COVID Funding Tips for Small Businesses

Jul 21, 2020 by

In today’s economy, is it more important than ever before to understand and implement our COVID funding tips to help keep your business up and running.

The goal is to beat the odds and business failure statistics. As you know, up to 95% of businesses fail within 5 years, and now with COVID, most off-line business are not going to make it past the first year. 

The number one reason is lack of money, capital, funding or whatever language you want to use to describe that. It is amazing how many just think all those projected numbers on the business plan or excel spreadsheet are automatically going to happen because you wrote them out on a spreadsheet.

Your sales are not going to go the way you predicted. Most of the time, sales revenue is considerably less than anticipated. Sometimes, sales are better than anticipated and a scalability problem comes into play. Many times, you are looking for new partners, vendors, or opportunities to grow and those may not be working out.

The overall challenge is that you must understand the funding fundamentals just as well as you may understand your online conversion fundamentals or your sales presentation fundamentals. This is just a must.

Once you understand the funding fundamentals, you will be in a position to secure more funding to grow your business (or, in many cases, stay in business and beat the odds).

The first step is to stop using your personal credit cards for your business. If you have formed a separate legal entity, you should not be using a personal credit card. The entity should apply for a business credit card in the name of the entity.

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Questions to Help Determine if an LLC or Corporation is Best.

May 13, 2020 by

Which entity is best for your new business, an LLC or Corporation? When you form a new LLC or corporation, the process is so easy, with so many online websites. Filing the articles with a registered agent is the easiest part of the process. The challenging part is to determine how your corporation or LLC should be taxed at a federal and state level and to make sure you have a complete formation, one that has real liability protection, not just filing the articles, which has ZERO protection.

Ask these Questions to Help You Determine is an LLC or Corporation Best?

Ask these Questions to Help You Determine is an LLC or Corporation Best?

Here are some of the key questions we recommend you evaluate before you form an LLC (which may be taxed in four different ways) or a corporation that may be taxed as a C corporation or an S corporation.

  • What is your business and how does this affect your choice?
    • A personal service corporation, in the past, was a flat 35%; but since the 2018 tax cuts, that has now been reduced to 21%
    • 20% deduction for pass-through income, with some restrictions
    • Are you investing in real estate or do you flip real estate?
    • Are you an e-commerce seller with potential sales and state income tax requirements?
    • Do you own real estate? If so, are you a dealer or investor? How many properties do you own? How much total equity and what percentage of your total net worth is all the properties?
  • Do you have partners?
    • Is it a domestic partner in a community property state (there are 9)? This comes into play with a single or multi-member LLC. 
    • Is it a foreign partner in another country? If so, is there a tax treaty with your partner’s country?
    • Do you plan to have a buy-sell agreement?
    • Is one partner an investor? This has a big impact on how your LLC is managed. 
    • Do your partners have an SSN or ITIN (this is important for banking, U.S. merchant account, and sales tax registration in a few states).
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Sales Tax Permit Registration Mistakes to Avoid

Mar 21, 2020 by

As an e-commerce seller, you want to avoid sales tax permit mistakes. This is the key part of the process when you are collecting and remitting sales tax.  Yes, some states like Washington and Pennsylvania will collect sales tax, but you still need to get registered and file sales tax returns.

Sales Tax Registration Mistakes to Avoid

Avoid these Costly Sales Tax Registration Mistakes

The process to get registered means obtaining a sales tax license or permit to collect and remit sales tax in the states where you have sales tax nexus. Since the June Wayfair vs South Dakota case, you now have to worry about the economic nexus states in many cases when you sell only 200 transactions in a state.

We have applied for thousands of sales tax permits for clients over the last several years and we wanted to share some key costly mistakes to avoid.

1. Are You Applying for a Sales Tax or Use Tax Number?

 Are you an out-of-state seller applying for a sales tax number or an in-state seller applying for a sales tax number? Each state is different. In some states, it is very clear, if you are an out-of-state seller, you are applying for a use tax permit, some states they combine sales/use tax as one option. Every checkbox takes you down a pathway and may come back to haunt you when audited; just make sure you get it right from the start.

2. Not Taking into Account Time Frames.
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12 Questions to Ask BEFORE Forming a U.S. Entity

Feb 26, 2020 by

These 12 questions below are not only important to ask, but are necessary to get the best answer and support. They apply to all foreign e-commerce sellers looking to establish a U.S. entity. Forming a U.S. company is not as simple as forming a single member LLC with a mail address. There is much more involved. These questions will help keep you on track when working with a U.S. entity provider.

US Company Formation

Ask these 12 questions before forming a U.S. company

  1. Do I Even Need to Form a U.S. Entity as a Foreign Seller?

    This leads to your options to sell in the U.S. as a foreign entity vs the advantages of using a U.S. entity.

  2. How Long will it Take to Form my U.S. Company Correctly?

    You will need to know the factors that will determine the length of time to form your entity, apply for the EIN, establish a bank account, as well as get into compliance with sales tax. Don’t get fooled by “incorporate in 24 hours or less” headlines; these usually lead to costly mistakes.

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How to Cut Expenses without Killing Your Business!

Feb 2, 2020 by

The purpose of any business is to develop a profit. There are many factors that will affect your business’s ability to generate a profit. Those include the costs of goods sold on your products, your price point on your product and services, your fixed and variable expenses.

In this economy where the sales funnel is typically wider for most businesses, meaning it will take more calls to make a sale, the knee-jerk reaction is to cut your prices to increases sales revenue to help generate overall more profits. That strategy typically will backfire (unless your up-sell process is strong and you know your numbers like clockwork).

One of the biggest issues is knowing the ratio between cutting your prices a certain percentage (like 10%) and now knowing your corresponding COGS (Cost of Goods Sold) percentage. The key question becomes, how many additional sales will you have to do at full price to make up for the one sale you gave a 10% discount? My good friend Spike Humer, has developed a very good chart that tells you the answer based on the price discount and COGS. For example, if your product or service has a 40%COGS and you cut the price by 10% the company would have to do an additional 15 sales to make up the profit lost on that one sale. This brings in revenue, but unless a strong back end exists this can lead to a fast track to being out of business.

There are a few fundamentals that we recommend you have in place before you start cutting expenses to make the best decisions.

First, you must know your numbers. There are important questions to ask yourself about your numbers. How many leads to you have each day? What is the cost per lead? What is your cost per appointment? Cost per new client? What is lifetime value of each new client?

For example, if you have 10 leads per day and you have to spend a total of $2,000 per month for marketing, and that is divided by 30 sales days (counting weekends ) or 20 sales days if you do not. That comes out to 10 leads per day x 30 sales days= 300 leads. Now take $2,000/300 leads=$6.66 per lead.

If it takes 10 leads to develop 3 appointments, that is $22.00 per appointment. If those three appointments turn into 1 sale that means it is costing you $66.66 per client (which is a low number). For many of you, it may be costing you $25 per lead that you receive. That changes the numbers dramatically.

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