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.
Since Dominos launched its famous “30-minute or less” delivery guarantee in 1984, the pizzeria has dominated the world of food delivery. A pizza restaurant’s delivery value proposition was unrivaled because:
Pizzas are easy to transport.
Pizzerias hired staff specifically for delivery.
Delivery drivers used an insulated carrier to keep the pizzas hot.
Pizza restaurants limited delivery to specific areas.
However, in recent years, customers have demanded more variety with their food delivery options. As a result, delivery service companies like Postmates, DoorDash, Uber Eats, and GrubHub have started to pop up in cities across the world.
These companies have streamlined delivery logistics, leveraged peer-to-peer networking, developed integrated delivery technology, and found ways to increase the portability of many types of food. The advancements these brands have made in food delivery have helped them become household names.
Food delivery services have lowered the barrier of entry for local restaurants to start delivering food to their surrounding areas. If you’re a restaurant owner, you may be wondering if you should partner with these meal delivery services.
What sort of profits can you expect? How much labor and internal cost will you accrue? We’re answering all of your questions below so you can decide for yourself—and prepare your staff for changes in demand.
Customer Demand for Meal Delivery Keeps Rising
When you take a step back and look at the statistics, it’s shocking how many people take advantage of services like GrubHub and DoorDash. In a survey of nearly 3,000 people by research group Zion & Zion, 40% report using a meal delivery service at least once in the past 90 days. The main demographics of people using these services are young (63% of respondents were between the ages of 18 and 29) and from lower-income brackets.
Outside of multi-restaurant meal delivery services like Uber Eats, some restaurants are starting to introduce their own delivery services. Outback Steakhouse, Chipotle, and Panera are 3 such brands that have launched internal delivery in the past 2 years, with many other restaurants following in their footsteps.
These trends mean the average restaurant owner has 3 choices:
Partner with an existing service (or multiple services) like DoorDash or GrubHub.
Hire delivery drivers and promote your own internal delivery system.
Ignore the delivery trend and continue asking customers to come to you.
Unfortunately, there is no easy answer. GrubHub works with all kinds of food styles and costs, from deliveries off the McDonald’s Dollar Menu to high-end steak dinners. It’s up to your business to decide.
Option 1: Partnering with DoorDash and Other Delivery Services
One of the main benefits of working with a multi-restaurant food delivery service is marketing. Your restaurant can get in front of new customers who might not have heard of you or would otherwise not drive past your storefront.
Customers search these platforms based on food type, location, price, ratings, and other variables that can help you land on their radar. If you meet their search criteria, you stand a good chance of landing their business.
This accessibility means you can use delivery services like DoorDash, Uber Eats, or Postmates to access new customers like never before.
However, you need to prepare for the fees that come with these partnerships. While each app has its own service fees, restaurateurs report that they lose an average of 30% of the meal costs when working with a delivery service. While larger chains can negotiate better fees because of the sheer volume of orders they bring in, small businesses should expect a hit on their profit margins.
“We put up with drivers and fees because delivery brings in a lot of new tickets and customers, and it also helps spread the word about us,” Joel Dooley, general manager at Munchiez, a sandwich shop based in Florida, tells Skift Table.
In this way, you may treat meal delivery services with the same care and expectations of a Groupon promotion. At best, you may break even, but the service provided to your customers and marketing opportunities can help brand loyalty and increase the customer lifetime value.
Option 2: Developing Your Own Delivery System
If the idea of working with an unpredictable third party and cutting out 30% of your profits for each order sounds unappealing, then you may want to consider setting up your own delivery system. This approach also comes with benefits and drawbacks.
While you won’t have to pay the fee, you will need to hire staff members to run orders across town. These positions will require an hourly wage, along with stipends for mileage if your drivers use their own cars. You may even need to invest in fleet insurance to protect your drivers in the event of an accident.
Juggling the supply and demand of your own system can become taxing. You can lose money if you hire more drivers than you need to deliver food. Alternatively, with only 1 or 2 drivers, you could create a bottleneck while waiting for your drivers to return from a delivery. Finally, with your own delivery solution, you’re responsible for all the marketing and promotions associated with your delivery.
While there can certainly be financial incentives with creating your own delivery system, the risks and investments might make it more than you want to handle.
Option 3: Staying Away from Delivery (for Now)
With the rising customer demand for food delivery options and the increasing number of restaurants offering delivery, you might feel pressure to join the food delivery trend. However, as we’ve outlined above, there are substantial risks when choosing either option. Therefore, it’s completely reasonable for restaurant owners to avoid offering food delivery at all—for now.
If you’re not sure whether you want to invest in delivery or partner with Uber Eats or another delivery provider, you may have some leeway to see how local restaurateurs and state regulators work with these companies over the new few years.
In an article for Chicago Business, Joe Cahill explained how 800 Chicago restaurant owners are pressing for new food-handling and cleanliness rules on food delivery services. In California, labor disputes are heating up as worker advocates say food delivery companies need to treat their drivers like employees, not independent contractors.
Similar problems exist across various states and cities regarding this industry and how to treat both restaurant owners and drivers fairly.
The industry of multi-restaurant delivery services could look significantly different within a few years, depending on where you live. You may want to see how regulations pan out in your area before choosing the best brand to partner with or deciding to create your own delivery system.
Make the Right Choice for Your Restaurant
Look at your restaurant’s gross margin and the estimated costs of partnering with a delivery service or hiring an internal delivery driver. How much can you afford to cut into your bottom line? How many deliveries could you afford to make before you started losing money? Are the new sales worth it?
