Risks Small Businesses Face

Own a small business? If so, be aware of the risks of different kinds. These risks can either be manmade or natural, and they may eventually bring serious damage to your business and may also leave a serious impact on your financial stability and daily business operations.

Following are the risks that your business may face and in this article you will know how to protect your business against these risks.

Acts of God

Storms, floods, fire, earthquakes, hurricanes, tornadoes and other natural disasters are high potential risks. These disasters are unpredictable and may occur at any time and pose as risks to your business.

As a small business owner, you cannot afford to ignore these risks. You need to determine these risks and take a sensible business decision by purchasing business interruption insurance, to keep your business operations moving.

Security breaches

Small businesses face potential threat to data online. For example, data hacked online. Further, the personal data of customers, such as e-mail addresses, passwords, social security numbers, etc., face the risk of being lost, theft or leaked.

You cannot rule out such risk to your business data. However, you can insure against it by purchasing security breach insurance or cyber liability, to protect your business.

Breakdown of machinery and equipment

Your business faces the probable risk of accidental breakdown or failure of machinery or equipment. You may be forced to shut down your business temporarily, if the cost of repairs or replacement of damaged equipment is more. If you are financially unable to bear these expenses, it will ultimately affect your business' profitability badly.

Buy equipment breakdown insurance for this kind of circumstances. This type of insurance protects your business against the risk of accidental breakdown of the equipment. It covers the repairing/replacement cost incurred.

Lawsuits

Small businesses majorly face the risk of litigation issues such as employment dispute, wrongful termination, injury to employees, libel, slander - to name a few. Also, due to your negligence with regard to your products or in business premises, the third party may sue you to recover the damages that they have incurred.

Business liability insurance will protect your business from the risk of legal issues. It covers the cost of litigation, medical expenses in case of injury to the third party in your business premises in an accident or because of a fall.

Insure against your risks

You should be aware of all the probable risks to your business. Identify the risks that may interrupt your business and decide for yourself which insurance coverage suits best for your business.

Purchase a comprehensive insurance package to protect your business against all potential risks. It is better to pay insurance premiums, rather than spending for the liability the risks bring in.

Choose an experienced and reputed insurance broker

Purchase an appropriate insurance coverage for your business, taking help and advice of an experienced and reputed insurance broker. They will look into all aspects of your business and figure out where your business is likely to face risk and then suggest a policy for you. It will not only save your time, but also gives you professional advice.

The IRS Wants You To Make Money With Your Home Based Business

Contrary to what everybody thinks, especially W2 employees, the IRS is your friend. The IRS tax code is designed and set up for promoting small business and home based business. Only five percent of the IRS code is really written about bringing in income for the IRS. The rest is all about expenses and deductions. So 95% is dedicated to reduce your taxes!

It is awesome!

There are a few things that you need to provide the IRS to qualify your home based business, but they are mainly looking for profit intent, consistency and record keeping.

1. Profit Intent is relatively easy to prove. If it's a hobby, like if you're trying to turn your Saturday golf game into a business, that's going to a bit tougher. Home-based businesses like network marketing, setting up a paint company or wedding planner or something, should be pretty easy to prove it's a "for profit" business.

2. Secondly, you need to work your business on a regular and consistent basis. There's no specifics on that but, even four to six hours a week, every single week should be sufficient. Of course, I recommend more than that if you are going to be serious about your business.

3. Lastly, you'll want to keep accurate records to prove that you have income and expenses.

If you keep accurate records of expenses, you can offset other income that you have. The expenses you have from RUNNING your business, such as expenses from your office in your home based business or money spent building your business, doesn't go to waste. You get to write it off. Your marketing, your business cards, your flyers, brochures or anything like that. If you want to RUN a business, you need to use all legal write-offs in your business and that's what will help you, not so much to get profitable right away, but make it worthwhile so that you're not losing money.

My Two Favorite Legal Deductions

My first Favorite legal deduction is the home based business office deduction, which is huge!

For example, if you have a 1,000 square foot house and you have a 100 square foot office, this gives you a ten percent write-off. It doesn't matter whether you're renting or you own your home and have a home mortgage. If your rent or mortgage is one thousand dollars, you get to write off, 100 dollars every month. If you need a new computer for your business, a video camera, software or anything that you use to promote and market your business, it can be written off.

My second favorite deduction may be even bigger. It's your automobile. Currently the business use mileage rate is 55.5 cents per mile. Always check the IRS website or with your accounting professionals, for updates.

Let's look at how this works.

Let's say you need to drive to go meet a prospect or you have to go to the office supplies store. You're going to keep track of all your "business" mileage to and from your business stops. You track ten miles in each direction for twenty miles total. That's $11 that you will deduct at year's end. As long as the initial reason for the trip was business, you can write it off. It will be between you and me if you just happened to stop at the grocery store on the way home. Oh yeah, the food you ate at your business meeting;50% of that can be written of as well!

Other Legal Deductions

If you have a child over the age of 6, they can be employed in your business. You can deduct their wages and they don't have to claim it up to $5,450. Double whammy! It must be a business related activity and not just taking out the trash. They could do filing or database management. Face it, your 6-year-old probably knows how to use the computer better than you anyway!

With the proper planning you can deduct part or all of your vacations. Let's say I am going to New York to meet with a client or prospect. We are going to have a few business meetings and talk about ways to grow our business. I can take my wife and we can do some tourist stuff while we are there. Travel can be written off with the proper planning.

All of your health costs may be able to be deducted.

Again, 50% of all food and entertainment that is "business" related can be deducted.

These are just the tip of the iceberg folks. You need to learn this stuff! If you know what you can deduct, it will help offset the cost of getting your home based business up and running and put you in a NO LOSE, situation. Once you are profitable, you will still need to track your deductions, but it will have become second nature by that point.

