Home Business Tax Deduction

While April is still a few months away, now's the time to start thinking of taxes. Start looking for all the receipts and documentation and start researching on what possible deductions you can get.

If you are running your business from your home, you may be able to deduct the expenses associated with running the business. Our article "Tax Time: Check What You Can Deduct from Your Home Office" explains what you can deduct from the business use of your home.it

While taking home business deductions can lower your tax liability, it is important to be careful about what you deduct and make sure that you follow the stipulations of the IRS. To qualify for home business deductions, you must pass the following test stipulated by the IRS:

• Exclusive Use - that part of your home must beset aside exclusively for the business.
• Regular Use - the place must be regularly used for business
• Trade or Business Use - Your principal place of business for any trade or business in which you engage;
• Principal Place of Business
• Place To Meet Patients, Clients, or Customers -- As a place to meet and deal with clients or customers in the normalcourse of your business
• Separate Structure - In connection with your trade or business if you are using a separate structure that is not attached to your home or residence (e.g. a studio, garage, or barn).

Following all these requirements is critical, lest you attract IRS attention and audit you. A few days ago, someone over at Yahoo Answers asked if he could deduct their pool because his wife who runs an unlicensed daycare from their home uses the pool with the kids she watches. That definitely won't fly with the exclusivity test as it can be hard to argue that the pool is used exclusively for the business and not used by the family including their own kids.

Taking careful scrutiny of what you claim as home business deduction becomes more important with the news that IRS will focus more on small and home based businesses this year. Tennessean.com even reports that "Nationally, small-business audits of all types increased 22 percent between 2001 and 2005." Hopefully, that won't include you or me.

Read the article "Home Business Tax Deductions: What to Watch Out For" to learn the things that you need to carefully check when using home business tax deductions.

Choosing the Best Topic for a Website

The best topic will be one where you can create unique and compelling content on a regular basis. If you want to earn via advertising, here are guidelines on how to select the best topic

1. Create a website on a topic where advertisers are plentiful and their bidding on ad systems such as Google Adwords or Yahoo Search Marketing. Instead of writing about your favorite squirrel (where hardly no advertisers are bidding for the space), write about the latest tech gadgets.

2. Write about a topic you are passionate about. Instead of writing about mesothelioma which is supposedly high paying but you know absolutely nothing about (and hence can only copy other site's content and can make no more than 10 pages), write about what you know best. Or if you insist in writing about a topic you know nothing about, seek the help of writers or attract a community that wants to talk about the topic so you don't have to worry about writing the content.

3. Think of a topic that attracts users looking for ways to spend money. A travel site works well because you will be attracting users who are looking to visit the place -- and hence spend money on hotels, travel tours, airline tickets, travel accessories and luggages. A camera or electronics review site is also great because you are attracting visitors are looking to buy cameras or other electronics equipment. The more the visitor is inclined to spend money, the more the advertisers are willing to spend to reach them

Doing Business in Other Countries

If you are thinking of starting a business in another country, a resource that I highly recommend is World Bank's DoingBusiness.org website.

Being from the premier international organization, the site has loads of economic information and studies on business environments including taxes as well as an extensive collection of business laws. More importantly to entrepreneurs, the site specifies the requirements asked in that country when you start or even close a business.

If you are looking to expand globally, make DoingBusiness.org your first stop.

Protecting Your Business Name and Trademarks

Many small and home-business owners -- including myself -- get intimidated and confused when thinking about trademarks and how it can protect their business names. Many fail to appreciate the importance and value of trademarks, and how the process works.

With this in mind, I interviewed Shannon Moore, General Manager of TradeMark Express http://www.tmexpress.com . Her business helps clients research and apply for trademarks and she does consultations on the issue of trademarks. Shannon is active in Yahoo Answers as well and she is the #2 in the Business and Finance category in terms of the most best answers.

My interview with her delved on various questions including the right time during the startup process to think about trademarking, the steps needed to trademark a business name, the cost involved, how to maintain the trademark and several other important questions. And Shannon proved to be an excellent and knowledgeable resource!

Read the article "Home Business Guide to Understanding Trademarks and Protecting Business Names" to help you understand how to protect your most important asset -- your business name.

