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To prepare for this post, I performed an online search for the phrase “how much should I pay myself?” I received a staggering 61.9 million results, clearly demonstrating it is a subject of much interest.

After reading some of the articles and accompanying comments, I discovered it is also a subject of much frustration.

While having the freedom to set your own salary sounds great in theory, in practice, many entrepreneurs find it is not all it’s cracked up to be. Determining how much to pay yourself, when to pay yourself, and where to get the funds to pay yourself depends on a variety of factors.

Let’s take a look at some of those factors now:

Start with Your Business Structure

When we question how much to pay ourselves, we are referring to the amount that will appear on our W-2. In some cases, you have discretion to determine your compensation; in other situations, the IRS tax form preparation process will set the amount for you. The determining factor is your company’s legal structure.

• Sole proprietors and single-person LLCs: Your compensation is equal to your net income as reported on line 31 of Form 1040, Schedule C (Profit or Loss From Business). This is your reported self-employment income. You will pay Social Security and Medicare taxes on this amount, and it is included in your overall income tax calculations. Because your compensation is the same as your income, there is no formal paycheck in this setup.
• Multi-person LLCs: Considered partnerships, there is no salary involved; only guaranteed compensation in the form of payments and distributions. Again, you will pay Social Security and Medicare taxes on the amounts received.
• S and C corps: You have compensation options — as an employee (salary and bonus) and as an owner (dividends), or a mix. With the dividend tax rate usually lower than the combined income and payroll tax rate, there is a tendency to maximize dividends and minimize payroll. The IRS is alert for this practice, so tread carefully.

To provide “protection” if audited, you should calculate a “reasonable” compensation for your responsibilities and the amount of time you devote to the position. Research recruitment websites, newspaper want ads, salary surveys conducted by industry trade groups, and ask others in similar positions. Another “protection” is to pay yourself an amount up to the Social Security base so the government is receiving all its payroll taxes.

In a company where you are not the majority shareholder, the board of directors will typically determine your compensation based on comparable positions in related companies. It is a best governance practice for the founder/CEO not to sit on his or her own company compensation committee.

What to Pay Yourself With

You pay yourself with cash in the bank. Do not confuse this with sales. Sales are not the final amount of cash available. You are paying yourself out of the net balance, which is the amount left after you deduct all your expenses, such as rent, compensation for your employees, marketing, office supplies, travel, insurance, and IT.

However, even net income is not a satisfactory target. If you give your customers 30-day terms to pay, while the sale may have been made in April, you might not collect the cash until May or June. So cash receipts may lag sales. You can’t take a salary or keep your business running profitably without cash, so keep your eye on this target.

Pay Strategies

Depending on the maturity of your company and your plans for the business, you may adopt different compensation strategies.

• Start-up mode: It is typical for a start-up to be cash-flow negative in its early months, if not years. This results from one-time start-up expenses like buying equipment, building out a facility, stocking inventory, marketing to attract customers, building products or websites, legal and accounting costs, and rent and utility deposits. Also at start-up, there are no or few customers. As such, during these times, your compensation will be light as there are no funds to pay more. Hopefully, you had prepared a business plan, including a cash-flow forecast, so you knew the range of your compensation during this period, and if there was not enough to “live on,” you have made other arrangements.
• Lifestyle vs. ramp and sell: If you intend to own and operate your company for many years, which is what 95 percent of entrepreneurs plan, then you will want to develop, over time, a predictable compensation plan both to meet your personal needs and be predictable for yourself and the company.

However, if you are in the 5 percent who plan to start a company, ramp up products/services and sales quickly and then sell the business, your main reward will be when you sell. In this scenario, you will have very modest compensation during the time you are ramping up the company. The good news is that the sale of the company will probably be taxed at capital gains rates, which are lower than ordinary income and payroll tax rates. Of course, while this compensation plan applies to you and other owners, your employees will need competitive compensation and benefits to attract and retain them.

