Last January, I again participated on the planning committee for the 2011 Entertainment Industry Conference for CPAs and attorneys. We agreed on most of the usual topics to be presented at the conference. Then, I suggested social networking. The idea was written on the board.
Fifteen minutes later, a respectible CPA turned to me and said, “Rick, I know social networking is a sexy topic, but I doubt it is what our attendees are looking for. They won’t come away with anything.” I nodded my head and thought to myself: Thank you. You just gave me an extra 12 months to blow my competition out of the water using social networking and SEO.
1. Americans spend most of their time online on social network and blogs–If you are reading this blog, you have contributed to the 23% statistic that more time is used reading blogs and social networks than checking emails. You may have also found me because of what I have been doing for over a year. Writing
2. Seventy percent of active online adult social networkers shop online–Sell where your buyers live, online. We are all going there. Have a bigger presence than your competition.
3. Fifty-three percent of active adult social networkers follow a brand(only 32 percent follow a celebrity)–Adults follow brands across social networks.
4. Sixty percent of social media users create reviews of products or services–When was the last time you reviewed a book on Amazon, or rated a restaurant on Opentable? You are contributing the movement. If your business is not on there, then you are behind the curve.
5. The number of mobile Internet users is up 47 percent from last year–I have actually trashed a rude restaurant that made us wait an hour beyond their seating estimate. We were outside with our 85 year old father-in-law on Father’s Day in the dark. My bad review went into Yelp before I reached my car in the parking lot.
If you are resisting the social network, SEO revolution, you are risking the well-being of your business. But, before you jump in, do some research and learn. There are consultants that can help you. Then, create a strategy and stick to its implimentation. Your online presence will not increase overnight, but the constant creation of content will get you noticed.
I couldn’t believe it. Well, actually I could, but I didn’t want to. Gregg Towsley of WSI Quality Solutions sat down with me me 18 months ago and showed me that my business’s social profile was dead. In other words, if you typed in industry key words, we didn’t even show up on ANY page.
I came across What Drives Small Business Social Media Engagement? by Dan Schawbel. He cited a study by Roost which offered advice to small business owners who want to create brand awareness, customer, acquisition, and customer services.
Using only Facebook and Twitter, the study suggested the following:
Publishing photos: The study suggested photos of employees, products, and functions. I remember when I first put up our web page, our most valuable search term was my assistant Maddy Curley. She was an actress that had (and has) some success on television and film. People googled her after seeing her on a TV episode and came up with her picture on our personnel page.
Ask Questions:Start a discussion by asking questions. You see this a lot on LinkedIn. I feel that providing information along with questions is a better strategy. What do you think?
Share Quotes:There are way too many twitter sites and blogs quoting wise people. I don’t like to. I find it is far more interesting to coin my own phrases that display my expertise. You don’t convince others of you knowledge and wisdom by using someone else’s brain. (You can quote that).
The main activity that got our firm on the front Google page ahead of CPA firms much larger than us is our content and consistency. To be successful, you must give to the business community. We provide advice and steps to individual businesses that can help them in managing their finances.
It’s always good to practice the basics, like a major league baseball player who may work on his swing by hitting a ball off a tee. So here I am going back to the IRS tax site to remind small business owners of the Tax Relief Act of 2010. There may be benefits that you may be missing.
Sect. 2011: Temporary exclusion of 100% of gain on certain small business stock
Expanding on the provisions of Internal Revenue Code Section 1202 and the American Recovery and Reinvestment Act, the Small Business Jobs Act provides an additional incentive for investment in qualified small businesses. Under this Act, investors in qualified small business stock can exclude up to 100% of the capital gain upon sale of the stock.
Under the SBJA, in order to claim the capital gain exclusion, the qualified small business stock must be:
Acquired after September 27, 2010, and before Jan 1, 2011, and
Held for at least five years before the stock is sold.
However, Section 760, Temporary Exclusion of 100% of Gain on Certain Small Business Stock, of the Tax Relief Act of 2010, extended the exclusion for qualified small business stock acquired before January 1, 2012.
Under current law, the earliest tax year for which this 100% capital gain exclusion can be claimed is 2015. Additional limitations, qualifications and requirements may apply. Capital Gains and Losses has information on reporting capital gains.
Sect. 2012: General business credits of eligible small businesses for 2010 carried back 5 years
The new law allows an eligible small business to carry back general business credits five years. Previously, the credits could only be carried back one year. The carryback is for credits determined in the first taxable year beginning after December 31, 2009.
An “eligible small business” in general is defined as follows:
A corporation whose stock is not publicly traded, a partnership, or a sole proprietorship, and
The taxpayer must have $50,000,000 or less in average annual gross receipts over the three preceding tax years.
