your bills on time. Payment history accounts for the largest share of your personal credit score, so get in the habit of paying on time. Setting up automatic payments for your personal and business expenses can make this easier.
Reduce your debt. Carrying high balances on your credit cards can work against your score. Prioritize paying down some of what you owe, aiming to use 30% or less of your total credit limit.
Limit new inquiries for credit. Applying for new credit cards or loans can knock a few points off your score each time. Stick with applying for new credit only when it's absolutely necessary.
These seemingly simple measures can go a long way toward helping you boost your credit score.
Running a business can make anyone’s stress levels rise. In a Bank of America survey of 1,001 small-business owners, 41% of respondents said managing the business is by far the biggest cause of stress—more so than raising children (9%).
Money is often the leading cause of stress, and bad habits typically cause money problems for business owners. If you’re feeling stressed and overwhelmed with the financials of your business, consider these 7 habits that could be sabotaging your success.
1. Cutting costs without considering their impact.
You will find that many business owners make decisions that are “penny rich but cash poor,” meaning they save in the short run but lose money in the long run. In a Planet Money episode, one restaurant owner wanted to add an extra table to his crowded New York restaurant, thinking a new table would bring in more money. The reality was that he needed to take away a table because customers would then feel more comfortable and spend more—raising profits as a whole.
We often think that the best way to increase revenue is to add. Whether that’s adding a new line of products, additional services, or some other investment into the business, we believe that we can fix a money problem by adding more expenses and resources. However, many times we need to practice addition by subtraction.
Learning what to spend and what to cut takes time and an innate understanding of your customers and industry. Make sure your changes will help your employees and customers in the long run, not just your bank statement in the short run.
2. Keeping messy books—or no books at all.
A lot of people avoid going to the doctor for fear of what they might hear. This “don’t ask, don’t tell” mentality is also how many owners feel about their books when business is not going well. As businesses start to lose money, they tend to turn a blind eye to their finances.
They don’t want the stress of seeing their debts and focus instead on other aspects of the company. However, this practice is like throwing water on an oil fire because your books are one of the best resources for business owners to make better strategic decisions.
Clean and accurate bookkeeping can help you find waste in overscheduled employees, forgotten client invoices, or other ways to cut expenses and increase revenue. If you are in trouble, stay focused and keep your books in order.
3. Ignoring changes in the market.
You spent weeks and months honing your business model and developing a successful plan before launching. You might have even enjoyed many years of growth and profitability.
However, consumer demand and other market trends can lead to changes in your business, and if you’re not willing to adapt, you’ll struggle.
Perpetually broke business owners often focus on their company and strategies without investing enough time into external research and analysis. Even worse, these same owners will continue the course regardless of market or consumer changes.
Would you rather be wrong and profitable or stubborn and broke?
Successful business owners understand the importance of adaptability. They’re willing to make strategic changes based on feedback, financial trends, and other market factors that indicate a need for it.
4. Starting too many projects at once.
The other side of the pendulum from managers not keeping an eye on the market is the business owner who has a habit of chasing the “next big thing.”
These business owners will start projects before finishing others. They’ll spend time, money, and resources pursuing multiple avenues and projects without truly being able to invest the care and focus needed to do any well.
While chasing the next trend, they neglect the core competencies of their businesses and miss out on increasing profitability through more efficiency.
Consider how many new ideas and projects you and your team can handle. You will have more success with one carefully-researched and executed project than several half-baked ideas.
5. Micromanaging team members.
When times get tough, some business owners dig into the daily operations and start to micromanage staff. They believe that the best way to increase profitability is to keep a closer watch over their employees and the minutiae of their businesses. However, this is far from the truth.
Most businesses cannot operate with one person dictating everything. Micromanaging will often drive away your good employees, thus increasing turnover costs. It’s also unrealistic because you’ll create bottlenecks in your operations.
Rather than micromanaging, focus on big picture decisions that have a more significant impact on the success of your business and implement processes that empower and incentivize your employees.
6. Forgetting to train and grow employees.
A good manager doesn’t just avoid micromanaging—he or she actively works to train employees and make them more responsible and independent. Roughly 85% of employees say that job training is important to them. They believe it improves their job performance and gives them more self-confidence to make decisions.
Not only will training your employees make them more effective, but it will also keep them around. Employee turnover is a serious issue for many businesses. Employee turnover leads to more stress for your current staff, and it has a direct and profound effect on your bottom line. SHRM suggests that it can cost 6–9 months’ salary on average to replace a salaried employee.
If you’re neglecting training and employee growth opportunities, you should change that habit and begin investing in your staff.
7. Not taking time off.
We get it—running a business is an around-the-clock job. How can you take a break or vacation if you want to turn your business around? Well, you need to take breaks, not just for your sanity, but because it’ll actually make you more productive.
In fact, business owners should take more time off than most employees because of the increased stress that comes with running a business. Experts recommend taking at least a week each quarter (4 weeks of vacation per year) to relax, reboot, and regain your strength to push on when you get back.
Find a balance.
The vast majority of the bad habits on this list have to do with a lack of balance or moderation. Closely managing employees is a good thing until it becomes micromanagement. Adjusting to change is a smart business practice until you take on too many projects at once. By balancing your goals and ambition with realistic expectations and healthy choices, you can avoid becoming a perpetually broke business owner.
Nearly 50% of all American veterans decided to ditch the corporate career route after World War II and forge their own entrepreneurial paths. With their training, discipline, and willingness to sacrifice, these military members made fantastic small business owners. But since the Korean War, the percentage of military veterans starting businesses has dwindled.
Why? Because starting a business wasn't easy, and the US economy made it nearly impossible for veterans to get access to the financing and resources they needed. That's far from the case today.
The government noticed the issue and did something about it (if only they'd do the same thing about the DMV). By introducing veteran-specific educational programs, financing opportunities, and set-aside contracts, the US government has finally given military members an even playing field.
One business-changing advantage the government has given veterans is the Vets First Verification Program. Qualifying for this program could change the way you do business forever. If you're a veteran small business owner, don't do business another day without learning the ins and outs of this program—it's a game-changer for anyone who is targeting government contracts.
What is the Vets First Verification Program?
The Vets First Verification Program is a government program that allows your business to bid on federal set-aside contracts and get exclusive access to resources and support. To do any business with the US Department of Veteran Affairs (VA), you'll need to register your business with the Office of Small & Disadvantaged Business Utilization (OSDBU), which isn't as easy as it should be. More on that later.
Government contracting can open up millions of dollars of new opportunities for your business—that's why securing a contract is so tricky. Fortunately for you, The Veterans Entrepreneurship and Small Business Development Act of 1999 guarantees up to 3% of quality federal government contracts and subcontracts will be set aside for veteran-owned small businesses (VOSB) and service-disability veteran-owned small businesses (SDVOSB). That 3% might not seem like a lot, but since the government spent $550 billion on contracts in 2018, rest assured—there's a whole lot of business to be had.
