June 22, 2017
Article of the Week: Five Mid-Year Tax Planning Strategies
For many small business owners, thinking about taxes occurs only twice a year: when returns are being prepared and at the end of the year. With half of 2017 over, now is the time to assess where you stand and implement these five strategies.
1. Meet with your tax advisor
The vast majority of small business owners use CPAs or other tax advisors to prepare and file their returns. These tax pros can also serve as business advisors throughout the year, providing guidance on what the business can to do to optimize profitability while minimizing taxes. If your tax preparer doesn’t provide this service, consider finding one who will. Schedule a meeting with your advisor to review your profits or losses, and to craft a tax plan that you can implement going forward.
2. Assess your profitability
If 2017 is shaping up to be a good year for you, consider strategies to help with expansion while saving taxes:
- Buy equipment. In 2017, you can opt to expense up to $510,000 of equipment purchases (even if you finance them) instead of depreciating the cost over a number of years. Find details in IRS Publication 946, How to Depreciate Property.
- Hire wisely. As you add to your staff, keep in mind that the work opportunity credit rewards you for hiring someone from a targeted group, such as a qualified veteran. Find details about these targeted groups and the amount of the credit in the instructions to Form 5884, Work Opportunity Credit.
- Set up a qualified retirement plan. You can save for your retirement years while cutting your current tax bill through contributions to a qualified retirement plan. If you don’t already have a plan there are several plan options; the one to choose depends on whether you have employees and how much of the contributions the business can afford to shoulder. Find more details in IRS Publication 560, Retirement Plans for Small Business.
3. Expand your R&D
You don’t have to be a drug manufacturer or a technology company to invest in research and development. Whether you do R&D to develop a product or simply find new methods for your operations by creating internal use software, you may qualify for a tax credit; this helps to underwrite the cost of research. Find more details about the research credit in the instructions to Form 6725, Credit for Increasing Research Activities.
A “qualified small business” can opt to use the credit as an offset to the employer’s share of Social Security taxes (up to $250,000) rather than using it against income taxes. Which business is qualified? One with less than $5 million in gross receipts for the current year and no gross receipts for any year preceding the fifth year prior to the current year. For example, a business with $4 million in gross receipts in 2017 and no gross receipts prior to 2012 may use this option. Find a more extensive explanation of this option from the IRS.
4. Issue stock
If you’re a C corporation in manufacturing, technology, retail, or wholesale, you may qualify to issue stock (referred to as small business stock or Section 1202 stock) that will allow the shareholder to eventually obtain tax-free treatment for any capital gain. More specifically, if you issue the stock now and it’s held for more than five years, then all of the gain is tax free. The stock must be acquired in exchange for cash, property, or services (i.e., not received through a gift or inheritance). Thus, it can be used to:
- Bring in new investors
- Reward employees
Find more details about a qualified small business for this purpose in the instructions to Schedule D of Form 1040 .
5. Review your income tax payments
If you’re paying your income taxes on business profits through estimated taxes, you have two more times to get it right for 2017: September 15, 2017, and January 16, 2018. You don’t want to overpay, which is an interest-free loan to the government (recouped when you file for a refund), or underpay, which can result in costly tax penalties.
Remember that estimated taxes include not only regular income taxes (including the alternative minimum tax), but also:
- Self-employment tax
- 0.9% additional Medicare tax on earned income
- 3.8% additional Medicare tax on net investment income
Find more information about estimated taxes in IRS Publication 505, Tax Withholding and Estimated Tax.
The summer has begun. Don’t miss this opportunity to review your tax position and to determine the strategies you can use between now and the end of the year to optimize your tax bill for 2017.
June 15, 2017
Article of the Week: Small Business Owners Can Shift Marketing Approach During Summer Months
Summer officially arrives next week and with the warmer temperatures comes time off and vacation plans for many of us. It can also be an active time for small business owners, and summer activity can lead to different marketing approaches.
Here are a few ideas for summertime planning and promotions for small businesses.
Community events can be a great way to increase exposure and get to know potential customers. In a story for the Small Business Administration, Rieva Lesonsky writes that small business owners should look for opportunities at street fairs, festivals, fun runs and outdoor concerts.
“Contact your chamber of commerce and your city’s parks and recreation department to find out what events are planned for the upcoming few months,” she advises. “Decide which events are likely to attract your target customers, whether that’s health-minded seniors, parents with toddlers in tow or millennial music fans.”
How to get involved? Lesonsky offers these ways to participate:
- “Sponsor the event in return for your name on flyers, programs or banners at the event.”
- “Host a booth at the event and give out free samples or sell your product. (Be sure to collect contact information with a signup sheet or fishbowl to collect business cards).”
- “Donate product to the event (a health food store could donate healthy snacks for refreshments at a fun run, for example).”
Reach out to current clients
The holiday season is often the time that businesses reach out to dedicated clients to thank them for their business. But summertime can bring opportunities to show this kind of appreciation. A story by QuickBooks details some ways to do it, including golf outings, taking clients to a baseball game, or putting on wider-ranging events.
