Crowdfunding is one of the newest and most powerful methods that entrepreneurs and business owners can use to raise money. As the name implies, Crowdfunding is getting a group of regular individuals (the crowd) to collectively fund your company.

There are four core types of Crowdfunding.

The first is charitable donation-based Crowdfunding. This is when organizations such as The American Red Cross conduct social media and other campaigns to get individuals to donate. Likewise Wikipedia requesting donations on its website falls into this category.

The second type of Crowdfunding is debt-based whereby the crowd (as opposed to banks) lends funding to other individuals (who may be business owners funding their companies) at favorable interest rates. This type of Crowdfunding is also known as peer-to-peer lending.

The third type of Crowdfunding is rewards-based. In this type of funding, the entrepreneur or business owner gives specific rewards to those who fund them. In most cases, these rewards are the product or service the entrepreneur plans to create. For example, an entrepreneur may want to create a new widget but doesn’t have the funding. So, they ask others to essentially pre-buy the widget, that is provide funding now in return for the future reward of receiving the widget once it’s created.

The final type of Crowdfunding is equity-based. In this type, individuals who fund you receive equity in your business and become shareholders. Equity-based Crowdfunding has been successfully used in England, France and several other countries. In the United States, despite being approved by Congress and the President, it is not yet legal as it must undergo final SEC review and approval. But by the end of this year, it is expected that equity-based Crowdfunding will be legal here too.

What’s so exciting about Crowdfunding is that it has benefits beyond just funding. For example, the process of trying to raise Crowdfunding in order to launch a new product or service provides great market research. If individuals eagerly fund you, the new product or service is probably a great idea. If they don’t, it probably means you shouldn’t launch it.

In addition, those who fund you will most likely become loyal customers who provide positive word-of-mouth marketing to their friends and colleagues. Such a marketing asset can increase both a business owner’s short-term and long-term revenues and profits.

Dave Lavinsky is the President of Growthink, a consulting firm that, since 1999, has helped over 500,000 entrepreneurs develop business plans, raise funding and grow their businesses. Growthink’s Crowdfunding Formula teaches entrepreneurs and business owners how to raise rewards-based Crowdfunding.

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The mentorship program also involves 12 hours of one-on-one virtual mentoring with a government contracting expert from American Express OPEN.

Once participants complete the program, they will be awarded a certificate of achievement and an online badge to be displayed on their website. They will also be given free PR during the program.

The VIP Mentorship program is free to business owners as part of American Express OPEN’s Victory in Procurement (VIP) for Small Business initiative –a national program launched in 2009 designed to help small business owners capitalize on the enormous growth opportunity provided through government contracts.

To apply, interested business owners will need to fill out the VIP Mentorship Application. Applications are due by May 1, 2012. More information on the program, including a link to the application and details on the mentors, can also be found at http://www.openforum.com/governmentcontracting/resources/mentor.

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Have you missed any of my blogs this week? Read on for the quick recap.

Could Facebook and Twitter actually hurt your business and keep customers from buying from you? Get the truth in my post on Huffington Post Small Business.

Does encouraging your employees to become entrepreneurs sound crazy? Crazy like a fox, maybe. Find out how entrepreneurial employees can boost your business in my post on Anita Campbell’s Small Business Trends.

One thing employees don’t want to be: corporate. Find out how to turn this to your advantage in my post on Huffington Post Small Business.

In your efforts to make more sales, are you turning your best customers off? Discover the big mistake you might be making in my post on Network Solutions‘ GrowSmartBusiness blog.

Then, find out how to increase customer loyalty with one simple step in my post on American Express OPEN Forum.

If your business sells upscale products, you’ll want to know the surprising results of a survey on what demographic buys the most luxury goods. Check out my post on AT&T’s SmallBusinessInSite for the scoop.

Speaking of target markets, the Hispanic customer is one of the biggest markets out there–and growing by leaps and bounds. Learn how to market to Hispanic consumers in my Q&A on the LA-SBDC Network website.

