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Use a Business Mentor to Plan for 2013

By bridgetwpollack, Guest Blogger
Published: December 17, 2012 Updated: December 17, 2012

Now that 2012 is wrapping up, we have the opportunity to take a breath, evaluate where the year has taken us in relation to our business goals and create a game plan for how we will move forward towards success in the new year. A business mentor may just be the perfect means to helping you create that plan. A study by the U.S. Small Business Administration, SBA ED Resources 10-11 Impact Study Final Report, found that small business clients who had received 3 or more hours of mentoring reported higher revenues and increased business growths. Whether you are already in business or looking to start one during the next calendar year, a mentor can help guide your business by providing an outside, unbiased perspective that will keep you on track towards your goals or, perhaps, offer new ideas you had not yet considered.

Planning for Your New Business Idea

If you have a great business concept—or even just a general idea of the kind of work you would like to be doing for yourself—a mentor can assist in hammering out the details of how to bring your ideas to fruition. If you have not yet created a business plan, a mentor can walk you through the process of doing so, bringing to the table years of real world business experience and having helped numerous other entrepreneurs get their ideas off the ground as well.

If you are not sure exactly what shape your business will take, the process of creating financial projections like pro forma income statements and profit and loss statements will give you insight into the results of several different scenarios before taking the financial and personal plunge. These financial statements can seem daunting to the uninitiated, but with a mentor with financial expertise at your side, you will be able to navigate them with ease. Having a clear picture of the financial potential of your business concept will let you know if it truly is feasible or needs to be further refined in 2013.

Planning for Your Current Enterprise

For current business operators, a mentor can help evaluate the current state of your business and make sure it is on track towards your goals. If you have not yet created a business plan for your enterprise, a mentor can guide you through doing so. If you have drafted a complete business plan, they can help you evaluate how you have met your objectives and revise the plan according to changes in the business, the business landscape or your goals.

No matter what the business topic, a mentor has likely encountered the same scenario or is able to refer you to someone else who has. Mentors are unique in that they have specific expertise from their own experiences in the business world, but also a wealth of general business knowledge from helping others start and grow their ventures. Some topics and questions a mentor can help you think through in planning for 2013 are:

Marketing: How effective is my current marketing plan? Are these efforts on track with my goals

New Offerings & Directions: Where does my business stand in relationship to my competitors? What opportunities exist for me to expand or take the business in new and profitable directions?

Technology: Are my employees equipped with the right technology for the activities and goals I want to accomplish?

Budget & Cash Flow: Does my budget match with the initiatives I have set out for next year? Will I have sufficient cash flow to carry me throughout 2013?

A Sounding Board

One of the greatest benefits a mentor can offer your business is simply a wise ear. We hear time and again from SCORE clients that the greatest function their mentor serves is as a sounding board: someone to bounce ideas off of, rehearse their elevator pitches with and be reassured that they are on the right path. A mentor also makes a fantastic addition to your business team because they offer an outside, unbiased perspective that can spot obvious fixes or opportunities you may be too entrenched to see and supply fresh ideas to solve nagging problems. Cassie Green, owner of Green Grocer Chicago, spoke of her mentor saying, “It’s great to get a perspective from someone who doesn’t have a personal interest in the business. They are totally objective and just want you to succeed.”

Entrepreneurship can certainly seem like a lonely road at times. But working with a mentor to plan out a map that will help guide you along that road can make it a little easier.

About the Author:

bridgetwpollack
Bridget Weston Pollack

Guest Blogger

Bridget Weston Pollack is the Vice President of Marketing and Communications at the SCORE Association. She is responsible for all branding, marketing, PR, and communication efforts. She focuses on implementing marketing plans and strategies to facilitate the growth of SCORE’s mentoring and trainings services. She collaborates with SCORE volunteers and develops SCORE’s online marketing strategy.

