“My house is always for sale.” That’s what a mentor of our CRO used to say. It’s about always being on the lookout for someone who might buy the house someday, or planning for when the day comes. 

You may not have started your business with a view to selling it, but it’s a good idea for business owners to plan for when they’d like to step down or hand the reins over to someone else. That plan can help the transition to go smoothly as well as make sure you get the highest possible returns. 

Many business owners actually have a plan in place for selling the business even before they begin operations. That’s because the plan affects decision-making throughout the business’ lifecycle—“adding to the value of the house”, as it were. 

In coming up with that plan, you’ll want to think about how long you’re going to run the business, and how much in revenue you plan on generating during that time period. You’ll also have to take your partners or anyone who’s invested into your business into consideration, as well as how big your business is, and the industry you belong to.

1. Sell to partners or managers. Note that high interest rates and upfront capital needed may deter them from buying out the business, so selling down over a vesting period might be an option, where you still retain part control and ownership.

2. Sell to an investor. This might be to your network, one of your employees or relatives. Bear in mind that investors may want you to stay in the business until they can find a suitable replacement, so this is where there could be a longer exit period required. 

3. Sell to another business. Mergers and acquisitions are among the most popular ways of selling a business because of how it can generate cash, quickly.  

4. Sell to someone who wants your team. Business owners who are particularly concerned for the welfare of their employees might choose to sell to a company looking to expand its talent base. They can rest assured knowing their team will be cared for after the business is sold.

5. Sell the business on the market via an IPO. Going public is another popular, high-profile and highly profitable way to sell your business, but note that this may not be the best way during an economic downturn and requires a lot of initial paperwork, money and time to float.

6. Sell the business’ assets and liquidate. This involves shutting the business down altogether and dividing the proceeds of the sale of your business’ assets between you and your stakeholders. You can do this right away, or over an extended period, during which time you “withdraw” your funds from the business until there’s nothing left. 

As a final option that doesn’t involve selling your business when the time comes, you might consider simply handing the business over to loved ones such as your children. 

Whether you choose to hand over or sell using one of the options above, it’s also a good idea to have accountants and legal advisors on hand. You’re likewise going to need a thorough examination of your financial records to help you valuate your business. If you’d appreciate some assistance with your plans for the sale, book a discovery call with us, today.

 

With this year’s halfway point just around the corner, now would be a good time to start taking stock of your business’ financials, and to see whether you’re on track towards meeting this year’s goals.

While forecasts usually go hand-in-hand with planning your annual budget, making frequent forecasts are standard for a lot of businesses. You might hold them every month or every quarter if you’ve been in business for some time, or weekly to monthly if you’re just starting out.

It’s also common practice for businesses to adjust forecasts they’ve made at the beginning of the year as the year passes, particularly in response to current events such as the recent pandemic. 

As many businesses continue their post-pandemic rebuilding efforts, key decision makers may be struggling with the question of whether they should even still be in business. An upcoming mid-year forecast might be able to provide some answers.

1. Refer to your results from the first half. Base your projections on past financial statements that reflect your complete transaction history. Only when you have a clear view of your past performance will you be able to make an accurate forecast.

2. Choose your forecasting method. Established businesses can use the historical method, which uses financial statements that reflect your performance in the past year. New businesses that don’t have a whole lot of data yet can base their projections on research drawing from industry trends. Some businesses use a combination of both methods.

3. Set specific revenue and expense goals. Make sure you know what the value drivers are when you set these goals so that you can monitor the factors affecting your performance. 

4. Document your forecast. Prepare a pro forma income statement, cash flow statement, and balance sheet which show what your finances could look like for the rest of the year. 

Some businesses use a rolling forecast to give them more flexibility in responding to events as they happen. Similar to making frequent, quarterly forecasts, an example of a rolling forecast is one made at the beginning of the year, and then adjusting it every quarter. This is in contrast to static, yearly forecasts made at year’s end, which some businesses also use as a benchmark together with a rolling forecast.

Making allowances for optimal and not-so-optimal business conditions also form part of making a mid-year forecast, as they likewise enable you to make ad hoc adjustments to your budget.

When the year has drawn to a close, it will be essential for you to compare your mid-year forecast to the actual performance of your business. You’ll be able to gain valuable insight into why you were (or weren’t) able to reach your goals for the year and to plan your budget accordingly.

Book a discovery call with us today to help you make a mid-year forecast that can help you make the most of the rest of this year.

 

If you want to achieve certain growth objectives for your business, having recourse to investors might be the course of action for you. While approaching investors might be commonly associated with businesses that are just starting out, a business in any stage of its growth may feel the need for the kind of funding that investors provide. 

