Category Archives for "Business Tips"

How to protect your friendship and your business

Good friends, great business partners

Survey small business entrepreneurs and you’re sure to discover relationships that soured when long-time friends became business partners. Fortunately, the story doesn’t always end on a tragic note. Here’s why:

  • Friends can talk openly. Because a foundation of trust has been established, friends have already learned to communicate candidly. When tough business decisions need to be made, they can discuss choices without wondering how criticisms will be construed.
  • Friends capitalize on each others’ strengths. One partner may love recordkeeping but tend to avoid dealing with the public. The other, a crackerjack salesman, may struggle with accounting minutia. As friends, they can capitalize on one another’s strengths to advance the company vision while minimizing internal squabbles.
  • Friends are committed. Friends care about each other, and will often go to lengths to work out differences because they’re committed to the friendship. They also typically have an understanding of each others’ top priorities, and are willing to help in reaching goals.

How to protect your friendship and your business

No significant business relationship should be undertaken lightly or blindly. With the help of skilled advisors, initial expectations about the company should be committed to writing. This includes laying out the details of operational roles, capital investments, working hours, exit strategies and other crucial aspects of the business. Even among friends, clearly written policies can prevent future misunderstandings.

Depending on your timeframe and industry, consider performing a beta test: a pilot project you can complete jointly before launching a business together. Along the way, ask these questions:

  • How do you handle disagreements?
  • Does one person always take the lead?
  • Can you easily switch leader and follower roles as circumstances dictate?

Test your relationship in a real-world setting. Observe how well you work together and make adjustments before the firm starts operations.

One more question worth pondering: is your potential business-partner friend in a stable position in life? If he or she is working through the aftermath of a divorce or climbing out of financial debt, consider postponing the launch of your business. If possible, start operations without major distractions.

If you’d like more advice about creating a successful business partnership structure, give us a call.

CPA Helps Business Owner Reach Goals

 A Designer’s Vision: CPA Helps Business Owner Reach Goals

Janet began her interior design business three years ago with a promising idea. The designer planned to work three days a week and help families achieve the home of their dreams by offering them her experience and creativity.

But, as happens often with small business owners, the dream didn’t quite come true. Instead of working three days a week, she found herself balancing a 70 hour work week while looking after her three children.

At the end of the year, Janet met with her CPA to review her accounts and tax position. The good news: she was profitable and had cash in the bank. The bad news: she confided she was becoming more and more unhappy with the business. She even said she thought about selling it.

The CPA talked to her to help align her business and personal goals. Together, they discovered that:

  • Janet’s overriding motivation was to make enough money so that she could spend more time with her children
  • She had taken on all comers and felt obliged to squeeze in more and more clients
  • Her brand in the marketplace was premium, but her pricing did not reflect that
  • By running the numbers together, they found that 23% of Janet’s clients had contributed 82% of her profit the previous year.

Following the session, Janet agreed to work with her CPA redesigning the business to suit her lifestyle goals, by starting with the numbers and going from there.

Not surprisingly, revenue jumped significantly as a result of understanding the numbers. But more importantly, within 12 months, Janet had her life back, meaning she could be with her kids more.

If you’re interested in learning about how to improve your business’s performance, please call Harvey and Caldwell today in Overland Park, KS to schedule an appointment and have a chat.

Source: Panalitix

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Save on Business Travel Costs

While nurturing relationships

You may view corporate travel as a necessary evil. But you also know that successful companies thrive on relationships, and nurturing those relationships can require face-to-face contact with clients, vendors, and potential customers. So when you have to cut travel costs, you may struggle with a balancing act. If you cut too much, business relationships may deteriorate. Cut too little and profits may suffer. Here are five ideas that can help bridge the gap.

  • Video conferencing. You may remember early issues with this technology, including hardware and software glitches and slow internet connections. However, today’s advanced systems and networks have reduced the incidence of low-quality graphics and choppy audio and video feeds. You don’t need your own video conferencing studio to take advantage of high-definition systems. Look into pay-by-the-hour rental options instead.
  • Discounts. Investigate price reductions for corporate customers offered by hotels, car rental companies, and airlines. The savings can be significant when your staff regularly travels to the same destinations. Make sure your employees know about and use these vendors.
  • Cost-cutting ideas. If your travel plans are flexible, take advantage of mid-week flights and less-frequented airports. In some cases, train transportation may be a viable alternative. When possible, purchase tickets at least two weeks in advance to get better deals. Research hotels at your destination, and book rooms at those that offer complimentary breakfasts and free internet service.
  • Employee surveys. Employees who spend a lot of time on the road tend to develop definite opinions about everything travel-related. Your sales staff and other travelers can be a valuable resource when you’re reworking travel policy.
  • Travel audits. Don’t cut costs or change policies haphazardly. First make sure you understand how much you’re spending and where the money’s going. Get a firm grasp on the details behind the numbers. Then act.

