Hiring an independent contractor or new employee is an important decision that every owner(s) will face at some point during the life of his or her small business.  For many the idea to use contract labor in lieu of full- or part-time employees is very attractive.  For example, specific job skills may be required only for an identifiable project or for a short period of time; more people may be need to carry the company through a very busy period; the business may not have sufficient resources to attract the talent it needs on an employer-employee basis but may have resources to “contract” these skills for a particular period of time.

As the use of contract labor increases among small business so does the interest of the Internal Revenue Service and certain state employment departments.  Government agencies have therefore, become very aggressive in efforts to ensure that all persons performing work are categorized properly. This interest, in part, stems from the suspicion that companies are using contract labor to avoid the withholding and payment of payroll taxes.  If an individual is classified as an independent contractor and the IRS later rules that the individual should be an employee, the business can be held liable.  The resulting penalties could include:  back taxes; penalties and interest on Social Security; state and federal unemployment negligence; fraud; and state and federal withholding taxes.

What’s standing between you and starting your own business? If it’s a lack of money, relax. There are a number of reasonable start-up capital options available to aspiring entrepreneurs. The key is planning. Your financing strategy must make sense to both you and your prospective lender.

In just 60-seconds, we’ll show you how to build a sound financial foundation for your start-up business.

0:60     Identify Your Needs
Estimate what you will need to launch and sustain your business—equipment and supplies, inventory, office or manufacturing space, franchise fee, etc. Then, consider what portion you can reasonably provide from your own resources (e.g., savings, contributions from family or friends). Be careful. You don’t want to over or underestimate your needs, nor do you want to endanger your family’s financial security and relationships.

1.  Assess your company’s insurance needs. Property-casualty coverage isn’t enough. Consider a broad range of coverage, from business interruption and consequent loss of revenue to product liability and wrongful termination.

2.  Shop around. Ask several agents to evaluate your insurable risks and listen to their ideas.

3.  Don’t buy on price alone. Check www.ambest.com or your library for the insurance provider’s standing with A.M. Best Co., a company that rates insurers.

1.  Referrals always begin with providing your current customers with prompt, reliable, quality service. They’ll be happy to spread the word on your behalf—often without you having to ask.

2.  Ask your current customers if they know of any colleagues who are looking for the kind of service you provide. Follow up with a call or letter to those businesses. Make sure you get your customer’s permission to cite them as a referral source.

3.  If a customer compliments you on your work, ask them to put it in writing for use as a testimonial in your marketing materials. Again, make sure you have their permission to use their name for that purpose.