Advantages of being a veteran-owned small business.
While qualifying and registering your VOSB can be a pain in the you-know-what, it's definitely worth it. Here is a taste of the benefits and advantages you can expect:
Ability to work with the VA: The VA only works with VOSBs and SDVOSBs, so you'll be part of a smaller pool for any work they have to offer.
Set-aside government contracts: Be first in line to win federal contracts reserved just for military veterans. These contracts could make up the entirety of your entire business.
Educational resources: The VA offers training on everything from building a successful business plan to strategies to win government work.
Mentorship and networking: You'll be connected to individuals who have the know-how to guide you in the right direction. The VA will also help you build relationships and connections with large private-sector firms and those in charge of government procurement.
Special financing terms: The SBA offers small business loans to the general population, but they provide lower rates, better terms, and financial support to VOSBs.
How to register your business as a VOSB.
Before you try and register your business as a VOSB, make sure you meet all the VA's qualifications:
Be considered a veteran, meaning (a) you've served on active duty in the military and have not been dishonorably discharged or (b) served as a Reservist and were called to federal active duty or were injured in the line of duty.
Own at least 51% of the company you register and be in charge of the day-to-day operations and management.
Have the necessary experience to make business decisions.
Must be the highest-paid person at the company.
Work full-time for the business you're registering.
Hold the highest position at the business.
If all of these conditions are true, then you qualify to register your business as a VOSB.
Next, you'll need to apply online through the Vets First Verification Program. The application will walk you through all of the necessary steps.
If you have questions about your eligibility or how you can ensure your application will be accepted, the Center for Verification and Evaluation (CVE) hosts free webinars to answer all of your questions. You can also find a local Verification Assistance Counselor to give you one-on-one support by using the VA's state-organized list.
Get registered—it's worth the hassle.
Even if you don't want access to set-aside government contracts or educational resources, it's still a good idea to register your business as veteran-owned. Studies show that 70% of Americans prefer to do business with a VOSB than a non-veteran-owned one. This is a free, fantastic opportunity you can't pass up!
The process can be a hassle, but it's worth it in the end. Don't wait to get the help you need—these exclusive resources are invaluable, especially for new business owners. Thank you for your service—we wish you the best of luck in this next important stage of your career.
As a small business owner or someone who is self-employed, tracking your business-related expenses and understanding what you can and can't deduct while doing your taxes is critical. Not only can it maximize your small business deductions and save you lots of money, but it can also help you reduce your risk of being audited.
Some of the most common business-related expenses are travel costs. Whether you drive to meetings often or fly out for conferences and stay in hotels, understanding what is and isn't considered a travel expense is an important aspect of small business accounting.
What Is a Travel Expense?
Travel expenses are costs that occur while you're traveling away from home for business. If you're on vacation with your family, your margaritas don't count as travel expenses. However, if you're traveling for a work-related conference, everything from your airfare or mileage to your hotel and food can count as business-related travel expenses. Personal expenses, such as a new pair of shoes, don't count, even if you're traveling when you make the purchase.
However, not all business-related travel expenses are deductible. According to the IRS, you can't deduct anything extravagant or unnecessary, so don't try ordering a private limo service to pick you up from the airport and writing it off. You also have to be traveling away from the general area considered your "tax home" for at least 1 workday to deduct your costs as travel expenses.
Different Types of Travel Expenses
There are several different kinds of travel expenses. Understanding what they are will help you identify what is and isn't considered a travel expense.
Transportation
If you're on a work trip, any transportation services you use to get to and from work events can count as travel expenses. This category may include shuttles, buses, trains, taxis, and car rides. Generally, deductible trips include transportation from the airport to your hotel and back, as well as transportation between any work-related events or clients and your hotel.
Additionally, if you use your car to get around on a business trip, you can claim mileage on your taxes and deduct it at the standard mileage rate. According to the IRS, the mileage rate for 2020 is 57.5 cents per mile that you drive for business-related usage.
Airfare
Airfare is also included as a travel expense if you choose to fly to your destination for a work-related trip. However, if you pay for your flight with frequent flyer miles or other rewards points or if a client provides your ticket, you're not able to write off airfare as a travel expense.
Accommodations and Lodging
If you need to pay for overnight accommodations on a work trip, whether that's a hotel or other type of lodging, it counts as a travel expense. Of course, your lodging costs have to be within reason, so don't expect to be able to deduct a 5-star resort.
Food
You can generally deduct 50% of the meals you consume while traveling away from your tax home for work, as long as they're for non-entertainment purposes. While there's no specified distance you must be from your house in order to deduct meals as a travel expense, the IRS does state that you can take the deduction when you're away from home for longer than an ordinary workday and it's necessary to stop somewhere to sleep. Multi-day trips are clearly applicable, but if you're on a half-day trip to the next town over, it probably doesn't count.
Miscellaneous Travel Expenses
While transportation, airfare, lodging, and food are the most common travel expenses, they're far from the only ones. Travel expenses can also include the following:
Shipping and handling costs for luggage or work-related materials to and from your destination
Laundry
Business-related communication (business calls or faxing, for example)
Tips paid for work-related expenses
Other necessary costs related to business travel
What Isn't Considered a Travel Expense?
In addition to these deductible travel expenses, a number of common travel expenses aren't deductible.
You can't deduct any travel expenses that aren't business-related, which includes personal expenses completed while traveling for business. You also can't deduct travel expenses that are superfluous or excessive, such as luxury purchases. If your family travels with you on a work trip, their expenses don't count as your travel expenses.
When you have business-related expenses in your home city, they may or may be deductible. However, they aren't considered travel expenses.
Knowing what counts as a travel expense will help you understand what you can and can't deduct when doing your taxes. Pair that knowledge with common small business tax credits, and common small business tax mistakes, and you'll be able to maximize your refund and avoid being audited.
Every successful business is built on a successful plan. And one of the most important aspects of your plan will be the marketing strategy. After all, if people don’t know about your business, they will never be able to pay for your goods or services.
As you strategize your marketing efforts, you’ll need to pay close attention to your budget. There are diverse ways to approach your marketing budget. One popular method is to let the expenses lead the charge. As you list out key marketing executions, you’ll keep a running tally of the cost. Then you take the total cost and adjust your budget to accommodate your chosen marketing efforts. This aggressive approach makes marketing a priority, sometimes at the expense of other aspects of your business.
An alternative way to approach your budget is by earmarking a percentage of your revenue for marketing. This approach is a more reactive way of handling your efforts, as your strategy will need to be reigned in any time revenue decreases. But this method helps contain costs and ensures that the other areas of your budget won’t be infringed upon by marketing expenses.
Regardless of your chosen budgeting approach, it’s important to understand the various expenses you should include in your budget.
“Marketing expenses are an important consideration for all businesses because marketing is a primary business function that creates a customer for the business,” explains a business finance report from the Houston Chronicle. “It's critical for business owners to understand the significance of marketing expenses, its accounting definition, marketing expense management, and tax treatment.”
