I recently spoke to Kimberly Palmer. She’s the senior editor and personal finance columnist for US News & World Report. And in addition to appearing on NBC’s Today show, CNBC, CNN, and local television and radio shows nationwide, she has also written for the Washington Post, The Wall Street Journal, and the Asahi Shimbun/International Herald Tribune in Tokyo as a Henry Luce scholar.

Well, with tax season upon us, I thought I’d venture a little out of the PR and marketing area. Instead, I asked Kimberly to provide some financial tips for small business owners and insights from her new book, “Generation Earn.”. Here’s what she had to say:

Why did you write your book?

I was frustrated with the lack of personal finance books written for people like me; people who are not downing in debt, but who still want solid financial advice to help take them to the next level. So many books for 20- and 30-somethings focus almost exclusively on debt issues, but I don’t think most of us are defined by our debts, as large as they might be. So I wrote Generation Earn to go beyond all the debt-talk and explore how to get ahead in today’s economy.

Why should entrepreneurs read your book?

Because almost everyone needs to act like an entrepreneur at least to some degree in the new economy, I profiled many entrepreneurs and devoted an entire chapter to the importance of being entrepreneurial.

Some people want to run their own business full-time, but others just want to start up a venture on the side, or have a second (or third) source of income to supplement a main gig.

When you’re an entrepreneur, it becomes even more important to manage your money well, because you need extra savings to cushion ebbs and flows in income, as well as plan for your own retirement, take out insurance, and anticipate taxes. I write about those unique challenges and how to successfully navigate them.

What one, main piece of advice do you have for entrepreneurs who want to leave their full-time jobs and start a business now?

The most successful entrepreneurs that I profiled in Generation Earn actually held onto their full-time jobs while they built their small businesses.

One woman worked as a paralegal while she slowly built up her yoga studio. When she finally quit, she already had a steady revenue stream from her studio and yoga clothing design business.

Another couple who started up a pet décor Web business still work their full-time jobs (as a lawyer and fundraiser) even though their Website is pulling in a steady revenue stream. Even though it means they’re getting little sleep for now, they know it’s essential for their financial security…. so my advice is to build up your business before quitting your full-time gig.  

What specific tips do you have for new business owners to help them save money and control business costs?

The first step is to figure out how you can save a significant chunk of whatever income you are bringing in – I recommend saving one-quarter of your pre-tax income, which includes retirement savings.  

The key to doing that, if it sounds impossible, is to start slowly and to automate. Set up your bank account so you are automatically saving two percent of your income each month. Then, slowly raise that to three, four and five percent (and higher).

As for controlling business costs, it’s important not to be overly frugal – investing in your business is key to growing it, so you might need to spend on advertising, Web design, or whatever makes sense for your company. Look for savings elsewhere: lifestyle costs, transportation, food, or housing, for example.

What advice can you give entrepreneurs to help them save on taxes?

Be super-organized! The classic mistake that so many people make is to wait until taxes are almost due before figuring out what they can deduct and where those old receipts are.

Setting up a simple filing system, or using a website that does it for you (such as myquickreceipts.com) can save you a lot of time and headache. If you know you are just not up for the challenge, then outsource the job to an accountant.

It can save you a lot of trouble and money in the long-run.

Thanks Kimberly! Those are great tips. If you’d like to learn more, or get a copy of Kimberly’s book, Generation Earn, visit www.generationearn.com.

And if you need help in saving money on your PR and marketing activities, please let me know here or at www.rembrandtwrites.com.

You can choose one of six options: Sole Proprietorship, General Partnership, Limited Partnership, Limited Liability Company, C Corporation or S Corporation. You will find that each of these differ to the degree of liability that you, as an individual will have and also how each is subject to taxes.

• A Sole Proprietorship means that you, and you alone, own the company and are responsible for both its assets and its liabilities. This is the most common and by far the simplest of structures, but as a sole proprietor, you can be held personally liable for the debts and financial obligations of the company. This risk also extends to any monetary obligations or penalties gained as the result of an employee of yours. Business financing will be much harder to come by and will also have more risk attached, as investors will not usually invest in sole proprietorships. Both a good and bad point, depending upon how you feel about it, is that you will be completely in charge. You will have the responsibility for making every type of business decision there is, from inventory, to suppliers, to employees, to the type of toilet paper you put in the restroom and if it will roll over or under. Some of the pros for having a sole proprietorship include the fact that if you decide to sell or transfer, you don’t have to get anyone else’s approval. There are few legal costs associated with forming a sole proprietorship and there are few formal business requirements. You also will not be responsible for corporate tax payments, but if this is the only reason that you are considering a sole proprietorship, you might want to think again.