• Wait and see: Obviously, you need cash to pay compensation, and in a start-up or growing business, the cash on hand is often very unpredictable, so you need a flexible pay calculator. You can either pay yourself a percentage of cash profits, or you can pay yourself modestly during the year and a larger amount at year-end when you know the results for the year.

What to Do With the Compensation Received

Your compensation belongs to you and not the company. So first deposit the compensation received in your personal bank account. Then you can decide to use it for personal needs or reinvest in the company, which will take the form of providing equity or a loan.

What Am I Worth?

This is a good statistic to know as you have options to continue to work for yourself or join another team, but you will not find this number in any financial statement or wage report. Revisit the compensation information you found in your research for comparable positions. If your company does not have the cash resources to pay you this amount, you might consider working for someone else.

Key Lessons

• There is less flexibility in setting one’s compensation than many entrepreneurs anticipate.
• Compensation strategies are different for startup vs. ongoing businesses, and for business that you plan to operate for many years vs. quickly grow and sell.
• You need a business plan with financial forecasts to know if will have sufficient cash to pay yourself a reasonable compensation

For more business planning tips on creating a business plan and key mistakes to avoid, you can view Hal’s other posts here.

Small business owners around the United States are feeling more optimistic than they have in some time, according to the Fall 2015 PNC Economic Outlook Survey. Do you share their sunny outlook? Here's some of what the survey uncovered.

• 25 percent of the small business owners surveyed expect to hire new employees in the next six months. That's the largest number planning to hire since 2012
• 26 percent have hired employees in the last six months—a significant increase over the 18 percent who reported hiring in the spring
• Over 40 percent will raise wages and salaries in the next six months—the highest percentage since 2007, before the Great Recession 
• More than 90 percent will at least break even this year, while 70 percent will make a profit. Just 6 percent project taking a loss

What's behind small business owners' optimistic views? Largely, it's due to declining energy prices, as well as lower prices for other essentials. Just half of small business owners in the survey expect their suppliers to raise prices in the coming year, down from 62 percent last year. And only 28 percent plan to raise prices in the coming year, a decrease from 38 percent last year.

No wonder that 87 percent of entrepreneurs surveyed are optimistic about their own businesses prospects for the coming year. That's up from 83 percent this spring. In addition, 76 percent are optimistic about their local economies—the highest number since 2007. Almost 60 percent believe housing prices in their local market will rise in the next six months. Finally 67 percent feel optimistic about the overall U.S. economy. That's not too shabby.

As they plan for a positive year of growth, small business owners aren't planning to take out loans or lines of credit to attain their goals. Just 18 percent plan to pursue loans or credit lines in the next six months. This, even though 23 percent say access to credit has become easier to obtain than it was three months ago, and only 12 percent say gaining access to credit is harder.

While not tapping into outside financing sources, the small business owners plan to reinvest in their own businesses. Thirty-six percent plan to invest in business operations, 29 percent will put money into their cash reserves, 27 percent will distribute money to owners, and 25 percent will pay off debts and liabilities. One rising cost they are worried about is health care: Nearly half (49 percent) expect the cost of employee health insurance to increase in the next six months.

Small business owners do have a few concerns, however. For one thing, although they're interested in hiring, they say it's becoming more difficult to find qualified workers. More than one-third (34 percent) say it’s harder to hire qualified employees than it was a year ago. One in 10 (11 percent) who aren’t currently hiring say it’s because they can’t find skilled workers.

What are your plans for the next six months? No matter what your business goals are, a SCORE mentor can help you achieve them. Visit SCORE to find out more.

Whether your business is brand-new or a long-running venture, it’s important to recognize that it’s impossible to accomplish all your business dreams alone. You need partners to help you along the way.

What kind of partner is right for you? It depends on your business goals. If you need additional knowledge and industry expertise, you might want to bring on a formal business partner. If you need additional financial capacity, it could be time to seek a funding partner. If you’re working to increase brand awareness in your community or industry, a strategic partnership may be your best path to sustainable growth.

Performing a SWOT analysis will help you determine which type of partner could provide the best support to your business. Once you’ve determined your strengths, weaknesses, opportunities, and threats, consider how each of the following types of partners could help your business grow.

