Cash Money Life» Small Business

How to Organize Your Small Business Finances

Ryan — Thu, 04 Mar 2010 10:18:17 +0000

Many small businesses face a similar question shortly after they open their doors – how do we manage our money? Like your personal finances, there is no “one-size-fits-all” approach to manage your small business finances. But there are some good practices that you should follow.

Today, I’m going to give you a quick peek under the hood of how I organize my small business finances and give you some alternative resources to help you find the best products and services for organizing your business finances. The setup I use is applicable for many small businesses, freelancers, sole proprietors, and contractors. However, it may not be right for your situation (for example, I won’t cover payroll, maintaining or tracking inventory, and similar topics). Consult with a financial advisor or tax professional for more advanced needs.

Separation of personal and business funds

I recommend using separate accounts for your personal and business funds. Separating your funds may offer you protections and will make it easier to sell your business if you ever decide to sell (determining valuation, tax reasons, etc.). It also makes it easier to handle your taxes on an annual basis. You aren’t required to separate your personal and business finances, but it is generally a good idea if you are bringing in decent income.

Depending on the size and nature of your business, you may not need to separate your personal and business funds. For example, if you have what could be considered hobby income (arts and crafts, part time web design, and similar endeavors). Regardless of whether or not you decide to separate your funds, you need to keep accurate financial records for tax reasons, tracking income and expenses, and other business reasons.

Decide on your business structure

Shortly after my small business became profitable I decided to incorporate it as an LLC. The how’s and why’s for that decision will be left for another article, but one of the main reasons I did it was to create a clear legal entity for my business and facilitate opening a business savings account. Some banks or financial institutions will allow you to open a business account as a sole proprietor*, but many require you to have a business formed as as LLC, S-Corp, C-Corp, or other legal business entity. I recommend speaking with a business lawyer or doing further research on your own if you are unsure of which legal business structure you should use for your small business. (*a Sole Proprietorship is not a legal business entity, it is considered an extension of the person running the business).

Obtain an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is a specific tax number for your business, similar to an SSN for your individual taxes. A specific tax number for your business is helpful when opening business savings and checking accounts, self-employed retirement plans, and separating income for tax purposes. This is also the number you give to people you do business with, so it is a good way for sole proprietors to avoid identity theft. Obtaining an EIN from the IRS is free and easy and takes about 5 minutes. You can apply for free at the IRS website.

Open Business Savings and Checking Accounts

As previously mentioned, separating your business savings and checking accounts from your personal accounts is usually a good idea. I recommend opening a business checking account with a local branch to make it easier to deposit checks and handle other tasks. Unfortunately, many local banks don’t offer high interest rates for their business savings accounts, so while I use a local bank for my business checking account, I use ING Business Savings for my business savings accounts.

You will also want to consider how you will receive payments, so consider using a service to produce invoices, receive money, handle web transactions, etc. You may also wish to open an account with PayPal and/or Google Checkout to facilitate sending and receiving money. You can also consider Intuit’s QuickBooks, which has features that allow small business owners to send and receive payments, handle online transactions, create a payroll, and maintain their business accounting. It’s a powerful tool for small business owners and is scalable depending on your needs.

Open a Business Credit Card (optional)

Chances are you will have a debit card attached to your business checking, but you may wish to have a business credit card for your expenses. Advantages of using a business credit card include cash rewards, better protections, lower liability, and the ability to float expenses, if necessary. I currently use the AT&T Universal Business Rewards Card and pay it in full each month.

Small Business Accounting Software

You can always use a ledger to keep track of your income and expenses, but with the variety of high quality, low cost, or even free software options, there is no need to try to save a few pennies and do the work by hand. Software is often quicker, easier, and more accurate than pen and paper. You can use a simple spreadsheet such as Microsoft Excel or Open Office Calc (free), or go with a specialized business accounting program.

I currently use Quick Books Simple Start, which runs less than $100 and covers my needs (tracks income/expenses, create invoices, stores images of receipts, store client/customer information, notes, and more). I haven’t found a better all in one solution for my needs and for the price than QuickBooks Simple Start. Quick Books is an Inuit company, so it is compatible with Quicken and TurboTax.

A QuickBooks version to fit your needs. QuickBooks also has various product levels to meet virtually all business needs – Online, Simple Start, Pro, Premier, Enterprise, and a version for Mac users. There are also QuickBooks versions to accept payments, run point of sale software, or do payroll. In short, there is something for most small business applications. You can check out the details for each of the various QuickBooks products at the QuickBooks website or check out some QuickBooks coupon codes for more savings.

Other popular business accounting programs include:

Out Right (Free)
Gnu Cash. (Free)
Fresh Books. Monthly fee.
Peach Tree. One time purchase.

*A note about Quick Books and Peach Tree: Most accountants should be familiar with QuickBooks and Peach Tree, so it’s not a bad option to check out those or speak with your accountant for advice before purchasing or selecting a software program for your accounting needs.

Create a System to Organize Your Taxes

I use an accountant for my taxes, but I like to do everything in my power to make it easier on both of us. Creating a system for organizing your taxes makes everyone’s job easier. My basic tax organization system involves using Quick Books for tracking income/expenses and storing images of receipts, and I maintain several manila envelopes for each tax year where I file my receipts and invoices. I also maintain a separate folder for all legal documents and correspondences (i.e. LLC articles of corporation, IRS documents, tax forms, business permits, etc.). Finally, I scan everything to my hard drive and back it up to an external hard drive for additional protection against data loss.