• A General Partnership is when you contract with one or more other people in order to run the business with equal responsibilities and liabilities. These can be operative or financial and must be spelled out in regard to who has what responsibility and how much financial liability each partner has. These are formed by individuals and are taxed much the same as a sole proprietorship is taxed. Some of the advantages include the fact that business financing is more readily available as you can pool your financial resources, though don’t plan on looking to investors for business financing. General Partnerships are also situations that investors go into very cautiously. Finding business financing through an investor may be difficult, if not impossible. You also have others whose expertise and strengths you can depend upon to provide ideas and take on projects that may be beyond your own scope. A General Partnership comes with limited startup costs and there are few formalities to go through in order to form one. Some of the disadvantages are the difference of opinions that can occur. Partnerships can be fraught with discord as the parties have differing visions or goals. Partners are also personally liable for the business’s debts and financial liabilities, something I have counseled against over and over. It is also a situation where it is “One for all and all for one”. In other words, if one of you makes a business blunder or even breaks the law, all of you can be held liable.

• A Limited Partnership can be formed to bring in more expertise or skills or even money, but in this situation there must be at least one general partner that shares equally in the business’s financial obligations and responsibilities. Limited partners are often silent partners to the extent that they are not necessarily involved in the day-to-day running of the business, but may have other interest, financially or otherwise, and they will share in the profits of the business. Various reports will have to be filed with the Secretary of State for your particular state and each state has laws on the books that regulate the responsibilities and obligations of the partners in this type of business. Again, additional business financing may be difficult to come by, as investors are also cautious of this type of business structure, but with the partners in place, additional business financing may not be necessary and you are more likely to attract investors to a Limited Partnership than to a Sole Proprietorship or General Partnership. The reason for this is that the general partner in this relationship can be a corporation or LLC, which can be attractive as far as mitigating financial liability. The con is that the corporation or LLC can also be a part of and have a vote in the major decisions that affect the partnership. Your biggest problem may be in finding the general partner required, as they assume personal liability. Limited partners, on the other hand, can leave the business or be replaced without having to dissolve the Limited Partnership.

• A C Corporation is a traditional business structure that leaves you with little or no personal financial liability. It is established as a unique business entity and is a for-profit, state-incorporated business. Fees are paid and numerous legal documents filed, to include the Articles of Corporation. Unlike the above structures, business taxes are filed separately from personal taxes with the IRS and corporate taxes are paid on a quarterly, bi-annual or annual basis. Any debt the corporation incurs will not be the personal responsibility of the owner or owners. Business financing can be obtained by the corporation, not by the individual, and the corporation can own property, enter into business deals or even file law suits independently of the owners or shareholders. A big plus in having a C Corporation business structure is that the corporation can take advantage of corporate benefit health plans and group life insurance plans, up to a specified amount per employee. Retirement options are often better than those offered by non-corporate plans. The biggest downside is the double taxation that takes place. Besides paying corporate income taxes, the dividends paid to shareholders are also taxed at the applicable tax rate. Though the corporate tax rate can be higher, the initial taxes can be much lower. The first $50,000.00 is taxed at a rate of 15%, while a sole proprietor will be paying 28% on his or her personal income tax from the first dollar.

• The S Corporation, which happens to be my favorite business structure option, is much the same as the C Corp in reference to liabilities, but an S Corp is not double taxed. An S Corporation is only taxed on the personal level, which for the first $50,000.00 may be higher, but in the long run will be lower than what a C Corp will ultimately pay. It is also really easy to convert from an S Corp to a C Corp if your business grows to such an extent that you wish to change your business structure. Most of the paperwork will already be in place and the financials will be well-documented, so converting from one to the other is fairly easy and pain-free. An S Corp can have no more than 100 shareholders, for example, which would be one reason to convert to a C Corp. An S Corp also has residency requirements that a C Corp will not, but as long as you meet the criteria, I would definitely look at structuring your business as an S Corporation as opposed to any other. Business financing is usually the easiest to obtain when you are an S Corp, though both the S and C Corps commonly receive investor financing. The biggest difference between an S Corp and a C Corp is in the taxation and the additional risks associated with the higher taxation.