Business Partners

A traditional business partner is another person who can step in to make progress in the weaker areas of your business knowledge. Hate math and statistics? It might be time to enlist a partner to serve in the CFO role. Not sure how to increase your manufacturing schedule? Bringing a partner with experience in logistics on board could be just the thing your business needs.

Don’t just recruit a friend who wants a piece of your business pie. Take time and diligence to vet potential partners’ experience, work ethic, and references. A great business partnership is one that focuses on meeting goals, leveraging resources, and communicating clearly.

If you’re thinking of bringing on a formal business partner, take time to research the legal implications that may come into play.

Neighbors

Partners aren’t just the people who work in your business -- they might work nearby. Think of complementary businesses in your city. Can working together help you both reap the benefits?

Say, for example, you own a dog grooming salon. There’s a popular organic pet food store a few blocks away. Instead of seeing another pet-focused business as a competitor, the pet food store is really an ally. If your two businesses can work together strategically to host special events and promotions, you may be able to increase revenue for both your businesses.

You may not need a formal contract for this type of community partnership, but be sure to list each business’s basic responsibilities in writing for your records and accountability’s sake.

Your business “neighbors” can also come from outside your geographic area. Look for ways to work with complementary businesses in your industry, such as manufacturing partners, supply vendors, or other potential collaborators.

Investors

If your business needs capital to grow, you’ll seek financial partners. Don’t assume that finding an angel investor is the only route. Explore your options in a SCORE webinar on funding options, including equity investors, crowdfunding platforms, microfinance organizations, and banks

Above all, seek a financial partnership that you’re comfortable with based on your business’s progress and potential for growth.

Mentors

Mentors may not work hands-on at your business, but they’re an important asset for evaluating growth opportunities. Think of them as a coach guiding you and cheering you on from the sidelines during the big game.

Look to local networking groups, business associations, and industry colleagues for mentors you can call on for advice. Of course, you can always call on SCORE mentors to guide you at any point on your business journey.

Except for the occasional overnight successes you read about, most of us grow our businesses slowly by careful decision-making, sticking to budgets and doing due diligence. It could take a few months to a few years to get to the point when you can see positive growth, but in any situation it’s always helpful to learn from those who’ve gone before you, like the folks at your local SCORE.

In the meantime, here are a few things about business growth I’ve learned along the way:

1. Where you can cut and where you need to spend: For my business, we decided to go virtual and save on office costs. Not being in an office together is not ideal, in my view, but it works and has definitely helped our business grow by lowering operating costs. Where we need to spend is travel for face-to-face meetings. For my business, it’s all about the personal touch, so it’s important to have the capital to make travel arrangements when necessary. You are the best judge on where your business can save money so you can spend it in the right places, such as marketing, hiring help or buying more inventory.

2. Assume no one is looking for you. What I mean by that is you’ll need to work hard every day to get the word out to the world that you are open for business and why they should buy from you. Try means possible. My business uses social media, trade shows, SEO, personal appearances, referral strategy, e-newsletters, social network advertising, relationship marketing…I could go on. The point is, in the beginning you need to try it all. Once you’re in the groove you can check your analytics and narrow down your efforts to what works best.  

3. You can say no. It took me a few years after startup to feel comfortable enough in our success to turn down clients. When you’re starting a new business, you’re always afraid clientele may dry up so you tend to take everything you can get. Unfortunately, this strategy may lead to a bunch of work that’s not worth your time or effort. Losing money because you didn’t value and price your product or service high enough is a quick road to burnout. Before jumping into any business relationship, it’s important to weigh the pros and cons. You may end up taking a low-paying client because the connection is so valuable, but at least you won’t be spinning your wheels.

A few weeks ago, during my Tuesday night basketball game, somebody fainted.

Not feinted, as is usually the case. I mean fainted. As in plop, straight down to the ground, right there in the middle of the court.

And so we all rushed over and stood around him, wondering what to do.

