How Small Businesses Can Prepare For Costly Legal Actions

If you own your own business, even a work at home business, you probably should carry some legal insurance beyond what your existing business, auto and homeowner or renter policies encompass. Your coverage on these policies may or may not cover legal services required for such situations as false arrest, libel, slander, or invasion of privacy.The increasing complexities of the legal system trigger the escalation in the costs of lawsuits. This can be exceedingly expensive to a small business proprietor, especially if you have a home based business. You simply can’t afford to hope that you will never be mixed up in a costly legal proceeding.Hiring an attorney to defend some claims against you or your business may destroy a small business. With money so tight these days, what small business owner can find the money to pay a minimum of $200 per hour for a lawyer who specializes in business law? Unless you are running a million dollar business, this type of assistance is far too expensive for most people.A couple of options are available to you.First, talk with with your insurance agent to find out what additional policies or riders you can obtain that may cover legal costs for standard legal actions arising from the usual course of business. You might be able to get an umbrella plan that will expand both the dollar limits of your current coverage as well as increase the number of situations covered. An umbrella plan can be an inexpensive answer to your legal exposure.A second choice is a prepaid legal plan that protects you, your family, and your business. Typically, for a fixed monthly or annual price your will obtain a collection of legal services that are tailored to the requirements of a small business.One widely used and helpful feature of a prepaid legal plan is your option to have phone conversations with your attorney. You can talk about potential issues with your attorney and obtain his or her legal advice before you do something that could produce a lawsuit. This is a positive aspect of most plans and can help you avoid lawsuits, saving you a lot of time, expense, and worry.Many prepaid legal plans also include your attorney’s time for reviewing usual documents and contracts. Without a legal plan you might not consider having contracts reviewed. But, your attorney can suggest ways to improve the contract language and notify you of possible issues. This also can rescue you from lots of headaches.Prepaid legal plans will also cover your attorney’s time for preparing for and conducting a trial, should a legal situation require a trial. Frequently your plan details the particular types of legal situations that are covered for trail related expenses.Typical of any legal agreement, you need to read over any prepaid legal plan cautiously to note precisely what services are included as well as their limits. You don’t want to think you have broad coverage when your coverage is extremely limited.Most plans also provide discounts for services not specifically made available by the plan.You also should be concerned about the options you will be given for your attorney or law firm. After all, legal specialization and experience play a critical part in your legal status,. Scrutinize the options and ask each potential firm for references from prior clients. If you know other small business owners who have utilized a particular plan, talk about their experiences with them to see their evaluation of the law firm they are working with.You ought to also check with your state’s Bar Association and the Better Business Bureau to find the background of the attorneys and determine if there are some complaints, including fee disputes, against the firms. Find out about such items as your potential attorney’s educational background, professional track record, and length of time practicing in his or her specialty.Also, find out about how disputes with your legal plan provider are handled. Determine if they deal with disputes internally or submit them to an objective third party for resolution. This might have a major influence on your relationship with your plan provider.By and large, as a small business owner, you should consider the risk of legal proceedings against you and make preparations to handle those situations. You will rest easier and perhaps avoid some pretty big expenses in the process.

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Starting an Online Business – Top 8 Myths Shattered

