top CPA firms Los angeles Archives | Page 7 of 11

Healthcare Reform: If It Walks Like a Duck and Quacks Like a Duck…We’ll Call it a Toad

I just returned from a great informative panel on healthcare reform presented the by the LA chapter of the Association of Strategic Planning. I was surprised to learn that many large and smaller companies are trying to use the independent contractor designation to reduce healthcare benefits for employees. I wrote about a similar topic in the National Healthcare Reform Magazine back in August. My article warned employers about the misclassification of an employee, and how it could sabotage their tax credit.

What I didn’t think of, were companies intentionally trying to circumvent the tax laws in order to save healthcare insurance. This can be very risky. The IRS is no stranger to businesses trying to reclassify employees as independent contractors in order to save payroll taxes. The rules are complex and employee definitions differ from state to state. However, I tell clients that if you tell your “contractor” how to do his/her job, you run the risk of the person being classified as an employee(thunbnail definition.)

Now, I can imagine these companies trying to align themselves with the Fedex case where the U S District Court ruled the drivers as independent contractors instead of employees. But now the risks involved in this aggressive stance is not only healthcare insurance penalties, but payroll taxes, and workers’ compensation issues(not to mention labor law issues.)

Be very careful when classifying those who work for you. A tax professional may be your best friend in keeping you out of “fowl” play.

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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.

Business Plans: Some Tips to Financing Your Own Business (or How to Waterski)

When I was nine years old, I learned to water ski. My uncle and aunt (Jim and Eva Smith) owned a boat. My cousins were already skiing on two skis, so in Lake Isabella, California, my time had come. My uncle did some “dry runs” on the sand (in order for me to experience the “feel”) by pulling me up, by hand, with a ski rope. Then came time for the boat. Nothing could have prepared me for a high horse power outboard motor. My first half dozen attempts were “face-plants.” The next half dozen were “butt-plants.” I was getting discouraged and embarrassed. But my uncle didn’t flinch. He said he had all day and would stick with me until I got up. And finally, around the fifteenth attempt, I made it. Oh, not for long, for at least 50 yards. What a feeling. After that, I moved into the groove over the years, and eventually graduated to one ski, carving my temporary signature outside the boat’s wake like the others.

The AMEX forum article How to Raise Capital For Your Business reminded me of this experience. Our firm is frequently approached by entrepreneurs to prepare a business plan for their investors. The article breaks out the type of investors for a business plan and at what stage they may enter into your future.

Friends, families, and fools: The initial idea stage, the label says the rest.
Vendor financing: Acquire the product, sell it, then pay for it. You’ll need to create a strategic relationship with vendors who believe in you, and sell on consignment. This is done in the art world
Bootstrap: Well, if you have the money to risk, but it is always better to risk other’s money.
Venture capitalists: For others to invest, you have to show, in your business plan, that you have risked your own resources. Also, you will impress them if you manage some level of success on such meager self-financing. Never present a business plan that pays yourself back before the investors.
Partner: If there is another business who could be a stakeholder, they may want to risk a little with you.

In order to develop a credible business plan, you must be conservative and have some foundation for your numbers. One such idea is to use another business (or business plan) that is similar, and mirror its sales and profit. Usually, that is hard to come by, so you would have to make some assumptions in your business plan notes. Tell investors what your break-even point is, show them your first year’s monthly cash flow, and most of all, show them when and how much they will get paid.

In my water skiing overature, I had all the components of a new business plan:

I invested my own time and humility.
I was determined to succeed.
My uncle believed in me and invested his time and boat in my dream.
I didn’t have unreasonable expectations.
My uncle understood his investment in me, and the time needed to reach success.

Business plans are just a start, not a finished product. But, if you have all the business plan components, your credibility and investor comfort level rise.