This is a one year initiative applicable only to the tax year 2010 (For fiscal year filers, the effective tax year is the first tax year beginning after December 31, 2009). The five-year carryback period is available only for credits carried forward to the tax year 2010 and/or earned in the tax year 2010.
Sect. 2013: General business credits of eligible small businesses in 2010 not subject to alternative minimum tax
The new law allows general business credits to offset both regular income tax and alternative minimum tax of eligible small businesses as described in Section 2012 of the Small Business Jobs Act (see above). The provision is effective for any general business credits determined in the first taxable year beginning after December 31, 2009, and to any carryback of such credits.
This is a one year initiative applicable only to the tax year 2010 (For fiscal year filers, the effective tax year is the first tax year beginning after December 31, 2009).
Sect. 2014: Temporary reduction in S-Corporation built-in gain recognition period
Under the Small Business Jobs Act, if the fifth year of an S Corporation’s recognition period ends before their 2011 taxable year begins, then no entity-level tax is imposed on the net recognized built-in gain for the 2011 tax year. Sect. 2021: Increased expensing limitations for 2010 and 2011; certain real property treated as Code section 179 property.
An expense deduction is allowed for businesses which choose to treat the cost of certain qualified property, called section 179 property, as an expense rather than a capital expenditure. For qualifying property placed in service during the taxable years 2010 and 2011, the new law increases both the maximum amount of the deductible expense under IRC Section 179, as well as the statutory phase-out amount. The provision also expands the definition of IRC Section 179 property to include the following types of real property: qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property.
Sect. 2022: Additional first-year depreciation for 50% of the basis of certain qualified property
Generally, businesses are allowed to recover the cost of capital expenditures over time through depreciation expense. IRC Section 168(k) allows for additional first-year depreciation, for 50% of the basis, of certain qualified property placed in service after December 31, 2009. The new law extends the additional first-year depreciation deduction to qualified property acquired and placed in service during 2010.
Section 401, Extension of Bonus Depreciation, of the Tax Relief Act of 2010, expands the additional first-year depreciation deduction (bonus depreciation) to equal 100 percent of the cost of qualified property placed in service after September 8, 2010, and before January 1, 2012. It also provides for a 50 percent first-year bonus depreciation deduction for qualified property placed in service after December 31, 2011 and before January 1, 2013.
Sect. 2031: Increase in amount allowed as deduction for start-up expenditures in 2010
For taxpayers starting an active trade or business, the new law increases the amount the taxpayer is allowed to elect as a deduction for start-up expenditures under section 195(b) for taxable years beginning after December 31, 2009. Section 2031 allows up to $10,000 as a deduction for start-up expenditures, but requires a dollar-for-dollar reduction of the $10,000 deduction if startup expenditures exceed $60,000. This expense should be claimed as an “Other Deduction” on business returns, such as the Form 1120, 1120S or 1065, or as an “Other Expense” on the Schedules C or F of the Form 1040. The remainder of any start-up expenditures, not deducted under section 195(b), can be amortized ratably over 180 months on Form 4562, Depreciation and Amortization.
Sect. 2042: Deduction for health insurance costs in computing self-employment taxes in 2010
Generally, small business owners may not deduct the cost of health insurance when calculating self-employment tax. Under the Small Business Jobs Act, and subject to specific statutory restrictions (i.e. deduction is not available if self-employed individual is eligible to participate in an employer-subsidized health plan maintained by the employer of the taxpayer or the employer of the taxpayer’s spouse), business owners can deduct the cost of health insurance for themselves and their family in the calculation of their 2010 self-employment tax.
Always consult your tax professional before making any of these decisions.
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.
My grandfather was Alfano the Great. In the 1920’s he walked between 2 eight story buildings with no net. In addition, he walked on his hands, rode a bicycle and did wheelies. All for a few bucks. Obviously, he never fell, or I wouldn’t be here.
The IRS, US Labor Department, and several state labor departments are about to cut the tight rope of some employers who classify employees as independent contractors.
Michael Cohen report, IRS to Team with Labor Dept. on Employee Classification, discusses the IRS and the Labor Dept. combine efforts with seven states to tackle the problem of employee tax classification. This could be a game-changer because one of the problems in employee tax classification has been defining what an “employee” is.
This move among all of these agencies (and I can only guess that the number of states signing on will grow), will allow a sharing of information about employee tax classifications. Now, this may seem harmless, but remember when you can operate a business in Los Angeles without a business license? Ten or fifteen years ago, one of the main ways L A City found you was to look at the business marques in buildings and cross-check them to the business license lists. Now, they get their information from Sacramento and individual tax return schedule C. All they do now is match the addresses to the individual tax return and send out penalty notices.