These are just a few questions to guide your discussion with your general manager and accountant as you consider whether to start offering food delivery.
Food service might be the most volatile industry. Between operational issues, changing consumer trends, and other internal and external forces, your restaurant could fail for a mountain of reasons.
As a restaurant owner, you need to recognize these risks and strive to continuously mitigate their effect on your business.
We’ve compiled seven of the most common reasons that restaurants struggle and how restaurateurs can overcome these challenges. Use this list as a guide to measure the current and ongoing state of your restaurant and make changes, when necessary, to keep your business thriving.
1. Ballooning Menu
Is your menu as thick as a copy of Moby Dick? Do you keep adding new items to appease broader palates? If this sounds like your restaurant, it may be time to cut your menu down.
They say that if you’re good at a lot of things, you can’t be great at anything. This adage is true with restaurants. If you have several options on your menu, especially across different cuisines, it’ll be hard to stand out.
In a survey of the top 500 restaurant chains, most menus had an average of 130 items. This list includes sizes, appetizers, and drinks.
The size of your menu will depend on your restaurant, but often, you’ll find value in condensing your menu.
Look at your tickets and see which items have the lowest order rate. Test different menu sizes and see how your customers respond. You most likely will find that your menu follows the 80-20 rule: the top 20% of items make up 80% of your sales.
Fewer items mean less work for your kitchen staff and more opportunities to perfect these dishes. A smaller menu also means fewer ingredients and provisions that you’ll need to stock, which can cut down your expenses significantly.
2. Attracting New Customers
Every restaurant has its regulars. The staff loves them. They tip well. They are important to the success of your business.
However, you also need to appeal to new customers. Your business needs a steady flow of new customers to keep growing. New patrons fill the space left by lost customers and lead to increased profits.
Kaleb Harrell, cofounder of Hawkers Asian Street Fare, shared how he handed out samples and discount cards at an event. The company spent a total of $2,000. However, if it acquired even 25 new customers out of 1,000 people at the event, the company would profit more than $1,500 per customer over 2 years. One event is worth almost $40,000 to them.
Consider how you market your business and what opportunities exist for you to bring in new people.
3. Keeping Up with Your Books
Most restaurants don’t fall into the red overnight. Instead, restaurateurs continue cutting into their profits and neglecting operational problems until they are too far in debt to keep their doors open.
If you want your restaurant to thrive, keep a close eye on your finances. This practice includes closing the books nightly to see what expenses and profits you accrued and reviewing your finances monthly to account for major expenses or changes.
Be diligent with your bookkeeping, and don’t be afraid to cut excessive spending quickly.
If you don’t have a financial background, then you may want to find an accountant who specializes in restaurant management. He or she can take you on as a client and notify you of financial trends that might be killing your restaurant.
4. Keeping Up With New Restaurant Technology
The technology available to restaurant owners today is nothing short of amazing. You can measure restaurant noise levels and adjust your music automatically to improve customer satisfaction. You can use inventory management software to track and order ingredients in real-time when your stock reaches certain levels.
In short, if your restaurant has inefficiencies, there’s probably software to help, but keeping up with constantly evolving technology and selecting the right ones for your restaurant can be a challenge.
Look at your day-to-day tasks, along with the challenges that your team members face. What slows them down? Where do you experience bottlenecks? Determining the answers to these questions and the effect they have on your bottom line will help you decide whether you should pursue a technological solution.
If you can automate a clunky process or shave a few minutes off the wait times for your customers, then you can make a significant impact on your productivity and profits.
5. Training Your Staff
On-the-job training can be incredibly powerful and effective. Your new restaurant employees can learn from your more experienced staff members while applying the lessons directly as they work. However, this method shouldn’t be the only training that your staff members receive.
As a restaurant owner, you’re staking your reputation every time someone dines at your establishment. However, you can’t oversee every order, so you must trust your team. If you neglect training, your restaurant is more likely to have inconsistencies with quality, service, messaging, and more.
Strive to develop a culture of learning in your restaurant. Empower and reward senior employees for training staff. Consider setting aside time at least once per month for team training. You can do this as a whole staff or have your staff hold training during different shifts.
Review industry best practices, customer service expectations, and other ways team members can improve their work. Even if you don’t have new staff, this training can help refresh your employees and correct any issues they have.
6. Handling Difficult Employees on Staff
The restaurant business is personal. You work alongside team members all day, serving food and helping customers.
It’s not uncommon for employees and management to develop friendships. Many restaurant owners even hire significant others and family members to their staff. These relationships are often more personal than in other industries.
As a result, it can be difficult to let staff go—especially if they are someone close to you personally.
However, a toxic team member can drag the whole restaurant down. Not only will he or she provide poor service to customers, but the lack of accountability can drive your good employees away.
Review your HR manual (or develop one through the help of examples online) and create a process for reprimanding employees. This process can include disciplinary activities like warnings and write-ups to help improve the behavior of these employees.
Documenting toxic behavior will help you create a case for firing your staff members that is transparent and fair to all employees—even those with whom you have a close relationship.
7. Losing Your Vision for Your Business
When you first opened your doors, you likely had a vision for the type of restaurant you wanted to create. You probably had a certain passion that made you excited to come to work every day.
Over time, it can become easy to ignore the forest for the trees. You get so focused on small problems and challenges that you forget your overall dream. You forget why you started the restaurant in the first place.