Hire an Accountant that Specializes in Small Business (optional)

Not everyone needs to hire an accountant, but you may find that your personal and business tax situation dictates the need for professional help. Chances are, a good tax professional can help you find ways to maximize your business deductions and find other methods to help maximize your return. An accountant will also help you calculate self-employment taxes and estimated taxes, both of which are essential for small businesses. A good accountant should stand by their work and help you if you are ever subjected to an audit and the tax preparation costs are a qualified business expense you can write off the following year. Finally, outsourcing this business task frees your time for more important tasks, such as working on revenue-generating tasks.

Self-Employed Retirement Plans

Even if you run your business part-time and have an employer-sponsored retirement plan, you should still consider opening a self-employed or small business retirement plan. There are many benefits, including investing more money for your retirement, tax deferrals, and more. Which small business retirement plans you are eligible for and which is best for your situation will vary depending on many factors, including your business size and structure, income, and other factors.

The most common SE Retirement Plans are:

I chose to open a Solo 401k with Vanguard. After examining the plans I was eligible for, I discovered a Solo 401k was the plan that offered me the potential to contribute the most money each year (business income allowing). I chose Vanguard because they offer a wide variety of low cost funds, excellent customer service, and I have had individual investments there for almost a decade.

There are many other financial institutions that may meet your needs, many of which are also among the best places to open an IRA. *Consult with a tax professional, business advisor, or do thorough research before choosing your Self-employed retirement plan.

This is not a complete guide on how to run a business

This article only covers how I manage my small business finances. Your needs may vary depending on your business situation, the size and structure of your business, the type of business you run and other factors. You may be required to obtain licenses, permits, or other documents based on your state and local laws. Other considerations include doing business as (DBA), trademarks, etc.

Customize Your Own Financial Plan for Your Business

This is my basic business setup, and it works well for me. It may also work for your needs if you are a freelancer or other small business owner who doesn’t deal with inventory or licensing issues. Feel free to use this as a rough template to get started, but your business is unique, so customize it where necessary.

Questions or comments? Leave a comment and I will address it in the comments section or in the article, whichever is more appropriate.

~$~

This article written by Ryan Guina. Ryan is the founder and editor of this site. He is a writer, small business owner, entrepreneur, and professional in the corporate world. He served over 6 years in the USAF and also writes about military money topics at Military Finance Network.

All content copyright Cash Money Life.

Want to Work for Free? Start a Business

Ryan — Tue, 16 Feb 2010 10:19:09 +0000

Raise your hand if you would show up to work everyday, work hard, and go home without receiving a paycheck or any other form of monetary compensation. A pat on the back is great and all, but let’s face it, a nice word or two doesn’t pay the bills. Cash pays the bills.

While you normally wouldn’t volunteer to work for free, that is often exactly what happens when you start a business. It usually takes some time to get things going to the point where you are not only receiving positive cash flow, but enough cash flow to turn a nice profit and pay yourself a decent hourly wage.

I worked for free for months

I will use this website and the other sites I run as an example. It took me about 7 months to earn enough money through Google AdSense to qualify for a payout ($100). It took almost a year before I earned my first $1,000. In that time I wrote 5 or 6 articles per week, and spent an untold number of hours writing, editing, reading and responding to e-mails, and other work related tasks. My hourly wage for the first year was lower than the hourly wage in many third world countries.

But I took a long term view with my business. My goal with this site and others is to help people improve their lives. I enjoy writing about personal finance and career topics, and I enjoy the learning, sharing, and interacting that come with running websites. And somewhere along the way my hobby turned into a business. I began earning more money, and now, three years after I started this site, I can say that not only do I not work for free, but I earn a decent hourly wage.

Working for free is a normal part of starting a business

Running websites is not the only place where you might work for free. When I was in high school I worked part time for my best friend’s neighbor who had recently started a business. He worked all day at his company, but didn’t draw an actual salary or hourly wage. For the first few years he basically lived off whatever profits he made that he didn’t need to funnel back into his company. It made for some lean months and some very lean months, and I learned a lot by seeing this first hand. As the old adage goes, success doesn’t happen overnight. It takes time to build a successful business.

Chris Guillebeau, from The Art of Non-Conformity, wrote an eBook called 279 Days to Overnight Success. In his book, Chris addressed the issue of taking the long term approach to your business and mentioned that yes, sometimes entrepreneurs need to work for free in order to build the trust and equity needed to produce a viable business. Here is a quote from page 66 of his ebook (which you can download free through the link above):

…I also noticed a disturbing trend in some of the other emails. Several people all said that they were insane to work for free when first starting their business. When I read those comments, I thought, “Am I missing something here? I thought everyone works for free when they are starting something new. That’s the whole point of risk and reward.”

Working for free may be insane in the outside world, but with most small businesses it is actually quite normal. (…) I don’t mean to deter you in any way. If anything, your chances of success will greatly increase as long as you understand what you’re getting into.

What a great quote. I agree with Chris’s statement and I would like to add something that I think he hints at, but doesn’t explicitly mention…

You are working for free, but with a greater goal in mind

There is a light at the end of the tunnel, and even though you may start a business and work for free for an indeterminate amount of time, you are working toward your ultimate goal, which is building your business.

