Laura Girty, REI
Laura Girty works with REI, Rural Enterprises of Oklahoma, Inc. I’ve known and worked with Laura for years in local community projects.

REI is a certified development company (CDC) licensed by the US Small Business Administration. They work with SBA and USDA Rural Development Business and Industry loans.

By going through a CDC like REI, you can get longer terms and lower rates than going directly through the bank. Your bank will still be involved, but the guarantee will help make the bank more comfortable, Laura said. People get turned down locally, and go to REI to start the SBA process. Sometimes bankers call directly in order to get the guarantee.

When loaning for blue sky value of an existing business, banks really like to be in partnership with SBA, Laura said. (“Blue sky value” is the value of an existing business over and above what its tangible assets are worth. We also used to call it “good will” in the accounting field.)

Top three reasons for using SBA loan guarantees:

1. Start up business that has no record of income.
2. Weak collateral.
3. Need for longer a repayment period.

Equity requirements
You don’t get to borrow 100% of what you need. Sounds odd, doesn’t it? But what it means is that you have to invest something in the business yourself. Local banks usually require 20% equity. SBA guaranteed loans usually require 10%, Laura said. Some cases require an additional 5% or 10% of equity, like start ups or businesses with specialized facilities (think car washes – hard to make any other business work in a car wash building).

Applying
“I’m finding out that when you’re all done with the (SBA) application, it’s like that (3 inches thick),” Laura said.

“Packaging” lets you fill out one application to seek more than one SBA loan guarantee, like a 504 loan for the building, and a 7(a) on the inventory. If you apply at one time, you can have more than one SBA loan. If you do them separately, there is a certain waiting period.

Kari Roberts, Alfalfa County Bank
Kari Roberts works for a local lender, Alfalfa County Bank, in Cherokee, Oklahoma. Previously, she worked with Laura in her small business. (In a small town, we all have connections.)

Kari repeated a line you’ve probably heard, “The bank is the place you go to borrow money, after you’ve proven you don’t need to borrow the money.”

Documentation
All loans require some type of documentation. For small business loans, that usually means personal and business tax returns for the past three years, and a current credit report.

“If you are going into business, and you are not making your car payments on time, how are you going to make the thousands of dollars right?” Kari asked.

Kari listed the 6 C’s of commercial lending, the factors bankers consider to evaluate your loan application:

1. collateral, 
2. capital (personal investment), 
3. cash flow, 
4. character (willingness to repay, credit score), 
5. capacity (legal stuff in order), and 
6. conditions (economic, etc.).

Looking at the financial statements, the lender will also calculate some basic ratios, like loan to value (80%), and  revenue over payments (120%), Kari said. The ‘loan to value’ ratio means the amount being loaned is not more than 80% of the total value of the business. The ‘revenue over payments’ ratio means that your business generates at least 120% of the loan payment in revenue. You have to be able to make the payments!

Kari repeated that it’s very tough to borrow 100% of what you need for a business. Be prepared to have personal equity to invest.

Know your business
The benefit of doing an SBA loan is, paperwork is so extensive that you are going to know your business inside and out, Kari said.

This article is part of the Small Biz 100, a series of 100 practical hands-on posts for small business people and solo entrepreneurs, whether in a small town, the big city, or in between. If you have questions you’d like us to address in this series, leave a comment or send us an email at becky@smallbizsurvival.com.

But there is a simple reason you procrastinate on invoicing: it’s not fun.

We like to work on the parts of our business that are fun to us. Even the prospect of, “I have to do this to get paid” isn’t usually enough to keep us from putting off our invoicing.

Does this make us bad business people? No. It’s normal. Here’s a little bit of proof: a professional gardener shared his feelings in a Flickr photo that tells the story, “Dog and I just realized: invoicing is the worst part of the job.”(Click through to read his caption and notes.)

So what do you do about it?

Build a system. Set up the steps that need to be taken throughout the process to make it as easy as possible to figure and send those invoices. And the first step is to create and record some standards of what you charge, whether by the hour or by the finished product or whatever method works best for your business.The second step is a system that makes it easy to record your work just as soon as you do it.

Do it only once. Record your work in the same format as your invoices so you can copy from your work record and paste directly into the invoice form. (I use this trick, myself!)