• A Limited Liability Company, or LLC, is a relatively new business structure that basically incorporates the advantages of a Sole Proprietorship with that of a Corporation. Basically, it operates as a separate legal business entity, but without having to incorporate and be subject to the rules, regulations and taxation of a Corporation. A fairly simple operating agreement is drawn up and agreed upon by the members, and then filed with the state, but shareholders are not required and the formalities that a corporation must adhere to are not upheld in the case of an LLC. Most LLCs must have two or more members, but some states are doing away with that requirement and allowing a single member to form an LLC. This is kind of a “you can have your cake and eat it too” form of business structure, and though I personally don’t care for an LLC, I can appreciate the advantages of an LLC, such as the personal liability protection and the more relaxed requirements when it comes to paperwork. Business financing is more readily available than for an SP, GP or LP, but not as easy to come by as if you had a Corporation. Some investors though are becoming much more comfortable with this newest form of business structure, just making sure that the structure of the LLC is designed to provide the investor with a specified amount of control.

So, do your research. I definitely suggest obtaining the services of either a business attorney or a financial advisor, especially if this is your first look at business structure and how it could possibly affect your business financing. And, I’d like to remind you that I always recommend separating your business finances from your personal finances; more than ever in today’s economy, well-informed decisions and erring on the side of caution will give you some form of financial protection.

So why aren’t the banks lending? One reason is Congress won’t let them. The government gave banks money to bail them out, but told them not to repeat their mistake of giving loans to undesirable candidates. That seems reasonable, but it really is a vicious cycle. With the downturn in the economy, more people are losing their jobs, which means they aren’t making any money. Few businesses are hiring due to less spending etc. so people can’t find work. These people decide to start their own business, but can’t get a loan because they don’t have a job.

So what can you do as a business owner (new or already established) to get some capital for your business? One thing you can do is to look into business cash advances. These cash advances are given to businesses that sell a portion of their future profit in exchange for capital they will receive now. They are similar to payday loan companies–where you get a cash advance for your paycheck, but you end up paying a little more than you borrow.

Another thing you can do is work on your credit score. With a debt management program, you can work with your creditors to get out of debt and slowly restore your credit. Doing this will open the door hopefully for banks to start lending again.

Bank of America for example has promised to lend $5 billion to small businesses this year, which could start a domino effect for lending. If Bank of America can prove to other banks lending to small businesses aren’t as risky as they think they are, we could really be seeing some improvement in 2010.

I guess we will just have to wait and see what happens, but for now there are options out there for small business owners and entrepreneurs such as business cash advances as well as a debt resolution program. It might just take a little more creativity and thinking outside the box to get the capital you need.

Click on the image below to learn Natalie’s challenges and my recommendations.

As I say at the end of the interview, Natalie’s really on the right track here. She has a day job and has started ChicSweets part-time, ramping it up slowly but surely with little risk so she can gracefully step away from her day job when everything is ship-shape with ChicSweets and not a moment before.

Note also that I got a great tip/idea from fellow StartupNation member Carli Kiene of Inked Fingers Photography to help Natalie drum up business in the wedding planning arena. Thanks Carli!!!

Franchising, like starting any small business, requires a financial investment and risk. I like to use the old adage … if it were easy, everyone would do it. With a large small business lender struggling, franchisors are getting more creative with their ability to help franchisees and others use a proven business model to own their own business. A good example of that is Marco’s Pizza.

Marco’s has decided to take the issue of financing into their own hands. According to a press release, to help current and potential franchisees overcome the credit crunch, Marco’s Pizza has created several innovative financing tools.

To help with store down payments, Marco’s introduced a private equity fund that can invest $50,000 to $100,000 per store. The company is also developing a $50,000,000 private equity fund that would finance up to $250,000 of a new store’s costs, depending upon the franchisee’s investment. Those eligible for both programs must either have proven experience in the franchised food service industry or be current Marco’s Pizza franchisees.