Entrepreneurship is about believing in yourself and your ideas. If you are truly passionate about your business, then working for free is not only recommended for success, it is essential for success. If that means working long hours to see your project or business succeed, then so be it. Your hard work and dedication are required to help your business reach the critical mass it needs to be successful and hopefully become self-sustaining. It takes time and it takes work. But the long term reward is worth the early sacrifices.

~$~

10 Home Office Money Saving Ideas

Craig — Mon, 25 Jan 2010 11:22:24 +0000

Sometimes after spending the day at the office we come home and spend money on our office like someone else is going to pick up the bill. However, the cost of maintaining a home office will be paid by your personal budget. As a result, cutting costs in your home office is a great idea.

In addition, if you are self employed and run your own small business every dollar you save on your business is another dollar profit.

10 Ways to Cut the Cost of Maintaining Your Home Office

Refill your own printer cartridges. Undoubtedly, this is a hassle. However, it can provide substantial savings. I have a laser printer and I buy a refill pack for $20. The pack lasts for three refills. The cost of one print cartridge is $80. I save $220 every three refills. Alternatively, consider buying ink cartridges from a discount store online, such as 123InkJets.com.
Keep a list of items you need to buy. If you have a list of items you need to purchase you can watch local office supply stores for that item on sale. In addition, you might have the time available to order the product online. If you get organized you will be able to cut costs.
Stock up on sales. When an item you regularly use (like paper) goes on sale purchase a larger inventory. This way you guarantee getting the sale price over an extended time period.
Reuse scrap paper. With this one simple action you save money and the environment. If you print up a piece of paper you don’t need, just drop it into a file for scrap paper. These papers can be used for giving the kids to play with, doodling, or they can be used as printing paper for other non-important print jobs.
Set your print default to print in black and white draft setting. Since color printing is 3 to 4 times more expensive than black and white there is no reason to print directions to Uncle Joe’s house using color ink. When you need the color or a higher print quality you can manually make the changes just for that one print job.
Buy used items. Auctions, garage sales, second hand stores, or store closings are all great places to get used furniture and products. I have two filing cabinets in my office that I paid $20 for (both). I bought them when a local store was going out of business. I used to have a desk that I bought at a garage sale. Also search places like Amazon, Half.com, or used book stores to find the best prices on books. I buy almost all my books used and the savings is substantial.
Make your own bookshelves. I just finished making bookshelves in my office. I’m not exactly a carpenter, but learned to build when I moved overseas. Standard items (like a bookshelf) are great construction projects for anyone with a minimal amount of building knowledge. I ended up with about three times the bookshelf space compared to the cost of buying a bookshelf.
Negotiate when purchasing big ticket items like computer. You don’t need to be a master negotiator. Just be aware of the current value and average sale price for an item and be sure to use this one negotiation tip – ask “Can you do any better than that?” You can also save money on your next computer by examining your needs (not wants), or buying a refurbished computer.
Use free computer software and programs. There is a lot of free computer software. For example, I use SpyBot and Avast for internet security – both are free. I use Evernote as a note pad – free. There are also great products like Skype that allow you to make free computer to computer calls overseas.
Consider a laser printer. If you do a significant amount of printing you will see a significant reduction in the ink related to printing costs. You will need to do your own math based on your current product, but you should be able to find out how many pages on average it prints per cartridge. Investigate the cost of a laser printer and the number of prints per cartridge. See if the laser printer will provide a good savings over time.

Photo by Jakesdad.

~$~

This article written by Craig Ford. Craig is a fulltime missionary in Papua New Guinea who writes Money Help For Christians and Help Me Travel Cheap, a frugal family travel blog. He is the author of Money Wisdom From Proverbs, has a Masters of Divinity degree, and (most importantly) eats homemade pizza with his family every Friday night.

All content copyright Cash Money Life.

5 Reasons Your Press Release Sucks

Ryan — Fri, 18 Dec 2009 11:17:05 +0000

As the owner of a several websites I receive dozens of unsolicited press releases each week. It comes with the territory, and I’ve come to expect them. But 99% of them end up in the trash without further action on my part. In fact, most of them are never opened. If you run a business or PR company, then read on – here is some straight feedback on why your pitch gets pitched right into the trash bin.

5 Reasons Your Press Release Sucks

I receive at least 50 e-mails each business day and if you can’t hook me in the first few seconds, your press release is going to the trash, regardless of your product, service, or goal. I have a limited amount of time to run my business and the only way I can succeed is to be ruthless with spam, junk mail, chain letters, and worthless press releases. Yes, I classify most press releases in the same category as spam. Before sending a press release, ask yourself a couple quick questions:

1. What am I trying to accomplish?

Are you trying to get people to visit your website, try a new application, purchase your product? Then say so! The vast majority of press releases are three paragraphs of “industry speak” with no indication of a desired action. If I have to spend time trying to figure out your goal, then you lose.

2. Who is your target audience?

I run a financial website. It’s not difficult to determine that after a quick glance at my website, logo, domain name, etc. Unfortunately, I receive multiple press releases each week that are not closely related to my niche. Medical press releases, organic foods, religion, etc. All wonderful topics. None of them are within the scope my website. Verdict: delete.