Use an online system like Invoice More, Fresh Books, or Greener Billing.

Delegate. If you’re bad enough about procrastinating, pay someone else create invoices from your work records. That could be an employee, a virtual assistant, or your local bookkeeping service.

How do you keep from putting off invoicing? Have any great tricks or stories to share? Or just want to admit that you, too, are human?

This article is part of the Small Biz 100, a series of 100 practical hands-on posts for small business people and solo entrepreneurs. If you have questions you’d like us to address in this series, leave a comment or send us an email at becky@smallbizsurvival.com. This is a community project!

First, what is a blog? It’s a special type of website, one that is designed to be regularly updated. Posting an update is about the same as writing an email. This site is a blog, and I also use one for my small business, Allen’s Retail Liquors. If you haven’t set up a website before, do get some help at least with the setup.

Now to the big question, should you blog for your small business? Here is one great way to tell. Write down every basic question a customer asks you. Start today, and do this for two weeks. If you end up with a long list of questions you can answer, then you have enough material to start a blog. If you don’t, then a blog may not work as well for.

But what if my customers aren’t online?
Of course, you’d love to have your blog draw more local customers in your front door, or bring you more signed contracts. However, that might not work if you are in a small town with few local people online. Drawing customers isn’t the only purpose to blogging.

Side benefits from blogging

1. An answer resource for customers.
   The next time a customer asks you a basic question, you can encourage them to read the answer online. 
2. An answer resource you can publish in many forms.
   Once you’ve written those answers, you can:
   • print them out as handouts
   • compile a short booklet
   • put them on a CD as PDF files
   • make a speech you deliver to educate potential customers.

The one BIG secret to make it work: 
Focus on what customers want to know, not what you want to tell them about your business.

This article is part of the Small Biz 100, a series of 100 practical hands-on posts for small business people and solo entrepreneurs. If you have questions you’d like us to address in this series, leave a comment or send us an email at becky@smallbizsurvival.com. This is a community project!

You can think of marketing as everything except making your product, or doing your service work. The Four P’s of Marketing are Price, Place, Promotion, and Product.

Product
“But you just said marketing was everything except the product!” It’s everything except making the product. Marketing includes your choice of products and services, and how you decide what to offer.
Have you talked with your customers lately to see what product they want? How can you help them solve their problems?  

Price
Setting price in a small business is something of an arcane art form. I’ve found standard formulas for setting prices, but they require a lot of data that many small businesses don’t have or don’t track. That means you fall back on doing your own thinking. Do you want to be the most expensive? Can you beat everyone else’s price? Do you want to? Would raising your price help raise customers’ perceptions of your value?

Eric Granata shared his story with raising prices.

The raising prices trick can work. I used to keep prices low on one of my CafePress shops because I figured I’d sell more if the prices were reasonable. Once I raised prices, sales increased AND I made more from each sale.
I’m not saying it works in every case, but it’s worth considering.

Place
You are targeting people within certain geographic bounds. That may be your local area, defined by a rough circle on the map. It may be people in towns of a certain size, spread all over the map. (If you are targeting everyone, everywhere, then you aren’t targeting!)

It may be international. If you have personal contacts around the world, you may be able to do some global business. I have several clients from outside the USA. That started because I traveled abroad, and made friends. You might start the same way.

Promotion
Here’s where you get the word out. Promotion includes your paid advertising, but also a lot more. Do you have a website? Are you active on any online networking or social sites? Do you participate in local events? Are you handing out coupons or stickers? Do you offer a loyalty club? Publish a newsletter? Hand out pens or keychains with your name on them? Speak at the Rotary Club?

Promotion is everything you do to reach out to new people and make them aware of your business. If you have the other three P’s lined out, spend most of your marketing time on Promotion, finding ways to connect with more people.

Chris Penn compared it to marketing pizza.

They thought that making a quality product was marketing and wondered why their stores were empty day after day after day. “But we have an awesome product!” “Maybe we need a new color palette for the inside of the store!” “Maybe we should move the register closer to the door!”
They’re rearranging toppings on the pizza instead of figuring out how to get people in front of the pizza to at least take a bite. They’re staring at the pizza, wondering why no one is buying it and eating it.

Growing with the Four P’s

For more about how the Four P’s can spark growth, read my article this week at US News Outside Voices.

