Small Business Profit Explosion

Marketing Tip of the Week- Never Take a Sale for Granted!

I’ve been looking at cars recently, and marketing is constantly running through my minds. Car dealerships spend tons of money on advertising, leads, and internet marketing, but it really comes down to the sales person. If you think about it, this is true in most sale transactions.

As I visited different dealers I met many different salespeople. Each had their own personality and style to getting you to their sales milestones (engage, test drive, and financing). There was one that stood out the most, not because he was particularly good sales man, but because once we started to talk numbers he assumed I was going to buy the car. He was so confident he even had the staff prepare the car I was looking at for the purchase. He was very surprised to see that I walked away from the deal because the numbers didn’t work out. It reminded me of the saying “Don’t count your chickens before they hatch.”

In marketing, nothing is ever a sure thing. Never assume that your sale is done until you receive payment and your customer has left with the product. Even then, any good business person knows this is just the beginning of a long term business relationship.

 

MYTH VS TRUTH: Is Receivables an Asset?

The myth most business owners believe: Just about all business owners consider it an asset. Why not? Their bankers and their CPA’s tell them it is.

Why this myth causes a problem: In a word – you can’t spend receivables! (Yes, I know you can borrow against it. But, that is getting very hard to do.) In truth – trade receivables is really potential future cash in the bank.

The truth successful business owners learn the hard way! The best sale is a cash sale. Better yet, the best sale is a sale where you get prepaid all or a part of it in advance. You have to pay your staff and your vendors. And, they want CASH!

But, business owners also know they will sell more if they can offer payment terms. In many industries this is what the customer has come to expect. So, what do you do if you must sell on terms?

Lesson learned: The following are many of the ways that smart business owners control their receivables:

1. Don’t let it become a receivable in the first place! Give a discount for prepayment. On large jobs, especially from new customers, take a substantial down payment.
2. Know your customers. Do a credit check if they are new. Or, trust them and start them off with a small credit line and let them “earn” their way to a larger credit line. This is what I did when I was the Controller for Magnolia Coca-Cola back. We often provided credit for a startup where our competitors wouldn’t. But we paid particular attention to these and called them quickly if they were late on a payment. As these customers grew they were very loyal Coke customers because we trusted them when no one else would.
3. Be upfront with your customers about your payment expectations. Don’t be afraid to discuss payment with them.
4. When possible, don’t deliver the product to the client until the bill is paid. We implemented this on tax returns a few years back and it greatly reduced our receivables.
5. Don’t hesitate to collect. The longer a balance is outstanding the higher the chance of it becoming non-collectable. Assign smaller ones to your staff. But, the owners and the sales staff should be involved in the larger balances due.
6. When a balance becomes seriously past due and there is doubt about collecting it, you should call the customer and offer a deep discount to the customer if they pay by a certain date.
7. As a last resort, have an attorney send a collection letter. I am not really a fan of suing for receivables. This often leads to a countersuit. Plus, your time is better spent getting a new good paying customer. But, a collection letter from an attorney often is enough to shake loose a payment.

Thank you for your continued support and let’s make this year our most profitable year ever!

 

Tax Tip of the Week- IRS Kicks Off Random Corporate Audits

 An IRS official says, about 2,500 small corporations (those with assets of less than $250,000) will be audited as part of the IRS national research program. Starting in April, tax returns from 2010 will be reviewed. The IRS will use the results of these exams to update its return audit selection formulas.

Adding these random audits to the increase in audits due to the massive increase in the number of IRS auditors since 2007, greatly increases the odds that your small corporation may be audited.

This may be a good time for you to meet with your tax preparer and discuss any potential exposure you may have.

Like any good CPA, I need to add a disclaimer: unfortunately, it is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.

 

Focus Your Time on the Work That Increases Profits, Sales and Cash Flow

(Growing Your Business Series: Part 4)

 

This is number two on my top ten ways to increase your business profits, sales and cash flow. But, I find it is almost always the hardest thing for any business owner to accomplish. Even when a business owner is highly motivated to increase sales and profits, they never seem to get around to it. Why?

