Category Archives: Finance

Getting Wrong About Investing

Starting a business takes a lot of savvy. Many entrepreneurs border on genius when it comes to their particular niche, and that’s why people are willing to invest in, buy from, and do business with them. While a particular entrepreneur may thrive in her/his field, they may struggle in one common arena: Personal wealth management.

Entrepreneurs spend so much time garnering investments that they often don’t take the time to make any of their own. If you’ve ever started something you probably know all too well how easy it is to invest in a project, with no promise of a return. You pour all your time, energy and in this case money, into a venture hoping that it takes off (and eventually pays off).
One founder has set out to solve this problem. Paul Adams, CEO and Founder of Sound Financial Group, has a passion for helping fellow entrepreneurs reach personal financial success. As a result, his Seattle-based investment firm manages millions in capital for its clients. Paul has some great insights on where and why founders often struggle to manage their own personal finances.

Personal Wealth Management Tips

1. Legacy vs. Retirement Dreams
When most of us think of retirement, we think of vacations, houses and no debts. Adams and Sound Financial recommend an alternative perspective. Instead of putting your focus on how you’re going to spend your savings, think about the legacy you plan to create. “First, cast your vision of the future; then set an intention for any financial advising relationships you engage in, establish a plan and strategy and track your progress going forward.” Having this mindset helps vision driven founders find purpose in their financial planning.

2. Selecting the Right Kind of Assets for Long-term Withdrawals
Adams also details that “Anticipating a lifetime of withdrawals from a defined asset pool over an indefinite period of time is a complex challenge for which there is no simple solution. Pursuing this challenge can require creative approaches and persistent vigilance.”
Once you retire/exit/sell you’re essentially out of a job, so you’ll need to have saved well.
Solution? Plan for market fluctuation and have clear expectations of what your desired retirement lifestyle is going to cost. You’ll need to ensure that your investments are able to meet those expectations.

3. Your Business is Great, But it Might Not Be Great for Investment
The other mistake entrepreneurs make when relying on their businesses for personal success is banking on a sale price down the road. “I know entrepreneurs that have based their retirement plans on the current value of their business. The problem is, 10 years from now when they plan to sell, no one might be willing to purchase it for that price. It’s important to create a strategy that doesn’t rely on such variables.” Adams shared.
Loving your business is great. It’s natural for founders to believe that their ventures are also worthy of personal investment, but startups are risky and markets are volatile by nature, so you shouldn’t just rely on your ventures for retirement funding.

4. Mistakes in Calculating Net Worth
So much of getting a business started is pitching to the right people and selling the value of a venture. It’s not uncommon for entrepreneurs to present the best version of things in order to get people on board. Unfortunately when it comes to self-valuation things get a little tricky.
Often entrepreneurs simply calculate the most current value of the business and use that as a baseline for their own net worth. Adams shares that “There’s a difference between your personal balance sheet and that of your business. Entrepreneurs who are new to financial management also make the mistake of including the wrong assets in their calculations.
Vehicles, homes and similar assets have real value, but they shouldn’t make it into your net worth calculations unless you plan on selling them soon and not replacing them.”
Measuring your net worth is a critical part of your financial strategy because it helps you determine what investments you need to make to plan for retirement. An inaccurate assessment of your current worth may lead to shortfalls down the line.

5. Don’t Make Commitments Without Having Them in Your Existing Plans
Adams shared “I can’t tell you how many entrepreneurs get themselves into trouble by committing to things without including them in their financial strategy. Expenses like vehicles, college tuition or a better house are easy to aspire to or promise, but planning for them is a whole different game. Whenever you want to commit to something in the future for you or your family, start including it in today’s plans.
The key is having the patience to incorporate these goals as a part of your long-term strategy. It also requires a degree of self-awareness and self-control. You have to be able to realize a want or a desire and postpone it until you can assess its impact.

So to recap, Adams recommends that you:
Plan your legacy before you plan your retirement,
Plan what your retirement withdrawals will be based on both the kind of assets you have and the lifestyle you plan on living,
Don’t base your retirement on the future sale price of your ventures,
Accurately measure your net worth to help determine what’s needed to accomplish your retirement goals,
Don’t commit to expenses before including them in your strategy.