“To show appreciation for a large group of customers, host a barbecue,” the story states. “Or share your expertise by holding a free class. For instance, if you run an arts and crafts store, hold a workshop to show families creative craft ideas for kids during the summer. Your gestures will demonstrate that you’re thinking of customers this summer — and will be there for them when the season ends, too.”
There seems to be a fun “national day” of something several times a week, like the recent National Doughnut Day, which earned a lot of buzz on social media. As Rohit Arora writes for Inc.com, these days, along with holidays and the warmer weather, can be a way to create promotional opportunities.
“The Fourth of July presents a wide range of opportunities, including American-themed promotions,” Arora says. “Restaurants and other food retail businesses can take advantage of National Ice Cream Day on July 17 and National Waffle Day on August 24. Bars and nightclubs can plan for occasions such as National Pina Colada Day, National Daiquiri Day and National Tequila Day."
Collaborate with business neighbors
When the weather is pleasant, it could be smart for nearby businesses to work together to present an outdoor event. Lesonsky writes that areas “with lots of foot traffic” can be a prime location for this kind of activity. She suggests having a sidewalk sale, in which the participating businesses offer special deals outside of the store. Other ideas from Lesonsky include:
- “Hosting a ‘stroll and savor’ event where local eateries sell small samples of their menu items outside on the sidewalk.”
- “Hosting a music night where local musicians play inside restaurants or shops and ‘busk’ out on the sidewalk to attract passersby.”
- “There are many other ideas, from closing off the street to cars and hosting an arts fair or classic car show, that can bring foot traffic into your shopping area. Brainstorm with other business owners to generate the best strategies for your area, and work with your city to be sure you get all the appropriate permits.”
There’s no doubt that people naturally love free stuff. Though promotional items may not seem terribly significant, they can turn into walking billboards of sorts with such items as koozies and T-shirts. In a story for grasshopper.com, Michelle Nickolaisen recommends summer-related swag, like flip-flops or sunglasses. And she calls product giveaways “a tried and true marketing technique.”
“Even if your product doesn’t necessarily make sense to give away in the summer, you can still capitalize on a giveaway with a little creativity,” she writes. “Take advantage of the fact that your potential customers and clients are vacationing by giving away leisure items like books or, if you want to get fancy, a Kindle or iPad, that people will use on their vacation.”
Examine marketing materials
Seasonal items and swag can gain attention, but don’t leave out the traditional methods of spreading the word about a business. Rhonda Abrams writes for USA Today that summertime can be a good time to “freshen up and modernize” marketing items. Business cards are a good start.
“When was the last time you took a hard look at your business cards?” she writes. “Brochures? Do you still have a fax number but not your social media handles printed on your material? You can get a new look at reasonable prices from a few online print companies, such as Vistaprint, PsPrint, Moo.”
Focus on social media
For many people, vacations aren’t complete until photos and stories are shared on social media. This can present creative opportunities for businesses, according to Claire Prendergast in a story for Entrepreneur. Consider interacting with customers who share “tidbits about adventure travel” on Facebook, YouTube and other social networks, she says.
“Think about hosting a social media contest, inviting customers to share exciting stories or intriguing photographs around a summer theme, and offer a grand prize to the best entry,” she writes. “You’ll get people talking about your business in the process, while also collecting contact information from contest participants. Be sure to identify prospective customers who you can reach out to at a later time.”
Look ahead to the fall
The fall brings different marketing opportunities, including back-to-school, the end of vacation season, the return of football and cooler temperatures. Abrams advises carving out some time in the summer to plot out ways to get ready.
“Summer won’t last forever, and you want to be ready to land some big customers as soon as people are back at their desks,” she says. “The summer months are a great time to do some strategic planning. Clarify and narrow your target market and figure out the best ways to reach prospects. Come up with a marketing budget and marketing vehicles so you’re ready to go.”
June 8, 2017
Article of the Week: This is What Makes A Vacation Restorative
Time off helps us recover. When we’re not working, we’re able to rebuild internal resources that we depleted while dealing with the stress of work. But not all time off recharges us equally.
What is it about some vacations that make them great so that we return to work feeling fully restored and ready to be our most productive selves again?
I separately asked three experts on work recovery what the properties are of a really good vacation, in terms of returning to the office rejuvenated, and they all jumped on the same word first: detachment.
“The most important thing is detachment,” says Mina Westman, a professor of organizational behavior at Coller School of Management, Tel Aviv University. Detachment means letting go of work psychologically and not thinking about it, or at least not thinking about it negatively.
Detachment seems to work across the board. In studies, detachment was positively associated with employee well-being in both white- and blue-collar jobs and in many countries around the world, according to Charlotte Fritz, associate professor in industrial and organizational psychology at Portland State University.
But for many knowledge workers, detachment is easier said than done. In an era when staying in touch with work colleagues is easier than ever via apps like Slack and HipChat, some employees end up keeping in touch with the office even while on vacation. Checking in throughout a vacation lets employees manage unexpected problems and not get slammed with work upon return, which they may believe will make their return less stressful.
Sabine Sonnentag, professor of work and organizational psychology at the University of Mannheim, Germany, says that “mentally detaching from work is crucial,” but added, “detachment is a means to recover and to restore.” She understands why people feel the need not to detach. “It might be better to check email once a day than constantly ruminate and worry about the emails that might have come in,” she explains.
