Category Archives: General Advice

Is Your Team of Employees Helping or Hurting You?

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Ohhh I loved my pillow. I used to travel with it all of the time when I was a kid. This week, while I was at the Los Angeles airport on my way to see clients in San Francisco, I saw this guy with the worst comb-over ever traveling with his own pillow. I was expecting him to whip out a juice box and maybe even his special blanky. He had made up his mind to travel in comfort.

So, how comfy are you in your business? I mean really comfy? I’m not sayin’ that you should convert your office into a day spa. I’m talking a little less chaos and less flying by the seat of your pants. On a scale of 1 to 10, how stressed are you when you come into the office? Believe me, I still have some of those days.

In the past year, I have worked with tons of entrepreneurs. Many of them aren’t comfy in one particular area – their team of employees, independent contractors, and even their vendors! They have the wrong people with the wrong skill sets in the wrong positions.

Take it from me. I have had many of the wrong pillows on my team. My revenue stalled, my client experiences weren’t as great as they are now, and I was spending tons of time fixing mistakes that my people made. Ugh!

Here’s the deal. We all want a team of employees who are dependable, smart and take initiative. But that’s not enough. Try filling your positions based on how your people are wired.

On one end of the extreme is the person who loves to do research, gather data and pays a lot of attention to detail. On the other end of the extreme is the person who is highly creative, can make quick decisions, and can function with 5 projects going at the same time.

A common mistake that entrepreneurs make is hiring creative people to do highly detailed tasks. Things fall through the cracks. The systems don’t get followed, or even implemented – and then you, the business owner, have to do it yourself. Time is money.

If you don’t have the right team to support you, it is going to be challenging to seriously grow your business. It’s that hard. Things could be so much easier if you had a team of employees using their strengths and doing what they are innately good at. Why try to fit a square peg in a round hole? Get comfy.

Make an investment and hire the right people (or vendors) for the right job. Other than marketing, this is THE investment that you must consider if you want to have a kick ass 2nd half of the year, and really a HUGE 2014.

How do I do this? I use the Kolbe Index A test. I even use it with clients. It helps me connect with them because I understand how they are wired. It’s that good. The cost? $50. I get no kickback if you use them.

Take your biz to the next level. Get comfy. Get support. Get the right team of employees to help you so they can hold down the fort while you are on vacation with your cozy pillow.

Justin Krane, is a Certified Financial PlannerTM professional and the President of Krane Financial Solutions.  His savvy, holistic approach to financial planning allows clients to unite their money with their lives and businesses with sound financial decisions. Using a unique system developed from his studies of financial psychology, Justin partners with entrepreneurs to create a bigger vision for their business with education and financial modeling. Follow Justin on Twitter @justinkrane.

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Time is Money: How to Set Up a Small Business Network

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For small business owners, a business network can make life much easier. The network allows for seamless sharing of files among all of your employees and is much easier to set up than most people realize. It also speeds up the productivity of your office due to the faster transfer of information and isn’t too expensive to install a small business network in either. You can do it yourself with minimal instruction and background experience. The next few steps will lay the basic blueprint for setting up a network in nearly any small business environment.

The Basics

First and foremost, you are going to need a router. Routers transfer information between computers on the same network. It is the central hub for your network. Preferably, you are going to want a business grade router, so you can use all of the advanced security features.

The wireless against wired route is a bad example, since you are never forced to use one over the other. However, a wired network provides more security. On the other hand, a wireless network allows for laptops and Wi-Fi capable desktops to connect without the hassle of wires. You can have both networks on one router, so you will never be lacking in connectivity.

Types of Networks

You can do either a peer-to-peer network or a client-server network. The only difference is in the way the files are transferred.

Peer-to-peer networks allow the transfer of data directly from one PC to another PC. However, it also has the potential to be less secure and has fewer features than a server-client setup.

A server-client setup allows you to transfer data between computers too, but all of the information goes through a server that is located on the premises before it arrives on another PC. It effectively adds another layer of security on top of your existing system and oftentimes large businesses prefer this setup.

