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.