Getting ready to start your dream business? Be sure to read my post on SCORE’s Success Blog for the most important startup step of all.

Before you launch, you’ll also want to check out my post on SmallBusinessLoans.com for tips on building your personal credit so you can get the financing you need.

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Getting funding for a small business has never been easy–and today, it’s tougher than ever. One way to increase your odds: Read what Dave Lavinsky has to say in today’s guest post.

Are you looking for funding to start or grow your business? If so, build a Board of Advisors.

Advisors are simply successful people you ask to advise you on growing your business. A “Board” of Advisors is simply a group of these advisors (typically 4-8).

Unlike a Board of Directors, which is more formal and typically requires paying each Director, a Board of Advisors is more informal. While you don’t pay them in cash, I recommend paying Advisors with warrants in your company. When you do this, they take the position more seriously and have a vested interest in helping you succeed.

So, why is having a Board of Advisors so helpful in raising money? Here are four key reasons:

1. Practice: If you can’t convince an individual to invest their time (perhaps one hour per month for one year) to be part of your Board, you won’t be able to convince someone else to invest their money in your business.

2. Connections to Capital: People you ask to be on your Board will generally be people who are very successful (that’s why you want them on your Board). Such people can generally invest in your company themselves if they want, and/or have vast networks of successful contacts to which they can introduce you.

3. Credibility: Having brand name Advisors (individuals who are local, national or industry celebrities) gives your company a lot of credibility. For example, if Donald Trump were on your Board, wouldn’t it make your company seem like a clear winner to investors? Even much smaller name advisors than Trump help in this regard.

4. Operational Success: Once you raise your funding, your goal is to grow a successful company. And if your Board includes seasoned entrepreneurs and executives who have already achieved such success, they can and will give you great advice and guidance.

As you can see, creating a Board of Advisors has real advantages to any company. Start by creating a big list of individuals you respect and who have the track record, brand name and/or connections to help your company succeed. And then start meeting these people, and inviting the best ones to join your Board.

Dave Lavinsky is the President of Growthink, a consulting firm that, since 1999, has helped over 500,000 entrepreneurs develop business plans, raise funding and grow their businesses.

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While meaningful market turnaround may be lacking at this point in the economy, merger and acquisition opportunities remain, particularly for smaller establishments whose profitability may be appealing to larger companies with cash on their balance sheets.

No matter what specific field you’re in, knowing the true value of your operation is essential.  A larger company may make an offer that seems reasonable – or perhaps more than expected – but you could still be leaving money on the table.  In other circumstances, it’s also imperative to understand the value of your business with regard to the sale of common stock, estate or charitable tax requirements, management buyouts, or just a fiscal check-up.

It’s never too early to get a firm handle on the value of your business and to identify its value drivers…keeping in mind that you can grow your business, without growing the value.

Ultimately, in just about any industry, it’s all about the margins. Prospective buyers are less concerned about sales than they are about margins and sustainable cash flow. And for the small business owner, there are a lot of variables to those all-important margins– the weather, the cost of heating oil, the price of materials, etc.  Protect margins by pricing accordingly; keeping in mind that erosion of margin is the erosion of value.

Rule of thumb is a three-to-five-year window to plan for exiting or to position for sale…and evidence of sustainable cash flow is critical. Savvy buyers recognize that a 40% spike in revenue may not necessarily be the best indicator of long-term value.  You can ‘strip mine’ a business for a couple of years and grow the margins but that does not set the table for future growth.  A savvy buyer will also recognize this and adjust their offer accordingly.

Sustainable growth is defined by steady increases year to year. Regardless of where you are in your exit planning stage, remember that high margin and constant cash flow is what will attract a potential buyer.

John M. O’Brien is managing director of The BVC Group, a professional services firm providing independent business valuation opinions to clients, based in Amherst, N.H. John’s work has been reviewed by the Big 4 public accounting firms, and he has successfully worked with companies all the way through the IPO process. For additional information visit www.thebvcgroup.com.