Security

Security is the next important measure in a business network. A good security system prevents users from accessing your network without your permission.

Typically a secure network is successfully set up by following these instructions. First, you install a WEP password onto your router. This can be done through the router’s firmware, which is accessed by typing in the router’s IP address. Next, you choose a password. It translates into four strings of hex code that protects the password from outside sources. Finally, you must input the password on every wireless device that connects to the network. In some cases, you will also have to do it for computers that have a wired connection to the router.

Additional Useful Features

You may want to use VPN, or virtual private network, software for accessing your network from places around the world, assuming you have an internet connection.

On a VPN, your computer is treated as a computer that is in the network. There is one key difference: speed. The speed of a VPN network depends on the speed of the internet service you are using.

However, a VPN provides a business with a means of accessing their network from around the world. This is obviously extremely efficient and helpful because it allows business professionals to access their network without physically being at the office.

As a small business owner, you can install all of these systems yourself. In turn, this helps to save you money and provides you with a secure network. It is simpler than it seems for small networks, but it gets tricky when inputted on a larger scale. It is pretty convenient to obtain more extensive knowledge about these topics with a Management Information Systems Degree, as well.

Blake Pappas has a bachelor’s degree from Arizona State University and is currently pursuing an MBA. 

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How Taking Minutes Can Bring Small Businesses to Success

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With technology ever evolving and online collaborations on the rise, minute taking can seem like an old-fashioned approach to recording a business meeting. However, it does still have its place and can benefit a business in numerous ways, especially those who are new to running a company and start-ups.

As a quick refresher, minutes are notes recorded by an allocated individual, often a PA or secretary, in order to summarize what has been discussed at a meeting. Done correctly, they will highlight the meeting chronologically and succinctly, including important information such as event dates, deadlines, who said what, budget concerns and suggestions.

Why are minutes important?

Minutes are important for a number of reasons. To begin with, it’s important to have a record of meetings that have taken place in order to act on information. Often, once out of the meeting, important information may be forgotten, so having that record gives everyone involved a reference point when it comes to carrying out what has been discussed.

For those employees who don’t attend the meeting, but will be working on some of the things discussed, it’s a valuable record to use as a starting point for carrying out their job. Further to this, it means that workers can effectively stay on track, with clear deadlines and definitions, without the need to ask others in the office or type up their own notes.

Minutes are also important for absent members of staff and as a tool to avoid arguments over who decided what and when.

How they can help avoid failure

Record keeping is an important aspect to every business and keeping minutes is just another instance of this. By looking back at previous meetings, managers can track the success of certain projects by seeing instantly what was discussed and imagined for each one.

Budgets can be examined to see where they can be improved, or when funds can be added to improve various aspects of the business and information from minutes can be included in the company’s annual report, giving an effective yearly overview, which has all of the necessary information included.

The performance of suppliers can be tracked too, using information such as when they were first used, how much budget was allocated and how they have performed any work for the company. This kind of information is invaluable for keeping tabs on suppliers and service providers to ensure the company is getting the best deal.

Communication

In business, another important factor is communication and this is where minutes really come into their own. Without minutes, everybody would be required to remember what happened during a meeting and non-attendant staff would receive a watered down version, often which will have changed from what actually happened.

Taking minutes and having a clear and concise overview of everything discussed in a meeting will make for a happier team, who are more productive. It also promotes effective collaboration as everyone is on the same page from the start.

Collaboration is a bit of a buzzword at the moment and this is because it’s very effective and has been proven to increase productivity. For a company that is just finding its feet, this is priceless, as a productive and happy team will always be an asset to any business.

This has recently been further confirmed by the introduction of social intranet where an office network has its own kind of social network, something on which minutes can easily be distributed and collaborated on with little fuss.

Minute taking has been an invaluable business tool for many years and should never be discounted because of advances in technology. By capturing an organization’s most important decisions, communicating them clearly and keeping a concise record, businesses can safeguard against any problems they may experience in the future.

Effective record-keeping, communication and productivity increase, budget tracking and the well-being of employees are all key take-out points that every new or small up and coming business should bear in mind and apply when it comes to a building a successful company.