What Your Small Business Needs to Know About Charitable Giving This Holiday Season

By Caron_Beesley, Contributor
Published: December 10, 2012

During the season of giving thanks and giving gifts, charitable giving can make a big difference to those in need and also shine a favorable light on your small business. But what’s the best approach and how do you claim that all-important tax deduction? Here are some tips for developing a charitable giving strategy and claiming the right deduction.

Giving Back is Good for Small Business

Research shows that giving back is not only important to small business, but  also important to your customers. According to a 2010 philanthropic study by Cone Communications, 85 percent of consumers have a more positive image of a product or company when it supports a cause they care about. Ninety percent want companies to tell them how they’re supporting causes. So more than 278 million people in the U.S. want to know what a company is doing to benefit a cause.

Charitable giving is also great for employee morale because it brings employees together to support good causes that are separate from their everyday work-life. From a marketing perspective, it can also give your business an opportunity to reach out and connect with members of your community on a different platform.

Of course, there’s also the tax deduction – more on that at the end of this post.

Making it Happen

Despite the benefits, charity isn’t always easy for small businesses. Finding the time and resources for meaningful activities can be challenging. And how do you determine which charity is the right fit for your business and your community?

As with all aspects of managing your business, it’s important to have a plan that is clearly tied to your goals. Connect your business purpose to a particular charity. For example, if you are in the restaurant trade, support a charity that collects food for the homeless or organizes military care packages for our troops. Lawyers could support charities or non-profits that work to provide low-cost legal support for low-income individuals.

If you can’t find an appropriate charity, simply pick one you’re passionate about and that will resonate with your employees.

For some other ideas about getting your small business involved in giving back, read this blog from SBA guest blogger Anita Campbell on SmallBizTrends.com: 5 Steps to Giving Back: Charitable Giving and Your Business. Anita’s tips can help you:

  • Determine what causes you want to help
  • Involve employees
  • Investigate the organization
  • Decide how you will help
  • Get your customers involved

Claiming Your Tax Deduction

Most charities or non-profits operate as tax-exempt 501(c)(3) organizations and donations made to them are tax deductible. Donations that are eligible for a tax deduction include cash, volunteered services, sponsorship of local charity events or the donation of inventory or services.

Be sure to check the tax status of the charity of your choice either directly with them or with this online search tool from the IRS for a quick look-up of tax-exempt organizations.

So what tax benefits can charitable giving provide?

Charitable contributions can qualify as tax deductions against your business’ annual tax liability. Generally, you can deduct up to 50 percent of your adjusted gross income. However, the IRS tax code is complex and it’s important to note that not all contributions can be deducted.

  • Cash contributions – You can claim a deduction for cash or other monetary contributions as long as they aren’t set aside for use by a specific person. Make sure you make the contribution within the current tax year to be eligible for the deduction, regardless of the accounting method your business uses. Use Form 1040, Schedule A, to itemize deductions on your return.
  • Property or inventory donations – These are tax deductible, although you’ll need to assess their fair market value. Use Form 8283 for donations over $500.
  • Volunteering – This is a popular form of giving, and while you can’t deduct the value of your service, you can deduct some of the expenses you incur such as the cost of buying a uniform or even the costs of hosting a fundraising party.
  • Benefits you receive as a result of your giving – If you get something in return for your donation you can only deduct the amount of your contribution that is over the value of the benefit/prize you receive. Suppose your company got involved in a charity auction and you placed a winning bid.  If you bid $500 and the fair market value of the prize was $200, you can deduct the difference of $300.

It’s always a good idea to consult your accountant or tax advisor for information about what constitutes a charitable tax deduction and how to properly file your claim.  Check out this IRS Guide to Charitable Contributions, too.

 

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

Are Your Employees Working Overtime During the Holidays? Understand Overtime Wage Law

By Caron_Beesley, Contributor
Published: December 5, 2012 Updated: September 15, 2016

The holidays tend to complicate small business payrolls, what with employees looking to earn a little extra cash and owners needing coverage for extended hours or shifts. But not all employers must pay overtime and not all employees are eligible. Confused? Here’s what you need to know about your obligations as a business owner when it comes to overtime pay.