Employee tax classification databases may change the odds for those employers who are skirting the issue. The penalties could be stiff. Discuss your tax situation with your advisor before making any decisions.
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.
There are brilliant people that study for years to provide brilliant advice based on solid, empirical evidence. Then, there are others that just talk well.
Financing, Outsourcing And 7 Other Tips from an Expertby Shira Levine, touts the advice of two business women, Amy Abrams, and Adelaide Lancaster who are releasing a book in September based on 100 interviews of entrepreneurs.
The article sets forth the following advice:
You’re never finished with your homework
Really ask yourself what you want out of your business
Focus on what is meaningful to you vs. what you are passionate about
Figure out your business goals
Determine what to outsource
Find access to capital
Specialization is key
Now, I have not read the book. And based on these seven points, I probably won’t buy it. The reason is because these points don’t present a case that is no more than common sense. Business people do not need motivational speakers or cheerleaders. Instead, they need experience, knowledgeable and trained people to give them real advice of what, how, and when to do things.
To prove my point, if you were to buy this book, may I suggest that you spend an extra $50 and buy the following:
Good to Great by Jim Collins
Blue Ocean Strategy by W. Chan Kim and Renee’ Maugorgne
Predictable Success by Les McKeown
If you do not have the time or budget to read those, at least buy a smaller guide, Achieving Strategic Alignment by Barry MacKechanie.
Most of these books are critically acclaimed with sound business advice based on years of research by highly educated and experienced strategists. In these books, you will find recurring themes.
Compare what they say to Abrams/Adelaide book if you choose to buy it. Small business owners cannot hire the seasoned professional, but can learn from them through their writings. Business acumen has a price, but the inability to develop it has a much bigger price.
My college-aged son played “Satin Doll” with his jazz band in a local upscale restaurant last week. I turned to my wife and told her I played that song in a big band music group back in 1969. The 1953 Duke Ellington song is still timeless. But the same old tune doesn’t work for business startups.
The Digital Music News reported that nearly $15 million dollars was thrown at music startups in July bringing the year-to-date total to $143 million, Spotfly representing almost 1/4th of the total.
So far this year, about a half a dozen startup record companies have approached me to design a strategy and business plan for their new music venture. They always have the same plan: 360 deals, sign up and write for other bands, run on a shoestring budget.
I always reply, “So, what are you going to do different than the other companies, because their business models are broken.”
I always get a blank look because they only seek to do what others have done unsuccessfully before them. This of course allows me to do my Blue Ocean Strategy speach. I also thrown in my bad strategy caution.
A large componet that I stress to startups is that you must focus on your consumer. What is the consumer asking for? What are your competators giving the consumer that they don’t want? Are you able to create a strategy where you can extracate those things the consumer is not asking for and present a product or a service to the consumer that they are not getting from your competators?
Business consultants seem to produce the same framework for startups. To think like those who have come before you will not turn your startup into a resounding success. I am not saying that you should launch a startup based on some hairbrained scheme that you have not researched. No, instead, you should make informed decisions and take calculated risks with your startup.
In addition, don’t paint only a rosy picture of your startup, but present scenarios that show breakeven, normal, and pie-in-the-sky financial projections.
I worked with a plumber, Dan, when I was 15 years old. I learned some plumbing, but mostly I ran to his truck for tools and dug ditches…lots of ditches. Dan told me that I was good, but I wasn’t as good as “Speedy” from Big Springs, Texas. Speedy earned this ditch-digging title over all of the other plumber helpers.
One day, the boss bought a mechanical trencher. A trencher required one operator to walk behind it and guide it. Everybody wagered bets. Some on Speedy and the others on the trencher. Speedy was amazing digging a ditch along side the machine who worked at a steady pace. Speedy actually pulled a little ahead, until he had reached about twenty feet. Speedy started to lose steam, and slowly dropped farther and farther behind until the machine had reached the forty foot finish line, first.
This story parallels many situations in our new business economy. Of course, as a CPA/Planner I have seen this scenario in the world of business and in history, e.g., the steam locomotive, blacksmith, and prop-driven passenger aircraft. However, today’s new business economy has injected this phenonemon with steroids. Not only do you have to be ahead of your competition, you have to be ahead of your industry and any verticle industry that may steal your market share.
Take Apple for example. Twenty years ago when they were pushing the Macintosh, who would have guessed that they would now dominate not only the personal computer world with their ipad, but the music delivery system, itunes?