Common Small Business Scams

MSNBC.com has a very interesting on some of the common scams preying small business owners that you need to be aware of. I have heard of some of these schemes for the past few years, but it is still worth keeping in mind lest you be victimized.

Here are some of the scams the article talks about and what to do to avoid becoming victimized

• sending a check returning the amount "overpaid"
• paying advanced fees for supposed "valuations"
• bogus invoices
• blue sky scams in the vending industry

I'm not too proud to admit that we were once hit by a scam. Someone ordered text link advertising from us - the website looked extremely professional and their service seems to be legit. After several months, we got hit by a chargeback because we were apparently paid with a stolen credit card. The website soon disappeared with a note from their web hosting that the site has not paid their fees.

That incident taught us to really examine every order with a finetooth comb. In hindsight, there were signs but we ignored it -- e.g. the billing address for the card is Ohio but the company's address is in NY, the company address when checked with MapQuest doesn't exist, the phone number given was in NY, and the email address is just Yahoo. But I suppose you live and learn

Read the article at MSNBC and protect your business from scams

Focusing Your Search Engine Efforts

comScore has released the December 2006 market shares in the U.S. of search engines. Google again leads the pack and the rankings are as follows:

• Google = 47.3 percent
• Yahoo = 28.5 percent
• Microsoft = 10.5 percent
• Ask = 5.4 percent
• Time Warner Network(AOL) = 4.9 percent

So what do these numbers mean? For me, it shows that any search engine optimization efforts -- whether organic or paid -- should focus on Google. With majority of Internet users searching in Google, any effort directed towards improving your site's ranking in Google (particularly for pay per click advertising) could bring the most buck for your money.

I'm not saying of course that you need to forget Yahoo or MSN or the other lesser known search engines. But if you have limited resources and small advertising budget, focus first and foremost on Google. The key is to focus on efforts that can bring the biggest return to your time and money.

Entrepreneurship Around the World

If you want a comparison of entrepreneurial activities across countries, the best resource is the Global Entrepreneurship Monitor [GEM] study. Conducted by Babson College and the London Business School, the study surveyed over 100,000 people in 42 countries.

The latest study released this January 9 finds that the percentage of nascent entrepreneurs in the US [those who were thinking of or have recently initiated an entrepreneurial venture] fell from 12.4% in 2006 to 10%. However, the number of established entrepreneurs is slightly up indicating that entrepreneurial activity is alive and well in the United States.

Entrepreneurship is also going strong in countries such as China and Argentina. In China, early-stage entrepreneurship increased to 16.2%, from 13.7% from in 2005, and in Argentina, the number rose to 10.2%, from 9.9%.

Read the full GEM study

Growing Market for Small Businesses: The Non-Profit Sector

If you are looking for a growing market to serve, check out non-profits.

Non-profits are growing fast. According to a report of the National Council of Nonprofit Associations entitled "United States Nonprofit Sector," , there were 837,027 nonprofits in the United States in 2003. These non-profits had combined assets of $1.76 trillion which makes the U.S. nonprofit economy the sixth largest in the world — surpassing those of Brazil, Russia, Canada, Mexico, and South Korea.

Even in terms of employment, non profit workforce grew by 5.3 percent from 2002 to 2004 compared to the 0.2 percent drop in the for-profit world, according to the study at Johns Hopkins "Employment in America's Charities: A Profile"

So what are the needs of non-profits that offers opportunities for small businesses? Here are a few:

1. Executive recruitment and temporary employee placement - with the tremendous growth in the non profit sector, the demand for top level officials in non profits has soared as well. The growth of the sector combined with its relative immaturity result in a growing demand for businesses who can assist them in finding their personnel needs. You can provide head hunting and recruitment services for non-profits.

2. Online job bank for non-profits - One opportunity online is to create a job bank listing job openings in non profits and where people interested in working for non profits can post their resumes.

3. Tools to tap online giving - Majority of contributions and donations to non profits come through their traditional sources such as direct mail and donor solicitation. However, non profits are seeing the growing potential of the Web to increase their donor base and generate contributions. Given the younger demographic of the Internet users, the Web also allows them to tap younger contributors relative to their traditional donor base.