When is Overtime Due?

Under the Fair Labor Standards Act (FLSA),  both full- and part-time employees have equal rights concerning overtime pay (enforced by the Department of Labor). Some states also have overtime laws. The FLSA requires that covered, nonexempt employees are paid overtime pay at not less than one and one-half times their regular pay rate (hence “time and a half’) after 40 hours of work, per workweek.

It’s important to note that these hours must be within the workweek, so for example, employees who work a 12-hour day on Monday but no other days that week are not entitled to overtime because they didn’t work over 40 hours within that one week – no matter how long their first shift was.

Do all Employers Have to Pay Overtime?

Although most employers are required to pay overtime, there are many exceptions.

To determine if you need to pay overtime, you need to understand what the term “covered” means. A “covered” employee is “covered” by the FLSA and therefore eligible for overtime pay. But not all employees are “covered.” Here’s what you need to know to determine whether your employees are covered:

  • If your business does more than $500,000 in sales each year and you have at least two employees, then your employees are generally “covered” and eligible for overtime.
  • However, even if you don’t meet these criteria, you must pay overtime if your employees work in what the Department of Labor calls “interstate commerce.” This is a broad category and includes anyone who is involved in producing goods that will be sent out of state. It also covers an employee who makes phone calls or sends letters out of state, employees who travel for business and even employees who do janitorial work in a building where goods are produced for shipment out of state!

If none of these criteria apply to you, you might still be covered by your state’s overtime law.

Read more from the Department of Labor for official explanation of who is covered and who is not.

Which Employees are Entitled to Overtime?

If your business is covered by the FLSA or state overtime laws, most but not all your employees may be entitled to overtime. We’ve just discussed what a “covered” employee is, but it’s also important to understand what an “exempt” or “nonexempt” employee is and how this factors into overtime pay.

While “nonexempt” employees are eligible for overtime, “exempt” employees are not. But what is an exempt employee? The FLSA has a fairly broad list of job types that are exempt, such as newspaper deliverers or seamen, among others. For the complete list, check out this overview of employees who are exempt from overtime rules from the Department of Labor.

There is one category of exempt workers than can confuse employers – administrative, executive and professional employees. Sounds like a broad definition! But here’s the deal: employers aren’t required to pay overtime to these employees if they are paid on a salary basis and earn at least $455 a week, every week and perform certain job duties – generally managerial or supervisory. The Department of Labor offers more information about the basic requirements that determine whether an administrative, executive or professional employee is exempt from overtime.

Do I Have to Pay Overtime to Part-Time Employees

Yes. Part-time and full-time employees have equal rights when it comes to overtime, minimum wage and other requirements of the Fair Labor Standards Act.

Is Extra Pay Required for Weekend or Night Work?

Extra pay for working weekends or nights is a matter of agreement between the employer and the employee. The FLSA does not require extra pay for weekend or night work. However, if covered and nonexempt workers do work more than 40 hours in a work week, they are due time-and-a-half in overtime pay.

When is Double Time Due?

The Fair Labor Standards Act has no requirement for double-time pay. This is a matter of agreement between you and your employees.

Got Questions?

Still have questions about overtime law? You can contact the Department of Labor directly via phone, mail or email.

More Information

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

In Praise of the Lean Business Plan

By Tim Berry, Guest Blogger
Published: November 30, 2012

Confession: I wish I’d come up with the term lean startup. I love the term and, for that matter, the idea behind it. Credit for that goes to Eric Ries, author of the book The Lean Startup, and Steve Blank, blogger, entrepreneur, and sometimes professor (at Stanford and Berkeley both, no less, which I guess is also a feat) who’s adapted it and popularized it along with Eric.  If you’re curious, here is the Wikipedia definition:

“The Lean Startup … relies on validated learning, scientific experimentation, and iterative product releases to shorten product development cycles, measure progress, and gain valuable customer feedback. In this way, companies, especially startups, can design their products or services to meet the demands of their customer base without requiring large amounts of initial funding or expensive product launches.”

