Saturday, December 15, 2007

Is Your Business Ready for the New Year?

This article was written by Carl Woodard, SCORE Orange County Second Vice Chairman

With the new year just around the corner, does your list of resolutions sound like this? 1. Clean out the garage 2. Get more exercise …etc., Setting goals is a great idea, but when was the last time you applied the same process beyond your personal life?

Here’s an idea. Consider preparing a list of resolutions for your business! I’ll bet that there are some areas that need cleaning out, dusting off and getting a bit more exercise in 2008. And, you probably know what they are.

Pull out your Business Plan. Did you reach those sales goals that you worked for this year? How is your Cash Flow? Has a new competitor arrived that you did not anticipate? Has that affected your profit margin because you stepped up your advertising and ran two more promotions? By the way, what is your margin? And, have costs caused your breakeven point to move higher than it should? It’s probably time to grab a pen and get your ideas on paper!

While it is always a good idea to revise your Business and Marketing Plans regularly, don’t let that major effort delay putting a few simple, but often overlooked, ideas to work as soon as the clock strikes midnight and the football games are over….well, perhaps you shouldn’t wait that long!

Let’s pick just a few simple ones for starters:

  1. First, find a meaningful way to make your product or service stand out from the competition. You want to be top-of-mind when your customer needs what you offer.
  2. Second, make a detailed list of potential customers to contact as early in the year as possible. Contact them by telephone, an introductory letter or, perhaps, in person.
  3. Next, remember to thank your current customers, regularly. That doesn’t require an expensive gift. Try a phone call or a personal hand-written note to deliver a sincere “Thank you”.
  4. Can you expand your services, or product line, to serve your current customers better? And, since they buy from you now, why not ask them for a referral?
  5. Review recent promotion methods to see if they need improvement. After a while, some methods become stale.

That should start the year rolling with a positive approach. And when you make your list of things to do, remember to contact any of us at SCORE Orange County to help you with your Business Plan, Marketing, Finance or Sales questions or to just discuss general business management with you. Plan to attend our workshops, which are conveniently offered throughout the area, and come to our Women in Business breakfast meetings.

We can be reached at 714-550-7369 to set a convenient appointment or we can be contacted at www.score114.org. We have approximately 100 experienced counselors waiting to help you.

Have a successful New Year

Up to $5,000 of Start Up Costs Can Now be Deducted

This article was written by Dick Ginnaty, CPA

Start up costs are costs incurred prior to actively operating a business and include such activities as analysis of potential markets or products, travel or other costs to secure prospective distributors, suppliers or customers, and includes professional fees incurred to form a corporation, partnership or limited liability company.

Historically these costs were capitalized and either not deductible until the business ended or were written off over a 60 month period, 1/60 of the cost per month. Under current law if the starts up costs are less than $50,000 then $5,000 can be written off immediately. Any remaining costs are written off under the old rules, 1/60th of the costs each month for 60 months.

Start up costs for purchasing an existing business are also subject to the fast write off rules but they include only the investigative costs incurred in the course of the search.

Costs of issuing and selling stock or costs of transferring assets to a corporation are not included in start up costs for this purpose. Nor are syndication fees, or costs of making a contract between a partnership (or LLC) and the partners regarding operation of the business.

Good luck and here’s hoping it “all adds up” for you.

(If there is any area in accounting or tax that you think needs to be addressed in this newsletter please e-mail Dick at Ginnatycpa@aol.com and if it is of general interest, he will address it in future articles).

To Achieve Greater Business Success, Unlock Your Employees

This article was written by Hillel Pitlik, SCORE Orange County Management Counselor

Traditionally, business organizations establish a hierarchical structure of supervision. Unfortunately, this method can cause the organization to act in a fragmented manner where ideas are suppressed and cooperation is thwarted.

In many cases, problems which arise in everyday activities are left unsolved because the responsibility chain is not clearly defined. I’m reminded of a visit to China when a faucet in our hotel bathroom was not functioning. We called the desk and they sent a plumber to fix it. We asked him, “Why the cleaning personnel had not found the problem and reported it?” He replied, “That isn’t their job.” Unfortunately, this happens in our organizations much too often.

While your organization has specific goals – never underestimate how much your employees can contribute to greater success. It is the objective of good management to harness the power and ingenuity of the people.

The basic question to be addressed is. “How do you get all the employees pushing in the same direction while keeping their eyes out for problems?” Today’s mantra for such an organizational fabric is “Teaming”.

It’s important and vital to any business because it is your people who best understand the nature of the problems they face in their every day activities, and they are almost always the one’s best able to devise workable solutions. A methodology that encourages these ideas is the one that will best serve the total enterprise.

Teaming is based on the premise that the whole is stronger than the sum of its parts. Each individual has something to contribute and taken together success is more frequently assured. A simple example that comes to mind is a small manufacturing business that has lost a key manager. The documentation for the products of the company was largely in the head of this key manager. The workers in the shop had been there as long as the manager. There was a critical need to recapture the lost information. By empowering the working team that had the equivalent knowledge, the business was able to survive this information loss. In fact, the resulting documentation incorporated many improvements that the individual employees had introduced on their own. By engaging the team, the efficiency and productivity of the organization improved substantially, because the workers were not just automatons but part of the entire process.

In addition to solving problems, the team can establish goals for productivity that become a commitment and thus the team’s success is a group objective that has a higher probability of being achieved. The best team structure demands that the team supervisor is part of the team. The supervisor is there to make sure that the resources the team needs for success are provided in a timely manner as well as working in the team to assure success.

Think TEAM and your business will flourish beyond your expectations. Your employees will be happier and you will realize the business success that a good enterprise deserves.

Help Needed

This article was written by Bern Lefson, SCORE Orange County Management Counselor

It’s that time of year when owners gear up for extra temporary help. Finding good help is always challenging. Here are some tried and true tips to make finding good help.

  • Hire only those people you would want all year round. If you wouldn't hire them for full time positions, don't consider them for temporary holiday help. Remember poor or incompetent service will not ring the cash register.
  • Use the message that gets you the help you need. Use words or terms that attract the serious applicant. Using words that attract those just looking for an extra buck is a mistake. Use your imagination to post eye-catching posters or fliers in places where your type of applicant will see them.
  • Recruit wherever you are. Put creative messages on back of business cards and give them out to everyone who provides you with good service. Don't forget to include your employees. When you hire someone referred by your employee, give a cash referral bonus or paid time off after the holiday rush has ended.
  • Hire with the longer view in mind. Good seasonal employees when treated well will be available when full time openings arise or for the next holiday season

Following these concepts will take the hassle out hiring employees.

Thursday, November 15, 2007

Marketing Your Business: is it time for you to go on-line?

This article was written by Ben McCulloch, SCORE Orange County Vice Chairman

Measured by what’s being spent, it seems like everyone is doing it. Spending on on-line advertising has surged 60% to nearly $10 billion, while ‘off-line’ advertising is decreasing (according to Fortune Small Business, July 1, 2007). If you don’t already have a ‘web presence’, should you? And, if you do, is what you’re spending resulting in higher sales?

The lure – the web’s potential reach and impact – seems clear: the e-marketplace is as much local as it is worldwide, and it’s ‘always on’. As with any marketing activity, your e-marketing goal is to satisfy a customer’s need. Though this medium may be different, your first challenge is their awareness that you exist.

Can you even be found?

Awareness begins with presence which, of course, requires a website. But, the customer must be able to discover you without specifically looking for you. Using ‘off-line’ marketing tools, such as the yellow pages, the customer looks within given categories. You must choose which categories to be listed.

While fixed ‘yellow pages’ types of listings can be found on the web, most customers search using a web browser and a few key words. Instead of a fixed list, each customer defines the ‘category’ that makes the most sense to them; your challenge greatly increases: you must anticipate – and match – how your customers will describe their need. Clearly, your choice of the keywords that describe your website is of huge importance. A ‘match’ – even a partial one – between the customer’s keywords and yours means you can be found.

But, will you be noticed?