Some opportunities in this area include providing consulting services on how the non profits can create an online presence and expand their membership base. I know of one non profit in Washington DC that even created a website specifically for the donors, where their studies and papers are translated from policy-speaks to "what is it for me" style for the donors - and they have seen an increase in their donations.

4. Technology needs of non profits are significant - One opportunity include creating software applications that will facilitate the giving process. Non profits involved in counseling, for example, need case management software that will allow them to track their activities with the people they deal with, write notes about their interactions, produce assessments, demographic analysis and activities reports and manage documents. The key though is affordable technology given that many of these non profits are cash strapped or lack resources. There are also a lot of demand to assist in creating their websites and helping them reach their target audiences.

Non profits offer a lot of opportunities for small businesses. Assess if this segment is something that will fit well with your business goals.

Guide to Setting Up a Site Using Affiliate Programs for Beginners

1. Create a website. The website should have content as your content is what will drive traffic to your site. Your site should create value for visitors, and elicit their trust. They need to trust you enough to know that the products and services you are recommending is best for them -- and they will do the action that you want them to do.

One of the common mistakes I see of newbies is they create websites for the sole purpose of earning from affiliate advertising, and their website ends up nothing but banners of various affiliates they promote. Their website has no value at all, just a bunch of advertising plastered here, there and everywhere with hardly any content. This approach is likely to fail because the website is not giving the customers a reason to be engaged with the site.

2. Check what types of website the affiliate program accepts. Some companies running affiliate programs refuse to accept sites using free hosting such as Geocities. If you are thinking of a blog, check if the company you want accepts blogs. And check if you can add/run scripts that the affiliate program will give you on the site you will set up (some blog platforms are harder to use in terms of adding scripts). No scripts means no affiliate program ads and no revenue.

Then you can decide on how you want your site hosted -- whether you can start slowly and use a free hosting site or right from the start present a more professional image for the site with a paid hosting program. It is important to think of scalability -- when your business starts to grow -- and how it will affect your hosting needs. If you are in Geocities, and your site grows and now needs a better hosting platform with more bells and whistles, you may start from scratch again in terms of traffic generation because you will have a new domain name.

My suggestion is to get a real domain name, pay hosting and start the business right.

3. Select the affiliate program that is right for you. There are many affiliate programs to choose from. You can go to Commission Junction , Linkshare or Clickbank to see various affiliate programs in one roof. Or you can go to individual websites that offer these programs and apply.

Time to Start Thinking of a Strategy to Tap Social Networking Sites

Social networking is growing huge -- and it is only going to get bigger. In fact, according to Nielsen/Netratings , the darling of the social networking genre, MySpace, is the fastest growing Web brand in the US. Traffic of MySpace grew from 16.2 million unique visitors in July 2005 to 46 million in July 2006.

Looking at those numbers, you can’t help but think – is there a way to bring a slice of that huge pie to your site? How can you tap MySpace to further your business and bring traffic to your site?

My first impression with social networking sites is that their users are teens and youngsters; but I was actually surprised to learn that some sites attract a more mature audience. According to Comscore MediaMetrix , visitors to MySpace.com and Friendster.com are generally older, with people age 25 and older comprising 68 and 71 percent of their user bases, respectively. In fact, 40% of MySpace users are aged 35-54 (my age group!).

I’ve poked around MySpace to see how businesses are using the site. The artists have been among the first who saw the potential of social networking, with musicians and videographers posting their music and videos, and artists showing their paintings. I’ve seen some business coaches who are using the site to post their credentials with an invitation to meet those who “want to be millionaires” as they can definitely help achieve in achieving this goal.

Big businesses are also on board. Burger King has a MySpace profile for their mascot. Automobile manufacturers have pages for some of their brands such as Honda Element, Scion and Toyota Yaris.

One thing is common, though – their MySpace profiles are all about branding (after all, you can’t use MySpace to sell directly). More than that, these businesses do not use an “in your face” type of selling, but uses a more subtle and softer approach. It’s not “buy me, buy me, buy me” but more “get to know me and you’ll like me.”