Well the reason I hear most is that they are so busy running their business and putting out fires that they never seem to get around to it. I also run into this. I start off the day with great plans on getting things done and by the end of the day nothing has happened due to client and employee interruptions.

But, that is the easy answer. The truth is we all like doing things we do well. And many of us are very good at making the product and satisfying the customer. So – that’s where we spend all our time.

That is why I almost always tell a business owner that they are 100% responsible for keeping their business from growing! Please don’t think I am telling you not to produce a quality product! What I’m saying is that this may not be the best use of your time. If you had the money you could hire someone to do the technical work that is required to produce the end product for the customer.

But, like Dan Kennedy has said countless times, every business is in the business of getting and keeping as many profitable customers as possible! That is where the majority of business owner’s time should be concentrated on. That means I am not really in the CPA business – I am in the business of getting more profitable, paying customers for my CPA business. The same applies to any business. Once you start looking at your business that way it will quickly change how you allocate your time.

What I am leading to is the following: The business owner’s time is the most valuable resource in the business! You can buy everything else except more hours in the day.

In part 5 next week I will discuss some methods for increasing the amount of time the business owner has to work on their real job of increasing their sales, cash balances and profits.

Until then, thank you for your continued support and let’s make this year our most profitable year ever!

Marketing Tip of the Week - Successful Business Owners Don’t Follow The Herd

In fact, the most successful business owners see what other business owners are doing and do the opposite!

Why? Well consider that according to the Small Business Administration (SBA), over 50% of small businesses fail in the first year and 95% are out of business in the first five years. Of the ones that survive past five years, less than 1% reaches a level that allows the business to survive the retirement or death of the founder.

So why then do most new business owners study what other business owners are doing and then just copy them? This almost assures that they will become one of the 95% who either fail or are just getting by.

If you truly want to succeed you should instead see what the “herd” is ignoring.

• Is there a niche where your product or service can be sold that the herd is currently ignoring?
• Is there a new way to use your product or service that the herd doesn’t see?
• Is there a new product or service that you could be offering that the herd is not offering? (Think Apple iPads.)
• Is there an add-on product that you can offer that the herd isn’t offering?
• Is there a more efficient way to produce or deliver your product?
• Is there a different price (either higher or lower) that your product or service can be offered at?
• Is there a way to increase customer satisfaction when using your product or service?

Sounds like a lot of trouble and work. But, so is failure!

 

TEXAS SALES TAX 101: AN INTRODUCTION

The Texas Limited Sales, Excise & Use Tax Act imposes a tax on sale, lease or rental or personal property (touchable & movable) and on certain services. In general, Texas imposes the sales tax on the on the end user based on the sales price of each item of a taxable sale.

Most business owners understand sales tax law, but are unaware of the Texas Use Tax which applies to the purchase of items out-of-state and then brought into Texas. Since a non-Texas retailer made the sale, Texas sales tax would not be collected at the time of the sale. The use tax applies to “any taxpayer who purchases tangible personal property from any retailer for storage, use or other consumption in Texas.”

In Texas, the tax law presumes that all retail sales or uses of tangible personal property are taxable. This means that unless you can find a specific exemption that specifies that a product is non-taxable (such as orthopedic products) then a product is taxable.

No such presumption for services exists. This means that unless the law states that a service is taxable then your service is not taxable. (We will cover taxable services on a future blog article.) 

Like any good CPA, I need to add a disclaimer: unfortunately, it is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.

 

MYTH VS TRUTH: SALES TAX IS NOT A THREAT TO MY BUSINESS

The myth most business owners believe: Most business owners never worry about sales tax after they first open their business. At that time they set up their procedures and then believed that, as long as they paid their sales taxes monthly, there was nothing left to worry about.

Why this myth causes a problem: In a word - audit! My clients have been audited at a higher rate than any time in the last 20 years. And, based on my discussion with other CPA’s, this is happening city wide.

The truth successful business owners learn the hard way! Sales tax audits are a bigger threat to your business survival than almost anything else. The sales tax audit from my last three client audits resulted in an average bill of over $100,000. (Of course, after appeal we expect to pay much less).