3. Who am I addressing this to?

This one irks me the most. “Dear Mr.,” “Hello Mr.,” and “Webmaster,” are not salutations I respond to. My favorite is “hey there,” which I have received numerous times from large PR companies. Seriously, does that Fortune 500 company you work with realize you address bloggers and the press as, “hey there?” I doubt it, and I doubt they would be amused. Try a little professionalism and address your recipient by name.

By the way, GMail is a wonderful tool that previews the first line of the e-mail. If the e-mail isn’t addressed to me, it gets deleted without being opened. My name isn’t that hard to find either – it is the third word on my contact page.

4. Flattery won’t get you anywhere

Yes, you’ve been following my site for months and just love it and share it with all your friends and family and coworkers… which is why you have never contacted me before or left a comment on an article, and you addressed your press release to me as “Dear CashMoneyLife.” Fail.

5. No option to opt out of future press releases

There is a little thing the Federal Trade Commission put out a couple years ago called the CAN-SPAM Act. According to the FTC, the CAN-SPAM Act establishes requirements for commercial messages, gives recipients the right to have you stop emailing them, and spells out tough penalties for violations. It applies to:

“any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service,” including email that promotes content on commercial websites. The law makes no exception for business-to-business email.”

Now I don’t profess to be a lawyer, but the way I understand it, that means your press release should give me the option of opting out of all future e-mails. And I want to opt out of the majority of them because they do not apply to me or my business.

How to write a strong press release

Start by addressing each of these issues listed above and your success rates will increase exponentially. Respect the time and intelligence of the recipient and they will in turn be more receptive to your product or service. If not, then give them the option of opting out of your messages. Want more tips? Check out these references:

~$~

Multi-Level Marketing – Business Opportunity or a Scam?

Ryan — Thu, 17 Sep 2009 13:18:53 +0000

I have always been an entrepreneur at heart. It started when I was young with something I call the playground economy. The playground was where I discovered I could sell baseball cards, gum, candy, or other little things for a small profit. When I was younger, a few quarters represented a nice return on my investment of time and energy. To this day I run a small business and I enjoy finding ways to make money.

The dream of small business ownership

Many people dream of owning their own business. Who wouldn’t like to be his own boss and set his own hours, meet with other small business owners over a nice lunch that can be expensed, and deduct home office and other expenses? Add in flexible hours, the ability to work from home, and a low barrier to entry and you have the perfect business, right?

Selling the dream. The dream of owning a business or working from home is a dream that is sold everywhere. You see it on TV, hear it on the radio, and you can read about it in the newspaper and online. A Google search for the phrase “work from home” returns 330 million articles. Many of these “opportunities” come in the form of multi-level marketing companies.

What is a multi-level marketing?

Multi-level marketing, or MLM, is a business model that relies on independent representatives to sell products for a company. Instead of the company paying for advertising and promotion, multi-level marketing companies rely on individuals to spread the word about their company. In return, the individuals receive a commission on their sales (more on this later, as commission plans can be extremely convoluted).

Multi-level marketing goes by many names, including network marketing, direct marketing, referral marketing, matrix marketing, direct selling, pyramid selling, and more. You may also hear it referred to as a pyramid scheme, but pyramid schemes typically don’t involve a product and are illegal in the US.

How multi-level marketing works

Multi-level marketing relies on peer to peer advertising and sales. MLM companies believe the best way to create sales is through a trusted source. Word of mouth advertising is much more persuasive than a 30 second TV spot or a full page color ad. Multi-level marketing representatives try generate sales through personal contacts, sometimes through events such as parties, product demonstrations, etc.

Multi-level marketing compensation

Many MLM companies are incorrectly labeled as pyramid schemes, which are illegal. The reason many MLM companies are referred to as pyramid schemes is because the compensation “trickles up” and often results in higher commissions for those near the top of the chain. Many MLM companies offer additional incentives for recruiting new members to your “downline.” In some plans you can receive a commission based on the sales made by people you recruited, and some companies even require you to bring in a certain number of new members before you can receive compensation, regardless of how much you sell. This brings up an important point – many multi-level marketing companies have complicated compensation systems.

Types of multi-level marketing compensation plans

The first red flag I see with many MLM companies is the compensation plan. You can easily determine how much you get paid for most jobs. Your compensation is usually based on a salary, an hourly wage, a commission, a bonus, or a combination of these. But many multi-level marketing companies have confusing compensation plans such as:

stairstep earnings
binary compensation plan
uni-level matrix plan
forced-level matrix plan
hybrid compensation plan
breakaway compensation plan
compressed compensation plan

To top it off, the compensation plan may also include special bonuses or trademarked terms like Extra Super Duper Star Seller Level Silver to denote your compensation level. If you understand what those words mean or you can decipher the graphics and multi-paragraph explanations of the compensation plan, then you are one step ahead of me – and the majority of MLM participants.

*Note: Many MLM companies require independent distributors to purchase a minimum amount of products, reach a certain sales quota, or recruit a certain number of new distributors to be eligible to receive compensation.

Common multi-level marketing products

Most multi-level marketing companies offer products that fill a need or a void in people’s lives. The three biggies in everyone’s lives are Health, Wealth, and Love. These three categories make up a large percentage of the products offered by MLM companies. The most common products are health foods and nutrition items such as vitamins, juices, and extracts; skin care products; financial products; exercise equipment; household items; clothing and accessories.

