7.5-Year High for Small Business Borrowing Bodes Well for Economy

by Ruth Awad21. November 2014 07:58

small biz loan app

There’s been a lot of talk about the economic rebound in the United States, but there’s also been a lot of speculation about how long we can expect the good times to last. If the current numbers from the Thomson Reuters / PayNet Small Business Lending Index are any indication, perhaps the naysaying chatter was preemptive.

According to Reuters.com, U.S. small businesses are borrowing more than they have in the last seven and a half years. The index shows that as of September, the rate is 125.4, up from 118.5 in August. But what do these numbers actually mean?

In short, they indicate confidence in the future of the economy. After all, what savvy small-business owner is going to borrow money if they expect to fall on hard times soon?

Let’s take a look at how small-business owners can use the current economic climate like wind in their sails to continue to invest in their companies.

When the Coast Is Clear, Celebrate Accordingly

As a small-business owner, you may already be aware of just how prevalent businesses like yours are in this country. The Freelancers Union estimates that as many as 54 million Americans do independent work and so are considered small businesses by the IRS. And a considerable number of them run what most people would recognize as small businesses. When you look at those numbers (courtesy of this Business Insider infographic), that prevalence easily translates into economic strength:

  • There are 28 million small businesses currently operating in the United States.
  • Of that number, 22 million are self-employed.
  • 75 percent of all U.S. businesses are non-employer businesses (i.e., businesses with $1,000 in annual receipts and that are subject to federal income taxes).
  • About 120 million workers – over half of the entire population – work in a small business.
  • Non-employer businesses generated $989.6 billion in revenue in 2011.
  • 65 percent of all new jobs since 1995 have been created by small businesses.

While these stats should embolden you, it’s wise to keep in mind the lessons from the recession, which is just barely in our rearview mirrors. Indicators point to a bright and prosperous future for small businesses, but you never can predict when an accident might sink all your hard work.

Looking Ahead: What to Do When Rough Waters Hit

Part of securing your business’s future means investing in the financial safety nets that can keep you afloat if you find troubled waters. Remember, it doesn’t necessarily take a recession’s gale to knock you off course. A lawsuit or property loss could drain your bank account just the same (or worse).

So while prospects look promising, perhaps now is a good time to invest in insurance. The appropriate policies can pay for…

  • Legal expenses when you’re sued over bodily injuries that happen on your property, professional mistakes, advertising injuries, and more.
  • The replacement or repair of lost or damaged property (e.g., your storefront, office space, computers, inventory, and more).
  • Medical expenses for your employees when they are injured at work.
  • Business interruption expenses when a disaster forces your business to temporarily shut down, allowing you to make loan payments and payroll, even when you’re not generating income.

To learn more about how to get affordable insurance coverage, check out our blog series on insurance saving tips. And when you’re ready to invest in your business’s future, be sure to talk to an insureon agent who can handpick policies for your business’s specific risks, needs, and budget.

What Is Special Event Insurance?

by Brenna Lemieux19. November 2014 07:57

old timey party

When you’re throwing a party or hosting an event, getting sued is probably the furthest thing you're your mind. But in today’s litigious climate? Maybe it should be the first thing you think of.

Whether you're throwing a holiday party, fundraiser, trade show, wedding, or other event, you may need Special Event Insurance to cover your liabilities. This is a short-term policy that only covers your business for an event that it organizes. Whether you're an event planner, marketing agency, or just a family throwing an elaborate wedding, Special Event Insurance can step in when you're sued over the property damage, accidents, or injuries that “crash” your party.

How Does Special Event Insurance Work?

To understand how Special Event coverage works, let's look at an example. Say a nonprofit throws its big annual fundraiser. It rents out a ballroom, hires a catering company, conducts a silent auction, and hosts a fancy dinner party for some of its biggest potential donors.

But what happens if the catering company starts a fire? Or one of the attendees has too much to drink and gets in a car accident? Who pays for damages attendees do to the ballroom?