Business Security Leaks: Here’s Another Hole in the Dam to Plug

We only have ten fingers, so how can we keep plugging potential security leaks in business and personal information? See the Phone security article that speaks about the police’s right to search your phone. That doesn’t bother me, as a CPA, unless it is illegal to write business articles. What bothers me is first, we had the lost laptop scare, then the forgotten thumb-drive, now the lost phone. All of which can compromise proprietary and personal information.

But let me tell you how carelessness can make you lose your lunch. 25 years ago, I was assigned as the business manager to a top entertainment executive. He was a volitle man and told me why he left one of the big CPA firms for us. His story started with an IRS audit in which a CPA of the big accounting firm representing him. The night of the audit, the client received a phone call from a stranger saying that the stranger had found some tax files in a phone booth. As you might have guessed, the big firm CPA stopped to make a phone call (before cell phones) after meeting with the IRS, and left his client’s tax files in the phone booth.

“Slip of mind” stories are somewhat common in the business world, but the gravity of the situation depends on the quantity and access to the information.

Now here is a 21st century FICTIONAL story on how something like this could have serious consequences. Let’s say a person uses their Ipad to conduct business that deals with personal financial information. The Ipad, the apps, all are used in this person’s business. That day, he leaves the Ipadat a restaurant. The Ipad is never to be seen again. All of the information will be at risk of being compromised.

And what about the text messages? The police, and anyone else, can read your undeleted text messages that may contain financial information.

One thing that I do with my clients is use multiple platforms. For example, if I open up an online bank account, I e-mail them the link to the bank. I do not include the email or user number. Next, I text message the user and password without any indication what they are for. I ask them to erase everything they receive from me as an extra precaution.

Another strategy our CPA firm practices is to process information in a paperless environment. This way, there is no loss of paper. Your paperless files must be secure, though. In regards to your business, you may consider going the “paperless route.” It could save you a lot of problems.

So security breaches can be made by your CPA, attorney, doctor, bookkeeper, financial advisor. Be aware of that when you look to engage one of these professionals.

When Standard Business Principles are Not a Clear Strategy

The standard business principles that your grandpa taught you 30 years ago, may not all apply to in today’s Internet environment. Take the Indie Connect Magazine article 10 Business Principles. Some of these principles may be stale in today’s business strategy. Here are some examples:

The Law of Supply and Demand The article explained that if there nobody wants your product or service, you can’t sell it to them. This may be fine for the corner fruit stand, but not when you have a world at your fingertips…In the old school of business, you were restricted to a geographic location by your resources. Today, at the time I am writing this blog, there has been over 2 1/2 billion google searches (See World Metersat the time you are reading this.) This means that if you develop a proper Internet strategy, you can attract a substantial market somewherein the world. Demand can be misleading in the Internet, because of the sheer numbers of individuals that are available to find you. You can almost sell anything to anyone, even if the demand seems absent.
You Spend Money to Make Money I can’t think of another principle that has been shattered by the Internet. 30 years ago, a local business person may have placed $1,000s of dollars of Yellow Pages ads in different cities to get the attention of hundreds of people. Today, if you spend mor time than money in establishing your product on the Internet, you can be successful. The one who wisely spends money in these slim economic ties, will be the one who will go the length.
Every industry has its own set of ‘best practices’ Yes, but these best practices may be a crutch that forces you to swim in a red ocean instead of a blue ocean where competition becomes irrelevant. You become a commodity. (See Blue Ocean Strategy article). To be successful, you have to examine what your customer is looking for from the industry, not what your industry is delivering to the customer. Sometimes, they can be very different.

Read the other priciples listed in the article, but look at them through the eyes of one in the 21st century.

The Band “Kiss” FaceBook and Twitter Strategy Case Study…Old School

Chances are, if you are reading this article, it is because you found the link on a social network like Facebook and Twitter. However, the strategy dicussed in the following article will probably be obsolete within a year…bummer. Music Think Tank published a cool article How to use Facebook and Twitter on your Official Website using “Kiss” as their case study in using such social networks.