Having recognised this need, many business owners find it difficult to figure out exactly how much they should be asking investors for in an investment proposal. Asking for too much, or even too little can turn investors off and erode your credibility. Knowing the right amount to ask for takes a lot of careful consideration and planning. 

1. How much your business is worth. It’s best to get help from professionals in figuring out the best way to value your business, as there are many different ways of calculating this. Some of the things that go into this calculation are your business’ assets, revenue, how big your team is, and how much potential you have for further growth.

2. What stage of growth your business is in. If your business has been up for some time, you’ll be able to use your business’ valuation in calculating how much to ask investors for. A newly created business won’t have this valuation and may not be able to ask for as much.

3. How much your operating costs are. Add up your operating costs such as equipment, payroll, utilities, and marketing. New businesses will also have to consider registration and related costs. Then factor in any fluctuations in your operating costs and determine a percentage of your total costs to add as a buffer. 

4. The type of investor you’re approaching. Different kinds of investors give out different amounts, so you have to be sure you’re asking the right one. If you’re asking for an investment of $1 million or less, for instance, you should approach an angel investor. If you’re hoping for an investment of more than $2 million, you’ll want to ask a venture capital firm.

5. How many potential investors you have. Being able to secure investments from more than one investor affects how much you’ll be able to ask for. More potential investors mean being able to ask for more, and vice versa. 

6. How you plan on using their investment. Certain aspects of your business such as production or marketing may require more resources, which should be reflected in your investment proposal.

7. How much their return on their investment will be. If you want to be able to provide an ROI of X% for instance, you’ll need to ask for X amount of dollars. Show the investors how much in returns they can expect if they invest X amount, particularly when you exit or sell the business.

8. How much of the business you’re willing to let them own. One way to calculate how much to ask for as an investment is to consider offering a percentage of the ownership of your business. Then you could ask for X amount, plus Y% of your business equity. 

Make sure you’ll be able to back up the amount you ask for with financial records, and that your estimate of your operating costs don’t fall short. Book a discovery call with us to get help with your investment proposal and get the funding your business needs, today.

A business can’t afford to not spend on marketing. That’s because marketing is all about finding new clients and showing them why you’re the better choice out of all your competitors.

Like other tasks or business processes, marketing requires resources, or a percentage of your business’ operating budget. While business owners know they ought to spend on marketing, how much of their budget they should allocate to marketing isn’t always clear.

If your business makes less than $5 million, the US Small Business Administration advises you to set aside 7 to 8% of your revenue for marketing. However, there is no fixed or ideal percentage that applies to all businesses. How much you spend on marketing depends not just on revenue, but on what stage of growth your business is in, and what industry you belong to. 

A new business, for instance, is expected to spend more on marketing than one that’s already been established. Businesses in retail, consumer electronics and financial services, for example, also tend to have a bigger marketing budget than those in other industries.

1. Define your marketing objectives. Before you can determine exactly how much your business needs to spend on marketing, you must first be clear on what you want your marketing activities to achieve. These objectives must be specific and have a timeframe for achieving them, as well as quantifiable outcomes.
2. Identify the marketing activities needed to reach these objectives. If, for example, you want your marketing objectives to generate awareness for your business, display advertising may be one marketing activity you can carry out. If your objective is to generate X leads within X months, you could consider inbound marketing tactics.
3. List what you need to perform these marketing activities. If you choose to run a display campaign, you’re going to need a copywriter, a graphic designer, and a media planner to take care of running the ads and managing ad spend. You’ll need similar resources for inbound and other digital marketing activities.
4. Compute how much these activities will cost. Rates for each resource (whether internal or outsourced) and marketing channel will vary. Even if you choose to do some or all of these marketing activities yourself, a considerable amount of time will still need to be spent on top of the cost of tools and utilities.
5. Have metrics in place for tracking marketing performance. Your marketing budget will need to be periodically adjusted to make sure you’re getting the most out of every dollar, and these adjustments can only be made on the heels of careful monitoring. You should be able to re-allocate resources as needed to marketing activities that are performing better than others.

Prioritizing your marketing activities after adding up these costs are big decisions you’ll have to make. If you could use some assistance in planning your marketing budget against the bigger picture, we’re just a discovery call away.

 

The longer you’ve worked with an accounting firm, the harder it can be to part ways with them—that is, if circumstances have led you to consider finding a new accounting services provider.

While it’s true that changing accounting firms comes with its own challenges, knowing when it’s time for a change can benefit your business in the long run.