If you've ever hosted a major event, you know that countless things can go wrong – and that the host of the party is legally responsible when they do. But when you carry Special Event Insurance, you don’t have to worry about these “what ifs.” Your coverage pays for your liabilities so you don’t have to.

In fact, more and more venues are requiring that hosts carry some kind of Special Event Insurance.

What Does Special Event Insurance Cover?

Depending on the type of event you throw, you can get insurance coverage for…

  • General liabilities.
  • Liquor liability.
  • Lawsuit coverage for slip and fall accidents.
  • Lawsuit coverage for property damage caused by attendees or employees.
  • Cancellation insurance, which covers fees and other payments you must make even if the event is cancelled because of an accident or weather.

Most Special Event Insurance only covers the specific loss events that are outlined in your policy. Your insurance agent can help you understand what is and isn’t covered before you commit to a policy.

Do I Need Liquor Liability Insurance?   

If you're serving or selling alcohol, you probably need Liquor Liability Insurance coverage. This policy protects you from lawsuits when one of your attendees or employees drinks too much and…

  • Damages property.
  • Is involved in an accident.
  • Injures someone.

Did you know that you could be liable if an attendee drinks too much and gets in a car accident after your event? That's right. Some states have “social host laws” that make hosts, servers, and event planners liable for their guests' actions, even after they've left the party. Even in states without laws on the books, an injured party could sue your business for negligence.

For example, say you run a wedding planning business. Your caterers do their job and keep the champagne and wine flowing throughout the evening. Unfortunately, the bride's crazy uncle has too many glasses of bubbly and backs his car into the side of the reception hall.

In this situation, the wedding planner can be liable for the damages. Fortunately, Liquor Liability Insurance can cover you from the risk of intoxicated attendees.

For more on liquor liability, see our blog post, "What Kind of Liquor Liability Insurance Do I Need?"

How Much Does Special Event Insurance Cost?

How much you pay for Special Event coverage depends on the kind of event you're hosting and whether or not alcohol will be served. Here are the minimum Special Event Insurance rates:

  • Event Insurance (no Liquor Liability) = $350.
  • Event Insurance (with Liquor Liability) = $750.

You might have to pay more depending on the following risk factors:

  • Type of event.
  • The number of people you expect to attend.
  • Where the event is hosted.

If you’d like specific quotes on Special Event Insurance, call one of our agents at 1-800-688-1984 or submit an online insurance application

Make a Better Impression on 88% of Your Potential Clients

by Ruth Awad17. November 2014 08:35

thumbs up

Who knew that online reviews translate into real dollars earned or lost for your business? According to a survey conducted by Dimensional Research, an independent market research company, 88 percent of people are influenced by online reviews when making a purchasing decision, be it dining out for dinner or dropping off a computer for repair. Needless to say, it’s the positive reviews that inspire those patrons and clients to trust a business.

But the negative reviews have their own power, too. In fact…

  • 95 percent of customers share bad customer service experiences.
  • 54 percent share those bad experiences with more than five people.
  • 45 percent spread the venom via social media.

Having said that, when it comes to online reviews, most participants agreed that they have read more positive customer service reviews online than negative ones.

So let’s turn this information into steps your business can put into action. We’ll explore ways your business can generate positive online reviews and leverage their sway on prospective clients.

Tap into the Power of Positive Online Reviews

The nice thing about online reviews is that they’re like word-of-mouth referrals in overdrive. They have the potential to reach hundreds of thousands of people and influence their purchasing decisions without you doing any of the heavy lifting (other than giving those reviewers a positive experience to write about!).

So how can you take advantage of this kind of passive marketing to prospective clients and customers? Put the following tips to use:

  • Create a page for your business on Yelp!, Thumbtack, and OpenTable (for food businesses). Be sure to include your business’s contact information, hours of operation, pictures of the establishment, and other relevant details.
  • Stay up-to-date on what others are saying about your business. If you get a bad review, don’t ignore it in the hopes it will just fade away. As the stats earlier demonstrated, those reviews can have a negative impact on your business’s reputation and deter others from taking a chance on you. Respond to the review in a professional and friendly manner, and offer a solution to address the problems.
  • Ask previous clients to write a review for your business on one of the review sites. If your client is raving about your work, wonderful! Thank them for sharing their experience with you and ask if they would share it with the public, too. You can offer incentives to entice clients to follow through with publishing their testimonials. 

