Here’s the hard truth. You can make much more money running your own business than working a normal 9-to-5 job for someone else.

Who do you think is the wealthiest person in most towns in the U.S.? The top doctor? The best lawyer? The president of the local bank?

No. It’s almost always someone who started their own business. And often, it’s a simple service business — such as a trash collection service, a landscaping business, a cleaning business, a moving company… or you name it!

Let’s start with a simple, one-person service business

For many service businesses, you can charge as much as $100 an hour for your services.

So, let’s say that you sell your services for 30 hours per week, 50 weeks per year. That would be 30 x 50 x $100 = $150,000 annual income.

Suppose you work only part-time and you manage to bill, let’s say, 10 hours per week. That would be 10 x 50 x $100 = $50,000 annual income. Not bad for a side business.

It gets even better! If your service business is specialized or has a unique twist to it, you may be able to charge a lot more. Maybe as much as $200 an hour. If you can bill 30 hours a week at $200 an hour, that’s $300,000 a year.

Soon you may find that you have more work than you can handle yourself. Then, it’s time to hire employees. After that, there’s no limit to how much you can grow your business and your income.

When starting a business, you’re creating an asset for you and your family

After a few years, you may decide you want to do something else. Then, you can make even more money by selling your business. If you have a good business with regular customers, you can sell it for a lot of money. For example, some larger dog walking businesses have sold for over $500,000.

With a product business, you can do even better. But there’s also more risk because you usually have more competition.

For example, I started my book publishing company in my basement apartment with just $1500 and built it up to an annual sales level of $20 million and profits of $5 million. I eventually sold it for $40 million.

Of course, you can always go work for a big corporation and try to make it to the top of the ladder. I personally know the CEOs of two Fortune 500 companies. I can tell you that neither one of them made as much money as I did with just one of my small businesses. One of these CEOs had to outperform 400,000 other employees to land the top job.

The bottom line is that if you want to make a lot of money, then you should consider starting your own business.

By Bob Adams, Harvard MBA, serial entrepreneur, and founder of BusinessTown.

Starting a business can be an exciting and rewarding journey, but it often comes with financial challenges, especially for underserved communities and minority entrepreneurs. Fortunately, there are various grants available to help fund your business dreams and make them a reality. Access to grant information is crucial for these communities to help ensure they can take advantage of available opportunities. In this article, we’ll guide you through the process of applying for grants, providing easy-to-understand steps and valuable resources to support your entrepreneurial aspirations.

1. Understand your business needs

Before getting into the grant application process, take some time to identify your specific business needs. Be clear about the purpose of the grant and how it will help your business grow. Having a well-defined plan will make it easier to find grants that align with your goals. Identifying key stakeholders is crucial for successfully completing the grant application process, helping ensure efficiency and preventing delays.

2. Research grant programs

There are numerous grants available, each with its own eligibility criteria and application process. To find the right grant for your business, explore the following resources:

• Minority Business Development Agency: The MBDA offers various programs to support minority entrepreneurs. For instance, the Capital Readiness Program funds incubators and accelerators to assist underserved businesses in launching and scaling their operations. Visit their website to explore grants tailored for minority entrepreneurs.
• SOGAL Foundation: Contact Content Manager Simona Sillah for information on their grants supporting diverse founders.
• Galaxy Grants: Hidden Star, a nonprofit organization, offers Galaxy Grants to support women and minority entrepreneurs. These grants provide valuable resources, tools, funding, and knowledge to help small businesses grow.
• Communities Foundation of Texas: Check out their grant opportunities to support businesses in Texas.

Be cautious of scams; avoid sites that may ask for payment upfront and provide no real value.

It’s important to note that the federal government generally does not provide grants to start a business. However, there are several funding programs to help entrepreneurs start, expand, or recover from disasters. The U.S. Small Business Administration (SBA) offers various funding options, including loans and grants, targeted at minority and underserved communities.

3. Prepare your business plan

Most grant applications will require the well-crafted elements of a business plan. Highlight your business’s mission, objectives, target market, and how the grant will contribute to your success. A compelling business plan increases your chances of securing funding. To learn more about creating a business plan, check out this resource.

4. Review eligibility criteria

Carefully review the eligibility criteria for each grant you’re interested in. Some grants may have geographic restrictions, industry preferences, or specific requirements for underserved communities.

5. Gather necessary documents

Grants often require various supporting documents, such as financial statements, tax returns, business licenses, and letters of recommendation. Prepare these documents in advance to avoid delays in the application process. These documents are essential for securing funds for your business, especially when applying for grants and educational funding.

6. Navigating Grant Programs

Navigating grant programs can be a daunting task, especially for those new to the process. With numerous funding opportunities available, it’s essential to understand the different types of grant programs and their requirements. Here are some key points to consider:

• Formula Grants: These grants are awarded to specific entities, such as state and local governments, based on a predetermined formula. Formula grants are often used to fund programs that benefit a wide range of people, such as education and healthcare initiatives.
• Discretionary Grants: These grants are awarded competitively, and the funding agency has discretion over which projects to fund. Discretionary grants are often used to fund innovative projects or programs that address specific needs or issues.
• Grant Programs: Grant programs are designed to support specific goals or objectives, such as education, healthcare, or economic development. Understanding the goals and objectives of a grant program can help you determine whether your project is a good fit.

To navigate grant programs effectively, it’s essential to:

• Search for funding opportunities: Use online databases, such as Grants.gov, to search for funding opportunities that align with your project’s goals and objectives.
• Review eligibility criteria: Carefully review the eligibility criteria for each grant program to help ensure your project meets the requirements.
• Understand administrative requirements: Familiarize yourself with the administrative requirements for each grant program, including application deadlines, submission procedures, and reporting requirements.