John Mariotti’s article, What’s Your Impossible Dream? tries to inspire business people to think big in whatever they do. He encourages people to do what they are good at, and what they love to do.
CPA/Planners take issue with motivational speakers. They seem to push people downhill but really give no guidance to where they are to go, and how they are to get there. That just won’t work in the new business economy because jobs are increasingly driven overseas, the wealth has been sucked into the top 5% of our population, and governments are being increasingly squeezed and cannot create jobs.
Looking at it from a planning perspective, I recommend Jim Collin’s books, Good to Great and Built to Last. Jim speaks of the three circles: Passion, economic denominator, and best in the world. In other words, do what you are passionate about, do something that can make money, and do something that you can be the best in the world at. The intersection of these circles should be your BHAG (“Big Hairy Audacious Goal”). In addition, keep your plan simple. Jim called it the “hedge hog” concept because the hedgehog was the best of doing just one thing to outsmart a fox.
Of course, as a CPA, I would suggest you quatify the economic aspect of this application.
The new business economy will require you to choose your path very carefully, but with all the elements above. To take the safe road may reduce you to the masses and risk whatever potential you have.
“Far better to date mighty things, to win glorious triumps, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows not victory, not defeat. –Theodore Roosevelt, 1899
I grew up in a family of small business people. It started with my grandparents who opened an Italian restaurant in 1949 with their four high school children. At that point, my grandfather would arrive at the restaurant at 4 am and make the pizza dough that would raise by 9 AM. However, at 6 AM he was at Terminal Island in Los Angeles building navy ships as an electrician. Several years later, he achieved financial independence in which he could retire from shipbuilding and work full time at the restaurant. The restaurant supported, in part, five more of his children, and a couple of dozen grandchildren who worked such jobs as pizza makers, waitresses, dishwashers, and parking lot attendants.
This memory of small business financial independence came to me when I read Nell Merlino’s article, Building a plan to achieve financial independence with your small business. Nell lists three good points: Recognize your worth, get a mentor or coach, and don’t fear math. But even with these, you will not achieve the small business financial independence if you are unable to delegate to others. The end result is that you will end up working 80 hours a week in a business that you cannot sell and dies when you die.
The book, The E Myth Revisited by Michael E Gerber will help you understand your “worth” by leveraging your talents in supervising others. Most small businesses cannot achieve financial independence if the owners perform all of the main functions themselves. It is very hard to grow your business in a predictable and productive way, if you are so concerned with the nuts and bolts of the operation. You must step back and train others. He states that you must transform your thinking from a technician’s perspective to an entrepreneurial perspective. For example, Michael distinguishes these views as, “The entrepreneurial perspective asks the question: ‘How must the business work?’ The technician’s perspective asks: ‘What work has to be done?'”
In most cases, if you choose a technician’s perspective, you will not achieve financial independence because you will have to solve every problem yourself. In addition, you will not be able to enjoy (or even go on) a vacation because you will be on the phone every day putting out fires from your vacation spot.
The most important goal this year should be your financial independence. Identify where you are in your business, where you want to be, and how will you get there.
As a CPA, I have categorized home-owner’s financial strategy into two categories over the last 32 years: One, the Depression Victim, and Two, the Leverage Junkie. The Depression Victim’s financial strategy is a person who has lived or heard about people living during the Great Depression of the 1930s. My mother is like that. The philosophy goes like this. You buy a house, and you pay it off, period…Sure, you can buy rental real estate, but don’t use your house as a piggy bank.
The other financial strategy extreme is the leverage junkie. Looking at them through my CPA glasses, I see that a person who holds that philosophy will buy a house, and then when it goes up in value, borrow against it to buy an other.
As you probably guessed, many people that lived by the second philosophy felt our latest economic downturn. Conversely, those that stuck by the first philosophy fared better.
But what if you take a middle road? You refinance a current mortgage? Jilian Mincer’s article, When Refinancing Doesn’t Make Sense looks at this financial strategy. CPA’s normally look at these topics from a very narrow point of view, but I act more as a financial strategist than a CPA to my clients, at times. For example, the authors state that to refinance at a low rate and accelerate your payments may be wrong, because you can earn 7% with the same money that you are saving 4.5% in mortgage payments. Really? In today’s volatile economy where States are going broke and the feds can’t control income, where are you going to find a stable 7% return with very little risk? My CPA clients that have this financial strategy mindset will not risk their money to that extent.
Now there is an exception to this point of view. I always suggest that my CPA clients save a few of months of liquid assets. It could be in savings, bonds, even precious metals, but something that you can tap into in an emergency. Why is this important? If you contact a serious illness, suffer an injury, or get laid off, you have a cushion to make a few months of rent or mortgage payments while you decide your next move.