Wondering, because out of the 20+ men present, our combined medical knowledge was discouragingly weak.

How weak? Let’s just say that in the competition that night for “Most Prepared to Treat a Possible Heart Attack Victim,” it was a tie between a financial planner who claimed to “watch a lot of Discovery Channel programming” and a guy whose dog had recently given birth.

Luckily, our fainting man sat right back up and was ultimately, perfectly fine.

Nonetheless, it was scary. And, given that the vast majority of participants at this weekly event are well north of 40, we knew this could happen again.

And so the following week, a dozen of us showed up at the local fire station on Wednesday night and plunked down $10 each for a crash course in CPR.

I have to confess, I found the whole thing a bit confusing. Yes, they’ve done a commendable job of dumbing down the complicated business of restarting a human heart (any medical treatment that hinges upon singing the Bee Gees’ “Staying Alive” while being administered is clearly intended for the liberal arts majors among us). But still, a lot to remember.

One detail, though, did stay with me: As the person performing CPR and if there are bystanders present, before beginning, you are supposed to pick somebody out of the crowd, point directly at them and shout, “You there! Call 911.”

The key point, apparently, is “pick somebody.” Because, as our cheerful instructor Dave cautioned, if all you do is shout, “Somebody call 911!,” it’s very likely that nobody will assume they are somebody (still with me?).

He went on to explain that with no one “officially” in charge, most people will conclude that others are more capable and more experienced, and therefore do nothing. By singling out an individual, that person is suddenly empowered to take action.

Guess what? When it comes to asserting a point of view and behaving as an expert, we professionals often think the same way – somebody(s) else knows a lot more than we do.

Outside the confines of a company – in a place where job titles, org charts, tenure, office size, etc., have little significance – the professional services world is also one in which nobody is officially in charge.

Which means that if you’re waiting for the local newspaper to call you up and happily inform you that “we’ve been watching and you have earned the right to speak your mind,” you’ll be waiting for a long time.

Instead, I recommend taking a page from my new friend Dave, the CPR instructor: Assume authority and take decisive action. Share your point of view, take a position, publish lots of content, offer lots of advice. (tweet this)

Might you make a mistake, be disagreed with or even say something stupid? I guarantee it.

But, as Dave observed, “Everyone else is as scared and unsure of their capabilities as you are. Just remember that when somebody’s heart stops beating, their chance of survival decreases by 10% every minute. Even if you don’t perform all the CPR steps perfectly, doing nothing is the worst possible action.”

When it comes to standing out from the crowd, being seen as an expert and growing your business, that’s about the best advice I’ve ever heard.

When it comes to growing your business, do you take it slow and steady or do you go full speed ahead?

According to the American Express OPEN Small Business Growth Pulse, which surveyed entrepreneurs with at least $250,000 in annual sales, 72 percent of small business owners say growth is a priority for them right now. However, the approaches entrepreneurs take to get to growth differ. While the majority of entrepreneurs (63 percent) report taking a slow and steady approach, 25 percent prefer to be aggressive in their pursuit of growth.

Here's a closer look at what the study found about small business growth.

Small businesses are growing. The good news is almost half of business owners in the survey report that their companies have grown "significantly" since launch. That doesn't mean growth is without stress; 49 percent of entrepreneurs polled admit that coming up with new ideas for business growth “keeps them up at night.”

The Takeaway: Growth isn't something that happens once; it's an ongoing process, and one in which you can never rest. If you want your business to grow, you must constantly keep tabs on your market, your competition and your industry. And, as the entrepreneurs in the study know, you've always got to keep coming up with new ideas.

Make a plan or wing it? Four out of 10 entrepreneurs in the survey say their past growth was planned; just 27 percent say their companies grew spontaneously or organically. However, of the entrepreneurs who are prioritizing growth currently, a whopping 65 percent have created a formal plan for growing their businesses.

The Takeaway: As the late Yogi Berra said, “If you don't know where you're going, you'll probably end up someplace else.” Creating a plan for your business's growth greatly increases your chances of success by helping keep you on track despite all the demands of running your business day to day.

