Certified Public Accountant Los Angeles Archives | Page 5 of 7

Internet Ad Revenue Breaks Record. Are You a Spectator or a Player?

When I was 13 (1970), my stepfather took me and a friend to the Olympic Auditorium to see one of my favorite wrestling heroes, Rocky Johnson. I thought this guy was so cool, and I thoroughly enjoyed his coolness in wrestling. My stepfather on the other hand, laughed at me when I got upset because Rocky’s nemesis, Freddie Blassie, would bite him on the forehead when the ref turned his back. It pissed me off to see my hero lose the match through unfairness. So, my stepfather took me to the live match in downtown Los Angeles to show me that it was all fake.

He was right, but I was still entertained. Not by the wrestlers, but by the adult people in the audience. Even though they could see the fake punches and kicks, they were into it as if they were in the ring. What a hoot! But as history was being made in the ring, the audience did not (and probably could not) become a part of it.

Such is the case of the Internet which is changing the way we do business every day. In the AP article, US Internet Ad Revenue Hits Record in 2010 by Barbara Ortutay, the author reports another record set by those who advertise on the Internet. Now, remember, these are Internet companies who are paying hard dollars to get to you through your computer. It does not count those of us who do not advertise but, reach our target audience by serving them, and contributing to the dissemination of knowledge.

The question is, are you participating in Internet history, or are you watching it pass you by? Just think of how much you rely on Google and Opentable, not to mention apps like Yelp and Groupon. What are you doing in your business life to contribute to history? Just like when George C Scott said to the West Point graduates. “Thirty years from now, when you’re sitting around your fireside with your grandson on your knee and he asks you, ‘What did you do in the great World War II,’ you won’t have to say, ‘Well… I shoveled shit in Louisiana.'”

It doesn’t cost anything to start a blog. It doesn’t cost anything to feed the machine. I tell my clients (even those in the entertainment industry), today is the best time to promote yourself in the history of the United States. It takes three things:

Creativity
Persistence
Ignorance of the fear of failing

Check out some of our other articles that may help you. Life is too short to sit back when you can make a difference in your business and personal life, and the lives of others. Don’t be one of those who dwell on the days of shovelling shit, when you could be one who contributed to feeding the masses.

Can You Grow your Business Social Footprint, without Putting it in Your Mouth?

You walk into a party and a sharply-dressed grey-haired guy (not me, I’m in my boxers right now) shakes your hand. Sporting a toothpaste commercial grin, he says,” Let me tell you about the value of owning a silver-plated casket!” You respectively try to talk your way out of it, but before you do, a slim red-haired woman, sporting a noticeable over-bite grabs your arm. “Hi. I’ve been feeling your energy from across the room, and there are past lives that want to surface in you…Make an appointment with me, and I will work them out for you at a discounted rate.”

Twitter is a cocktail party. When I scroll down on Twitter, I am always annoyed by those that just say, “Buy mine! Buy Mine!” They offer nothing that can inform me and help me. Why would I buy anything from them?

Others post words of wisdom (or at least they think they are), like “Is forever longer than always?–Dolly Parton.” How pathetic.

So, I welcomed the article How to Spread Your Business Social Footprint Around the Web by Josh Catone. Josh, who obviously has a social networking background graces us with a few good points on how to increase your social footprint, or profile.

Be Everywhere: Josh points out a good fact, but as business people, we only have so much time to spend hitting many of the social networks. I would suggest that a business person choose where they have the most impact and traffic. Then, you can use your employees, in a limited way, to social bookmark your site in various other networks. One hour per employee a week can make a big difference in your exposure.
Participate in the Conversation: This is my point above. Participate by being constructive and helpful. You will not find any of my blogs pitching the reader. The author should write to help and to display the author’s knowledge.
Share your expertise: As I said, show what you know. There is too much knowledge for any of us to know everything, so we are in this together building each other up to create a better society, and smarter business persons.

The points above are tactics to the strategy of growing your business. Don’t be stuck in the 20th century and ignore the web. I bet your competitors aren’t.

Small Business People Need is a Strategist, Not a Marketer and That Person is You.

