What’s Yours is Mine? The New Sharing Economy and Small Business

In recent years, many workers have found new ways to earn a living, becoming their own bosses as they enjoy a freelance lifestyle. Whether they’re offering rides to the airport through Lyft or Uber, or running errands through TaskRabbit, people are redefining the way they earn a living and blazing a trail for future generations.

But there are downsides to working this way. For freelancers, the unpredictability of work and changing pay structures make it sometimes difficult to make a reliable living. But for businesses and the American economy as a whole, the impact can be far more widespread.

Pros and Cons of Our New Sharing Economy

Pro: Growth of Outsourcing Opportunities

The increase in freelance workers gives businesses a great alternative to hiring full-time, salaried workers. Instead they can outsource work on a per-project basis and continue working with those employees if they do well.

Additionally, errand services like TaskRabbit give professionals the ability to outsource mundane personal tasks, like picking up dry cleaning or running errands. They can then focus on their own work. For traveling professionals, Lyft and Uber have proven to be a better alternative to taxis and public transportation, allowing them to call for a car and pay all on their mobile devices.

Con: Shortage of Skilled Workers

Unfortunately, a sharing society also means fewer professionals in the workforce. As the unemployment rate drops, this could result in there being a national labor shortage, where businesses scramble for help from what is a much smaller pool of skilled workers who are willing to work a structured office schedule.

The Millennial generation is now filling the workplace, and they have expressed their preferences for a fun and flexible workplace. The workforce of the future will require a performance-based workday rather than one that is measured by time clocks and traditional 40 hour work weeks.

Pro: Entrepreneurs Working Together

The ad hoc environment can be very good for business owners, who can take advantage of the large variety of skilled freelancers available.

More shared work spaces like Canvs are opening up across the country, providing desks and meeting space for a variety of talented independent workers and small businesses. Co-working spaces encourage collaboration, prompting entrepreneurs to learn from and help each other as they build their businesses.

These centers also serve to help build the local economy by encouraging business growth.

Con: Wage Degradation

There are some who are concerned about these shared labor concepts. Economist Dean Baker pointed out to the New York Times, that the wages workers make in these gigs can equate to less than minimum wage. He expressed concern that in time, this could create a downward pressure on wages overall that could impact the earning ability of mainstream America.

However, for the most entrepreneurial-minded workers, this type of work can help build the confidence they need to start their own businesses.

The new sharing economy opens opportunities for both consumers and workers, allowing people to work on their own terms. With the unemployment rate still high, this sharing economy is enabling people to make money while they wait for job opportunities to open up.

It seems to me that the freedom of being your own boss is empowering and has the potential to inspire many to start their own businesses – which benefits the economy as a whole.

How to Use the Sharing Economy to Benefit Your Business

Running a small business has a lot of perks to it.

A huge budget usually isn’t one of them, so small businesses have to continually look for ways to stretch a dollar and make the most out of the operating budgets they do have. Finding ways to save on expenses while increasing profits is necessary to stay afloat.

One way for small businesses to save on costs associated with running a business is to utilize today’s economy of sharing.

With the nation’s workplaces being filled with Millennials, companies are changing the way they do business. Instead of larger corporations keeping their cubicles filled with life-long, dedicated employees, companies are now hiring employees who are more caring, sharing, and have a lower level of commitment than their older peers in the business world.

For smaller businesses with fewer employees, this millennial mindset and the sharing economy, sometimes called “collaborative consumption,” can save money on operating expenses and raise profits if done correctly.

Let’s look at a few ways that small businesses can utilize the sharing economy and make it benefit the bottom line:

Raising Capital

Unless you’ve been stranded on a desert island for the last 5 years, you’ve likely heard of crowdsourcing, and the sites that aspiring entrepreneurs, those raising funds for medical expenses, and others use in their fundraising efforts.

Instead of going door-to-door selling wrapping paper or candy, or hitting up relatives for capital, small businesses can turn to crowdsourcing as a means for raising capital. Although video games and movies are the most funded projects in crowdsourcing, anybody can put an idea out there and offer special perks to those willing to invest in it.

Crowdsourcing can save time for businesses when raising capital, and also be an easier way to come up with funding than applying and qualifying for a traditional bank loan.

Business Trips

With business hubs in the United States being mainly on the east and west coasts of the country, there will most likely be a need for business travel now and then for small businesses.

Costs in transportation and lodging can really add up, and since ride sharing for airplanes hasn’t really caught on yet, businesses can save the most by using shared car rides and accommodations. Whether it be a ride to the airport, or to a meeting from the hotel, small businesses can save on transportation costs by using services like Uber and Lyft.

