Artists’ Futures are Truly in Their Hands

Posted on February 2, 2012 by The LA CPA

I was twenty-one in 1978 when I got my first part-time CPA accounting job while studying at UCLA.  The adding machine I used had a crank…really.

Over the last year or so, I have written about apps that help business people run their businesses better.  Recently, I came across Artistgrowth that literally puts “organization” in the hands of the artist, manager, and others in the music world.

The app helps you manage your schedule, gigs, and tours.  In addition, it  helps you and your CPA manage your finances by allowing you to photograph your receipts and attach it to a report.  The app also has a portal that connects you to many different informational sources, videos, etc. that discuss such things as promotion, songwriting, and instrument repair.

The Action Packs section helps you implement the knowledge you learned in the informational sources.  I thought the business plan pack was very superficial, but at least it displays the basic concept.  (These packs are limited depending on your subscription level.)

Before jumping on your phone and buying it, step back and think about what you and your music business lack.  The problems with apps is that they offer a whole list of bells and whistles that you may not need.

I have written several times during the last year that now is the best time in the last 100 years to start a business because of all the resources available online.  This app seems to be one of those gems that a music professional can leverage.  The boundaries that separated CPAs, managers, and even artists are changing.  The things that one person used to be responsible for, may no longer exist.  If you have the ambition and maturity, you can evolve your role to further your career and maybe save you a lot of money and grief.

I am not saying that you should replace your CPA or manager with this app.  However, by assuming some of the lower level responsibilities, you can empower your CPA to provide higher level services that could multiply the financial return of this app.

 

 

 

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IRS Mercy? To Err is Human, to Forgive is Divine

Posted on January 31, 2012 by The LA CPA

Well, as a CPA for the last thirty years,  I thought I’d see the tin man get a real heart before the IRS show any heart at all.  The IRS has released some sort of an amnesty program designed to offer mercy to businesses that have misclassified workers as independent contractors instead of employees. IRS Announcment 201-64 states out the conditions that an employer must meet in order to minimize the penalties for misclassifying workers.  It is called the Voluntary Classification Settlement Program (VCSP).

For those of you that are unaware of this tax controversy, when employers classify employees as independent contractors, they escape the obligation of paying payroll taxes on those employees like social security and medicare.  The criteria of classifying workers is complex because it covers tax law, national labor laws, and state laws.  Your CPA can calculate the costs you may be avoiding.

If a taxpayer voluntary invokes this option (without being under audit), then they will only have to “pay 10 percent of the employment tax liability that may have been due on compensation paid to the workers for the most recent year…”  They will not be liable for any interest and penalties and not subject to any prior year’s audits.

So, as an employer, what does this mean?  If you are classifying workers properly, it means nothing.  However, as a CPA, I have seen substantial misclassification by new clients that I have helped correct.  Yes, they end up paying more taxes, but the client sleeps better at night.

The downside of ignoring proper classification are heavy penalties, interest, and possibly jail time.  Sometimes employers are exposed when a worker files for unemployment compensation, worker’s compensation, or social security.  The worker is surprised that nothing had been paid in by his “employer” over the last ten years he had worked.  Thus, an investigation may materialize which will require you to hire a CPA and/or an attorney.  You will have to pay them and the taxes if you lose.

Various departments and levels of the federal government are mobilizing not only to uncover worker misclassification, but also a CPA who is improperly advising a client to do so.  Even the Obama administration is increasing efforts to uncover workers misclassification in the September 2011  release of his plan “Living Within Our Means and Investing in the Future: The President’s Plan for Economic Growth and Deficit Reduction.”

If you feel you want to embrace this amnesty, talk to your CPA about your exposure and the additional requirements to qualify.  As a business owner, you should clear your mind of such anxiety and concentrate on your business strategy.

 

 

 

 

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Changes: Bowie Was Right, Look Out You Rock n Rollers

Posted on January 27, 2012 by The LA CPA

“Still don’t know what I was waiting for

And my times was running wild

A million dead-end streets and

Every time I thought I’d got it made

It seemed the taste was not so sweet.”

