Save up as much money as possible before starting.

All too often, people go into business without any savings, exclusively using loan money from friends, banks, or the SBA. They except to be able to start paying the loans back right away with their profits. What these business owners don't realize is that it can take months or years to make a profit. And once a lender discovers a business isn't as profitable as expected, the lender is likely to call in the loan or refuse to renew it for another year. Often new business owners then have to take out home equity loans or use credit cards to pay off their loans (which puts their home and credit rating at risk). For more information, see Business Financing FAQ.

A better plan is to save up as much of the needed investment money as possible, including your living expenses for the first year, or even two. Odds are that your business won't be profitable for one to two years. Even if you get plenty of business coming your way -- and your customers pay you on time, which isn't always a sure thing -- you'll want to be able to invest most of that money back in the business for space, equipment, advertising, and insurance needs.

Start on a shoestring.

Think small. Don't rent premises if you can work somewhere else, and don't hire employees until you can keep them busy. (You can hire independent contractors or temps in the meantime.)

People who start their small business on the cheap, often in a garage, den, or some other scavenged space, and create their first goods or services with more sweat than cash, have the luxury of making their inevitable rookie mistakes on a small scale. And precisely because their early screw-ups don't bury them in debt, they are usually able to learn and recover from them.

Protect your personal assets.

When you go into business for yourself, you are usually personally liable for all judgments and debts that the business incurs. This includes business loans, taxes, money owed to suppliers and landlords, and any judgments against the business as a result of a lawsuit. If you don't protect yourself, a creditor can go after your personal assets, such as your car and your house, to pay for these debts.

While you can protect yourself against lawsuits by buying business liability insurance, this won't help you with business debts. If you will be running up big debts, consider forming a corporation or limited liability company (LLC). Just one person can form either of these types of businesses.

Understand how -- and if -- you will make a profit.

You should be able to state in just a few sentences how your business plans to make a substantial profit. For starters, you need to know your costs: how much you'll spend purchasing inventory, paying the rent, compensating any employees, and covering what is likely to be a surprisingly long list of other costs. Then you can figure out exactly how much you need to sell each month, for how many dollars, to cover those expenses and have an adequate profit besides. These numbers are all you need to create a "break-even analysis."

Make a business plan, no matter how short.

Understanding your profit numbers and creating a break-even analysis is the first step in making a business plan. For most small companies, the key portions of a business plan are the break-even analysis, a profit-and-loss forecast, and a cash flow projection. (Projecting your cash flow is key and will make or break your company: Even if your business is getting plenty of work or selling its products, if you're not getting paid for 90-180 days, you're not going to survive unless you've planned for it.) With a cash flow spreadsheet in place, as well as a profit-and-loss forecast, you can tinker with your business idea and improve it before you start -- and continue to use them after you start.

Creating a business plan also allows you to determine what your projected start-up costs are (how much money you'll need to save) and what you marketing strategies are (how you'll reach customers to make sales). If you can't make the numbers work on paper, you won't be able to make them work in real life.

Get and keep a competitive edge.

Building a competitive edge into the fabric of your business is crucially important to long-term success. Some ways to get this edge are by knowing more than your competitors, making a product that is hard or impossible to imitate, being able to produce or distribute your product more efficiently, having a better location, or offering superior customer service.

One way to hold on to your competitive edge is to protect your trade secrets -- confidential information that gives you a competitive advantage in the marketplace. Examples of trade secrets include customer lists, survey methods, marketing strategies, and manufacturing techniques. To protect your trade secrets under the law, you need to take steps to keep the information confidential. This includes marking documents "Confidential," using passwords to protect computer information, using nondisclosure and/or noncompete agreements, and limiting access to employees with a reasonable need to know the trade secrets.

Another way to keep your competitive edge is to react quickly to bad news. Once you see that your business faces some kind of adversity, you need to come up with a plan to deal with it immediately. This may involve moving your offices, introducing a new product or service, or developing a better way to reach customers.

Put all agreements in writing.