This article is part of the Small Biz 100, a series of 100 practical hands-on posts for small business people and solo entrepreneurs. If you have small business questions you’d like us to address, leave a comment. This is a community project! Get the whole series by subscribing to Small Biz Survival.

Inventory is product you buy to resell, so yes, it affects your cash flow. You spent money to purchase it. You collect money when you sell it.If you are preparing Cash Flow Statements, you’ll show inventory purchases as a cash outlay.

Inventory purchases are not a regular expense. The money you spend to purchase it does not go on your Profit and Loss Statement. (Want a refresher on the P&L? I explain more, in Do you get accounting?)

The total inventory you own is an asset, and it goes on your Balance Sheet.

Inventory also gets its very own financial calculation, Cost of Goods Sold. It represents the amount you paid for the items you sold. That gives you a good number to compare with your sales to see how much money you made. It’s usually figured once a year, and is a required section on your income tax return in the USA.

Here’s the formula to calculate it:

• Beginning Inventory + Purchases – Ending Inventory = Cost of Goods Sold. 

All those numbers will be the wholesale cost that you paid for your inventory items.

This calculation is one reason why you must count your inventory at the beginning of each year. You’ll need to know where you started in order to figure the cost of goods sold.

Special thanks to the anonymous commenter for suggesting this topic! What small business questions do you want answered? Ask away!

This article is part of the Small Biz 100, a series of 100 practical hands-on posts for small business people and solo entrepreneurs. If you have questions you’d like us to address in this series, leave a comment or send us an email at becky@smallbizsurvival.com. This is a community project!

Photo by Becky McCray.

I just searched for some local businesses, and found many that were missing essential info. It’s easy to do, because you’re too close. You think everyone will know, you assume they can figure it out. But it doesn’t work that way. Lots of people don’t know. Maybe they found you through search, or they recently moved to town, or they just never knew about you before.

So here’s the checklist of basic info every small town business ought to include on their website.

At the very top:
• Full business name 
• Business category, if it isn’t stated in the name

Get in contact:
• Phone number
• Email address 
• Mailing address

Location:
• City and state
• Street address
• Map of your location, or link to an online map

Come on in:
• Business hours  
• Bonus: picture of your business from the street

Buy something:
• Lines of business
• Specific brand names

Take time to check your site. You might be surprised at what’s missing.

And don’t bury these essentials in small type, or hard to find locations. Make them big, bold, obvious, and maybe even repeat them. 

This article is part of the Small Biz 100, a series of 100 practical hands-on posts for small business people and solo entrepreneurs, whether in a small town, the big city, or in between. If you have questions you’d like us to address in this series, leave a comment or send us an email at becky@smallbizsurvival.com. This is a community project!

Photo by Becky McCray.

How do you know if you’re a sole proprietor? If you haven’t incorporated, you are a sole proprietor. If you formed an LLC, you were supposed to declare whether you wanted it to be treated as a corporation or a sole proprietor. Still not sure? Time to check in with a professional. 

The Questions

The Schedule C tells you exactly what questions you’ll need to answer. Even if someone else will be preparing your return, download a copy of the 2008 Schedule C and study it. That’s how you figure out what numbers your tax preparer will need.

One of the first questions is your accounting method. Unless you have a good reason to be different, you are on the cash basis. That means you count transactions when they actually hit your hand. The alternative is accrual, where you count income as soon as you invoice the customer. This is another good question to discuss with a professional.

Part I for Income is pretty straight forward. In most cases, all your sales go in gross receipts.

Pay special attention to Part II where it lists Expenses. The categories are more broad than what you’re likely tracking. For example, all the utilities are lumped together on Schedule C, even though you probably track phone expenses separate from internet access.

If these last three sections apply, they call for a bit of professional advice. If you sell goods, Part III walks through the cost of goods you sold during the year. Part IV is for vehicle expenses, if you drove some business miles last year. Part V covers oddball expenses that you didn’t work into the existing categories in Part II.Our tax expert Glenna Mae Hendricks, E.A., strongly suggests you avoid creating new items for Part V. It’s better to find a place in Part II that it fits than to invite extra scrutiny in Part V.