–David Bowie, Changes from the Hunky Dory album

This song ran through my head when I read the article, Just-in-time strategy for a turbulent world by Lowell L. Bryan.  Bryan tackles the corporate world, but the same principles would apply to artists or  small businesses.  Basically, change is good and time can be on your side.

One unique concept he proposes in his article is “for businesses to take full advantage of their best opportunities without taking unnecessary risks.”  Bryan implements this concept by advocating that businesses set up a portfolio of initiatives.

In a nutshell, his concept states that businesses  should not develop a single-minded strategy that requires a bucket full of resources.  Instead, develop smaller pilot programs at much smaller price tags, and re-evaluate constantly.  The small business or artist will be able to switch directions quicker because they will not be so heavily invested in any one.

This concept can be achieved more today, than any time in the last one hundred years because of technology.  Technology, most notably the Internet, allows artists and small businesses to reach their target audiences in real time.  This ability will accelerate changes and require an artist or small business to adapt quickly.

So, how do you get started?  Using Bryan’s illustrations, all initiatives should adapt the artist’s and small business’s core competencies.  In other words, you have to know what you don’t know.  If you are developing your core competency, than the time frame can be much shorter, even less than one year.  The risk would be lower.

Conversely, if you are venturing into unfamiliar territories, then your time frame should be 2-3 years before it comes to fruition.  The less you know about an initiative, the larger the risk.

But, should you invest entirely in longer time frames?  The answer obviously is no.  You have to make sure you balance your longer term initiatives with your immediate ones so you can provide adequate cash flow for all of them.

Now that you have picked out your initiatives and time frames, how should you implement the plan?  Bryan suggests four steps: Search, execute, monitor progress, and reassess the initiative portfolios.  This procedure is no different than what I have been writing about all year.  In any of your initiatives, you have to measure what you are doing against benchmarks and milestones.  The old adage is if you can’t measure it, you can’t manage it.

Artists and small businesses should consider adapting this method of strategy in the fast-moving world.  Who would have believed 20 years ago that you would be able to access the world in a little handheld device?

 

 

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How Business Consultants Can Help America Compete

Posted on January 24, 2012 by The LA CPA

Think of your latest large purchase.  Was the technology or production based in the USA?  Recently we purchased a Panasonic plasma flat-screen.  Panasonic is based in Oaza, Kadoma.  The other options were flat-screens from Mitsubishi and Samsung.

Why no USA?  It may not surprise you to see that the USA has fallen from 1st to 4th in innovation-based competitiveness according to the Commerce Department.  This conclusion prompted the America Competes Reauthorization Act which reported that research, education, and infrastructure has been neglected in the US.

There are many reasons for the poor US showing, but instead of pointing fingers, business consultants should be working with their clients to help innovate.  Even though the report list  recommendations concerning government commitment, business consultants can play a role on a micro level.  Here are a few of the report’s recommendations and the possible role of a business consultant:

  1. Support regional clusters: Though the report encourages all levels of governments to support regional clusters (like Silicon Valley), a business consultant can facilitate the development of a regional supply chain of a client.  “Just in Time” inventory system is one example where a business consultant can facilitate a client’s processes.
  2. Accelerate high-growth entrepreneurship: The federal government’s Startup America program seeks to match  businesses with resources.  A business consultant, however, can position a client’s strategically to take advantage of such opportunities.  What resources are available in a particular industry?
  3. Promote exports and access to foreign resources:  A business consultant can make a large contribution to a client in the area of exports by advising the client to register with the US EXIMBANK.  The government agency insures foreign receivables allowing clients to finance their manufacturing of products to be exported.

Business consultants can play an important role in facilitating business development.  Small and medium sized businesses must innovate with the view of creating a market segment where competition is (at least temporarily) irrelevant.

A recurring problem though is that most business consultants can’t implement the strategy.  That is where CPA/strategists dwell.  An external CPA could implement a strategy that he/she has designed.

The business consultants who are advocating this strategy during the Great Recession are now becoming industry leaders in the Great Recovery.  If you, as a business consultant, have not already been promoting an aggressive  strategy, then already you are behind the curve.