The laws of your state require you to put some contracts and agreements in writing:

• Contracts that will last longer than a year.
• Contracts that involve the sale of goods worth $500 or more.
• Contracts that transfer the ownership of copyrights or real estate.

Even if not legally required, it's wise to put almost everything in writing, because oral agreements can be difficult or impossible to prove. This includes leases or rental agreements, storage agreements, contracts for services (such as consulting or electrical work), purchase orders or contracts for goods worth more than a couple hundred dollars, offer letters of employment, and employment policies. Get in the habit of getting and giving receipts for all goods, services, and deposits, regardless of how much.

Hire and keep good people.

Your goal should be to hire and retain truly excellent employees -- not just reasonably competent ones. A highly competent and truly enthusiastic employee is at least two and sometimes even three times as valuable as a person of average skills.

To create a stable and happy workforce, it's essential not only that your employees (and independent contractors) believe they are being fairly treated, but that your business is worthy of respect. Employees and contractors who like their work will represent you well on and off the job. And customers will more likely be loyal to an upbeat business -- and are more likely to recommend it to their friends.

Pay attention to the legal status of your workers.

When you hire workers as independent contractors, make sure they shouldn't really be taxed as employees. The IRS can impose substantial penalties against you for not withholding taxes and paying taxes for a worker who is really an employee. The IRS and other agencies are likely to think that a worker is an employee rather than an independent contractor under any of these conditions:

• The worker works full-time or nearly full-time for you.
• The worker doesn't work for anyone else.
• The worker provides services that are an integral part of your operations.
• You control how the worker does the job and provide detailed instructions and training for the worker.

One way to help avoid trouble is to have the worker sign a written service contract, or independent contractor agreement.

Most employees you hire will be "at-will" employees -- subject to being fired at any time and for any reason (except for illegal motives such as discrimination). It's important to preserve your at-will rights because they protect you from having to prove that you have a valid business-related reason to terminate an employee. Don't make any promises to prospective or current employees that you are offering a permanent job or that they will lose their job only if they perform poorly, because this will limit your ability to terminate the employee for other reasons, such as personality conflicts or finances.

When hiring an at-will employee, have the employee sign an offer letter that makes it clear that the employment relationship is at will. Except for high-level executives, you shouldn't have employees sign an employment contract -- this can limit your ability to alter the terms of employment as your business needs change and subjects you to higher legal standards.

Pay your bills early and your taxes on time.

In the real world, where a reputation for keeping one's word is a hugely important asset, a good strategy is either to pay your bills up front or pay them early. You gain trust, build a positive credit profile, and have a built-in safety net if things go badly. These benefits outweigh any interest you might earn by holding onto your money until the last possible minute.

Most importantly, pay your payroll taxes on time, especially the portion that you withhold from your employees' paychecks. The IRS and state tax authorities can hold you personally liable for these taxes, plus stiff penalties, if they're not paid. This is true even if you operate your business as a corporation or LLC or if your business goes bankrupt -- you will still be personally and legally on the hook to pay back payroll taxes.

Avoid These Costly Affiliate Internet Marketing Mistakes

Affiliate Internet marketing can be profitable for people looking to make money on the Internet. If you do more research, however, you will find that many people have failed. The difference between the two is minimal, but there are some simple mistakes that can be costly.

Below are five affiliate marketing mistakes to avoid.

1. Not having a plan:
With the internet changing as frequently as it does, it is essential that you have a plan of some sort. While your plan is certain to change with the internet, having a plan will prepare you for what is to come. If you know where you want to take your affiliate business, bumps and curves along the road will only momentarily throw you off.

2. Selling the program:
It can become quite easy to get caught up in the game and begin to sell the program as opposed to the product itself. What you have to realize is that you are going to make your money from the commissions through selling the product. Too many people sign up and then attempt to sign as many other people up as they can. While it is perfectly fine to try to sign people up you are not going to make real money from second-tier commissions. Stick to where the money can be made.