“Marco’s Pizza’s year-to-date growth is outstanding given the tight credit environment,” said Marco’s CEO Jack Butorac. The company achieved more than ten percent chain growth in the first half of 2009. “These financing tools were recently introduced to help increase Marco’s growth rate through franchisee candidates and expanding franchisees facing credit challenges.”

“The due diligence of our credit providers is impressive and, I believe, a major validation of Marco’s business,” CFO Ken Switzer added.

Marco’s also offers franchisees the opportunity to lease complete stores through its captive leasing company. The program can provide up to $200,000 in financing for a new store. Marco’s is also developing a new leasing program that can provide up to $125,000 of equipment-only financing per store.

Many other franchisors assist in financing. Some home-based franchise opportunities will help finance the franchise fee and others will provide short term loans to help you get your business off the ground. As the credit markets continue to evolve and as people continue starting new businesses, be sure you thoroughly investigate financing options to give yourself the lowest interest rate and the best opportunity for success!

Links

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/20/AR2009072000962.html?nav=rss_business

http://www.pmq.com/news/news.php?id=13166

The loan is for amounts up to $35,000 and meant to be a short-term solution to stimulate cash flow. The goal of the ARC loan is get owners investing in their businesses again, instead of just scrapping by with their heads barely above water. The loan proceeds are systemically paid out over a period of six months and repayment does not begin until the last disbursement has been received. Repayments can be made for up to five years. The loans are available starting June 15^th, 2009 through September 10, 2010 or until the all the funding has been disbursed. The loans will be issued by commercial lenders and then backed by the SBA. The SBA will then pay the commercial lenders a monthly interest rate.

Ideal candidates will have a plan for future cash flow, a history of profitability in at least one of the business’s previous three years, and are no longer than 60 days past due on their current debt payments. The loan program is not available to start-ups, non-profits, or companies that can not prove viability.

This new program just might be the break many small business owners have been hoping for to get them back in control of their finances. For more information, visit http://www.sba.gov/recovery/arcloanprogram or contact your current SBA approved lender for application details.

I’d love to hear your comments below! Please be sure to follow me on www.twitter.com/glamajama and sign up for my newsletter at Moms Can Launch!

I just moderated an expert panel on video as part of the Wells Fargo Webcast Series on this very topic and believe it’s a great way to get a snapshot of residential and commercial real estate realities and strategies. The program discusses how real estate can be a tool for reducing expenses as well as generating revenue. It also sheds light on the new rules of the road, including federal initiatives that impact us. Learn about:

• Lowering monthly payments by refinancing or renegotiating
• Mitigating commercial property tenant vacancies
• Reducing overall operating expenses and discovering true cost savings for your business
• Adapting to the current residential and commercial property markets

To survive you’ll have to make the most of your time (which you likely have more of as a result of less customer activity) and take into account the impact of your business bolstering efforts today as well as in the long term.

Here are tried and true survival strategies used by successful entrepreneurs:

1. Cozy up with Customers. They’re your lifeblood. But much like you, your customers are under duress. Take them to lunch and commiserate. Provide a giveaway recognizing their past patronage using inventory that’s collecting dust. If you take the time to listen to customers’ needs and show them you genuinely care about their welfare and success, you’ll likely uncover immediate business opportunities as well as engender future loyalty.

2. Experiment. The worst thing to do during tough times is lose your entrepreneurial spirit. Use the extra time on hand to conduct otherwise too time-consuming ideas you’ve always wanted to explore. For example, it could be a strategic alliance with a complementary business or a special buy-one-get-one-free email marketing campaign (we recommend VerticalResponse), just about anything product-, operational- or marketing-related that you’ve simply never had the time to try because you were too busy.

3. Loop in Financiers. With the overall economy in a recession, it’s likely your business is taking a hit, too. Rather than recoiling into the shadows, proactively share exactly what’s happening and what your plan is with your banker or other capital sources. Ensuring that they understand your business and are well attuned to your future plans will help you avoid financial surprises that often occur when parties aren’t well informed.

4. Trim Hours Not Staff. If lower revenue is a reality, consider cutting hours of your employees rather than firing them outright. It not only shows you care about their welfare, but strategically it also helps you retain your most valuable asset – your people – for when the economy inevitably turns around and you need 100%+ hours from them. Firing is difficult, but hiring quality people and training them is a huge burden on a business you should avoid if you can.