Many leaders and founders spend more time managing the success of their business than their own finances. The fact of the matter is you’ve worked hard to achieve the success you’ve earned, so you owe it to yourself to manage it well.

Know The Best Mobile Payment Systems for Retailers

The easier you make it for your customers to do business with you, the more likely they are to consider you first when they need something. According to Pew Research, 90% of Americans own a cell phone, 64% own a smartphone, and 57% use it for online banking. Your smartphone is likely more important to you than a wallet or anything else you would carry with you, according to research.

All of those facts illustrate why companies like Apple, Google, and numerous startups are so interested in mobile payments. It has not yet caught on en masse but it’s coming.

A quick search reveals plenty of options. Which should you choose?

Two Types

Using a mobile device to process payments isn’t new. Many companies have offered the technology for years. The “new” technology involves consumers using their phones in place of a credit card. If you’re not ready for the latter, here are some options to accept credit cards using your smartphone.

PayPal Here- A lot of companies have fallen victim to cybercrime. Despite the widespread attempts to infiltrate PayPal’s systems, it hasn’t happened. This is a company that has earned your trust. PayPal requires you to have a PayPal account and a small credit card reader that plugs into your smartphone. Download the app, and you’re in business. No monthly fees and 2.7% per swipe.

Square- Hats off to Square’s marketing team. In large part, when people think of scanning credit cards with smartphones, they think of Square. You’ve probably seen the commercials and know the brand. Like PayPal, simply plug a reader into your phone, download the app, and you’re set to go for only 2.75% per swipe.

Square is even ready for the switch to EMV and NFC technology. In the Fall of 2015, Square will ship its contactless reader.

Intuit GoPayment- If you use QuickBooks, and there’s a good chance that you do, look at Intuit GoPayment. You get the card reader and the app for free and swipe rates are 1.75% plus 25 cents if you pay the $19.95 per month fee or 2.4% plus 25 cents without the monthly fee.

Amazon Local Register- You may not know that Amazon has a mobile payment service. Swipe fees are lower than PayPal and Square at 2.5% but you have to purchase the card reader for $10. However, Amazon gives you a $10 new account credit making the card reader essentially free.

Contactless Options

If you’re just now looking to get into mobile payments, the above options work, but from a technology perspective, they’re old. If you don’t want to get into contactless options, go with Square until the others have an EMV card reading device or take your chances with a third party EMV reader that hooks into a computer or mobile device.

But let’s talk contactless! Customers simply hold their phone or mobile device over a contactless reader and the payment is complete. It’s that fast—and the more tech savvy consumer is already using it and wants to use it more. There are two systems worth talking about.

Apple Pay- Apple knows how to market and it has the money to do it. If you’re even a little techie, or you watch TV, you’ve heard of Apple Pay. A customer loads their card into Apple’s payment app. When they visit a store that accepts Apple Pay, they simply authenticate the payment with their fingerprint, hold their device over the payment terminal and transaction is done. All you have to do is have a payment terminal that is NFC enabled and you have everything you need. NFC enabled terminals are as little as $250.

Signing up for Apple Pay is easy and free. All you do is contact your payment provider and they’ll do the rest. Apple Pay doesn’t charge you anything so whatever you were paying in credit card fees before you’ll pay the same with Apple Pay.

Contactless payment systems are more secure. Apple Pay assigns a unique number to your transaction instead of transmitting your card number—“Tokenization” in geek speak. This number is used only once so even if a cyber thief got the number, there’s nothing they can do with it.

Google Wallet- Google Wallet is Google’s mobile payment system. Enter your cards into the app, and you’re set to accept payments. Google Wallet is more geared towards e-commerce but works just fine with NFC terminals in your brick and mortar location. As soon as Android Pay is available to the masses, it will better compete with Apple Pay—likely being accepted everywhere consumers can use Apple Pay.