3. Going through the motions:
There is nothing worse than a salesman that is going through the motions and appears to be looking at a sheet of paper with guidelines. If you want to have success with online affiliate marketing, you have to have passion and believe in what you are selling. This is not to say that every person you talk to is going to sign up or purchase something. But you will sound so much more influencing if you believe in what you are saying.

4. Moving too quickly:
While time is money on the internet, each customer is potential money as well. Take the time to talk with prospects so that you leave a lasting impact on them. Jumping from one customer to the next too quickly will do nothing for you. If you show each prospect that you truly care about them and their needs, they will be more inclined to listen. From there, you can sell your product on a more personal level and give them reasons for how your product can truly benefit them.

5. Be yourself:
The last thing you want to do is create a typical affiliate program page to sell off of. This looks too automated and far to cliche. If you want to have success, personalize your page and show people you are an individualistic. There are thousands of affiliate program sites that are identical; mix things up and make yours stand out.

While there are hundreds of things you can and should try to avoid with your affiliate Internet marketing, try not to get too caught up in worrying about these things. You are going to make mistakes, so move on without hesitation. These are a few of the mistakes you may encounter along the way. But as long as you remain confident and goal-oriented, you will set yourself up for success with your affiliate business.

12 Essentials for Striking the Right Balance in a Family Business

1. Set some boundaries. It’s easy for family members involved in a business to talk shop 24/7. But mixing business, personal and home life will eventually produce a volatile brew. Limit business discussions outside of the office. That’s not always possible, but at least save them for an appropriate time — not at a family wedding or funeral, for example.

2. Establish clear and regular methods of communication. Problems and differences of opinion are inevitable. Maybe you see them already. Consider weekly meetings to assess progress, air any differences and resolve disputes.

3. Divide roles and responsibilities. While various family members may be qualified for similar tasks, duties should be divided up to avoid conflicts. Big decisions can be made together, but a debate over each little move will bog the family business down.

4. Treat it like a business. A common pitfall in a family business is placing too much emphasis on “family” and not enough on “business.” The characteristics of a healthy business may not always be compatible with family harmony, so be ready to face those situations when they arise.

5. Recognize the advantages of family ownership. Family-owned businesses offer unique benefits. One is access to human capital in the form of other family members. This can be a key to survival, as family members can provide low-cost or no-cost labor, or emergency loans. Firms run by trusted family members can also avoid special accounting systems, policy manuals and legal documents.

6. Treat family members fairly. While some experts advise against hiring family members at all, that sacrifices one of the great benefits of a family business. Countless small companies would never have survived without the hard work and energy of dedicated family members. Qualified family members can be a great asset to your business. But avoid favoritism. Pay scales, promotions, work schedules, criticism and praise should be evenhanded between family and non-family employees. Don’t set standards higher or lower for family members than for others.

7. Put business relationships in writing. It’s easy for family members to be drawn into a business startup without a plan for what they will get out of the business relationship. To avoid hard feelings or miscommunication, put something in writing that defines compensation, ownership shares, duties and other matters.

8. Don’t provide “sympathy” jobs for family members. Avoid becoming the employer of last resort for your kids, cousins or other family members. Employment should be based on what skills or knowledge they can bring to the business.

9. Draw clear management lines. Family members who often have a present or presumed future ownership stake in the business have a tendency to reprimand employees who don’t report to them. This leads to resentment by employees.

10. Seek outside advice. The decision-making process for growing a family business can sometimes be too closed. Fresh ideas and creative thinking can get lost in the tangled web of family relationships. Seeking guidance from outside advisors who are not affiliated with any family members can be a good way to give the business a reality check.

11. Develop a succession plan. A family business without a formal succession plan is asking for trouble. The plan should spell out the details of how and when the torch will be passed to a younger generation. It needs to be a financially sound plan for the business, as well as retiring family members. Outside professional advice to draw up a plan is essential.

12. Require outside experience first. If your children will be joining the business, make sure they get at least three to five years business experience elsewhere first. Preferably in an unrelated industry. This will give them valuable perspective on how the business world works outside of a family setting.