A web search of ‘web marketing’ using the popular search engine, Google, returns 402 million websites matching these keyword criteria; at ten results displayed per page, that’s a lot of pages to view. Studies show that web searchers, on average, do not look beyond the third page of results. If so, to be noticed, you need to be among the first 30 results. Page ‘ranking’ is a process totally controlled by the search engine, in this case, Google.

How search engines rank individual web sites is a well-guarded secret. However, it is widely believed that, among the possible ranking factors, the frequency that a web site is mentioned or linked-to by another web site is the most influential. The search engines determine these frequencies through continuous assessment of the entire web; as your site is increasingly mentioned or linked-to, your rank should rise. So, to stand out from among others whose keywords also match the customer’s, a high ‘page rank’ is crucial.

Will they look? More importantly, will they stay?

You’ve made the cut. Now you must convert a web searcher into a visitor by compelling the potential customer to click on your web site. Your original choice of web domain name plays a factor; obscure names may confuse the prospect and cause them to proceed to a site that is more recognizable.

The average visitor stays at a web site for just a few seconds before clicking the ‘back’ button. Getting visitors to stay at your web site longer involves your product and message, and how they are presented on your site. Once they have landed on your page, web site design – appearance and navigability – becomes a critical factor in keeping visitors aboard, and potentially converting them into customers.

A new set of tools to conquer a new marketplace

E-marketing involves new technologies, new unknowns, and new decisions to be made. Fortunately, strategies and tools have evolved to guide a credible web presence and monitor its effectiveness. Included are terms you may have already heard or seen: ‘natural (or organic) keyword search’, ‘paid keyword search’, ‘search engine optimization’, ‘pay-per-click’, and ‘web analytics’, for example.

If it is time for you to go on-line, or just to learn more about the strategies and tools that you can use, arrange a session with a SCORE counselor or attend one of our ‘Internet Marketing’ workshops. We hope to see you there, and to visit your site sometime soon.

The Lease Clause Worth Paying For

This article was written by Dick Ginnaty, CPA

For a lot of businesses the biggest dollar commitment made at the start of the business (and periodically thereafter) is the lease that is signed. A $1,500 per month lease for five years means you are making a $90,000 commitment usually guaranteed personally by the owners of the business. In my experience, the lease commitments are one of the biggest reasons for bankruptcy, and it may be avoidable if the lease clause and considerations described below get negotiated and included in the lease.

It is very, very difficult to feel absolutely secure when committing to a long term lease in the startup of a business. Too many things can happen that may make the leasing decision the wrong one. Owners can get sick and can’t continue with the business. The partnership breaks up. The nature of the business changes. The location’s traffic isn’t right. Spouses change jobs and locales. Divorce happens. Anyone of these events can make the lease a financial albatross.

What’s the solution? First, only commit to the least timeframe possible (get a two year lease with a three year option vs. a five year lease). Remember options don’t cost you but give you the right to continue in the space. Second, document the promises or assumptions made by the management company (i.e. the big anchor store will stay, or will move in, no competing store will be allowed to lease space in the building or center etc.). Third, negotiate a cap on all aspects of the rent (base rent, annual increases, common area charges, property tax increases etc) and finally, try to negotiate the inclusion of an escape clause.

An escape clause is a clause that says the lease will terminate early if certain pre-defined events happen. One event that can and does happen is death of the owner. Negotiate that the lease will end a set number of months after the event. There is nothing more tragic than the remaining family facing a long term lease obligation after the breadwinner is gone.

Be realistic in the negotiations. The landlord needs time to re-lease the space and it needs to be ready for renting before they can market the space. Having said that, it is hard to imagine that six months of rent (perhaps paid when the escape clause is exercised and the space is vacant and returned to leasable condition) would not be reasonable. To incentivize the landlord (or management company) to consider your requested clause, I would wait until all else is negotiated and agreed upon, to ask for the escape clause, and I would offer them a few cents more per month (or a reduction in the tenant improvement allowance) for the flexibility. The more events that would trigger the escape clause (i.e. the greater the flexibility on your part), the greater the incentives that will probably be required.

Always remember to calculate what you are offering. A reduction of the tenant allowance of $3,000 over a five year lease amounts to a 5 cent increase per month to the landlord on a 1,000 square foot lease.

Good luck and here’s hoping it “all adds up” for you.

(If there is any area in accounting or tax that you think needs to be addressed in this newsletter please e-mail Dick at Ginnatycpa@aol.com and if it is of general interest, he will address it in future articles).

The Employee Retention Challenge

This article was written by Bern Lefson, SCORE Orange County Management Counselor

“I just lost my best performing employee and I don’t know why?” Does this question resonate with you; if so, join the many who struggle with this issue.

Companies spend a great deal of time and money recruiting and training employees, and the cost of replacing staff members lost through turnover is great. The monetary cost of replacing one employee is generally estimated to range from 50 percent to 200 percent of the annual salary for the position, and may even be higher in very specialized fields. Additionally, poor employee retention can have a negative impact on workplace productivity, job satisfaction, and overall morale.

In order to figure out how to improve employee retention, employers need to first identify the reasons for turnover. It’s important to realize that some turnover is inevitable. It’s natural for some employees to choose to pursue different career paths for a variety of different reasons. When turnover is excessive, however, employee retention problems may be a symptom of a larger problem that exists within the organization.

There are some common reasons why employees leave. One of the most common is feeling unappreciated. Managers who want to keep their best employees are well advised to recognize employees both for outstanding accomplishments and consistent, on-target performance. As is said time and again; “people don’t leave jobs, they leave supervisors.” Other common reasons include:

  • Concern regarding promotion opportunities.
  • Harassment concerns
  • Misunderstanding about job performance expectations
  • Personality conflicts among peers and/or supervisors
  • Perceived lack of appreciation for employee.
  • Supervisors in need of managerial training
  • Workforce morale problems

Some innovative benefits programs that are gaining favor in today’s workplace and can have a positive impact on retention include:

  • Flextime so that employees may better juggle the stresses between work and their life
  • Training opportunities so that employees feel appreciated and valued. This also aids in keeping employee skills current and marketable

Managers who recognize the importance of taking proactive steps toward keeping their best people motivated and satisfied can have a positive impact on employee retention. They can begin by evaluating their own management styles, and taking steps to make sure that all employees feel appreciated.

Additionally, managers focused on learning how to deal with turnover problems should encourage their companies to implement an exit interview program if one does not already exist. The results of exit interviews need to be evaluated on an ongoing basis, to identify patterns of organizational behavior that need to be corrected.

Getting Disaster Help from the SBA

What You Need to Know About Disaster Assistance

  • If you are a homeowner or renter, FEMA may refer you to SBA. SBA disaster loans are the primary source of money to pay for repair or replacement costs not fully covered by insurance or other compensation.
  • SBA offers low-interest disaster loans to homeowners, renters, businesses of all sizes and private non-profit organizations.
  • Homeowners may borrow up to $200,000 to repair or replace their primary residence.
  • Homeowners and renters may borrow up to $40,000 to replace personal property.
  • Businesses may borrow up to $1.5 million for any combination of property damage or economic injury.
  • SBA offers low-interest working capital loans (called Economic Injury Disaster Loans) to small businesses having difficulty meeting obligations as a result of the disaster.

What You Need To Do

  • Homeowners and renters must begin by registering with FEMA. If you haven’t already done so, call (800) 621-3362.
  • Homeowners and renters who receive a disaster loan application should complete and return it to SBA, even if they are not sure if they will need or want a loan. If SBA cannot approve your application, in most cases they refer you to FEMA’s Other Needs Assistance (ONA) program for possible additional assistance.
  • All businesses should register with FEMA.

Contact SBA

  • SBA representatives will be at all federal/state Disaster Recovery Centers (DRC). Call the SBA at (800) 659­2955 for information on DRC openings, hours of operation and locations.
  • Submit your completed application by visiting the SBA desk at any local Disaster Recovery Center (DRC), or by mailing it to: SBA, 14925 Kingsport Rd., Ft. Worth, TX 76155. For additional information visit our website at www.sba.gov/services/disasterassistance .