Written by Ellie Boyd- Video and writing journalist for Payday Angels- A small company who are taking it upon themselves to tackle the financial crisis within the payday loan industry.  We review other payday lenders- for example read our Payday UK review here. As we are new to building our company up, we have relied heavily on tracking our every move, in order to develop business more efficiently and learn from previous mistakes made. 

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5 Tips for Launching a Successful Online Store

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When you decide to start a business, optimism and excitement abound. You work tirelessly to ensure your business has solid fundamentals across legal, product and more but as launch day for your online store approaches, a myriad of new details and competing priorities can leave you feeling anxious. Here are 5 areas of focus that should top your list to help you successfully launch your store.

Put your best foot forward

One often sees online stores fail in one crucial area: properly and beautifully showcasing their products. Despite a strong product line, customers can misconstrue poor picture quality for poor product quality. Don’t fall into this trap! Follow these simple guidelines and display your most important site assets, your products, in the best possible light.

  • Consistent background: pick one consistent color or backdrop and stick with it for all product photos.
  • Crop to the same size: choose one set of dimensions for all photos so a shopper sees a product listing page of equally sized images, focusing on what is important versus oddly shaped images.
  • Zoom in: include at least one picture that shows your product up close, perhaps the fabric pattern, texture or other intricate detail.
  • Provide context: show your product in use. The more guessing you can take out of the equation for a customer, the more likely you are to make the sale. That means showing a food product on a table, an earring on an ear or soap in a nice bathroom setting.

Make sharing easy

Word of mouth about your store cannot spread easily without the proper mechanisms in place. Many shopping cart platforms give you the technical tools to include social share buttons, star ratings and product reviews on your store. The social cues that are sent when a shopper sees favorable stars, reviews and shares are invaluable. Be sure to enable these features immediately and ask friends and family to seed some positive responses to help you get going in the right direction.

The little touches matter

Stores with excellent products are nice. But stores with great products and topnotch customer service are memorable. Start with custom order receipts. This is one of the rare chances when a customer is expecting an email from you. Include a discount to encourage a follow up purchase and thank them for their order. Additionally, consider unique packaging or including a surprise sample or note along with a customer’s shipment. In short, even little touches can help you stand apart from the competition and boost sales.

Create a “test & try it” calendar

If you try to tackle every sales and marketing tool in the handbook at launch, you’ll likely end up overwhelmed and unable to fully give each the attention it deserves. Instead, create a calendar with a weekly goal. Each week, try a new strategy or tactic. In the beginning that could be week 1 creating your Facebook business page and week 2 starting your Twitter account. After you’ve gotten into the routine of posting to each, create a Pinterest account in the weeks that follow.

Get in front of customers

Selling your products offline can help you tailor your messaging and pricing online. Local farmers markets, mall pop-up booths and trade shows are all great places to get in front of a large volume of shoppers and hear their on the spot reaction to your products and how you’ve positioned them. In person feedback is invaluable and can help you refine your store quickly after launch, showcasing the best possible version to your online customers.

Happy selling!

Anjali Cameron leads marketing for Cashie Commerce, which makes it easy for small businesses to create and mange social, mobile and online stores. Cashie Commerce helps customers sell anything on any website and provides the sales and marketing tools to help customers grow their business. Working daily with small businesses, she’s learned a lot about ecommerce best practices. Check out her tips and ideas for selling online.

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X is for Xenodochial… or (e)Xcellent Customer Service!

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Obviously, we struggled a little bit with the letter X. There aren’t a lot of topics that lend themselves well to this particular letter, so unless we wanted to discuss the ins and outs of running a xylophone business, we had to expand beyond our normal vocabulary. Enter xenodochial, a long word that essentially means being nice to strangers – a quality that businesses must exhibit if they ever hope to attract new customers! But for simplicity’s sake, you can also think of X as standing for (e)Xcellent customer service.

Truly the most confusing letter.

There are a lot of theories on how to best serve your customers, but in reality there is no one answer on how to provide good customer service. Instead, there are multiple factors that have to built into how a business interacts with its customers.