However, there is a major point that I disagree in the author’s strategy. He set up Kiss’s Facebook with the idea to bring everyone back to Kiss’s web page. That is old school. Today, if you want to impress people with your skills and knowledge, you link everything to your BLOG. And that blog should be a page on your web site.

Why? You link people to your blog to demonstrate your knowledge in a specific area. Web pages are stagnant and not very interesting. Blogs are dynamic and informative. Secondly, just as I am trying to demonstrate in this blog, the blog topic should give the user free information.

Now, maybe a band, or an artist may not have anything to write in a blog, and their official web site is good enough. But not for the rest of us. You are an expert in something. Share it with others and build relationships.

Are You Brave Enough to Cannibalize Your Business in Order to Save it?

I love it when companies shape a strategy in order to save themselves. Usually, when companies make drastic changes they usually just downsize(e.g., lay off the receptionist and the file clerk.) This was a common story in 2010. But not for The Atlantic. Gigaom recaps the resurrection of the Atlantic after it had not showed a profit for over a decade. In 2010, The Atlantic implemented a revolutionary strategy that resulted in a $2 million profit. I will not repeat the article but outline some ideas that you can take to your business.

Be an industry leader, not a follower. (see my previous blog on Looking in the Rear View Mirror).
Make a cash flow budget over the next year, but don’t use that as a strategy. It should only aid your tactics to stay in business until you execute your new strategy. If you are a business in the black, make one anyway. It may help you run more efficiently.
Investigate the concept of shifting some of your operations from a brick and mortar business to a viral business. For example, if you own a restaurant, at first glance, you may not see any opportunity to avoid the brick and motor business because you need a place for your customers to sit. However, have you thought of packaging meals for web orders? This strategy may only account for 15% of your business, but it could have a 20% higher net profit return. There are many options.
Review your target customer. Are you meeting their real needs, or you just trying to sell them what is most profitable for you? Do you need to target a new clientele? A good example of this is the Five Crowns Restaurant in Corona del Mar. The restaurant was established in 1965 and has catered to an older clientele. About 2 years ago, they allocated a portion of their restaurant with a seperate entrance called The Side Door. This pub-style, fun-loving division has been popular with the younger crowd.
Adjust your operations to your strategy, not your strategy to your operations.

In these difficult times, there are still opportunities for those who dare to take the initiative.

Finance Your Business with your Future Income? Ask the US Government, they Do It All of the Time

So, you have a business plan and you are looking for financing? But the banks want nothing to do with you. Hey, what about your nice steady income of royalties? Ya, that’s the ticket! So, you jump to the Wall Street Journal and read the article on how others are doing it. Yes, you can do it! You can sacrifice your royalty income as collateral for the loan.

So, you meet with a company that specializes in this and they offer $7 million @ 14% interest, plus a stock option and 2% of your incremental revenue. Why not? The US Government are using future income to finance current debt.

As a preparer of strategic plans and business plans, I initially see a potential problem in this story. And that is the decision-maker is emotionally involved in starting the company, but is considering sacrificing secure income for a speculative one. Considering the success rate of new businesses, the downside is not a pretty picture.

Compare this to venture capital, where the business owner is giving away a large chunk of the business. In this second option, the risk is spread among a number of companies or individuals, the reward is smaller, but in a worst case, the business owner can still rely on the royalty income if the whole venture crashes.

Business owners always have to look at the downside of any decision to measure the risk. In addition they should have someone who is not emotionally involved that can give them a straight answer.

So, what should you do? Well, one thing to consider is, to do both. Take in some venture capital, sacrifice a little royalty income, and give away a smaller amount of equity. This way, your upside is not as large, but your downside is protected. Every deal is different, but don’t forget to measure your personal risk when deciding which avenue to take.