1. They’re getting harder to reach. You should be able to ask your firm for advice when you need it, which will enable you to make timely business decisions. You shouldn’t have to wait for answers or do a lot of traveling to reach them.

2. They’re difficult to talk to. Chances are, you’ll be more familiar with the jargon of your own industry than you are with accounting terminology. Your firm should be able to explain things to you clearly using words you can understand.

3. They only hustle when a deadline is near. Keeping your finances in order is a year-round process which involves planning well ahead of time. This means you shouldn’t have to rush if tax dues or any other deadlines are coming up. 

4. They don’t keep tabs on IRS news. Busy business owners like you don’t often have time to stay on top of news that affect taxes and other financial aspects of your business. Your firm needs to be the one to keep watch for you—to make sure you don’t pay more than you have to for taxes, and that you’re able to benefit from any programs that have just been announced.

5. They don’t seem to be providing added value. Your firm should be providing insight that helps your business save, as well as earn, more. If you feel that you don’t seem to be getting the full value of what you’re paying them, it may be time for you to have a talk with them.

6. They don’t seem to understand your business or industry. Every business has its unique needs, and all industries each have their own regulatory requirements that can have an impact on the way they manage their finances. Your firm should be familiar with these requirements and be able to help your business to navigate them.

7. They’re not using the latest accounting software. Not using cloud accounting methods or updated software is as much of a problem for a firm’s clients as well as its own accountants.  You may be running the risk of inaccuracies, or not be up to date yourself, as your firm should be able to teach you how to use the software they’re using for you.

We know it’s not an easy decision to make, and you may want to discuss this with someone familiar with accounting for businesses like yours. For personalized advice on finding the right accounting firm for you, we’d like to invite you to book a discovery call with us, today.

 

by Matthew Peng, CRO, DoubleRule

It’s a hefty decision, and not one to be made hastily. You’ve either already started a business or you’re thinking about starting one, and you’ve realised that you will need help.

The question is, where is this help coming from? Hiring someone to join you instead may entail resources you aren’t prepared to allocate upfront while trying to grow your business quickly, therefore, finding a co-founder just may be the right course of action.

That’s what I decided to do for one of my own business ventures, and I’d like to share how I undertook this process in the hopes that it might serve as a guide for those of you considering the same.

How to Find a Co-founder

To begin with, I didn’t want to have a huge pool to choose from, and formally advertising for a co-founder isn’t something I’d recommend, mainly because you could literally end up with just anybody. 

You want to handpick somebody for the role, that would be complementary to your skillset so start with your networks when you search. In my case, I approached someone who worked in an adjacent industry to myself and who I played sports with socially, so I knew I could work with him in a team setting.

Once you’ve identified your top pick, make sure you arrange to have multiple meetings with this person in different settings to see how you would both get along on a range of topics and scenarios. Make your decision slowly, so as to really get to know this person as a potential business partner.

What to Look For in a Co-founder

1. Complementary expertise and experience. In looking for my co-founder, I wasn’t looking for someone who was a carbon copy of myself. I needed someone who had experience I didn’t have, and whose skills filled gaps in my own skill set.
2. Value brought to the business. As you continue your meetings, be sure to ask “What value do you think you’ll be bringing to the company?” Steer conversations away from what you want your potential co-founder to do; rather, find out what this person could be doing as part of your business.
3. Matching career aspirations. It’s crucial for your new co-founder to have the same kind of drive as you. You’re also going to want to look at what stage they are in life, i.e. the motivations of a young business owner will differ from those of someone more mature. Ask yourself whether you’d be comfortable being co-founders with someone at that stage.

Other Points for Discussion

1. Networks. Find out what kind of connections your potential co-founder has that your business might be able to leverage. 
2. Capital. Learn how much in capital or resources this person is able to contribute. 
3. Business structure. Talk about what roles might be best suited for one another and delineation of responsibilities and how you might settle in times of a split decision. 
4. Legal. Finally, to make things comfortable for both parties, make sure you agree on how to enter or exit the company and other such details, and that you don’t scrimp on getting professional legal assistance in drawing up a formal agreement. 

These are the points I’ve followed in finding my own co-founder, which I hope will be of some benefit to you. For personalised advice on how to start or grow your own business, I’d like to invite you to book a discovery call with us, today.

 

We need all the help we can get these days, which is why the government has extended the Employee Retention Credit or ERC program that helps business owners like you to keep your team members on your payroll. 

Very simply, ERC makes it possible for your workers to still get paid, even if Covid-19 has kept them from working during the period covered by the program.