I am not the MySpace crowd; I’m at the age when I don’t need to post my profile to meet new unseen friends on the Internet. But the question of how to capture the attention of social networking users for a product or service is something that every small business needs to start thinking about.

Preparing for the 2007 Holiday Season

The year has just started, but it is time to start planning and thinking about the holidays of 2007. And what better way to start planning than by looking back at what happened last year.

Oneupweb.com has an interesting study called 2006 Holiday Online Retail Buying Trends: A Study of the Consumer Behavior Online that looks at the traffic, conversion rates and sales during the 14-weeks holiday season. It provides an analysis on effective pay per click campaigns, and offers strategic bidding advice in preparation for the holidays.

The study offers a number of interesting insights on the holiday online selling trends and traffic, including the period where sales and conversion start rising as a signal of the start of the holiday season and online holiday shopping peaks. The study also finds that a pre-Thanksgiving dip in traffic and sales occurs as well as the impact of last-minute shoppers on the week before Christmas.

Their findings include:

1. Be ready by Halloween.
2. Back-to-school triggers testing.
3. Protect peak season opportunities, e.g., develop bid strategies with higher conversion rates in mind (to offset seasonally high keyword prices), and develop inventory strategies.
4. Prolong the season with e-cards.
5. Use milestones to predict peak volumes, e.g., multiply Halloween levels by four or double levels two weeks prior to Thanksgiving to estimate peak volumes .

Read the study 2006 Holiday Online Retail Buying Trends: A Study of the Consumer Behavior Online

State-By-State Guide to Starting a Business

One of the most common questions we get is: "How do I start a business in [name of state]?"

Many of our users want to know what is the process for establishing their business in their state, what permits and licenses do they need to get, where can they get these licenses, how much will it cost to register the business, and where can they get help, and all the other nitty-gritty of establishing a business. The whole process of starting a business, especially the legal and regulatory requirements, can be very confusing and daunting for a new entrepreneur.

To address this need, we created a special section called State by State Guide to Starting a Business that provides a guide where entrepreneurs can find the information they need to start a business in their state. For each state, we provide pertinent links to state government website and small business development centers on:

• How to start a business = all states provide a guide on how to start a business in their state; the trick is in finding where these guides are located. Some are published in the state website (e.g. Alabama.gov), while others are in their Secretary of State website. Still other states have one-stop shop websites for businesses such as North Carolina's NCCommerce.com run by the Department of Commerce.
  
• Business Registration, Permits and Licenses = while some states are better than others, the information on how to go about registering a business name, where to get permits, what businesses needs to get a license are on the Web. What we did was to make it easy for the users to find.
  
• Taxes = ahhh, taxes, of course. We provide the link to the business tax page of the state's Department of Revenue
  
• Mentorship/Assistance = many home business owners do not know where to get help or advice when they are starting and running their businesses. We provide links to the Small Business Administration office in each state as well as the various SCORE offices by county.
  
• General Resources = we typically included links to the Secretary of State website as well as the chamber of commerce website for the states and other information that could be helpful to the entrepreneur

Visit our State by State Guide to Starting a Business

How to Get Your Forum Noticed

We are in the midst of revamping the PowerHomeBiz.com forum, with all its contents removed and new posts not allowed. As we are rethinking of what to do with the forum, here are some of my learnings in how to get your forum noticed based on our, um, less-than-stellar performance:

1. Start with content. Think of your audience and what they want to talk about. Then make sure you have those categories. Start with the most pressing issues, then expand as your forum grows.

2. Make sure that your forum does not look "dead". Make your forum appear that there's some action going on. I know of many forum owners who "seed" their forum -- putting posts by creating multiple accounts -- to get the question and answer going. Stop if other people start participating.

3. Advertise where your users are. Buy targeted advertising -- from ads in ezines or newsletters, buy text links. Pay per click ads on the search engines and partner sites will also work well. Costly, yes but needed to get the attention of your target audience.

4. Issue press releases announcing your new forum. While outfits charge as much as $650 per release, there are free press release submission places on the Web. Press releases allow you to (a) attract media attention; (b) get more back links to your website without sending each website an email request; and (c) get more visibility especially if your press release gets in Google News or Yahoo News.