By understanding the different types of grant programs and their requirements, you can increase your chances of submitting a strong application and securing funding for your project.

7. Craft a powerful application

When filling out the application, be clear, concise, and compelling. Clearly explain how your business aligns with the grant’s objectives and how the funding will drive a positive impact.

Seeking guidance can be crucial to navigate the application process effectively, helping ensure you meet all requirements and maximize your chances of success.

8. Follow instructions to submit grant applications

Pay close attention to the application guidelines and deadlines. Late submissions or incomplete applications may disqualify you from consideration. Always be cautious of unreliable sources as well; these sites should never ask for prepayment.

Before attempting to submit grant applications, ensure you have the correct registrations and administrative prerequisites in place, such as SAM.gov and DUNS, which are essential for compliance.

9. Submitting and Tracking Your Application

Once you’ve completed your grant application, it’s time to submit it to the funding agency. Here are some key points to consider:

• Submit your application: Follow the submission procedures outlined in the funding opportunity announcement, which may include submitting your application through an online portal or by mail.
• Track your application: Once you’ve submitted your application, track its status to ensure it’s being reviewed and processed correctly. You can usually do this by logging into your account on the funding agency’s website or by contacting the agency directly.
• Respond to requests for additional information: If the funding agency requests additional information or clarification on your application, respond promptly and thoroughly.

To ensure a smooth submission process, make sure to:

• Complete all required forms: Ensure you’ve completed all required forms and attachments, including the grant application, budget narrative, and supporting documentation.
• Meet the submission deadline: Submit your application by the deadline specified in the funding opportunity announcement.
• Follow up: If you haven’t received confirmation of receipt or an update on the status of your application, follow up with the funding agency to ensure it’s being processed correctly.

By following these tips, you can ensure a successful submission process and increase your chances of securing funding for your project.

Applying for grants may seem daunting, but with determination and the right resources, it becomes an accessible path to fuel your entrepreneurial journey. By utilizing the information and links provided in this article, you can take the first steps toward securing funding and bringing your business dreams to life. Remember, there are resources like our ZenBusiness grant for our customers, further supporting them on their entrepreneurial quest. Let’s build a more diverse and inclusive business landscape together!

Why do small businesses fail? Business failure isn’t something you want to think about when you start a business. But if you want your business to succeed, you need to know and avoid these 11 common reasons why businesses fail.

According to the U.S. Bureau of Labor Statistics (BLS), approximately 20% of new private sector establishments fail within their first year. Those trends have remained pretty consistent over the years, too (all the way back to 1994, in fact).

Another BLS study showed that approximately 34.7% of private-sector establishments born in March 2013 were still operating in 2023, indicating that about 65.3% did not survive to their 10th year. There are many reasons for these failures: difficulty getting loans, supply chain disruptions, inflation, and so much more.

But for most businesses, the cause of failure is much simpler: making a common mistake (most of which are avoidable). Here are the top 11 reasons for small business failure and what you can do to avoid making those mistakes yourself.

Cash flow problems are a common problem for nearly any business these days, and independent retailers are no exception. Here are six things retail store owners can do to make an immediate improvement in their cash flow.

Cash flow is an ongoing challenge for independent retailers, as it is for many small businesses. Sales growth remains modest at best, and credit remains largely unavailable to many independent retailers. That puts many squarely behind the eight ball.

Here are some tips that can help you drive more dollars to the bottom line:

Understanding Cash Flow Challenges

Cash flow problems in retail can stem from a variety of sources. Poor inventory management is a common culprit, leading to either overstocking or stockouts, both of which can tie up cash unnecessarily. Inefficient payment procedures, such as delayed invoicing or lax credit terms, can also disrupt cash flow. High operational costs, including rent, utilities, and payroll, can quickly deplete cash reserves, especially during slow sales periods.

Additionally, economic downturns can reduce consumer spending, further straining cash flow. For small to medium-sized enterprises (SMEs), these challenges are often magnified due to limited resources and financial flexibility. Understanding these root causes is crucial for developing effective strategies to manage and improve cash flow.

Common Cash Flow Issues and Their Impact on Retail Sales

Retailers often face several common cash flow issues, such as insufficient cash on hand, poor cash flow forecasting, and inadequate cash reserves. Insufficient cash on hand can lead to reduced inventory levels, making it difficult to meet customer demand and potentially driving customers to competitors. Poor cash flow forecasting can result in unexpected shortfalls, making it challenging to cover operational expenses or invest in growth opportunities. Inadequate cash reserves can leave a retail business vulnerable to emergencies or economic downturns, leading to delayed payments to suppliers and decreased customer satisfaction.

Effective cash flow management is essential for maintaining a healthy cash flow, helping ensure timely payments, and investing in initiatives that drive growth and increase retail sales.

Maintaining a cash reserve is essential to cover unexpected expenses, helping ensure that your business can withstand unforeseen circumstances that could halt revenue.

Proper forecasting is crucial to prevent negative cash flow, as it helps in understanding future sales and expenses, helping ensure business sustainability.

1. Focus your retail marketing strategy on your proven customers

These are the customers who have demonstrated already that they value what you do and the merchandise you sell. What else can you offer them? These are also customers who have shared their email addresses with you. This is your list, and it’s one of the most valuable assets you have. Marketing to these customers is much less expensive (and more productive) than marketing more broadly using expensive traditional media like newspapers and magazines.

2. Turn your inventory to increase retail sales

Having more doesn’t mean you’ll sell more, especially when the extra inventory is in unnecessary depth of stock or in items at the fringes of assortments. Lean inventory, closely aligned to support prudent sales plans, promotes a greater sense of urgency with customers to buy now, when they first see it, rather than wait for when it might go on sale. Replenish more frequently, in smaller quantities, continually bringing in new, fresh, exciting merchandise.