A Few Notes on Creating Positive Experiences & Building Brand Loyalty

At the end of the day, marketing of any kind will only take you so far. The key to creating and retaining satisfied clients is providing top-notch customer service that goes above and beyond making the sale. That may mean…

  • Educating prospective clients about your products or services.
  • Addressing the clients’ specific pain points with tailored solutions.
  • Following up with clients about their experience with your small business.
  • Interacting with prospective clients and followers via social media.

When clients feel as though your business genuinely cares about helping them, it goes a long way toward building trust and loyalty, which can lead to positive online reviews and repeat business.

know your business risks

Making Small Business Saturday Work for You

by Ruth Awad14. November 2014 08:05

florist open for business

Black Friday may be the day big-box retailers make the big bucks, but Small Business Saturday is when small and local shops get a chance to shine. And why shouldn’t they? After all, there are 53 million small businesses and independent workers in the United States, making this sector an economic force to be reckoned with.

Small Business Saturday was first introduced by American Express back in 2010, but since then, it’s taken on a life of its own, thanks to wide social media attention. You may think you have to be a retailer to take advantage of the holiday, but that’s not the case. Let’s take a look at how you can make this upcoming Small Business Saturday a profitable day for your business on November 29, 2014.

Tips for Winning Small Business Saturday

Before we get into the ways you can draw potential shoppers and clients to your door, keep in mind that sales may not be the ultimate endgame of this holiday. In fact, if you don’t own a retail business, perhaps the mark of a successful Small Business Saturday is networking with others in your community.

Having said that, here are some ways you can capitalize on the occasion and get the word out about your business.

  • Post signs and logos on your website or in your store window. American Express’s Small Business Saturday website offers customizable materials you can print for free or post on your website and social pages. If you own a brick-and-mortar storefront, hang these on your shop doors and post them on local community bulletin boards.
  • Tell your story. People like doing business with other people, so use the holiday to share your story and how your business came to be. This personal touch humanizes your business and makes people feel connected to it. You could write a blog post about why you started your business and how you got it off the ground. Be sure to share your story on your social media channels and to…  
  • Step up your hashtag game. Let your followers on Twitter, Facebook, and Instagram know about Small Business Saturday and use the hashtag #smallbusinesssaturday or #smallbizsaturday to join the social media conversation. (Related reading: our social media marketing blog series.) For instance, post a picture of something you’re offering at a special Small Biz Saturday price and put those hashtags to work! Be sure to ask your followers to share your post, too. And speaking of special deals…
  • Offer freebies, discounts, or special products. This is where businesses of all walks can shine. If you own a retail business, use November 29 as a day to have a big blowout sale that customers can’t resist. If you own an ecommerce business, host a site-wide sale on your products. Restaurants and food businesses can offer free coffee or treats for anyone who stops by for a bite. And if you sell services, offer a discount for those who sign on with your business on Saturday. Don’t forget to send out emails or newsletters about the promotion.
  • Lend a hand. Use the occasion as an opportunity to network with your community by offering a helping hand. Ask other small businesses if there’s anything you can do to help them promote their sales or services on November 29, and they just might offer to do the same for your business. It’s a great way to get your business’s name out there.
  • Foster a sense of community. Don’t just use Small Business Saturday as a way to promote yourself – share the glory with other small-business owners! You’ve probably had considerable help getting your business where it is today, so take the time to share the thanks and help out other new businesses when possible. That might mean sharing your tips and resources for successful SBS promotions or tagging other businesses in your social media posts to let your followers know about your community.

