Small Business Tips Archives

5 Benefits of Owning Your Small Business Property

February 21, 2019/by Team

Is it time to purchase the commercial property you’ve been leasing? If you’re a small business owner who currently rents office or retail space, you could be in a position to benefit from becoming an owner.

Of course, the decision to own or rent will depend on a number of factors unique to your business, such as your location, revenue, and business experience.

But there are general positives for your business that come from purchasing commercial real estate. Here are five of the top benefits you could expect to enjoy should you transition from renter to owner.

1. The ability to build equity in your property

Perhaps the greatest drawback to leasing a commercial property is that every monthly payment simply ends up in the landlord’s pocket. However, purchasing that space gives you the ability to immediately start building equity in the property.

If that property increases in value over time, you can cash in by selling or leasing the building.

Those who secure a loan to help purchase commercial real estate also have the option to tap into their equity by executing a cash-out refinance. By refinancing and taking out a larger loan, a borrower can convert their existing equity into cash. The amount of the original loan is then repaid to the lender while the rest can be used for business improvements or future investments.

2. The creation of additional revenue streams

If you purchase office, retail, or warehouse property that your business can’t occupy completely, you have the opportunity to establish a new revenue stream by leasing the additional space to tenants.

Rental income can play an important role in bolstering your revenue during difficult periods for your business. This can provide a real sense of comfort for those working to get their small business off the ground.

It must be noted that taking on tenants requires project management capabilities you may not currently possess. If you do plan on leasing a portion of your commercial property, consider investing in property management training or hiring a professional to assist you.

3. Tax benefits

Owning commercial real estate puts you in a position to enjoy tax benefits that could significantly impact your bottom line.

As an owner, you can take advantage of depreciation deductions and mortgage interest write-offs that can offset the cost of your original purchase and generally ease the tax burden you may currently feel each year.

Be sure to consult a tax professional to learn more about the benefits (and potential drawbacks) of owning commercial real estate.

4. Freedom and control

Renting a commercial property leaves you with few options when it comes to renovations or additions. This can be a real source of frustration for those who enjoy being in control of all aspects of their small business.

Once you own your office or storefront, you have the freedom to truly make it your own. If you purchase your restaurant’s building, for example, you could finally create more room for tables or redesign the kitchen. Getting these types of changes approved by a landlord can take ages – by the time you’re able to make a necessary change, your business has already suffered irreparable damage.

With control also comes consistency. Owners of commercial real estate never have to worry about a landlord’s rent hikes or rule changes that can stunt a business’ growth.

5. Appreciating value

Commercial real estate investments have a history of strong appreciation. Besides the general demand increases that come from scarcity in an active market, commercial real estate can appreciate in value based on their ability to generate income.

This means that as the owner of a commercial property, you have a hand in increasing the asset’s value. By renovating the building or adding rentable space, you can effectively add value to your original investment. This is one of the main advantages a hard asset like commercial real estate has overstock or bond investments.

Owning commercial property is not without its disadvantages as well. The purchase price itself may be staggering for those just starting their business. Additional challenges having to do with building repairs or tenant vacancies can be debilitating for business owners who don’t have the resources to manage them.

But you may find that the benefits of finally owning your own office or retail storefront far outweigh the potential difficulties. If you value day-to-day control and have a long-term vision includes both your business and the building it occupies, ownership may be your best bet for success.

If you’re interested in purchasing a commercial property, one of your first steps should be to determine the financing solution that makes the best sense for your business. Commercial Direct, a division of Silver Hill Funding, LLC, specializes in providing flexible commercial mortgages to small business owners – even those with tax documentation issues that make it difficult to work with traditional banks.

Author: Zack North

Zack North is the Director of Marketing for Commercial Direct. As a regular contributor to a number of top industry publications, Zack enjoys writing about topics that help investors and business owners approach commercial mortgage financing with confidence.

The Small Business Year-End Checklist

December 19, 2018/in Small Business Tips /by Team

Just like spring cleaning your house, your business needs a good tidying and updating once a year. Make December the month you get organized, focused, ready and able to create more success than ever in 2019. Catch up on your bookkeeping.

Just like spring cleaning your house, your business needs a good tidying and updating once a year. Make December the month you get organized, focused, ready, and able to create more success than ever in 2019.

Catch up on your bookkeeping.

Until you have a clear picture of your annual profits and losses, you won’t be able to make decisions for the future. Ideally, you have tracking software that’s been keeping you up to date on expenses and income. Now it’s time to analyze the numbers and see where there’s room for improvement.

Plan for taxes.

If you pay quarterly estimated income tax, double-check that all payments have been made, to avoid incurring penalties. Make tax-reducing moves such as capital expenditures and donations. Your accountant can give you other tax-saving ideas and help you decide on the best ones for you based on your business profits or losses, projected tax rates, and other factors.

Organize receipts.

Prevent a big headache at tax time and get that pile of paper receipts digitized. Scan them and group them in folders according to vendor and tax year. If the payments aren’t already in your bookkeeping system, enter them now.