One common factor among some (not all) MLM products is the relative high price compared to comparable items you can purchase from a retail store. Most companies or MLM associates will claim the difference is in the quality or proprietary nature of the product. But it makes one wonder if the price difference is from the quality of the product or the fact that several people get a cut of the sale?

Money Merge Accounts. A common financial product sold through MLM companies are money merge accounts, which work to more quickly eliminate your mortgage. Some of these companies are legitimate, while others are not. I recommend reading about the Pros and Cons of Money Merge Accounts for more information.

How MLM companies recruit new members

The products MLM companies sell work on the emotions of the potential customer. The same often goes for recruiting new distributors. The biggest selling point is owning your own business, setting your own hours, freedom from a boss or a schedule, etc. Many companies have large conventions that are more like pep rallies than seminars. It is not uncommon to see some of the top distributors flanked by high priced cars or pictured in front of their multi-million dollar mansions. The truth is that multi-level marketing is a lot of work and the vast majority of distributors earn less in commissions than they spend on membership fees, training products, and minimum purchase requirements. In many cases, MLM companies are selling the dream of becoming wealthy.

Question to ask before joining a multi-level marketing company

As with any business, it is important to understand the company, business model, products, threats, opportunities, and other requirements before joining. At the minimum you should be able to easily answer the following questions:

The company. What’s the company’s track record and reputation? Is the company public? Has it been involved in any major lawsuits regarding its operations?
The product. Which products does the company sell? Does it have the evidence to back up product claims? Is the product competitively priced? Does the product appeal to a large customer base?
The business model and compensation plan. Do you understand the compensation model? Is there a cost to join the plan (many companies charge outrageous prices for administration fees and training materials)? Is there a minimum monthly sales commitment to earn a commission? Will you be required to recruit new distributors to earn your commission?

Examples of multi-level marketing companies

Wikipedia has a list of multi-level marketing companies which can be found here. The list includes many prominent and well-known companies that you may have heard of, including Amway Global (also known as Quixtar), Avon Products, Discovery Toys, Mary Kay, MonaVie, Pre-Paid Legal Services, Primerica, and The Pampered Chef.

Are multi-level marketing companies scams?

Some multi-level marketing companies have bad reputations for many reasons, including the proliferation of scams. Some people who join MLM companies also turn into salesmen 100% of the time. So you end up dreading your weekly dinner party because it turns into one long infomercial. Running a business is great, but alienating friends to try and make a buck is never cool.

But that doesn’t mean that all MLM companies are scams. A few years a friend of mine started his own company, which I later learned was a multi-level marketing company. He ended up doing very well with it, and continues to do well to this day. He gave me some information about it, but in the end, I decided it wasn’t for me.

Is Monavie a scam?

MonaVie is a multi-level marketing company that has been in the media often lately, with many people asking if MonaVie is a scam, including this article, is MonaViea scam?, and this article.

I encourage you to read these articles for more information, then visit the Monavie website if you are still curious about this business opportunity.

What does the FTC have to say about MLM?

The FTC recognizes there are legitimate and shady MLM companies and has strong warnings against pyramid schemes, which are illegal, and several other warnings regarding multi-level marketing companies. You can read their words in these two articles:

Multi-Level Marketing Companies – Good or bad?

The truth regarding MLMs is this: Some multi-level marketing are legitimate and represent a unique opportunity to run your own business. But it is hard work. On the flip side, there are many MLM companies that are scams. Do your research before you sign up for any business venture.

My experience. I know several people who have been involved in multi-level marketing programs. Some of them run their independent distributorship as a full-time job, and I know people who do nothing but write a check to the parent corporation each month and wish for a better life. Much of the result depends on the legitimacy of the MLM company and the amount of work you are willing to put in.

~$~

Entrepreneur Spotlight – Larry Deane from Empty Cabin Media

Ryan — Mon, 31 Aug 2009 04:43:02 +0000

Today’s Entrepreneur Spotlight is Larry Deane, from Empty Cabin Media, a blog consulting and website design company. Many people know him as Glblguy, the former owner and writer for the personal finance blog, Gather Little By Little (Glblguy was the anonymous name he chose when he started his personal finance website).

Larry has been a good friend of mine for over two years now, and did the customizations to the Thesis theme I run on my site. You can read more about the design in this article. Larry recently sold his personal finance website, and is now concentrating on his blog consulting and design business. Today’s interview discusses his entrepreneurial pursuits past and present. I hope you enjoy getting to know Larry a little better!

Entrepreneur Spotlight – Larry Deane from Empty Cabin Media

Q Larry, thanks for agreeing to this interview, I know this is a busy and exciting time for you. Can you share with us a little history about the entrepreneur in you? Was Gather Little By Little your first business venture?

A Absolutely Ryan, and thanks for giving me the opportunity to do this interview with you.

Gather Little by Little wasn’t my first business venture. To be honest, we would need to travel back in time to when I was around 12 years old. I learned to do software development on the old 70s TRS-80 Model III computers. I got pretty good at it, and while my Mom was shopping at the mall, I would hang out over at Radio Shack and play on the computers. The store’s owner saw what I was doing and asked if I would be interested in writing some “demo” programs for them in exchange for free and/or discounted merchandise. Of course I gladly did this. I’d say this was really my first business venture.