The New Tax Bill, Don’t Squander the Opportunity

By now, you must have heard that the new tax bill passed both houses and is sure to be signed by the President. But what opportunities does the new tax bill have for you? Well, from a tax standpoint it depends. The impact of the tax bill is different for individuals depending on their tax bracket. For example, if you have children and are not in the top tax bracket, you may still qualify under the new tax bill for your $1,000 child tax credit. Or, if invest a lot in stocks, the new tax bill will allow you to still get your qualified dividends taxed a favorable 15% tax rate. But the main impact of the new tax bill that will affect all taxpayers is the reduction in social security withholdings. I don’t recall Congress passing a tax bill like this in the 30 plus years I have been preparing tax returns.

However, since the tax bill is throwing social security gift to you, you have an opportunity for some cash flow or retirement planning. You can start 2011 by paying down the credit cards that have accumulated over this economic downturn with your extra cash. Likewise, you can increase your retirement contributions by your savings. The trick in cash flow is to live within your means, and if you are not careful, you may squander your tax bill savings. Opportunities like this do not come along often, so use it to your advantage by planning.

Discuss your situation with your tax professional before making any decisions.

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Are there Too Many People Between You and Your Fans(or Clients)?

I stumbled across this article, There’s No Long Tail on Hypebot.com. The article mostly bored me until I got to the last paragraph regarding business. It stated, “The way the [music] industry is structured today there are too many people and organizations between the artist and the fan, which has the result of increasing the numbers of marginal businesses where the income is spread too thinly.”

Though this may be true in many cases, in the internet business world of today, the concept of the middle man is going the way of the cassett tape. Back in the 1980’s a band needed a record company (consisting of an army of persons), a promoter, a personal manager, a business manager, a tour manager, a publicist, etc., just to have a chance of being heard by their fans. A frustrating thought, unless you compare the record business to my father’s day in the 1950’s. He (Bobby Norris) signed as a Rockabilly vocalist with Capitol Records, and couldn’t even get substantial airplay without paying the stations “payolla.” (Ironically, today, eight years after his death, his records are in a Capitol Records Rockabilly album, and are playing, and sold on the internet.)

The way of the middle man, as we know it will deminish in some business industries (like music), and surface in other business industries like mobile apps. In regards to your business and industry, what role will a middle man play? Social networking and search engine optomization(SEO) has played an important role, but will the SEO business industry be edged out as more people use their apps to find information (like Yelp!) instead of Google?

So, what should you do? First, in your industry, take a step back and see what your fanbase or customer is looking for? Are they looking for more fireworks on stage like KISS, or a band that can act as a bellweather, like the Beatles, in a changing culture? Are you just following the pack, or is there another way to get to your fan (or clients) that others have not addressed. Don’t follow the flow. Have the flow follow you. Second, find your blue ocean and make your competition irrelevant.

Is Your Viral Strategy Becoming Obsolete?

A little while ago, I wrote an blog that borrowed a quote from from Wayne Gretsky, who said he is successful because he skated to where the puck was going to be, not where was is at. Now, a recent study makes a claim that can affect every business that uses Search Engine Optimization methods. Currently, businesses use various methods to increase their visability on search engines. Some of these tactics include the expensive “pay-per-click.”

The article, Consumers under 35 Ditching Browsers for Apps, disusses a recent study that millennials choose mobile apps over search engines. However, before you fire your SEO consultant, read the article closely. The survey question was not asked properly to arrive at this conclusion.

Still, notwithstanding the article’s basic point, there is a bellwether here. In certain situations, the Mobile App may be the only viable tool for web search. When you are looking for a Starbucks in the car, would you use Yelp! or Google? Most mobile app users I know, at any age, use Yelp! To use Google is way too long and less refined for the area you are searching. This example can be replicated for many situations. The real question is, whether your tactics have been adjusted in light of it. How can your viral strategic plan be implemented as the consumer habits change? Strategic Planning is a circular process. Quantitative results will play a major role (Sales, profit, customer increases), but they must be looked at in context of your strategy, and the every changing landscape.