Archive old files.

Clutter is one of the biggest hindrances to productivity. Move anything that’s not current from your computer, desk and filing cabinet, into separate long-term storage. For digital files, it’s easy to put them on their own hard drive.

Back up all digital data.

You don’t want one server crash or natural disaster to wipe out all your records. Back up your files in at least 2 places, including external hard drives and cloud-based services.

Analyze your suppliers.

What products and services worked well for you this past year? You’ll want to keep on doing business with them in 2019. What isn’t giving you a good return on your investment? If advertising flyers cost more to print and mail than they’re bringing in new business, consider a better use for your marketing dollar.

Analyze your productivity.

Make a list of your work-related activities, and how much time you spend on each of them. Now decide which ones are helping you meet your goals, and which are distracting you or no longer relevant. Would be better to delegate.

3 Questions to Answer Before You Start a Business

July 20, 2018/in Small Business Tips /by Team

You know you have the inspiration and the drive to launch a business. But it takes more than that to survive and thrive over the long term. Here’s what you should know to make sure it starts off in the right direction and keeps on going that way.

What is the ultimate goal?

There are many reasons why people decide to start their own business:
• Do what you love doing for the rest of your life
• Do something that makes the world a better place
• Make a pile of money and retire early
• Be your own boss

If you don’t define your ideal outcome, you won’t be able to plan a strategy for working towards it, or even see when you’ve achieved it.

A goal-based strategy can be a big help in keeping you on track. For example, if your goal is to create a smart, efficient business that allows you to spend more time with family, then it would be counter-productive to get bogged down in routine tasks that could easily be automated with a small investment in the right software. If your forte is interacting with people and selling your product, you shouldn’t spend hours alone in the backroom doing paperwork.

How are you different/better?

The key to competing successfully in any market sector is to stand out from the other businesses selling the same products or services that you do. Some possible answers include:
• Higher level of expertise — “25+ years of real estate experience”
• Better customer service — “I personally respond to every client”
• Affordability — “We beat their prices every day”
• Unique product benefits — “Patented technology for faster results”
• Benefits the community — “Made with 100% organic, sustainable ingredients”

Once you’ve established your USP (unique selling proposition), your marketing plan will flow from there. You’ll know who your customers are, where to reach them, and how to talk to them. And you’ll avoid wasting money on trial-and-error strategies.

How will you track progress?

You may not like thinking about numbers, but they really are the only way to gauge the financial health of your business. Financial reports clearly show you when and how to take the next step toward your ultimate goal.

Problems can be nipped in the bud: budgets reallocated, expenses trimmed, profit margins adjusted, cash flow bottlenecks removed. Opportunities can be seized: capital purchases timed for tax savings, operations expanded, working time reduced.

Now that you’ve answered these three questions, you’re ready to break ground. With a defined vision, targeted strategy, and measurable goal, you’ll make the right decisions to achieve success for your business and your life.

Pricing Your Services: Don’t Sell Yourself Short

April 1, 2017/in Small Business Tips /by Team

a woman looking at a phone while writing in a notebook

Does this sound like you? You offer great quality service, you have an excellent customer base, but you’re still making very little if any, profit. There could be many reasons for this, but one of the most frequent is that you’re not charging enough. Here’s how to stop undervaluing yourself and get the money you deserve.

Find out what’s behind your excuses.

Right about now, you’re probably thinking that you charge as much as your customers will tolerate. But if your competition is charging more, what’s the real reason for your low prices? Consider these possibilities:

You’re insecure about the quality of your skills or service
You haven’t added up all the benefits your client receives
You haven’t analyzed your competitive advantages and differentiators
You work extra long hours without getting paid extra

The vicious cycle of low pricing.

When you underprice your services, there are more consequences to your business than minimal profit margins. The more you lower prices, the worse your business gets, and the worse your business gets, the more you’re forced to lower prices.

You attract problem clients who will nitpick, disrespect your expertise and try to drive your prices even lower
Problem clients create an environment that repels good clients
You have no room in the budget for promotions and marketing, which attract more — and better — clients than low pricing does
Talented staff don’t want to work for you

6 steps to getting the prices right.

Work on your personal attitudes to self-worth and wealth acquisition, which may date back to childhood.
Do a competitive analysis: the benefits you bring to clients and ways that you’re different/better than competitors. If you can’t think of any, plan how you’re going to change that.
Immediately raise your prices to new clients by 20%. Transition existing clients more gradually. See how that works for a few months, then adjust as necessary.
Charge overtime for excessive demands for your time and talents, or just say no.
Make marketing and promotions plan to attract new, quality clients.
Bring in experts to support your weak areas, such as accounting or marketing.

Valuing yourself at your true worth isn’t just good for your soul, it’s good for your business. Get started on these tips today — you deserve it!