In today’s guest post, MBO Partners president and CEO Gene Zaino shares five ways that consultants, independent contractors and solopreneurs can minimize their tax burden and lessen the stress of tax planning.

No one looks forward to tax season, but tax payment and reporting burdens may be even greater than usual if you’re one of the approximately 16-million-strong independent worker pool in the country today.  Proper tracking of your business expenses, income  and tax payments are all key challenges facing independent workers. Getting this right is also a critical factor in protecting your status as an independent business (both for you and the clients you serve) since we are in an environment of increased government scrutiny of worker misclassification.

The good news is that the following 5 tips can help independents maximize deductions, increase cash flow and meet their responsibilities as a compliant independent business.

1. Estimate to save. The number one mistake independent workers make is failing to plan for their full tax burden.  Independent contractors must ensure that they account for self-employment tax in addition to income tax.  Also, depending on where your services are delivered, you may find that additional local business taxes apply (like the B&O tax in Washington State, or the Unincorporated Business Tax in New York City), so make sure you check the local tax rules of each city you work in and where you reside. Properly estimating taxes can reduce the year-end tax burden. In fact, pre-funding all owed taxes is required if your federal tax liability is expected to be over $1,000 (check local state tax rules as well).  Failure to fully fund estimated quarterly taxes can result in an unplanned tax burden and may also include penalties for underpayment. Do your research or seek professional advice and be sure to estimate your tax burden throughout the year. The actual amount of tax will change based on new projects and new expenses, but you should be able to calculate an estimated overall annual rate. Once you know your estimated annual tax rate, develop a good system that forces you to save a percentage of the money you receive from clients for taxes to avoid being caught off-guard. If you have trouble setting aside funds, consider opening a separate bank account for taxes and each time you receive a client payment, deposit that percentage into this account. Finally, you may opt to use a Consultant Services Provider like MBO Partners, where independent consultants are provided a business center and a system that calculates their income with each client payment and every allowable business expense, keeping taxes managed and funded up-to-date.
2. Track and manage business expenses. Many independent workers miss important business deductions because they do not have a system, the advice, or a process in place to properly track and document them. In order to be deductible by IRS standards, the expense must be both “ordinary and necessary.” As ordinary expenses can vary by occupation, it is important to get educated about allowable deductions and put an organized system in place that allows you to properly track and maintain the appropriate documentation throughout the year. Whether it’s  a scanning tool, an Excel spreadsheet, or working with a service that keeps you organized, it’s important to be consistent year-round. Submitting expenses and managing them shouldn’t be an annual chore but a daily routine for an independent operating a “business of one.”
3. Get familiar with per diem rates. If you have yourself set up as an employee of your company, you may be entitled to a per diem allowance when you travel a certain distance from home to conduct business.  Provided you comply with the IRS rules (be sure you check with your tax professional) this can help reduce your tax burden when working on projects that require long-distance travel.
4. Get the most from your health benefits. You may be able to reduce your tax burden by taking maximum advantage of your health benefits as there are plans that can yield pretax benefits. For example, opening up a Health Savings Account (HSA) along with opting for a high-deductible (approximately $5,000) medical insurance plan can be a good idea. You can contribute funds into this HSA and each dollar will offset your taxable income. For 2012 you can contribute up to $3,100 for an individual, or $6,250 for a family.  As you pay for medical expenses to meet your deductible, they are taken from your HSA.  If you do not use the funds they will roll over, earning pre-tax interest, which then can be applied to future healthcare costs.
5. Fund your retirement. Independent workers have a number of options for retirement planning including Simplified Employee Pension, Individual Retirement Account (SEP) IRA and Solo – 401(k)s. If you can afford to save for retirement, then it makes sense to put a plan in place that allows you to save the maximum.  If you have your own company there are many easy ways to leverage your retirement plan that allow you to contribute well up to $50,000 (and in some cases more) tax free dollars depending on the type of plan you choose (see your tax or financial advisor to find the best option). This is one of the best ways to build up your nest egg for your future.