Samsung Pay- Samsung recently released its beta version of Samsung Pay, a payment platform to compete with Apple and Google. At the time of this article, it was only available to about 1,000 people in it’s home country of South Korea but early reports are positive.

Let’s Learn About Mobile Payment Security Tips

Consumer technology is supposed to make things easier. Credit cards are the payment method of choice for so many because they’re fast, easy, and safer than carrying cash. Arguably the biggest advance in the technology of payments is mobile payments with a smartphone.

Due to its marketing budget, the best-known mobile payment method is Apple Pay but despite the company’s status as a household name, it’s technology is relatively new and unproven compared to more established players in the field like PayPal and Square.

Technology allowing you to pay using only your smartphone is very new and because of that, cybersecurity is a concern for both consumers and the business owners accepting these mobile payments. But most experts advise not to worry.

Mobile payments use NFC or near field communications. It’s kind of like Bluetooth but the differences make NFC more appropriate for mobile payments. Bluetooth signals have a range of about 30 feet while NFC is limited to about 4 centimeters. Because of the short range, the signal is more secure. If a hacker wanted to intercept your data during the transmission from your phone to the payment terminal, they would have to position a device within 4 centimeters of your device.

Second, Bluetooth technology takes longer to connect the two devices and uses more battery power.

The newest mobile payment technologies have multiple levels of encryption. Apple Pay, for example, doesn’t transmit your credit card information. Instead, the credit card processor receives a special number that is valid for only one transaction.

How to Stay Safe

No technology is absolutely safe and regardless of how secure, it’s only as secure as the person using it. Most security concerns come from older but still popular mobile payment gateways like PayPal and Square. Here are a few ways to stay safe:

1. Don’t use public Wi-Fi- If you’re entering credit card information on your phone, either through manually typing the numbers or swiping the card. You never know who is on these networks and the chances of somebody getting your financial information is higher.

2. Don’t store passwords on your phone- Rest assured, as soon as somebody figures out a better way to authenticate your information, passwords will be a thing of the past. They’re already inconvenient but to combat that problem consumers often do everything they can to make them assessable and trouble-free.

But the more convenient you make it for yourself, the easier you make it for a cyber thief to get their hands on your information. Don’t store your passwords on your phone unless they’re encrypted.

3. Strong passwords- Along the same lines, your password should have no link to you personally. Don’t use your birthday, your son or daughter’s name, your street, or anything else linked to you. That information is publically available and hackers know where to find it.

4. Use a Password on Your Phone- If you’re using your phone to do financial transactions, you must have a password—not the month and year of your birthday either.

5. Stay mainstream- Only use apps from official company app stores and well-known companies. Unless you’re an IT expert that understands the under-the-hood details of cell phones, stay away from jail breaking your phone or any app that relies on a jail broken phone.

6. Have a device locator running on your phone- There are apps for all phones that allow you to track the location of your phone if it’s lost or stolen. Make sure it’s turned on and correctly configured.

7. Don’t link to your mobile device to your debit cards- Let’s say somebody gets a hold of your phone and uses it to make payments. If you have the security features of your phone activated, that will be difficult but if it happens, you will immediately dispute the charges because you’re monitoring your bank and credit card accounts with an app of some sort. (hint)

If it happens, you don’t want the thief emptying your bank account. That would mean you have no money until the problem is resolved. That’s why you don’t use your debit card. Use a credit card. At least the only thing you lose is access to your credit card for a brief period.

8. Examine the payment terminal- You don’t have to be a mobile payment expert. If the machine looks tampered with or there are any other items around it, don’t use it. Devices the size of strawberries have been created in labs that can steal data transmitted through NFC but to date, no real reports have surfaced.

What is real are devices being attached to gas pump readers as well as terminals in other stores that can steal your information.

Payment Types Should Your Business Accept

Most business owners would say that the most important thing they do is accept money. Without money, every other business activity is irrelevant because money is the lifeblood that keeps the business open. Of course, building relationships is important and essential but unless your business has a healthy stream of capital rolling in, you’re destined to close your doors.