 

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The Best CPA Tax Tip: Filing Your Tax Return For Free

Posted on January 20, 2012 by The LA CPA

Yes, you heard me.  The IRS has a link that provides free tax software to those who have an adjusted gross income of $57,000 or less.  The IRS explains the program:

Everyone can prepare and e-file their federal tax returns for free using the
IRS Free File Program. Free File is offered through a public-private
partnership between the Internal Revenue Service and tax software companies.
Free File can help you do your taxes fast; it’s safe and it doesn’t cost
anything.

Nearly 100 million Americans – that’s 70 percent of the nation’s taxpayers –
can use the free brand-name software and secure e-filing offered by
private-sector companies. Software products also are available in Spanish. Each
company sets its eligibility requirements, generally based on income, age or
state residency. However, if your adjusted gross income was $57,000 or less in
2011, you will find at least one tax software product to use.

Here’s how it works: You must access Free File through the IRS website. At www.irs.gov/freefile, there’s an online tool which allows you to give a little information about yourself then guides you to the software for which you are eligible. Or, you
can review a complete list of companies and their offerings and make a
selection.

Try it and see if you can save tax preparation fees.  Of course, if you have a business, or unusual tax situations, you may want to hire a CPA.

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IRS Fraudulent Tax E-mails: Never Give a Sucker an Even Break

Posted on January 17, 2012 by The LA CPA

“Never give a sucker an even break,” is attributed to W.C Fields in the 1923 movie, Poppy.  However, some say it represents the real personality of W.C. Fields as a ruthless businessman.

So, don’t be a “sucker” to fraudulent tax notices.

CPA’s usually see through tax fraudsters because we know how the system works. Still, it facenates me when I get an email stating that my tax payment was rejected, or that my tax refund has not been claimed.  Fortunately, the IRS gives us some guidance to those who don’t wallow between the lines of the 1040.

Here are five things the IRS wants you to know about phishing scams:

  1. The IRS doesn’t ask for detailed personal and financial information like PIN
    numbers, passwords or similar secret access information for credit card, bank or
    other financial accounts.
  2. The IRS does not initiate taxpayer communications through e-mail and won’t
    send a message about your tax account. If you receive an e-mail from someone
    claiming to be the IRS or directing you to an IRS site:
    • Do not reply to
    the message.
    • Do not open any attachments. Attachments may contain
    malicious code that will infect your computer.
    • Do not click on any
    links. If you clicked on links in a suspicious e-mail or phishing website and
    entered confidential information, visit the IRS website and enter the search
    term ‘identity theft’ for more information and resources to help.
  3. The address of the official IRS website is http://www.irs.gov. Do not be confused or misled
    by sites claiming to be the IRS but ending in .com, .net, .org or other
    designations instead of .gov. If you discover a website that claims to be the
    IRS but you suspect it is bogus, do not provide any personal information on the
    suspicious site and report it to the IRS.
  4. If you receive a phone call, fax or letter in the mail from an individual
    claiming to be from the IRS but you suspect they are not an IRS employee,
    contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need
    to contact you. Report any bogus correspondence.
  5. You can help shut down these schemes and prevent others from being
    victimized. Details on how to report specific types of scams and what to do if
    you’ve been victimized are available at http://www.irs.gov, keyword “phishing.”

If you are unsure, do not do anything until you contact your CPA.  One phone call to a CPA can save you a bundle by keeping you out of a fraudulant transaction.

 

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With FaceBook Music, You Don’t Need No Stinkin’ Payola

Posted on January 12, 2012 by The LA CPA

My father sang rockabilly in the 1950s under contract with Capitol Records. (Click here for a Bobby Norris sample.) When I was young, he told me stories of “payola.”  Payola is the (illegal) practice of record companies (and I guess artists) paying discjockies to  play their songs during the normal daily rotation.

Capitol Records, to his knowledge did not  offer payola  for him and his records didn’t sell much.  However, with the rockabilly resurgence of today (nine years after his death), his music is making its way to loyal fans.

Carl Jacobson’s article Fans on Facebook: What to Do Next to Engage Your Fans, Increase Sales and Grow Relationships provided some ideas that my dad would have benefitted from if such an opportunity existed in the 1950s.