About five years ago, a partner and I were interviewing a tech guy for a position in our business intelligence software firm. The prospect was pretty low key, and was not really very personable. At the fifteen minute point, he asked, “So, what role do you see me playing in the company?” I glanced to my partner, who allowed me to take the lead. Scooting up in my chair, I peered into his eyes. “Jim,” I said, “I think you would be a good fit dressed as a giant taco, twirling an arrow on Lincoln Blvd.”

Jim’s mouth dropped open as silence saturated the walls. Then, my partner couldn’t hold it back any longer and burst into laughter. The prospect had no sense of humor, we certainly couldn’t work together. We couldn’t afford a marketer, but we needed our employees to fill that gap with some positive communication skills.

Ivana Taylor touches on communication from a quantitative, as opposed to a qualitative point of view in 6 Reasons You Don’t Need a Full Time Marketing Person in AMEX’s Open Forum . She pushes the concept of hiring an outside marketing person, (obviously promoting her skill set).

However, resist chastising her for self-promotion, and try to pull some pearls of wisdom from the article.

You see, I agree with her, but only to a point. Frankly, there are so many resources on the web, that you can (as a small business owner on a budget) do your own marketing. You don’t need an inside or outside marketer, you just need to hire an outside consultant to teach you for a limited time.

This consultant should be well-versed in SEO and social networking. Once you understand these concepts, you should adjust your web page to leverage them. Such things as blog articles and news releases are just two of the tools that should mastered.

But every one is doing that, right? No. The field is wide open. Your marketing strategy should be to bring prospects to you. How are you doing that now? Word of mouth? Well, you better hope people are doing a lot of yacking.

This is not to say that you can carry it alone. There will be a day where you will grow so fast, and so big, that you may have to re-evaluate whether to bring in your outside web marketer back in. In fact, an annual meeting would be a nice “tune-up” once you bring your marketing plan.

In any event, as a small business owner, your strategy must always evolve with tactics that can be measured by some sort of metrics. Don’t throw money at your SEO/ SE education without determining what you want to accomplish. Then build the tactics to get there.

Whether an Artist, or a Business, You can Write Your Own Story

When I was 15, I wrote a song for my girlfriend. She said the music was alright, but the lyrics (the inspiring, personal lyrics that revealed my love for her) sucked. Well, never the one to go down in flames, I got back at her….I married her seven years later(serves her right, and she’s still stuck with me 32 years later).

I enjoyed reading Mark Winkler’s article, You can Write Better Lyrics published in the April 2011 online edition of Music Connection Magazine. He laid out a laundry list for song writers that I adapted for business and strategic plans.

Come up with a great title: Like in a song, you need something short and sweet that can interest people. Some think the Executive Summary of a business plan fits the mold, but there is more. You should be able to recite an “elevator speech” in less than thirty words that spells out the proposition.
Be Specific: Winkler advises that lyrics should be specific to tell a story in a song. The same goes for a business plan, however, a lot of the specifics can be relegated in the accompanying financial statements and notes. You don’t have to tell every detail in the body of the plan.
It’s the Music Stupid: Just like a great set of lyrics will not save a bad melody, a great business plan will not save a bad business idea. Research the masses to see if your business idea will be accepted.
Writing is re-writing: One thing our business plans have done every time, if forced our clients to re-write some of their assumptions. Like in a song, when the dog starts to howl, or your friends struggle not to laugh, its time to rewrite.
What you say counts: Winkler advises your words to be golden droplets in the minds of those who experience them.
Step away from your piano and guitar: Just as the tune can stand on its own, so the business plan must pass the smell test. All the fancy footwork will not sway a savvy investor. Oh sure, there are those who can stomach any heavy metal song with a lot of distortion and Marshall amps, but the songs that live in the hearts and minds of the hearer need more. In your business plan, make sure you transfer your passion to the investor.
A song is not a poem: A business plan is not an MBA thesis. You are trying to convince people to part with their money. Dazzle them with brilliance, but don’t baffle them with bullshit.
Your lyrics must sing: So should your business plan, and it must not be a requiem.
Need I repeat–repetition of words: What message are you trying to convey about your new business? Is it the same thing that others have done? Are you creating your own blue ocean where competition becomes irrelevant?
Know your genre: There are many diverse rules in business. Are you a manufacturer? An e-tailer? What about a record company? You must know what is NOT working in these industries. As I said in a previous article, you must know the industry, and more importantly, know the target market. What are they clamoring for that the industry is not providing? What expensive service or good, is the industry providing that the target audience does not need?