3. Don’t compete with yourself

Many independent retailers will want to adopt a Better-Best or a Best-Only pricing structure. Offering too many options where customers can trade down to a less-expensive item leaves money on the table and slows the turn on the higher-priced offerings, thus lessening their perceived value. If consignment merchandise is part of your mix, make sure they complement rather than compete against your assortments.

4. Get paid for what you sell

Sales and promotions melt away cash flow, not to mention the fact that they lessen the perceived value of your offering and encourage customers to wait for the next sale. Getting paid also requires, however, that you fully mark up your merchandise in the first place. Markups tend to naturally erode as wholesale costs increase and retail prices don’t fully keep up, unless you actively manage your markups to keep them where you need them.

5. Make payroll a manageable expense to manage cash flow

For most independent retailers, payroll is the largest cash outflow after merchandise payables. A payroll that is primarily made up of salaried and full-time hourly employees may provide a level of stability but can be pretty inflexible and can create significant cash flow challenges, particularly during slower periods. A more balanced payroll, between salaried and full-time hourly employees and part-time employees, provides the flexibility to more closely align payroll dollars with when they’re truly needed.

6. Stop doing things the way you’ve always done them

Familiarity is comfortable, but it inevitably leads to diminishing returns. Customers thrive on newness — on new merchandise, presentations, and experiences. Repetition breeds staleness, and that will drive customers elsewhere. The most successful independent retailers are always re-inventing themselves, testing new items, programs, presentations, and concepts.

Enhancing the Customer Experience

Creating an engaging environment is key to boosting retail sales and enhancing the overall customer experience. Start by optimizing your store layout and design to ensure a smooth flow and easy navigation. Use dim and warm-colored lighting to create a welcoming atmosphere, and consider incorporating a signature scent to make your store memorable.

Technology can also play a significant role in enhancing the customer experience. Implement personalized customer service through digital tools that track customer preferences and purchase history. Offer complimentary services, such as gift wrapping or personal shopping assistance, to add value to the shopping experience. Encourage customer feedback to continuously improve and adapt to their needs. By creating an inviting and engaging environment, you can increase customer satisfaction, loyalty, and ultimately, drive sales.

Create an engaging environment to boost retail sales. A comprehensive retail marketing strategy can help connect with customers through authentic brand storytelling and understanding their desires. Additionally, a retail sales strategy centered around customer loyalty, such as implementing loyalty programs, can incentivize repeat purchases and improve customer retention. Sales associates play a crucial role in delivering personalized customer service and enhancing the shopping experience by using technology to access customer profiles and make tailored recommendations. Furthermore, having knowledgeable sales associates on the sales floor during peak hours is essential for maximizing revenue through effective upselling and cross-selling techniques.

After all that we’ve been through, how much cash flow is enough? It’s not enough just to be cash flow positive. The challenge is to generate exceptional cash flow from the sales revenue you’re generating, even as you work to grow revenues even further.

Allowing employees to work from home could reduce your business’s expenses, but you may have to reimburse your employees for their costs of working from home. Here are important details to consider.

Can a business cut costs by having employees work from home? Do the benefits of remote workers outweigh the potential disadvantages and challenges? That’s a question many businesses are pondering now. Many companies that hadn’t let employees work from home in the past were forced to test remote work to safeguard the health of employees and keep their businesses going during the pandemic.

According to the U.S. Bureau of Labor Statistics, in 2023, 35% of employed individuals performed some or all of their work at home on days they worked, consistent with the 34% reported in 2022 and higher than the 24% observed in 2019, prior to the COVID-19 pandemic. ​In many cases, that unplanned test of having employees work from home worked out so well that some companies extended remote work arrangements indefinitely.

Some big corporations allowed their employees to continue telecommuting even after the pandemic dangers waned. But what about businesses that don’t have the resources those mega-corporations do? Is it practical to let your employees work at home? What are the challenges? Are there any legal ramifications that could adversely impact your business?  Here are some of the top pros and cons of letting your staff work remotely.

Benefits of Letting Employees Work from Home

One of the biggest benefits of having employees work from home is the cost savings. With fewer or no employees working in an office building, a business can downsize its space requirements and save on the cost of rent, utilities, and related office expenses such as office supplies, equipment, and insurance for the space being leased. Companies with employees who normally travel to clients’ locations can save substantial amounts on travel costs by having the client work done remotely, too.

In addition to cost savings, businesses may benefit by being able to attract employees from a wider geographic area and by improving employee job satisfaction.  Employees often prefer working from home because it saves the time, cost, and stress of commuting, eliminates the cost of buying lunch, and can reduce what they spend buying work clothes and/or having them cleaned.

Two Legal Problems for Employers with Remote Workers

But while reducing your operating costs sounds like the sure road to increased profitability, there are some potholes that could jar your business if you don’t avoid them. Among the biggest potential problems for employers are the requirements (or, in some cases, desirability) of reimbursing employees for their costs for working from home and the need to track hours accurately.

When do you need to reimburse employees for work-at-home expenses?

The rules for reimbursement employees depend on several factors, including state law, minimum wage and overtime rules, and whether working from home is optional or required. Unfortunately, some laws vary from state to state, and there aren’t yet any court rulings that spell out requirements for some issues.

State Laws Regarding Reimbursing Employees

One key issue is what state your business is located in, says Jeffrey Naness, a partner in the law firm Naness, Chaiet, and Naness, located in Jericho, New York. Naness, who specializes in labor relations and employment law, emphasizes that “states vary widely” in terms of obligation to reimburse expenses.