As you can see, you don’t have to be in the retail industry to get in on the spirit of Small Business Saturday. Even if someone might not buy your services as a Christmas gift for a family member, you’ll earn considerable goodwill by helping out others and raising awareness about the ways small businesses have a real impact on communities.

how is your business exposed

Holiday Gift Giving for Clients, Employees, and Business Partners

by Rieva Lesonsky12. November 2014 07:45


Once your holiday promotions are in place, your next task is deciding who to buy presents for, what to buy, and how much to spend on holiday gifts for the important people in your (business) life. Although there isn’t a limit on how many people you can give business gifts to during the year, nor on how much you spend on those gifts, your business gift deduction is limited to $25 per recipient, so choose wisely.

Here are some tips to help you shop for your business holiday gifts.

Who Should You Buy Business Gifts For?

The holidays are a perfect time to reward employees for a great year. It’s not a time to reward them as a sales incentive. Holiday gifting is different from giving a year-end bonus.

As far as clients and other businesses you partner with, gifts should only be given to those with whom you have an ongoing working relationship. If you’re bidding on a project with a prospect, it is inappropriate to give a gift. In fact, it could be seen as a bribe. Also, make sure the person is allowed to accept a business gift (some companies or government agencies forbid this).

What Gifts Should You Buy for Professional Associates?

What to buy your staff depends on how many employees you have and how you set up your organization. For example, a VP doesn’t get the same type of gift as your receptionist.

Personal gifts are fine as long as they aren’t too personal and don’t show favoritism for any employee. Personal gifts are also a great idea for clients and partners, especially if the gift references a passion or hobby of the client. Maintain notes in your CRM system on each client’s interests to give you ideas. Of course, food is always a popular holiday gift for employees and clients.

How Much Should You Spend on Business Gifts?

Because $25 is the limit you can deduct, staying close to that amount is cost-effective, especially for a small business. On the other hand, when gifting your biggest client, you might want to think bigger. Here are some good rules of thumb:

  • For clients or partners that brought you $15,000 in revenue this past year, spend $100 or more on a nice business gift.
  • For clients bringing you more than that in a year, $100 to $500 may be more appropriate.
  • For smaller clients netting you $10K or less, spending $25 to $50 is acceptable.

Rieva Lesonsky is CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email Rieva at rieva@smallbizdaily.com, follow her on Google+ and Twitter.com/Rieva, and visit her website, SmallBizDaily.com, to get the scoop on business trends and sign up for Rieva’s free TrendCast reports.

know your business risks

P.F. Chang's Lawsuit Could Affect Your Cyber Liability Coverage

by Ruth Awad10. November 2014 08:26

wok on fire

According to Hartford Courant, an insurance industry journal, the Travelers Indemnity Co. of Connecticut is suing P.F. Chang’s Chinese Bistro. The insurance company claims the restaurant's General Liability Insurance policy doesn't cover losses or legal expenses stemming from the restaurant’s data breach. If Travelers wins the federal case, it could be a definitive blow for businesses that rely on policies other than Cyber Liability Insurance to cover cyber risks.

In other words, it’s a lawsuit to watch, folks. Here’s the skinny:

  • Travelers sold General Liability policies to the restaurants that were active for 2013 and 2014.
  • Between September 2013 and June 2014, hackers gained remote access to P.F. Chang’s point-of-sale software.
  • Customers brought a class-action lawsuit against the restaurant chain after the data breaches compromised their financial information.
  • P.F. Chang’s made a claim on their policy issued by Travelers.
  • Travelers filed a lawsuit, claiming it does not have to defend or indemnify P.F. Chang’s because the General Liability policies only apply to bodily injury or property damage – not data breaches or loss of electronic records.

The moral of the story (other than P.F. Chang’s is being sued left and right!) is that you must understand what your insurance policies do and don’t cover. In this case, the federal class-action lawsuit against P.F. Chang’s alleges the restaurant failed to take adequate steps to prevent a data breach and protect customer financial information – claims a Cyber Liability Insurance policy can address, but not standard General Liability Insurance.

Let’s explore the differences between these two policies so you can spare your business a similar insurance fiasco.