Monday, October 15, 2007

401 K’s are available for the one person business (Sole Proprietor, Corporation or LLC) and should be considered

This article was written by Dick Ginnaty, CPA

Since 2002 the big corporation benefit of the 401 K contribution has been available to the one person sole proprietorship, or single employee corporation, or single member LLC. For 2007, the maximum contribution to the plans including the Company’s portion (up to 25% of compensation) for those earning $50,000 is $24,794 for the self employed, and $28,000 for corporate owner/employees. If the person is over 50 then another $5,000 can be contributed. That’s a big contribution in anybodies language.

The plans have to be established before year end to qualify (employee contributions have to be deducted from their pay) but the employer contribution can be deferred until filing of the entity’s tax return.

Be aware that there are some administrative expenses which should be investigated before committing to the plan but they should be fairly nominal. Specifically, once the plan assets exceed $250,000 the plan has to file a tax return (a form 5500).

A couple of additional features of the 401K plan make it more appealing than some of the other retirement plan options (IRAs, or Simple IRAs). As a 401 K plan, you can rollover balances from other retirement plans to the 401 K and you can set up a “loan” option on the 401 K balance. Under the loan option, you can borrow up to $50,000 from your 401 K plan (limited to 50% of the balance in the plan).

Also, if you employ your spouse, further contributions can be made on their behalf.

The plan works for partnerships or multiple member LLCs or multiple shareholder corporations as long as all the “employees’ of the entity are the owners or owner’s spouses.

401K’s can be a big help in reducing your current tax bite, so keep them in mind.

Good luck and here’s hoping it “all adds up” for you.

(If there is any area in accounting or tax that you think needs to be addressed in this newsletter please e-mail Dick at Ginnatycpa@aol.com and if it is of general interest, he will address it in future articles).

Test Drive Your New Employees

This article was written by Bern Lefson, SCORE Orange County Management Counselor

Wouldn’t it be wonderful to check out new hires just as would a new car by taking them out for a test drive? Well, it can be done.

In California, employees are presumed to be “at will” which means that employees may be terminated for any reason, so long as it is not illegal. Unless of course, you have employees that work under an employment contract who can then only be terminated for reasons specified in the contract. So, you will generally want to make sure that you do not agree verbally or in writing to limit in some way your power to terminate “at will.” And, you could benefit from including in any employment offer letters a statement that makes it clear that the employment relationship is “at will”.

To enable “new hires” to become as productive as quickly as possible, the initial weeks of their employment can be an important time for managers to ensure that they fully understand their work expectations and the organizational norms. Also, during this time, both the employer and employee have a chance to evaluate each other to determine if this is a good fit for both.

For the employer this is a superb time to evaluate the new hire. To garner the most and best out of this period make certain you do the following:

  • Set out the roadmap. It is important to set expectations for new employees during their first weeks on the job. Expectations can be set by creating goals and objectives that establish direction for the new employee. Plan small wins along the way to help them succeed.
  • Pay attention to the stop signs. Immediately address any wrong behaviors and help educate the new employee on expected company behaviors. Organizational culture is sometimes tricky to learn.
  • Take advantage of the straight lanes. Everyone has strengths. Once a new employee's strengths are discovered, it is important to plug those strengths into organization opportunities. By having a conversation about the person's strengths and observing them in action, you will have a much clearer understanding of how the new assets can be best leveraged.
  • Getting to know you. As you get to know the new employee and they get to know you and the organization, the goal is that both sides will get more comfortable with one another. Take the time to invite the new employee to organizational social events to get to know them outside of work.
  • Drive defensively. There will be times during thisthese early weeks that you will uncover development needs. Make a list and have a conversation with the new employee to discover learning and development opportunities.
  • Use the brakes. New employees may find it hard to learn the organizational nuances and culture, thus leading them down the wrong road. Take time out to check in with the new employee on a consistent basis to see how they feel about how things are going. Communicate, communicate—and then communicate some more.
  • Looking ahead. By looking ahead to future organizational needs, you will be able to determine which role is best for new employees, based on an understanding of their strengths and weaknesses.

Join the Online World – A Message for Small Business Owners

This article was written by Vicki Reynolds, SBA

Social Security’s employer website is your first stop for information on W-2s, electronic filing, verifying Social Security numbers, free software, technical specifications and much more. You can register to use Business Services Online (BSO) at any time at www.socialsecurity.gov/employer.

Through BSO, you can stop doing those paper forms for your wage reports (Forms W-2 and W-3) and start doing them online. You also can file the correction forms (W-2c and W-3c) online. All you need is something you probably already have: a computer and an Internet connection. So save yourself some time and effort, turn your entire wage reporting paperwork processes into just a few keyboard clicks.

Independent Contractor or Employee? Choose Wisely.

Article complements of Dawn D. Fleming, ESQ. of Pre-paid Legal Services at 714-606-3520 or visit www.protectandgrowyourbiz.com.

A letter from the IRS arrives informing you that your business has been selected for a tax examination to determine whether or not your workers have been rightfully treated as independent contractors. At stake is the possibility that your business will owe large sums of money in interest, penalties and back taxes for failure to remit employment tax withholdings to the IRS that you should have deducted from your workers’ paychecks but failed to. Add to these sums the cost of accounting and legal defense fees to protect your interests during the IRS examination. The result could be financially devastating to you and your business. If the business is a corporation and you think the liability limitation will protect you, think again. If the business files for bankruptcy protection the debt is not dischargeable, the IRS debt will haunt you personally. There are ways to prevent this nightmare scenario.

There is no single fact, but rather three categories of inquiry that the IRS reviews to determine the status of a worker. They are (i) behavioral control, (ii) financial control, and (iii) the relationship between the parties. Behavioral control is determined by whether the business has the right to direct and control the work. IRS looks to see the level of instruction and training a worker receives. Does the company dictate how, when or where the work is to be done? What tools and equipment are to be used? Where to purchase supplies? Financial control looks at factors like expense reimbursement, opportunity for profits or losses and whether there is a significant investment by the worker.

The last category may be the most important: the relationship between the parties. Here the inquiry is: how do the business and the worker view each other? If the worker receives employee benefits such as vacation, insurance and retirement, the implication is the worker is an employee. Conversely, however, just because no benefits are received does not mean the worker is an independent contractor. It is important to note that if a written contract between the parties exists, it allows them to demonstrate the intent of the parties to the IRS. The existence of this document alone could save a business from the scenario above by expressly spelling out that a worker is an independent contractor. A well-drafted Independent Contractor Agreement will also incorporate all the factors listed above to cement the position taken by the parties.

Additionally, a safe harbor for businesses exists, called “relief”. A business will not be liable for back taxes, interests and penalties even if the worker is later determined to be an employee as a result of the tax examination. Businesses are eligible for relief from having to pay these back sums if three requirements are met: (i) reasonable basis (ii) substantive consistency; and (iii) reporting consistency. Essentially, if you relied on the tax advice of an accountant or attorney, a Federal Tax court case, an IRS ruling or industry custom as the reason for treating a worker as an independent contractor, then the reasonable basis requirement is met. Substantive consistency means that similarly situated workers are all treated the same. You can’t pick and choose treating some workers as employees and some as independent contractors if they do the same work. You must file a 1099-MISC for each worker unless they earned less than $600. If you file 1099-MISC for some workers, but not others, relief is only available for workers to whom these forms were issued. To make it easier on employers, a business may complete and submit Form SS-8, which requests the IRS to make a determination of the proper classification of a worker. Visit www.irs.gov for more information on this subject.

Saturday, September 15, 2007

Members of SCORE Chapter 114 Thank Bill Morland

Members of Chapter 114 thank Bill Morland for his dedication and leadership for the last 2 years. Through his innovation and effort, the chapter continues to rank in the top chapters in the nation. Job well done!

The results are in:

8,000 no-charge one on one counseling sessions for SCORE clients! 

11,000 no-charge email counseling sessions!

7,200 workshop attendees!

These are the numbers of local small business owners and aspiring business owners who have taken advantage of SCORE services conducted by SCORE Chapter 114 in the past two years. Many thanks to all of you.