How entrepreneurial couples make their businesses and relationships work

Trust yourselves: Couples say one of the biggest joys of this arrangement is being able to trust that your business partner has your best interests at heart.

Talk all the time: Doubling up on work and relationship means that communication is even more important for entrepreneur couples than for other couples “Marriage is complicated enough, and when you add your business life on top of it, you’ve just added many, many more situations that are going to have to be talked about.”

Divide the labor: You both need to be devoted to the success of the work, but that’s about where your responsibilities should diverge. You need to delineate your different roles clearly so that you can each have a domain within the enterprise where the other doesn’t interfere. That may be easier than it seems: Since opposites often attract, your relationship has probably made you used to complementing one another.

What about the children?: Most advisors say you should try to keep your kids’ lives away from the company and the business out of purely family concerns such as child rearing and vacations. “Having kids forces you to define these two parts of your life very clearly

Be wary: Some experts strongly warn that you “should not try this at home.” It’s too difficult to keep the work and relationship roles separate, so you shouldn’t mix business with pleasure, “by working together, there is not time that couples also are apart – so they don’t bring any freshness or diversity of life into their relationship.” And when one of the pair dies, “the other is very lost because so much of their life has been intertwined.”

A way to hedge your bets is for one partner to pursue the business full-time while the other sticks with what he or she was already doing. still working nearly full-time. “We felt it was unwise to put all the stress on the business right away as our sole source of income,” “The job keeps us in benefits. And we’ve been gradually transitioning.”

Exit strategy: Face the possibility that, despite your best efforts and intentions, your dreams of sharing work and home just might not unfold perfectly. And because most people believe that their relationship is far, far more important than a particular business venture, your company could be at risk. So you might have to alter your plans.

Starting a business together can be the ultimate experience in marrying your work and professional lives, but its not without risks - be aware of them up front and plan accordingly.

Bringing an Outsider into Your Family Business

Blood is thicker than water — and sometimes more important than money. If your startup is a family business, you know what we’re saying.

But as your family startup grows, it’s only a matter of time before your staffing needs outstrip even the smaller branches of your family tree. It’s time to hire an outsider.

A lot rides on this, whether you’re bringing in someone at a high level for their professional expertise — or just because you’ve run out of sisters to answer the phone that, happily, won’t stop ringing.

Here’s how to navigate this pivotal moment in the life of your startup:

Maintain family control

Someone coming into your company as a savior or make-over artist may believe his own success and expertise should entitle him to a seat at the family table. If it comes up, cut it short. Spell out very clearly that the potential rewards do not include a place among the company’s majority shareholders.

Look for someone with “family traits”

You can dramatically increase your chances of success if the first non-family member on board is someone who’s already known by, or at least familiar to, you or your family. This candidate already has had some exposure to family relationships and maybe even your company’s culture.

Don’t underestimate the importance of the family culture

When you go outside the family to hire, you’re looking for help to take your business to the next level. But don’t lose sight of the family dynamics that got it to this point.

Unfortunately, most entrepreneurs don’t realize how much conflict it can create if they don’t hire the right person from outside the family, So they look for someone with the experience they need, and neglect making sure that the person is going to fit into the family-owned business.”

Whether or not you’ve done this, if the new hire just doesn’t fit, start over.“You may make a mistake, Don’t be afraid to say that they don’t fit in and that you’re sorry. Don’t spend too much investment of time and money on the front end trying to make sure they fit. Just go find someone else.

If you’re the new hire, lose your illusions

Anyone joining a family company as the first outsider should be clear-eyed about what they’re getting into.

“You need to come into it with your eyes wide open, meaning that the family dynamic will dominate, and family relationships will be as important as — if not more important than — corporate performance,” “Don’t go in there thinking anything other than, ‘I’m not going to rock this boat unless I’m absolutely commanded to.’”

Many family-owned companies reach a point where they need to hire someone who’s not kin. Going outside can work out fine, as long as you hold onto the family culture and all parties are clear about roles and expectations.