This guide will introduce you to many of the common marketing expenses that small businesses deal with. It’s not intended to be a comprehensive list. Each business has unique elements and needs.
Marketing Expense Examples:
Online presence: You can’t operate a successful business these days without a website. Plan on expenses related to buying a domain, designing your website, and paying for hosting. You’ll also want to have a blog and multiple social media accounts. These channels are relatively inexpensive to create and operate, but there will be expenses related to the creation of content.
Digital tools and technology: The costs associated with digital tools typically have a great ROI because of the precious time the tools can save you. But you’ll still need to account for expenses such as email platforms, project management software, accounting software, or customer relationship management systems.
Research: The best marketing is always guided by data. Plan on expenses related to surveys, industry reports, focus groups, product testing, or magazine subscriptions. You can minimize these expenses by leaning to the digital side, where tools like SurveyMonkey allow you to conduct high-impact research without the hefty price tag.
Advertising: The best advertising campaigns involve multiple media channels. Examples of possible expenses include display banners, TV spots, radio ads, direct mail, and print ads.
Printed materials: This category can be a catchall for various printed pieces, such as business cards, catalogs, brochures, coupons, vouchers, or posters. Depending on your industry and location, these expenses vary significantly.
Samples or gifts: One of the best ways to help someone understand the benefits of a product or service is to let them experience it firsthand. Consider allocating money for samples and gifts to lure customers to your business or reward their loyalty.
Sponsorships: This approach allows you to connect your business with others in a way that attracts new customers. Affiliation is a powerful tool, so it could be worth the cost.
Equipment: Accomplishing your marketing goals may require additional equipment. For example, if you’re taking product photos, you might want to invest in a quality camera. Or you might need tablets to use for presentations at trade shows or networking events.
Promotional items: If this is a marketing strategy you plan to use, there will be expenses related to bags, shirts, pens, electronics, sunglasses, stress balls, or whatever else you plan to give away.
Events: This category includes expenses such as flights, ground transportation, hotels, meals, registration fees, booth displays, and other necessary supplies. Depending on your industry, this category could potentially be a major component of your marketing budget.
Public relations: You might want to enlist the help of communications experts in your marketing. A talented public relations expert comes at a premium cost, but if you use their skills to the fullest advantage, it can be worth it.
As you formulate your marketing budget, take special care to identify each expense that will fall within it. This thoughtful approach to finances allows you to track the impact of each marketing effort so you can determine the ROI and assess whether you want to keep it as part of your overall strategy.
You know you want to start a business, but you have no idea how to get started.
Going from initial idea to full-fledged business is a lengthy process. At first, you want to do enough brainstorming and research to make sure you've landed on the right business idea. After you've locked in the idea, you need to start developing a plan for everything from your financials to your marketing and sales to your management and operations. You'll also have some legal hoops to jump through, including registering your business and securing licenses and permits.
That's the easy part! Once you're ready to go, you'll need to secure funding to cover your startup costs and build up the capital and inventory you need to open the doors and, eventually, start turning a profit.
The startling truth is that about 50% of all new businesses fail. The reasons for their failure vary, whether it’s offering a product with no market need, lacking capital, not having the right team, or not being able to compete. All of these reasons come down to one thing, though— a failure to adequately prepare before jumping in headfirst.
All of this isn't to scare you away but rather to emphasize that getting answers to your questions now will help you keep things running smoothly in the long-run. With proper planning, new business owners can make sure that there's a need for their idea, the funding to get it off the ground, the right talent to propel it forward, and the resources to compete with other companies.
Whether you already have a business plan or don't even know what kind of business you want to start, here are answers to the most commonly asked questions about starting a business.
The idea
1. What kind of business should I start?
Before asking yourself what kind of business to start, you should ask yourself what you're passionate about. As a business owner, you're going to have to dedicate an immense amount of energy and time to get your business off the ground, so it should be something you care about.
After that, identify which of your interests can be transformed into a product or service that's needed. You want to operate at the intersection of passion and demand. To get your gears turning, here are some common industries for small business:
Food and beverage
Accommodation
Health care and fitness
Arts, entertainment, and recreation
Web design and marketing
Auto repair
Pet care
Business consulting
Personal care
Cleaning and repair services
Real estate
2. Should I start my own business or buy a franchise?
According to Entrepreneur, franchises have a higher rate of success thanks to brand recognition and proven demand. If you want a higher degree of security, buying a franchise might be right for you.
However, with a franchise, you have to pay the owner fees and royalties that eat into your profits, and you don't get much freedom or flexibility when it comes to the direction and growth of your business. If you value flexibility and innovation, you might prefer to start your own business.
3. Will people buy what I'm selling?
The most important step to take before going all-in on your new business idea is to make sure there's a market for the product or service you want to offer. You can do market research on your own, but it's a good idea to at least meet with a consultant. Research your industry, your target market, your competition, and your geographic area if your business is tied to a physical location. Use this information to develop an informed idea regarding the viability of your business idea.
4. Why do so many businesses fail?
Another method for gauging the viability of your business idea is to look at why other businesses fail. Machine intelligence platform CB Insights analyzed startup data to come up with the top reasons new businesses fail, and the conclusion was clear—almost half of startups failed because there was no market need for their product or service.
The other 2 biggest reasons for startup failure included running out of cash and not assembling the right team, followed by less common reasons like being outcompeted, pricing and cost issues, having a user un-friendly product, or lacking a business model.
5. Can I run my business from home?
Many people nowadays start their businesses with the goal of being able to work from home. While the internet makes this scenario a lot easier to achieve, lacking a physical presence can make it challenging to grow your business and get the word out there.
If you want to run your business from home, you must be comfortable using technology and working from behind a computer. You should also learn the basics of skills like digital marketing and web design. Unless you're an expert, you'll want to outsource those tasks, as they'll be critical to your business's success.
The setup
6. Who can I talk to about starting a business?
Once you've got an idea or two that you think will make for a good business, it's wise to seek counsel regarding issues like profitability, setup, and funding. Consider speaking with a business consultant or business coach as well as small business owners in your community.
The US Small Business Administration works with local partners to provide you with mentorship as you start and grow your business, so use them to search for local assistance in your area. There is also a plethora of resources for female business owners and programs for boosting minority business owners.
7. Do I need a business plan?
While you should get clear on your business idea before taking the time to create a business plan, you will need one eventually. Business plans help you develop your business idea further, as well as identify any potential issues and tweak your plan before putting it into motion. They're also a necessary tool for communicating with other people, such as investors, lenders, partners, or employees, why they should jump on board.
Essentially, you will need to define your business and its goals, do a market analysis, investigate your competitors, detail your business financials and come up with financial projections, and explain exactly how you plan to achieve your business goals.