Small businesses can also save on local transportation by using these services instead of purchasing and maintaining a fleet of vehicles. Small businesses can save up to 50 percent of lodging costs by using services like Airbnb.

Outsourcing Small Tasks

Small businesses can outsource a lot of small tasks to outside providers. Handyman services, painting, cleaning, and maintenance can be outsourced to the lowest bidder on sites like AskforTask. You can also find the services of a logo designer, app developer, and writer from freelancers on sites like Fiverr.

Monetize Space

Do you have extra offices in your building that aren’t being used? Space for a cell tower? Unused parking spaces? You can turn all of these assets into money for your bottom line by utilizing the sharing economy to rent them out. In some cities, parking spaces are worth $50,000 a year.

Hiring Temps

Using a service like Wonolo, you can hire temporary employees to work just 3 hours, 3 days, or 3 weeks. You can even use these services to hire temporary to permanent employees. You can use a service like this just to find temps to perform menial tasks like sending out mailers, but more and more businesses are using them to fill longer term positions like web design.

When done properly, and small business can use collaborative consumption, or the sharing economy, to save money in the short term and the long run. Small businesses can also form relationships with individuals and other businesses that can be mutually beneficial to both.

How is Your Small Business Facing Today’s Challenges?

According to the Small Business Index, a recent survey of 1,000 small business owners by MetLife and the U.S. Chamber of Commerce, there’s a lot of confidence in the small business community; but, it’s tempered by concerns about the economy.

In fact, the Index found that 60.6 percent of small business owners have a positive outlook for their company and the environment in which they operate. The insights go even deeper than that, though, and reveal the areas where small business owners are feeling more confident.

For example, small business owners feel good about the overall health of their businesses and revenue expectations. But their takes on the state of the national and local economies and quality of employee recruits tend to be less sunny.

To learn more and chat about the new Small Business Index findings, join our upcoming Twitter chat. The chat will feature more information from the research along with some actionable insights you can use to improve and grow your business.

Small Business Trends’ founder and CEO Anita Campbell (@smallbiztrends) will moderate the chat. She will be joined by fellow small business influencers, Rieva Lesonsky (@Rieva) and Susan Solovic (@SusanSolovic). The chat is scheduled for June 21 from 7 to 8 P.M. EDT.

Here are some of the topics that will be covered:

How are Entrepreneurs Overcoming Small Business Challenges?

What are some positives for today’s small businesses? According to the Small Business Index from MetLife and the U.S. Chamber of Commerce, small business owners are generally optimistic about their overall business health. And there are a couple of other areas where business owners tend to feel positively.

Where is there room for improvement? But those positive feelings don’t necessarily extend to all areas of business and the economy. For example, some business owners seem to feel less optimistic about the national economy as a whole, as well as their local economies.

What are some actionable insights businesses can take to improve? So what can small businesses do with this information? Using the data gathered by MetLife and the U.S. Chamber of Commerce, chat participants will discuss some steps you can take to improve your small business outlook going forward.

More Details:

What: Twitter Chat “Voices of Small Business: How Business Owners are Confronting Today’s Challenges”

Who:

  • Anita Campbell, CEO of Small Business Trends (@smallbiztrends)
  • Rieva Lesonsky (@Rieva)
  • Susan Solovic (@SusanSolovic)

Where: Twitter

Hashtag: #MetLifeSmallBiz

When: June 21, 2017 7-8 P.M. EDT

Foxconn Says Apple, Dell Part of Its Bid for Toshiba Chip Business

HIGHLIGHTS

  • Apple, Dell, & Kingston are part of the Toshiba’s chip unit business bid
  • Toshiba said Amazon, Google, Microsoft, & Cisco too are a part
  • Toshiba is planning to sell its chip business unit

Apple Inc, computing giant Dell Inc and Kingston Technology Co are members of a Foxconn-led consortium bidding for Toshiba Corp’s chip unit, the CEO of the world’s largest electronics manufacturer told Reuters on Monday.

Terry Gou, Foxconn’s founder and chief executive, also said Amazon.com Inc was close to joining and that the Taiwanese firm was also in discussions with Google, Microsoft Corp and Cisco Systems Inc about their participation in the bid.

Foxconn Says Apple, Dell Part of Its Bid for Toshiba Chip Business

He declined to comment on the total size of the offer or say how much Apple and other US firms planned to invest in the bid.