5. Check your forum software if it is spiderable and indexable by the search engines. I know of some forum software such as Ikonboard (the one we use) where you have to install a plugin just to allow the contents to be read by the search engine. Your forum should be in the search engines. If not, use Google Sitemap and submit an XML file of the contents of your forum on a regular basis.

6. Give incentive for current subscribers to refer other subscribers/members. Think of a way that will make it easy for others to refer your forum to others. Check if your software has this capability; or if none, find a plug in or a third party software that will allow others to refer your forum to others. Viral marketing is very important, and it is your role to make it easy for others.

The Opportunities in the Auction Market

In an issue of Business 2.0 a few months ago about what types of businesses venture capitalists are looking to fund, Roger Lee of Battery Ventures answered that he is willing to provide $6 million to those who will develop an auction site that would facilitate product placements for movies.

Product placements in movies have become a big thing for big companies -- e.g. Ray-Ban's sales tripled with the release of Tommy Lee Jones and Will Smith's Men in Black; James Bond's Die Another Day featured products from various companies such as Samsonite luggage, Omega watches, a Phillips heart rate monitor, Bollinger champagne, Heineken beer, Sony security systems, and British Airways.

Well, apparently, someone has already thought of the idea. A startup company called NextMedium has come up with an online exchange for product placement in movies and TV shows. I just don't know if Battery Ventures actually funded them, though a press release issued by the company in July 2006 said that they have raised a total of $9.5 million from various VCs such as Ascend Venture Group, Globespan Capital Partners, and Bessemer.

One thing is clear though: auctions or online exchanges offer a lot of opportunities for businesses.

eBay has become a giant now, but it is still not a perfect secondary market. Offer your products on eBay and oftentimes the bidding will not even approximate the valuation of your item. The success of your auction depends on the presence of the right buyers at the time you are offering your product.

Like this need for an online exchange for product placements, there will be other specialized needs that can be addressed via the auction format. Maybe not another gigantic marketplace like eBay, but more specialized and more niche auction sites.

If you are thinking of a million-dollar opportunity, think of other specialized needs that an online auction can facilitate.

Warning Against Grant Scams

I just responded to an email sent by a visitor asking about government grants and whether he can get one to start his business. This is a common question that I suppose is on a lot of people's minds. Even on Yahoo Answers where I am the #1 in the Business and Finance category, this is my bread-and-butter question (or where I get most of my best answers) as there are a lot of people asking this question day in and day out.

The Small Business Administration even included the question of whether there are grants for starting or expanding a business in the Most Requested Items section in their website http://www.sba.gov/mostrequesteditems/CON_FAQ2.html

"The U.S. Small Business Administration does not offer grants to start or expand small businesses, although it does offer a wide variety of loan programs. (See
http://www.sba.gov/financing for more information) While SBA does offer some grant programs, these are generally designed to expand and enhance organizations that provide small business management, technical, or financial assistance. These grants generally support non-profit organizations, intermediary lending institutions, and state and local governments."

You may also want to read the warnings FTC has issued against these "grant" companies:

• http://www.ftc.gov/opa/2004/03/grantresources.htm
• http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt134.htm

Here is also one of the warnings issued by the Better Business Bureau http://www.concord.bbb.org/tips_timesharescams.html

If you want information on grants, the only places to go are government websites: the Catalog of Federal Domestic Assistance (CFDA) http://www.cfda.gov/ and Grants.gov http://www.grants.gov/ - these are two sites created by the federal government to provide transparency and information on grants. Browse through the CFDA listings and see if you can find any grant that would support a for-profit venture. Once you find the grant where you can qualify, go to Grants.gov and download the application form of the relevant grant. You will be asked the CFDA number of the grant.

When you hear or see offers of companies promising to give you grants, treat it with a grain of salt and be very skeptical about it. Uncle Sam does not call or email or write to people to tell that they can get grant money. I have previously written about grants at http://www.powerhomebiz.com/guide/cases/shirleyisabel.htm

The Strategy of Giving Your Offerings for FREE

I've met some people who are perplexed why some businesses give their products or services for free -- and how they make money. In fact, your products for free has been one of the best business models, particularly on the Internet.