I also wish I’d named my last book The Lean Business Plan instead of The Plan-As-You-Go Business Plan. Jerry Calmes, then the publisher at Entrepreneur Press, and his marketing team and my marketing team at Palo Alto Software and I spent weeks trying to find a title that described my revised sense of business planning, which is very much in tune with the ideas behind the lean startup: keep it small, expect it to change, review and revise often, use it to steer and manage your business. Plan-as-you-go was the best we could come up with. We would have loved the lean business plan if it had occurred to us.

The sense of flexibility, rapid change and iteration in the lean startup makes perfect sense with business planning too. Both startups and business plans need to reflect the rapid change in business landscape as technology advances.

Regardless of the name or label, business planning has in fact changed in recent years. It has become leaner and more agile. The long-winded formal business plan is obsolete. Nobody should postpone business in the name of developing a business plan. No business plan should be long-winded or formal. And any realistic useful business plan is obsolete in a few weeks.

As military leader and former president Dwight Eisenhower once said: “The plan is useless. But planning is essential.”

Here are some tips for adopting lean business planning (even if I call it plan-as-you go) for your business. And this is for your business, regardless of whether or not you need a plan document to take to a bank or show potential investors. This is for running your business better:

  1. The first and most essential component of the plan is the review schedule. Set up a set day of the month for taking an hour or two and reviewing the plan, looking at actual results and comparing them to the plan, and revising as necessary.

  2. Always list assumptions. The best way to tell whether you need to change a plan or stick to a plan is to look at whether assumptions have changed. In today’s world, the assumptions change quickly. When assumptions change, the plan has to change.

  3. Keep it short, simple and just big enough. It’s not a text. It’s a loosely related collection of modules. Use bullets and don’t sweat the style, format or editing. It can live on your computer in different files for different components. Spreadsheets are great for financial projections, bullet points for strategy and focus, and lists for tasks and responsibilities and metrics and milestones.

  4. Keep it focused on its business purpose. For most of us, it’s about managing better, as in breaking long-term goals into meaningful steps and defining metrics and tracking results. In some special cases, it’s for communicating with outsiders. If it’s not a document for bankers or investors, don’t waste time making it pretty. Don’t waste time writing out what everybody in the company already knows.

  5. Always include milestones. Those are specific lists of what is supposed to happen and when, how much it costs or brings in, and who is responsible for it.

  6. Always include basic numbers. Cash flow is the life-blood of the business and you can’t afford not to plan and manage for cash. In practice, it takes projected sales, costs, expenses, assets, liabilities and capital to predict cash.

And that’s what you can call a lean business plan. Don’t ever expect to finish it, because when the plan’s finished, your business is finished.  And don’t expect it to be right, because management isn’t about guessing right, but rather knowing how and in what direction you guessed wrong and how to correct. 

About the Author:

Tim Berry
Tim Berry

Guest Blogger

Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 46 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including his latest, 'Lean Business Planning,' 2015, Motivational Press. Contents of that book are available for web browsing free at leanplan.com .

6 Business Tax Credits and Deductions to Take Advantage of Before New Year’s Day

By Caron_Beesley, Contributor
Published: November 26, 2012 Updated: September 16, 2016

The end of the year is fast approaching, but there’s still time to take advantage of a variety of business tax credits and deductions – some of which are new for 2012. 

Here are just a few to consider, plus some best practices for maximizing your claims.

Take Advantage of 2012 “Section 179” Deduction Limits

Under the American Recovery and Reinvestment Act, Section 179 of the tax code provides tax benefits for equipment purchases made before the end of the year. Typically when you purchase an item for your business, you can claim a tax deduction for it. But fixed assets are not counted in the year of purchase. Instead, they must be depreciated over a number of years. Section 179, however, allows you to fully deduct the cost of assets such as computers, furniture, certain business software, vehicles, manufacturing equipment and more in the year of purchase – up to a certain amount. 