Take some time for yourself at least once a quarter to look at your business from a high level. Are you providing the value you want to customers? Do your menu and service reflect your brand? Recalibrate and refocus to get your restaurant back on track.
Running a Restaurant Isn’t Easy
Simply put, operating a successful restaurant takes a lot of work—otherwise, everyone would do it. The seven challenges above can impact your restaurant quickly if you’re not paying attention. However, if you’re proactive and diligent with your management approach, you can mitigate these risks and increase your chances of success.
The new year changes the landscape in many US states, making some places better to do business—and others much worse. Just like in real estate, your “location, location, location” can influence your business’s chances of success or failure.
This adage is also true at the state level, where state regulations can be a significant factor in the difference between your business’s profits and losses. We took a look at which states make it the hardest to do business and which states are making it even harder in 2020.
We combined these 3 lists and averaged the rankings because their methodologies vary a great deal. Consider California, which is ranked next-to-last at No. 49 in the Small Business & Enterprise Council (SBEC) ranking because of its high corporate income taxes and expensive gasoline. On the other hand, Wallethub ranks California all the way up at No. 8 thanks to the availability of venture capital and very strong average business revenue.
These significant differences are why we’re presenting a “ranking average” that factors in all 50 state’s rankings. And when we average these rankings, here are the states that consistently finished near the bottom of the list.
10. Maine
The entire state of Maine is technically located above the southern border of Canada, making it the northernmost state in the northeast US. That’s why the state has a relatively weak infrastructure, which creates logistical challenges for small businesses. Though Maine rates respectably in terms of affordable office space and low cost of living, the state also has few available employees and a low level of education or certification among its available workers.
Maine is also the home of a curious 2017 legal ruling where the lack of an Oxford comma in statehouse legislation cost one business $5 million. A Maine dairy company was forced to pay its truck drivers $5 million because of a state law that meant to exempt overtime pay rules from truckers whose job involved “packing for shipment or distribution.”
The problem? That phrase did not separate “packing for shipment” and “distribution” with a comma, so truckers argued that it did not apply to drivers who only distributed and did not pack the cargo. The truckers won the multimillion-dollar settlement, and the law was eventually revised.
But consider that the Maine legislature allowed such a snafu, and an individual business took the financial hit for the oversight.
9. Maryland
Maryland does benefit from its proximity to Washington, DC, a goldmine for lobbying businesses or entities chasing government contracts. But that’s not what most American small businesses do.
For the rest of us, Maryland scores consistently poorly with a very high cost of living and a high cost of doing business. Rent and regulation conditions in the most highly populated areas of the state make it hard to do business in large parts of Maryland.
New small business laws in 2020 include the increased minimum wage of $11, plus a 9% raise in Maryland commercial property taxes, marking the 7th consecutive year those taxes have gone up.
8. Delaware
Big businesses love Delaware because it is a longtime LLC tax haven for limited liability companies. LLCs can incorporate in Delaware no matter the location of their actual headquarters and replace their own state corporate income taxes with Delaware’s zero corporate tax rate. An astonishing 2/3 of the Fortune 500 are incorporated in Delaware, even though the state ranks 46th in population.
Unfortunately, this practice is subsidized in part by Delaware small business taxpayers. The state has far more complicated tax regulations for its own small businesses than the bigger out-of-staters. Delaware’s exceptionally high worker’s compensation premiums and difficulty in securing small business loans also contribute to Delaware having the 2nd-lowest small business survival rate in the country.
7. New York
The Empire State is not the best place to start your business empire. It’s no secret that New York is one of the highest-taxed states in the country for both personal and business taxes. The state’s high cost of living has been a running joke for years, and currently, the state has the 5th-highest gas taxes in the nation.
But New York is also a high-risk, high-reward state. The state’s access to venture capital, high-spending clientele, and potential for national visibility is the envy of most any other place in the nation.
A slew of new minimum wage laws kicked in statewide on January 1, 2020, though these varied by region.
6. West Virginia
West Virginia has one of the lowest ratings in the country for cost of doing business. But on the flip side, financing is incredibly difficult to come by in the Mountain State, small business growth there is not traditionally good, and access to new technologies rolls in very slowly.
Small businesses can do well in West Virginia if they capitalize on the state’s powerful energy export trade. But few lucrative West Virginia small business opportunities exist outside the energy sector.
5. Connecticut
Connecticut is a high-tax state in every category across the board, but at least have the lucrative Boston and visiting New Yorker demographics for potential customer monetization. The influx of Yale students and parents doesn’t hurt either.
But there are other tough realities to doing business in the Constitution State. Connecticut has an unusually high cost of living, and a looming unfunded pension crisis in the state will likely spell higher taxes for the state in 2020 and beyond.
As of January 1, Connecticut expanded its 6.35% sales tax to include previously exempt items like laundry and dry cleaning, interior design purchases, parking fees, and safety clothing.
4. Vermont
The state of Vermont is another high-tax state where it’s difficult to get financing—and an expensive place to live and do business on top of that. But the state’s most glaring weakness may be an aging workforce and few available hires. CNBC reports the state is trying to fix this by offering up to $10,000 in relocation credits for remote, work-at-home employees who relocate to the state. It’s a clever strategy to woo larger sectors of the gig economy, but it’s too early to see if the tactic has worked.
