Business Advice

Consumers are being urged to monitor and lock or freeze their credit profile, but how should small business owners respond? Will a freeze impact a business?

When a small business is damaged by a natural disaster — be it a hurricane, flood, earthquake or tornado — recovery presents its own set of hazards. There is, of course, the immediate cost of lost business. There are both short- and long-term physical dangers posed by weakened walls and ceilings, exposed power cables and mold. And then there are the threats posed by skilled disaster recovery scam artists who see small business owners as easy prey. Kenneth Citarella, CFE, knows all about these post-disaster scams. A former New York state prosecutor, Citarella now works for Guidepost Solutions LLC, which provides investigations, compliance, monitoring, and security and technology consulting solutions for clients in a wide range of industries. In the wake of Super Storm Sandy, which devastated large sections of coastal New Jersey, Brooklyn and Staten Island in 2012, Citarella served as a Guidepost Solutions “Integrity Monitor,” making sure contractors were in fact performing the work for which they were being paid. “The days and weeks following a natural disaster are times of great stress and confusion,” Citarella said. “This is the perfect breeding ground for scams of all kinds. Small business owners need to be aware of how they may be targeted and how to avoid being a victim.” How Fraudsters Find Their Marks While natural disasters are horrific events, they’re great for contractors and restoration companies for whom such events are their bread and butter. As soon as a disaster occurs, it’s not unusual for construction companies to descend on the affected site, blanketing the area with pamphlets and brochures, and stuffing mailboxes with business cards. While many contractors are legitimate, there can be a good number of storm chasers who are just out to make a fast buck. At a time when construction labor is at historic lows, small business owners may find themselves working with a firm with less than stellar credentials “The more enterprising scam artists will take the time to go door-to-door, offering low-ball prices or even offering to cut the business owner in on the fraud,” Citarella said. “For example, they’ll offer to do the $75,000 worth of restoration work that is actually required, bill the business owner’s insurance company for $100,000, and then split the difference. This is an obvious solicitation of fraud and should be reported immediately to the local police.” Common Types of Post-Recovery Fraud In addition to the insurance scam described above, Citarella discussed other forms of fraud a small business owner might encounter following a major disaster. “The most common type of recovery fraud involves a contractor who shows up to do the first two or three days’ worth of work, and then just disappears. Another type involves the use of lower-grade or otherwise substandard materials,” Citarella said. Citarella also noted that otherwise well-meaning contractors may buckle under the pressure a natural disaster creates, leaving the business owner out thousands of dollars and still unable to operate. “A small contractor can easily get in over his head,” Citarella stated. “He may not be able to get enough workers, have problems with his supply line, or be managing too many projects at once. There may be no criminal intent here, but the outcome is the same.” How to Avoid Contractor Fraud Find reliable, licensed contractors and validate their businesses before hiring them to help you rebuild. Experian’s ContractorCheck.com/Hurricane is being offered as a free resource to those affected during this time of recovery. This website enables you to find contractors and easily check the critical components of a contractor’s business background, including license, bond and insurance data (if an when available from state licensing boards). Click here to see a sample report. Also, the Better Business Bureau (BBB) offers a list of recommendations to business owners and anyone else looking to hire a construction contractor, among their recommendations: 1. Ask for Recommendations. Ask friends, relatives and fellow business owners to recommend contractors they have previously hired. 2. Check Their Track Record. Use bbb.org or other business review websites to get customer reviews, complaints and any notices of criminal violations. 3. Verify the Business License. Make sure the contractor under review has a valid license to do business in your state. 4. Get Multiple Quotes. Always get at least three quotes for any particular job. Any quote that is unusually low is probably one to avoid. Remember the old adage, “If something seems too good to be true, it probably is.” 5. Look for Signs of “Professionalism.” A reputable contractor will arrive in a vehicle that is clearly marked and branded, and may wear a uniform bearing his/her company name. 6. Request References. Ask the contractor for a list of previous customers you can contact and discuss their satisfaction with the contractor’s service. 7. Check Professional Affiliations. Ask if the contractor belongs to any trade organizations. Such companies are usually bound to operate according to a strict code of ethics. 8. Avoid Large Up-Front Payments. Pay by check or credit card for added protection. Avoid paying in cash. 9. Get Everything in Writing. Demand a written contract, and make sure to read it carefully, especially the fine print. Make sure the contract includes the contractor’s name, street address, telephone number, email address and state license number. Fill in any blank spaces. Don’t sign anything you don’t understand. “Document every step of the reconstruction progress,” Citarella added. “Take pictures every day to record the contractor’s progress. Smartphone pictures can be invaluable in the event of contractor misbehavior or if there is a challenge by your insurance carrier.” Citarella described four “gears” that run any reconstruction machine. “There’s the business owner, the adjuster, the carrier and the contractor. All four need to work together to get a job done right. However, the only one who has a stake in effective cooperation is the business owner. So if you have a business that needs post-disaster repair, take the time to make sure it’s done right.” If you are in the process of rebuilding following Hurricane Harvey or Irma and need to check the contractor you are working with, go to www.contractorcheck.com/hurricane to receive up to 15 free reports. Also, Sam Fenerstock of Credit Manager’s Association published an excellent article titled “How To Assist Your Customers To Stay In Business After Natural Disaster“, it contains lots of great information about disaster preparedness and working with your customers if they are impacted by a natural disaster.