Where Physical Loss Ends and Digital Loss Begins: General Liability vs. Cyber Liability Insurance

It’s easy to see why P.F. Chang’s may have drawn on its General Liability coverage to address the data breach. After all, GL is often (mistakenly) thought of as a catch-all liability policy. And it does offer some pretty formidable protection by covering third-party lawsuits over…

  • Bodily injuries on your commercial property.
  • Property damage caused by your business.
  • Advertising injuries (e.g., copyright infringement).

Perhaps P.F. Chang’s was told that data is a form of property. Maybe the restaurant owners thought the lawsuits over compromised customer data would be addressed by GL’s property damage liability coverage. However, GL only covers lawsuits over the loss of someone’s physical property – e.g., a restaurant being sued over its kitchen fire that destroyed neighboring property.

Data is a separate beast entirely, and that’s why it requires a separate policy to protect it.

Cyber Liability Insurance is designed to cover the specific nuances of data breaches. The policy comes in two forms:

  • First-party response. This pays for the cost of responding to a data breach (e.g., credit-monitoring services, breach notification, security patches, and PR measures).
  • Third-party defense. This pays for legal expenses when your business is sued for failing to prevent a data breach (hint: this is the kind of policy P.F. Chang’s should have had).

Because data breaches are quickly becoming the norm, more companies are investing in Cyber Liability policies. You can learn more about it here: “Cyber Insurance: Why It Matters, Where You’re Exposed.”

Does Your Small Business Need Cyber Risk Protection?

You may want to consider investing in a Cyber Liability policy if your business…

  • Stores sensitive customer information on its servers, devices, or network. It’s grounds for a lawsuit if a customer’s Social Security number or credit card information is accessed via your network.
  • Is small. Small businesses are the most common targets for data breaches. Read more about that in the post, “‘No Business Too Small’ to Be Hacked, Says Security Expert.”
  • Belongs to the allied health industry. You can face double-whammy costs if hackers access your patients’ health records. Patients can sue you and you could be fined for violating HIPAA or HITECH laws. (Related reading: “Allied Health Professionals: Why Your Data Isn't Safe.”)

To get free quotes on Cyber Liability Insurance today, complete a quick online application. Our insurance experts know the policies that keep your business protected from the financial doom-and-gloom of data breaches and will explain your coverage to you so there’s no second-guessing.

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Hiring Temps This Year? Make Sure They're Safe

by Ruth Awad7. November 2014 08:34

temp worker in need of some help

With the holidays fast approaching, you may be on the lookout for some extra help – especially if you own a small retail business. But you don’t want to hire more full-time employees – the rest of the year, you get by just fine with the staff you have.

So temporary workers it is. Perhaps you contract with a staffing agency to place workers with your business. Maybe you go it alone and fish for leads via your business’s social media channels. (For more tips on selecting seasonal workers, read our post, “Hiring for the Holidays.”)

No matter which approach you take, there is one universal truth about temporary workers: according to the Occupational Safety and Health Administration, these employees are high risk for work injuries and illnesses. This brings up a few questions. For starters, why is this group so high risk? What can you do to keep these employees safe? And are you responsible for covering your temp workers with Workers’ Comp Insurance?

Let’s get some answers.

The Plight of the Temp Worker

While crunching the numbers on workplace injuries, OSHA noticed an alarming trend: many of the reports involved temporary workers suffering serious or fatal injuries – some on the first day of the job.

There could be a few reasons why this group of workers is so vulnerable:

  • There may be a lack of communication between the host employer and staffing agency about workplace conditions.
  • Temporary workers are in a new environment and don’t know the workplace hazards.
  • Host employers may not realize they are obligated to train temporary staff in workplace safety.

Last year, in response to the issue of temp worker safety, OSHA launched its Temporary Worker Initiative, which provides outreach, training, and enforcement. Your business needs to understand and follow these OSHA guidelines if you hire temp workers, lest you be fined for noncompliance. For example, you can be fined up to $7,000 if you fail to ensure that employees who carry heavy loads wear steel-toe boots. You can read more about citations and penalties here: “Types of OSHA Violations.”