At the age of 15 I started working in a pet store selling fish and aquarium supplies. I enjoyed the aquarium hobby very much and started keeping my own aquariums. This led to another small business I ran where I would set-up and maintain aquariums for family, neighbors and friends. I didn’t have too many clients, but the side money was nice and I enjoyed it.

I later returned to the computer industry while in college and ran a small business that fixed computers, installed hardware, and trained people on how to use computers. I didn’t have a great deal of clients, but it was fun and made me some extra money. My Dad still has one of the original business cards I had printed up.

Once I graduated, my entrepreneurial endeavors got put on hold for a while as I started a career as a professional software developer, got married and started a family. Even then I continued to talk to my wife about wanting to work for myself someday and maybe being able to start my own software company, aquarium company, etc.

In 2007 I decided to give blogging a try. I didn’t start Gather Little by Little as a business though. I initially started it to help others by sharing what I was learning about personal finance. Frankly I never thought anyone would really ever read it. Three months or so into into it I realized that I could potentially make money from it in addition to helping others…a win/win if you will. Sometime later, I realized that blogging could be the foundation for a real business.

GLBL started out as just a small site for me to really play with and soon bloomed into a site that gained 3000+ readers and generated a pretty decent supplemental income for me. In my mind, it was a huge success and also proof that I could make a side business work.

Q It’s interesting that you didn’t start GLBL with the intention of it turning into a business like it did. Do you think there is more opportunity for “accidental businesses” than most people think?

A Absolutely. I think there are many similar situations where people just started blogging to share information with the their friends or just exercise their creativity only to find that there was a much larger demand for their topic and content than they thought. That’s exactly what happened to me. I initially thought that magazines and “professional” media sites would always win. I mean they have professional writers, editors, proof readers, artists, etc. What I found though was that people really loved reading articles from “real” people. They loved reading personal stories about our lives and how we achieve goals or make mistakes.

If you think about it, it makes sense. If you pick up a copy of say Money Magazine and read it, it’s pretty easy to walk away feeling like a complete financial failure. BUT, if you read blogs like you find the M-Network, you’ll feel at home and in good company. You’ll also realize that there are others out there just like you who are dealing with the same kinds of issues you deal with on a daily basis. My most popular articles on GLBL where one’s were I admitted mistakes and talked about how I was going to keep from doing them again.

Q As we mentioned in the introduction, you sold your website, GatherLittleByLittle.com. Did your design and consulting business play a factor in your decision to sell GLBL, and do you have any advice for anyone considering selling a website or other small business (valuation, money transfer, etc.).?

A Selling GLBL was an incredibly difficult decision, and yes, my design and consulting business played a large factor in that decision, along with many others. I sold GLBL for one primary reason though: to give me time to do other things I wanted to do. One thing everyone should know about blogging is that it takes time. To grow a successful and popular blog, you have to put a great deal of time into it. I did that with GLBL. But after writing for 2+ years about personal finance, I found myself repeating some of the same things…to be honest, writing on it was becoming a job. I certainly still enjoyed it, but I also had some other ideas in the back of my head I wanted to do. I found myself more excited about the new ideas then writing on GLBL. I’ve always been like that though. I start something, enjoy it for a while then move onto something else, sometimes coming back to it, other times not.

GLBL and the blogging community in general taught me a great deal about blogging and about how to build a successful blog. I began realizing I could use that knowledge to help others create blogs of their own. That is how Empty Cabin Media started. I started off just doing blog consulting and coaching, then branched out into development work and now offering full Wordpress hosting and support. Fortunately I jumped on the Wordpress Thesis theme bandwagon pretty early, and that has turned out to be 99% of my current development work. I would consider myself an expert at this point on the Thesis theme and I really enjoy making sites where you can’t even tell it’s using Thesis, like this one.

One of the interesting things with selling GLBL was how hard of a decision it was. I didn’t expect that. Over the 2 years I had really put a great deal of myself into GLBL and frankly developed a very strong relationship with my readers. I felt a personal attachment to them and the site itself. When trying to decide on whether to sell GLBL or not, those two things played a big factor. It was very important to me to not disappoint GLBL readers or let them down. I hope I didn’t do that. Many of the comments regarding the sale were very positive, but a few were really tough to swallow. Those still haunt me a bit.

As for advice on selling I do have some, but let me precede that by saying I’ve only sold one blog, so not even close to being an expert on blog sales. For evaluation, I used a 24 months of income rule. Meaning that the value of my blog was basically my current monthly revenue stream over the course of 24 months. I then added a premium due to rank, authority, and popularity. That became my asking price. While I can’t disclose the final sale price, I did end up getting very close to that in the end.

One suggestion I’ll provide for those that might consider selling their blogs or websites down the road is to keep meticulous records on both your traffic and income. Traffic is easy: just install Google Analytics as soon as possible. Income is a little harder. Fortunately there are many options. I started with a simple spreadsheet but now use Outright.com as it just makes things much easier for me (and it’s free!). Outright also integrates seamlessly with Freshbooks, the software I use for estimates and invoicing for Empty Cabin Media. Whatever you decide to use, make sure you track it monthly and by income source. Oh and keep it backed up and safe!

Q Blogging and web design are very different business models. What have you learned from running two different types of businesses, and do you have any related advice for others starting a business in either of these verticals.