“California has a specific law mandating reimbursement of business expenses. There have been cases that held that, even though the expense was a flat-rate cell plan that the employee had anyway, the employer was still obligated to reimburse the expenses of using it.”

As a result, in California and some other states, the courts may hold that employers are required to pay a portion of employees’ wi-fi and other expenses, even if the employee did not increase his/her own costs.

While California may be the most aggressive on this matter, they aren’t the only location requiring reimbursement. Illinois, the District of Columbia, and Montana are among the other locations that have laws related to reimbursing employees for at-home expenses.

Federal Fair Labor Standard Act

State labor laws aren’t the only ones that may require expenses to be reimbursed. No matter what state your business or employees are in, the Federal Fair Labor Standards Act (FLSA) may come into play. If you have employees who are being paid near the minimum wage, the FLSA may require your business to reimburse their costs for working at home, too.

“Although the FLSA doesn’t require reimbursement of expenses, if the payment of business expenses by an employee brings them under minimum wage or what they would have to be paid for working overtime, then a claim could be brought under Fair Labor Standards Act, “ explains Naness.

For example, suppose you have an employee who earns the federal minimum wage and whom you require to work at home. They pay $60 a month for internet access and $70 a month for their smartphone. If they make minimum wage, subtracting those costs ($130) from the salary they earn would cause their hourly rate to fall below the federal hourly minimum wage level. Therefore, you may be required under the FLSA to reimburse the employee for their personal expenses incurred working for you to the extent the employee’s pay is brought under minimum wage, taking into account these expenses.

Do remote workers have to be reimbursed for personal internet and phone bills they’d pay even if they weren’t working from home?

The answer, at the moment, depends partly on the state in which you and your employees are located. In California, for instance, if the employee must use their personal phone for work calls, the employer is required to pay a reasonable percentage of the phone bill. A handful of other states have laws covering what expenses have to be reimbursed when employees work from home, but in the majority of states, the law isn’t clear yet about what does or doesn’t have to be repaid.

But, the pandemic has caused somewhat of a shift in thought on this question, too.

“Before the pandemic, there were court decisions that said the employer didn’t have to reimburse the additional expenses of working at home if working from home was purely voluntary,” says Naness. “In that case, the costs weren’t necessary. The employee could have worked in the office.”

Because of the pandemic, many employers started requiring employees to telework because of isolation orders or because they think it’s safer for employees who can work from home to do so. In states that don’t already have specific laws covering remote workers and reimbursement of expenses, “it’s unclear how the courts would rule on the issue,” says Naness.

In California and perhaps some other states, “the logic of past court decisions would suggest if the employer requires that the employee to work at home, the employer may be obligated for a share of ongoing internet expenses that the employee would have paid anyway. If you want to be careful as an employer, you might decide that you’ll pay some portion. Then the interesting thing is what portion.”

To determine that proportion, one option is to conduct an analysis of what percentage of usage was for work and what percentage was for personal use.

Wage and Hour Compliance for At-Home Workers

“A major issue is tracking time for hourly employees,” says Naness. With no time clock to punch or no supervisor on-site to see what time they arrive and leave, “how do you keep track of when they are and aren’t working?”

The answer is to insist on some kind of tracking. It can be online activity monitoring or online timesheets, paper timesheets, or any other method of recording time. Whatever tracking method you choose should indicate when the employee stopped working for their lunch break. “That’s an enormous area where claims arise — employees saying they didn’t take their lunch break and should be paid for that time,” Naness emphasizes.

Another area of concern, he adds, has to do with exempt employees an employer requires less work from and allows to work from home for a reduced salary. While the work they do may still qualify them as exempt from overtime rules, the salary reduction might lower their income below the minimum required to be considered exempt. In that case, they’d need to track their time and pay overtime for any week the employee worked more than 40 hours. 

Minimize legal problems with a written work-from-home policy

Employers should have a written policy that covers reimbursement and all the other issues that arise when employees work from home.

As far as reimbursing employees goes, the policy should make it clear that to be reimbursable, the employee’s expenses have to be “reasonable and necessary business expenses,” says Naness. “There should be a provision that requires the employees to request for reimbursement with sufficient documentation to support the request and indicates a time limit for submitting the request. There should also be a provision requiring employees to get preapproval for expenses over a certain dollar amount. You might want to specifically deal with certain expenses that are a problem such as computers or printers.”

In addition to covering the terms for reimbursing the expenses for employees who work remotely, the policy should cover all the other related issues. These include things such as which jobs qualify for working from home, the percentage of time employees will work from home, whether remote work is temporary or permanent, the hours of the day and days of the week they’re expected to work, the break time they’re required to take, and how working hours will be monitored.

For hourly employees, the policy should include information on whether or not they must get advanced permission to work overtime. Safety and security measures that are required for at-home workers should be spelled out as well.

It’s not easy to find money to start a business if your personal credit is bad, but it can be done. Here are some alternative ways you may be able to get the money you need to get your business off the ground.

The volatility of the market over the past decade has resulted in tough times for many people — especially for budding entrepreneurs looking to get their business off the ground. While the state of the economy should never be a deterrent in starting a small business (people and businesses still need to consume goods and services regardless of whether the economy is up or down), down economies do have some effect on business owners’ ability to find and obtain capital for their ventures.

But all is not lost if your personal credit is a bit lacking.

Figuring out how to get money to start a business isn’t easy. While some people can launch a business with no money, most business owners usually have some type of capital to put into their business — be it from personal savings, retirement accounts, or loans from friends and family. However, they usually don’t have all the funds necessary to launch their business, and they tend to struggle with allocating the money they do have to the numerous startup expenses they’ll encounter.

Plus, bad credit (or even no credit) will make it very difficult for business owners to get unsecured working capital for items like marketing, payroll, or even office supplies.