There are many books on this subject and your tax professional can help as well. You need to have the right tax person because some will fight you on certain deductions. If they are LEGAL, there is no reason why you shouldn't be taking them. It's all in black and white on the IRS website, so get familiar with it.

Using Your Money For The Monthly Expenses Of Your Home Based Business

I hear people saying that they just can't afford to start a business. GARBAGE! If you are currently employed, which you should be if you are trying to start a home based business, you can afford to get started. All you need to do is change the number of withholding on your w-4 and receive your tax refund in advance.

Dangerous? Not even close. It's your money! Getting a huge refund, once a year, is not a good thing. You are loaning your money to the government. Why not use it to create income for your family? Don't get this money if you are going to be stupid and just buy stuff.

Use it to start a home based business!

I hope this helps show you how to make money with a home based business of your own. It's not that scary and you can "learn as you earn."

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Outsourcing For Your Small Business on a Shoestring Budget

We put our heart and soul into our small businesses. They give us freedom, autonomy alongside challenges, heartache and obligation. They allow us to develop skills we want and force us to develop skills we have no interest in. Essentially we become "a jack of all trades" and potentially a "master of none" in our own business, if we don't seek external help through outsourcing at some point of the business growth.

Whether the assistance you need is in marketing, SEO (Search Engine Optimisation), finance & accounting, warehousing or call centre work there is almost always an outsourcing solution to your business needs. Outsourcing certain functions within your business is often the most cost effective way of achieving certain business goals and tasks. Realising the need for a 3rd party to take on the work is half the battle for a business owner. Not taking this step may very well strangle your business at the level of your capabilities denying the business the growth you want to achieve.

1. Don't sign long term outsourcing agreements at the outset.

There are plenty of excellent sales people out there who are trained to tell you what they can do for you and how great your business will be, if only you sign a 24 month agreement. Hiring an expert that asks you for a long term agreement is fraught with potential problems regardless of the quality of their references and sample work.

Ask your potential provider if they will work on a trial basis at an agreeable rate, if the answer is no this may be the first indicator that this person or company won't deliver.

A typical example of this is illustrated in the world of Search Engine Optimisation providers, who as a general rule lock businesses into 12 month contracts with no exit. When you ask why, the standard response is that they don't control Google so they need the 12 months to get results. Whilst they may not control Google they should be able to deliver good short term results - but SEO is a whole other subject.

So as a small business owner what do you do about long term contracts like this?

Ask the expert to back themselves and agree to a month by month contract with a no fault exit for an agreed period. Set clear and agreed expectations of the measurable outcomes and stick to them. If they can't meet your expectations in a trial they won't make you happy and your business grow in the long term.

If you are happy with their performance and confident they will help you grow your business after an initial trial period, you can then negotiate a long term agreement.

2. Don't be afraid of using overseas or online freelancers.

For tasks such as website development, programming, data entry, copy writing and in fact any task that can be easily defined freelancers are a brilliant and highly cost effective solution.

Access to overseas freelancers is usually through a website dedicated to presenting freelancers who are available for work, some of the better known sites include elance.com, freelancer.com.au and odesk.com. Whichever site you choose ensure that the site has a valid security certificate for payments and an easy to use dispute resolution service, even with the best of intentions, things can, and do, go wrong.

These sites provide a secure marketplace for freelancers to pitch for your work. Many freelancers have full time jobs and freelance as a second income, some spend all of their time freelancing. Regardless of who you choose there can be quite a few advantages to using a freelancer, for example:

· They are generally cheaper.

· You can source experts from around the world.

· They work fast as they don't get paid until the work is completed to your satisfaction.

· The skills sets they possess are often unavailable to smaller organisation or in some cases in your country.

3. Communicate with your Experts

Amongst the most common ways that an outsourced expert can become a liability to your business rather than a benefit is when the lines of communication aren't open.

As the client, you need to instigate conversations with your freelancer as soon as you are unhappy, concerned or just have a feeling things aren't going the way they should be. A good freelancer will not be concerned by a client checking up on them, it is a part of the job. Don't put off difficult conversations. The longer it takes for you to communicate a problem the longer the problem has to grow.

Communicate clearly, many outsourcers will have English as a second language and you should ensure you take that into account, likewise bear this in mind when you receive a response, have a cup of tea and consider the way forward before you fire off a rude email in response. Remember the old saying, "Act in haste and repent at leisure"

Not all communications should be negative either, don't forget to communicate the positives. When an outsourced expert is really doing a great job and you are happy, let them know. Outsourced experts are just people and they love to hear when things are going well and will go that extra mile when you communicate the positives.

4. You can (and should) outsource anything

You know your business like the back of your hand and your passion and drive is what will make your business succeed. If you are finding yourself doing tasks that have to be done but don't contribute to the growth of your business then you are working "in the business" rather than "on the business".

Sit down and make a list of the tasks that are essential for your business but don't have to be done by you and investigate outsourcing them, you may be pleasantly surprised. These tasks may be data entry, updating your website, packing and sending of products or bookkeeping or literally any other task you need done, a potential solution exists out there somewhere. Choose the tasks that can be affordably outsourced and in turn free up your time to do the tasks that only you can do.

I believe that outsourcing is a hugely effective way of growing a small business whilst still allowing you the freedom to run your own (now much bigger) show. Outsourcing taps into a huge knowledge base of experience that may not be available in your location and allows your business to benefit from that experience for a fraction of the price of hiring full time staff.

Our online toy store started as a small enterprise in a shipping container in regional Australia, using the tips above and implementing outsouring strategies our business has grown by 400%, our entire supply chain is run from a major metropolitan city and we have the ability to work on the business instead of in the business.