You’ve probably heard that if you want your customers to do something you should make it as easy as possible for them to do it. If you want them to sign up for your e-mail list, give them more than one way to give you their information. If you want them to visit your store, make sure there’s plenty of parking, you’re open at convenient hours, and your location is as central as practical.

How you collect money follows the same rules. The easier it is for your customers to pay you, the better it is for you. But here’s the problem: the easier it is for you to get paid, the more you’ll likely have to pay for that convenience. Which of the many payments should you offer and why?

It Depends

Don’t you hate it when you can’t get a hard and fast answer? Unfortunately, it really does depend. It depends on the type of business, its size, the amount of employees and customers, the average cost of transactions, and more. But don’t worry; we can give you some general guidelines.

If, for example, your business only works with other larger businesses rather than retail customers, you probably don’t need to accept cash. Unless the business is exceedingly small, its accounts payable department isn’t going to pay anything in cash. You won’t need a layaway plan either.

A retail small business that deals largely with the general public on mostly low-dollar purchases probably won’t deal with purchase orders. That business may not accept them because they don’t have an accounts receivable department to track the PO and collect payment.

Should You Accept These Payments?

There’s plenty of ways to pay. Which should you accept?

Cash- Unless you’re a business that deals in high-dollar invoices and works with only commercial customers, you should accept cash payments. If you’re a retail business that has a self-service model, you may not accept cash either. Some gas stations that don’t have a store now only accept credit cards, for example.

Checks- If your business works with other businesses, you probably don’t have a choice but to accept checks. If you’re a retailer, you have a choice. Whole Foods has stopped accepting checks at many of its locations and many other retailers have as well. If you do accept checks, have a means of verifying the check before taking it as payment. There are now websites that will help you with this.

Credit Card- With more than 500 million credit cards in circulation in the United States alone, you should accept credit cards regardless of the business you’re in. Some businesses traditionally don’t accept cards but that’s changing too. But consider the amount of fees you will pay to take credit card payments and work those into your cost.

Mobile Payments- Only about 41% of people say that they have used their phone to make purchases in a retail store and of those, only about 14% say they do it regularly. If you’re not yet using Apple Pay or one of its competitors, don’t consider yourself a dinosaur but it’s hard to find people who don’t think mobile pay is only going to grow. You may not accept it now but keep a close eye on it.

Money Order- You might consider cashing money orders if your business works with a large amount of low income consumers who may not be eligible for a credit card or checking account and don’t want to carry cash. If you accept money orders, verify their authenticity.

ACH- ACH, or automatic clearing house, uses your bank account to transfer funds to you. Employers often use this payment type to pay their employees. If you’re a freelancer, ask the business you’re working with if they make ACH transfers. If they do, you’ll likely get paid faster than through other means.

Payment Plan- Avoid this, if possible. Small businesses don’t usually have credit departments and you don’t want to get into the business of tracking down late payments and everything else that comes with setting up payment plans. If they want a payment plan, they should use a credit card.

Layaway- Just like a payment plan, unless you’re a large business, you probably want to bring inventory in and sell it as fast as possible. If you’re offering a special price, you might work out a deal to honor the price and order the item once they have the money to pay if you’re out of stock.

Bitcoin- If you’ve never heard of bitcoin you should definitely not accept it as payment and even if you have, it’s best to stay away from it for now as well. Virtual currency is so new and so volatile that it’s not worth the hassle. There are also security concerns.

Sales Tax Nexus

If you want to incite stress, a tension headache, and maybe a bit of anger, strike up a conversation with fellow small business owners about sales tax. For businesses that sell outside of their home state, it’s a giant nightmare that is nearly impossible to navigate without help.

Today’s word of the day is nexus. Nexus is simply a connection. Once you establish a nexus with another state, you have to pay taxes in accordance with that state’s laws. The bad news: If you establish a nexus with all 50 states, you have to know the tax laws for each of those states and pay appropriate taxes based on your business activity in each. Or you have to hire a company to take on the task for you.

In more academic terms, nexus is, “maintaining, occupying, or using permanently or temporarily, directly or indirectly or through a subsidiary, an office, place of distribution, sales or sample room or place, warehouse or storage place or other place of business.” How do you create a nexus?