Records to collect
Besides providing your preparer with the totals, you’ll want to be able to prove how you got them. That means documenting the transactions that add up to those totals. If you’re using QuickBooks or another computer system, you can print out the transaction reports. If you used Glenna Mae’s envelope accounting system, you already have the answers on your summary sheets. If you don’t have a system, …. aren’t you ready to get one going for this year?

This article is part of the Small Biz 100, a series of 100 practical hands-on posts for small business people and solo entrepreneurs, whether in a small town, the big city, or in between. If you have questions you’d like us to address in this series, leave a comment or send us an email at becky@smallbizsurvival.com. This is a community project!
 

New to SmallBizSurvival.com? Take the Guided Tour. Like what you see? Get our updates.

We have five members; me, plus:

• Rick Mahn
  Social Media and The Enterprise, Personal Branding, IT Infrastructure
• Sheila Scarborough
  Writer, Web 2.0 Tools workshops
• Chris Cree
  Blogging and Social Media, Online Marketing
• Todd Jordan
  Social Media/Networking, IT Programming

So we are an interesting group, with some commonalities and some differences.

In our first discussions, we set a scope and mission for the board.

“Focus on helping each other grow our biz by providing honest and open feedback and advice.” 

We didn’t try to polish this up too much; just to set down our thoughts. Our bullet list of our purpose was:

• Advise
• Encourage
• Review
• Idea Farm
• Biz Plan Critique
• Integrity in business ethics
• Feedback and Advice

Each month, we meet via Skype, voice only. I think video would be too distracting, as we try to focus on person at a time. We talk about what’s going on in the last month, and where we are headed. We check our accountability items from the last month, and add new ones in a shared Google Doc.

We’ve met since June 2008. We’ve bounced around ideas, gained perspective, and been reminded to think big picture. Sometimes, we don’t like the advice we’re given, but we always seem to benefit from it. Sometimes we share a breakthrough. We have our ups and downs, and having the group helps to deal with it.

You can do the same with a group of your peers. 
You can also make great connections at SOBCon 09.

This article is part of the Small Biz 100, a series of 100 practical hands-on posts for small business people and solo entrepreneurs, whether in a small town, the big city, or in between. If you have questions you’d like us to address in this series, leave a comment or send us an email at becky@smallbizsurvival.com. Get the whole series by subscribing to Small Biz Survival.

You’re heard it a million times, and if you’re feeling stressed, it’s easy to forget. When you are working, in the flow, making progress, and a customer calls or walks in and interrupts, it’s hard to remember.

But… how do you work on that?

Jon Swanson gave me the best answer I’ve heard.

“You need to know what your purpose is. The point of a business is making a difference in the lives of people, and the most important group of people is…customers.”

The lesson: take time to be clear about your purpose.

That means time away from the business to think about, and be clear about your purpose.

In the moment, the way to apply this is to pause. Pause and remember your purpose. If you’re interrupted by the phone, put your hand on the phone, but don’t answer it yet. Take a moment. Picture a client with good news. Imagine all the wonderful possibilities. Smile, then answer.

For customers coming in the door, take a deep breath, and remind yourself of your average sale. Mentally say, “Thanks for the $50!” Smile and go give some great customer service.

This article is part of the Small Biz 100, a series of 100 practical hands-on posts for small business people and solo entrepreneurs, whether in a small town, the big city, or in between. If you have questions you’d like us to address in this series, leave a comment or send us an email at becky@smallbizsurvival.com. Get the whole series by subscribing to Small Biz Survival.

Photo by Becky McCray.

In Oklahoma, the statewide entrepreneurship program includes more than the usual fact sheets.  Glenn Muske specializes in home-based and micro-business. Then there is the Robert M. Kerr Food and Agricultural Products Center, supporting value-added food and agricultural processing products in Oklahoma.

The services in your state will be different, customized to your local economy. And of course, the quality of people makes all the difference. So it’s worth checking into.

You can find a small group of entrepreneurship articles and other resources on the national eXtension site.

Technorati Tags: small+business, rural, consulting, extension, cooperative

This article is part of the Small Biz 100, a series of 100 practical hands-on posts for small business people and solo entrepreneurs, whether in a small town, a big city, or in between. If you have questions you’d like us to address in this series, leave a comment. This is a community learning project. Get the whole series by subscribing to Small Biz Survival.