9. How do I pick a good name for my business?
The key to choosing an effective business name is to pick a name that's both simple and unique. Names that are long and complicated can be easily forgotten and difficult to spell, making it hard for your business to gain traction by word-of-mouth and via the internet.
On the other hand, you want a name that's memorable, catchy, and conveys your business's unique brand identity. Above all, you want to avoid using a name that's already taken. Search the internet for your business name, do a trademark search at USPTO.gov, and look up the .com domain name, as you'll want to buy that. You'll also want to register your business name once you've selected one.
10. How do I choose a business structure?
You'll need to decide how to structure your business, and the most common options are sole proprietorship, partnership, LLC, C corporation, and S corporation. The structure that's right for you will depend on your business's size and ownership, and the structure you choose will determine how you're taxed. Read up on the different business structures and decide which one is the best fit.
11. How do I register my small business?
Unless you're operating as a sole proprietor and your business name is the same as your legal name, you'll likely want to register your small business.
The process for registering your business will depend on the business structure you chose, but generally speaking, you'll need to register with state agencies. Most states require you to update your registration every so often. You may also want to apply for licenses and permits depending on your business type and location.
12. Do I need a business bank account?
You should open a business bank account as early as possible if you're starting a business. For both legal reasons and accounting purposes, you'll want to keep your business finances separate from your personal finances. This separation protects your personal finances from your business's liability, and it also makes doing your taxes and analyzing your business revenue easier.
The best way to keep your business finances separate is to open a business bank account and use it for all of your business transactions. This approach also makes you look more professional and helps you build a business banking relationship.
13. Do I need a business credit card?
You don't need a business credit card, but they can be useful. Not only does a business credit card help you build business credit, but the best business credit cards offer lucrative rewards for all the money you're spending on your business.
Business credit cards can also be useful for covering short-term cash shortages. If you need a little extra cash to make an important purchase, your business credit card is faster than a loan. It's also likely more expensive, though, as credit card interest rates are high. For this reason, it's important to pay off your balance in full each billing cycle if you can.
14. How do I keep track of my business finances?
Apart from keeping your business finances separate, you'll also want a good accounting app that can help you track and organize your business finances, send out invoices, and help you do your taxes. Look for an app that allows you to connect your business bank account, offers customized invoices, and provides a tax estimator. Most accounting apps come with a free or low-cost basic plan and allow you to upgrade to more robust plans as needed.
15. How do I set business goals?
The key to setting business goals is knowing which metrics to value and pay attention to. You'll want to create a list of KPIs, or key performance indicators, and set goals in relation to those. These metrics should be crucial to your business's success and easy to measure and quantify.
Common KPIs include profit margins, revenue growth, revenue concentration, and working capital. These can also be more specific to your business, such as the number of new contracts per quarter or average event attendance numbers. Make sure to set deadlines for your KPIs, which can include monthly, quarterly, and annual goals.
By choosing a few KPIs, you'll be able to set business goals that are relevant, specific, and easy to measure. You'll also be able to share these goals with your team and have them track their individual progress accordingly.
The Funding
16. How much money do I need to start a business?
The Small Business Administration offers a tool to help you calculate your startup costs, which will include everything from rent, inventory, and equipment to permits, employee salaries, advertising, and website costs.
Your exact startup cost will depend on the size and type of business you want to start. For example, the typical cost of starting up a microbusiness is $3,000, and most people who start home-based businesses need around $2,000 to $5,000. However, if you want to open a restaurant, retail store, or something similar, you'll likely need significantly more money to get started.
17. How can I get funding for my business?
While some entrepreneurs prefer to self-fund, you don't always have to have the cash in hand to start your business. There are plenty of ways to secure funding that will cover your startup costs or the ongoing costs of running your business until it's profitable. Common methods for funding small businesses include the following.
Each funding method has its own pros and cons. For example, bootstrapping can leave you with less capital but more freedom, whereas bringing in investors provides access to a big capital boost but means losing some equity.
18. How can I get a small business loan?
Small business loans can be a good funding option for business owners who don't want to give up control of their business but want immediate access to more capital. You'll want to figure out which small business loans you qualify for and what the application requirements are for each one.
You'll need good credit, and some lenders will check both your personal credit and your business credit score. Many lenders will also want to see that you've already been in business for at least a year and are generating at least $50,000 or $100,000 in revenue, although there are exceptions. You'll need to provide business and personal tax returns, bank statements, and other legal documents to apply. Most importantly, you need to make sure you can repay your loan on time before borrowing any money.
19. How can I get investors to invest in my business?
If you've decided you want to raise money for your business, the first step is finding investors. There are online fundraising platforms, like AngelList and StartEngine, that make it easy for business owners to connect with potential investors. You'll also want to get out in the real world to get noticed. Startup events and conferences are great places to do this, as are startup accelerators.
Finally, don't underestimate the power of your community. Ask around, and maybe someone will be interested in investing in a local business. You can also start a crowdfunding campaign on websites like Kickstarter, Indiegogo, and Patreon.
20. How long until my business is profitable?
It can take anywhere from 6 months to 2 or 3 years for your business to start regularly turning a profit. Most business owners should plan for at least 1 year without a profit, although franchise owners will likely generate profit more quickly.
It’s important to consider this starting stage when creating your business plan and deciding how much money you need to start your business and whether you want to resort to funding options such as loans and investors.
So, you’ve decided to truck it out by yourself and start your very own trucking company? Well, congratulations! The trucking industry is ripe with growth and opportunity, and it’s just waiting for ambitious entrepreneurs like you to seize the occasion.
See, America needs trucks. We desperately need trucks. The shortage of truck drivers is getting worse every year, and that deficit is expected to widen by more than 100% over the next decade. Aging drivers are retiring, women are struggling to join the industry, and the labor market is growing tighter and tighter—so more knowledgeable trucking business owners is exactly what our country needs.
The trucking industry is—and will remain for the foreseeable future—the lifeblood of the US economy, moving nearly 71% of all freight tonnage in the country. Annual truck tonnage has seen growth over the last 10 consecutive years, and although 2019 wasn’t as magical as 2018 for the industry, now’s as good a time as ever to jump into the competition.
But starting your own trucking company isn’t all wide-open roads and beautiful sunsets—it’s a lot of hard work, patience, and savvy decision-making. Oh, and money. Yes, money. One of the biggest barriers to entry in this industry is capital. Fortunately for you, there are plenty of fantastic financing options that can help you get your business off the ground. But how much cash are you going to need, exactly? Good question.
This guide is chock-full of all the costs you can expect to pay when starting your trucking company. It includes the obvious investments (like your truck and its many big ol’ expensive tires), and it also contains the not-so-obvious expenses (like toll fees and CDL endorsements). It’s all here to give you a good idea of what it’ll cost to make your trucking dream a reality. But before we dive into the nuts and bolts of your expected costs, we need to take a step back and look at the big picture—your business plan.
Begin with your business plan.
