Category Archives: business building

Maine Client Named SCORE Outstanding Young Entrepreneur for 2017!

 

Tristan Corriveau of Scarborough accepted his national award for Outstanding Young Entrepreneur with a boyish grin. 

“So, this is really cool!” he said.

The 2017 SCORE Awards celebrates the best in small businesses from across the country and honored Corriveau and his SCORE Maine mentor, Donna LeBreux for their work in launching Corriveau’s innovative business, The One Gallon Soap Company. 

 The One Gallon Soap Company with its environmental mission, produces liquid hand soap made from recycled bars of hotel soap.

Corriveau started his company in 2016, inspired by checking out of a hotel room and realizing he was leaving a nearly entirely unused bar of soap behind. After he discovered over two million such bars of soap are discarded by hotels every day, Corriveau’s passion for the environment drove him to figure out a way to repurpose them. He got to work experimenting, partnering with the Press Hotel in Portland and working with students at the University of Southern Maine (USM). His efforts led to a grant from the Libra Future Fund, which enabled The One Gallon Soap Company to move forward in its mission to perfect its process for recycling the used soap.

The aptly named One Gallon Soap Company exclusively packages its 100% recycled, premium liquid hand soap in gallon jugs. Selling soap by the gallon enables the company to sell the same amount of soap as other companies while only using one-tenth of the number of bottles.

Corriveau credits his SCORE Maine mentors, LeBreux and Chuck Grossman, for their roles in helping him start and grow his company.

“In every moment of doubt, frustration, and confusion, my mentors have stepped up and pushed me, listened to me, advised me, and cheered me on. They’ve been key to The One Gallon Soap Company’s success. It’s a privilege to be a part of SCORE.”

Corriveau’s mentors connected him with USM to identify a scalable method to sterilize used soap and facilitated valuable local partnerships. Through meeting with him about every two weeks (and sometimes more if there’s a particular issue to address), they continue to provide guidance and insight about finances, marketing, and more.

Lead mentor LeBreux thinks that Corriveau’s award was well deserved.

“Tristan encompasses the success characteristics of some of our most successful entrepreneurs. He has a passion for his business, he has intensity, and he has commitment to his ideas,” LeBreux said. 

We hope you’ll join us in congratulating Corriveau on his business success and celebrating how SCORE mentors can help entrepreneurs realize their dreams!

 

With experience in all aspects of launching and running a small business, SCORE mentors offer valuable guidance and feedback. If you need help starting a new business or overcoming a daunting challenge in your existing business, contact us today.

 

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Is It Time For Your Business To Hire?

If you’re like many small business owners, you started out as a  “solopreneur”—a one-person bands who does it all. However, as your client lists and product or service offerings grow, there comes a point where you can’t do it alone.

Some signs that may indicate it’s time to expand your team include:

  • Tasks are slipping through the cracks.
  • You’re missing deadlines.
  • You’re making silly mistakes.
  • You’re finding it difficult to stay organized.
  • Customers and vendors are getting frustrated because you don’t respond promptly.
  • You’re working constantly and beginning to feel burnt out.

If any combination of the above sounds familiar, consider delegating some work. Whether you decide to add employees to your payroll or work with independent contractors, by making others a part of your team you’ll be able to focus on what you do best and ensure other responsibilities don’t go undone.

So, should you hire employees or outsource work to independent contractors? Both have their advantages and potential disadvantages.

Pros Of Hiring Employees

  • Because they’re part of your business, they stand to gain a stronger understanding of your business’s internal processes, needs, and expectations than an independent contractor might have. Therefore, they will know how to do their work and understand how that work fits into the big picture.
  • The hourly rate you pay them will probably be less than you would pay to a contractor.
  • You have more control over the work. As an employer, you establish how you want tasks done, what technology and tools to use, office hours, etc.
  • When your workload increases, you have someone who is readily available to assist. Your work is their priority; they aren’t dividing their working hours between you and other clients.
  • If you need to step away for a day or go on a week-long vacation, you have someone you can rely on to keep the business operating while you’re gone.