First, though, it us up to the business owner to determine what their customers expect from them in terms of interaction. After all, what works in a restaurant may not necessarily work for a tire shop. Part of finding your niche is learning what your customers expect, and then working to meet those expectations. After you figure that out, you can begin training your employees on how best to interact with the customers. Do they want to be greeted at the door? Updated on new products? Treated like close friends? Part of running a business is organically zeroing in on answers to those types of questions. While a business book can give a laundry list of recommendations, customer service expectations and policies should be built on your experience with your customers.

Of course, good customer service goes beyond your interactions with your customers. You also need to make sure your employees are happy and treated well by the management – yes, they should always work in the interest of the company and people that pay them, but you can always tell when someone hates working somewhere. A disheartened, unmotivated employee may not treat customers poorly, but they certainly won’t work to make sure they have an excellent experience.

Finally, there are three parts of customer service that advisors and analysts constantly harp about – knowledge, body language, and anticipating needs. Though these three things border on cliché, they can be useful as long as they aren’t the only three parts of customer service focused on. Everyone who works for the business should be knowledgable about what the business sells, should be able to make eye contact and smile, and should be able to anticipate common customer needs so that customers feel that the business went “above and beyond” (if you will pardon another cliché) while helping them.

Xenodochial may be a complicated word, but customer service doesn’t have to be. Honestly, a lot of what creates a good customer experience is common sense. Treat your customers well and know what you are talking about. When you hire people to work for you, make sure they know and do the same. Small businesses have an advantage over giant corporations because they can still inject a bit of that personal touch into how they interact with their customers. And, as long as your employees feel as though they are an important part of your business’s success, they will be willing to work hard to maintain that level of customer service you worked so hard to build.

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4 Risks and Payoffs to Running Your Own Small Business

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For most of the risks that you face in running a small business, there tends to be a corresponding payoff that goes hand in hand with it. Business insurance will deal with some risks that can damage your company and work on ways to mitigate them, but there are more general risks that a business faces that are far from insurable. Luckily, these less insurable risks do normally come with a silver lining to balance things out.

Risk: No financial security

If you run your own business, you are the one that pays the wages. This means that your financial security is far from guaranteed. You have a responsibility to keep your staff in employment and to nurture their development, all the while being careful not to overwork them and drive them into the ground. Not only that, but you will answer to a higher power if you have share holders who should be breathing down your neck to make sure you are doing the best you can in maximizing their investments.

The lack of financial security will really hit you when you realize that holidays and sick days are less of an option. When you work or yourself, it can be difficult to schedule that kind of time off and keep the business afloat at the same time.

Payoff: No fear of losing your job

Of course, you could argue that while financial security might be in short supply for you, job security is in fact much better. Working for yourself does ensure that you won’t be made redundant.  That might sound like an issue of semantics and psychology (a journalism tutor once described to me the fine line between “freelance” and “out of work” in that there is so very little practical difference between the two but one is a more positive state of mind than the other) but running your own company makes you the master of your own destiny when it comes to continued employment. You might have to work harder and for longer periods of time, but at the same time this should be easier because you’re doing something that you’re passionate about and you’re able to better act on your own ideas. That has significant advantages over working for someone else in an area that maybe you have less interest in.

Risk: Burnout

What started as a passionate effort that you find yourself pouring all your time into can quickly turn into a soul destroying struggle to stay committed if you start to burn out from it. The burnout can have the added impact that comes from knowing you’ve destroyed a genuine passion through all work and no play in an effort to get your start-up off the ground. Burnout can strike at the most inopportune times and cripple a business with significant potential. It is most likely to hit you if you have bitten off more than you can chew and find yourself facing a seemingly insurmountable workload. A company that burns out can survive, but it risks a demoralized staff and could sack its reputation if it fails to deliver on promises. Additionally, once things plateau in terms of progress, it can be difficult to get that ball rolling again.