On October 1st I will turn the Chairmanship of SCORE 114 over to Dr. Jack B. ReVelle concluding my two year tenure as Chapter Chairman. I am extremely proud of the volunteer contributions of our 95+ (numbers, not age) SCORE members who are the driving force behind the achievement of such a contribution to our small business community. And I am honored to have served as Chairman of such a stellar group of dedicated volunteers. Thank you SCORE 114 members.

I will of course remain very active in SCORE but wish to thank all of my SCORE colleagues, all of our SCORE clients and friends, and our national SCORE organization for the support and counsel during my tenure as Chapter Chair.

Meet the New Chairman of Chapter 114 - Dr. Jack Revelle

Dr. ReVelle (Jack to his many SCORE clients) holds a B.S. degree in Chemical Engineering from Purdue University and both his M.S. and Ph.D. in Industrial Engineering and Management from Oklahoma State University. He has held numerous positions and been honored many times over during his lengthy career. Here are some of the highlights.

Dr. ReVelle was the Founding Dean of the School of Business and Management at Chapman University and the Founding Chairman of the Decision Sciences Department at the University of Nebraska. He has held high level management positions at GenCorp Aerojet and Hughes Electronics. His honors include the Distinguished Economics Development Programs Award from the Society of Manufacturing Engineers, the Akao Prize from the Quality Function Deployment (QFD) Institute, and a Distinguished Faculty Award from the National Graduate School of Quality Management. Dr ReVelle is a published author of many books which are available on the internet.

Jack has been a SCORE counselor for three years and has a deep commitment to assist the local small business community. We are proud to be a colleague of his in SCORE and anticipate more record setting years for your SCORE chapter under his capable leadership.

Avoiding the QuickBooks” Electronic Shoebox”

This article was written by Dick Ginnaty, CPA

Years ago, the bane of accountants was the arrival of the client with the shoebox full of receipts, announcing that the box contained all their business receipts, and that everything the accountant would need was contained therein. Needless to say it took a lot of time to make sense of the contents of the box.

Well, there is a modern version, the shoebox is digitalized and it is contained in the QuickBooks file from some clients. I called it the “electronic shoebox”. It contains all the information the client thinks you need. The problem is that as untrained business people they have put the information into accounts and areas where it doesn’t make sense, and the accountant has to spend a lot of time unwinding the entries (and charging you for it).

The following hints are meant to help minimize the “electronic shoebox.

For checks and payments which you don’t know what to do, create an account called “suspense” as another asset account and charge the amount to that account. Your accountant can then analyze this account and distribute it to the appropriate accounts.

Establish a second “trial” company where you can try new things in QuickBooks to see if you will get the desired results before doing it in your real company file. Things that don’t work won’t contaminate the real data.

Sit down with your accountant before year end (November is a good month), and review your file. Accountants have more time available, and they can correct errors then. It serves the purpose of cleaning up your company file and having a year end review and tax planning session at the same time.

If you have just implemented QuickBooks, review your setup with your accountant within the first 30 days of usage. A lot of the “shoebox” effect happens upon startup, and the accounting for startup costs.

These are only a few suggestions, but avoiding the “electronic shoebox” will save you money, and give you a more accurate financial picture.

Good luck and here’s hoping it “all adds up” for you.

(If there is any area in accounting or tax that you think needs to be addressed in this newsletter please e-mail Dick at Ginnatycpa@aol.com and if it is of general interest, he will address it in future articles).

Business Plan the Easy Way

This article was written by Hillel Pitlik, SCORE Orange County Management Counselor

Frequently, our SCORE clients start to write a plan without having gone through all the preliminary thinking needed to answer the many questions that surface during the planning process. I’m reminded of the definition of a lecture by a college professor. “A lecture is the process of the professor transferring the ideas in his lecture to the notes of the student, without passing thru the brains of either.” I submit that a method that allows for exploring the questions and developing the answers will, in the end, result in arriving at a well thought out plan for the business idea in question.

What is such a direct approach? In principle, it is a diary like method that captures the thinking of the prospective entrepreneur step by step. It starts by obtaining a ledger book with non-removable pages.

Start the process on the first left hand page of the diary. In 150 words or less write your business idea or description. To the left of the entry enter the date. The left hand pages are reserved for questions that arise during the process; the right hand pages are reserved for the answers, To the left of each question (on the left hand side) should be date of record. On the left hand page to the right of the question should be the projected date when you will have the answer to this question. When you answer the question, date the entry.

Each time a question occurs to you enter the question. As answers are obtained they will appear opposite the question they refer too. As the process progresses, answering of the questions may beg still other questions, and so forth.

Simple questions such as: “Who is the competition? What resources will I need? Where should I locate the business? Is my personal status such that embarking on the enterprise is reasonable? Etc. must be answered.

In addition, I recommend that you periodically, (bi-weekly) rewrite the business idea without reference to the original statement. Then compare the two, to see if the business concept has changed as the question/answer process has proceeded. Becoming aware of the subtle changes in the idea may well lead to a better business in the long run.

Many of the questions will deal with financial issues that must be answered with spreadsheets and cash-flow projections. Pasting in such entries is encouraged. Thus, the diary is the embodiment of the evolution of your business idea from start to Business Plan.

You should be aware of how successfully you have adhered to your question answering schedules. This self scheduling method will keep the process moving forward apace. In addition, it is beneficial to reread the diary periodically to assess your basic progress toward getting the business started.

The actual Business Plan is then, simply, an extract of the research that you have conducted thru the diary. Viola, that wasn’t so hard after all.

Networking

This article was written by Robin Noah, SCORE Orange County Management Counselor

I recently had a business owner ask if networking was good for a small business. My answer was a strong YES. Running a successful business is dependent on what you know, who you know and how well you know them in order to enhance your circle of influence. So yes, networking is a process businessperson should engage in. It is a marketing opportunity.

Business people like to associate with other business people, so attend networking events where business people will be in attendance. Networking allows you to meet, and establish a relationship with people who may not have heard of your business through any other means. Successful networking takes skill, planning and commitment.

Plan for your events by defining your goal and the strategy for achieving the goal. “How do you want to be remembered?"

In the beginning the goal may be to meet and present your business to at least 3 persons. Be prepared with the statement that describes your business. Work on developing an elevator speech. You need to prepare others to act as your “promoter”, just as you would do for them.

Consider the following:

  1. Visit a few groups a few times before you commit to any group. Get to now the rules of operations, what the fees are, if there are any limitations and what is offered to members. You need to be comfortable among the group you choose.
  2. Be prepared. Learn how to tell your story in a dynamic way. Develop an “elevator speech” or a pitch statement that grabs the attention of your audience. Keep in mind that success in businesses is in solving problems for clients in a fair, efficient and cost effective way. Tell why a client should pick your service/product above others.
  3. Have your promotion materials with you and lots of business cards. Collect business cards and use them to set up a database for promotional activities or to pass on leads.
  4. Follow up leads and referrals. Make appointments to meet potential clients.
  5. Thank the person giving you the referral/lead. Thank them for the opportunity to service their referral and offer to help them in the future as well.
  6. Measure your success. After each meeting review your goal to see if you met it. If it the easier it gets.

Remember that you know more about your business than other businesspersons at the event. Give a picture of your business and how it resolves clients’ issues in one or two sentences. Just enough to promote the response “tell me more..” That is the time that you go into details. If you do these things you will be remembered as being prepared and professional.

Wednesday, August 15, 2007

Successful Marketing

This article was written by Robin Noah, SCORE Orange County Management Counselor

A BUSINESS REALITY: It has been said that close to 90% of new products brought to market fail. When you take into consideration the effort, money and time it takes to bring a product to market, which often is the launching of a new small business, you have to ask what the contributing factors are. Best answer: Failure to meet the bridge to success. A product or a service (p/s) has no value without its ability to fulfill the primary intention a customer has for using them. Your p/s crosses the bridge as you demonstrate how the p/s achieves the specific result the customer is seeking. No matter how great or how good you are at providing the service or the use of the p/s if the customer cannot see it at the get go – you are climbing a very steep hill.

How do you get control of this and make it work for you? Develop a profile of your potential customers. Who are they, what problems do they have, what does the result of your p/s impact – health, education, wealth, pleasure? Is your p/s the answer to their dilemma?