Section 179 deduction limits change each year. Here’s what’s new for 2012:

  • For 2012, the limit for any individual piece of equipment is now $139,000, as long as total purchases in either year do not exceed $560,000. This means that if you buy or finance a piece of new or used equipment, you can deduct the full purchase price (up to $139,000) from your gross income.
  • For expenditures above $560,000, the amount you can deduct is reduced by a dollar for each dollar over.
  • A “Bonus Depreciation” provision allows you to deduct 50 percent of the cost of certain property after you’ve taken the Section 179 deduction and in addition to the standard depreciation deduction.

Review your inventory and equipment. If you find you need to replace obsolete or aging assets, this may be the time to do so. Be sure to talk to your tax advisor or accountant for more specifics on qualifying purchases and read more from the IRS about deducting business expenses.  To deploy this deduction, the equipment being purchased must be in place on or before December 31, 2012.

Get a Tax Credit for Hiring a Veteran before December 31, 2012

Late last year, President Obama signed into law specific tax credits for employers who hire unemployed veterans before December 31, 2012.

Under the Vow to Hire Heroes Act of 2011, employers who hire a veteran who has been unemployed for at least four weeks can claim a credit for 40 percent of the first $6,000 in wages (up to $2,400). If you hire a veteran who’s been unemployed for at least six months, the credit goes up to 40 percent of the first $14,000 of wages (up to $5,600).

If you plan to hire new employees before the end of the year, check out this employer-friendly plain English guide for more information on the skills veterans can bring to your company, and how to apply for the tax credit. 

Start a Business in 2012? Keep Good Records to Claim Start-Up Deductions

If you started a new business in 2012 you probably incurred costs before you even opened your doors. Unfortunately, non-operational businesses can’t deduct business expenses. Instead, you must wait until you are operational and generating income.  Only then can you deduct a portion of qualifying start-up costs – up to $5,000 in the year the business was launched. Any amount over and above that must be amortized over a period of 18 months.

If you started a business this year, or are planning to open your doors in 2013, make sure you keep good records of your start-up costs so you can leverage the deduction on your 2012 tax return. Read more about How to Write Off the Expense of Starting Your Business.

Log and Capture Business Travel Costs

There are numerous deductions you can claim over and above the current $0.55 per mile business mileage deduction. For example, the cost of laundering clothes on a business trip is also deductible! For tips on what constitutes a business travel or entertainment expense while on the road, read How to Deduct Business Travel Expenses.

Other expenses to record include advertising/marketing costs, educational expenses, banking fees and health insurance premiums.

Set Up or Grow your Retirement Plan

One of the best tax write-offs for the self-employed is to set up a retirement plan or, if you already have done so, contribute pre-tax money to reduce your 2012 taxable income. This year, self-employed individuals can contribute $17,000 as a 401(k) deferral, plus 25 percent of net income. Check with your plan administrator for limits and deadlines for different types of plans.

Contribute to Charity

With the holiday season upon us, now is a good time to consider making a business charitable contribution and benefit from the tax deduction. This blog explains more about what you can and can’t claim.

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

How to Price Your Small Business’ Products and Services

By Caron_Beesley, Contributor
Published: November 19, 2012 Updated: September 28, 2016

The goal of business is to make a profit. Many small businesses fail at this because they don’t know how to price their products or services, but pricing is the critical element to achieving a profit, a factor that all firms can control.

If you’re a startup or are revisiting your pricing strategy, here are some suggestions from industry experts and small business owners to help you get the price right. 

1) Understand service costs and their impact on pricing

Every service has different costs. Many small service firms fail to analyze their services' total cost and thus fail to price them profitably. By analyzing the cost of each service, prices can be set to maximize profits and eliminate unprofitable services.

The Iowa Small Business Development Center offers a useful course on How To Price Your Products and Services, which includes tips for analyzing your total costs. Components to understand and analyze are:

  • Material costs
  • Labor costs, including, but salaries plus benefits
  • Overhead costs. Any cost not readily identifiable with a particular product is overhead. Taxes, rent, insurance, marketing and transportation are all overhead. Part of the overhead costs must be allocated to each service performed or product produced and must be adjusted annually.