Developing a Pricing Strategy for Professional Services

March 1, 2017/in Small Business Tips /by Team

a woman celebrating with a cup of coffee

As a professional services provider, did you know that the way you price your services is actually part of your overall marketing strategy? Whether you’re an accountant, lawyer, or business coach — if you’re pricing your services without thinking it all the way through, you could be underselling or underachieving the goals you’ve set for your company.

Not sure where to begin? Start by answering these simple questions and you’ll be well on your way to creating a great pricing strategy that works for you, while you spend your time working with new clients.

What are your business goals?

Yes, your goal is to grow your business. That’s a good start! But beyond that, what are you trying to achieve in your business right now? Are you attempting to reach a new segment of the market? Increase profit margin? Gain a larger market share? The answer to this question is the first step to determining how to price your services.

How does your target market make decisions when it comes to your services?

Different segments of the market make buying decisions very differently. As a financial planner, are you trying to reach young, budget-sensitive families, or very wealthy people close to retirement? It’s important to price your services so that your target perceives your value. For example, low-cost promotions and giveaways on premium services can undercut your value and confuse potential customers.

How is your competition pricing their services?

Chances are, you won’t be the only option your prospects are considering. That’s why it’s important to be prepared with an understanding of your competitors’ pricing so you can explain why your services cost more, or less than theirs. Keep in mind that the more competition you face, the more likely price will be the primary means by which customers make their decision.

Based on all of the above, which pricing strategy makes the most sense for your business?

Here are a few options to consider…

Premium Pricing

Is the service you provide especially unique? Is your target market very wealthy? If yes, pricing your services higher than the competition might be right for you. While higher prices = higher profits, keep in mind that premium-priced brands have the added challenge of creating a high-value perception in other ways to justify the higher price.

Economy or Market Penetration Pricing

Are you trying to steal business away from the competition or attract price-sensitive clients? Pricing your services lower than the competition is the way to go. If your low-price strategy is temporary to penetrate the market, be prepared for the possibility of an initial loss of income while you establish yourself in the market place – and have a plan for increasing your pricing in small increments over time. Also be sure to create the perception of value with other marketing strategies, so customers don’t confuse your low costs with low quality.

Psychology Pricing

This pricing technique attempts to affect customers on an emotional level before a logical one. Did you know there’s evidence that consumers tend to perceive prices ending in odd numbers as being significantly lower than they really are because they tend to round to a lower number? Some also suggest that removing the comma from a number over $1000 creates the perception of a lower price. There are dozens of psychology pricing strategies that range from how you align your numbers to the words you use next to them. These tools can be very effective, but it would be a mistake to start here before determining the real “why” behind your pricing.

Tiered and Bundle Pricing

Do you offer basically one service with options that vary in value? Try using a pricing structure that offers “good,” “better,” and “best” options – this can help your customers quickly understand exactly what they can expect from you and has the added benefit of capturing a larger market share by appealing to a wide range of shoppers.

Bundle pricing essentially combines services that would cost more on their own then when packaged together. If you have a number of a la carte services apart from your core offering, bundle pricing could be an effective way to create a perception of high-value at a lower cost.

Remember, your pricing strategy has a huge impact on your business’s ability to make a profit, but it’s just one piece of the pie. Looking at the overall financial health of your business on a regular basis is just as important. xendoo handles your bookkeeping so you can always be aware of your financial health.

6 Ways to Cut Overhead Costs

February 1, 2017/in Small Business Tips /by Team

Every business has to spend money in order to make money. Here’s how to keep those ongoing expenses from getting too high and impacting your bottom line.

Take a fresh look at every single expense.

Chances are, some of them have become a habit but can now be either eliminated or achieved in a more cost-effective way.

Re-negotiate supplier and vendor contracts.

There may be things in there you don’t need anymore.
On the other hand, you may find that buying more services from one company costs less than piecemealing it out to several suppliers.
Ask for a better deal from existing suppliers.
Shop around for more favorably priced suppliers.

Allocate more marketing efforts to free or low-cost channels.

Word-of-mouth and tell-a-friend promotions to existing clients.
Social media campaigns.
Strategic partnerships with other local businesses.
Employee sales competitions.
Testimonials from satisfied clients.

Centralize purchasing.

One person in the company should handle it all, from office supplies to phone/internet providers to equipment rentals. This person will:

Prevent duplications, unexpected shortages, and confusion.
Be good at wangling better deals, concessions, and discounts.
Shop around for the best offers.

Re-think your office space.

Do you really need to be leasing so much space?
Do you have too much inventory/equipment on hand, taking up storage space?
Is there another space available that offers equally good access for current and prospective clients at a lower rate?

Control labor costs.

Avoid paying overtime by fine-tuning scheduling or converting to part-time employees.
Reduce turnover and hiring expenses by maintaining a happy, fulfilling work environment.
Cross-train employees to fill more than one role.
Prevent time theft with an app that tracks actual hours worked.

Solving the overhead problem is all about baby steps. Chip off a bit here, a bit there, and keep a year-round watch on expenses. It will all add up to some nice, healthy profit margins.