With PowerHomeBiz.com, for example, we give away the information for free. But we earn from the ads we post on the articles. Advertising is one of the most common ways information websites such as ours earn from giving away the store for free, so to speak.

This strategy has been used to a great advantage by companies who actually sells products or services. Long ago, Estee Lauder has started the trend among cosmetic and beauty companies to give free samples away, and now this seems to be the norm in the beauty industry.

On the Web, Adobe gave away its PDF Reader and made a lot of money from its paid products. So with Macromedia Flash, which gave away its free Shockwave Player. Skype allowed free download of its software, but earned from their premium services. SixApart offers its LiveJournal blogging platform for free, but sells a premium version.

The trend nowadays is to give something for free -- in order to capture the audience attention, make them familiar with the company, and make them try the product. Once hooked, offer them a premium version or offer them one of your paid products.

Business 2.0 calls this the "freemium" business model, where a free version of the product is given away only to lure the customers with the paid version. And you will find that they will want to pay because they have already tried and used the product, or they are more responsive to your offering because they already know and trust your business.

10 New Rules of Branding

Branding may be a marketing concept that is more commonly used by the big boys rather than small businesses, but it is an important ingredient in the success of a product. ChiefMarketer.com has an interesting article on the new rules of branding that even small businesses should consider:

1. Brands that influence culture sell more; culture is the new catalyst for growth.
2. A brand with no point of view has no point; full-flavor branding is in, vanilla is out.
3. Today's consumer is leading from the front; this is the smartest generation to have ever walked the planet.
4. Customize wherever and whenever you can; customization is tomorrow's killer whale.
5. Forget the transaction, just give me an experience; the mandate is simple: Wow them every day, every way.
6. Deliver clarity at point of purchase; be obsessive about presentation.
7. You are only as good as your weakest link; do you know where you're vulnerable?
8. Social responsibility is no longer an option; what's your cause, what's your contribution?
9. Pulse, pace, and passion really make a difference; had your heartbeat checked recently?
10. Innovation is the new boardroom favorite.

Read the full article

Top 10 Growing Markets for Small Businesses

What are the hottest markets today? This is the common question asked by entrepreneurs who are on the lookout for business ideas that will give them the biggest return.

Whether you are looking for a market for your new business or a market to expand your existing business, here are some growing markets that you should consider:

1. Small businesses
2. State and local governments
3. Growing Hispanic market
4. Gay community
5. Burgeoning consumer debt
6. Growing number of obese people
7. Prison market
8. Specialized pet products
9. Baby boomers
10. Lifestyle changing habits

Read the article "Top 10 Growing Markets for Small Businesses for 2007"

Ecommerce Tips for Small Online Businesses

Happy New Year to everyone! Hope you had a great holidays.

Online shopping is such a wonderful innovation for me that I am absolutely hooked to it. In fact, I did almost all of my Christmas shopping online. In doing so, I noticed some little things that some retailers may overlook, but could help online sellers build customer confidence and improve bottomlines:

1. Be consistent in naming your products. Keep the names of your products consistent in your webpages and invoices. For example, if the product's name on your website is "Golden Pearls", don't call it "Yellow Pearls" in your invoice. Doing so can confuse the customers and they may question whether the product shipped to them is the same as the product they ordered.

2. Ship the product using the shipping method you charged them. If the customer pays $24 for the shipment of a jewelry set via FedEx, ship it via FedEx. Don't ship it via USPS Priority that costs only $7. While the shipping fee may be high, the customer agreed to it -- and hence expected to get what they paid for. They may be on the lookout for the package waiting for the FedEx truck to pull in, only to get frustrated when the FedEx truck does not because they don't have the package! Customers will feel shortchanged if you change your shipping mechanism and opt for the cheaper one -- without informing the customer or reimbursing them for the price differential.

3. Check the products you ship. During crunchtime when there's so many items to ship, it can be easy to get confused. But make an effort to check and double check if the items in the package coincide with the order. Imagine the frustration of the customer who ordered Black Akoya pearls only to receive White Akoya pearls because the retailer failed to double check the order. It's a lot more hassle to arrange for the return of the product and added cost to the retailer to ship the correct order (if the customer does not cancel the order).