Lesson learned: As a business owner it is your responsibility to do a threat assessment annually. You should learn the sales tax laws that apply to your business and do an annual self audit to determine your potential exposure.

To help you, I will be writing a series of blog articles titled TEXAS SALES TAX 101. Look for the first installment tomorrow.

 

Marketing Tip of the Week – We’re Expanding!

We are proud to announce or newest project, Innovative Marketing Consulting (IMC). We are offering affordable marketing options for small businesses.

We offer everything from social media set-ups, simple websites to customized marketing programs. In the near future we will also offer mobile applications and Search Engine Optimization (SEO).

Our goal is to help small businesses owners market their business using the newest technologies regardless of their budget or experience. IMC can give small business owners the chance to utilize internet and other marketing media and have it make them money!

Go to http://www.imcelpaso.com/ to learn what we can do for you!!

 

For The Busy Business Owner That Can’t Keep Track Of Their Mileage And Expenses!

I’m always looking for things that can help my business clients keep better records and I came across Texthog.com.

Texthog is an online program that allows users to text their expense to their account and the program will keep track of the amounts you have spent. With the paid accounts you can take pictures of your receipts, track mileage, and create subaccounts and reports. It’s inexpensive too! It’s only $7 a month or $50 a year for 2 users. Trust me; it will probably save you a lot more than that in taxes and is a tax deductible item for businesses. Go to www.texthog.com to check it out.

FYI- I do not get paid to products or services I promote. I just like to promote things that I feel will help people make their lives easier. 

 

Marketing Tip of the Week- Make it Fun!

Customer’s like to feel like they’re a part of something special and exciting. So, when you’re planning promotions try to make them special and exciting! Use your creativity!

We have seen business owners give away prizes, give free food and drinks, or invite guest speakers or bands; anything that draws people to your location!

Just remember to sell once the crowd is there! I have heard business owner’s complain people just come for the free stuff. But, the owner only did half the job! Aside from your hosting duties, you and your staff have to take advantage of the crowd and make your sales pitch! Change the store layout, go over sales techniques with your staff and be prepared.

So make this month’s marketing fun and exciting!

 

Marketing Tip of the Week – Your Logo

I have seen many good and bad logos in my day. Here are some tips on how to make sure you don’t pick a bad logo.

• Don’t use an actual picture as a logo – Pictures are hard to reproduce and resize so when you’re printing your letterhead, banners and other business documents your logo won’t print well
• Don’t use clipart- Clip art is a little bit better than a picture but unoriginal! Anyone can use that image. Your logo should be unique and allow your audience to bring your business to mind when they see it.
• Don’t rely heavily on different colors- there may be times where you have to print your logo in black and white. I have seen many logos become unrecognizable because they do not print well in black and white.
• Don’t hand draw you logo- Hand drawn logos look unprofessional. Customers may think you’re too cheap to pay for a professional logo which translates to: This company is unprofessional and may cut corners with my services. Or, This company is too cheap to get a real logo, so their products must be cheap.

When creating your logo remember,

• It should be something that is simple, unique and easy to remember so customers can instantly associate your logo with your company
• Don’t be afraid of spending a little money. There are tons of graphic designers out there that are reasonable with their fees. Remember this is your business’s identity and will be with you for a long time
• Go with what you like! Your logo doesn’t have to be a picture of a toilet if you’re a plumber. Go with something you like and looks professional.

I hope this helps you pick the right logo for your company!

 

Client Questions - Can I Deduct My Spoiled Inventory?

Question: A florist called our office this week asking if she can deduct the cost of flowers that didn’t sell over Valentine. I get this question often from restaurant owners also.

Answer: Since flowers and food have a short shelve life, it is very rarely held in inventory. Normally the business owner deducts the cost of the flowers or food when they are purchased. Accordingly, they cannot be deducted again when they are thrown out.

Larger retailers, wholesalers or manufacturers who have an inventory on their tax return will get a deduction when they write items of inventory off as worthless.

Like any good CPA, I need to add a disclaimer: unfortunately, it is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.

 

What Would You Tell a Family With This Household Budget?