A Yes, they sure are but there is also a great deal in common as well. The fundamentals of running a business still apply to both: record keeping, time management, marketing, employee/contractor management, etc. The key difference in the two models is clients.

With GLBL, I could write when I wanted to. If I didn’t want to write/post an article for a week I could, sure I might lose some traffic but I was the only one impacted. With my consulting business I can’t do that. I commit to deadlines and I’m expected to meet them. The other big difference is that with GLBL if I stopped writing, I continued to make money. Sure it might decline over time, but the income didn’t stop. With my consulting business, I get paid by the job in most instances, so if I don’t complete the work, the income stops.

Neither model is good or bad, just different.

As far as advice, for blogging here’s what I would suggest:

Pick a niche to focus on that you are both knowledgeable about and enjoy writing on. If you don’t enjoy it, you won’t do it for long.
Don’t wait, just start writing. Far too many people spend months trying to make their site perfect. Don’t make that mistake. If you think you have a good topic to write up, go reserve that domain name get your basic site set-up and start writing. Or better yet, let me do all of the set-up for you and all you have to do is write!
Find other bloggers in your niche that are starting out like you. Partner with them, become friends and help each other grow. Much of the success of GLBL was due to the M-Network. As a matter of fact, you’re reading this because Ryan and I were in the M-Network together and became friends. Just like with any business, relationships matter.
Don’t underestimate the amount of work. Growing a successful blog involves: writing, maintaining your site, keeping it fresh looking, marketing, participation in social media, and participation in your niche through reading other blogs and commenting on them.

My advice for starting a consulting/development shop is:

Build a website that shows what you can do. If you haven’t done anything yet, do something for a friend for free. You can use that site as a testimonial for what you can do. Make sure you have a strong About page that tells your credentials and makes visitors understand why they should hire you.
Participate in related forums and give information away free. This will get you noticed and help establish you as an authority. I did this by being very active in the DIYTheme forums for the Thesis theme. Most if not all of my current and past business came from readers of those forums.
Create a blog. Make sure you have a blog on your site where you write articles about what you’ve done, are doing and shows readers what you can. Personally I even write up detailed articles that tell readers how to do cool stuff with Thesis for free. For example: Thesis feature box and Thesis Theme – Add another menu. Why do this for free? The articles draw readers to my site which in many cases convert to clients.
Make customer service and quality your number one priorities. Customers are your bread and butter, and your business is only as successful as they make it. Don’t ever forget that.

Q What are your future plans for Empty Cabin Media or other business ventures? Do you plan on starting any more blogs or money making websites?

A That’s an excellent question and to be honest one I am still trying to work out. Ultimately I’d love to grow Empty Cabin Media into my primary business and do it full-time, but I’m not there yet. Doing so is tricky too as in order to grow it that big, it requires are large time investment. Something I just don’t have right now with 6 kids and a full-time job.

With that said though, my plans are to continue working with clients to develop awesome looking Thesis and non-Thesis based sites. I’d really like to continue to grow my Wordpress Hosting option as well, as I really think it could make it far more easy for non-technical people to start out from day 1 on a solid blogging platform that looks professional.

One new feature of Empty Cabin Media you’ll see soon are Thesis skins. These are custom Thesis files that you’ll just drop into the “custom” directory that will allow you to very quickly give you default Thesis site a slick look and feel. I have 3 or 4 almost ready to go and will continue to announce them. For now they’ll be free, but I would like to develop some more “premium” skins down the road and make them available for a reasonable cost.

As for blogging, definitely have a few things in the works there as well, so make sure you subscribe or keep an eye out for those as well. While they won’t be personal finance related, they will be about some other hobbies/interests I have. I’m working on getting the sites up and running now and hope to launch them soon. They’ll of course be based on Thesis!

Q Do you have any advice for budding entrepreneurs or bloggers?

A Sure do: Just start. I’m a huge advocate of just jumping into the “pool” rather than getting wet slowly. With any online business or venture, hesitation is time wasted. Start with the basics and grow from there, but JUST START!

Ryan, thanks so much again for the opportunity. It’s been a pleasure.

Thanks for sharing, Larry.

Do you have a unique entrepreneurial story to share? If so, I would love to hear it (please use my contact form). Unique stories, businesses, or other enterprises may be considered for future editions of the Entrepreneur Spotlight.

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Protect Your Brand Identity

Ryan — Thu, 20 Aug 2009 12:23:56 +0000

Owning a small business is a lot of work, but it is extremely rewarding to see your creation become successful and bring in a steady stream of income. But your success can also make you a target for others who are looking for a shortcut.

As a small business owner, I realize the success of my business is due to many factors. One of those factors is the branding that goes into my business.

Branding is more than just a logo. It can refer to just about anything associated with your business, including the name of the business, slogans, logos, color schemes, typeset (think of the Coca-Cola logo), domain name, etc.

Your company branding is usually the first thing people associate with your business, and because of this, it is one of the most important elements of your business. You need to protect it from people looking to either debase your standing within your industry, or use your good image to trick others into thinking their business is your business, and walk away with your customers.

How to protect your brand identity

The first thing you will need to do is identify the elements of your brand that are unique and should be protected. This can include things such as your company name, logo or symbol, and other distinct elements of your business. Once you have that list, think of the ways you can protect those elements. I am giving two examples of how to protect your branding, but this list is by no means exhaustive.