5. Stretch Your Spend. To make every dollar go as far as possible, review all of your vendor contracts. Where reasonable ask for breaks on pricing. Everyone’s in this together and though your heroics have made you the leader of your company, and a shining example of an American entrepreneur, don’t let your pride keep you from taking advantage of these potential savings. Every dollar saved will be critical during the down year to come.

It’s a huge challenge to be in the hot seat and be ready to fire away with valuable advice. But it’s thrilling, too. Kind of addictive, actually. What a rush to know you HAVE to stick it. You CAN’T mess up. As the Eminem says in the son, “you only get one shot.”

I’m lucky to have gained a lot of experience behind the mic of the StartupNation Radio program. Years of the weekly shows and having to be ON and SHARP as callers call in with questions and request advice on an infinite variety of business topics have primed me somewhat for this kind of experience.

Still, it’s intense appearing on TV and wanting to be good.

Having waxed on about “the pressure,” now I’ll tell you a little trick. The show and advice given is not completely spontaneous. Each of the panelists are prepped with a “situation analysis” we know we’ll have to address on the show.

So here was the situation as presented to me prior to flying out to the CNBC studios:

Cedric and Kymberly run a barbecue featuring great family recipes in Chicago. Their sales have slowed to a trickle. Tough economy, tough neighborhood, and not a great location within that neighborhood. They’re up against the wall, falling short on paying the rent. What can they do? And here was my emailed comments back to the producers to get the my perspectives and talking points to them in advance:

Honestly, their numbers don’t work now that his operating expenses surpass his revenue.

At the most basic level, Cedric has these options:

• Reduce his operating costs
• Increase his revenue

To reduce operating costs, he could:

• Close the store and go mobile for event- and on-location sales of bbq or rent time/cooking facilities somewhere else and just focus on the catering aspect of his business.
• If he’s in a tough neighborhood, in this economy he may be able to negotiate with his landlord with the argument that nobody’s moving into the space anytime soon – cut a deal, create extended terms, negotiate down the rent.

To increase revenue, he could:

• Take his “shingle” to where the market is. Get a mobile unit and go to sports events to support tailgates. Go to parks, go to lunch hours near construction sites and corporations.
• Focus strictly on his catering business, which is more “build to sell” and doesn’t require fixed cost facilities
• Create a new product-line marketing the signature barbecue sauce.

But the problem is so immediate, that I think the today/tomorrow options are as follow:

• Call a meeting with the landlord, as difficult as it is, and show him your business plan. Present to him the specific extended plan for making him whole. Show him the path you believe can get you there. If he understands the plan, maybe he’ll cut you some slack!
• Parallel path: Immediately start networking with other restaurant or cooking facility owners you know of to inquire about using their under-utilized facilities or facilities in off hours.
• Stop looking for investors from the UK and start looking for a local angel investor. Some people love the food business, love BBQ, and would love to make a smallish—even “casual”—investment in a BBQ business. who’s a community leader that comes to mind whose office you could call. Give him/her a call immediately. Even if no money comes from it, ideas and other valuable connections may.
• Give your customers a “half-off” your next order offer to create more near-term sales.
• Communicate, communicate, communicate with all parties involved. Only then will you he have a chance to get some special consideration from landlords, customers, vendors, etc.

So there it is - my prep, advice, and an insight for you on how the shows come together. How would you have advised Cedric and his wife?

It may have taken the shape of a loss of data, or a short-fall in needed cash. Perhaps it was a lawsuit or a personal medical situation. Who knows - it could’ve been an unexpected tax hit or maybe even a key customer pulling back from a large order that you’d considered “in the bag”.

We had our own crisis last month when this website was attacked and disrupted by a “hacker-bot”, a new term for me and one I’ll always wince at when I hear it in techie conversations.

This coming week I’m going back on CNBC’s The Big Idea to discuss how to deal with crises like those mentioned above. I’m wondering if any among you would like to be featured on the program to ask your burning question about how to deal with a crisis you’re experiencing. The show will air next week on Tuesday, barring any pre-emption.

So, anyone dealing with a crisis at their business? Been through one recently and want to avoid similar situations in the future? Please share your comments below and/or volunteer to be considered for the show by satellite uplink from your town’s local TV station.

If preferred, as an alternative, you can use this link to contact me, too.

Rich