Tip: To help you calculate your gross margin and understand its impact on pricing.

2) What are your competitors charging?

Pricing isn’t just about making a profit and covering your operating expenses, it’s also about where you want to position yourself in the marketplace, explains Scott Gerber, host of Inc.com’s Ask Gerber.  Where do you want your brand to be in the grand scheme of things? Perhaps you want to be the high-end competitor to someone who’s at the low-end of the market, or the reverse. The key, as Gerber suggests, is figuring out what’s going to get you the best penetration in the market as fast as possible, and broadening your client base according to what your competitors are not doing with their pricing models.

Useful Tools: Check out SBA’s SizeUp tool to help you assess how your business stacks up against the competition.

Tip: Do not try to compete with a large store's prices. They buy in larger volumes and their cost per unit is less. Instead, highlight other factors, like customer service.

3) Take advantage of front-end, back-end and/or tiered pricing

This is a common tactic for structuring your pricing model. Gerber suggests thinking of a car dealership. A sales rep knows he has multiple options for generating revenue from every customer who walks onto the lot. So the rep has the advantage of not only locking the customer down on a price for a car (the front-end pricing), but can also be pretty sure that the customer is going to pay more on top of that price for financing options and other add-ons – whether they anticipated this or not. Consider this the back-end pricing option. Bundled together, they equate what is also known as tiered pricing.

Tip: Think of ways you can tier your small business’ pricing structure to sell people early on the notion of a price, and then add options that ultimately will help you increase your bottom line.

4) Understand your conversions and metrics

Make sure you know how much you’re actually making on a particular product or service so you can figure out if that’s the right fit for that product. As an example, Gerber explains, if you’re selling only one out of 10 customers on a certain product, maybe that’s a sign that you’re pricing it too high. Consider the merits of dropping it by maybe 10-20 percent; you could increase the conversion rate by three or four times. The money you make on aggregate sales would be more than you’re making now on that one product. The bottom line is never assume things are okay as they are and can’t be done differently and perhaps more profitably.

5) Price higher than you think you would

An owner of a local fencing and decking contractor recently surprised me by admitting: “I always unwittingly underprice my services.” This wasn’t sales speak; he was simply recognizing that although he’s the best at what he does and has plenty of business, he doesn’t make enough money on the jobs he quotes.

Not charging enough is a common problem for small businesses simply because they often don’t have the operational efficiencies of larger companies and frequently find that, whatever they sell, their costs are higher than they anticipated. Small businesses do have one advantage, though, and it’s one that justifies charging a higher price – service! Here are two blogs that offer tips for leveraging service as a value proposition and revenue generator:

  • How to Avoid Falling into a Price War by Focusing on Value

Tip: Other differentiators can help you justify higher prices or selling above your competition. including:

  • Satisfaction in handling customer complaints
  • Knowledge of product or service
  • Helpful and friendly employees
  • A convenient or exclusive location
  • Exclusive merchandise

6) Pricing below the competition

If you decide you want to adopt a low-end competitive pricing strategy, remember that your profit margin per sale is going to be less so you’ll need to focus on reducing your costs. The Iowa SBDC recommends several best practices for this approach:

Obtain the best prices possible for the merchandise

  • Locate the business in an inexpensive location
  • Closely control inventory
  • Limit product lines to fast-moving items
  • Design advertising to concentrate on "price specials"
  • Offer no or limited services

Tip: While some businesses can be successful with this strategy – think online retailers who can take advantage of cost-cutting like drop-shipping – it can be difficult to maintain this approach. Why? Because every cost component must be constantly monitored and adjusted. It also exposes a business to pricing wars. Competitors can match the lower price, leaving both sides out in the cold. 

What pricing strategies have worked for your small business? Leave a comment below or discuss them below.

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

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