But Green Mountain State businesses and those recent relocators face new 2020 costs with a recent property tax increase. The state’s minimum wage also increased by 18 cents on January 1, raising it to $10.96.
3. New Jersey
Tax watchdog groups consistently rank New Jersey as the worst state for business taxes, and their 2020 updates to those rankings are no different. While the Garden State has a tremendously well-educated and productive workforce, that workforce needs to be handsomely compensated for a notoriously high cost of living. That’s one of many reasons Wallethub ranks New Jersey as having the highest business costs in the country.
Garden State small business employers are still absorbing the costs of state-mandated paid sick leave and expanded family leave laws that went into effect last year. And as it will every year until 2024, the state’s minimum wage just went up by a dollar to $11.
2. Rhode Island
Rhode Island is the only state here that has the distinction of being dead last in not just 1 but 2 of the analyses we consulted. Both CNBC and Wallethub say Rhode Island is the worst US state for small businesses, thanks to one of the most aging infrastructures in the country, combined with costly office space, labor wages, and insurance.
The smallest of states also raised its minimum wage on the 1st of the year, hiking the pay rate to $11.50. Rhode Island also recently reinstated the individual mandate of the Affordable Care Act, which had been effectively eliminated by the Trump Tax Plan, and added a tax penalty for any employees who do not have a health insurance policy.
1. Hawaii
The Aloha State manages to finish with even worse results than Rhode Island’s “dead last on 2 lists” ranking by landing in the bottom 3 of all the assessments we checked. Costs of supplies are off the charts in the remote island state, skilled workers are terribly difficult to come by, and the business tax burden is about double what it is in most continental US states.
The huge advantage, though, is that you’re in Hawaii, a beautiful area where tourists crank out mountains of disposable income. But certain Hawaii small business sectors face pesky new regulations in 2020. Retailers can no longer use plastic bags, and restaurants are required to provide juice, white milk, or water as children’s beverages. Hawaii and West Virginia are the regional outliers on this ranking. Most of these states are in New England and the upper northeast region of the US, something to take into account if relocating or expanding your business to a new state.
No matter what state your business is located in, it’s always helpful to have more capital. Every state in the US has an internet connection, allowing you to apply for a loan online to put your business in the best state of mind.
You opened a business to make money, not to give things away for free. However, sometimes offering free services can bolster your business. The key to having free services work for and not against you is understanding the right way to go about it. To help you navigate these murky waters, we’re outlining some essential dos and don’ts of offering free services.
When to offer free services.
Free services: You gotta know when to hold ‘em and when to fold ‘em. Ultimately, you’ll need to review the unique costs and benefits for your business, but here are some of the best reasons to offer free services.
If it’s something that doesn’t cost you anything.
There are certain cases where offering a product or service for free comes at no additional cost to the business. This is often the case in audience-based businesses. If you have a seat that would otherwise be left empty, you’re paying the cost of that seat whether or not a customer occupies it. Theater, seminar, or web-based classes are prime examples where offering a free slot may benefit your business if it means building word of mouth. If any part of your business is “set it and forget it,” this option could be great for you.
Deciding if this applies to your business will depend on your industry. While there may be empty tables in a restaurant, allowing patrons to sit down for a free dinner comes with the costs of the food and beverage the customers would consume— not to mention the additional labor associated with accommodating them.
If you can transition them to a paid user down the road.
This strategy is a common approach to offering free services. We see it everywhere from a Disney+ trial subscription to credit cards that waive APR or an annual fee for new customers. The theory behind these introductory offers is that you can show the customer how baller your business/product is. Once the offer is over, they’ll be hooked. Think of the introductory offer as a salesperson closing the deal for you.
If you can offer a pared-down version of your paid product.
You may have been reading this article thinking, “Wait a second, Lendio offers free accounting. Where does that fit in?” Right here, and we’re telling you because transparency is an essential element in successfully offering free services. Lendio's software has multiple tiers. We’re able to offer accounting software for free to users who want a pared-down experience. Then, we offer more comprehensive products that include accounting help from professional bookkeepers for businesses that need more assistance with their bookkeeping.
Free options like this work well for new businesses—especially in the tech space. It can help you build word of mouth and grow your business. To be successful, though, you need to make sure your free product maintains your company’s standards. There’s no point in offering something free if customers are going to be disappointed with the experience.
If the benefits generally outweigh the costs.
In the end, you need to ensure the benefits of offering free services will outweigh the costs. That’s true of the reasons listed above, as well as any others you may be considering. It’s no good to offer free services if they’re going to drain your small business of money and resources. If you determine that offering something for free can benefit you, it might be worth a try!
How to offer free services.
Once you decide to offer a free product or service, the second step is execution. Much to our chagrin, customers will not give you a gold star for offering something for free. You need to execute your complimentary services well.
Set clear expectations
Expectations can make or break the offer of free services. Make sure that the details of the offer are clearly outlined—for the benefit of both you and your customer. Explain expectations at the time of the offer. Don’t feel that you need to hide anything. If they only get limited access to your online classes, let them know. If you can provide a one-time offer for free admission, that’s great as long as they know. If you can provide a free trial or discount, provide clear communication of the terms. Setting clear expectations up front can prevent people from feeling surprised and disappointed, aka saving you a headache down the line.
Keep communication professional.
If a customer is unhappy with your free services (we hate to see it, but occasional unhappiness is inevitable in love and business), you have to take it in stride. Remember: if you treat them with compassion when they’re angry, they may remember that when the cortisol dissipates, giving you the opportunity to win them over in the end.