IDEA 1 – Be Ready to Sell Today! Carl’s idea, here, actually transends any art or commerce.  Don’t launch your product of art until it is ready.  This is one of the biggest errors authors make with their first book.  They are so excited about getting their first book out that they fail to hire someone to read it and provide feedback.  The result many times is the author blows his or her chance to sell a great story because it is poorly written.  Carl suggests  Mystore for Facebook to capture fan’s information.  But, make sure your product is absolutely perfect.  This concept transfers to any business, in that you should not reach out until you have perfected your strategy, product, and service.

IDEA 2 – Engage…Don’t Advertise This works with any business of relationship.  People want to be involved; people want to contibute to a goal; people want to feel like they matter.  Don’t lauch your music saying “Buy this!”  Remember the advent of American Idol?  FaceBook allows people to share their opinions, so ask them to.

IDEA 3 – The Virtual High-Five The FaceBook “like” gets a lot of traction these days.  Thank and compliment others when the opportunity arises.

IDEA 4 – Reward Fans Then Ask Them to Reward Their Friends Freebees are nothing new in business.  Just make sure you limit what you are providing to your fanbase.

IDEA 5 – Advertise Yourself to Fans of Similar Artists In business we call this strategic relationships.  You can trade recommendations with other artists using MyStore.  This can also work in other business contexts.  Use complimentary companies to partner with in promotion.  For example, let’s say you own a beauty salon.  Women that go into beauty salons are concerned with their appearence.  So, you may want to partner with a Yoga or Spinning instructor to advertise and offer combined deals.  This way, your customer is enhancing her appearance in different ways.

With the proper use of social media(e.g., MyStore for FaceBook), you can reach your fans with investing just your time.  Payola is Gonola.

 

 

 

 

 

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Boss Trek:The Next Generation. How Running a Successful Business Has Already Changed

Posted on January 10, 2012 by The LA CPA
My late brother-in-law, Philip Epstein was the son and nephew of  famous screenwriters called “the Epstein Brothers.”  These brothers, Julius and Phillip, wrote Casablanca(garnering an Oscar) and many other great movies.  Phillip told me sometime later, Jack Warner tried to harness the Epstein Brother’s creative ability by forcing them to work 9-6 every day.  The brothers did.  The next movie released turned out to be a theatrical bomb.  Jack Warner asked them why did that happen?  They replied, “We don’t know why?  We were here from 9-6 every day!”
That was one extreme of a boss trying to manage  employees.  Another is a book I read, Copy This!: Lessons from a Hyperactive Dyslexic who Turned a Bright Idea Into One of America’s Best Companies by Kinkos founder, Paul Orfalea. The book discussed many aspects of the rise of Kinkos, but one was the fact that the partners referred to their employees as partners.  They never said a person worked for them, but with them.  As a CPA and strategist, this concept interested me because even though this culture seemed revolutionary in the 1970s and 1980s, it actually existed in a much bigger company, Nucor Steel in the 1960s. (See Judo 101: How to Defeat a 500 Pound Gorrila.)
This whole employer/employee relationship concept  is discussed in What it will take to lead 20 years from now by John Baldoni.  Mr Baldoni refers to the Hay Group’s Leadership 2030 report.  The article and the report described the new leader as a mediator and coach, allowing more employee autonomy.  The report stated that leaders have to work harder  to generate employee loyalty.
But this article (and maybe the report) only looked at this from a leadership point of view.  That point of view was fine, but  incomplete.
As a CPA, I look for direction and people, just not people.  If you are going to promote autonomous employees, you must first learn how to align individual roles to an organization’s strategy.  You must know how an employee’s work fits into the organization’s strategy.
After you aligned the employee with a goal you must measure it.  Do not make the mistake of giving an employee free reign without deliverables, metrics, and time frames.
So how does this tie into our famous Epstein Brothers?  Was Jack Warner wrong to force the metrics of a common work day on them?  The answer is probably yes.  Mr. Warner had the right idea, but the wrong metrics.  The metrics in that case may have been timeliness and theatrical results.  Film, like every industry must find the right combination of expectations and metrics.
The next generation of small business owners and CPAs will be different than the prevailing culture. But that culture exists today, probably  in some of the more successful businesses.  So, instead of planning for the future company culture, embrace it now and be an industry leader.
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Judo 101: How a Small Business Can Fight a 500 Pound Gorilla

Posted on January 6, 2012 by The LA CPA

Over my life time, I’ve trained in several martial arts.  It started at eight years old with Judo.  Within six weeks I had learned how to maneuver a 200 pound man (instructor) and flip him over my shoulder.  (I weighed about 70 pounds at that time.) The feeling was ecstatic and at 54 I can still flip people over my shoulder effortlessly.

