From hair salons and home-décor stores to dentists to dog groomers, all types of small businesses are crucial pieces of our economic puzzle. But this diverse group is also tied together by shared challenges. So, we asked local experts, including some who work for or own small businesses themselves, to share their insight and advice on common and current small business trends, issues and topics.
1. START HERE - With its “How to Start a Business Roadmap,” the City of Montgomery has streamlined the process of creating a new small business here.
The map guides entrepreneurs to all the vital waypoints on their journey. There are directions to local education and training resources and templates for business plans. It marks pitstops for business fuel, aka financing, and offers advice on location selection. Near the end of the trip, it provides all the forms and necessary paperwork required by the City to begin a business.
Find it all at montgomery.al.gov.com under the Work tab.
2. HOW TO: ACCESS CAPITAL - Andrea Rogers Mosley, Director of the Small Business Development Center (SBDC) and Procurement Technical Assistance Center (PTAC) at ASU, is an expert on the importance of adequate funding for small businesses and noted the financial hurdles many of them face. “Accessing capital is vital to the survival of businesses, especially small businesses. Without it, small businesses, especially microbusinesses, struggle with the potential to grow or create jobs. Most entrepreneurs cannot start new businesses or grow their existing companies without capital,” Mosley said.
There are significant challenges. “Most financial institutions require a minimum of two years of financial statements before considering loaning money,” she said. “Many startup entrepreneurs lack the years in business or established credit history these financial institutions may require. This has a huge impact on the successful launch or growth of small businesses.”
Mosley shared key tips for overcoming these barriers:
- Have a sound business plan: A business plan is an important strategic tool that helps entrepreneurs to develop and map out focused steps to make sound decisions before the launch of a business. The business plan helps to create short and long-term objectives through research that helps business owners succeed.
- Include real numbers: A solid plan should include research that identifies needed funds to support an entrepreneur’s vision of starting and growing a business, as well as a minimum of three financial projections of annual revenue and use of funds.
“My business conversation with an entrepreneur always begins with personal wealth, credit and financial matters because an entrepreneur’s success starts with their initial skin in the game,” she said. She also pointed to additional available resources. “SBA [Small Business Administration] has two great programs, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) program that provide seed money up to $750,000 for small business technology start-ups.” Entrepreneurs can learn more at SBIR.gov.
And Mitch Graul, Small Business Leader at Wells Fargo, offered this advice. “One barrier is a lack of awareness about where to go. There are many options for small business owners,” he said. He pointed to these specific resources:
SMALL BUSINESS RESOURCES:
- Small Business Resource Navigator - (bizresourcenavigator.com) is an online portal helping connect small business owners to potential financing options and technical assistance through Community Development Financial Institutions (CDFIs) across the country.
- Small Business Resource Center - (hop.hosting.wellsfargo.com/3bp2) is a Wells Fargo site that offers articles, videos and information on a variety of small business topics like credit and financing, cash flow and financial management, business planning and operations.
- The Small Business Administration - (sba.gov).
- The Small Business banking experts at Wells Fargo.
** YOUR CHAMBER AT WORK - Alabama recently put special emphasis on innovation and entrepreneurship, forming the Alabama Innovation Corporation, a public-private partnership established by the Alabama Legislature. The Chamber supported this initiative as well as the passage of a bill that increases access to venture capital for small and minority businesses.
TIPS FOR SUCCESSFULLY SECURING BUSINESS CAPITAL:
Mitch Graul also listed these tips for successfully securing capital:
- Start by creating a sound business plan.
- Ensure you create sound financial footing.
- Establish checking and savings accounts specifically for your business and separate from your personal accounts.
- Be able to demonstrate a consistent flow of funds over time, creating a record that shows long-term stability.
- Build relationships with three critical partners: an attorney, a CPA and a banker.
- Having good relationships with these partners will help ensure they understand your business, your industry and your goals, and that they can help you navigate business life cycle changes as your business grows.
- It’s also important to connect with other business owners; create an advisory board to help you think through your business plan, the industry and pitfalls.
3. NEED TO KNOW: TAXES - Lyvonnia S. Poppell, CPA Principal and tax line of business leader at Jackson Thornton highlighted recent changes in tax law that affect small businesses.In 2021, the Alabama Electing Pass-Through Entity Tax Act became law, which, beginning with the 2021 tax year, allows Alabama S-Corporations and Subchapter K entities to elect to pay Alabama income tax at the entity level. Most owners will see a tax savings of 1 to 2 percent of the entity’s income. Caution: This is not an automatic decision for the entity. The tax situations of the owners will play an important role in whether or not the election should be made.