Cons Of Hiring Employees

  • In addition to wages, you may also be required to provide certain benefits to employees. That can add additional cost to your bottom line.
  • You add the complexity of payroll to your business. Certain paperwork is legally required and you’ll need to withhold employees’ federal, state, and local taxes; social security; and Medicare from their paychecks.
  • Even if your business experiences a drop in sales or profitability, you still need to pay your employees their wages and salaries.
  • If you discover an employee isn’t a good match for your business, terminating that worker might not be a simple process.

 

Pros Of Hiring Independent Contractors

  • You don’t have to commit to paying them regular wages or a salary, nor are you required to provide benefits. So, even though you’ll likely pay them more per hour than you would employees, they could save you money overall.
  • If things aren’t working out with an independent contractor, you simply don’t have to work with them anymore (after any contractual obligations are met). You don’t have a termination process to adhere to as you would with an employee.
  • It brings in someone with the specialized skills you need for a particular area of your business. That may mean little to no training necessary.
  • They are responsible for their own permits and professional licenses.

 

Cons Of Hiring Independent Contractors

  • You lose some control over the work. Independent contractors typically have the autonomy to work from where they want, use the tools and technology they want, and work the hours they want.
  • Independent contractors often work remotely, so it may be difficult to know exactly how work is progressing.
  • Because they serve multiple clients, independent contractors may not be able to meet your deadlines as quickly as you would like.
  • Unless you have an agreement with an independent contractor that explicitly states it, you may not own the copyright for works that an independent contractor creates for you.

 

To make sure you make the right choice for your business, consider the type of work you need help with, the amount of work you need to delegate, whether the work is recurring or sporadic, how much control over the work process you’re comfortable with, and the legal and financial impact your choice will have on your business.

 

A SCORE mentor can serve as a valuable sounding board and source of insight as you begin working through all of that. Contact us today to schedule free counseling from our volunteer mentors who have knowledge and experience in all aspects of starting and running a small business.

Funding Your Business: Borrowing from Friends and Family

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Many startups struggle with financing their small businesses. With the average cost of starting a business approximately $30,000, most entrepreneurs need to seek some source of funding beyond their own coffers. For some, borrowing money from friends and family may be their only option.

 

According to credit analyst and volunteer SCORE Portland mentor Matthew Buonopane, “The five Cs of credit are of primary concern to banks when lending to businesses. These C’s include: character, capacity, capital, collateral, and conditions. While character, capital, and conditions may be in place to the bank’s satisfaction, collateral and capacity, or a history of good operating performance, are often absent or difficult for small business owners to obtain.”

 

Using funds from relatives and friends comes with unique risks and benefits, so carefully consider the pros and cons before asking Aunt Jane to float you a loan.

Pros

  • Borrowing from friends and family may give you quicker access to cash. They probably won’t demand as much documentation about feasibility and your business plan before helping you financially.

 

  • You may have more flexibility in setting the payback arrangements so you’re not feeling strapped or overstressed as you start and grow your business.

 

  • When friends and family invest in your business, you may find they have an abundance of enthusiasm about your endeavors. Having their moral support and encouragement can keep you motivated and optimistic.

 

Cons

  • If your business fails or hits hard times, you risk hurting the financial security of those you love if they extended themselves to support you.

 

  • Borrowing from loved ones may cause your relationships to become strained if your near-and-dear lenders feel—since they loaned you money—they have a right to tell you how to run your business.

 

How Can You Borrow To Build Your Business Without Breaking Trust

First and foremost, be upfront about the risks and challenges involved in starting a business so your friends and family know what they’re getting into.

 

Also, consider these other tips before you accept funding from them:

 

  • Conduct research and do your due diligence before asking for money. Do you feel confident your business will succeed? Ask yourself, “Would I invest in this business if someone asked me to?”

 

  • Be realistic when considering what funds your business will require. Get a good handle on the costs your business will have to cover so you’re asking for an amount of money that’s in line with your needs.

 

  • Determine if the funding will take the form of a loan or a share in your business.

 

  • Craft a contract and lay out a payment plan. This will ensure you and your friend or family member are on the same page and have the same expectations.

 

Get Help In Considering All Options

Even though you may think borrowing from friends and family is your only option, there may be other viable funding resources that you’re not aware of. By contacting SCORE and setting up a time to meet with a mentor, you might learn about alternative financing opportunities. Reach out to us today. Mentoring is free of charge, and our mentors have experience in all aspects of starting and growing a small business.

