Starting a small business

A friend of mine asked me a question relating to starting a small side business via Facebook last week. I thought that this might be a good weekly series. Many people have small side businesses or have thought about starting a small business, but just aren’t sure where to start or how to maintain their records. Over the next few weeks, I’ll be addressing some of the things to think about when starting and running a small business. If you have questions regarding small businesses, feel free to ask them in this post or send me an email.

My first rule in small business is start it with cash. If you can not start a business without going into debt, this might not be the right direction for you to go into. 80% of small businesses fail. That doesn’t mean that your small business will fail, but I don’t want you getting into debt over it. Do your research, see how much start up money you need and start saving. You may not be able to go all out when you start your business, but starting slow and growing with cash will leave you in a much better financial situation.

My friend had asked me about getting a credit card to start her business because the representative she was working with said she could get miles or points for her purchases. Plus, it would help her keep all of her expenses seperate. You can do all this without paying any annual fees or interest charges. Open a free small business checking account. I work with Webster Bank in Connecticut. I get free checking, plus my debit card earns rewards points. Just open a checking account in the business’ name and get a debit card if you need one.

Here is my pet peeve with small business owners. Your business account is only for business transactions. Your personal account is only for personal transactions. Keep them seperate. If you want to take money out of your business because you have profit, write yourself a check and deposit that check into your personal account. If your business is low on cash, write a personal check to the business and deposit the money into your business account. Once you start mingling your funds, it becomes very difficult to keep everything straight for tax purposes. Keep the business stuff in the business account and that’s it.

When you keep your business finances separate, it makes doing business a lot easier, especially when tax time comes around.

Making a list, checking it twice

When I posted about how much I hate cash I got a number of comments on twitter and facebook with the fact that Dave Ramsey says you spent 12% to 18% more when using plastic than when using cash. Here is how to get around that:

1. Have a very strict budget and update it throughout the month as you are spending. Pick a day each week to go online with your bank and figure out how much you spent in each category. I use QuickBooks for this, but there are a number of other programs out there that are less expensive. You can even use a spreadsheet if you want and download your bank activity into the spreadsheet, then add a column for category. Fill in categories and then sort by that column. See, free budgeting software right there on your computer! I update my budget before each shopping trip so I know exactly what I can spend.

2. Always have a list when you shop. Always. Even when going to the mall, I have a list of what I am looking to buy and my budget. That way, I know how much I can spend. The most important places to have a list are Wal-mart/Target and the warehouse club, if you belong to one. It’s so easy to pick up things you don’t need.

3. Limit the number of trips to the store. Every time you go to the store, you increase your chances of purchasing impulse items. Make a list during the week, making sure you watch for things that are running low before you actually run out of them. Running out of cat food will instantly send you to the store. Put it on your list before running out. I also find psychologically people feel better when they go to a store and come out with multiple items. I watch a lot of people. It’s very rare that people will walk out of Wal-mart or Target with one item. Therefore, add items to your list as you progress through the week and only go once.

4. Keep your list in a high traffic area. I use my fridge. I usually have two magnetic pads on my fridge, one for groceries and one for nongroceries. I do not purchase nongrocery items at the grocery store unless there is a MEGA SALE, which doesn’t happen very often. Nongrocery items are generally a lot more expensive at the grocery store. It’s better to buy them at Wal-Mart or Target. Sometimes pharmacies will also have MEGA SALES on these types of items. So stay on the look out.

5. Always keep your coupons with you. You never know when an item from your grocery list might show up on sale at Wal-Mart, Target or the pharmacy and they all except coupons.

If you can keep your eye on the prize (staying within budget), you can avoid spending that extra cash without having to pay with cash. That makes me happy. I still hate cash.

Are you a list shopper?

P.S. If you would like to friend me on facebook, please put klingtocash in the message box. I get a lot of friend requests and I want to make sure I don’t miss any of my readers.


Free Grocery Coupons

Are you getting all of your rewards?

About a year ago, I was in my bank and saw a brochure for Visa Extras, a rewards program typically available for credit card accounts. I ignored the brochure since I don’t use credit cards. Later, I noticed another brochure for the program while I was in line for a teller. I picked it up and noticed in inside that it was also for debit cards. I signed up immediately.

This was about 11 months ago. As I’ve said, I hate using cash. I use my debit card all the time. With all of the double and triple point promotions throughout the year, I’ve racked up over 18,000 points. At 20,000 points, I can get a $50 gift card.  I know that seems like a lot of points, but I am spending the money anyway. It’s nice to get a little something back, right? There is no fee for the program.

Check with your bank to see if they offer a program like this. Are there other rewards programs you are missing out on? What’s your favorite rewards program?