Before you start planning how many trucks you’re going to buy and how much it’ll cost you, you need to take a holistic approach. By creating a business plan, you’ll be able to see the path from start to success in its entirety, and you’ll see all the essential milestones along the way.
There’s no one-size-fits-all business plan in the trucking industry. You may decide to hire a bunch of owner-operators with their own trucks, or you could choose to build a fleet of big rigs and find talented truckers to drive them. And your aspirations now could change over the next 2–3 years, and that’s okay. Your business plan isn’t a binding document to keep you headed in one direction—it’s a GPS to get you from where you are now to where you want to go.
So step 1: get out your business plan. If you don’t have one yet, that’s A-OK—check out our step-by-step guide to creating your plan. Once that’s done, you’re ready to start making some real estimates. As we look through all the expected costs of starting a trucking business, you’ll likely discover new opportunities and barriers that’ll change your business plan. That’s great! Keep it close by so you make sure it’s always up-to-date.
Now, on to the costs you can anticipate.
Expect these costs for starting a trucking business.
Starting a trucking business isn’t cheap. You’re going to need trucks, truckers, parking, equipment, office space, licenses, permits, gas, marketing material, and much more—it’s not as simple as buying a truck and hitting the highway.
In fact, depending on what kind of business you want to build, you might not actually drive the truck at all. Perhaps you’ll hire full-time truckers. Maybe you’ll hire subcontractors. Or you may just run a one-person show where you do it all—there’s no right answer, but you’ll need to factor in the associated costs of each decision you make.
It can all be a little overwhelming, and that’s why we’re going to help you take it step-by-step, item-by-item. Let’s start with some of your most expensive assets first: real estate and trucks.
1. Real estate
As you scale, your real estate demands will grow, but on day one, you’re going to need some basics. You’re going to need docking and parking for your fleet, and you’ll likely want office space for administrative tasks—nothing fancy, but you’ll need something. Preferably, you’ll want to find locations that are easy-access for massive trucks and are close to major highways and interstates. This location will help eliminate unnecessary transportation waste and save valuable time.
2. Trucks
Next, you’re going to need trucks. Start small and scale as you grow. You may just want to start with 1 or 2 trucks, at first, and buy more as need demands.
A new truck and trailer could cost you well over $150,000, so you’ll have to decide whether you want to buy new, buy used, or even rent or lease. Purchasing a brand new truck will guarantee it’s in tip-top shape, meaning you’ll have fewer maintenance and repair bills over the next few years. But you pay a hefty premium for that peace of mind.
Buying a used semi-truck is much like buying a used car—just on a much larger scale. You’ll save thousands of dollars up front, but you should anticipate more maintenance costs and fewer years left of operation. Depending on the age and mileage, you could pay anywhere between $30,000 and $80,000 for a reliable big rig.
Another option is to rent or lease a truck, but this can get expensive very quickly. Used trucks may lease for around $800 a month while new rigs may lease for up to $2,500 a month. Oh, and don’t forget about the insurance costs, too, which can run as high as $1,000 a month.
If you’re going solo, you only need to pay yourself, but if you’re looking to scale, here’s what you can expect. A trucking business crew has truckers, maintenance workers, logistics coordinators, dispatchers, accountants, attorneys, administrative staff, recruiters, trainers, and more. As a small business owner, you may wear multiple of these hats from time to time. However, as you scale, you may hire full-time employees, freelancers, or subcontractors for any one of these positions—it all depends on your business plan and strategy.
If you build a large fleet of trucks, you may hire in-house maintenance workers. Or you may choose to outsource all your maintenance and repair work—it’s entirely up to you and your unique situation. The same is true for your truck drivers. On average, drivers’ salaries make up over 43% of the costs of operating a trucking business.
4. Equipment
Depending on your trucks and the industries you serve, you may need to buy and maintain a variety of additional equipment. For example, if you’re transporting frozen goods, you’ll need to purchase temperature-controlled storage containers. If you transport logs, you’ll need a specific bed and ties. Or if you carry hazardous cargo, you’ll need specialized equipment.
This specialized equipment usually has higher costs, and it’ll also require unique cleaning and maintenance. Keep these additional costs in mind if you choose to work with less-competitive niche markets.
5. Fuel
If you thought the gas price for your private vehicle was bad, then you’re in for a big surprise. On average, a commercial truck will burn through at least $70,000 worth of diesel fuel per year. That’s a lot of fuel (and a lot of money)! On average, fuel will account for around 22% of your total truck operating costs.
There are plenty of tips and tricks to cut fuel costs, but it’s still going to be a massive expense for every one of your vehicles. You have to spend money to make money, right?
6. Tolls
This expense might seem insignificant in the grand scheme of things, but toll fees can add up. Toll charges have skyrocketed over the last decade, increasing by close to 75%. Depending on which study you look at, toll prices could be your 2nd or 3rd biggest operating cost (alternating with fuel). It all depends on where you operate and which routes your drivers frequent.
A tool like Tollsmart can help you plan your routes and predict your expenses—this practice will help you accurately invoice your clients so you get the most bang for your buck. Other tools, like Bestpass, will help simplify your toll management expenses and help you find excellent discounts.
7. Repairs and maintenance
Alternators will break, tires will puncture, wiring will need to be fixed, breaks maintained—there’s a lot that goes into sustaining efficient trucks. Repairs and maintenance costs average around 10% of your total truck operating costs ($15,000 annually). Tire repairs and maintenance cost around $4,000 annually per truck on average, and that doesn’t take into account when you’ll need to replace some tires completely.
Increasing labor rates, parts costs, and replacement tire prices caused maintenance expenses to increase by up to 5% in 2018, and that number will likely keep steadily rising. Keep that in mind as you create your financial forecasts for your operating expenses.
8. Licenses and permits
As you can expect, you’ll need several licenses and permits to transport massive trucks full of cargo across the US. This post contains an excellent checklist, although you may need additional licenses depending on your home state and if you’re transporting unique goods. Here’s a quick list for reference:
Business Registration
Commercial Driver’s License
Federal DOT and Motor Carrier Authority Numbers
Unified Carrier Registration (UCR)
International Registration Plan (IRP) Tag
International Fuel Tax Agreement (IFTA) Decal
BOC-3 Form
Standard Carrier Alpha Code (SCAC)
Depending on the kind of cargo you’ll be hauling, you may need additional license endorsements. For example, if you’re transporting “hazardous” material (meaning explosives, combustibles, flammables, gases, and other potentially dangerous goods), you’ll need a HAZMAT endorsement.
Total, you’re looking at a few thousand in annual expenses for licenses and permits.
9. Insurance and taxes
Like with most insurance plans, you’ll pay a different amount for varying degrees of coverage. Your basic coverage will be cheaper, and your more comprehensive coverage will be more expensive. Obviously, you’ll also pay more if you’re insuring newer vehicles. It’s better to be safe than sorry, but you’ll need to decide which coverage packages will most benefit your business.