1. Selling Stuff- If you sell a product or service to a client or customer in the state you are located in—you have a nexus. Some states have tried to claim that you have nexus if you sell anything at all over the Internet to their residents.

2. Physical Presence- Do you have an office in the state?—nexus.

3. An Employee- Do you have an employee in the state even if they don’t have an office?—nexus.

4. Warehouse- Are you storing your goods in the state?—nexus

5. Independent Contractor- It doesn’t matter what you call them. If they’re doing work on behalf of your company—nexus.

6. Drop Shipper- Do you work with another company that ships products for your company from that state?—nexus.

7. Trade Show- Did you go to a trade show in that state and make a sale? (or not make a sale?)—you guessed it—nexus.

8. Amazon Fulfillment- Do you sell products through Amazon and they’re warehoused in that state?—nexus.

9. Affiliates- Do you have affiliates whom you’ve never met or don’t even know about who are selling your products on their website based in another state?—that’s nexus.

The Depressing Truth

If you or anybody connected to your business does any activity in another state, you’ve probably created a nexus. Because states are generally strapped for cash, they’re looking for any and all sources of income. Because of that, they’re cracking down on businesses that have traditionally made sales in multiple states but never paid sales tax.

The other problem is that these laws aren’t created at the federal level. These are state-level laws and each state is free to do it however they would like. That doesn’t make for an easy task for any business owner.

Even behemoths like Amazon are having trouble with compliance. You don’t have to look too hard to find stories of Amazon leading the charge against what the company calls “heavy handed” state tax laws. Over the years, the company has refused to conduct some business activities in certain states and has gone as high as the U.S. Supreme Court trying to block states from requiring customers to pay sales tax on online purchases. In 2013, the Supreme Court refused to hear an Amazon appeal against a New York state law requiring state tax on online sales.

What to Do

As a small business owner, you probably don’t have time to navigate the complicated maze of compliance in each state. First, are you getting enough business from other states to justify the cost of compliance? If your business is primarily online, the answer is probably yes but if you’re selling a handful of product in another state, it might be too early in your growth cycle to justify the cost and hassle.

If it does make sense, there are services that can help. One of the most popular with small business owners is Avalara. The company automates sales tax filing for each affected state. Simply sign up, upload your sales data to its platform, and Avalara will generate your sales tax return forms for each state. Another is a free service called TaxCloud. Both services integrate with a number of popular ecommerce shopping carts, and when integrated will automatically calculate the right tax as well as file your returns and remit moneys owed. At this time (summer 2015) TaxCloud is authorized to file taxes for its clients in about half of the states in the US, but is working to expand that number.

You can get similar services from local bookkeeping and tax preparation business as well as other online sources. You can do it yourself but that will require going to each state’s taxation website, figuring out what constitutes a nexus, and finding and preparing the forms.

Increase Your Small Business Profits

As a small business owner, you know that sales, alone, aren’t an indication of your business success. The true measure of success is your business’ profits. True, increasing your total profit for the year usually requires increasing sales, but here’s the rub: if you’re not careful, the cost of increasing sales could lead to decreased profit margins or even a loss. So how can you boost your small business profits this year? Here are eight strategies to fatten up your bottom line.

1. Attract new leads with information marketing

Today’s customers are hungry for information. They want to educate themselves before they talk to a sales person or make a purchase. Providing them with that information can make your business more profitable because it helps you win the customers’ attention, contact information and ultimately their orders. Do it by offering information-packed downloadable special reports, white papers or checklists for free. The information doesn’t have to be long. It just has to be informative and promoted with an attention-getting headline. Promote the giveaway on your website and through social media and require at minimum an email address to gain access to the information. Be sure the giveaway includes a call to action to turn the lead into a paying customer. And don’t forget to follow up on the leads.