I’ve always believed that whatever liquid capital (cash on hand) a business owner has walking into a new venture should be used for the overall development and growth of the business — it’s essentially like putting in your own venture capital. However, this method of allocation usually leaves little or no additional money for other items businesses need for their operations, including tools and machinery to provide their goods or services, inventory, rent, or even office equipment, such as computers, copiers, or even vehicles — items used in the day-to-day life of most businesses.

Fortunately, other ways exist for business owners to get these items, even if the entrepreneur has bad credit.

Social Lending Sites

For unsecured working capital, business owners can use the numerous social lending sites that have proliferated on the Internet over the last decade or so. Social lending is essentially where members borrow and lend to each other. Gaining access to capital for these sources tends to be easier because you get to tell your story directly to funders.

Further, rates for these types of loans are usually lower than traditional bank lending. While considered personal loans, the funds received here can be used for any purpose, including starting and running your business.

Micro-Credit Organizations

There are also micro-credit organizations whose whole purpose is to help new and growing businesses get capital after they’ve been turned down by traditional lenders like banks.

These organizations are typically nonprofit groups, backed by the Small Business Administration (SBA), and understand the trials that business owners face when trying to get their business venture off the ground. Plus, they offer a plethora of guidance to help you with your long-term success.

Equipment Lenders

Many new small businesses need all types of equipment for their business — from standard office equipment like computers and copy machines to tools and machinery that allow them to make or provide their products and services. There are equipment lenders that only provide these types of loans. They work with new startups and are extremely flexible in developing programs that can meet these businesses’ specific needs. And, while these loans and leases are secured by collateral (the equipment), there’s less emphasis put on personal credit histories.

Purchase Order Financing

A startup business is often considered a company that’s been in operation for less than one year. During this time, many businesses generate financial assets but still find themselves lacking working capital as they grow. However, these assets can be used to secure financing, either to speed up the flow of payments, to complete current jobs or orders, or to get the funding needed for payroll or additional marketing.

These capital resources include factoring a business’s receivables (why wait 30, 60, or 90 days to get paid by your customers when you have bills that need to be paid now?) or purchase order financing, where your business can receive cash to complete jobs that are already in the works or funds to bid on jobs that would have otherwise eluded your business due to lack of working capital.

Also, there are business cash advances for businesses that accept credit card payments from their customers, allowing them to use future sales for growth capital today. The real bonus about these types of financing options is that they aren’t focused on the business owner’s personal credit history but more on the strength of the asset.

Grants

Given our government’s propensity to help people get back to work (most new jobs are created by small businesses), there are government and private grants for small businesses to help people in need — including business owners.

Bankruptcy and Credit Counseling

Lastly, should a business owner still face difficulties due to credit issues, then the only step remaining is to eliminate those issues. While bankruptcy and credit counseling will continue to harm your credit after you complete these programs, there are other ways, like debt consolidation, that can reduce your unsecured debt (including credit card debt) into one low, affordable payment. This allows the business owner to free up current creative cash flow strategies as well as improve their credit scores.

While most lenders tend to weed out potential borrowers through credit profiling — leaving many new business owners in limbo — the resources listed above are designed to fill the lending gap and help all business owners, regardless of past credit mistakes.

Becoming a small business owner could lower your family’s taxes, even if your new business is not yet profitable.

Because a business can claim tax deductions for its share of housing, utilities, transportation, travel, and computer equipment, starting a small business can legally save you thousands of dollars in taxes on your (and your spouse’s) full-time job income. To learn more, check out our list of tax-deductible startup costs.

The government wants to stimulate the U.S. economy, so they generously give tax deductions for business startup costs and operating expenses.

Keep reading to learn about the IRS regulations regarding home businesses, side hustle gigs, part-time businesses that are allowed tax write-offs, and cautions on how to prove that your business is not merely a hobby (for which deductions are not allowed).

Understanding Tax Deductions

Tax deductions are expenses that can be subtracted from a business’s taxable income to reduce its tax liability. These deductions can be categorized into business expenses, home office expenses, and personal deductions. Understanding tax deductions is crucial for small business owners to minimize their tax bill and maximize their tax savings. By claiming the right combination of deductions, small businesses can lower their taxable income.

Benefits of Business Tax Deductions

Business tax deductions offer numerous benefits to small business owners. By claiming deductions, businesses can reduce their taxable income, lower their tax liability, and increase their cash flow. This can help businesses to invest in growth, hire new employees, and expand their operations. By taking advantage of tax deductions, small businesses can save thousands of dollars in taxes, which can be reinvested in the business.

Expenses That Qualify as Tax Deductions for Starting a Business

There are two types of expenses that you can deduct from your taxes — start up costs and ongoing operating expenses.

Startup Costs

The IRS allows three types of startup costs eligible for deductible business expenses. You can only write them off on your taxes if you actually open the business.

1. Creation – Costs for research, competitor analysis, surveying markets, and visiting possible business locations. These costs can be associated with creating a new company or investigating an existing business for investment consideration.
2. Preparation – Costs for opening your company, such as buying equipment, employee training, travel to suppliers, advertising and marketing expenses, business cards, and legal fees.
3. Organizational – Expenses for incorporating your company, registering trademarks, salaries for company directors, and accounting fees.

The IRS allows you to deduct up to $5,000 in business startup costs and $5,000 in organizational costs totaling $10,000 BUT only if your total startup costs are $50,000 or less.

If your startup costs are over $50,000, you’re not allowed these deductions. These monies can be applied to reduce your taxes in the year before you open your business in the following year.

Note that the Tax Cuts and Jobs Act is set to expire at the end of 2025. If it’s not renewed, startup deductions could be affected.