“I can tell you Apple is in for sure,” Gou said in an interview, adding that its participation had been approved by the Chief Executive Tim Cook and Apple’s board of directors.

 

Foxconn, formally known as Hon Hai Precision Industry Co, and its Japanese unit Sharp Corp would have a combined stake of not more than 40 percent, he added.

Representatives for Apple and the other US firms named by Gou could not be immediately reached for comment outside of regular business hours. Sharp declined to comment.

If You Care About Small Business, Keep the Home Mortgage Interest Deduction

President Obama’s budget reform commission proposed eliminating the home mortgage interest deduction. This idea has analysts scurrying to estimate the proposal’s economic impact.

Unfortunately, our lawmakers often forget the law of unintended consequences when offering up changes to policies. In this case, our elected officials need to consider how making mortgage interest non-tax deductable will impact small business credit markets.

While policy makers might not see the connection, the mortgage interest deduction is linked to small business credit. That’s because the deduction helps to prop up housing prices. With 25 percent of those running small companies using home equity to fund their businesses, a drop in housing prices would mean that small business loans and lines of credit would be harder to come by.

Mortgage Interest Deduction

Getting rid of the mortgage interest tax deduction will have a sizeable effect on small business credit markets. Analysis by the National Association of Realtors indicates that home prices would drop 15 percent in the absence of this deduction. A study I conducted with Mark Schweitzer of the Federal Reserve Bank of Cleveland shows that each one percent decline in housing prices lowers the value of home equity loans (HELOCS) by 1.33 percent. Combined with the estimate of the home price decline from no longer being able to deduct mortgage interest from your taxes, this shift would mean a 20 percent drop in the value of HELOCS.

That’s a lot less small business credit. A report by the New York Fed put the dollar value of outstanding HELOCs at $700 billion in the beginning of 2010. Thus, we should expect to see a $140 billion decline in outstanding HELOCs if the home mortgage interest deduction were eliminated.

A sizeable chunk of this decline would be borne by small business owners. Analysis of the Federal Reserve’s consumer finance survey shows that business owners accounted for one quarter of home equity loans in 2007, the latest year for which data are available. Thus, dropping the deductability of mortgage interest would shave $35 billion from small business owners’ home equity loans.

While we don’t know for sure how much of small business owners’ home equity borrowing is financing business operations, the amount is sizeable. Analysis of Fed consumer finance survey data indicates that households with businesses had median home equity debt that was 50 percent more than that of households without businesses in 2007. If the difference in debt levels between the two types of households represents the portion of home equity borrowing the business owners are using to finance their companies, then one third of the small business owning households’ home equity borrowing is being used to support business operations.

The reduction in housing prices estimated to come from dropping the deductability of mortgage interest would lead to a projected $11.7 billion decline in home equity borrowing by small business owners for business purposes. That’s about 16 percent of the $71.8 billion in loan originations made to small companies (businesses with less than $1 million in annual sales) in 2009, the latest year for which data are available.

And that’s just the effect of eliminating the mortgage interest deduction on small business owners use of home equity loans to finance their companies. Any effect of the eliminated deduction on other types of loans used to tap home equity for business purposes would be on top of this.

Our elected officials need to consider the law of unintended consequences when they debate eliminating the mortgage interest deduction. Doing so will cause a contraction in the small business credit market that could lead small businesses to cut back on capital investment and hiring.

BizEquity Partners with Equifax in a Bid to Democratize Business Valuations

What is your business worth? Do you have any idea?

BizEquity, an online provider of business valuation big data, recently announced it has entered into a strategic partnership with Equifax (NYSE: EFX), an information solutions and global insights provider, to help answer this very question. The companies say they’re offering a joint business valuation service that will help small business owners better understand what their businesses are worth and help financial professionals prospect more effectively.

BizEquity says it has valued over 33 million private businesses and distributes its patented cloud-based service through thousands of financial advisors. The company says the new partnership marks the next step in democratizing business valuations, bringing together Bizequity’s “pioneering valuation service” with Equifax’s platform that reportedly organizes, assimilates and analyses data on more than 820 million consumers and more than 91 million businesses worldwide.

“We are proud to team up with Equifax, a global leader in the world-wide data and insights business, to harness the power of billions of data elements and use this data to democratize knowledge for every small business around the world,” said Michael M. Carter, CEO of BizEquity, which is headquartered in Wayne, PA, but has offices in key markets around the world such as London, Singapore and Delhi.BizEquity Partners with Equifax in a Bid to Democratize Small Business Valuation

New Small Business Valuation Service

Business valuation knowledge is important for small business owners and financial advisors who want to optimize their ability to capitalize on a range of opportunities, such as business insurance and financing. With a significant number of businesses looking for financing and many proprietors planning retirement based on the sale of their companies, BizEquity insists this valuation knowledge is crucial.