Successful marketing is designed from a customer’s perspective. The message clearly defines how you will meet your customer’s expectations. It tells how the p/s will achieve the result they seek; that yours is the essential resource for meeting their needs, expectations and interests. Engage in a question and answer process where you can get answers to:

  • What is the basic need of your potential customer?
  • What emotional need has to be satisfied?
  • What benefits and features of your p/s meet their needs?
  • What success will they achieve as a result of your p/s?
  • What is the best way to express these attributes?
  • What action words will appeal to your potential customer?

Reality is based on knowledge not assumption. What you believe to be the answer may not be what you customers are looking for. Listening takes precedence over talking. Use what you hear to fortify you as you cross the bridge to success.

Customer Service

This article was written by Jerry Margolin, SCORE Orange County Counselor

Customer Service is simply providing information to your customer in a reasonable and timely manner, whether you have solved the problem or not. It is seldom recognized, because it is rarely seen.

  • When talking to a customer on the phone, put a smile in your voice.

Believe it or not, it carries over to the person on the other end of the line! Do you know how hard it is to sound harsh if you are smiling when you speak? Simply put; it’s almost impossible. Any time that you can have a pleasant, and friendly conversation, it’s a lot easier to solve the problem. That’s your job. It’s not a contest, and the customer will remember it well..

  • Listen to what your customer is trying to tell you.

A customer can be upset about many things. They may have been waiting on hold and left there for a long time. They may have worked with customer service agents in the past, who were argumentative, and are dreading doing it again. A cheerful voice, showing some empathy, and saying something like “No wonder you’re upset!” Let’s see how we can solve the problem” is hard to ignore. In many cases it is enough to keep the customer.

  • Don’t lie or make promises you can’t keep!

Yesterday I had a meeting at 1:00 PM that was very important. I hadn’t eaten yet, and it was already 12:35 p.m. so I ran next door to the hamburger place, and asked how long it would take to make a hamburger for me. He thought carefully, and said “Seven Minutes.” That was plenty of time to get it down, and make my meeting. I said “go for it!” Almost twenty minutes later I was still waiting and running out of time. I asked him why it wasn’t ready. The answer was “We make all of our hamburgers cooked to order, and to perfection, this is not McDonalds.” I asked him why he lied to me for an $8.00 order. He kept talking about the quality and how much I would enjoy it... I explained that an honest answer, would have allowed me to make the decision as to what I wanted to do, but trying to keep me there for the order, was not acceptable... His partner suggested they should give it to me raw. They wanted to win. I knew that asking for my money back was pointless, and I saw that they were finally wrapping it, so I took it and gulped it down as I ran back to the office, also noticing that everything I asked to be left off the hamburger was on it. They got their win but it will cost them my business and all my friends business if I can help it. So don’t be so intent in winning the battle, that you lose the war..

Anyone can sell a product that works well and is reasonably priced, but your real opportunity to impress a customer is when they have a complaint. The way you handle it is critical. A fast efficient solution which is positive for both sides can create a permanent bond with your customer. Try it; you’ll like it!

SBA Offers Patriot Express Pilot Loan Initiative

The Santa Ana District Office of the U.S. Small Business Administration (SBA) announces the launch of a comprehensive initiative that focuses the agency’s full menu of financial, procurement, and technical assistance programs on the military community. The centerpiece of this initiative is a streamlined loan product based on SBA’s highly successful SBA Express loan program.

The Patriot Express Initiative includes new and enhanced programs and services for veterans and members of the military community wanting to establish or expand small businesses. Eligible military community members include: veterans, service-disabled veterans, active-duty service members participating in the military’s Transition Assistance Program, Reservists and National Guard members, current spouses of any of the above, and the widowed spouse of a service member or veteran who died during service or of a service-connected disability.

More than 150 banks have already been approved to participate in Patriot Express and more applications are arriving daily. Loans are available up to $500,000 and qualify for SBA’s maximum guaranty of up to 85 percent for loans of $150,000 or less, and up to 75 percent for loans over $150,000 up to $500,000. For loans above $350,000, lenders are required to take all available collateral to secure the loan and may obtain collateral for smaller loans depending upon individual bank requirements. Interest rate maximums for Patriot Express loans are the same as those for regular 7(a) loans: a maximum of prime + 2.25 percent for maturities under 7 years; prime + 2.75 percent for 7 years or more. Interest rates can be higher by 2 percent for loans of $25,000 or less; and 1 percent for loans between $25,000 and $50,000.

The Patriot Express Pilot Loan Initiative can be used for most business purposes. Details on the initiative and the list of participating lenders can be found at http://www.sba.gov/patriotexpress.

Sunday, July 15, 2007

Help for Start-Up Business Wanting to Meet Governmental Requirements

This article was written by Bill Morland, SCORE Orange County Chairman

Many of the entrepreneurs that come to SCORE are looking to create startup businesses. Their questions are usually about required licenses, business structure, local regulations, etc. Here are some web sites that are designed to assist the small business owner in securing the proper information regarding governmental requirements. In addition you will find good information on successful business practices.

Last October the SBA and 21 other federal agencies re-launched the business.gov web site. You can now search for compliance assistance information across all Federal agencies by industry or business area. The site is http://www.business.gov/.

You can find zip code specific information about state and local requirements by type of business by going to http://www.calgold.ca.gov/. Enter your business type and then select your county and city and you will be presented with a comprehensive list of local agencies that may have a say in the establishment and conduct of your business.

Great explanations of business legal issues and kits/forms for utilization are readily available at http://www.nolo.com/ and http://www.allbusiness.com/. If you want to find the average wages being paid by occupation in your metropolitan statistical area, go to http://www.bls.gov/, click on “wages, earnings, and benefits” then “Wages by area and occupation for 375metrpolitan statistical areas (MSAs)……” You will be able to secure specific wage data by occupation.

Then of course you can ask business questions of SCORE counselors across the country by going to http://www.score.org/. Under the heading “Ask SCORE for business advice” enter your keywords and click submit. You can select a counselor, ask your question and receive an answer by email. Plus our Orange county SCORE web site, http://www.score114.org/, is rich with information and web sites under our “Library” tab. Financing options and other information are readily available at the U.S. Small Business Administration’s web site at http://www.sba.gov/.

These web sites are valuable sources of tools and information to help you be successful and that’s what you and SCORE are working toward. Try them out. I know that you will be pleased with the information.

Buy/Sell Insurance – Protecting Everyone

Life insurance on the partners in a business can be an effective way to ensure that the business survives the death of a partner, and provides funds to the beneficiaries of the deceased partner.

When a death of a partner (partner in this context could be a shareholder, or limited liability company member) occurs it can have devastating effect on the business and of course, the lives of the family. Life insurance can provide funds to purchase the deceased partner’s interest providing an answer to the oft times tragic event.

There are two approaches to who owns the policy which may have a substantial effect on the surviving partner/shareholder/member. In both approaches the effect on the beneficiaries of the purchase is the same. Capital gain accrues to the purchase of the interest in the business.

In the first approach, the Company would own the policy, and would then buy the deceased partner’s interest. There would be no negative tax consequence to the Company but there would be no increase in basis for the surviving partners either. Upon sale or dissolution, the partners would pay tax on any profit without the benefit of the increased basis.

In the second approach, the partners would own the policy, and they would buy the deceased partner’s interest directly from the beneficiaries. In this approach the partners’ ownership basis would be increased by the transfer price to the beneficiaries, and upon subsequent sale of their interest, their gain would be reduced accordingly.

Buy/Sell agreements are not simple agreements as they usually indicate how the business will be valued. Therefore it should be in written form, and the use of experienced attorneys is advised.

Last item before signing off, is that in neither approach is the insurance premium a deductible expense.

This article was written by Dick Ginnaty, CPA (if there is any area in accounting or tax that you think needs to be addressed in this newsletter please e-mail Dick at Ginnatycpa@aol.com and if it is of general interest, he will address it in future articles).