Where does growth come from? Small business owners are about evenly split as to the most important aspect of business growth. Twenty-six percent say attracting more customers matters most to growth, while 24 percent say increasing revenue is most important and 23 percent believe increasing profits is key. To achieve these goals, one-third say their biggest growth opportunity is expanding into new marketplaces, while one-third say diversifying into new products and services will give them the best chance for success.

The Takeaway: When we think of growing our businesses, most of us probably think of getting more customers. But that's not the only way to go about it. In fact, it's quite common for businesses to grow their customer base and actually see their profits decline. This occurs when you don't take the time to do financial planning and projections that take into account all the added expenses that can come with growth, such as adding staff or expanding your location. You can also grow revenues and profits without ever adding customers; just try tactics such as boosting your prices and cutting your operating costs.

Small business owners don't grow it alone. More than four in 10 (41 percent) of the entrepreneurs surveyed say networking has the biggest effect on their growth — more than marketing or advertising does. About half (49 percent) say networking with other small business owners, as well as with business experts, is a critical step on the path to business growth.

The Takeaway: Getting ideas, inspiration and referrals from your contacts is a smart way to approach business growth. Don't forget to get help from your SCORE mentor in planning for your own growth strategy. Don't have a mentor yet? Visit www.score.org.

This week I spent two days conducting observational research in a convenience store. Interestingly, while we had set questions and data capture methods, our greatest insights came from what was NOT said by consumers.

First a little background…

This project was the result of joint effort between seemingly disconnected groups: an association, a non-profit advocacy group, a SaaS consumer business and a chain of convenience stores. At a conference earlier this year, Jeff Lenard from the National Association of Convenience Stores NACS, Julie Garel from The Project on Nutrition and Wellness (PNW), (a program of the Convergence Center for Policy Resolution), Aviva Goldfarb, CEO of the Six O’Clock Scramble online meal planning business and Lisa Dell Alba owner of Square One Markets realized they shared the same goal - to help the average family eat more healthy food.  Besides a common mission each group also saw the benefits from a PR, policy or sales perspective. 

After months of development, the team created The Six O’Clock Scramble Fresh & Fast Family Dinner Kits™. The all-in-one kits provide all the ingredients and recipes time-stressed families need to prepare a fast, fresh meal. The kits sell for under $20 and are designed to feed a family of four. At $5 per person, the dinner kits are an affordable dinner option and less expensive than eating fast food or dining out, and less than half the price of meal-delivery services like Blue Apron, Hello Fresh and Plated.

Square One Markets agreed to offer the dinner meal solutions for 10 weeks as part of the pilot test. One to two new meals would be offered each week to customers to test different recipes and combinations (such as Tortellini with Crisp Turkey Bacon and Peas, Tortilla Pepperoni Pizzas, Shredded Chicken Chili and Black Bean and Corn Soup).

This launch was innovative, and therefore risky, in many ways

• The existing convenience store suppliers could not provide the kit ingredients. Regular Square One suppliers delivered either packaged food with a long shelf life, or a single perishable category (like milk). Lisa Dell Alba therefore needed to find and then specially arrange to work with a restaurant supplier in order to get the healthy ingredients. She also needed to schedule the labor to create smaller portions and assemble the kits for the pilot.
• The average time spent in a convenience store is 3-4 minutes. Getting attention, much less trial would be a challenge.
• The regular Square One customer was an individual male stopping in to get a drink, a quick breakfast or lunch or snack for himself. Based on prior research we knew that the decision regarding family dinner tends to be on the mom’s “worry list”.
• Convenience store customers typically did not cook at home. When asked “what else would you do for dinner tonight?” most answered “Fast Food” or “other casual Dining takeout”.
• The convenience store channel was not associated with healthy or family dinner.

The pilot was kicked off on September 29th at Square One Market’s convenience store in Bethlehem, Pennsylvania. From a research perspective the team decided to gain insights by observational learning or the uncovering of private information by observing consumers’ actual choices.