Need help calculating your startup costs? Learn how to estimate your startup costs by industry.

Business Operational Expenses

Once your business is open for customers, your list of tax deductions expands dramatically to include these expenses:

• Car Transportation – You can deduct a portion of your car expenses (including gas and oil) when you use your vehicle for business purposes such as traveling to customers, suppliers, trade shows, and delivering merchandise.
• Housing – If you have space in your home that is dedicated regularly and exclusively to your business, you can deduct the business’s proportional costs of that space (including mortgage, insurance, and property taxes) from your taxes.
• Utilities – Dedicated phone lines for businesses are legal deductions, as are a portion of the costs to heat and cool your home business.
• Travel and Entertainment – If you travel to trade shows, customer presentations, and suppliers, your travel expenses can also be used as tax write-offs.
• Eating Out – If you hold business meetings over dinner, coffee, or even smoothies, you can deduct 50% of the cost of restaurant meals.
• Computer Equipment and Furnishings – Section 179 of the tax code allows up to 100% of computer equipment to be expensed annually, up to six figures. This is good news since it means that your new computer can be deducted in the same tax year.
• Computer Software – Programs you purchase to facilitate your business operations, whether they’re a single download or a subscription service, can be deducted from your taxes.
• Office Supplies – Supplies you use regularly, like shipping boxes and packing peanuts or printer paper and toner, can qualify as deductible expenses, provided they’re used solely for your business.
• Health Insurance Premiums – Premiums for health insurance can be deducted, providing significant tax savings for business owners.
• Education – Any education that will help in your business can be expensed, from training on how to use Photoshop to classes on bookkeeping.
• Legal and Accounting Fees – The fees you pay your attorney or accountant, whether they’re a one-off service or a regular part of your business operations, are deductible business expenses.

Maximizing Tax Deductions

To maximize tax deductions, small business owners should keep accurate records of their business income and expenses throughout the year. This includes receipts, invoices, and bank statements. By keeping accurate records, businesses can help ensure that they are claiming all eligible deductions and minimizing their tax liability.

Additionally, businesses should consult with a tax professional to help check that they’re taking advantage of all available deductions. A tax professional can help businesses identify eligible deductions, prepare tax returns, and navigate the nuances of the tax code.

Best Businesses to Start Today

1. Consulting – This can be home-based, where you travel to your customers or consult via telephone and Internet. Usually, you can deduct costs for home office space, telephone lines, internet access fees, and computer equipment. Consulting businesses can also take advantage of various small business tax deductions to reduce their taxable income. For more information, check out “Reasons to Start a Consulting Business.”
2. Internet Services – This category can include website designers, coders, programmers, e-commerce store owners, online advertising agencies, and website copywriters. Read about our best online business ideas.
3. Artisan for Handmade Crafts – Create crafts and art to sell in galleries, craft fairs, and online. Deduct expenses for materials and supplies, travel to fairs, and education. Get ideas for your craft business name.
4. Services – Offer services for tutoring, organizing, event planning, carpentry, and hairstyling. Deduct all your equipment and material costs, plus your cell phone, tools, and trucks.

Can starting a small business help with taxes?

Yes, the IRS allows you to deduct up to $10,000 ($5,000 in startup costs and $5,000 in organization costs such as incorporation) from your personal taxes a year prior to opening your company, providing a significant tax deduction. Then in the same tax year that you open your doors, you can also deduct additional ongoing expenses like home office expenses (mortgage and utilities), transportation, travel, supplies, advertising costs, and equipment.

It’s important that your business is actually attempting to produce a profit; otherwise, it will be considered a hobby, which doesn’t qualify for deductions. Worse, your “hobby” could be looked at as an attempt to pull one over on the feds. This is crucial because hobby expenses are not tax deductible, and starting a business only for the tax benefits will come with penalties if investigated.

If the IRS comes knocking, they’ll look for evidence that you’re making an honest effort, regardless of your success or skill, to produce a profit. Though there’s no fast and hard list of things they will want to see, a website, accounting records, business-related receipts, a separate bank account, and activities like sales calls or marketing activities will all help to show that you’re endeavoring to create a profitable business.

One other way the IRS looks to see if your business is a bona fide business is the rule of three out of five. This is a way the IRS uses to determine profit motive (even if you don’t make a profit right away). The rule is that if your business made a profit for any three of the past five consecutive years, your company is not just a hobby.

Remember that tax laws are subject to change. Regularly reviewing the IRS official website or consulting with a tax professional cane help you stay compliant with the most recent regulations.

Considering starting your business in Delaware to save taxes? Read about the benefits and risks of starting a business in Delaware.

Related Posts

• 6 Mistakes to Avoid When Starting a Small Business
• Starting a Business in Retirement: Retiree Business Ideas
• How to Get Money to Start a New Business from Your 401K Retirement

Thinking of starting an agricultural business? Looking for farming ideas to make money? We’ve got what you need right here: some of the most profitable agricultural business start-up ideas for entrepreneurs.

The agricultural industry provides essential services and opportunities for improvement in farming practices. There’s a wealth of good business ideas out there, many with low investment startup costs such as worm farming, growing mushrooms commercially, and more. There are even beginner-friendly ideas for agriculturally minded entrepreneurs, like selling at farmers’ markets and lawn care maintenance.

Want to get your best and most profitable small farming business idea to start growing your own lucrative business? Keep reading.

When retailers accept fake bills, they bear the entire burden of the loss. Although counterfeiters’ techniques are improving, the bad bills can still be detected. Here’s how to spot counterfeit money and protect your business from related losses.  

Counterfeit money is an ongoing threat retailers can’t afford to be complacent about. During the first three months of 2021, U.S. Customs and Border Protection officers seized $1.6 million in counterfeit currency in Chicago, Illinois. Another $110,000 in fake currency was seized in California.