There were not significant Federal tax law changes for 2022, but here are a couple of reminders and upcoming changes to consider:
- Through the pandemic and now continuing, many employers have allowed employees to continue to work remotely in other locations. Employers could have income tax and payroll tax filing requirements in those locations.
- There is still time to consider the Employee Retention Credit (ERC), which provides employers up to $7,000 per employee per quarter in refundable tax relief for the first three quarters of 2021 (and a reduced benefit for 2020). There are two ways you can qualify for the ERC: 1) if there was a reduction in revenues; and, 2) if your business/charity has had a more than nominal disruption due to federal, state, local government or regulatory COVID orders.
- General Liability protects an organization if an accident occurs at the premises of a business, such as trips and falls and covers bodily injury or property damage of others, not the business owner or employees.
- Business Auto covers damages to others in a vehicle used for the business. Comprehensive and Collision Automobile Insurance covers repair costs for a vehicle if there is a collision or weather damage. If a company has employees using their vehicles for business purposes, ensure “non-owned and hired” coverage is in place to protect the organization.
- Workers’ Compensation provides for medical expenses and lost wages for an employee if they were injured on the job. The department of industrial relations requires Workers’ Comp for five or more employees, and company owners count as employees.
- Property Insurance covers physical damage to buildings or business personal property and should be reviewed every renewal to consider any property appreciation. Flood is excluded, so businesses should consider a flood policy if applicable. Any business that relies on its location to do business, such as a restaurant, should also consider business income coverage. This coverage would provide income to the business while the property is being repaired.
- Inland Marine Coverage. If the business has any property that leaves the premises, it needs to be scheduled on an inland marine policy to provide coverage while off-premises. Although some call these items “business personal property,” each item should be scheduled to provide coverage for physical damage while offsite.
Local attorney Sandra Lewis shared a few legal topics small business owners should stay on top of.
- Always keep business financial records separate from personal financial records.
- Report income and pay taxes to the IRS in a timely manner.
- Always maintain and protect the privacy of your clientele.
“If you operate as sole proprietor, that means creditors can come after not just your business assets but personal assets. This includes someone who has won a lawsuit against you. But if you operate your business inside an LLC or corporation, the only recourse creditors usually have are the assets inside that business entity. That’s why I think it is always a good idea to be an LLC or corporation for the protection it offers. Once you decide to go this route, you choose between forming an LLC or incorporating. My personal preference for a small business is LLC because it provides the most flexibility for an owner in how it can be set up, particularly if you are a business that looks to grow in the future. LLCs also have tax benefits: You are only taxed once on the income you earn through that LLC. This income flows through to your personal tax return.”
6. HOW TO: HIRE & RETAIN EMPLOYEES - Marcel McElroy, President of Top Talent Recruiter, outlined some necessary steps for grabbing talent and holding on to it.
ON HIRING: “You’ve got to understand today’s market, and many don’t,” he said. It’s no longer business as usual. Demand is extremely high, and good talent is hard to find. “If you see someone you like, you need to make a fast decision, or you’ll miss out,” he said. McElroy currently has a paralegal interviewing with five firms and thinks she’ll get four offers, so she can take her pick.
This has an obvious consequence: It drives up what employers have to pay. But it’s not only about salary. “Expanded benefits and increased flexibly—like remote work options and flex hours—are important to potential hires too. Other perks, like an in-house gym or paid membership to a gym are becoming the norm,” McElroy said. “I’ve not seen pet insurance as a benefit on an offer yet, but I’ve heard of it. In fact, the pandemic really made these things a priority for a lot of people.”
Position titles are changing too. Now, an executive assistant might be called a project manager. A sales rep may now be a client service rep. “This can get confusing if you can’t tell what they are or what the job does, but for some, the title matters,” he said. “It makes them feel good about the role they’re playing in the business. So, for those who care about that, the right title can be another way to set yourself apart from the competition. Employers willing to get creative with everything they offer will have a better time finding the right people.”
ON RETENTION: The higher wages, the perks, the flexibility bring people in but can also help you keep people. “I tell employers to look at what you offer your employees and ask yourself, ‘What would I think about this if I was an employee?’” McElroy said. “If it’s not enough to keep you, it’s not enough to keep your good employees either.”