Payoff: Relative freedom

Running your own business does give you a remarkable amount of freedom. Although declarations of being able to do whatever you want might be overstretching it a bit as they ignore the commercial realities of your situation, you really can run the show the way that you think is best. Your potential to adapt and change the way you do things is an ideal counter to stave off burning out or address it if it hits you.

Risk: Not enough clients or business

Struggling to drum up enough business or clients can be a significant problem for small businesses and the self-employed. Larger businesses might have larger contracts and longer running agreements whereas your business might take a lot more short term work which can quickly dry up depending on your trade or profession.

Payoff: Choosing your clients

Which clients you take on is entirely up to you when given the option to pick between those interested in working with you. It is your responsibility to maintaining new and recurring business and keeping your schedule full, but if there are contracts that you would rather pass up on, that’s entirely up to you. Small businesses still in their early start-up stages might be a little more under pressure to take on anything that comes their way, but ultimately once you find yourself more established and in more of a selective position, the direction you take your business and who you want to work with is your decision.

Risk: Failing in your responsibilities

Being employed within a company can limit the responsibilities that you have in place. Depending on your role, you might manage a whole division or particular function of a company, but unless you are particularly high up the corporate ladder, the buck does not stop with you. With your own company, it’s all on you. You are responsible for pretty much everything that goes on as part of your business activity, regardless of the division and often regardless of delegation. There is a lot to stay on top of and be held accountable for and the risk is that you ignore a critical area which ends up landing you in significant trouble.

Payoff:  Direct rewards

There is a direct link between how much work you do and how much money you earn when you’re running your own small business. Other factors can sometimes work their way in such as favorable market conditions might mean you are on the right side of a boom in industry and simple good luck could also mean you inadvertently strike a virtual gold mine with your products or services, but when it all boils down to it, your rewards for hard work are much more direct than the vague commission structures and rumored promises of potential promotions that you get in full time positions.

Written by David Hing for YOUR Insurance a broker that understands insurable risks for small businesses and knows a little about non-insurable risks too.

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Do You Owe This Misunderstood Tax? (Hint: The Answer is Probably Yes)

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This guest post is brought to you by Outright.com, the alternative to Mint for business and simplest way to manage your small business finances online. Sign up today for a less taxing quarterly estimated tax time!

You’ve jumped through what seems like countless hoops to get your business going. You’ve filled out every form and talked to all the right people. You did all the research and learned from others’ past mistakes. Now it’s just a matter of getting it all done.

Of course this is easier said than done. There are a million things you have to do as a business owner you never dreamed about as a salary or wage worker. Aside from your usual business matters you must now attend to you have to worry about dealing with taxes.

Not just your usual taxes, either. Quarterly estimated taxes, or QETs, are about to become a huge part of your life. If you don’t know what they are or how they work, though, you could be in for a world of hurt. Let’s take a look and get you familiar with them.

What are Quarterly Estimated Taxes?

Back in your days of working for “the man” you probably didn’t have an intimate relationship with the tax man. Sure, there was the yearly scramble in April and you noticed that some money was taken out of your paycheck, but that was about it. You didn’t have to calculate anything every pay period or constantly send money in yourself.

Now, though, things are different. Taxes were taken out of your check because the U.S. is a “pay as you go” tax system. Now, though, you’re the one responsible for paying your taxes as you go. Fortunately, you don’t have to send in tax payments every time you receive payment on an invoice, but you do have to pay these “quarterly estimated taxes.”

In a nutshell, you need to figure out how much in income taxes you will owe at the end of the year and send in four quarterly payments totaling that amount. These payments are sent in for Quarters 1-4 in April, June, September and January.

Of course, you won’t know after Q1 just exactly how much income you’re going to make. After all, you could have an unforeseeably prosperous Q4 and end up owing more in taxes than you expected come next April. Fortunately, the IRS understands this, which is why these payments are “estimated.” A good rule of thumb is to pay as much in estimated taxes as you paid last year. You can find this number on your 1040 form. So if you owed the IRS $4,000 last year, make each quarterly estimated tax payment $1,000. Paying as much as you owed in the previous year will also mean you’re off the hook for fines and penalties.