Unfortunately for businesses, not all counterfeit bills are found and seized before getting into distribution. And when a business accepts fake money in payment for merchandise or services, they lose the face value of the money they received plus any goods or services they provided to the customer who paid with the counterfeit $20, $50, or $100 bill.

Fake money shows up in different states in different denominations at different times. Oftentimes, business owners don’t take notice of the bills because the purchases are minimal and the counterfeit money denominations are so small.  

In one case, the Connecticut Better Business Bureau (BBB) was alerted to a $100 counterfeit bill that had been passed to an unidentified retailer in Southeastern Connecticut. According to the Connecticut BBB, the phony bill began as a legitimate $5 banknote.

“The counterfeiters apparently used a technique that involves bleaching legitimate money and altering the bills to look like $100 notes,” the BBB stated in an announcement. “Many businesses use special pens to detect counterfeit currency; however, the pens cannot give a definitive confirmation about suspected altered currency, and they are not sanctioned by the U.S. Treasury.”

Large bills like $100 and $50 bills aren’t the only ones that are counterfeited, either. In December, 2019, U.S. officials seized close to $1 million in counterfeited one dollar bills.

RELATED: Learn to Spot Fake Cashier’s Checks

Understanding Counterfeit Currency

Counterfeit currency, also dubbed fake money, poses a significant threat to both the economy and individuals. It’s estimated that over $70 million in counterfeit bills are in circulation worldwide.

Counterfeiters are using increasingly advanced techniques to create fake bills that are hard to distinguish from genuine currency. This makes it crucial for business owners and individuals alike to understand the security features of genuine bills and how to spot counterfeit money. By being vigilant and knowledgeable, you can help prevent the spread of fake currency and protect your business from potential losses.

How to Spot Counterfeit Money

Business owners should train their employees to examine all bills they receive, $10 and higher. If they believe they’re being given counterfeit money, they can call the police.

Small business owners need to be aware of the many ways to detect counterfeit money. The Secret Service offers a downloadable PDF called Know Your Money that points out key features to look at to determine if a bill is real or fake. We’ll walk through some of the key techniques here.

Know the security features of genuine bills

Spotting fake money begins with knowing what the real bill should look like. Genuine currency incorporates several security features designed to thwart counterfeiters. These features include:

• Security Threads: Genuine bills have embedded security threads that glow under ultraviolet (UV) light. These threads are woven into the paper and are challenging to replicate.
• Raised Printing: Authentic bills feature raised printing that you can feel by running your fingers over the bill. Counterfeit bills often lack this tactile feature.
• Watermarks: When held up to light, genuine bills reveal watermarks that are difficult to reproduce. These watermarks are integrated into the paper itself.
• Color-Shifting Ink: Genuine bills use color-shifting ink that changes color when tilted. Counterfeit bills may either lack this feature or display it incorrectly.

These security features make it significantly harder for counterfeiters to produce convincing fake bills, helping you spot counterfeit money more effectively.

Inspecting the Bill

To determine if a bill is authentic, follow these steps to inspect its security features:

• Hold the bill up to light: Check for the security thread and watermark. These should be visible when the bill is held up to a light source. You should also see a hologram of an image that matches the person on the face of the bill. If someone has bleached and altered a $5 bill to look like a $100 bill, for instance, the hologram will display an image of Abraham Lincoln, who appears on the $5 bills, instead of Benjamin Franklin.
• Feel for raised printing: Run your fingers over the bill to detect raised printing, which is a hallmark of genuine currency.
• Tilt the bill: Observe the color-shifting ink by tilting the bill back and forth. The ink should change color as you tilt it.
• Check the serial number: Ensure the serial number is not repeated or unevenly spaced. Inconsistencies can be a sign of a counterfeit bill.
• Examine the edges: Authentic bills have crisp, well-defined edges. Blurry or uneven edges can indicate a fake bill.
• Check for microprinting: Microprinting makes bills harder to reproduce. The $5 bill has “USA FIVE” written on the thread; the $10 bill has “USA TEN” written on the thread; the $20 bill has “USA TWENTY” written on the thread; the $50 bill has “USA 50” written on the thread; and the $100 bill has the words “USA 100” written on the security thread. Microprinting can be found around the portrait as well as on the security threads.

By following these steps, you can more confidently identify counterfeit money and protect your business from potential losses.

Advanced Detection Methods

Beyond manual inspection, several advanced detection methods can help spot counterfeit money:

• Ultraviolet (UV) Light: Use UV light to detect the security thread and other embedded security features that glow under UV light. The $5 bill glows blue; the $10 bill glows orange; the $20 bill glows green; the $50 bill glows yellow; and the $100 bill glows red — if they are authentic.
• Counterfeit Detection Pens: These pens use special ink that reacts with the paper to identify counterfeit bills. However, they are not foolproof and should be used in conjunction with other methods.
• Magnetic Detectors: Genuine currency contains magnetic ink, which can be detected using magnetic detectors.
• Advanced Imaging Technology: This technology analyzes the paper and ink used in the bill to detect counterfeits.

While these advanced methods can be effective, they are not infallible. The best defense against counterfeit currency is education and vigilance. Always report any suspected counterfeit currency to law enforcement agencies to help combat the spread of fake money.

By understanding and utilizing these techniques, you can better protect your business from the risks associated with counterfeit currency.

Know what to do if you suspect fake bills

If you believe you have received counterfeit money, the U.S. Treasury advises you to do the following:

• Do not put yourself in danger.
• Observe the passer’s description — and their companions’ descriptions — and write down their vehicle license plate numbers if you can.
• Contact your local police department or call your local Secret Service office.
• Do not handle the counterfeit note. Place it inside a protective cover, a plastic bag, or envelope to protect it until you place it in the hands of an identified Secret Service Special Agent. You can also mail it to your nearest Secret Service office.