Trademarks. According to the United States Patent and Trademark Office, a trademark is a word, phrase, symbol or design, or a combination of words, phrases, symbols or designs, that identifies and distinguishes the source of the goods of one party from those of others. The ® indicates a mark that has been registered with the United States Patent and Trademark Office.

A trademark gives you certain legal rights to use and protect your trademark. To file a trademark, you must first make sure no one else has registered the trademark. You can search the government database, the Trademark Electronic Search System (TESS). After you do a preliminary search to determine your desired trademark is available, hire a lawyer. Seriously. There is a lot of paperwork, dotting the i’s and crossing the t’s. Protecting your brand is worth spending the money to make sure you do it right.

Copyrights and patents. Copyrights and patents are different forms of intellectual property protection. These links will take you to the United States Patent and Trademark Office definitions.

Domains. The internet is a wonderful place. But it is also full of opportunists. When you select a domain name for your business, consider buying the .com version, as well as the .org and .net versions of the same name. You may not need to buy all three versions of the domain for a personal blog if you do not intend to make it a business. But if you have plans on developing your website into a money making site, then you should consider buying the three main extensions.

I also recommend buying multiple domain names if your website can be easily mistyped into the browser. You can redirect multiple domains to your main site, ensuring no one else can piggyback on traffic that should have gone to your site. An example of this can be seen at the personal finance blog, SquawkFox, which is located at http://www.squawkfox.com/. The misspelling http://www.squakfox.com/ redirects to the correct page. Smart thinking, and solid brand protection.

You should also consider buying multiple domains to protect your brand identity if the words in your domain can be easily rearranged in a manner that could cause confusion if someone were to create a site in a similar vertical.

Don’t think you need multiple domains? A friend of mine recently discovered that someone purchased the .net version of his domain and set up a site that mirrored his. Based on how the other people did it, he most likely has some legal recourse. But in the mean time, it can cause confusion and loss of brand identity.

Domains are one of the cheapest forms of brand identity insurance. Domains are inexpensive – usually anywhere from $5-10 per year, depending on the company you use as a registrar and whether or not you have any applicable coupons. I always search for GoDaddy coupon codes when I register a domain, but it doesn’t hurt to shop around at other registrars such as Register.com.

Protect your brand, protect your company

The old saying, “an ounce of prevention is worth a pound of cure” rings true when it comes to protecting your brand. A small cash outlay upfront can save you an immense amount of frustration down the road, and possibly give you legal recourse against offenders.

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When Should You Sell Your Small Business?

Ryan — Mon, 20 Jul 2009 11:17:28 +0000

My wife and I recently sold one of our websites – no not this one! Several months after I started blogging, my wife decided she wanted to try her hand at it to see what she was missing. I think she was afraid she had lost me to the world!

My wife was in the medical field before she became a stay at home mom, so she started a health and nutrition blog. After close to a year of blogging, my wife decided her blog had run its course and it was time for her to hang up her blogging hat. That left us with a website that had value and was earning money, but was otherwise stagnant.

Why we sold our website

My wife put a lot of heart into her website. She shared her personal story, she had a substantial number of subscribers, and her blog was starting to earn a profit. However, she was no longer interested in writing new content and decided to move on. Because her site shared her personal story, she didn’t want to sell it. So we left the site up and continued earning a minimum amount of income through advertising.

Her business started losing value. The best time to sell her site would have been when she stopped writing, or shortly afterward when traffic and income were at their peak. After she stopped writing new articles, traffic and income started slowing down considerably.

After almost a year of dormancy, I asked her again if she wanted to sell her site. She was more open to discussing it and we finally agreed that we would sell it if we could get a reasonable price. I also told her we could use the money to start a 529 college savings account for our daughter, an idea my wife liked.

So I contacted a few people and came to terms with a friend who purchased the site and is now creating new content. Because the blog was already an established site and domain, I am positive it will improve in terms of traffic and income in relatively little time. I can’t share the terms of the deal, but it was enough that we feel we received a fair price, and low enough that the buyer should be able to turn a profit.

Bottom line: We sold the website because it was an asset that had more potential than we were realizing and it would continue to diminish in value unless it was nurtured.

When should you sell your business?

Many small business owners will face this question at one point or another. Your business may grow too big for you to handle, you may no longer have the expertise or desire to run it, you may get an offer that sweeps you off your feet, or you may simply wish to move on. Quite simply, there are as many reasons to sell your small business as there are types of small businesses.

Some reasons you may consider selling your business:

Time. Running a small business takes a lot of time, and selling your business can give you more time for other pursuits.
Money. Cash out; sell it to someone with the capital to expand it; sell it to fund another venture; etc.
Life events. Death, divorce, birth, moving across the country, and a host of other personal reasons may tip your hand toward selling.
Decreased performance. Decreased sales and revenue could be a good reason to sell your business. Sometimes a change in ownership can breathe new life into a company.
Growth. A period of growth can be a good time to sell because it is more attractive to buyers. Growth may also make your business too much to keep up with.
Partner wants to move on. Sometimes one or more partners can buy the remaining interest in the company, other times the entire business needs to be sold.
Other opportunities.

There are no clear cut answers regarding the best time to sell your small business, and because each small business is unique, it isn’t possible to cover every example. Just make sure you do your research and make sure you are selling your business for the right reasons.

Have you sold a business? I’d love to hear about it.

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