Understanding Commercial Leases

A commercial lease is a major expenditure for most small businesses. Frequently these types of leases are of long duration and will affect the profitability of your business for many years to come. As a business owner it is important that you read and understand every term contained in the lease, it is an enforceable contract. Many times landlords will provide prospective tenant with their “standard lease”, a pre-printed form that may not suit your needs. A “standard lease” has been prepared by the landlord’s attorney and is normally drafted in a way that favors the landlord’s interests and protects that individual’s rights.

Many times pre-printed forms are used for their psychological effect: as a mechanism to prevent the other side from thinking they can negotiate more favorable terms, don’t fall into that trap. Of course, how much you can negotiate depends on the status of the commercial real estate rental market. Regardless, you should make sure that any verbal promises made by the landlord make their way into the lease. Most leases have an “integration clause”, it states that all prior unilaterally terminate a service that may have been one of the primary reasons you selected the property. For example, you may have chosen a property because it was clean and secure. The landlord provided a cleaning service and security patrols. If the lease does not include these terms the landlord has the right to discontinue these services and there is nothing you can do about it. If these services are included in the lease agreement, the landlord has a legal duty to provide the service.

Some terms which should be contained in commercial leases include: identification of the parties (names and addresses, where rental payments should go), identification of the premises being leased, the permitted use and occupants of the premises, the term of the lease including occupancy and commencement dates (they are different), amount and disposition of any security deposits, the amount of rent and frequency of payment, a description of the building services the landlord will provide (utilities are a big expense these days!), a list of what isn’t included (taxes, maintenance & repairs, insurance, etc.), signage rights, tenant improvements, options to purchase or expand, what happens in event of default, assignments and subleases, relocation, re-entry rights, parking, fixtures and zoning.

Terms to watch out for include paying for landlord expenses in connection with a sublease (beware of attorneys’ fees!), limits on advertising and/or competing with landlord for space available for sublease, clauses obligating the tenant to cover the landlord’s expenses for the cost of managing the property. Any of these provisions can cost your business dearly.

Article complements of Dawn D. Fleming, ESQ. of Pre-paid Legal Services at 714-606-3520 or visit www.protectandgrowyourbiz.com.

Business Insurance

The success of a business, whether it's a tiny enterprise run out of a room in your home or a large corporation, is largely dependent on hard work and ingenuity. However, no matter how industrious you are, one disaster can wipe out all your profits and even destroy your business. The key to making sure that all the effort and money you have invested in a business doesn't disappear when a disaster strikes is to protect it with the appropriate insurance.

It is not unusual for us to find that many small businesses we counsel are not insured and they do not include insurance costs when developing their small business venture. This is very risky practice as business insurance is necessary to protect your business in case of an unplanned financial liability. The reality is that lawsuits are filed against small businesses every day and owners are burdened with some very high costs to defend themselves and hefty payouts when they lose a case. A small business should acquire insurance from the beginning. A key issue is that some owners assume that because they form a corporation or an LLC for their business structure they are not liable for any lawsuits against their companies. That is just not true. Business owners, under certain circumstances, are still liable for their individual acts of negligence.

Some insurance coverage is elective and some is mandatory. Typically you start out buying liability and property insurance. Along with that you need to consider errors and omissions insurance, employment practices and product liability to name a few. You will pay unemployment insurance as mandated by law. In addition, you'll pay disability insurance in accordance with state regulations. Other types of insurance you may elect to purchase include: Health and Medical insurance, Disability insurance, Directors and Officers, Vehicle insurance, Business property insurance, Web site insurance and Life insurance for key persons.

If you have employees you are required to carry workers compensation insurance.

Home-based business should look into General Liability Insurance covered by a Business Umbrella Liability Policy. Depending on the type of homeowners insurance they have they may be able to increase their policy limits on business property by adding a simple endorsement to their homeowner policy. A business insurance agent will be able to advise the businessperson as to whether or not this endorsement is available and if your home business qualifies.

Learn about business insurance by talking to an insurance agent that specializes in business insurance and by visiting Internet web sites. The http://www.about.com/ web site is a good place to start.

This article was written by Robin Noah, SCORE Orange County Management Counselor

Friday, June 15, 2007

Business Owners Who Are Called to Active Duty by Military Reserve or National Guard Face Unique Situations

America’s small business owners who are called to active duty by a military reserve or National Guard unit face unique situations…..SCORE can help!

 

Our recent celebration of Memorial Day reminds us of the sacrifices that our military forces have endured and continue to endure to protect our cherished freedoms. Many of those who are deployed are small business owners who simply lose their business in their absence while serving our country. Some of the issues that these deployed business owner’s face are detailed in two recent Business Week articles which can be viewed at http://www.businessweek.com/. The articles are entitled “The War’s Toll on Reservists – Entrepreneurs” dated 1/30/07 and “The War Back Home” dated Spring 2007. Go to the web site and type the article title into the search box and you will be able to view the articles.


SCORE chapters throughout California are alert to the issue and are anxious to do their part by offering no-charge business counseling to the military personnel. In 2004 Orange County SCORE recognized this problem and successfully organized SCORE chapters throughout California to reach out to these deploying military personnel. This program was implemented through the California National Guard web site at http://www.calguard.ca.gov/. To view the program, go to the site click on “Guard and Soldier Resources”. Then click on “SCORE…”, and you will go to a web page that informs the soldier of the services offered. By clicking on “Schedule an Initial Call” the soldier can select a convenient SCORE chapter with which to work. The soldier fills out a short form which is emailed to the selected SCORE chapter. The soldier will then be contacted within forty eight hours. Subsequent no-charge counseling and mentoring can be conducted by email, telephone, or face to face.


Since inception this program has served over 50 California Guardspersons and Reservists. Unfortunately the program is under utilized principally because of lack of awareness. That’s where you come in. If you know of a Reservist or Guard small business owner who is facing or is in the midst of deployment, please let them know that SCORE help is available. Give them the above information and we will be sure that they get the special care that they deserve. Thank you for your help.

This article was written by Bill Morland, SCORE Orange County Chairman

Married Sole Proprietors Can Deduct Medical Expense Reimbursements Paid to Their Employee - Spouse

Sole proprietors can employ their spouse and establish a deductible medical reimbursement plan for the employee (i.e. their spouse and their family, including the sole proprietor).


The plan can reimburse insurance premiums and all out of pocket medical expenses not covered by the insurance policy. The amount is deductible from their sole proprietor’s earnings, reducing both the income tax and the self-employment tax arising from the earnings. It is also not taxable income to the spouse…such a deal!



The “catch is that the program must cover all employees or the benefits become taxable to the recipient, so it best fits those sole proprietors that only employ their spouse and children. It also requires a written agreement be in place before a medical reimbursement plan can be implemented.


The restrictions may make it not practical for a lot of sole proprietors but for those it fits, it could be a big benefit.

This article was written by Dick Ginnaty, CPA (if there is any area in accounting or tax that you think needs to be addressed in this newsletter please e-mail Dick at Ginnatycpa@aol.com and if it is of general interest, he will address it in future articles).

Increasing Your Business Using Customer Service Techniques

Most customers that are lost by small businesses are lost because of poor customer service performance, rather than for any other reason. A small business has a golden opportunity to increase their sales simply by being aware of customers needs, and responding positively to them. In fact, many of these same customers are willing to pay more for the privilege, since it happens so seldom. Here are a few tips that you might consider.


  • Never use an automated telephone system unless you absolutely have to!

Let the big boys annoy their customers; not you. Most people hate to be put on hold while a recorded message tells them how important they are. It doesn’t matter how many employees that you have, any time a telephone is answered by a person rather than a machine, your stock goes up.


  • If you say you will call back in fifteen minutes, call back in fifteen minutes!

If you set a time to call someone back with information, call them back at the promised time even if you haven’t received the information yet. Too often I hear “I didn’t call back, because I had nothing to tell you” Yes you did have something to tell them; you had to tell them that you did not have the information yet. Customers are almost more grateful for that, than they are for the answer to their problem. It says that you are working on it, you haven’t forgotten, and that you are trustworthy. They will remember that the next time that they buy a product that you sell.


  • Learn the names of as many customers as you can, and use them!