Why Quarterly Estimated Taxes are Your Friend

Believe it or not, QETs can actually help your business. It can be a little annoying at first to constantly be worrying about these payments, but there are several payoffs that can improve your company in the long run.

The first reason is organization. One of the first things you should do before starting the process of figuring out your first payment is getting your paperwork in order. We recommend grabbing an account at Outright, which can automatically track all your invoices and payments and everything else financial. This way you don’t have to constantly keep up with physical paperwork.

This organization can benefit your business in a huge way. So much of your time will be eaten up by tasks like QETs that a proper system can make a huge difference in your production schedule.

On top of that, handling QET payments can give you a lot of experience when it comes to April taxes. The more you do them and the more you keep up with them the better you get. When yearly taxes come around it will seem like nothing to you! Not to mention you aren’t facing a steep tax bill all at once.

As far as payments to the IRS go, we recommend using the EFTPS. It’s an electronic payment method the government set up and is super fast and easy. Unless you’re lucky enough to live in a state without income tax, you’ll likely owe quarterly estimated taxes to your state government, too. Check out your state’s taxing authority for more information on those.

If you have more questions about quarterly estimated taxes, check out Outright’s Online Sellers Tax Guide or ask our financial experts a question at the Outright Community!

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Is Your Business on the Right Track? Take the Quiz and Find Out!

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This guest post is brought to you by WePay – the easiest way to accept credit cards online.

How well do you know your company? You may think you know your company like the back of your hand, but every business owner needs a little reminder to take a look at the big picture. Take the following quiz and think where you’re headed and if that’s the direction you want.

Question: Who are my customers?

Yes, you know who your customers are as you have their order forms saved. But do you REALLY know them? Where do they live? What are their other interests? What websites do they go to every day? The more you know about your customers the better you can customize an experience for them which will make them ecstatic to do business with you. This can lead to more sales and lifelong fans recommending your business to everyone they know.

Question: Where does my money go?

Your business can only grow properly when you’re consistently making more money than you’re pumping out. This may seem obvious, but it’s easy to forget sometimes, especially when we get caught up in buying stuff we may not need. Start tracking every cent that goes out of your business and see how much you’re wasting. You may be surprised!

Question: Why am I in business for myself?

Every business owner has a unique story. Some get into business to get out of the rat race while others want to spend more time with their family. Yet others have a great business idea they know will succeed. Whatever the case may be, it’s important to always remember it. If you don’t, you may end up taking your company in a direction you didn’t expect…or want.

Question: How does the public find my business?

You’ve no doubt undertaken several marketing and public relations campaigns to spread the word about your business. Do you have any idea which ones worked? If not, it’s time to find out, as discovering the road your clients travel to get to you can change the way you do business. For instance, if clients mainly find you via social media, you would want to amp up those efforts rather than continuing to spend money on magazine advertising.

Question: How do people pay me?

This is another question that may seem silly and obvious. Why should you be worried how people give you money? The answer is it’s another way to nab even more sales. If your customers are clamoring for you to take credit card payments and you don’t listen, you’re missing out on money in your pocket.

Question: Where do I see my business in X years?

How far in the future have you thought about your business? Naturally nobody wants to imagine a time where they’re forced to hand over the reins when you have a company that’s your baby. However, it’s important to imagine what your “endpoint” is as it will arrive one day whether you like it or not. The more detailed your plans for retirement, the better off you’ll be when the time finally arrives.

How’d you do on the quiz? Is there one aspect of your business you really need to focus on?

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W is for Withdrawal

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Today on the ABC’s of small business we’ll be covering the basics, and the benefits, of what it means to file for a withdrawal for your company.

As previously covered here on MyCorp, corporations or LLCs that have previously foreign qualified in a state other than their home state to legally operate and conduct business in, file for a withdrawal in order to stop doing business in that state. By filing for a withdrawal, this ensures the business will have no further obligations to that state and the sooner the withdrawal is filed for review, the better. The more changes a business undergoes, it may become necessary to stop operating within certain states and expand to others instead.