Business plans and song writing require a set of skills. Most times you only have one chance to sell what you are offering. Make it count.

Starbucks: The Moby Dick of Beans

Many are unaware that “Starbucks” was Captain Ahab’s first mate in Moby Dick. Melville was brilliant. Ahab gets killed by the whale, and Starbuck, now free from his oppressive and compulsive amputee master, goes on to start a billion dollar coffee chain…only in America. (Was that how it ended? I don’t remember, I just remember Melville spending whole chapter describing various kinds of whales).

My wife alerted me to this Costco Connection (April 2011) article, The Big Four-oh. The article discussed the Starbucks (the coffee chain) CFO’s book, and his company’s metamorphosis to save itself. I found the following passage seemed appropriate:

“There is a wisdom that is woe; but there is a woe that is madness. And there is a Catskill eagle in some souls that can alike dive down into the blackest gorges, and soar out of them again and become invisible in the sunny spaces. And even if he forever flies within the gorge, that gorge is in the mountains; so that even in his lowest swoop the mountain eagle is still higher than other birds upon the plain, even though they soar.”
– Moby Dick, Herman Melville

This passage speaks of tactics, not strategy. For the record, strategy is “a plan, method, or stratagem for obtaining a specific goal or result.” Tactics are the maneuvers to achieve that strategic goal. In other words, strategy is the horizon, and tactics is the path to getting there.

The article does not speak of a bad Starbuck’s strategy, but tactics. In the article, the author says, ” But while the company was growing stores–and thrilling Wall Street with short-term results–it wasn’t growing a business. Costs weren’t being watched, supply chains broke down, shortcuts such as re-streaming milk crept into the operations and at times you couldn’t even smell coffee in a Starbucks, thanks to food…”

This is an area that we stress to our clients. Dreaming up a strategy is fine, but if your house is not in order where you can get reliable metrics, then you cannot tell if the gorge you are soaring in is leading you down to the pigeons, or keeping you up with the condors (well, eaglesis a better analogy, but I like California Codors since I watched two soar in the mountains while backpacking 25 years ago–there were only about 20 alive at the time).

If this is still Latin to you, then I suggest you buy a quick read, Achieving Strategic Alignment by Barry MacKechnie. I had lunch with Barry through an introduction by a Bernstein Growth Wealth Management superstar, Andrew Hicks. The book, which can be read in two hours (three for me), not only discussed strategy, but gave a play by play approach to tactics. In other words, the book illustrated how to break down your journey to baby steps.

I cannot stress this concept enough. Dreaming (or even strategical planning) without tactics, is about as effective as Captain Ahab’s desire to kill Moby Dick. If you choose to obsess about the whale, and not on the harpoon, you will just loose another leg.

Successful implimentation of a strategic plan occurs with one eye on the horizon and the other on your next step.

Breaking Tax News: IRS Provides Relief for Employer Healthcare Reporting

Under the Affordable Care Act employers are required to report the cost of employer-provided health care coverage on the Form W-2. Notice 2010-69, issued last fall. The initial act required employers to report this for 2011, and issued on W-2s mailed in 2012. In today’s guidance, the IRS is providing relief for smaller employers (those filing fewer than 250 W-2 forms). The requirement will now be optional for them at least for 2012 (i.e., for 2012 Forms W-2 that generally would be furnished to employees in January 2013) until further guidance is issued.

We currently struggle with educating large payroll providers like ADP and Paychex to conform to laws that were enacted 10 years ago. As tax consultants and business managers, this helped us a lot with our smaller clients.