Everyone loves to hear the sound of their name. It says that you remember them, and are important to the proprietor and that business. If I regularly use a cleaner, or small sandwich shop, dog groomer, or whatever, and they speak to me by name, rather than asking me what it is, and how to spell it each time I go there, I feel flattered and want to recommend that business to my friends, so that they too can feel flattered and enjoy the same experience. When I go to a restaurant and the owner stops by the table, and says “Jerry how was the food this evening?” It tells my dining companions that my business is meaningful to that restaurant, and theirs will be too.

  • Be flexible when dealing with problems!

If you guarantee a product for thirty days, and it breaks on the thirty-first, think of negotiating something anyway. The big question should be “Is it defective, not when it was bought. Giving a customer their money back once, may cement the relationship with your business. Good customers are hard to replace. If you are unable to make that decision for some reason, at least give them a gift certificate or a decent discount on their next purchase. You don’t win when you invoke a rule because “it’s there.” In fact by making a concession to a rule, you may turn an angry shopper a devoted shopper for life instead.



There are lots more tips to mention, but hopefully, these will get you thinking.

This article was written by Jerry Margolin, SCORE Orange County Management Counselor

IRS Starts e-Newsletter Just for Small Businesses

The IRS has started a news service, e-News for Small Business. Distributed every Wednesday, it brings timely, useful tax information right to your computer, including, but not limited to:



  • Important, upcoming tax dates

  • What’s new on the IRS website

  • Reminders and tips to assist businesses with tax compliance

  • IRS news releases and special IRS announcements


e-News’ convenient format will put IRS tax information at your fingertips. “Useful Links” brings you quickly to some of the most useful information on IRS.gov for large and small businesses and the self-employed.


To start your FREE subscription to e-News, just go to IRS.gov at http://www.irs.gov/businesses/small/content/0,,id=154826,00.html, type in your e-mail address and submit.

Tuesday, May 15, 2007

“Cash” Basis or “Accrual” Basis. Which is Best for Retailers?

This article was written by Dick Ginnaty, CPA

When a business starts, one of the decisions that needs to be made is whether to report your business for tax purposes on the “cash” basis or on the “accrual” basis. This choice is indicated on the first tax return that is filed for the business. This choice should be made with the thought of maximizing the tax benefit of the choice.

Under the cash basis, revenues are reported when received, and expenses are recorded when paid. Under the accrual basis, revenues are recorded when earned, and expenses are recorded when incurred. Under the accrual method, your receivables count as taxable income, and your expenses that are not yet paid (i.e. accounts payable) are deductible.

Many times beginning businesses will chose the cash basis of reporting because they get to delay paying taxes on their open receivables until they have been paid. This may work for many businesses but it may not be the best choice for retailers, and web based e-commerce sellers.

For many of those they don’t have any receivables. They get paid at the time of purchase, or even prepaid, but they do have expenses that haven’t been paid yet that relate to the period (i.e. utility bills, telephone bills, wages, commissions etc.). For these businesses the accrual method is better because under the accrual method they won’t recognize any more income (they have already received all they are going to get) and yet they can deduct some expenses that they haven’t paid for yet. It is the very best possible position.

So think hard about your situation, and good luck. By the way, if you already have selected the cash method of reporting, a change is possible but it requires the approval of the IRS commissioner. Luckily, the change from cash to accrual accounting is one qualifying for “automatic consent”, but it still requires an application using Form 3115 following the steps outlined in Revenue Procedure 2002-9.

Good luck and here’s hoping it “all adds up” for you.

(If there is any area in accounting or tax that you think needs to be addressed in this newsletter please e-mail Dick at Ginnatycpa@aol.com and if it is of general interest, he will address it in future articles)

Talent Pool or Talent Puddle

This article was written by Larry Tucker, SCORE Orange County Management Counselor

“I don’t have the time to search for the best employees for my new company. It’s all I can do just to get product out the door.”

Sound familiar?

My cousin Mario

So we fall into the “my cousin Mario” trap. “The guy’s looking for a job, so I’m going to hire him.”   

Stop! What are the odds that out of the 200,000 people who live and work near your business, this guy is the right fit? One in 200,000, I guess. You have to reduce those odds. The time, energy and dollars you spend turning over one employee after another will drain your time and focus you on the wrong priorities.

Plan…just a little

What are the characteristics of a successful employee for this role? You probably have time to list those behaviors as you’re taking your shower in the morning. Consider these behaviors in two categories:

Minimum standards: A waitperson, for example, must present herself well, know food and beverage, and be able to handle the check.

My value differentiator: But my restaurant, for example, will cater to people who enjoy gourmet food, so “knowledge of food” or “ability to learn quickly” becomes key characteristics. You will likely have a list of 5 or ten characteristics, each with its own priority.

If you’re expecting your company to grow, today’s hires may be tomorrow’s managers. This expectation may add a few more characteristics to your list.

The talent puddle

“It’s not a talent pool; it’s a talent puddle. I’m thrilled just to get someone to answer my ad.” You might be surprised. Advertising for employees has many similarities to selling products. Whether you advertise on Monster.com or in the local paper, consider including these elements in your ad:

Tell them about your company, why it’s different, what you’re trying to be. (If you’ve got a website, referring to it in the ad is the best way to communicate this information.)

Make it clear what behaviors/talents/expertise you are looking for.

Explain why your company may be a better place to work than somewhere else. The ad should reflect well on your company.

Interviewing for behaviors

“An interview is where I tell them what they are expected to do in this job, right?” Yes, but that’s only a small portion of the interview. Experts say that if you spend more than 20% of the interview talking, you probably haven’t done a very good job of interviewing. Interview for your list of characteristics by asking behavioral questions. Looking for a multi-tasker? “Give me an example of a time when you had two or more top priorities and how you handled that situation.” A team player? “Tell me about the last time you worked or played in a team and how you handled it.”

There will be a significant return on investment for the time you spend hiring the right employee the first time out. Of course, the success rate is never 100%, but if you can reduce your chances from one in 200,000 to one in 2, you’ll have time to focus on building a successful business.

Sunday, April 15, 2007

Where Small Business Is Heading

This article was written by Bill Morland, SCORE Orange County Chairman

Want to know where small business and entrepreneurship is heading in the future?

Intuit Inc., best known as publishers of the popular small business software “QuickBooks” has sponsored a study conducted by the Institute for the Future that tells us that entrepreneurship will contribute greatly to the economic scene in the next 10 years but the makeup of the entrepreneur will be far more diverse than we see today. Specifically Intuit reports that “by 2017, the white, middle-aged men who traditionally launch small businesses will be outnumbered by Generation Years — those born after 1982 — women, immigrants and ‘un-retiring’ baby boomers opting for entrepreneurship as a second career.” The press release summarizing the study may be viewed by going to www.intuit.com and clicking on “about intuit” then “press room” then “press releases”. 

A recent article in the Wall Street Journal entitled “Entrepreneurship 101” by Kelly Spors states that “Colleges used to ignore their students’ business aspirations. Now they are trying to nurture them”. Our local colleges and universities are leading the way in educating entrepreneurs of the future. Your local SCORE chapter participates in various entrepreneur inspired curriculums and projects at Cal State Fullerton, UC Irvine, Saddleback College and Orange Coast College.

Our resource partner, the US Small Business Administration, in their publication “The Small Business Advocate” reports that the US Bureau of Labor Statistics found that “small businesses generated 65% of net employment growth between September 1992 and March 2005” and that “the most net job creation takes place in the first two years of a firm’s existence and within firms that employ fewer than 20 workers”. 

We at SCORE have seen our small business workshop attendance in our local areas increase by 53% in our last fiscal year. All of this data adds up to the fact small business is very important to our local economic growth and will continue to be so for the foreseeable future. We at SCORE will be focusing on future growth patterns and how we can prepare ourselves at our upcoming yearly training meeting in May. Our goal is to stay relevant and be pro-active with the upcoming change and growth of small business in local areas. We are here to help you be pro-active as well and welcome you to signup for no-charge counseling by calling 714-550-7369 or visiting us on-line at www.score114.org and signing up for one of our more than 140 workshops that we will produce for you this year. We thank you for being a client or friend of SCORE and for your support of your local SCORE chapter.