2. Use the leads you already have to get paying customers

No matter how you get your leads, if you’re like many small businesses, you don’t follow up on them as much as you should. In fact, chances are you only follow up on the leads you believe are hot leads, and then you may only follow up once or twice. The problem with that approach is two-fold. First, you waste the marketing dollars you spent to get the lead. Second, it keeps you from having ongoing communications with prospects who could become customers. Those possible customers include individuals who are just starting to research their intended purchase, and those who are ready to buy, but who have other more pressing things demanding their attention when you call. Ignore them and you’re likely to lose the sale to a competitor.

To solve the problem – and increase your profits this year – formalize your lead follow-up procedures. Have a plan for following up with the hot leads. List the steps you’ll use to stay in touch, including what to do if you don’t get a response after the first call or two. Plan how you’ll handle leads from customers who don’t appear to be ready-to-buy. Decide how you’ll keep in touch, what information you’ll send them or point them to. Have everything written and scripted out, and automated as much as possible so you’ll easily be able to start the process for each new lead. If you don’t already have it, develop a monthly or twice-monthly email newsletter that you can send out to all prospects who have asked for information about your products and services. The newsletter will let you stay in touch with and convert luke warm, not-yet-ready-to-buy prospects into paying customers.

3. Increase order size and/or frequency

The math on this is simple. If you have 100 customers who each spend $50 within one month, you take in $5,000. If you get those same 100 customers to spend $70 a month, you take in $7000 for the month – which translates to more profit for you without increasing your marketing budget. To get order sizes to increase, learn (and train your employees) to upsell and cross sell. If you’re a physical therapist, for instance, you might encourage patients to buy stretch bands, icepacks and other equipment from you so they can continue their exercise program at home. You might also be a reseller for nutritional supplements. Fliers in your waiting area and placing posters where patients will see them while doing therapy can all help sell additional services without your therapists having to “sell.” If you sell products through an online shopping cart, add a function that automatically suggests related products to the shopper.

Prepare a Price Quote

It seems so simple, doesn’t it? What’s so hard about giving somebody a price quote? The truth is that there’s a lot more to think about than just the number because a price quote is so much more than just the price. It’s a window into you, your business, and what the customer can expect if they do business with you. Savvy customers can find a lot of information in your quote well beyond price. Here’s how to do it right.

Before the Quote

You receive a call, e-mail, or a customer comes to your store asking for a price quote. They simply say, “Can you give me a quote on some repairs I need on my home?” Before you prepare the quote, get to know your customer. If you’re in the contracting business, you’ll probably end up at their home but first, qualify them.

Do you handle the type of home improvement or repair they’re looking for? Do they need it done within a certain time frame and can you meet it? Where is their home? Is it within your service area? Don’t waste their time or yours if it’s not a job you can do, it’s not a product you stock or service, or if it so far outside your area of expertise that you can’t get them top-notch service.

Next, if you have to go to their home, like in the case of our contractor, follow some basic rules. First, show up on time. Be a person of your word. If you say 2:00, be there at 2:00. If another job holds you up, call or text as soon as possible and let them know. Also, call or text when you’re heading to their home. That gives them a heads-up but also helps to make sure you don’t show up to find nobody home.

Look professional. That doesn’t mean suit and tie unless that’s considered professional attire in your line of work. In the case of our contractor, keep an extra shirt and pants in your truck that are clean, fit well, and make you look polished. It won’t matter to some people but looking clean and neat is a big deal to some of your potential clients or customers.

Finally, ask all the questions you need to put together an accurate quote. Will the customer be purchasing the paint for the rooms they want you to paint, or will you be purchasing it? How many high hats do they want in the ceiling of the finished basement, and how many light switches will they want and where will they be located? Who will be responsible for painting the new deck the customer wants you to build? This helps you and shows your customer that your attention to detail is alive and well. It also helps prevent disputes over what was supposed to be done for the price you quoted.

Along the same lines, practice and polish your general sales pitch. Tell your potential customer about you, your company, what makes you better than your competitors, and the basics of how you do the job. If it applies, have some pictures to show them, offer to give them names and numbers of references, and let them know that you’re licensed, bonded, and insured. (Or any other designation that comes with your line of work)

At the end of the conversation, make sure you have multiple forms of contact in case one doesn’t work. Let them know when to expect your quote and deliver on it. Don’t be late. You don’t want your customer thinking, “if she can’t get me a quote on time, how will the job go?”