Keep communication professional, and under no circumstances should you make them feel you’re put out over complaints about a free service. If you’re not ready to receive negative feedback on something you’ve offered for free, you’re not ready to offer something for free.
When to walk away.
In some industries, like creative fields, professionals may find themselves bombarded with asks for free services. If you find yourself on the receiving end of relentless requests for free work from the same person, that may be a sign they don’t value the work you do. Offering free services should be an opportunity to market your business. It should never be an avenue for people to take advantage of you.
It’s okay to constantly reevaluate your approach to free services. If it’s no longer working for you, change it. When customers ask why, you can clearly tell them. Again, expectations go a long way in securing and maintaining customer loyalty.
Vendor credit, loans, and other lines of credit can be essential in helping your business maintain cash flow and keep up with customer demand. Your ability to obtain financing hinges largely on what’s included in your business credit reports.
These reports tell suppliers, vendors, and lenders how responsible your business is when it comes to borrowing money and repaying it. The more often you pay on time and the less debt you carry, for example, the more favorable the odds are that you’ll qualify for financing.
When your business credit is less than perfect, improving it belongs at the top of your to-do list. There are several things you can do to clean up your small business credit reports and improve business credit scores. This guide breaks down everything you need to know to work your way toward a better business credit rating.
Small Business Credit vs. Personal Credit: What’s the Difference?
It’s important to keep in mind that personal credit and business credit aren’t the same things. Personal credit history is associated with your personal identifying information. Chiefly, that means your Social Security number.
Personal credit reports are generated by the 3 primary credit reporting agencies: Equifax, Experian, and TransUnion. Information from your personal credit reports regarding loans, credit cards, and other debts in your name is used to calculate your personal credit scores. These credit reports and scores are what lenders look at when you apply for new credit. Landlords, utility companies, and employers can also check your personal credit for screening purposes with your permission.
Small business credit is different. Your small business credit reports detail financial information related specifically to your business. Instead of using your Social Security number, business credit information is linked to your business’s Employer Identification Number or EIN. Your business credit report includes information related to financial accounts opened in your business’s name.
It’s important to note that you may use your Social Security number initially to obtain business credit. For example, if you’re applying for a business credit card, the credit card company may ask for your Social Security number, EIN, or both. Once the account is opened, your account activity would be reported to your business credit reports.
Now that you’re clear on the differences between personal and business credit, here are 7 helpful ways to polish up your small business credit.
Start with a Thorough Review of Your Credit History
Before you can address any issues with your business credit, you first need to know what those issues are. That means checking your business credit history.
There are numerous options for pulling business credit reports, both free and paid. Dun and Bradstreet, for instance, is considered the gold standard for business credit reporting. However, you can also get business credit reports through Equifax and Experian, as well as credit monitoring services such as Nav or Capital One’s Business CreditWise tool.
What’s important to note is that different business credit reports may contain different information, depending on what’s being reported by your creditors or vendors. When reviewing your reports, check closely to make sure the following types of information are accurate:
Your business name and address
The Standard Industrial Classification (SIC) code used to identify your business
Payment history
Creditor or vendor information, including account numbers, balances, and available credit
Public records, such as judgments or liens
When checking your credit reports, it’s important to make sure these items are being reported correctly. Unlike consumer credit reports, business credit reports aren’t covered by the Fair Credit Reporting Act. This means there’s no formal dispute process in place if you find an error on your business credit history. However, Dun and Bradstreet, Equifax, and Experian each have policies in place for business owners to dispute errors or inaccuracies.
You should also look for any items on your credit report that might be hurting your score, such as late payments or past due accounts. If you have any of these on your business credit, you can move on to step 2.
Get Past-Due Accounts Up-to-Date
If your credit report review reveals late or missed payments, make getting those accounts current a priority.
Reach out to each creditor or vendor that you’re behind with to discuss terms for bringing the account current. If you have multiple accounts to negotiate, consider whether you can work out a payment plan that allows you to make progress with each of them. Alternately, you might want to pay the most delinquent account in full and work out payment agreements for the rest.
Once your accounts are current, you can re-establish a positive payment history by making on-time payments going forward. While different factors influence your business credit scores, payment history ultimately carries the most weight since creditors and suppliers want to know they can count on you to pay on time.
You might be wondering if bringing late accounts current will give your business credit score an automatic boost. The short answer is no. Even though the account may no longer be past due, the negative payment history will remain on your credit report. You can, of course, reach out to your creditor to ask them for a courtesy removal of negative marks, but they’re not obligated to honor your request.
Add Relevant Information to Your Credit Report
It’s entirely possible that not all of your vendors or creditors report your account history to the business credit bureaus. Or they might report your account to one business credit agency but not the others.
Making sure that you’re getting proper credit for a pattern of responsible credit use is having all of your accounts listed on your credit history. With Dun and Bradstreet, for instance, you can report any open tradelines even if your vendors don’t report them, which could help with improving your credit history.
It’s also possible to help your business credit using bills related to expenses other than debt. A reporting service like eCredable, for instance, allows you to submit account history for things like utilities or cell phone services. This information is then transferred to the credit bureaus.
It’s important to note that services like eCredable may report to smaller credit bureaus, rather than larger companies like Dun and Bradstreet or Equifax. But it can still be a helpful way to improve your small business credit using your payment activity for bills you’d already pay anyway.