Need more business cost-saving and budgeting advice? Contact our office for suggestions.

Plan For the Future

Do you have a plan for the future of your business?

Is your company a statistic? If you operate a family-owned business, the answer may be yes. According to the U.S. Small Business Administration, over 50% of all small business owners are aged 50 or older. If you’re included in that group, you might be wrestling with the question of selecting and training a successor. Think you’re too young to retire? Getting an early start helps you avoid “crisis mode” decisions that may damage your company’s future prospects. Early planning also provides opportunities for helping your successor learn the business and get prepared to assume full responsibility.

Here are two initial steps to consider.

  • Choosing a successor. Do you expect a family member — perhaps one of your kids — to take over the company when you’re ready to retire? Be sure to align your company’s best interests with your child’s dreams, skills, knowledge, and passion for success. The decision can be an emotional one, so it makes sense to involve an objective third party such as a financial advisor, attorney, board member, or trusted friend. Be open to considering a long-term employee or an outsider with more extensive experience in your industry.
  • Establish a training plan. Identify the critical functions of the company and provide the opportunity for your chosen successor to gain experience in operations, sales, and accounting. Establish a timetable for training, allow for mistakes, and resist the temptation to override routine decisions. Let your successor develop a management style that fits both the company’s mission and your successor’s temperament.

Succession planning takes time and effort. For assistance, put us on your team.

Is S corporation status right for your business?

When you incorporate your business, one decision is whether or not to make an election to become an S corporation. By choosing to make the election, you switch from a regular corporation, known as a C corporation, which is taxed as a separate entity, to an S corporation, where profits and losses are taxed on the individual tax returns of shareholders. Put another way, an S corporation retains the limited liability feature of a corporation, but transfers the tax treatment on income and losses to the individual level.

When does the election make sense? In cases when your individual tax rate is lower than the corporate rate, passing income to your personal federal income tax return means less overall tax. Another example: The difference in the way losses are handled. In a C corporation, losses can offset future profits. Unfortunately, in a start-up business, generating a profit may take years. Shareholders in an S corporation can use losses to offset other income, as long as they have basis in the business.

So what is the downside? From a tax standpoint, C corporations may be able to provide more tax-free fringe benefits to shareholder-employees than S corporations can. In addition, S corporations must meet certain rules to avoid terminating the election. For example, the S corporation can have only a limited number of shareholders, all shareholders must be U.S. residents, and shareholders must generally be individuals.

Do you have questions about whether S corporation status is right for your business? Contact us. We can help guide you through the tax benefits and drawbacks.

Social Media Marketing Has Benefits and Risks

Only a few years ago, Facebook, Twitter, Instagram, LinkedIn, and YouTube were mere dreams of forward-looking visionaries. Now, computer users worldwide spend hours every day communicating via these social media platforms. And the conversation is not all about weekend fun and dinner menus.

One study found that two-thirds of adult internet users were influenced by blogs and other social media outlets when making purchasing decisions. Whether your company’s target demographic includes retirees planning their next vacation or kids hanging out at the local coffee shop, the lure of online community and its potential as a marketing venue should not be overlooked. Here are pros and cons to consider.

On the plus side, social media marketing is relatively inexpensive. Compared to more traditional forms of advertising, such as billboards, television, radio, and magazines, placing your products in the public eye via social media can be done rather cheaply. You set up an account, upload a video, and voila! Your campaign is on its way. Social media sites let you reach a huge audience, both domestic and international. According to one survey, 89% of internet users between the ages of 18 and 29 participate in social media activities. That’s a big market. Professionals use social media sites, too, to network with colleagues.

On the other hand, maintaining a social media presence can be time consuming. Keeping content fresh, updating product information, and responding to customer feedback require significant resources, and the benefits are hard to measure. As a result, months may pass before marketing efforts produce a demonstrable return on investment. In addition, when you post a video or share a new product line, negative comments may follow. Some customers aren’t reluctant to criticize products and services that annoy them, whether or not the criticisms are justified. Erroneous and deceptive information can be shared at the click of a button, and negative feedback, if left unchecked, has the potential to damage your brand and reputation for years.

Connecting with others is the time-tested way to create a successful business, and social media is one more channel available to you. Just be aware of the benefits and risks before you begin leveraging the potential of this latest form of marketing.

Consider working with a professional Digital Marketing firm.

How to hire — and fire — family members

Working with family can be a pleasure. It can also be a pain, especially if you have to terminate the employment arrangement. Here are tips to help you ease the strain on family relationships.