Office in the Home Deduction..Not a Red Flag if You Qualify.

This article was written by Dick Ginnaty, CPA

For years the office in the home deduction has been identified as a red flag for drawing the attention of the IRS in the audit selection process. In my experience that has not been true. The deduction should be taken if you qualify.

To qualify, the home office (it can be a part of a room) has to be the principal place of business for the particular activity (full or part time). It also, and this is critical, has to be regularly and exclusively used for the business. Occasional or most of the time, or usually doesn’t qualify.

If you qualify than you can deduct a percentage of the following expenses against your business income: mortgage interest, property taxes, insurance, utilities, association fees, cleaning fees and regular gardening service, and the cost of the home. The percentage is determined by the ratio of the square footage of the home office over the total square footage of the house. Renters also qualify. They just substitute rent for the mortgage interest, property taxes, and portion of the cost in the above allocation.

In listing the cost of the home above, I don’t want you to become too excited. The original cost of the home and any improvements have to be depreciated over 39.5 years straight line after deducting the cost of the land.

In addition, the home office deduction can only reduce your related taxable business income to zero. Any excess home office deductions are carried over and are usable in future years against future business income.

The home office deduction is a legitimate deduction if you qualify, so don’t hesitate to use it.

Good luck and here’s hoping it “all adds up” for you.

(If there is any area in accounting or tax that you think needs to be addressed in this newsletter please e-mail Dick at Ginnatycpa@aol.com and if it is of general interest, he will address it in future articles)

Ten Reasons Why Businesses Should Use Business.Gov

This article was contributed by the U.S. Small Business Administration (SBA)

  1. Find answers to frequently asked regulatory compliance questions. Business.gov provides links to FAQ databases from across the federal government in which regulatory agencies provide answers to common business issues. Business.gov's FAQ directory is organized by topical area making it easier to find information relevant to the user's specific business area.
  2. Find how to comply with regulations in your industry. Almost every industry is regulated to some extent. Browse Business.gov's Industry Compliance Guides to learn find info on specific regulations.
  3. Talk to a real human being about complying with regulations. Business.gov provides directly line contacts of federal personnel who are available by phone or e-mail to answer your questions.
  4. From registering a business to hiring employees, Business.gov provides resources that guide users to helpful agency resources covering all areas of business operations.
  5. Learn how to do business with the government. Business.gov helps small business new to federal contracting. Our Government Contracting guide includes links to helpful information on Business Opportunities, Standards, Registration Information, and resources to get business started.
  6. Business.gov provides guidance for specific audience of small business owners. Women, veterans, minorities, non-profits and the self-employed can all find help information on complying with federal regulations, doing business with the government, and applying for government grants and loans programs.
  7. Business.gov connects business owners with pertinent state business portals and compliance websites, and provides links to local government websites.
  8. Find information on timely and popular topics quickly. The Business.gov homepage highlights the most frequently request compliance topics, allowing users to quickly finding information they're looking for.
  9. Find information on specific regulations fast with Business.gov's search engine. Got a question about the FMLA - Family Medical Leave Act? Simply type in FMLA, and find helpful guides to understand your obligations.
  10. Business.gov helps savvy business owners conduct their market research by providing a directory of statistical and industry data sources from throughout the federal government.

HR Corner

This article was written by Robin Noah, SCORE Orange County Management Counselor

When an employer asks me where the good employees are, I usually answer “With good employers.” I further explain that employees are not as quick to leave a job where they are basically satisfied – even happy, with their work environment and relationships with other workers and management. When the employers are in the recruiting and hiring phase they paint a picture of the job that gives the candidate a vision of the position and the culture of the company. It is somewhat like the start of a romance. Where employers fall down is in the first day of the new world for the employee. How the person is greeted and “taken in” to the company on the first day will leave a lasting memory. Best business practices point to the smart employers who understand the need to have an orientation process, which is conducted on the first day, the new employee reports to work; to provide a foundation for the new employee.

An orientation is the process of getting the employee off to a good start. To support the fact that the candidate can feel they did the right thing in accepting this job offer. The process is developed with components that are critical to a) making the person feel welcomed, b) ensuring that the company standards and policies are communicated, and c) that expectations on both sides are clearly defined. In most small companies the employee’s immediate supervisor conducts the orientation. It is this person that begins to demonstrate the culture of the company.

It is best to have a checklist that will apply to all new hires so that there is no opportunity for discrimination issues. Key components of an orientation would be: Employee Welcome, Tour of work area, parking, reporting work time, introduction to other employees, policy handbook/guide, required personnel forms, mandated labor law information and job functions and measurements. Add to this any other issues that are specific to your company, including safety matters.

Most people learn by doing. So include a plan for introducing the specifics of the job allowing the employee to actually perform some of the functions. And because the mind can accept only so much new information at a time, learning should be divided into small chunks over the first month.

You can learn more about orientation by contacting Robin at score114.org.

Six Critical Steps to Marketing Success (Part 2)

This article was written by Tom Patty, SCORE Orange County Management Counselor

Note: Part 1 (Steps 1 through 3) was in the March newsletter.

Step Four: INTENTION
At this point in the process, your customer now knows that you exist, he or she has considered using you, done some comparison-shopping, and decided to give your product or service a chance. In other words, the consumer “Intends” to purchase your product or service.

Unfortunately, not every thing that we “intend” to do actually gets done. How many of us have put an item in an on-line “shopping cart,” only to be distracted or change our minds, and not finalize the purchase?.

This is a phase in the “purchase process” where incentives can be helpful. Sometimes the consumer just needs a little nudge to move him or her. Some kind of “today only” incentive might be just enough to prompt them to take action immediately.

Step Five: BUY
For some products, (new car, for example), the “purchase process can be as long as three months) for other, more impulsive items, the purchase process can be completed in minutes or even seconds.

This is the point in the purchase process where the customer actually commits to buy your product or service and pays for the item or service. You can take a moment to celebrate; but I tell my clients that this really is just “the half- way point in the process. Just as the physiological halfway point in the marathon (a 26.2 mile race) is 20 miles, “buying” is the half -way point in the purchase process.

Once the consumer has purchased your product or service, they will experience one of three potential emotions. The best possible outcome is that they will LOVE you and tell all their friends how great you are. Another potential outcome (and the most likely) is indifference. It is just another one of many purchases made every day.

Unfortunately, there is a third possible outcome. The third possible outcome is that the consumer is totally unhappy and feels that they did not receive the value they expected. (In a restaurant experience, for example, there are two chances to fail. The food can be bad and the service can be terrible.) If this situation occurs you have created an “anti-marketing” force. This consumer will likely tell everyone they know about their negative experience and encourage people NOT to buy things from you.

Step Six: LOVE
Remember: the goal of marketing is not just to “sell stuff.” The goal of marketing is “TO CREATE CUSTOMERS WHO LOVE YOU.” When you do this, you are creating both repeat business as well as additional business through positive word-of-mouth. You are creating a self-perpetuating sales machine. It is far more efficient and more profitable to grow your business by selling more goods and services to repeat customers and to people who are positively disposed to you (because of positive word of mouth) than continually having to find new customers.

It has been my experience--counseling people with both small and large businesses-- that they are often intimated by the sheer size and scope of “Marketing.” It can seem overwhelming. “Where do I start?” they ask.

By focusing on the purchase process, the business owner can follow a clear six-step path. The first step is “to identify in which phases of the purchase process (awareness, consideration, etc) you have a problem?” Different businesses have problems in different parts of the purchase process. For example, Apple’s IPOD does not have an awareness problem. They need to concentrate on other parts of the purchase process (such as shopping and intention).

Once you have identified the problem areas, you can then concentrate on providing solutions for these problem areas. The six-step approach provides the entrepreneur with a way to break down “big marketing problems” into small, bite-size portions, which can be addressed.

If you can identify and attack the problems and opportunities in each of these six critical steps in the purchase process for your product or service, you can begin to “create customers who love you”. Once you have done this, once you have created “a self-perpetuating sales machine,” you just need to learn how to count and keep track of the money.