If you’ve ever seen an episode of Shark Tank, then you know that the question of a business’s valuation always comes up. Most of the time, and much to the “Sharks” dismay, the contestants overvalue their companies, or do not know their business’s valuation altogether. And more times than not, this results in the “Sharks” passing on the opportunity to invest in the company. While many small business owners and entrepreneurs may find it difficult to calculate a true valuation of their company, they have an understanding that how much their company is worth can have a significant impact on the business’s financial future. For example, an accurate business valuation can open the door for an entrepreneur to gain access to the financial capital needed to take their company to the next level. Whether it’s a financial institution or a private financier, both investors will want to have every detail at their fingertips as they decide how much funding can be extended to the company. An accurate business valuation provides insight into how far the business has come, as well as how far the business can go in the future – information that any investor would want to know. But the significance of an accurate business valuation doesn’t end there. Many small business owners either outsource their bookkeeping tasks, or have their employees manage the business’s finances. Whichever the scenario, wealth managers, accountants, investment advisors and other finance-related professionals need to have a clear picture of the company’s worth in order to provide counsel on potential investments or other financial decisions. Additionally, a business’s valuation can have an impact on a less obvious, but still important, element of an entrepreneur’s financial well-being – business insurance. Without an accurate valuation, a company could end up being over- or under-insured, which could negatively impact in either scenario. If under insured and something goes wrong, the business suffers, and if over insured, a small business owner is simply wasting funds that could have been allocated to paying down other expenses or used for growth opportunities. Lastly, and perhaps the most common need for an accurate business valuation is during the selling process. In this situation, the value of the business is the most important aspect of the sale, because it serves as the basis of all negotiations. An accurate assessment of the company’s worth can ensure that the business owner will be fairly compensated for their years of hard work and success. In any event, small business owners should not view their business’s valuation as just a number. A complete understanding of the business’s value can have positive implications to the future success of the company, as well as the owner’s financial well-being. Plus, having a keen understanding of their business’s value, will help keep business owners from needing to jump the “Shark,” or at least will better prepare them if they come face to face with one in the future.

Experian is celebrating National Small Business Week by inviting leading influencers and thought leaders from the world of small business to contribute guest posts. Today Ebong Eka, Corporate CPA, Speaker and Business Expert shares some best practices for finding ROI when hiring an employee.   It's National Small Business Week and time to honor the millions of businesses started by entrepreneurs who stay up late for the opportunity to live the American Dream. If you're an entrepreneur, self-employed, freelancer or solopreneur, you've probably asked yourself the following questions when you were exhausted at 2 am: 1) Can I actually afford to hire an employee? 2) Won't hiring an employee cost a lot of money?3) Aren't I too small of a business to have an employee? Remember the saying, "it takes money to make money"? That's partially true but in this case every dollar you spend in your business should yield a return. In other words, if you spend $1 of expense, you should expect $2, $3, $4 etc. in income or revenue.    So how does a small business owner determine the "Return of Investment" on hiring an employee? If I had a dollar every time I heard "I can't afford to hire an employee yet because my business is too small!"....well you know the rest.  The difference between a solopreneur and a business is the ability to grow or scale.  Your business can't grow, if you as the business owner are doing the sales, fulfillment, customer service, website and everything else under the sun.   In my experience, many solopreneurs and small business owners don't hire employees because they believe doing so will cost more money than their business would earn.  There can be catastrophic consequences and negative financial implications if you make a mistake in the following areas:  1) Recruitment2) Retention3) Expansion  1) Recruitment Recruitment of talent is one of the biggest challenges small businesses consistently face. Hiring the wrong person can be costly because it can damage your sales process, product/service delivery and overall productivity of the business.  Pro Tip #1: Visiting websites like Upwork or Freelancer is a great way to find a great employee, save money and see reviews of their past work. If you want to hire someone locally, ask the perspective person if they understand the job description and responsibility. Then give them a small project to start.  2) Retention Whether you're a traditional business or a solopreneur, it costs a lot of money to not only hire but keep employees. One of the biggest challenges I've seen with clients who've hired me to speak to their sales teams or employees is employee retention/empowerment.  It's a problem, but if done correctly you can have inspired employees that will work hard to increase your bottom line! Pro Tip #2: Believe it or not, money or higher wages are rarely the problem for the employee. Your employee feeling a lack of significance is the bigger problem. One tip is to ask an employee for feedback on the best way to perform a task. That increases the employee's feeling of significance and increases the revenue for your business. 3) Expansion If your business isn't growing, you may be going out of business. The same questions you're asking yourself at 2 am can be alleviated by hiring an employee, whether in person or virtually.  For every $1 I spend, I expect a return of a multiple of that amount...in some cases as much as $10 in revenue. Pro Tip #3: Before hiring an employee, identify what that employee will be doing and make sure that task has the potential to yield a return in revenue for your business.  If you want to grow your business, hiring an employee is an important part of your growth. Legendary business mentor and expert Jim Rohn said "If you do the right thing at the wrong time, you get pain!" In other words, there are financial implications to every decision you'll make in your small business.  However, hiring an employee will cost your money in the short term but the investment will yield a great return in the long run.  Ebong Eka is a Certified Public Accountant, keynote & TEDx speaker, small business and pricing expert who regularly appears on MSNBC, Fox News, Fox Business Channel, NBC, Arise Television, China Central TV America, Huff Post Live and CNN.  He is also a Huffington Post Small Business Blogger and Office Depot blog contributor. Ebong is also the author of the bestselling book, “Start Me Up! – The No-Business-Plan Business Plan”, published by Career Press.