  • Hire for the right reasons. Adhere to the skill sets needed to keep your business operating effectively. Hiring your son because he’s struggling to find a job or employing your niece so she’ll be nearby are not good business reasons for bringing staff on board.
  • Set clear expectations. Communicate the job’s performance requirements to your family member right from the start, clearly enumerating company policies for promotion, compensation, and termination. Make it plain that unethical conduct will not be tolerated and that every employee will be held to the same standard of behavior. Other employees will perceive any favoritism shown to family members. If a poor performer is allowed to “skate,” morale, performance, and your credibility will suffer.
  • Document performance. Throughout your family member’s tenure with your company maintain a detailed personnel file that tracks behavior resulting in disciplinary actions. In the unfortunate case of a necessary firing, a well-documented file will provide a narrative record that lays out your reasons and clearly communicates the evidence leading to your decision.
  • Keep the termination process fair and open. You may want to involve a direct supervisor or a human resources professional to ensure that your company is appropriately represented and to prevent the conversation from lapsing into emotional arguments. Focus the termination meeting on job performance and provide an opportunity for feedback. Use the meeting to suggest resources and contacts to help with the transition to a new career. Give your family member the option of resigning with dignity.

The bottom line: Effective communication can help you keep family and business relationships intact. Contact us if you need more suggestions.

Shrink your company’s shrinkage

If a significant portion of your company's balance sheet consists of inventory, you may find that "shrinkage" — the variance between physical inventory counts and amounts recorded in your company books — is the culprit behind declining profits. A little digging, especially if you're in a retail business, may uncover an unsettling reason for numbers that don't add up: employee theft. Studies have shown that, on average, retail workers steal more inventory than shoplifters.

What steps can your company take to mitigate this risk?

  • Use security cameras. If you suspect inventory theft may be an issue, consider installing cameras in employee and customer areas, including stock and break rooms. Periodically review video footage. Let employees know that the cameras are active and being monitored.
  • Monitor trash bins. Dishonest workers sometimes throw inventory items in dumpsters and return later to pick up the goods. Quash this scheme by requiring all to-be-trashed cartons and boxes be flattened. Use transparent garbage bags. Randomly check trash containers. Let employees know that trash receptacles aren't exempt from monitoring.
  • Restrict access. Ensure that only authorized individuals are allowed to handle inventory. Keep high-value products and tools in a cage within the warehouse and provide keys to supervisors only. Consider locked cabinets for expensive items.
  • Make it plain. Establish and communicate written control policies. Guidelines might include prohibitions against taking backpacks into merchandise areas or duplication of access keys. Use time clocks to record when employees are present in warehouse and retail spaces. Require unique login IDs for inventory control systems so you can track transactions by user.
  • Detach departments. Keep receiving, warehousing, and shipping functions independent. Separate the purchasing department from accounts receivable and the receipt of merchandise. By maintaining a discrete distance between accounting and inventory-handling functions, you'll reduce the risk of theft. When warranted, take swift disciplinary action against employees found to be stealing and/or falsifying records.
  • Check and recheck. In addition to performing an annual inventory count, spot check merchandise throughout the year against purchase orders, shipping receipts, packing lists, and online inventory records. If you suspect widespread thievery or embezzlement, consider hiring an independent firm to conduct forensic audit procedures.

If you'd like additional tips for preventing employee theft, contact our office.

Business Tip of the Month

Establish a clear policy to curb absenteeism

Producing quality goods and providing great customer service depends on employees who take pride in their work and show up every day. But life happens. Sometimes employees get sick or struggle through personal crises. When such events occur, some workers choose to stay home for legitimate reasons but are eager to return to work. Others may exploit sick day policies. If you allow irresponsible employees to coast, you may find production deadlines slipping, customer service deteriorating, and employee morale taking a nosedive.

As a manager, your job is a balancing act. Dealing with employees who are consistently tardy or absent is not an easy assignment — but it’s doable. Here are three suggestions to get started.

  • Make your policy clear. When new employees come on board, inform them about your company’s policy regarding tardiness and absenteeism. Put the policy in writing, make it available to all staff, and state your requirements unambiguously. For example, you could clearly define tardiness using plain language, such as, “Employees who arrive over 30 minutes late will be considered tardy.” Also spell out your company’s definition of “excessive” absences: “Six or more unplanned absences in a six-month period will be considered excessive.”
  • Provide support. Consider establishing an Employee Assistance Program (EAP) to help staff through personal and work-related issues, some of which may affect attendance. An EAP conveys a caring attitude on your company’s part and may pay off in greater employee loyalty. An EAP program need not break the budget. Providing company-funded access to trained professionals on an as-needed hourly basis may meet the needs of your firm.
  • Hold employees accountable. Employees who show up on time, day in and day out, may become resentful if coworkers are allowed to arrive late without consequences. Make note of excessive absenteeism and tardiness in performance evaluations, and spell out the consequences. On the other side, reward staff who go the extra mile. If absenteeism is a problem, consider tying bonuses and merit increases to attendance goals. Administer your policies consistently and build in flexibility.

If you need assistance creating employee guidelines, contact us.