Some Expert Advice on Small-Business Money Management

Small businesses are frequently started by regular people who have a dream or an interesting idea. Unfortunately, many of them fail because their owners didn’t effectively manage their income and capital.

This may lead you to ask: Where can aspiring entrepreneurs and small-businesses owners go for advice on money management? For general tips, we’d naturally suggest the Intuit Small Business Blog. For more specific guidance, another source of information is WiseBread.com, a website devoted to educating small-business owners and others on how to “live large on a small budget.” The GoPayment Blog recently talked with attorney Will Chen, the site’s co-founder and marketing director, who shared his insights with us.

GoPayment: What prompted you to launch Wise Bread?

Chen: In 2006, I was making a six-figure salary straight out of law school, but I was completely clueless about money. I had a ton of debt and didn’t know how to manage my finances. They don’t teach students personal finance in school, even though that’s probably one of the most important life skills. I tried looking for help on the web, but most online resources were boring and confusing. When I complained to my friends Greg Go and Lynn Truong, they told me they felt the same way. That’s when we decided to start a new kind of personal finance blog that is friendly to novices and fun to read.

Have you seen any growth in certain types of small businesses in recent years?

Many of our readers are starting home-based consulting and freelance businesses. Most people no longer feel secure in their day jobs, so they are eager to start home businesses to supplement their income.

What are some of the “easy” ways that small businesses can cut costs and save money?

Have a look at the bank and credit cards you’re using. Take some time to examine which banks have the lowest fees or which business credit cards offer the most attractive terms. Banks and credit card companies are working harder than ever to attract small-business owners. Don’t be afraid to negotiate with your current providers or to take your business elsewhere.

What types of tax exemptions and deductions should small-business owners look into, to see whether they qualify?

I suggest investing money in a good tax-preparation software program or hiring a qualified tax professional. The money you save will be absolutely worth it.

What types of money-saving strategies or advice can you give to small-business owners when it comes to hiring and compensating personnel?

The two biggest HR-related costs are turnover and unmotivated employees. You can prevent both by having a smart hiring process that filters out people who don’t fit in your company. On Wise Bread, we invest an enormous amount of time in our hiring process. We’ve developed very specific job-posting language, stringent tests for applicants, and sophisticated interview procedures. When we hire someone, we know that person wants to be at our company and is motivated to do a great job.

Where do businesses often lose money without their owners knowing it? What are the “hidden money drains”?

Poor productivity by employees is the biggest money drain. According to The New York Times, the average worker switches tasks every three minutes. To make things worse, once that worker becomes distracted, that worker will take nearly a half hour to get back to work. This cycle of disruption consumes 28 percent of a worker’s day!

This is why I’m against multitasking for workers. Too many small-business owners expect their employees to do too many different things. The employee ends up being distracted and nothing gets accomplished. The key is to figure out the most important thing your employee needs to accomplish and let him or her focus on that one task.

How do some small businesses try to trim costs in ways that are unethical and/or illegal?

It is highly unethical to trim costs at the expense of your employees. If a company is experiencing financial hardship, the whole company must share in the sacrifice. The CEO should take a pay cut before the secretary does.

In what areas, if any, should small-business owners avoid cutting costs in the hopes of saving money?

Investment in employee training should be the top priority for any company. Good training boosts morale, increases productivity, and decreases turnover rates. Any cuts you make in employee training will cost you a lot more money in the long run.

Do you think that mobile payments are a good solution for small business?

The concept of mobile payments is brilliant. By making the payment process more convenient for the customer, the chances of that customer completing a purchase is greatly increased. Mobile payments are also good for consumers. I live in Los Angeles — the home of the “legendary” taco trucks. It would be awesome if all food trucks and street vendors in L.A. started accepting credit cards. I’ll probably gain 20 pounds, but it will be worth it!

Where do you see your website in the next three to five years?

Our projections show that in three years Wise Bread will reach roughly 10 [million] to 15 million pageviews and sustain a 30 percent growth in annual revenue per year. Many companies have expressed interest in purchasing Wise Bread or have offered us interesting partnership opportunities, such as starting our own TV show, doing live seminars, or launching our own financial products. These are all interesting opportunities we intend to explore.

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