7. NEED TO KNOW: MARKETING - The power of digital marketing was proven in the pandemic, and it’s likely here to stay:
- Loyalty Marketing. This method (offering consumers discounts and other offers based on their past purchasing habits) has been around, but now technology and specific data are fine-tuning it.
- Social Commerce. Selling goods and services directly from social media is growing to beat out traditional e-commerce and is completely trouncing regular ole “walk into the store” shopping. But to do it well, your business must build trust with consumers. Many are accomplishing this by harnessing the power of social media influencers, who already have the trust of a large audience, and getting them to promote their product or service.
- Personal Branding. Don’t hide behind your business. People connect with other people. By identifying and sharing your unique story, you can achieve emotional engagement and build that all-important consumer trust you need for social commerce.
- WHAT IS THE FIRST STEP A SMALL BUSINESS NEEDS TO TAKE TO GET ACCESS TO GOVERNMENT CONTRACTS? Get an employer identification number (EIN). The next step is to register your business in the System for Award Management (SAM) at SAM.gov. This site will guide you through registration.
- ARE THERE ANY LOCAL AGENCIES THAT CAN HELP WALK A SMALL BUSINESS THROUGH THE PROCESS? Yes. The Small Business Development Center (SBDC), located at The Alabama State University and Troy’s SBDC in Troy provide great resources for starting or growing a small company. We also have SCORE, a network of mentors who are helpful guides, and the Alabama Procurement Technical Assistance Center (PTAC) provides education programs that can assist when acquiring government contracts.
- HOW CAN A SMALL BUSINESS GET MINORITY/WOMEN-OWNED/VETERAN CERTIFIED? The best place to obtain that information is from the Small Business Administration sba.gov. The SBA will walk you through the process of obtaining these certifications; however, it is the responsibility of the business entity to market their business and find the opportunities.
- WHAT’S THE VALUE OF THESE CERTIFICATIONS? The federal government has set aside contracts to be awarded to those businesses that hold specific certifications to meet their socioeconomic goals. These designations make you more desirable in the market, giving you access for better partnership opportunities with firms, increasing access to funding opportunities and grants, as well as distinguishing you from your competitors who may lack the same credentials.
- WHAT’S YOUR NO. 1 PIECE OF ADVICE WHEN IT COMES TO SMALL BUSINESSES AND GOVERNMENT CONTRACTS? I wouldn’t just provide one piece of advice because there are so many variables to government contracting. However, I would encourage those seeking access to network, network and network. Next, invest in the resources that can assist in educating you and your businesses team and don’t be afraid to ask for help. Lastly, operate with integrity in all of your business affairs while building and maintaining relationships.
- Get an employer identification number (EIN).
- Register your business in the System for Award Management (SAM) at SAM.Gov.
- Visit Small Business Administration sba.gov to be certified as a minority business.
- Check out The Small Business Development Centers (SBDC) located at Alabama State University and Troy University.
- Encouraging volunteerism and service.
- Maintaining accountability that’s consistently applied from the top leadership down.
- Promoting and assisting in employee wellness.
- Providing (and paying for) opportunities for connection and fun, a.k.a. office parties and get-togethers.
EYES ON: OFFICE SPACE
Gene Cody, Associate Broker at Moore Company Realty, offered his take on the state of commercial real estate.
MBJ: HOW IS THE WORK-AT-HOME TREND IMPACTING COMMERCIAL REAL ESTATE?
CODY: We were already seeing a small shift to work-from-home pre-pandemic, but when COVID hit, it really accelerated the idea of remote work, and that trend absolutely impacted office leasing activity. That has changed. People are going back to the office. Businesses are leasing new spaces. Right now, we are getting pretty close to pre-pandemic levels.
There are some companies continuing to allow a lot of work from home that are just now getting to the time where they would renew leases, and they won’t be renewing. I see another little dip coming when that happens. But overall, I’m optimistic.
MBJ: ARE THERE OTHER NOTABLE TRENDS IN COMMERCIAL REAL ESTATE AFFECTING SMALL BUSINESSES RIGHT NOW?
CODY: When negotiating new leases, small businesses, like everyone else, are seeing rental rates increasing along with every other cost due to inflation. Annual increases were averaging about 2 percent a year; in today’s environment, you could argue it should be 8 percent, based on inflation. But that’s not happening. Landlords are not asking tenants for that much more. Most are trying to get 3 percent annual increases at a minimum. At the end of the day, if I was coaching a small business in a real estate deal, I’d tell them they have to pass that cost to their customers and consumers.