The government puts some heavy taxes on the trucking industry. The Heavy Vehicle Use tax and permit, as well as state-specific taxes, could cost you an average of $500 per truck annually.
10. Marketing
You could argue that trucks market themselves, and we wouldn’t entirely disagree, but you’re going to need some additional budget to market your business. First, let’s start with branding.
At a bare minimum, you’ll need a name, logo, color scheme, social media profiles, and a website. Of course, you can always go deeper and wider to create an impressionable brand, but you’ll need these basics. Unless you’re decently design-savvy, you’ll likely need to hire a freelancer to lend you a hand.
Next, decide which clients you want to work with. Do you want to work with construction companies, large corporations, small businesses, the timber industry, oil and gas companies, or manufacturers? Once you know who you’re targeting, then you can decide how best to reach them. That strategy might include social media ads, Google display ads, brochures, email marketing, cold calls, etc. If you lack marketing experience, you might want to get some advice and help from an agency.
Start preparing a cash cushion early on.
You'll want to start preparing a cash cushion to deal with any unexpected disaster on day one. The trucking industry is a fun one—every day is different, and you'll deal with a variety of challenges week in and week out/ But it's also rife with risk. Truckers will suddenly quit, tires will blow, trucks will crash, clients will delay payments—there's a host of things that can and will go wrong.
By building a rainy day fund, you'll have the capital you need to deal with any challenge. When you're just starting and cash is low, consider getting a business line of credit. A business line of credit is a financial safety net that's there when you need it, but you're under no obligation to use it. So if you need to fix a truck's engine immediately or hire an additional trucker, you'll always have the cash you need on hand.
Find the right financing solution.
With all this talk of money, money, money, you’re probably starting to worry about how you can afford everything. Don’t panic! Getting a trucking business off the ground takes a lot of cash, but lenders understand the investment and know it’ll pay off in the end. That’s why they offer some fantastic financing options for transportation businesses. Let’s look at a few options.
Equipment financing: With trucks costing upward of $150,000, you’ll likely need some financial help to get your feet off the ground. Truck cabs, beds, your coffee maker, and even the software on your computer—equipment financing can help you afford it all. With loan amounts up to $5 million and terms as long as 5 years, there’s no better way to finance your big rig fleet.
Term loan: You can use a term loan to finance just about any part of your business. You’ll get a lump sum of cash with transparent rates and terms, so you know exactly how much you’re paying every month.
Short term loan: If you need money, and you need it fast, a short term loan could be your best option. You’ll pay a higher interest fee, but you’ll get the money you need in as little as 24 hours.
SBA loan: The US needs the trucking industry, and that’s why the government offers a suite of loans with top-notch rates. Qualifying is difficult, and the process is long and tedious, but if you qualify, an SBA loan is a stellar financing choice.
Now, get trucking.
Remember, all of the numbers we shared are just general estimates. Your specific costs will vary based on your business plan, goals, and geographic location. Open up Google search, pick up the phone, and start getting accurate quotes. Once you have a better idea of your exact startup costs, then you’ll know how much financing you need. Then, once you have the capital in the bank, you’ll be ready to get your business off the ground.
Starting and operating a trucking company is a lot of hard work, but it’s well worth the money and time in the end. Done right, you can make a fantastic business within the trucking industry. So what are you waiting for? Put your pedal to the metal and get your trucking business on the road.
Here’s a little experiment to try the next time you’re in a group setting. It won’t matter if it’s a family gathering or a bowling night with friends, the results will likely be similar. Simply ask each person if they have a business idea. Without fail, the majority will reveal they indeed have an idea they think would be a hit. Perhaps it’s a restaurant, retail shop, or a technological solution. Whatever the industry, the fact is that most people have business ideas they dream about launching someday. And most of those people will never take action.
“The biggest struggle for most would-be entrepreneurs is taking that first leap,” explains entrepreneurial expert Alejandro Cremades. “It may be quitting a job, putting up a website, entering a startup accelerator program, approaching someone with your first pitch, or just announcing your venture to the world and family and committing the dollars and credit you have. This normally comes after a fair amount of brainstorming and planning. That can be a time when your mind frequently plays tricks on you. Fear and doubt creep. You can make plenty of excuses.”
This guide is intended for the courageous souls who have decided to take the risks necessary to build a business—those who want nothing more than to take their ideas from the drawing board to the board room. If you fall into this camp, your bravery is commendable. You have a challenging and thrilling journey ahead.
For the sake of clarity, the various tasks and strategies described in this guide have been outlined chronologically. This is not to say that every business will follow the same pattern. Rather, view this timeline as general recommendations that can be adapted to your unique situation.
Months 1-3
This stretch will be the most crucial period during your first year. These first few months are what separate the real entrepreneurs from the "I have a great business idea" people.
Craft a business plan.
Without a plan, your business idea can never be put into action. So think of your plan as the blueprint for everything that will follow. The Small Business Administration (SBA) recommends that you start your business plan with an executive summary. This section is where you’ll describe what your business does and how it is unique. In many ways, it’s like your elevator pitch.
Next, you’ll flesh out that executive summary with the following sections:
Service or product
Financial projections
Market analysis
Organization and management
Marketing and sales
Funding request
Appendix
Every goal included in your business plan should be trackable. Describe how you’ll get there, when it will happen, and how you’ll know the effectiveness. These details elevate your plan and make it actionable.
While your business plan will serve as blueprints for your internal team, it will also be shared with an external audience. For example, many lenders will request your business plan if you’re seeking financing. Take the time to polish it and make sure your plan is as impressive on paper as it was in your head.
Get an EIN and open a bank account.
You’ll need an Employee Identification Number (EIN) to do business in the United States. Visit the application page provided by the IRS, and you can complete the application process without too much difficulty.
Armed with your EIN, you can open a bank account for your business. There are plenty of excellent banking options out there, but many entrepreneurs choose to use the bank where they hold their personal accounts. This choice streamlines the application process, as the bank will already have your personal information and insights into your creditworthiness.
Build your network.
It takes a crew to bring your business to life. Start first with those closest to you, as your family and friends can provide irreplaceable support at this stage in the game. Whether it’s a sibling helping you with a project or your spouse patiently enduring a string of missed dinners, you’ll be set up for the most success when your inner circle is on board.
Moving out to the next sphere of influence, make efforts to connect with others in your industry. Look for partners who can help you build infrastructure and put your plans in motion. Networking events often provide opportunities to make the right contacts and get access to valuable resources.
The final component of your network is a solid mentor. Find someone who has walked a similar business path and can help you avoid both pitfalls and expedite success. You can find free mentorship through SCORE, or try to connect with someone using a platform such as LinkedIn.
The key ingredient to any good mentorship is mutual trust. When you know you can rely on each other to be honest and supportive, the stage has been set for a lasting partnership.
Hire an accountant.
