Just When You Thought it Was Safe, 7 More Business Don’ts
An ounce of prevention is worth a pound of cure- small business Don’ts part two
Editor’s note: In part one we coveredĀ Don’ts 1-10.This is part two of two of what not to do.
Here are the final seven:
- Ā Do not overlook the importance of shopping for insurance that may be required for your business.
There is the usual liability insurance required byĀ a landlord, plus many other types of insurance to be considered – property, business interruption, flood, health, life, auto, and directorsā liability. Comparative shopping is important. The cost ofĀ insuranceĀ is difficult to comprehend yet vital to survival of your business.
Consider how much of your operating budget is spent on various insurance components. Ā You many have a friend who is an agent but make certain your friend is knowledgeable.
- Ā Do not make tax avoidance a priority: It will hamper the growth of the company.
Many small business owners distribute profits at the end of each fiscal year. When they speak to their bankers about accessing capital, there is little interest from the bankers when there is nothing left on the P&L and the balance sheet. If ownership is concerned with creating an asset with long term value, he needs to show profits. Paying taxes can be a good thing if the company is in a growth mode. Business owners need to create a growth strategy with a competent financial planner. Paying taxes is an indicator of profitability.Ā
- Do notĀ seek funding from a lender until you have prepared to submit the required documents.
A short conversation with your banker is helpful. It will indicate if the lender has an appetite for your industry and the type of financing you are seeking or you should look elsewhere. In order to obtain a loan commitment from a lender you need to present a package of documents. Each lender has his own list, but the lists all are similar. Be careful about shopping for a loan and allowing several lenders to pull your credit. Screen the lenders and get a good indication of interest prior to allowing a lender to pull credit. A lender can provide aĀ Letter of IntentĀ (LOI) subject to credit affirmation and other conditions.Ā You need to know your own current credit score when applying for a loan for your business.
Business owners consider lenders difficult to please. Do not forget, lenders have underwriting requirements and legislative banking requirements, but they need your business. Small businesses make up the major source of employment in our Country and lenders know the importance of small businesses to the stability of our economy.
- Do not overlook local compliance issues.
Municipalities will differ in their requirements. Many businesses have regulations for various industries. Information is usually available for your industry online. Always check local requirements as well as Federal and State requirements.
- Do not market to the world. Select your niche market and grow.
Although your product may be suitable for the entire world, never, unless you have unlimited marketing funds, plan your marketing campaign for a broad-based market.Ā Seek your niche market and plan the best way to access that market. Stay aware of how your market is impacted by age variations, ethnicities, and cultural backgrounds.
- Do not write a generic business plan. Address your desired audience.
Are you addressing investors, vendors, lenders, or customers?Ā Make the changes within your business plan to address the reader. And, although most professionals speak of a business plan, you really need an abbreviated form referred to as an executive summary. It is a two- or three-page document with appropriate exhibits that support the executive summary. The exception to this is if you put together a proposal for investors. This will require much more detail since there is more risk involved on the part of the investor.Ā
Ā Do not go it alone. Seek counsel from other unbiased professionals: SCORE, SBDC consultants and other business resources in your community that provide consulting and workshops to educate you on the path to success.
Try to put a team together, a team that can provide wisdom gained from their professional experiences. People with experience in your industry are qualified, if they are unbiased.Ā And, having an advisory board that meets quarterly has great merit, but you will need to prepare an agenda that is circulated prior to each meeting. Serving a breakfast or a lunch to these unpaid professionals can go a long way.
Take advantage of local opportunities to educate yourself and your team. Attend networking events to stay in touch with the market, your competition and your clients.
Use these Don’ts to help mitigate some potential hazards.
Related content:
Part one:Ā 10 Don’ts for Small Business Owners and Entrepreneurs
Top 10 Marketing Pitfalls