Now that the Consolidated Appropriations Act (CAA) has been signed into law, more businesses and their employees will be able to benefit from the ERC as we move further into first half of the year.

In this post, we’ll talk about how the ERC program works, who can benefit from it, who won’t be able to benefit from it, and why some business owners might hit a speed bump or two in claiming their credits. Then we’ll talk about how you’ll be able to benefit from the ERC if your business should be eligible.

How ERC Works

In a nutshell, the ERC program gives employers a refund on their payroll taxes. You’ll be able to claim credit of up to 70% of each of your full-time employees’ qualified wages between March 13 and December 31, 2020, as well as for the first and second quarter of 2021. 

That means you can get up to $10,000 per employee, per quarter for this year’s first two quarters (versus the $10,000 per year that was available before the CAA was signed). 

When we say “qualified wages”, we mean the wages and compensation that you pay to some or all of your full-time employees in the quarters covered by the program. “Full-time employee”, on the other hand, would be one who puts in a weekly minimum of 30 hours total, or a monthly minimum total of 130 working hours.  

Expenses covered by group health plans count under the ERC, even if this is the only form of compensation you give a particular team member. 

Credits are claimable during the first and second quarters this year, or from January 1 to June 30, 2021. Note that credit only applies to that part of a quarter that your business was closed down, and not for the entire quarter. 

Also note that only salaries that your team member would have received during 30 days right before your business’ revenue started to dip, count under the ERC.

Now, if you have 500 or fewer full time full-time employees, you can claim ERC on ALL qualified wages paid out during the covered periods whether or not your employees were working at the time.

But for businesses with an employee headcount of over 500, only the wages paid to employees who haven’t been working during the first or second quarter will be considered for the ERC.

So what happens is, the ERC is applied to your share of the Social Security taxes of your employee, which means you’ll be able to refund that share, in full. 

This means that you’ll be getting the overpayment back as a refund which was taken out of the total tax amount. Put another way, if your credit exceeds your total liability of your share of an employee’s Social Security in the covered quarter, you’ll be able to refund the excess.

Don’t forget: You can claim ERC from 2020 and 2021.

Who Can Benefit From ERC

If your business has taken a hit from Covid-19 and you’re still in business between January 1 and June 30 of this year, ERC just may be able to help you out. We say “may” because you’ll have to meet the criteria given in the CAA.

Basically, you’re eligible for the ERC if your business was fully or partially closed because of a COVID-19-related government order, or there’s been a significant decline in gross receipts—but most businesses become eligible for the latter criterion.

How significant is “significant”? Starting in 2021, your gross receipts must’ve gone down by more than 20% in the first and second quarters compared to the same period in 2019. 

If you weren’t in business that far back yet, you can use the gross receipts from the quarter you opened for business as a point of reference for any quarter you don’t have 2019 figures for.

Now if you were able to take out a loan under the Paycheck Protection Program or PPP, you can also qualify for ERC tax credit, but only for wages that haven’t been forgiven or expect to be forgiven under PPP.

And also starting this year, organizations that hadn’t had access to ERC will be able to benefit as well. These organizations include federal credit unions and similar instrumentalities, public universities or colleges, and medical or hospital care providers. 

Who Cannot Benefit From ERC

The IRS says you can’t benefit from the ERC if your business is considered essential, unless your supply of critical material or goods was disrupted to an extent that hinders your operations.

You also can’t benefit from the ERC if your business premises are closed, but you’re pretty much business as usual through online means.

Take note that you may not be able to benefit from ERC if you’ve already received other credits or government relief provisions. Take the Families First Coronavirus Response Act, for example—any salaries you’ve gotten employer tax credit for, from this Act won’t be considered by the ERC.

If salaries on your payroll benefited from sections 45S or 51 of the Internal Revenue Code, whether they were paid medical or family leaves or tax credits for work opportunities, they also won’t count under the ERC.

How You Can Benefit 

So say you have figured out that you are eligible to benefit from the ERC—what you do is you calculate your total qualified wages and the related health insurance costs for each quarter. 

You’ll be needing Forms 941 and 7200, the latter applying to small businesses in 2019 with 500 workers or less  to help them ask for credit in advance.

But while the ERC can be a boon for business owners looking for ways to keep their employees on the payroll during the pandemic, it can also be a bane. For one thing, nobody wants to have to figure out their ERC eligibility when they’re figuring out their year-end taxes at the same time.

Other business owners who would very much like to benefit from the ERC might have already benefited from the PPP, and have loan forgiveness applications in the pipeline. 

While it is actually possible to take advantage of both the ERC and PPP, the deep dive into the nitty-gritties of their business’ financials to find out might be beyond these business owners’ accounting capabilities. 