Lisa Barone’s article, 6 Ways Your Small Business Can Steal Customers From Big Brands reminded me of the euphoria a small business owner can get when defeating his 500 pound gorilla competitor.

1. By Focusing on Simplicity

2. By Solving Users’ Core Problems

3. By Outmaneuvering Big Brands

4. By Excelling at Customer Service

5. By Being Fearless

6. By Becoming a Big Brand Yourself

Now Ms. Barone does a nice job of laying out a theory, but small business owners expect case studies.  Take Nucor Corporation.   They sought  to defeat the Goliath of the steel industry like Bethlehem Steel.  Bethlehem Steel and other mega steel companies were already in decline due to their labor relationships by time Nucor made a technological breakthrough in 1986.  Nucor’s “continuous thin slab casting” worked as an accelerator to Bethlehem’s demise, but the main advantage  was its culture.  Nucor treated its employees equally in status.  Nucor eliminated class distinctions with such practices of  having all 7,000 employee names appear in their annual reports and issuing the same color of hats to all employees.  In addition, Nucor did not provide large fancy suites and aircraft to its executives.

The result was that Nucor created a more stable culture.  A detailed analysis is discussed in Jim Collin’s Good to Great.

Whether you are an artist, or a small business, how are you fighting your major competitor?  You must start by taking the gorilla’s weaknesses and using them against it.  Just like I used use the weight of a 200 pound man to flip over my shoulder at eight years old.  Small business competition shines brightest at those moments.

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Nothing is New Under the Sun for 2012. If You Haven’t Been Doing It, You Are Late to the Ball and Midnight is About to Strike(Again)

Posted on January 4, 2012 by The LA CPA

My wife and daughter have replaced a large portion of my wardrobe.  Sorry, but I don’t watch fashion trends and can wear the same pair of pants for 5-10 years.  I now where Vans shoes.  I think I’m cool now.

I felt the author of 6 Important Marketing Trends to Watch in 2012 kind of missed the boar on trends.  What he called 2012 business  trends seemed to be trends that were started by industry leaders well before.  For example:
1. Abstract is the new concrete: The author projects that it will be increasingly hard to name products, and their names will become more abstract.  I disagree. 25 years ago, I-pad would have meant nothing to you.  The name is only relevant if it identifies with the product.  Eventually it will become the venacular.

2. Boomers–they’re baaack! The author makes the “shocking” revelation that the 47-65 year-old demographic are a major buying source.  Yes, we have been back for 20 years.

3. Trending is trending He used the old Wayne Gretcky quote of skating to where the puck is going to be. I used this quote in a November 2010 blog.  The problem, is you have to know where the puck is going to be.  What I recommend for business owners and artists, is you have to guide the puck to where it is going to be and promote that to others.  If you wait for trends to develop, you will always be behind them.  CREATE the TRENDS DON’T FOLLOW THEM.

4. The photo’s the thing. The image revelation emerged with television in 1960 when John F. Kennedy debated Vice President Richard Nixon.  Only the platform has changed.

5. Tablets, tablets everywhere. I assume by “tablets” he means I-Pads and similar products.  Bill Gates predicted this in his book, Business at the Speed of Thought. In his book, he actually predicted an Iphone or Ipad type of device.  It is amazing that Steve Jobs took the prize.

6. Creativity takes center stage. This trend has been around since the advent of the personal computer.  Once you released tools to the creative, you provided the pilot light for creativity.  What we are seeing now is the breakneck speed that creative people are using these tools, not the advent of creativity itself.

My point is that even  business bloggers are falling behind the trends.  If you are a business owner or an artist, you cannot follow trends.  You must create your own trend and have others follow you.  That is the secret of the Blue Ocean Strategy.

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