Filing for a withdrawal provides more benefits than simply being able to stop conducting business within that particular state you withdraw from. Additionally, you’ll be able to prevent late fees and additional changes and avoid paying unnecessary taxes and annual state fees for your business within that state. Once your withdrawal order form has been filed and approved by the Secretary of State, you will have terminated the corporate existence in that state.

As a quick side note, before you start filing, remember that all required fees, penalties, and costs must be paid in order for the application for withdrawal to be considered complete with most jurisdictions.

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The Predicament of Personal Guarantees For Business Credit

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So you have your new corporation or LLC formed… great! Now the next task on your list might be to build credit for it, but how do you do that?

In many ways, building credit for a new business is much harder than building personal credit. With the latter, there are a plethora of entry-level cards for students and people with no credit history. Unfortunately, you will be unlikely to find starter cards like that for businesses.

Pre and Post Recession

Before the “Great Recession” it was possible for new businesses to get a credit card without any sort of personal guarantee. Advanta, who was the second largest biz card issuer in the US, offered low-limit cards to new corporations and LLCs. But they went bankrupt and no other major bank has followed in their footsteps.

These days, when you apply for a small business credit card, almost every bank will require you to sign a personal guarantee. This means you will be held personally liable for the account.

For example, if you opened up the business version of a Capital One card, it would be treated exactly the same as a personal version in the eyes of the creditor. That means if you default on the account, Capital One would have the same collection rights and that delinquency would show up on your personal credit report. Ouch!

Is it worth the risk?

Of course as we all know, entrepreneurship in and of itself is synonymous with risk. So a personal guarantee certainly isn’t the only financial risk that goes along with starting a new business! But there are still three important things to consider before you plunge into a personally guaranteed line of credit.

1. If you have business partners, be extra cautious

It’s one thing to personally guarantee your own spending, but if there are partners involved who also own equity in the company, then you are also guaranteeing their spending on the account, too. Is that a risk you’re willing to take?

If your partner(s) have a bad credit history, that alone should be a red flag that it might not be the best idea to risk your credit for their spending. And even if they co-sign the guarantee, that risk would not be equal. After all, if things fall apart they don’t have much to lose since their credit is already bad. You on the other hand may have everything to lose if you have an excellent credit history that’s on the line.

Now if your partner(s) have a credit history comparable to yours, then the risk is more equally aligned.

2. While harder to get, there are other options

The one nice thing about personal guarantees is that they allow you to get an unsecured credit card for your brand new business. Without the guarantee that won’t be possible, but there are still other ways you can work on building credit.

One option is a secured loan, which basically operates how a secured card works (unfortunately there aren’t secured credit cards for businesses). The company puts forth a security deposit with a lender and then borrows against it. For example, a $10,000 deposit would be put up to get a $10,000 line of credit. Since you’re essentially borrowing money from yourself, this technique is rather useless for borrowing working capital. However if the goal is to just build credit, this approach is a great choice.

Another option is seeking out local vendors who are more inclined to offer unsecured credit in order to sell their merchandise to you. Forget the big chain stores like Office Depot and Staples because they require $5 million in annual sales before they will extend credit without a personal guarantee. However, you will find that many local and regional supplies are more open to giving new businesses a chance.

3. Personal guarantees are more risky with speculative industries

Of course every business is speculative to some degree, but some are really speculative. If your company has zero revenue and no foreseeable revenue in the near future, then it’s going to be even more risky for you to personally guarantee the credit. For example, a biotech startup might not have revenue for years and future funding from outside investors is uncertain. That’s a type of situation where the risk will be even higher than normal.

Meanwhile there are plenty of other industries like restaurants which may have a high a rate of failure, but at least they can generate revenue almost immediately (which can help to service debt). Being in a situation like that, where at least some revenue is coming in, is arguably less risky than a company who has no foreseeable future of any revenue.

The bottom line: it’s a decision to not be taken lightly!

Just like anything in life, there are both pros and cons that go along with personal guarantees. Just make sure you thoroughly consider the cons before you sign on the dotted line!

This guest post was written by Thaddeus Ackermann.

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