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:
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:
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.
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:
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.
Updated weekly with tips for business owners, taxes and financial strategies to help you make money and keep it. If you have questions please contact us @ (913) 451-4400.
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.
Need more business cost-saving and budgeting advice? Contact our office for suggestions.
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.
Succession planning takes time and effort. For assistance, put us on your team.
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.
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.
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.
The bottom line: Effective communication can help you keep family and business relationships intact. Contact us if you need more suggestions.
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?
If you'd like additional tips for preventing employee theft, contact our office.
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.
If you need assistance creating employee guidelines, contact us.