Nevertheless, she still recommends limiting the amount of time during a vacation that one spends working or even thinking about work. “Feeling guilty because one is not working at the moment is detrimental, maybe more detrimental than working itself,” she said.
RELAXATION, HOWEVER YOU INTERPRET IT
Another attribute of time off that leaves workers feeling more fully recovered is relaxation. It may sound like common sense, but in the moment of planning a vacation, people don’t always prioritize relaxation. Family obligations, like visiting relatives, or designing a vacation that’ll be fun for the whole family, could leave you without any time to unwind. Don’t sacrifice everything you find relaxing about a vacation to please others.
Relaxation is a pretty subjective word, and Sonnentag said we need not interpret it as passive activity. “Physical exercise can be highly beneficial for recovery,” she said. Sonnentag also pointed out that because vacations are longer than other kinds of time off, such as weekends and evenings, they afford people the opportunity to do “more extensive outdoor activities.”
Westman gave a nod to physical activity being beneficial for recovery, too. If you find it relaxing to go on a six-mile run while on vacation, don’t let anyone else talk you out of it.
MASTERING A HOBBY
An unusual way you can increase your chances of having a rejuvenating vacation is to work on a hobby or activity that you’ve been trying to master. Mastery, which Fritz described in a paper she published with coauthors as “engaging in experiences that involved learning or broadening one’s horizons,” can be anything from painting to practicing jiu-jitsu.
Mastery has to do with building skills that are unrelated to our primary jobs, and while they’re sometimes assumed to be creative, they don’t have to be. Playing a musical instrument is just as valid as taking a language-learning class. Time off spent on a hobby or personal activity that improves with long-term and sustained practice helps us recover from work and may increase our ability to think outside the box and creatively solve problems at work, according to one study. So spending your vacation on a yoga retreat or going to adult archery camp could have more benefits than you expected.
WHAT NOT TO DO ON VACATION
In addition to not working, Fritz has discovered that “thinking about the negative aspects of your job during vacation has been associated with greater burnout, more health complaints, and lower job performance after vacation.”
Likewise dealing with “non-work hassles,” like getting a flat tire or arguing with family, has been shown to impede recovery during time off. While some non-work hassles are unavoidable, try to steer clear of locations and situations that you know might result in frustration, anger, or annoyance. If driving is a typical source of stress, for example, it might be better to plan your vacation around taxis, car services, and other forms of transportation.
THE IDEAL VACATION?
While exactly what makes a vacation restorative varies from person to person, many experts do recommend taking more than one vacation a year. The reason has to do with a problem called vacation effect fade out. When we go on vacation, we rejuvenate, but the effects only last so long. Within three weeks of returning to work, employees are likely to be back to their normal levels of stress and burnout, according to a paper by Westman and a coauthor. The more vacations we take, the more total days of recovery effects we’ll feel, right?
June 1, 2017
Article of the Week: How to Successfully Network to Grow Your Business
Successful networking is about developing strong interpersonal skills and increasing your brand awareness. It can help you build your sphere of influence and create valuable connections for you to tap into. We all know well-developed in-person relationships keep on giving in more ways than one. Successful networking is a combination of confidence and preparation. Knowing how to network is a key skill in today’s business world.
Here are five networking tips to grow your business:
Have an open and confident body language for the memorable first impression.
You have about 7 seconds to make a first impression. You want to come across as a confident business professional - a mover and shaker. The confident body language can help you accomplish just that.
Open torso with uncrossed arms
Head and chest up
Shoulders pulled back
Expand your body to take up space
Mirroring other’s body language
Smile at people walking by
Always offer to shake hands - this leads us nicely to the next networking technique.
Have a firm and welcoming handshake.
A handshake is an act of confidence and respect when meeting another professional - approach it as such. Make it firm, warm and authoritative.
Have intriguing conversation openers at the ready.
Don’t start your line of questioning with ‘What do you do?” It’s tired and old. You want to be memorable. Here are a few suggestions for killer conversation starters:
What is your favorite blog or podcast?
What are you passionate about?
What are your hobbies?
Have your mindset set to the giver mentality.
Think how you can help other people, not how they can help you. The giver mentality results in authenticity and confidence. When we are in the taker mentality, we are in the scarcity mode and come across as needy. When we are in the giver mentality, we are in the abundance mode and we are at ease and a magnet for people. Being a giver helps you make meaningful business and personal connections.
Have a well-developed elevator pitch.
Prepare your elevator pitch beforehand. Tailor it to the networking even you’re attending. Stick to 1 to 3 sentences describing what you’re all about - make it interesting by injecting a few interesting personal tidbits that can lead to a more in-depth discussion.
An elevator speech is the easiest way to share who you are, what you do, and why you want to get to know another person in a quick efficient manner. When combined with a positive first impression and a confident handshake this can lead to building valuable connections.
Practice displaying a confident body language. Practice making a positive first impression. Practice your handshake. Practice and play around with your conversation starters. Practice tailoring your elevator speech to various audiences. Practice makes it more natural and second nature.