I find that my position as a CPA gives me a very good view point at business and personal finances. The best advice I can give is to balance your thinking and prepare for economic downturns.
My grandfather left quite a legacy. He came from Italy as a boy to start a new life. He acted in and scripted silent movies, fought in WWI, tightrope walked between two eight story buildings (without a net) over a busy Chicago street, helped build navy ships as an electrician during WWII, and founded a successful restaurant with his wife and nine kids.
His success in the variety of endevours is grounded in one quality: creativity. Creativity is a right-brain function, natural to some and alien to others. Should all brain-storming teams have a business strategist who has this trait?
Coyne and Coyne’s article, Seven Steps to Better Brainstorming, tries to quantify this concept with a set of rules that can build business strategists within a group. Their article states that brain-storming sessions should proceed in seven steps:
Know your organization’s decision-making criteria
Ask the right questions
Choose the right people
Divide and conquer
On your mark, get set, and go!
Wrap it up
Follow up quickly
At first, I thought that maybe step 3 would meet the need for a creative strategist. But, to my disappointment, they only categorized the “right” person as one who knows answers to questions that are asked about the operations.
Still, any strategy that quantifies brainstorming raises an eyebrow. You cannot quantify creativity, and thus create a business strategist. However, the article intriged me because it referred to another article, Sparking creativity in teams: An executive guide. Ahh, I said, here is a place where the authors are referencing the important creative person, maybe thebusiness strategist. Then I read the first sentence:
“Although creativity is often considered a trait of the privileged few, any individual or team can become more creative—better able to generate the breakthroughs that stimulate growth and performance.”
This opening sentence conjured up a new term in my head, Debabbitting. Debabbitting is any company process that aims to enhance creativity by forcing people into uncomfortable situations. But, in a business strategy session, people are most comfortable with what they know, and their usual approach to problems. In the classic Sinclair Lewis’s book Babbitt, George F. Babbitt, a mid-level company man, grew very uncomfortable when he tried to change his mundane outlook and style of life.
Now, don’t get me wrong, everyone has their special gifts. Most people are creative in certain circumstances. But, not anyone is creative in all circumstances. Take for example, a friend of mine who is a mechanical engineer. His forte is finding solutions to problems. He regularly uses creativity to find solutions to fix the problems. Yet, if you were to ask him to brainstorm outside of his element, he would struggle.
Les McKeown, author of Predictable Success, hit this point in his presentation at an Association for Strategic Planning–Los Angeles event. He spoke of his forth coming book, The Strategist–Leading Your Team to Predictable Success. At the meeting, Les described the different personalities in a business: The Operationalist (“O”), The Visionary (“V”), and the Processor (“P”). “O” is the person who solves problems, “P” does not solve problems, but will write a manual about it, and “V” is our creative person who doesn’t solve problems, and many times creates them. Though all of these roles are necessary, they conflict with each other. Therefore, Les introduced the “S”, the Synergist. The Synergist is the glue that brings all of the others together to arrive at solutions. I have find Les’s book more plausible then trying to conjeur people’s creativity. In fact, I would venture to rename the “S” as the Strategist, (the Business Strategist) because that person must strategize on how to bring all of the players together.
At first glance, you may argue that the business strategist is Les’s “visionary.” However, when you work in complimenting (and conflicting teams), you are creating a business strategist’s network, not individual. I believe Les said the roles are not cut and dry, but it seems to me that once you identify the gifts and each person’s own brand of creativity, the brainstorming session can evolve naturally.
So, how do you resist the temptation to Debabbit? First of all, you have to know your players, and their abilities. And second, you must use each person in such a way in which the process maximizes each person’s strengths. And finally, you must lead from the front by example to show the team how it can (and will) work towards a common goal.
Last January, I again participated on the planning committee for the 2011 Entertainment Industry Conference for CPAs and attorneys. We agreed on most of the usual topics to be presented at the conference. Then, I suggested social networking. The idea was written on the board.
I couldn’t believe it. Well, actually I could, but I didn’t want to. 
It’s always good to practice the basics, like a major league baseball player who may work on his swing by hitting a ball off a tee. So here I am going back to the IRS tax site to remind small business owners of the Tax Relief Act of 2010. There may be benefits that you may be missing.
My grandfather was Alfano the Great. In the 1920’s he walked between 2 eight story buildings with no net. In addition, he walked on his hands, rode a bicycle and did wheelies. All for a few bucks. Obviously, he never fell, or I wouldn’t be here.