The team worked to engage consumers in a variety of ways. The dinner kit bags were prominently displayed when walking in. Signs and Square One’s concierge service at the pumps announced the new product to customers. Inside the store Aviva Goldfarb prepared the meals and offered samples.  Customers were asked to fill out a brief raffle form to win a new dinner kit.

Some customers stopped in and tried the samples, commenting on the flavor and good idea of the project. But after several hours, we realized the importance of what was not being said - there was little examination of the actual kit or questions regarding price. The silence meant there was not a purchase preference even if the feedback on the product was positive.

Research on silence shows that consumers can remain quiet for a number of reasons (Zhang).

• Correlated preferences: The silence could simply represent a common distaste or a reluctance to adopt new products. In probing it was found that those who did not try the samples did not like one ingredient (like peas, or black beans). These no’s were considered fixed and unchangeable and were a barrier to trial.
• Correlated contexts:  Often silence reflected a very deep skepticism about the idea - that it would really work for the family. It needed to compete with the current behavior of grab and go fast food or take-out where each person got what he or she wanted. Dinner decisions were made in the moment. Luckily the kits could also fit into the last minute decision flow, but were a new idea that needed to be tried and accepted.
• Correlated payoffs:  Particularly for moms, dinner “success” does not depend on her tastes or preferences. Success is dependent on whether the entire family eats the meal.  Samples were most important for the kids - if they liked it, then the mom was interested. And learning it was healthy was an added bonus.

The pilot is still in motion with much more to observe and test.  But included in our plan is observing inaction and silence as important information.

Want to grow your small business, but not sure how? A SWOT analysis can help you choose the right direction for your company.

SWOT stands for strengths, weaknesses, opportunities, and threats; examining these four elements will provide an overview of the health of your business. Your strengths and opportunities offer avenues for growth, while your weaknesses and threats present warning signs meant not to deter you, but to inspire improvement.

You probably completed a SWOT analysis as a part of your initial business plan, to help determine your place in the market and focus your ideal customers and offerings. Now that your business is established, it’s time to do a new SWOT analysis to determine growth opportunities.

How SWOT analysis can illuminate paths for business growth

The SCORE SWOT analysis worksheet is a free download to help you think about strengths, weaknesses, opportunities and threats in six categories: product/service offering; brand/marketing; staff/HR; finance; operation/management; and market.

Your responses in each category can help you refine short- and long-term goals for your growing business and determine the action steps to help you reach those goals.

Growth opportunities may not always make themselves known as a grand change such as launching a new product line or expanding your number of locations. Growth for your business might mean hiring a part-time staffer to help with marketing tasks, or purchasing a new piece of equipment that will help you fill orders faster. In many cases, simply refining trouble spots may offer the greatest opportunity to growth. If you see an opportunity to streamline the way you create or deliver your products or services, doing so won’t just make your life easier -- it’ll make your customers happy, too.

Don’t think of your SWOT analysis like a re-brand or a remodel for your business. Think of it as checking the route on a map.

Cross-check your SWOT results with external circumstances

You’ll also be able to compare the results of your SWOT analysis with external factors that could affect your business. If you need capital to grow, what is the lending environment like? Could other economic factors, like the housing market, inflation, or interest rates hinder or help your growth?

You might feel excited about your goals and want to work toward them immediately, but in some cases, waiting a few months or years to implement parts of your growth plan can offer stability. Your SCORE mentor can help you determine the best approach.

To learn more about how a SWOT analysis can help your business grow, join our webinar on October 8. John Harmon, a mentor with the Fairfield, Connecticut SCORE chapter, will discuss how to perform a SWOT analysis and how doing so can benefit your business. Click here to register.

Your personal credit score is very important for most small business owners looking for a small business loan. Many lenders still use the personal credit score as a go-no-go metric for business loan approval. Even through your personal credit score offers an incomplete picture of your business’ credit worthiness, for most small business owners the need to build and maintain a good personal credit score is likely never going to go away. With that in mind, it’s important to understand how your credit score is calculated and how it could impact your ability to get a business loan.