There will undoubtedly be financial hurdles to clear as you work to launch your business. By finding a good accountant early on, you’ll be able to anticipate issues and apply proactive solutions. And you’ll greatly reduce your risk of getting burned by avoidable financial errors.
Choose a location.
Where will you base your business? If a home office will suffice, that’s obviously the easiest way to start. Just research the home business zoning ordinances in your area to make sure you do everything by the book.
Perhaps you’ll need office or retail space. This path requires more effort, as you’ll need to find a proper location and complete all the required paperwork before you move in. And you’ll need to budget accordingly, as it will cost more money from the onset.
Name and structure your business.
A lousy name can diminish even the best business ideas, so don't rush this step in the process. Lean on your network to find relevant names that stand out in the right way. Make sure that your preferred name isn't already in use by checking out industry directories and the website of the US Patent and Trademark Office (USPTO).
Once you’ve locked down your name, you’ll be ready to officially set up your business. There are multiple legal structures to choose from, each with their own benefits and drawbacks. Consult with your accountant or another trusted expert so you can proceed with confidence.
“Of all the decisions you make when starting a business, probably the most important one relating to taxes is the type of legal structure you select for your company,” states a business structuring guide from Entrepreneur. “Not only will this decision have an impact on how much you pay in taxes, but it will affect the amount of paperwork your business is required to do, the personal liability you face, and your ability to raise money.”
Here’s a quick look at the most commonly used legal structures:
Sole proprietorship
This structure is one of the simplest you could ever use for your business, so it’s no coincidence then that it’s also the most popular. As the name implies, a sole proprietorship has just one owner. If you’re going into business with partners, this won’t be an option.
As a sole proprietor, you’ll enjoy the most streamlined setup possible. You won’t have partner agreements to deal with, and all the requirements will be trimmed down because you’re the only person involved.
Financially speaking, you take full responsibility for your business with a sole proprietorship. All the profits come directly to you. The government will consider you and your business as one from a tax perspective, so profits will be passed through to your personal taxes. It’s worth noting that sole proprietorships have exceptionally low tax rates.
Because of the personal nature of this structure, you’ll also be the name associated with any debts or losses. This business structure offers no liability protection, so your assets could be placed in jeopardy if your business fails.
Corporation
Many entrepreneurs wish to create separation between themselves and their businesses, alleviating the financial liability mentioned above. A corporation makes this possible, as your business will be deemed a legal entity of its own. Any debt incurred by the business wouldn’t put your assets at risk.
Corporations are much more difficult to create than sole proprietorships because you’re creating something from scratch rather than just attaching a business to your already-established records. Plan on a large amount of paperwork and considerable setup costs.
Your profits won’t be able to pass through with a corporation, so you’ll pay a corporate income tax at both the state and federal level. You will also pay taxes at the personal level to take care of earnings that may have been distributed as dividends to shareholders. So, yes, you may need to pay taxes twice with a corporation.
Partnership
Setting up a partnership can be a great route when your business involves multiple owners. Depending on your unique circumstances, you can choose from a couple of different options. First up are general partnerships, which put all the partners on equal ground. With this structure, each partner manages the business and has legal responsibility for its finances.
Limited partnerships, on the other hand, allow for a hierarchy. Select partners are given full responsibility for the business, along with the liability that comes with that. Other partners can opt to serve in an investor role and have a protective buffer between themselves and the business.
The same pass-through rules that apply to sole proprietorships also come into play with partnerships. You won’t pay corporate income tax, as you would with a corporation. All profits and losses instead pass through to the responsible partners’ personal taxes. It’s a much more user-friendly way to handle taxes.
Structuring your business as a partnership is a streamlined process, and the costs are relatively low. The main thing to remember is that in partnerships, most or all of the partners will shoulder the financial liability of the business.
S corporation
This business structure combines some of the benefits of the options listed previously. Your business is set up as its own legal entity, as with a corporation, protecting you from financial liability. Additionally, you can include as many as 100 shareholders, which could potentially bring in more investors.
At the same time, all profits and losses in an S corporation pass through to the personal level of your taxes. As with a sole proprietorship or partnership, this structure makes your taxes easier to handle each year. Because it’s profits pass through, you won’t need to pay taxes twice, as you would with a corporation.
Anytime you’re combining elements of disparate structures, you can assume the complexity of the process increases. S corporations are difficult to establish, and the fees can quickly add up. Also, there are special requirements for the running of your business. For example, you must plan shareholder and director meetings, keep detailed minutes, and then allow shareholders to vote on big decisions.
Limited liability company (LLC)
This final business structure is also among the most popular. With an LLC, you get some of the key advantages found with partnerships and corporations. Namely, liability protection and pass-through tax rules for all earnings and losses.
If this hybrid approach sounds like an S corporation, that’s because the 2 structures share a lot of DNA. The biggest differences you’ll notice are that an LLC can have an unlimited number of shareholders and every person involved in the business can be involved in decisions.
While the pass-through style of taxes you enjoy with an LLC is highly attractive, you will also be responsible for self-employment tax. This additional element can make it so you owe more to the government each tax season.
Get your documents in order.
Regardless of which business structure you choose, there will be plenty of documents required to get your operation up and running. This step is where it’s beneficial to pump the brakes and make sure you give yourself adequate time to assemble all of the necessary documents. Even the smallest errors can come back to haunt you if they cause delays or incur unnecessary fees.
The following list includes many of the documents that could be required for your business:
Articles of incorporation
Business terms and conditions
Employment agreements
Contractor agreements
Sales terms and conditions
Services terms and conditions
Terms of use for website
Privacy policy for website
Intellectual property assignment agreements
Secure your business’s online presence.
The research process you applied to coming up with your business name should have included making sure a related domain name was available. Now you need to purchase the domain immediately so it can’t be claimed by a competitor or cybersquatter (someone who buys domains and then tries to sell them to you at an elevated price).
Once you’ve bought the domain, take efforts to make sure you will never risk losing it by missing a payment. The easiest ways to do this are to sign up for autopay with the domain provider or to put recurring payment reminders in your calendar.
In conjunction with your domain, you’ll also want to begin building your social media presence. This strategy could include Facebook, Instagram, Twitter, LinkedIn, or YouTube. Even if you don’t yet know how you’ll leverage these social channels in the future, the important thing is to create the accounts so the names are forever in your control.
Months 4-6
Now that you’ve set the foundation, it’s time to supply the fuel that will help your business move forward.
Get your finances in order.
At this point, you’ve already paid fees for activities like hiring an attorney and incorporating your business. Now it’s time to get detailed so that you can figure out how much money is required to keep the momentum going. Focus on specific dollar amounts and then develop a timeline for when you will need to acquire the money.
Your list of upcoming expenses might include permits, licenses, insurance, professional fees, inventory, supplies, equipment, vehicles, marketing, rent, or payroll.
Obtain necessary financing.
Knowing how much money you need is the single most important part of finding the right loan. And the second-most important aspect is the timeline for when you’ll need that money. Equipped with the information you gathered in the previous step, you should be ready to seek financing if it’s required.