The Actual Quote

Each different type of business will have different information but in general, your quote should have more than just the price. Send along some written information about your company—the same things you talked about in your general sales pitch.

Make the quote official. Don’t write it on a piece of paper or simply send a price in an e-mail. Have a quote form that looks official and polished. Remember, everything communicates a message about you and your company. The form should have your business name, any licensing numbers, logo if you have one, and all of your contact information.

Itemize your quote. List all the details that were agreed to. Nobody wants to see a number without knowing how you came to it. You don’t have to reveal all of your secrets—like wholesale pricing or anything, but if there are materials and labor, break those into line items.

In the case of our contractor, if multiple rooms need work, itemize each room so the customer has options. If you really want to service your potential customer well, give them multiple options. Maybe what they wanted will be out of their price range. Without asking, quote them at a level that fits their budget. That’s going to take more time but your competitors might not be quick to do that.

Give them a hard and fast start and completion date. If you really want to stand out, let them know that if you’re late finishing the job, they get a certain percentage discount.

Consider leaving some room to negotiate. You might quote 5% higher than you normally would in case you have a client that wants to haggle. Along those lines, let them know that if they get a lower quote, you would like a chance to match it.

After the Quote

Once you give them the quote, ask them when you should follow up with them. Your customer wants to see that you’re serious about working with them. They might wait for you to contact them just to see if you’re serious. If they don’t give you convenient time to contact them, send a note in 5 to 7 days.

Know About Multple Streams of Income for Your Business

You have your business, and it’s doing well. Something inside you is pulling you to something else, though. It’s not that you want to start a second business, you just want to do more with the business you have now. Multiple streams of income will give you that something more you’re seeking. Not only will it be in the same industry as you are already in, but it can significantly increase your income.

Teach an Online Class

This is a great way to position yourself as an authority in your industry. Hold classes that have to do with the products and/or services you sell. You can use a website such as Udemy to run your class or advertise it on your website and hold the class via phone, email, or Skype.

You make money by charging people to take your class. You can offer learning materials such as documents, videos, and audio files. People love valuable content, and they will pay for it.

Starting this alternate stream of income can be cumbersome in the beginning as you get the platform and materials together. However, once it is set, you won’t have to do much every time you hold the class.

Write an eBook

Many businesses choose to offer additional content than what’s on their website to make extra money. When you write an eBook, you can sell it on your website, Amazon, or other websites people browse for electronic reading materials.

You make money off every eBook you sell. If you sell it on your site, you will receive 100% of the price. If you use Amazon or another site, you will have to give them a cut of the price of the book. Usually, people find this to be worth it since sites selling eBooks have a lot more traffic, so there’s more opportunity for them to sell.

This is another option that takes a lot of work in the beginning, but once it’s done, you don’t have to do anything else. Many people do this as their main business, but it’s doable as a side one that goes right along with your current business. The benefit is that your eBook will likely interest people who would be interested in your services and/or products, which could end up increasing your revenue in that way as well.

Sell Products/Services Related to Your Current Business

Many people expand their business by offering more. Let’s say you are currently selling hair services for your salon on your website. You’ve received a lot of business from it, so you decide to offer the hair care products you have in your salon. Now, you not only earn money from new clients who find your website and choose to come see you, but you also make money from the sales of the products.

Think about what you could sell in addition to your products or services. If you’re already selling products, think of services you may be able to offer people. It doesn’t have to be services offered offline. Get creative and think of services you can offer online, and you’ll really be busy with making extra income as everyone turns to you for not only your products, but also the help you provide.

Learn More About Income Tax Basics for the Gig Economy

We live in the post-recession economy. Along with more skepticism over the future of the economy, many have bought into the gig economy—where people take individual contract jobs rather than working for a larger company. Some might call it the American dream but if you don’t plan correctly, it could turn into something of a nightmare.