What Does My Personal Credit Score Say About Me?

Your personal credit score gives a lender a look into your past to help them predict your credit behavior in the future. While there are some circumstances that negatively impact the credit score of an otherwise good borrower, here is what most lenders see when they review your personal credit score and how that could impact your ability to find a small business loan:

Below 579: Bad

There is some financing available for borrowers with this type of credit score, but it’s considered a high-risk loan and will likely come with higher interest rates. It’s very unlikely this borrower would be able to qualify for a traditional bank loan or a loan from the SBA.

580-619: Poor

Although there are financing options available, it is unlikely this borrower would find success at the bank. And, a borrower with this credit score should expect to pay a high interest rate. This score is also considered a higher-risk credit score.

620-679: OK

This is considered a moderate-risk credit score. A small business loan is very possible, but will likely not come with the lowest interest rates. If your personal credit score falls within this range, expect to pay a moderate to high interest rate. A 650 credit score is the bottom threshold the SBA will typically consider.

680-719: Good

This is considered a good score and many in the U.S. fall within this range. A borrower with this type of score can expect to see more approvals and better interest rates. A score of 680 is typically the lowest a bank will consider.

720-799: Very Good

If your credit score falls within this range you are considered a low-risk borrower and will be able to find a loan just about anywhere. A borrower with this credit score should expect to be offered excellent interest rates along with other possible perks.

Above 800: Excellent

If your personal credit score is above 800 you can expect lenders to roll out the red carpet. Borrowers with this credit score will be offered the best interest rates and the most favorable terms.

How is My Credit Score Calculated?

The formula used today to calculate your personal credit score was first introduced in 1989. Unlike your business credit profile all three of the major personal credit bureaus, Experian, Equifax, and Transunion, use a very similar system to calculate your score. While there are some slight differences, the information they look at is pretty straightforward:

• 35% Payment History: Late payments, bankruptcy, judgments, settlements, charge offs, repossessions, and liens will all reduce your score.
• 30% Amounts Owed: There are several specific metrics including debt to credit limit ratio, the number of accounts with balances, the amount owed across different types of accounts, and the amount paid down on installment loans.
• 15% Length of Credit History: The two metrics that matter most are the average age of the accounts on your report and the age of the oldest account. Because lenders use your score to predict future credit worthiness based upon past performance, the longer (or older) the file the better.
• 10% Type of Credit Used: Your credit score will benefit if you can demonstrate your ability to mange different types of credit—revolving, installment, and mortgage, for example.
• 10% New Credit: Every ‘hard’ enquiry on your credit has the potential to reduce your score. Shopping rates for a mortgage, an auto loan, or student loan will not typically hurt your score, but applying for several credit cards or other revolving loans in a short period of time could. According to Experian, these enquiries will likely be on your report for a couple of years, but have no impact on your score after the first year.

How Can I Improve a Low Score?

Building a good credit score or rebuilding a less-than-perfect score isn’t something that happens overnight, but there are some things you can start doing right away that will yield results fairly quickly. Here are four things you can start doing today:

1. Know Your Score: The best place to start is by looking up your current score. The three major credit reporting agencies all offer a free annual credit report as well as other services to help you keep track of where you are. They also offer an alert service that notifies you any time your credit is checked or changes. There are several other places that offer the same type of services at very low or no cost.

As you review your report and your score, look for errors. It’s not uncommon to find mistakes on your personal credit report. The major reporting bureaus all have dispute procedures in place and will correct any verifiable errors on your report.

2. Keep Your Personal Credit and Your Business Credit Separate: While it’s tempting (especially in the early years) to use your personal credit to cover business expenses, it’s not a good idea in the long term. It doesn’t help to build your business credit and the higher balances usually associated with paying for business expenses can actually hurt your personal credit. Remember 30 percent of your personal credit score is a reflection of how much credit you actually use verses how much credit you have available. In other words, if you’re maxing out your personal credit cards every month, it will hurt your personal credit score. This is true even if you pay the balance down every time a payment is due.