Work on Reducing Credit Utilization
Getting your payments in on time is the most effective way to clean up small business credit. Second to that, however, is minimizing the amount of revolving debt you’re carrying on credit cards or revolving credit lines.
Reducing some of what you owe could improve your credit utilization ratio, which in turn can help your credit score. Make a list of each revolving debt owed, including both the current balance and the total credit limit. Then, divide the balance by the credit limit for each one to determine each debt’s credit utilization.
For example, if you have a small business credit card with a $10,000 limit and you owe $5,000 on it, your credit utilization is 50%. Credit experts typically recommend that for the best credit score results, you keep your credit card utilization at 30% or less.
Aside from reducing balances on credit cards or lines of credit, there are 2 other strategies you can try to improve credit utilization. The first is to call your credit card companies or log in to your online account and request a higher credit limit. The second is to open an entirely new credit card account.
Either option could increase your total available credit. Assuming that your balances remain the same, this would help your credit utilization ratio. For example, say that you increased the limit on your card from $10,000 to $15,000 but kept the same $5,000 balance. Your new utilization ratio would be a more favorable 33%.
The key is not expanding your debt when expanding your credit limit. Doing so would only be counterproductive to your business credit score and potentially add strain to your business cash flow when it’s time to repay it. Something else to keep in mind is that applying for a new business credit card could ding your personal credit rating slightly if you apply using your Social Security number. Each new inquiry for credit can trim a few points off your personal credit score.
Consider Consolidating Business Debt
If you have business debts spread across multiple credit cards, loans, or lines of credit, consolidating them could make managing the balance easier while also potentially yielding positive credit results.
When you consolidate business debt, you’re getting a single loan to pay off your existing balances. You then make payments to that new loan going forward.
This move can do 2 things for you. First, it can make your debt more manageable. When you have just a single payment to make each month, you reduce the odds of forgetting to make the payment and incurring negative payment history on your credit report. That alone could help your score if you’re able to establish a lengthy track of paying on time.
The other benefit of consolidating business debts into a single loan is the potential to make your debt less expensive. If the interest rate on a consolidation loan is less than the average combined rate you were paying on your debts, that can translate to savings that you could reinvest elsewhere in your business.
If you’re considering consolidating business debt, pay attention to the terms different lenders offer. Compare the interest rates, fees, minimum and maximum borrowing limits, funding speed, and the minimum requirements for approval. Ideally, you should be looking for a loan that represents the best combination of favorable terms with a payment that’s realistic for your business cash flow.
Separate Personal and Business Spending
When you have a sole proprietorship or a small business with just a few employees, it may be tempting to use business and personal credit interchangeably, but this can be a mistake. Mingling expenses and debts can result in a negative impact on both your business and personal credit histories if you miss payments or max out credit cards.
If you use credit cards to fund your business, stick with business credit cards for those expenses. Avoid charging personal expenses to business cards or business expenses to personal cards. This practice can simplify things when it’s time to separate deductible business expenses for tax reporting purposes, and it can keep your personal credit activity from impacting your business credit history—and vice versa.
Just keep in mind that separating business and personal debts doesn’t necessarily separate your liability. If you open a business credit card or take out a business loan that requires a personal guarantee, you can be held personally responsible for the debt if your business defaults on the payments. A defaulted credit card or loan account could then be reported to your personal credit history.
Monitor Your Business Credit Regularly
The last tip for cleaning up business credit is simple: keep an eye on your credit history.
When you’re continuously monitoring your credit, problems like errors or potentially fraudulent accounts are less likely to hurt your score since you can address them before any real damage is done.
The easiest way to monitor business credit may be using a free service. Remember to read the fine print to understand what type of services you’re receiving and how your business and personal information is being accessed before entering into an agreement for free or paid credit monitoring.
Why Your Small Business Credit Matters
One of the most important reasons to take care of your business credit is financing.
In an ideal world, you may never need a loan or credit card—your business finances are sustained entirely by your cash flow. But that’s not always realistic.
If you’re planning to expand your business or purchase an expensive piece of equipment, for instance, you may not have the cash on hand to cover those costs. Or, if you operate a seasonal business, your cash flow may experience ebbs and peaks throughout the year.
In those scenarios, financing can help you maintain business as usual and continue pursuing growth opportunities. While your credit isn’t the only thing lenders consider when applying for a loan, line of credit, or business credit card, it is something that comes under scrutiny.
If you have poor business credit, that could limit your financing options. For instance, you may have to use short-term financing methods, such as a merchant cash advance or invoice factoring, to meet capital needs. While those options are convenient, they can also be more expensive than other types of financing, such as an SBA loan or a term loan.
Your business credit can also impact other credit scenarios with your suppliers. If you have a good credit score and you’ve always made reliable payments on vendor tradelines, then you may be able to renegotiate better credit terms. On the other hand, a poor credit history could make vendors reluctant to extend credit to you at all. That could make it difficult to get the supplies or materials you need, which in turn makes serving your customers more challenging.
Building Business Credit History from Scratch
Having limited or no business credit history is a situation you might be in if you have a newer business. In that case, some of the tips included here may not be as effective for helping to clean up your credit.
You can, however, take other approaches to create a positive business credit history. Here are some of the simplest ways to get started with building credit for your business:
Apply for an EIN if you haven’t already
Register for a DUNS number with Dun and Bradstreet, which is used to establish your business credit profile
Open a small business credit card
Automate your business’s monthly bill payments
Apply for vendor credit
Consider a small business loan
One last tip to know about business credit—your information is available to the public. Anyone can look up your business credit file.