Protect Workers of All Walks

OSHA and the National Institute for Occupational Safety and Health created Recommended Practices so that staffing agencies and host employers can better protect temporary workers. We recommend reading the complete guide, but for your convenience, here are some of the takeaways:

  • Stay in touch with the staffing agency. The agency is responsible for verifying the safety of their temp workers. That may mean they need to inspect your safety programs and step in when a temp worker is injured while working for you or has a “close call.” Keeping the lines of communication open with the staffing agency can help you both efficiently investigate and address safety risks.
  • Train temp workers like they are your own. Regardless of whether or not you work with a staffing agency, you must provide safety training for your temporary workers just as you would for your own employees.
  • Read your contract with the agency carefully. Your contract with the staffing agency should define the temporary worker’s tasks and the safety responsibilities of each employer. That way, there’s no confusion over which party is liable if something goes wrong.
  • Know your obligations. Though you and the staffing agency are both responsible for investigating worker injuries, OSHA requires that injury and illness records be kept by you. That’s because as the host employer, you control the manner of the temp employee’s work. Usually, your contract with the staffing agency will make this obligation clear.

Though OSHA doesn’t touch on this, we’d like to add another point: get your Workers’ Comp obligations sorted out. If you do work with a staffing agency, be sure the contract states which party is responsible for providing Workers’ Compensation Insurance. Typically, that is the agency’s duty. But if you are hiring seasonal workers on your own, you may need to cover those employees with your policy. To determine your coverage obligations, look up your state in our guide to Workers' Compensation laws.

If your state requires that your business cover seasonal workers with Workers’ Comp, you can face serious fines for noncompliance. You can read about one business’s serious misstep in the post, “State Sues Small Business over Workers' Compensation Insurance Violation.”

The best way to ensure the safety of your workers and your business is to understand your obligations for creating a safe work environment, educate your workers on keeping themselves protected, and do everything in your power to enforce workplace safety. Learn more safety tips in the post, “How to Prevent Workers’ Comp Claims.”

how is your business exposed

“Take It from Someone Who’s Been There” – Retirement Saving Tips for Small-Business Owners

by Jaclyn Patulo5. November 2014 07:42

myfootshop logo

Jeff Oster, DPM, is CEO and medical director of Myfootshop.com. He is a graduate of Western State College of Colorado and The Ohio School of Podiatric Medicine. Jeff has practiced podiatric medicine and surgery for 30 years. Myfootshop.com is the leader in an effort to democratize healthcare by using the Internet as a tool to improve healthcare literacy.

We talked with Jeff Oster about his trials and errors of saving for retirement and how small-business owners can avoid the same mistakes he made to maximize their chances at retirement savings success. The transcript below has been lightly edited for length and clarity.

How did you start your business, Myfootshop.com?

I’ve practiced podiatry for 30 years, but I was never really enamored by the traditional business model. Start an office, meet a person, interaction results in resolution or problem, payment, and repeat the process. It doesn’t entice me. In the late ’90s, I started writing about the things I knew and practiced. We developed an educationally driven e-commerce website focused on ankle and foot care. Stories, photos, and conditions were collected during the day, and at night, I would integrate them into the site.

There’s satisfaction and greater benefits when this information is shared. My blog posts reach a wider audience versus a single interaction with a patient in the office. So I became a doctor by day, Web guy by night. It’s a good fit for me – a healthcare entrepreneur. It’s been fun. To integrate the Internet, my goal was to create a lifestyle business. It’s a blast to be connected with people from around the world.

What motivated you to start saving for retirement?

As many small-business entrepreneurs probably experience, you’re always finding things to be done. We weren’t good at saving. We were always discovering new opportunities or concerns that would need funding. My wife is my business partner. She manages my practice and she’s the operation manager for the website. We don’t have anything like a corporate 401(k) option in place. We haven’t run a traditional plan with health benefits or retirement plans because we only have part-time employees. Nobody is going to lend us money for retirement.