3. Don’t Apply for Credit You Don’t Need and Don’t Jump Around: Every time you apply for new credit it impacts your credit score. Applying for credit you don’t really need will hurt your score. And, moving balances around is not a good strategy to improve your score; it’s considered a very transparent gimmick that will hurt your score. Plus, don’t forget the longer you’ve had a credit account the more positive the impact on your score, so closing one credit account to open a new account doesn’t help you.

4. Stay Current on Every Credit Account: The single biggest thing you can do to improve your personal credit score is to make timely payments on all your credit accounts. Once you start missing payments, it doesn’t take long for your score to drop. If your credit score is suffering, you won’t be able to change things overnight, but your diligent efforts will yield results. Before too long, consistent monitoring and good credit practices will help you improve your score.

Don’t believe anyone who claims they can drastically improve your credit score overnight. Aside from correcting errors on your report, there are no quick fixes. You should also know that it’s against the law for anyone who claims they can fix your credit to ask for payment before they go to work. Additionally, it’s against the law for you to use an alternate social security number to create a new credit alias. Fixing a less-than-perfect personal credit score simply takes time and good credit practices.

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As it turns out, I’m not actually ambidextrous, as I had long believed.

Ambidextrous, as defined by Dictionary.com, means: “able to use both hands equally well.”

That’s not me.

I don’t use them “equally well” – I use different hands (mostly my own) for different things, a tendency which, strictly speaking, makes me “Cross-Dominant.”

So, for example, I’m a lefty when it comes to throwing a Frisbee or football, playing basketball, holding a lacrosse stick, drinking coffee or speaking on the phone.

On the other hand (HAHA!!!), I’m a righty when it comes to eating, writing, shaving, bowling, throwing a baseball, brushing my teeth and, were I invited to, polishing a hippo.

All in all, I consider my cross-dominance to be an advantage.

First, because it seems to me that as long as you have two hands, you may as well maximize body performance and efficiency by distributing the workload evenly.

Second, because it forces me to think.

When I try a new activity for the first time, and because I’m not sure if I’ll be a righty or a lefty in a given situation, I’m forced to ignore convention and just figure things out for myself.

It may take me a little longer to get the hang of it, but the extra time and effort ensures that I’ve fit the situation to my particular skills and orientation. In the end, I’m always better off than if I had simply done it the right (or left) way.

Likewise, as professionals, we have (nearly) unlimited freedom to decide how we do what we do. The problem though, is that most of us, in most situations, simply follow the herd:

… The life coach in the process of building a web site visits the sites of other coaches, to “see how you’re supposed to do it.”

… The consultant dipping her toe into social media, first checks out how other consultants tweet, post, link and perform similarly social-media-related verbs.

… The aspiring financial planner reads the right publications, uses the right lingo and even buys the right car, all in the hope of knowing what he’s supposed to know and looking the way he’s supposed to look.

Following the pack is a strong, reasonable, natural tendency and one that I don’t claim to be immune to either. It took me over a year as a solo to realize that I didn’t have to be in my office 8 – 6 everyday, and another year after that before I noticed that my company doesn’t actually have a dress code.

But it’s a problem, nonetheless.

Because when we do things based on “how it’s done,” we give up the opportunity to fit our business lives to the way we prefer to work, think, talk and behave.

So here’s what I recommend: Spend a little less time figuring out how, and a little more time asking why:

• Don’t worry about how to publish a newsletter until you can explain why you need one.
• Don’t spend a year sweating over the writing of a book without first thinking about where it fits in your overall marketing plan.
• Don’t build a web site, design a logo, craft a tag line, hire an assistant, enroll in a class, attend a trade show or spend time and/or money learning a new technology until you have a pretty good inkling as to why you need these things in the first place.

Here’s the bottom line. There’s nothing wrong with learning from the example and experience of others. But all too often, we just blindly follow the lead of those who’ve come before.

Take it from a cross-dominant professional and do as much of your own trail-blazing as possible. I’ll leave it to you to decide which hand you swing your machete with.