Taxes are a critical part of running your independent business. A little guidance, time and planning can ensure that you are not only in compliance, but can help you generate more cash flow.  While these tips can help, there’s good reason to turn to specialists if you are losing sleep, billable time and income by trying to do it all yourself. If your income level merits outsourcing taxation management, income and retirement management, and proper expense tracking, another great choice would be to look at companies to partner with that help you (not just at tax time) but every day, affording you the time and energy to build your business, not administer to it.

Busy independent contractors should keep these tips in mind throughout the year, as well as at tax time, but it is always recommended to seek professional tax advice about your particular situation.

Independent Workforce Expert Gene Zaino is the President and CEO of MBO Partners.

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Have you missed any of my posts around the Internet this week? Keep reading to see what’s on my mind.

You may hear about “content marketing” a lot these days, but do you know how to use content marketing to attract BtoB customers? Get the skinny in my post on Network Solutions‘ GrowSmartBusiness blog.

Innovation’s a big business buzzword, but what does it really mean to innovate in today’s economy? Find out in my article on MSN’s Business on Main.

Speaking of buzz, Pinterest, a new social sharing site, is getting lots of it. Learn whether Pinterest can work for your business in my post on AT&T’s SmallBusinessInSite.

Worried that customers are going to post horrible things about your company on social media? Well, don’t be. Check out my post on Huffington Post Small Business to find out what consumers really say about businesses online.

Have you used Google+ yet? Get the basics on this social media network in my article for the L.A. SBDC Network.

More info is coming out all the time about how consumers use mobile phones to shop. Learn the latest in my post on Network Solutions‘ GrowSmartBusiness blog.

Love the reality show “Shark Tank“? (Or hate it?) Either way, you’ll want to read my post on American Express OPEN Forum and learn why some women entrepreneurs are just saying no to sharks.

What’s itsy-bitsy and teeny-weeny? Maybe your marketing budget–but that doesn’t necessarily matter. Read my post on the Huffington Post Small Business to learn why.

You might be thinking about hiring employees. To avoid one big hiring mistake entrepreneurs often make, read my post on the SCORE Success blog.

Get smart tips to save you money, keep your employees healthy and more in my Small Business Insider tips on SmallBusinessLoans.com.

Lots of young people today want to start businesses–but are their expectations realistic or not? Find out what I think on Anita Campbell’s Small Business Trends.

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Did you miss any of my blog posts around the Net this week? Here’s what’s on my mind.

Do you love the Oscars? I do too and I’ve made a point to try to catch all the Best Picture nominees. Discover the surprising business secrets I learned from “The Artist” in my post on American Express OPEN Forum.

It’s no secret that women make or influence the majority of consumer purchases. But who are they influencing and how? Find out in my post on AT&T‘s SmallBusinessInSite.

Looking to hire a salesperson? A manufacturer’s rep might be your best option. Learn what reps are and how to find one in my post on Network Solutions‘ GrowSmartBusiness blog.

Do you have a bully at your business (or are you one)? Find out what risks your company could be facing from their bad behavior in my post on Huffington Post Small Business.

Is your small business on Facebook? If you are, here’s some good news: You’re probably doing a better job of it than big corporations are. Get the skinny in my post on Huffington Post Small Business.

Speaking of social media, do you know what your customers are saying about your business? Learn how to find out in my post on the SCORE Success Blog.

Seems like small businesses are finally getting ready to hire again (fingers crossed). Get the scoop in my post on Anita Campbell’s Small Business Trends.

How tough is it really to get a small business loan? Find out in my post on SmallBusinessLoans.com.