I recently dove into the world of online business. There were several reasons for this choice but the most prominent was trying to imagine what else I could do that would yield the results in the time frame that this would if I stick with it. I admit that when I started, I held some of the same beliefs and assumptions about an online business that many people have. Through my mentors, research and my own experiences, I have learned that running a business online is pretty much exactly the same as starting a business offline, the internet just means a different way of going about it.Here are 8 of the most widely held myths about starting an online business:Myth #1 – It is easy and effortlessTruth – It is not easy or effortlessThe truth is that starting an online business is very difficult. Demanding, Exhausting. Frustrating. Slow. Overwhelming. Not everyone can do it. That is why there are so many people who quit. It seems easy because people assume you just sit on your computer leisurely at home playing around. In reality, when you get started, it feels like you are learning a new language. There is just SO much information to absorb and it feels like it needs to be learned all at once because everything connects to something else on the internet. You will feel all of the above emotions all at once – frustration, overwhelm, exhaustion and you will question whether this is the right choice for you. Yes there will be days when you find yourself in the zone and feeling especially productive, but those days usually come later after all the hard stuff has been worked out first. And even then, there will still be days of utter frustration when you spend the entire day trying to re-size a photo and then realize with horror that nothing else was accomplished that day.Myth #2 – You will immediately have ton of ‘time freedom’ to spend time with your childrenTruth – No you will notRunning an online business is no different that starting an offline business. It takes time and a lot of work. To make a business succeed, you will need to take it seriously and treat it like a business, and in the beginning all businesses are very very time consuming. The time freedom will not come until much later. Most likely sooner than a traditional business, but still not right away. If you have children and housework and possibly a ‘real job’, you will constantly feel the pressure that one of these things is slipping or that you are constantly two steps behind with everything. You will second guess yourself and think maybe you are just not cut out to do this. You will feel guilt all the time for neglecting your children/spouse/chores/friends in order to pursue this all consuming business.Myth #3 – You will not have to spend any money to start or run the businessTruth – Yes you will.Try to think of an offline traditional business that needs no money to start. Offline, you need supplies, equipment, software, possibly staff or a building space. All these cost money. Most businesses will be in the red for at least the first year. That means that they have put more money into the business than they have made back. Online business is no different. There are just different things to put money into. Usually substantially less money is required, but still don’t count on being able to start a business with absolutely nothing.Myth #4 – You will get wealthy right awayTruth – No you will notThe truth is that setting up a web presence takes time. Getting your blog established and noticed takes time. Generating traffic takes time. All those websites and blogs that have hundreds of subscribers and are generating massive income didn’t start out that way. It took months, maybe years or diligent efforts to achieve that status.Myth #5 – Once my website is finished, the hard work is over and i can relax and let the people begin to chase me down.Truth – No, you can’t and no they won’tUnfortunately, this is not the case. The website is only one of the first steps. First, your website needs to be able to be found by people typing in your product or service into the search engines. It is not automatic. This takes knowledge to make happen. Next, people want to see that you are more than just a fancy website. They want to see that you have maybe some articles, videos, social media, a blog or other content online that backs up your expertise and shows you are a real person. You will need to research paid and free methods to get your site to the first page of the search engines. You will need to research keywords and use them effectively in articles, videos, blog posts. This takes time and patience. And work. If your product or service is unique and something much needed, and you are able to get it onto the first page of the search engines, then maybe you might have a chance of getting your desired effect by virtue of having something that everyone wants but no one could previously find. Other than that, there are thousands of competing businesses out there that you need to work hard to compete for business with.Myth # 6 – I won’t have to deal with or talk to people. Everything can be done through email.Truth – Actually you will need to talk to people.After the initial contact is made you will need to develop real relationships in a more personal way than emailing. You will use email in the beginning for networking, attracting prospects or administrative things but after that, the phone shows that you are a real person and allows you to show your personality to your customers. And often a call is a much quicker method for answering questions than lengthy emails. The internet is simply a connector but after that, it takes work to maintain a relationship.Myth # 7 – I can run the entire business on auto-pilot and be making money while sleeping or on the beachTruth – True, but not right awayYou need to sow the seeds of hard work first before you can reap the benefits of a prosperous business on autopilot. Yes, you can outsource many of the tasks but you will need to still know how to do everything because you will need to be there to answer any questions your outsourcers have. Also, you need to consider that outsourcing certain things may not allow you the freedom the make changes when you want or inject your personality. People whose businesses run smoothly with minimal effort from them had to put a lot of work in to get to that point.Myth # 8 – In a matter of months I can work anywhere I want at any time I want and will be free to quit my job.Truth – No, do not quit your job yetYou will need to be sure you are established in your business first before quitting your job. That will take more than a few months. There is no magic income level or time frame that you will reach before you know it is time to quit. That is something that is completely based on what you feel comfortable with. But you need to be smart about it and make sure you business is making an income consistently, not just once.As you can see, there are many myths associated with starting an online business. It can be scary starting something unknown but with the right knowledge and help the rewards are amazing.