How would you counsel a family with the following household budget?

                Annual Income                                                                 $ 24,700

                Annual spending                                                              $ 37,900

                New credit card debt for the past year                          $ 13,300

                Existing credit card debt                                                  $ 153,500

                Recent spending cuts                                                     $ 385

You would probably tell them that they are close to bankruptcy. You would also probably tell them that they have to cut spending. Not just by the pretend amount of recent cuts they have made; but, with really, deep, meaningful cuts!        

Well this is every family’s share of the national budget and the national debt! (From a recent John Stossel Show.)

So, what will you be telling the politicians in this November’s election about our countries budget situation? Should they continue with more of the same and bankrupt the country or rein in our out-of-control spending now.

Better choose wisely! Your family’s future financial well being depends upon you making the right choice now!

(Start by educating yourself with a past blog – The Federal Deficit is Increasing by $237,823 per Minute! What Does That Mean to the Small Business Owner? (Link http://bit.ly/yRgdYs )

 

10 Surefire Ways to Make More Money and Keep it in the Bank!

Go to www.myprofitguru.com to listen to our free webinar that will show you the following 10 Surefire ways to make more money and keep it in the bank. This one hour webinar is jam packed with information that I have used over the last thirty plus years to help business owners increase their profits.

The following are the items I cover that I know can help you double or triple your profits this year:

1. See what the crowd is doing and do the opposite.
2. Focus your time on the work that increases profits, sales and cash flow.
3. Manage & improve every step of the sales cycle.
4. Increase sales to current customers.
5. Create a marketing system to get the big customer.
6. Speedup and improve all areas of the business transaction cycle.
7. Understanding & utilizing the most important rule of business.
8. Using 5 critical accounting numbers to increase profits, sales & cash flow.
9. Never totally trust your bookkeeper.
10. Be a lifetime learner.

At www.myprofitguru.com you will also receive a list with all legal business tax deductions (So you don’t ever miss a legal deduction again!), 65 tax cutting tips and a list of QuickBooks keyboard shortcuts.

Please let me know what you think of this free webinar.

Thank you for your continued support and let’s make this year our most profitable year ever!

 

Marketing Tip of the Week – You Are Your #1 Salesperson!

I’m constantly telling business owners they need to be out on the field selling. The reason being, that they are the number one sales person!

You are the person that knows your business the best. You’re the one with the experience and know your business’s strengths and limitations.  On top of that, customers know when they are dealing with someone who knows what they are talking about.  Once you have gained the customer’s trust, you’re almost always guaranteed to close the sale.

You went into business because you have a skill, product and/or service that you know the in’s and out’s. You also know that you provide a better value to your customers than your competitors. You have also taken the initiative in starting your business and have made sales! Now that you have grown your business, you have backed away from making sales, losing the best resource both for customer satisfaction and employee’s role model.  I have seen this time and time again.

There is no reason for you to be stuck behind a desk! Get out there and make contact with your current and prospective customers and make that sale! Your bottom line will reflect you!

 

Client Questions - Can I Deduct an Invoice that My Customer Refuses to Pay?

Question: Can I deduct an invoice that my customer refuses to pay?

Answer: Like many tax questions, the answer is maybe.

It all depends on when your company records income. A company can choose between recording the sale at the date of the invoice (on the accrual basis) or when the invoice is paid (on the cash basis).

If the company is on the accrual basis then the bad invoice can be deducted.

But, if the company uses the cash method of recognizing income, then you cannot deduct the bad debt since you never recorded the income. You will, of course, be able to deduct any material or labor that you used on the job.

Like any good CPA, I need to add a disclaimer: unfortunately, it is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.

 

Lessons Learned – Is it the business owners job to keep the trains running?

The myth most business owners believe: I must be the one to make sure the trains keep running.

Why this myth causes a problem: In order to get more customers, it is my responsibility to make sure that my product/service is delivered correctly and on time.

The truth successful business owners learn the hard way! As a business grows, sooner or later the time needed to run a business eliminates all time to develop long-term strategies and new products or services designed.