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Finding financing to start or grow your small business is difficult—but not impossible. In today’s guest post, business financing expert Dave Lavinsky (left) shares five secrets to raising the capital you need.

Most entrepreneurs require funding to start their business. And later on, most seek additional funding to turn their small business into a thriving one.

Here are five keys to help you succeed:

1. Understand that funding is a progression. Few to no companies raise millions of dollars out of the gate. Rather, companies typically raise a smaller “seed” round of funding, and use that funding to launch and start growing their venture.

The initial traction you gain from your seed round reduces the risk of failure to future investors. Start by seeking smaller amounts of funding, and later you can access larger amounts.

2. Go after the proper funding sources. Most entrepreneurs fail to raise funding because they pursue the wrong funding sources. For example, if you are just starting out and have no traction, then venture capitalists (VCs) generally aren’t interested. Likewise, if you aren’t a technology company, VCs are typically not the right funding source.

There are many potential funding sources, from credit cards to grants to angel investors to vendor financing. When seeking funding, identify all the potential funding sources available to you now, and systematically pursue them.

3. Begin cultivating relationships early. Consider a situation whereby within a six month period you built a business with 10 customers and $25,000 in revenues. In one scenario, you met an investor before you accomplished this and told them what you were doing, and in another scenario, you didn’t.

Although your accomplishments are the same, in the first scenario, the investor is infinitely more likely to fund your future growth. Why? First, because they’ve known you for six months. And second, because you told them that you were going to accomplish something, and then you did it. This breeds trust.

Meet potential investors early, forge real relationships with them and they will be much more likely to fund you.

4. Develop a formal business plan. To raise funding, you need a formal business plan. Your plan needs to credibly detail what your company is about and why it will be successful. As a wise investor once told me, “I’m not going to entrust my money to an entrepreneur who can’t even put together a credible and professional business plan.”

5. Always be marketing. Raising funding is marketing. You’re marketing your business plan and company to prospective investors and lenders. Treat it like any other marketing endeavor. Find the best target customers. Find the best channels to reach them (e.g., introductions). Give them your best presentation possible. Then rinse and repeat.

Dave Lavinsky is the president of Growthink, a consulting firm that, since 1999, has helped over 500,000 entrepreneurs develop business plans, raise funding and grow their businesses.

Photo courtesy: Dave Lavinsky

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Have you missed any of my posts from around the Web this week? Keep reading for a quick roundup.

I’ve got a new gig blogging over at Small Business Loans.com. Check out my first post to learn how to minimize the financial risks of starting a business–and keep reading to get lots of useful advice on all aspects of business financing.

There’s lots of positive news about the economy, including a new report that affluent Americans are feeling highly optimistic. Get the details in my post on Network Solutions’ GrowSmartBusiness blog.

Businesses are slowly starting to spend, too. If you market business-to-business, you’ll want to read this article, where SBDC Business Advisors Monica Rayes and Trevor Shickman share expert advice on winning B-to-B business.

If you’re considering hiring, don’t limit yourself to your own backyard. New research shows employees are more willing than ever to move for work. Learn more on Network Solutions‘ GrowSmartBusiness blog.

Or consider hiring a teen. Learn how hiring a teen helps more than just your business in my post on American Express OPEN Forum.

What do your women workers want? The answers might surprise you. Check out my post on Anita Campbell’s Small Business Trends to find out.

Speaking of women, conventional wisdom used to be that Mom makes most of the family purchasing decisions. That’s changing. Find out who’s in the driver’s seat by reading my post on AT&T‘s SmallBusinessInSite.

Are you worried customers of your retail store are using smartphones to find better deals–and walk out on you? Then you need to read my post on the Huffington Post Small Business.

Many studies show that teleworking improves employee satisfaction–but there’s one situation where it might do the opposite. Learn what teleworking arrangement you should avoid in my post on the Huffington Post Small Business.

Is there something you stink at? ‘Fess up–and read my post on SCORE‘s Success Blog to learn how to get better.

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