You have to change your outlook about saving money. The attitude of, “Hey, we’ve got some money set aside, it’s there, we’ll muddle along somehow,” is antiquated and unstructured. I have a couple relatives who are retired, and I saw retired patients who don’t have the savings. What kind of life is that? It’s kind of scary.

Why should you start saving early for retirement?

I’m 58, late in my career, and I needed to do something fast to start saving for retirement. We needed motivation and regretted not starting earlier. You think, “Hoo boy, what can we do to make this happen?” The later you start, the less time you have. Individual retirement ages vary by industry, but when you work by yourself, you don’t have that big-business structure that guides you. It’s the course of an entrepreneur. If you start early enough, the money you set aside has longer to grow.

How did you start saving for retirement?

We tried a couple methods, a bit of trial and error. We tried automatic deposits, savings mechanisms and tricks, but we never set up a formal retirement account in the early days. We have an IRA now. Everything was sort of a flop. Any sort of follow-through to make savings happen fell apart. Entrepreneurs set goals and to make them happen, stuff gets in the way – stuff that needs money. Revenue would come in and something would need attention. We’d keep saying, “Next week we’ll save. We’ll save next week.” The art of running a business is to mediate and make sure all that doesn’t get in your way.

Finally, we found the discipline to take a percentage right off the top of our revenue that comes in before the supplier gets it. Not just the net revenue, but all of it. Any dollar that’s paid to us, we take a percentage (we take five percent of all monies) for retirement. That’s what works for us. It was the only way we could structure our savings plan. We didn’t wait to pay someone else. It became a priority – you never miss it because it’s scooped right off the top.

Pay yourself first. Whatever percentage you think you can tolerate, take it and put it aside. The fun is watching it grow because money increases over time when you invest and handle it properly.

What if a small-business owner struggles to stick to a retirement savings plan?

For those who are undisciplined – and we know if we are (we think we aren’t, but we are) – it’s a very reliable mechanism for saving. Start now. The earlier you start, the smaller a percentage you have to pull from your income to save. Find the formula for the age and number that you want to reach for retirement. Consider your income for the next five years, ten years, and beyond.

Focus on yourself. So many entrepreneurs focus on other things than themselves, but you need to focus on the home front. It seems obvious at first, but you’re typically just concerned about putting food on the table. “Saving for retirement ­– I’ll do that later.” No. Do it now.

Small-Business Retirement Tips from Jeff Oster

  • Determine when you want to retire. How old will you be? What sort of plans do you have during retirement? Where will you live? Figure out your long-term plan.
  • Pick a savings plan that works for you. Pay yourself first. Budget a percentage of your earnings for retirement savings. Think about opening an IRA account or stock investments to diversify your savings.
  • Stick to it! Be consistent and make regular contributions to your retirement savings. Any deferred deposits only hurt you in the long run.
  • Start early. Don’t wait! Begin planning and saving for retirement now. Consult a financial planner if you need help getting started.

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Labor Department Helping States Crack Down on Worker Misclassification

by Ruth Awad27. October 2014 08:06


It may seem like we’ve been talking about worker misclassification a lot these days. (Need a refresher? Check out the posts, “This Common Mistake Can Cost Small Businesses Thousands” and “$2 Million Fine for Misclassifying Employees.”) And it seems all the talk is warranted because things are about to get real for small-business owners.

Accounting Today reports that the U.S. Department of Labor is cracking down on worker classification by funneling funds to states to help with enforcement – $10,225,183 to 19 states, to be exact. The DOL hopes that the extra cushion allows states to beef up worker misclassification detection programs and protect unemployment insurance programs. In practice, this means states can fine-tune their ability to audit employers.

This is a big issue for small-business owners because they often rely on freelancers and independent contractors when they first start out. When you hire freelancers, you get the help you need without the worry of offering benefits or paying half of their employment taxes. But if your freelance worker is legally considered an employee, you can be in a world of financial trouble. You could be liable for…

  • Back payroll taxes.
  • Workers’ Comp benefits.
  • Healthcare benefits (depending on how many employees you have).
  • Other penalties.

Let’s take a look at how you can avoid these fines and why the employment contract you use with freelancers matters less than you might think as far as regulators are concerned.