That’s yet another motivator to work on cleaning up any past credit mistakes, since potential customers, vendors, or business partners may take a peek at your credit history. The more effort you put into improving business credit, the bigger your potential return when it comes to your bottom line.
The word "audit" elicits fear, not unlike that of the Salem witch trials. Although punishments are less brutal (thank goodness), the government isn't afraid to set fire to your business. If the IRS decides to audit your company, your financials need to be in tip-top condition to avoid hefty penalties.
Audits aren't just about investigating your integrity—even honest small business owners can fail. These financial investigations care little about ignorance and lots about meticulous records.
But fear not! There are simple steps you can take now to guarantee your small business passes with flying colors. Although an audit is very unlikely (about a 0.5% chance), it's best to be prepared for the worst.
By taking these 6 steps now, you'll be ready if the IRS knocks on your business's door.
1. Keep Detailed Financial Records
Occasionally, the IRS audits businesses randomly. But more often than not, the IRS decides to audit businesses with suspicious tax returns. To make sure you're honest and can prove it, keep detailed records of all your income, expenses, losses, and deductions.
The law requires you to keep these records for up to 3 years, but most tax professionals advise you to keep it for at least 7.
So, if the IRS has questions, you'll have easy-to-access answers.
While you're at it, make sure to separate your personal expenses from your business expenses. Keep a separate bank account and credit card for your business. This practice will help you identify the appropriate transactions without any confusion.
2. Create Digital Copies of Your Receipts
If you're using cloud bookkeeping software as we’ve suggested, uploading and organizing your receipts is simple. If you claimed deductions, you're going to need itemized receipts to prove your purchase. No expense is too small—make it a habit to create a digital copy of every business receipt.
3. Lean on Your Accountant and Bookkeeper
Get in touch with the accountant or tax professional who performed your tax return. They should help compile the appropriate documents. Also, make sure your bookkeeper is present, too. They'll be able to speak to the bookkeeping processes and help accelerate the audit.
Don't have an accountant or bookkeeper? Consider hiring one. Keeping track of your financial records is hard work—even if you're never audited, they'll be well worth the price. And if the IRS does decide to audit you, you'll be forever grateful you have help to lean on.
4. Be Transparent About Your Contractors
More small businesses are saving money by hiring freelance contractors instead of full-time employees. This approach saves the company from paying for benefits, paid-time-off, and other employee perks. But high expenses on multiple independent contractors trigger the IRS.
That doesn't mean you shouldn't use freelancers—it just means you need to make sure they qualify as independent contractors and not employees. The term you give them isn't as important as the 3 factors the IRS considers: Behavioral Control, Financial Control, and Relationship of the Parties. Review the IRS's guidelines to avoid misclassifying and receiving hefty penalties.
If you pay any contractor more than $600, you need to file a 1099 with the IRS. Make sure every contractor sends you a signed W-9 before you pay them.
5. Stay Up-to-Date on Regulations
Laws change, state and local taxes vary, and auditing rigor fluctuates. But the IRS won't let you use that as an excuse. It's your duty to stay current on all regulations and taxes. Stay compliant by verifying your tax settings are always up-to-date on the software you're using.
6. Hit the Deadlines
Not too late, not too early—just right. File your tax return too early, and you'll give the IRS plenty of time to review it meticulously. Even if you're 100% honest, it's best not to give the IRS extra time to dig for errors.
It's more important, though, to avoid late filings. If you fail to file on time (or fail to file at all), the eye of the IRS will find you. Imagine Sauron’s eye finding Frodo whenever he puts on the One Ring—it’s just like that. Make sure to meet all of your important deadlines—not just the yearly tax return.
An IRS Audit Isn't the End of the World
Usually. While an audit can be a major pain in the backside, it's not an indictment. It's an investigation.
By following these 6 steps, you can avoid IRS suspicion and stay on your merry way. If the IRS does audit your business, whether at random or due to suspicious behavior, you'll be ready to survive unscathed. Don't wait for the unwelcome letter from the IRS to land in your mailbox—start audit-proofing your business today.
If you’re a veteran and a business owner, you’ve likely looked into a veteran-owned business certification in the past. You’ve also probably found the whole process confusing. There are several ways to get certified, and considering the substantial time commitment, it may not seem worth it to go through the process.
However, becoming a certified veteran-owned company can help you win more business from both government agencies and corporations. The certification can also be used as a marketing tool to help you reach potential customers who want to support veterans.
Read on for some tips on how to get certified, as well as a breakdown of the different types of certification available to veteran-owned businesses.
Why should I register?
The primary reason to register your business as veteran-owned is to win more business. Specifically, both government agencies and many large corporations set aside a certain amount of business each year for veteran-owned businesses (as well aswomen and minority-owned firms).
The certification process is pretty time consuming but necessary to compete for contracts for government agencies. But if your small business focuses on selling to government agencies, it’s worth the time and effort.
Corporations will also prioritize giving business to veteran-owned companies. For example, nearly 15% of Fortune 1000 companies have set goals to give business to veteran-owned businesses. The process of registering as a veteran-owned supplier for corporations tends to be less time consuming than the process for government agencies.
Additionally, many businesses and consumers like to prioritize purchasing from veteran-owned businesses, so getting your business listed on more consumer-facing sites likebuyveteran.com can help you reach a larger group of potential customers. The process of getting listed is relatively simple compared to some of the other certification options.