There’s bound to be some overlap between the two programs, and business owners looking to make the most of the assistance government has to offer are like to find ways to leverage both. If you could use some assistance in finding these ways or in determining your business’ ERC eligibility, we’re just a Calendly booking away. 

 

References:

• Gusto Blog
• Gusto Support
• IRS
• Investopedia
• Journalofaccountancy
• Journalofaccountancy
• INC

Benjamin Franklin once said that “in this world, nothing is certain except death and taxes.” 

Although the founding father originally made that statement about the then-new constitution’s validity and durability, it just so happens that it is mostly applicable nowadays. In the case of taxes, in particular, dealing with the IRS has become even more certain because of how every business is implored to pay their dues and comply with increasingly-stricter regulations.

As a business owner or self-employed professional making a living in the USA, you’re probably familiar with the process of filing, dealing with, and paying for taxes. By this time, however, there’s one rather shocking truth that you probably haven’t realized by now: you’re not filing and paying your IRS tax liabilities as well as you should. 

“How to pay tax” made much better

Like any other kind of practice or process that your business follows, paying for IRS tax liabilities is something that you can be better at if you start applying the right approaches and tips.

While correctly paying for taxes year after year is already a significant feat in itself, managing to do so in a much more effective and potentially-profitable way possible will convince you to take things up a notch. With the tax season right around the corner, however, you won’t have to wait a few years down the line to be smarter with paying the IRS and filing returns because you can start using these best practices ASAP:

Best practice #1: Don’t wait until the last minute to record your transactions

The biggest reason most business owners give themselves a much harder time than they should when paying their IRS tax liabilities is that they cram their recording and reconciliations. 

It may not seem like much, but putting your recording by as little as a few days or an entire week can lead to a domino effect of sorts wherein you have a much more difficult time with every day of delay. Thankfully, you won’t need to worry about cramming your reports or returns come tax season again because taking half an hour at most per business day to jot down your receipts and figures will help you pay your taxes better!

Best practice #2: Learn to separate your business expenses from your personal payments

Each year, business owners, self-employed professionals, and freelancers end up overpaying a significant amount of money to the IRS because of one mistake: they don’t separate their business and personal expenses. 

Although you might think that you’d easily decipher what expense is linked to your business and what is linked to your concerns, the truth can prove to be the exact opposite once all the numbers pile up. Unfortunately, a simple slip-up can snowball into a much bigger tracking and recording issue that will significantly hurt your returns once it’s time to compute and pay for tax! 

If you want to ensure that you don’t end up experiencing the same issue to the point where you lose thousands to hundreds of thousands each tax season with overpayments, you can separate both expenses by:

• Getting a separate bank account for your business
• Individually classifying expenses through the use of a sheet (if you can’t get a separate account just yet)
• Keeping receipts for every single business expense, cash inflow, and related transactions to correctly calculate your final taxable amount

Best practice #3: Invest in the right accounting tools

With the help of technology, paying for taxes (or dealing with finances, generally) no longer has to be the same arduous task it used to be because accounting software now exists to make the experience a lot easier.

Compared to the olden days of paper ledger sheets, filing cabinets, and copious amounts of number crunching, today’s tax preparation and payment experiences are now much smoother thanks to the use of technology. Using dependable pieces of software (such as those developed by our partner Xero or Quickbooks) will allow you to prepare statements, attain accurate figures, and quickly calculate in no more than a few minutes! 

Best practice #4: Outsource help

The biggest misconception that decision-makers make nowadays when they learn how to pay tax is that they think they need to do it themselves—especially when you consider that there are professionals around to help.

If you want to have a much faster, more convenient, and more effective time when you pay for your taxes, there’s no better way to achieve some results than to let an expert that’s trained to do so take over your finances. Using a service such as DoubleRule’s starter, standard, premium, or enterprise accounting, for instance, will allow you to not only have an easier time with filing and payment but also yield various advantages—such as:

• Raking in more profit by capitalizing on available tax incentives
• Reducing unnecessary costs or return items that may only lead to unnecessarily-high tax payments
• Saving more time on compiling and recording information

Having a dependable service provider like DoubleRule by your side is one of the best ways to improve the way you pay for your IRS tax liabilities. Regardless if you’re a small business owner, start-up manager, or service bookkeeper, we’re here to help—so schedule a free discovery call with us today!

Sources:

• CNBC: Tax tips that could save you thousands of dollars
• Doing Business: Good Practices in Paying Taxes
• Nationwide: Tips for small business tax