Distinguishing Employees from Independent Contractors

There’s no hard-and-fast distinction between an employee and a 1099 worker. Rather, the IRS gauges a worker’s classification based on…

  • The amount of control the worker has over how they complete their work.
  • How the employer compensates the worker.
  • A worker’s ability to work for other businesses or clients.
  • How essential the worker’s job is to the survival of the business.

 You could run into trouble if your freelancer…

  • Stays with your business for the long term.
  • Only has time to work for you.
  • Is required to keep a certain schedule.
  • Uses your equipment.
  • Is responsible for the bulk of your business’s work.
  • Doesn’t submit invoices in order to receive payment.

All of these factors could indicate an employee-employer relationship to the IRS. The main consideration is that the freelancer must be able to operate as their own entity without constant oversight from their client. A client can establish deadlines and project parameters, sure, but they can’t decide the manner in which the contractor completes their work.

The Triple Whammy Punch of Worker Misclassification

When an employee is wrongfully classified as an independent contractor, it’s not just the IRS’s wrath you’ll face. The IRS, DOL, and Workers’ Compensation Board can all dispute the status of a worker and levy fines.

As you may already know, employers are required in almost all states to insure their employees with Workers’ Compensation Insurance. But let’s say you accidentally misclassify workers as independent contractors, so you don’t have Workers’ Comp coverage. If your business is audited and your workers are reclassified as employees, your state can file a lawsuit against your business so you’ll pay the fines for being uninsured. You can read about those steep fines here: “State Sues Small Business over Workers' Compensation Insurance Violation.”

To learn about your state’s laws, check out our guide to Workers' Compensation laws.

But I Have a Contract!

As a responsible small-business owner, you probably use employment contracts to avoid these kinds of legal snafus. But even a lawyer-penned contract can’t override the reality of your working relationship, as far as state regulators are concerned.

This isn’t to say you shouldn’t use contracts – you most definitely should. They can back up your claims that your contractor isn’t an employee. But you’ll also need to give your contractor enough freedom to earn a living from other clients and to do their work on their own terms as long as they meet your deadlines and project requirements.

For more information on how to properly classify workers, see the IRS’s helpful guide.

protect your assets

Hiring for the Holidays

by Rieva Lesonsky24. October 2014 08:10

hiring sign

Tis the season to start your holiday hiring if you want your pick of the best talent. Truthfully, all of the big guys have already started (UPS, Walmart, etc.). In fact, according to the outplacement consultancy Challenger, Gray & Christmas, the holiday hiring forecast for employees is excellent, with more jobs out there thanks to spending gains and an overall rise in employment.

Are you now worried you waited too long to hire holiday staff? Don’t fret. Here are five tips to make sure you hire right for the holiday rush:

  1. Check online hiring sites like Elance and Odesk. You might run across some workers with specific skill sets suited for your small business, especially if you have a specialty business like IT services or marketing.
  2. Promote your job openings on social media. Reach out to active fans because you never know when one of your followers may be looking for extra holiday hours (or know someone who is). Also, reach out to your network on LinkedIn for any hiring suggestions.
  3. Check out temporary staffing agencies. They can help by doing the hiring legwork for you, including vetting applicants and doing most of the paperwork. Agencies also handle paying temps and tax issues, so all you have to do is pay the agency.
  4. Go rogue and look for help in unexpected places. Reach out to seniors or stay-at-home parents who need extra cash for the holidays. Make the hours flexible to attract more candidates. Ask local PTAs if you can buy an ad in their school newsletter, and ask local senior centers if you can post a flyer.
  5. Consider the teen-dream workforce. Teens need money and are often out of school in time to help your business for the holidays. To get the most from teen workers, offer flexible job schedules and make sure you clearly set expectations.

Rieva Lesonsky is CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email Rieva at rieva@smallbizdaily.com, follow her on Google+ and Twitter.com/Rieva, and visit her website, SmallBizDaily.com, to get the scoop on business trends and sign up for Rieva’s free TrendCast reports.

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