Remember, if you are passed a counterfeit bill, you own it. So when accepting cash, it pays to be knowledgeable about the crime of counterfeiting.

RELATED: Protect Yourself and Your Business From Identity Theft

Applying for business credit? Here are four basics to consider. If you or your business are seeking credit and feel a bit nervous about your chances of getting the cash you need, pause for a moment, take a deep breath, and remember this simple acronym.

This very tight, almost non-existent lending market for small businesses invokes many emotions from business owners seeking capital to grow and expand. These emotions run the gamut from despair to downright anger.

If you or your business are seeking credit and feel a bit nervous about your chances of getting the cash you need, pause for a moment, take a deep breath, and remember a simple acronym — C.R.A.P.

C – Credit. Your personal credit matters. It matters more now than ever. Today, lenders aren’t looking for ways to say “yes”; they’re only looking for reasons to say “no.” Their easiest, quickest method is to pull your personal credit history. If your credit score is not in the excellent range, the answer is “no” — before these lenders spend both time and money performing other due diligence on you or your firm.

Lenders want to ensure that you (the borrower) put them first when it comes to allocating the money you or your business has. The best barometer of your willingness to repay your creditors is your personal credit history — period. So, before you begin talking with lenders, pull your credit report. If your score is not in the upper 2% of all borrowers, simply say to yourself, “crap,” and move on.

R – Repayment. Even with a strong credit history, if you can’t demonstrate right now that you can make minimum payments, the answer will be “no.” Lenders don’t care that you think you’ll make a million dollars with their loan proceeds sometime in the future. You have to demonstrate that you have (through personal income) or your business has (through the conversion of assets or from profits) the cash flow to repay the debt facility — right now.

Put yourself in their shoes. Banks and other lenders don’t want to be your partner and take an equity stake in your business. They want to be repaid and earn interest on the money they lend. This is their business and how they make their money. So, before you begin talking with lenders, determine how you intend to pay them back (from income — personal or business) that you earn “now.” If you don’t have income or another method of repayment, simply say to yourself, “crap,” and move on.

A – Assets. This is an asset-based lending environment. Asset-based means more than just having collateral. Lenders want to lend against specific assets that are, for the most part, guaranteed to repay their loans. Assets like business credit card receipts, accounts receivables or purchase orders, or even business property and equipment. Thus, lenders can have first-lien entitlements to these assets. They will control them to ensure that their (the asset’s) cash flow comes through them first.

For example, with accounts receivable factoring, the lender will invoice your customer, requiring that all payments go through them. Thus, the lender is paid first (you get the remaining payment). If you do not have assets, either business or personal, assets that are wholly owned by you and have significant value, simply say to yourself, “crap,” and move on.

P – Persistence. Persistence is the key to getting any loan in any environment. You will hear many “nos” before you hear one “yes.” More than likely, you will hear many “nos” before you hear even one “maybe.” Just stick with it. Each lender has its own lending policies and area of expertise. Some lenders are flush with money to lend, while others are overextended. To get the loan you need, you have to work hard and just persevere. Don’t take “nos” personally — use them as building blocks for the next time. So, if you’re unwilling to put in the time and effort, simply say to yourself, “crap,” and move on.

Understanding Business Credit

What is business credit?

Business credit refers to the creditworthiness of a business, evaluated based on its credit history, payment habits, and financial stability. Think of it as a report card for your business’s financial health. Just like personal credit, business credit is a measure of your ability to repay debts and manage finances effectively.

For small businesses, establishing business credit is essential. It opens doors to loans, lines of credit, and other financial assistance that can fuel growth and expansion. In essence, business credit is the lifeline that can help your business thrive.

Why is business credit important?

Business credit is more than just a number; it’s a key to unlocking financial opportunities. A good business credit score can help you establish a solid reputation with lenders, suppliers, and vendors. This reputation can translate into lower interest rates, better loan terms, and higher credit limits.

Moreover, having strong business credit allows you to further separate your personal and business finances, reducing the risk of personal liability. This separation not only protects your personal assets but also enhances your business’s overall financial stability. In short, a robust business credit score is a cornerstone of a successful and financially healthy business.

Establishing a Strong Foundation

The journey to building strong business credit begins with laying a solid foundation. The first steps are registering your business and obtaining an Employer Identification Number (EIN). An EIN is a unique nine-digit number assigned by the IRS for tax purposes. It’s like a Social Security number for your business. Having an EIN is important because it’s often required to open a business bank account, apply for credit, and file taxes.

To register your business, you’ll need to file Articles of Incorporation (if you’re forming a corporation) or Articles of Organization (if you’re forming an LLC) with your state government. This process officially recognizes your business as a separate legal entity. Once registered, you can apply for an EIN online through the IRS website. With your business registered and an EIN in hand, you can open a business bank account, apply for credit, and start building your business credit history.

Remember, registering your business and obtaining an EIN are just the first steps. To truly establish business credit, you need to create a business credit profile, make timely payments, and maintain a good credit history. By doing so, you’ll build a strong foundation that will support your business’s financial growth and stability.

While the above is meant to provide a bit of humor in these troubling times, the information provided is still good guidance when you are seeking credit for business growth. Therefore, instead of being surprised, shocked, or just downright angry when you get turned down, think about the acronym C.R.A.P. If you spend time ensuring that you’re creditworthy before you begin your search, not only do you stand a better chance of getting the loan you need, but you should save valuable time and energy in the process.

Copyright BusinessMoneyToday.com

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