And, if you’re not looking for new ways to develop solutions to your customers’ problems and pains you are allowing an opening for your competitors to solve these problems for them.

Also, as Seth Godin said in one of his recent blog articles, “Yes, without trains running, it’s hard to get anywhere. But no, that’s not what the shareholders are hoping you’ll be doing every day.” (I highly recommend that you read his blog daily www.sethgodin.typepad.com ).

Lesson learned: As a business owner, you must not get so stuck in the details of running the business that you no longer have the time do the vital work of delivering solutions to your customers to their problems. 

 

Tax Tip of the Week: Retirement pay for owner doesn’t reduce SE tax

The tax court ruled that retirement payments made by self-employed business owners for themselves cannot be claimed as a deduction on Schedule C in order to reduce self employment tax (the business owners’ Social Security and Medicare).

It is deducted from adjusted gross income on form 1040 in order to regular reduce income taxes.

Contributions for the business owner’s employees and the costs of running the plan may be deducted on the Schedule C and will reduce both income & self-employment taxes. 

                               

Like any good CPA, I need to add a disclaimer: unfortunately, it is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.

 

Marketing Tip of the Week – What is Good Marketing?

The other day someone asked me, “What is good marketing?”  I thought that is a really good question and it can be answered in many different ways.

Many people may say good marketing is anything that gets people in the doors. That’s true to some extent but there is more to just getting people to your door, it’s also getting them to buy. Getting them to buy is the hardest part of marketing.

In my opinion, that’s just one of the elements of good marketing.

I think good marketing starts with a plan. The plan should at least consist of:

• a list of all of your products and services
• a list of possible add-on and cross selling products
• a description of each with a summary of what type of customer will need them
• what makes your business different
• how will you get your uniqueness across
• a thought-out and realistic budget
• a target market  
• a description of how you plan on getting their attention
• a filled out promotions calendar  
• a training calendar
• a plan of attack

Once your plan is done, good marketing has to start. A plan is nothing if it’s not implemented!

And the last part to good marketing is, keeping it going. Don’t get side tracked. Marketing isn’t something that happens overnight, it will take time.

I hope this gives you a good starting point in creating your own good marketing. 

 

The #1 reason small businesses prosper

(Growing Your Business Series: Part 3) 

As I wrote in my last blog, one of the big advantages a CPA has working with small business owners is that we get to learn what makes them profitable and what makes them fail. 

In my last blog (The Top 25 causes of small business failure. http://bit.ly/xkoyMF ) I gave you the reasons small business fail. But, while avoiding these reasons for failure is important, it is just as important to understand how to succeed.

Moya K. Mason released a paper this month on What Causes Small Businesses to Prosper? (http://www.moyak.com/papers/small-business-success.html). In it, she writes, “What does matter, it turns out, is having a strong grasp of the business basics. Without exception, companies that outperformed their industry peers excelled at what we call the four primary management practices – strategy, execution, culture and structure.” My observation of small business owners who prosper agrees with her findings. To this I would add the following reasons that small business owners prosper: 

• They have or acquire a strong, working knowledge of business basics.
• They have a strategic profit plan.
• They build their strategic profit plan around a clear value propositions for the customer.
• They are committed to marketing and selling their product.
• They concentrate their sales efforts to a niche rather than trying to sell to every possible customer.
• They develop a way to make their product something their customer “must-have” rather than something that would be a “nice-to-have”.
• They continuously turn out innovative products and services rather than reacting for events.
• They deliver products and services that consistently meet and exceed customers’ expectations.
• They hold themselves and their people to a high level of performance.
• They empower their employees and managers to make independent decisions and to find ways to improve operations.
• They make it easy for their employees and customers to work with their organizations.
• They hold on to talented employees and actively work to develop more.
• They get a mentor on board.
• They practice the “Golden Rule” in all of their business and personal dealings.
• They develop a good accounting system that provides them with strong management reports.

We will be launching a series of free and low cost webinars to help the business owner acquire the business knowledge they need to prosper. Keep a look out for future emails from me introducing these webinars.  

Thank you for your continued support and let’s make this year our most profitable year ever!