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B&B Financing in 2009 and 2010

B&B financing is going to be exceedingly difficult in 2009, and probably well into 2010. Sellers are going to have to be willing to be more flexible. At the beginning of 2009, the recession is deepening and almost all loans to small businesses – including B&B’s, are becoming less and less available. So, the questions which might be asked are, is there actually money to lend, and if so, wouldn’t the SBA be able to help?Yes, there is money to lend, especially at many of the community banks which did not take hits on their portfolios from bad sub-prime loans and who are also gaining deposits from larger banks that are in trouble. But even though it’s true, banks are not lending except to the very strongest deals – ones showing strong cash flow, substantial down payments for acquisition, and management experience. Financings are getting done and will continue to be, but it will take strong deals to do it. Even so, money is generally not available for refinancing of B&B’s right now.There is one other thing that I should also emphasize here. Properties generally five or six rooms and less, are highly unlikely to be financed by commercial lenders because the transactions are simply too small. This is going to make properties like this harder to finance in today’s market. In the past three or four years a lot of acquisition financing was provided by residential lenders. Most of these lenders have now headed to the exits.What about the SBA? Unfortunately, SBA only guarantees loans – they don’t make them. So if the banks won’t make SBA loans, the SBA guarantee doesn’t do anything. A lot of banks do SBA loans, but last year, the vast majority of banks that are licensed to do them made one or two, if any. And this especially includes the community banks which generally do have funds available and are often in areas where they know the specific property or the innkeeper. But they won’t do SBA loans because they are too paperwork-intensive, and they just are not set up to handle them.There are one or two non-bank SBA lenders (as of February, 2009) who are still making B&B loans because they understand them; but like banks, they are only doing the blue-chip deals — cash flow, substantial down payments and lodging or related industry management experience.How Long Will the Economy Affect Small Business Lending?The lending market for small businesses will not begin to significantly improve probably until the first quarter of 2011, and B&B’s are classic small businesses. The economy is going to worsen until probably the third quarter of this year, so the turnaround, when it starts, will be from an even lower bottom than where we are now. It is going to take at least until the third or fourth quarter until whatever stimulus package is passed can begin to take effect, and then these effects will not even begin to start making a difference until well into 2010. Plus, it seems that almost every few days another piece of bad news shows up making it even less likely that banks are going to start lending to small businesses any time soon.Also, small business lending always lags improvement in the economy and increases in lending to stronger larger businesses. Since small business loans are always riskier loans to banks, they are probably going to want to feel a little surer that the economy is actually moving forward so that there is less risk of a small business borrower’s not being able to pay back a loan.There is one factor may help to loosen lending a little sooner, and that is that banks are continuing to accumulate new deposits, especially from people moving away from the larger banks. And money not loaned out by a bank is income lost. When a bank has to pay interest on a deposit but does not have interest coming in from a loan, the more money it loses, and the more likely it may be to start lending.The Light at the End of the TunnelThat gloomy scenario having been presented may actually benefit those looking to purchase an inn to create a strong and growing business. Everything points to less far-flung travel in the next two or three years, so bed and breakfasts will become a more attractive alternative. Plus, the bad economy over the next two or three years will probably cause some owners who did not come into the industry with a high profit motive to close their doors so there could more business for remaining inns in a time of potentially increasing occupancy rates from people staying closer to home. And because more and more inns are either being or soon will be priced to sell, it creates an excellent buying opportunity for buyers with cash and management experience to acquire some excellent properties.So, Now What?With the lending climate that is going to exist for approximately the next two years, the probability is that if a B&B is going to get sold, the seller is going to have to hold some portion of it as a second mortgage.Here are some possible scenarios:1. Borrower is able to get a loan Suppose the property was for sale for $800,000Borrower can get a $400,000 loanHas 25% down — $200,000Gap (second mortgage) – $200,000.But at least in this scenario, the seller walks away from the table with a substantial piece of cash — $600,000.2. Same situation except SBA loan for $400,000; buyer has the 25%If the seller holds the $200,000 as a second, in order for SBA to approve it, it must be on full standby for the life of the loan – no payments (interest can accrue). This allows SBA to consider the $200,000 as equity, so the lender now has a 50% LTV. You still walk away with $600,0003. No loan is available; must be totally seller financedIf the property has to be sold and this is the only way, I would recommend a minimum 20 or 25% down payment from the buyer. This makes it very difficult for the buyer to walk away if things are not going well. Besides, 20 or 25% is what a lender is probably going to ask for, so if possible, so should you. So you get away with $200,000.

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