How do I qualify for a veteran-owned business certification?
To be eligible for most veteran-owned business certifications, your business must meet the following requirements:
More than the majority (51%) must be owned by a veteran.
The veteran owner must have been honorably discharged from service.
The veteran owner must be involved in management and daily business operations.
If you’re looking to qualify for the Service-Disabled Veteran-Owned Small Business (SDVOSB), you must meet the above criteria. In addition, the veteran business owner will need to prove a service-connected disability (which should be included in your discharge paperwork).
What are the different ways to get certified?
There are a few different levels of certification.
Federal contracts
To compete for national government agency contracts, you will need to get either veteran-owned small business (VOSB) certified, or SDVOSB certified via theVets First Verification Program. The verification process includes submitting business ownership-related paperwork, your honorable discharge papers, and a federal review.
Private contracts
If you’re looking to be included on national registers of veteran-owned businesses to attract work from other private businesses, you simply need to register with theNational Veteran Owned Business Association or the National Veteran Business Development Councilas a Certified Veteran’s Business Enterprise (VBE).
State contracts
You can also apply for state-level certifications, which may be necessary if you’re looking to work with state agencies. Some states offer their own veteran-owned business certifications, while others use third-party certifiers like the National Veteran Business Development Council (NVBDC) or the U.S. Department of Veterans Affairs.
As mentioned above, you should also consider listing your business on websites likebuyveteran.com.
Beyond specific veteran business owner programs, you are also eligible for broader contracting assistance programs with the federal government as a veteran business owner. TheSBA website provides the full list of programs you may also qualify for.
Are there other resources for veteran-owned businesses?
Sometimes it can be helpful to connect with other veteran business owners, whether for advice while going through the certification process or just general mentoring and networking. The SBA runsoutreach centers across the country where you can get in touch with other local business owners who served in the armed forces.
SCORE, a non-profit organization that provides resources to help entrepreneurs grow their businesses, has also pulled together educational articles for veterans.
Social media can be a game-changer for small businesses—if you know how to use it. This guide covers everything from choosing the right platforms to creating engaging content and growing your audience. With actionable tips and proven strategies, you’ll learn how to turn likes and follows into real business results.
Email marketing is one of the most powerful tools for small businesses—when done right. This guide covers everything from building your email list to crafting engaging campaigns that drive results. With actionable tips and step-by-step guidance, you’ll learn how to connect with your audience, boost sales, and grow your business through email.
Digital marketing doesn’t have to be overwhelming. This guide simplifies the essentials, from building an online presence to leveraging social media, email, and SEO. Packed with practical tips and step-by-step strategies, it’s designed to help small businesses succeed in the digital world without a big budget or a full marketing team.
Let’s face it. There’s a lot of bad marketing advice out there. Or great advice that’s far too in-depth for a small business owner who isn’t looking to start a full-time career in marketing. We created this guide to cut through the clutter and provide you with principles, direction and the applicable step-by-step how-tos to get the job done.
Your brand is more than just a logo—it’s the heart of your business. This guide walks you through the essentials of small business branding, from defining your identity and crafting your message to building a strong, lasting impression. With clear steps and actionable advice, you’ll create a brand that resonates with customers and sets your business apart.
Hiring for small businesses doesn’t have to be complicated. Your business can achieve success when you understand relevant legal requirements and find the right job candidates for your open positions. This comprehensive guide covers everything from finding the right employees to hire to employee training and development.
Your best customers are your biggest growth opportunity. This guide breaks down customer marketing strategies tailored for small businesses, helping you turn happy customers into loyal advocates. From building relationships to leveraging referrals, discover actionable steps to maximize lifetime value and drive sustainable growth.
From selecting the right franchise opportunity to navigating the financial aspects, this step-by-step resource equips aspiring entrepreneurs with the knowledge and strategies needed to thrive in the world of franchising.
Have a business idea but not sure where to start? Our comprehensive guide to starting a business has everything you need to know. From legal requirements to market research, we’ve got you covered.
Running and growing a business is no easy feat. Our guide to running a business has everything you need to know to keep things running smoothly. From managing employees to marketing your business, we’ve got you covered.
Take your business to the next level with our Accounting Guide. Master the language of numbers, understand financial statements, and make informed decisions based on accurate financial data. Discover the power of sound financial management.
Master the art of cash flow management with our comprehensive guide. Learn strategies to optimize your cash flow, forecast revenue and expenses, and keep your business financially stable. Take control of your finances and achieve long-term success.
Streamline your billing process with our Invoicing Guide. Learn how to create professional invoices, manage client payments, and maintain a healthy cash flow for your business. Get paid faster and efficiently track your revenue.
A great marketing strategy is the foundation of small business success. This guide takes you step-by-step through defining your goals, identifying your audience, and choosing the right channels. With practical tips and clear direction, you’ll build a tailored strategy that drives growth and delivers measurable results.
Navigate the complex world of taxes with our Tax Preparation Guide. From understanding tax obligations to maximizing deductions and filing quarterly taxes, we’ll help you stay compliant and minimize your tax burden. Unlock the secrets of tax success for your business.
Stay on top of your business finances with our Bookkeeping Guide. Learn the art of tracking income and expenses, maintaining financial records, and keeping your books in order. Unlock financial success with our expert tips.
Need help securing funding for your business? Our business loans guide simplifies the financing process, explains key terms, and walks you through your loan options.
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