Business Structure Basics: Which Legal Structure is Right for You?

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Choosing the right legal structure for your business is one of the most important decisions you’ll make. It affects how your company is taxed  as well as the level of liability protection.

Let’s take a look at the common legal structures you might consider for your small business:

Sole Proprietorship

When you are the sole owner of your business and don’t elect a specific formal business structure, you will by default be a sole proprietor. Many home businesses operate this way. As a sole proprietor, you as an individual are your business. From an income tax standpoint, your business profits and losses flow through to your personal income tax return. One potential downside of a sole proprietorship is the lack of liability protection it provides. If someone sues your business and your company doesn’t have funds to pay the legal fees or creditors, your personal assets are at risk. The upside to operating as a sole proprietor? Simplicity and cost effectiveness. Aside from needing to file a DBA (Doing Business As) if you’re using a fictitious name for your business and securing a business license (if required for your type of business), you avoid the formation paperwork, costs, and ongoing compliance that come with other legal structures.

General Partnership

When your business has multiple owners and the owners don’t elect a specific formal business structure, the business will by default be classified as a general partnership. As with a sole proprietorship, a general partnership’s profits and losses flow through to the owners’ personal income tax returns. And as with sole proprietorship, owners’ personal assets are not protected from legal action brought against the business.

Corporation (C Corp)

C Corporations operate as separate legal entities from their owners and offer limited liability protection to their shareholders, directors, officers, and employees. C Corps are subject to two levels of taxation: one at the corporate level and another at the shareholder level. The C Corp structure offers the advantage of raising funds through sale of stock (either privately or through the public markets) to an unlimited number of shareholders. Delaware C Corps are the preferred entity of venture capitalists and other sophisticated investors. The startup costs are higher with a corporation and you can expect more compliance formality and less tax flexibility than with LLCs and S Corporations.

S Corporation (S Corp)

S Corp is not a type of corporation but a type of tax status available for eligible C Corps. S Corps are identical to all other corporations except for their tax status. S Corp taxation is popular for many small business owners because it offers one level of tax at the shareholder level and some relief from the self-employment tax burden of owners of LLCs that have not elected to be taxed as S Corps, sole proprietorships and partnerships. Only an owner’s reasonable wages/salaries are subject to self-employment (FICA) tax while profits distributions to the shareholders are not. Shareholders’ distributions are assessed tax at the shareholders’ individual income tax rates. Like C Corps, S Corps may raise capital though sale of stock to shareholders, although limitations apply.

Single-Member Limited Liability Company

This structure, which is available to businesses with one owner, provides the limited liability advantages of a corporation and the flexibility of a sole proprietorship. It reduces owner liability without the formation complexities and compliance requirements that come with corporate structures. Typically, taxes are handled as for sole proprietorships (pass-through taxation to personal income tax returns) or you can opt for C Corporation or S Corporation tax treatment. With “LLC” at the end of a business name, customers might perceive a company as more credible than a sole proprietorship.

Multi-Member Limited Liability Company

When a limited liability company has multiple owners, it’s classified as a multi-member LLC. By default, a multi-member LLC is taxed as a partnership, but owners can instead elect for their business to receive S or C Corporation tax treatment.

Which Legal Structure Is Right For Your Small Business?

According to attorney and SCORE mentor Chris Dargie, entrepreneurs should begin the process of determining the best legal structure by considering three core questions:

  • What is the company’s purpose and business plan?
  • Who are the owners and what is their level of involvement in the business?
  • Will the company require outside capital, and if so, what type? (For example, to obtain venture capital, you would likely need to form, or convert to, a Delaware C Corporation before venture capitalists would consider investing in your business.)

Pitfalls To Avoid

While it is possible to change a business’s entity type at any time, doing so midstream can involve expensive tax consequences. Therefore, tax is a crucial consideration when selecting an entity.

The most common mistake Dargie sees with small businesses is the failure of sole proprietorships to convert to at least LLCs for liability protection. “There is rarely a reason for a single-owner business to operate as a sole proprietorship,” said Dargie. “Single-member LLCs are simple and cheap to form and maintain, and they offer liability protection for the owner at a cost that is much cheaper than commercial insurance. They’re really a no-brainer.”