For further analysis see https://www.accountingtoday.com/news/IRS-Offers-Guidance-Relief-Health-Coverage-Reporting-Requirements-57843-1.html?ET=webcpa:e1367:73200a:&st=email

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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any tax advice contained in this e-mail (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or state tax authority, or (b) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

The IRS Loves Us! They Really Love Us! Read Their Warnings on Tax Scams

I have had some great experiences dealing with the IRS, especially when a client was present. One time I walked in with a client who was the daughter of a well-known actor. She actually resembled her father, too. The first thing the IRS appeals agent said was, “I have been a fan of your father for years!” I knew we had just won our case. In fact, within ten minutes we had agreed with the IRS agent on excellent terms.

Then my client start talking, and talking, and talking….I kicked her under

the table. Luckily, this stopped the vocal hemoraging before any real damage was done.

Even though the IRS is our adversary many times, they also put out some items trying to protect the taxpayer from unscrupulous people. The IRS 2010 Dirty Tax Scams listed areas where taxpayers can be screwed by someone other than the IRS. It actually is very informative:

Return Preparer Fraud: Unfortunately some tax preparers skim off their client’s refunds. Other preparers tell clients that they can get big refunds, and end up preparing a bad return that creates problems down the line. Check out your tax preparer. I have corrected many.
Hiding Income Offshore: This is a no-brain-er. Don’t play games. I turned down a client who wanted me to prepare financial statements for a questionable offshore insurance vehicle.
Phising: Anytime you get an email, phone call, or letter from the IRS, do not disclose any information no matter how threatening they sound. Call a professional to check it out. The IRS never calls for information like a credit card to pay taxes over the phone. Ask their permission to record the conversation and see how fast they hang up.
Filing False and Misleading Forms: The low income earned income tax credit is a favorite by schemers. The IRS is having a hard time tracking them down. Also, phony forms 1099 (OID).
Non-taxable Social Security and withholdings: I have not pesonally seen this.
Abuse of Charitable Organizations and Deductions: As a co-founder of FOLA (Foundation of Local Arts), I can tell you the IRS makes you jump through a lot of hoops for your 501(c) (3) letter. If you plan to star an organization, find a good tax lawyer.
Frivolous Arguments: Don’t listen to scheming ideas and constitutional arguments. Remember, taxes pay the courts. They are certainly not going to buy your argument that Congress does not have the right to tax.
Abusive Retirement Plans: Don’t over contribute to your IRAs, and have a pension professional help set one up for you.
Disguised Corporate Ownership: Nevada corporation and you live in LA? Sure, the California Franchise Tax Board is looking for you. The IRS wonders why, too.
Zero Wages: This is a new one to me. Using forms to correct W-2s and 1099s as a way of hiding income.
Misuse of Trusts: Private Annuity Trusts, and foreign trusts to deduct private expenses are fertile ground for the IRS.
Fuel Tax Credit Scams: If you run a business with vehicles, look out. Claiming an unreasonable amount will put you on the radar.

So, the IRS does have some value other than take your money. Tax scams will always be here, so arm yourself with professionals and don’t do anything without consulting us.

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Inventory Defined: Money Wasting Away

My wife likes “Pawn Stars,” on the History Channel. She watches the antics of Rick Harrison, the “old man,” “Big Hoss,” and my favorite, “Chumlee,” deal with people who bring odd things to sell them. One aspect these pawn stars consider in a potential purchase, is whether they can sell it. I really can’t tell by looking at the TV, but it seems there is a lot of inventory that sits in that shop. My interest always perks up when Rick speaks to the camera. Behind him are always the same four guitars. One of them looks like a vintage Fender Stratocaster. Now, I have been a Gibson man my whole life, but I would like to add a nice 1960s era Strat to my collection, depending on his price.

In any event, the guitars, and whatever the stars have on display, may be wasting money. It would be interesting to run metrics and see what the “number of days inventory ratio.” In other words, how long does this stuff stick around before they sell it? If your ratio is too high, you have tied up your working capital (or debt) in inventory. The longer inventory stays around, the less return your investment in that inventory.

In regards to inventory, I came across this article 9 Tips on Managing Inventory by Katie Morell. She gave some good advice on moving inventory. However, before you read her column think of another option spelled out in, The Long Tail by Chris Anderson. Chris analyzes Rhapsody Music, Amazon, and other such companies that avoid the “brick and mortar” set up, with inventory that is held by others, or is digital inventory.