The good news is that a vast array of financing options is available to small businesses. Here are 11 of the most popular choices:
You may also want to pursue a microloan as another avenue for financing. Popular examples include Kiva loans, Opportunity Fund loans, and Accion loans. The dollar amounts may be smaller with a microloan, but they are often easier to qualify for and may provide just the jolt you need.
Finally, don’t forget to check for grants your business might be eligible for. The obvious advantage here is that grants never need to be repaid. The challenge is that free money is incredibly popular, so it can be difficult to find a relevant grant and then have your application accepted.
Regardless, it’s wise to survey all your options. Start by visiting Grants.gov to find out what grants the federal government offers. You’ll also find the eligibility information on the website.
When you’ve found the financing product that best matches your needs, set aside plenty of time to accurately complete the application. In the rush to get funding, many small business owners fail to give this process the attention it requires. Doing so will only cause problems. Lenders pore over applications like detectives, looking for indicators of your financial reliability. One of the best ways to showcase it is by submitting a polished application that includes every document and detail they requested.
Enlist some digital help.
There are simply too many responsibilities for you to handle every aspect of your business manually. Luckily, technology has reached a point where you can automate and streamline many of the tasks that were aggravating entrepreneurs just a few short years ago.
The main objective here is time management. Any tool that saves you time will also save you money.
“Is the saying, ‘Time is money,’ true?” asks an entrepreneurial resource from the SBA. “If your business runs out of money, you always have the opportunity to get more.
More money is ‘simply a sale away.’ On the other hand, once time is past you can never get that time back nor can you add more hours to a day. Yes, poor time management can cost you and your business tremendous amounts of money. Realize, however, that the better you manage your time the more money you can earn. With time management, business owners maximize how much they get done each working day.”
So just how do you reclaim more time each day? Here are some digital tools you might want to consider:
Marketo: This tool helps you engage with your audience and track the impact by combining your email, social, digital, and mobile marketing efforts in one place.
Deluxe: Payroll can be a nightmare for small business owners, but Deluxe automates many of these tasks and helps reduce errors.
QuickBooks: This powerful tool does most of the legwork for you when it comes to tracking mileage and handling expense reports.
Mailchimp: Email marketing is an important strategy for most small businesses. Mailchimp elevates your efforts by automatically sending messages for you and providing tracking.
Hootsuite: For your social media efforts, consider a tool like Hootsuite. It gives you a hub from which to post on all channels, which automates and simplifies the process.
RescueTime: This app is engineered for time management, tracking your online habits, and enabling you to set realistic goals for improvement.
Slack: Not only will this app make your company communication smoother, but it also enhances your project management efforts.
Square: This handy card-reader plugs directly into your phone or tablet. And it saves you time and effort on the backend by emailing or texting a receipt directly to the customer.
TripIt: Manage your travel and improve team coordination with this convenient resource. It’s a great way to manage crucial details and keep everyone connected while on the road.
Quip: By improving collaboration, this tool makes it easier to hit important milestones. Quip really helps your team get on the same page and manage workflow.
17hats: This app can improve your efficiency and data security by serving as a hub for your contracts, invoices, and workflow.
Months 7-9
Now is the time to focus on sustainability. Many of the tasks specific to “starting up” have been handled, paving the way for strategies that will carry your business well into the future.
Revisit your business plan.
Your business plan should contain descriptions of your business, your plan for financial management, your plan for business management, and your marketing strategies. Take stock of how you’ve done so far, then create a strategic plan for your next 12 months.
First off, what do you most want to accomplish? Identify a BHAG (Big Hairy Audacious Goal) for your business, then outline the steps necessary to help you reach it. You’ll also need to establish methods for tracking your progress. For convenience and accuracy, consider using one of the digital tools mentioned in the earlier section.
Each month, take stock of your progress. If you’re struggling to stay on track, consider modifying the goal to ensure it remains attainable. What’s important is that you stay focused on the future and continue to push yourself.
Put your marketing plans into practice.
Using your business plan as a road map, start courting the customers who will become the lifeblood of your business. Here are 4 possible strategies for building your customer base:
Provide free resources.
Most customers love perks, so don’t be afraid to entice people to your website with a free resource. If you’re positioning yourself as an industry expert, consider giving away a white paper. If you sell a product, you could provide samples in exchange for filling out your online form.
Partner up
In these early stages, your budget could be small and your customer list even smaller. By joining forces with a noncompeting business in your industry, you can gain access to a new audience and get more bang for your marketing bucks.
Socialize more
Facebook is usually the prime social channel for your marketing efforts, but there are plenty of other channels for you to explore. Put yourself in your customers’ shoes and think of where they spend their time online. If you can build a presence on a lesser-known but equally relevant channel, the impact can be substantial.
Create some fans
As you reach more people, it’s important to do things that get them excited about your business. You might want to provide special promotions or rewards to those who are on your email list or follow your social channels. Whatever you decide, make sure there’s a clear benefit for those who have been kind enough to connect with your communications.
Focus on service.
Getting a customer to visit your store, office, or website is great. But it’s the repeat visits that will make or break your business. Customer service is where you can distinguish yourself and convert the casual shopper into a longtime supporter.
Research shows that if an individual has a positive customer experience, about 70% of the time they’ll recommend that business to their friends and family. On the flip side, bad customer experiences cost American businesses about $41 billion each year. Modern customers have numerous options to choose from, so they simply won’t settle for lackluster experiences. This power to choose means that more than 90% of consumers will take action if they are dissatisfied with the service they’ve received.
Months 10-12
Congratulations on making it to this milestone! Your first year in business will bring plenty of ups and downs, but you should celebrate the fact that you were in a position to experience them. Remember, most people have business ideas. But you were one of the select few who had the determination and creativity necessary to make your business a reality.
Here are a couple of final recommendations for your first year:
Build out your infrastructure.
Now is your chance to refine your operations and ensure you’ve made the necessary connections with suppliers, contractors, partners, and employees. It’s important to continue attending industry networking events, as they’ll help you meet individuals who can elevate your business with their services and skills.
Make your presence known.
You’ve already set up social accounts and launched your marketing initiatives, but there’s still more to be done. Blogs may get a bad rap in some industries, but they’re a reliable way to reach your audience and provide SEO benefits. Also, take the time to add your business to relevant directories and listings. These entries will help you appear in online searches and stay top of mind.
Consider writing a press release that can be sent out to the news outlets in your region. Getting an article published in the right place is an excellent way to bring legitimacy and respect to your business even before you’ve had a chance to build your reputation.
Now that you’ve finished the initial tasks of starting a business and have a plan for the coming year, it’s time to focus on execution. Entrust all the small and recurring tasks to automated tools so you can dedicate time to the differentials that will truly set your business apart from the competition.
This business is your baby. You brought it into the world, and now you have the opportunity to watch in wonder as it grows.
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