Another common mistake Dargie sees is multi-member LLCs that lack basic operating agreements. “Most entrepreneurs understand that an entity offering limited liability protection to the owners is desirable, and the default entity type these days is the LLC,” explained Dargie. “However, LLCs with multiple owners present serious traps for the unwary. Anyone starting a business with others and intending to form an LLC should get some basic legal advice about the risks.”

Something else that Dargie has seen adversely affect business owners is when they’ve unknowingly created a general partnership. As an example, let’s say you’ve started a cleaning company and asked a friend to help you clean a few homes. Rather than putting your friend on payroll and compensating via an hourly wage, you instead agree to share a portion of the profits you make on the jobs he helps you with. By doing so, you’ve potentially made him a partner, and you’re potentially legally obligated to follow the legal and accounting requirements of a partnership.

Other common mistakes Dargie sees include commingling personal funds with business funds and the failure of companies to maintain adequate company records. “Owners should always treat their business entities as separate from themselves. Failure to do that can result in loss of liability protection and serious tax headaches,” shared Dargie.

Final Notes

With so much affected by the legal structure you choose, you need to do your homework and be as informed as possible. Be sure to consult with both legal and accounting professionals so you’re fully aware of how each structure will impact your taxes, liability risks, and ongoing compliance obligations. As you’re working through the process, remember that our SCORE mentors are here as a resource to direct you to trusted and reputable professionals in your area who can guide you in making this important decision.

 

Chris Dargie is a full-time attorney / director / shareholder at Perkins Thompson in Portland, Maine. He started volunteering with SCORE in January of 2014.

Please note that this article is for informational purposes only and should not be considered a substitute for professional legal or accounting advice.

Time for Your Business End-of-Summer Checkup

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With the end of summer closing in and fall just around the corner, now is a perfect time to pause for a moment and assess what’s working and what isn’t for your business. Although most of the year is behind you, you still have time to make adjustments that could save costs, drive more revenue, and improve profitability for 2016.

Time for a Small Business Checkup

By performing this end-of-summer checkup, you’ll assess where you might have fallen behind, so you can take action and get your business back on track this fall and winter.

 

  1. Evaluate your sales efforts. If you’re behind on revenue, it might be because you aren’t reaching out to as many prospects as you need to, or you might not fully understand the needs of your potential customers. No one ever said selling is easy. It’s hard work and it demands a willingness to recognize, accept, and fix weaknesses in the sales process.

 

  1. Review marketing tactics and initiatives. Look carefully at the collateral you’re presenting to customers, the marketing channels you’re using, and the brand message you’re communicating. Is your brand image consistent across all fronts? Are you seeing results in the way of brand awareness and revenue generation from your tactics and strategies? Review and assess how your website, social media, and print marketing materials are performing, so you can identify where you need to make changes.

 

  1. Improve customer relationship nurturing. Customers who feel they’re appreciated and wanted will always be more likely to stay for the long term. By making customers understand that they truly matter, you increase loyalty and satisfaction. A stellar customer experience drives existing clients to buy more—and it prompts them to happily refer others to your business. If you haven’t been making an effort to nurture your customer relationships through post-order phone calls or emails, periodic check-ins to ensure they’re happy with your services, updates about what’s new and exciting, and other efforts—it’s time to start.

 

  1. Find ways to streamline operational and administrative processes. Wasted time prevents businesses from growing to their potential. When excessive paperwork, duplicated work, and inefficient systems slow processes down rather than improve productivity, you need to find a better way. Carefully look at the various systems and processes (such as accounting software, project management apps, customer data management, lead generation, etc.) you use in your business and look for ways to streamline activities and save time.

 

  1. Evaluate expense habits. Your business’s spending habits directly affect your bottom line. While it’s important to stay on top of your expenses year-round, it’s especially critical as the year is winding down. If your profit and loss statement doesn’t look as favorable as you had hoped it would by now, dig into what you’re spending money on and identify what you might cut back on.

 

With the kids back to school and summer vacations now just memories, now is the time to get back to business and back on track to reaching your goals. By doing an end-of-summer checkup, you’ll have a head start in finishing strong when the year is at its end.

If you need guidance to help you keep your business on the path to success, contact SCORE about our free mentoring. Our mentors have knowledge of every aspect involved in starting and running a small business.