Some 10 million businesses are actually expected to change ownership over the next 10 years and will need business valuation services that are mainly provided by financial institutions and advisors, according to the press release announcing the BizEquity and Equifax partnership. The partnership hopes to change this by jointly distributing the BizEquity valuation service to hundreds of thousands of small businesses.

“By jointly distributing the BizEquity service, targeting over 900,000 financial professionals, we’ll both innovate and disrupt by delivering value to the commercial market,” Carter said in the announcement.

As part of the agreement, Equifax says it will license certain data assets that include financial and business details of some 80 million companies to BizEquity to pre-value over 71 million private businesses using its patented cloud-based valuation platform that harnesses sophisticated algorithms and big data knowledge. This will enable financial professionals, such as bankers, financial advisers and wealth managers, to provide their clients and prospects with real-time insight into the fundamental questions of what their businesses are worth and how they are performing — in a fraction of the time it takes to accomplish a traditional business valuation, the partnering firms revealed in the announcement.

Highlights of the new valuation service include providing financial professionals and small businesses with:

  • Innovative big data analytics,
  • A reliable and viable technology platform,
  • The ability to build stronger client relationships,
  • Key business contact details, and
  • Prospecting intelligence and lead engagement.

“Combining our market-leading data assets with BizEquity’s award-winning technology is an excellent strategic relationship and an example of how Equifax continues to create innovative alliances,” said Joy Wilder Lybeer, senior vice president of Enterprise Alliances at Equifax. A company headquartered in Atlanta, Ga, Equifax has grown from a consumer credit company into a leading provider of insights and knowledge helping its customers make informed decisions.

Image: BizEquity

Separating Your Personal and Business Finances: Why and How

New business owners may seek to keep things simple and co-mingle their business and personal finances. This is a BIG mistake. Here’s why, and what you can to do to appropriately separate your financial activities.

Why and How to Separate Your Personal and Business Finances

Why Keep Finances Separate?

There are important financial, legal and tax reasons to separate your finances:

Why and How to Separate Your Personal and Business Finances

  • Financial. It’s difficult to know how well your business is doing if you can’t easily eyeball a bank balance devoted to your company. You may run into cash flow problems using a single account for business and personal expenses. Also, having a separate credit card for the company helps to build business credit scores.
  • Legal. If your business is a corporation or a limited liability company, you can lose the personal liability protection you sought by setting up such an entity by co-mingling your finances. The reason: If you don’t respect the separate legal status of the entity, creditors may not have to and can go after your personal assets to satisfy their claims. There’s a legal doctrine called “piercing the corporate veil,” which means courts can ignore your entity’s status for purposes of your personal liability for any claims against the business if you haven’t observed the formalities of a separate business entity.
  • Tax. For federal income tax purpose, the law requires you to keep good books and records. This can only be done if you have a business bank account into which you deposit income and from which you pay expenses. A rookie mistake is thinking you can remember what expense is for business, such as a meal, when it comes time to prepare your tax return; you can’t — and it can cost you tax deductions!

How to Keep Finances Separate

It’s really a no brainer. All that is needed to keep your business affairs untangled from your personal money matters is to have a separate business bank account and a separate business credit card. If you choose to use PayPal, also set up an account for your business.

You also need separate accounting for your business income and expenses. So, for example, if you use Quicken or Mint.com to track your personal expenses, use a separate accounting solution, such as QuickBooks, for your business.

To make sure you input expenses into the correct accounting solution, be sure to keep business receipts separate from personal expenditures. This can be done using separate files for paper receipts or separate online folders for e-receipts. Online options, such as Shoeboxed can help you keep track of business receipts.

If you use a home office, business with personal matters can all too easily get mixed up. In order to claim a home office deduction, the space must be used regularly and exclusively for business. Incidental personal use may not kill the deduction, but it’s better to keep personal things out of the home office area.

If you use a paid professional to prepare your tax return, ask that you receive separate invoices for services related to your business and personal income and expenses. For example, if you’re self-employed, an itemized bill enables you to take a business deduction for the cost of preparing Schedule C; the balance is deductible only on Schedule A if you itemize.

Conclusion

Keeping your business and personal life separate is extremely helpful. It’s easy to do. It merely requires a little housekeeping to set things up properly, and then to follow through.