Now, you may not have products that has to be stored, but is ALL of your inventory imprisoned in your brick and mortar building, or can you eliminate some by changing your business plan? If you can removal some line of inventory from your custodial care, you solve a whole host of issues: Pilfering, rent, utilities, security, insurance, etc.

Still, I would like to see if Rick is willing to sell that Strat at a discount. The longer it sits around, the more money he loses.

BackYard Blog a Deux: Ok, So Your Backyard isn’t so Exciting…Try This

Pardon my French, but French isn’t my second language…English is. I’m still looking for the first.

At the time I was getting blog comments on my article, In Starting a New Business, You Shouldn’t Leave Your Backyard, I came across a section in Jim Collin’s book, Good to Great, that added another dimension. The chapter was the Three Circles of the Hedgehog Concept. Now, as a form of background, Jim advocated that you want to be a hedgehog, not a fox in business. Foxes are cunning and complicated; Hedgehogs are simple and effective…they just roll up in a ball of spikes every time, and it works.

A good example of this occurred twenty years ago with client, Michael Feinstein. Michael, in the early 90’s or late 80’s was a piano bar guy playing and singing Gertschwin. Using this passion, he was able to parlay this simple act into an internationally recognized performance. (He is still doing it today.) I will apply Jim’s philosophy to Micheal, but let me discuss Jim’s book, first.

Jim’s book illustrated a three intersecting circles diagram on how to be a great company, not just a good one. The first two circles were similar to what I mentioned in the last blog where I quoted the Susan Reid article. 1) Do what you are deeply passionate about, and 2) Do something that drives your economic engine. Now, where Jim differs in the message of the blog was the third circle. 3) Do something that you can be the best in the world at.

Now, that’s a tall requirement.

The first thing many would say is, “Yes, your core competency.” But Jim wouldn’t agree. He says, “Clearly, a Hedgehog Concept is not the same as a core competence. You can have a core competence at something but not necessarily have the potential to be the best in the world at it.”

Now, let’s get back to Michael. When he started he played his passion, Gershwin. His dad introduced him the musical genre when he was much younger. Second, his style and voice allowed him to make an economic living. But the third circle is what differentiated him from the others. He sought to design his performance, not to be the best pianist in the world, not to be the best singer or entertainer in the world, but to be the best Gershwin entertainer in the world. He found his blue ocean, and fulfilled the third circle requirement.

That tripartite strategy is the strategy to success, fulfillment, and greatness. The question is, do you have the business ambition to take the calculated risk?

In Starting a New Business, You Shouldn’t Leave Your Backyard

Several years ago, I was trying to convince a client who specialized in small business credit to join with us in using the EXIMBANK to finance movies. His response was, “Well, that seems a little out of my backyard. I have to stay within reach of what I know.” I always kept that in mind when one of my brother-in-laws offered up with “a great small business opportunity.” First, it was their digital psychiatric counselling to prisoners; then they dreamed of a shrimp farm in the middle of the desert; and a few weeks ago, it was converting abandoned cars in Kauai to scrap metal and selling it in Honolulu. Needless to say, I am not moving abandoned cars, or shovelling shrimp from a flooded sandpit.

Susan Reid, in her article, Stay within 2 degrees in starting a new business, touched on this concept(no, not shrimping). She broke it down a good list to follow in order to identify a good business fit for you:

Step 1: Identify the things you love to do: This is a rule that I told my sons. The first son is going into graduate school for poetry, the second son is starting at U C Irvine as a jazz pianist, the third, well, he’s chasing girls in high school. I told them that there is money to be made almost anywhere your heart it. You just have to find your blue ocean and go for it in a strategic manner.

Step 2: Identify businesses that match your current interests: I don’t necessarily agree with this point. I don’t advocate following in the path of other small businesses, but to learn from them. American ingenuity did not thrive by doing the same thing someone else did, but better. Instead, look at the small businesses and focus on the customer’s wants and needs that are not being met in other businesses. You may create a new industry.

Step 3: Talk to other small business owners: Just like above, learn but don’t emulate.

If you want more of an approach, go to my Blue Ocean article. In small business, go with your passion, stay in your backyard as far as your core competency, learn from others, and implement a strategy.