The Facts

A study by authors from Princeton and Harvard Universities found that the number of freelancers grew from 10.1% in February of 2005 to 15.8% in late 2015. Computer jobs hold the most freelancers but customer service, medical, and writing industries attract many as well. Freelancers beware—you might be setting yourself up for financial turmoil if you don’t think of yourself as a business owner. It has to do with taxes.

Taxes

As a freelancer you have to pay taxes just as you would if you worked for a larger company but with one important caveat. You’re responsible for all of the taxes. What you may not know is that when you are an employee, your employer pays half of your total Social Security and Medicare taxes. Thus, as an employee of someone else’s business, you paid 6.2% of your salary (up to the taxable maximum) for Social Security tax, and a 1.45% Medicare tax, (combined total, 7.65%.) Your employer was required to match those payments. Thus, your total contribution for Social Security and Medicare (your payment plus the employer’s) was 15.3%. And, of course, you also had money withheld from your paycheck for income taxes calculated based on the information you provided your employer on a W-4 form. As a freelancer, you have to pay both parts of the Social Security and Medicare taxes. Instead of paying the government your income tax plus 7.65% (combined Social Security and Medicare tax), you pay income tax plus 15.3% (minus any deductions or credits) That 15.3% is called a self-employment tax.

Determining the total amount of income tax, Social Security and Medicare taxes you’ll owe for the year isn’t easy. You have to take into account your income, your tax bracket, deductions, and credits. If your business is relatively stable, simply look at last year’s tax return and take numbers from there. Or, a very rough estimate is to take 35% of every dollar you make, put it in a separate account and use it to pay taxes. If you are required to pay state and city income taxes, don’t forget to calculate their cost for the year, too.

Information About Retirement Planning in the Gig Economy

In a previous article we looked at people who now work in the gig economy—taking contract jobs as a freelancer/small business owner rather than taking the more traditional route working as an employee for another business.

It’s not as simple as saying goodbye to your employer and setting out on your own. We looked at things like the self-employment tax and other tax considerations that significantly impact your earnings.

Along with taxes, there’s another consideration—retirement. Maybe you saved up a valuable nest egg before you left your previous job, but for many, they’ve barely started amassing a retirement savings. Because of this, you have to consider your retirement income before going all-in on the gig economy. Yes, you’ll receive Social Security assuming you pay fully into the system, but relying on a government program to keep you financially afloat in your later years isn’t the wisest strategy.

It’s All On Your Shoulders

In our last article we talked about how your employer paid part of your Social Security and Medicare taxes but as a freelancer you have to do it all on your own. The same holds true for retirement. Studies show that nearly 9 out of 10 employers matched a portion of the employee’s 401(k) contributions. That represented a large portion of your retirement savings but as a freelancer, you won’t get any employer match. It’s all on you to save enough to retire comfortably. If you’re 30 and haven’t saved anything, you will need to save about $649 or more per month depending on your income and lifestyle to retire with enough money to live comfortably on. You can estimate the amount you’d need from this calculator.

Have employees? This article may help you navigate their retirement options.

The IRA Dilemma

It’s easy, right? Just start an IRA, contribute as much as you can, and you’re set. There are a host of problems with that plan. First, an IRA comes with a $5,500 annual limit ($6,500 if you’re age 50 or older ) allowing you to contribute a maximum monthly amount of about $458 (or $541 starting at age 50)—not nearly enough if you’re significantly behind on savings. Your spouse can get an IRA, whether he or she is working or not, giving you an extra $5,500 to work with. That’s better but what about if you’re single?

The SEP

The Simplified Employee Pension or SEP is an option. You can contribute the smaller of $53,000 or 25% of your total compensation. Learn more about it in IRS Publication 560. But be careful. Don’t “forget” to claim all of those small-dollar clients that didn’t pay you enough to file a 1099. If you “forget” to claim it, it lowers your maximum.

SIMPLE IRA

The SIMPLE IRA plan for small employers is about as simple as anything involving the IRS can be. It works the same as a regular IRA but your yearly limit is higher. Instead of $5,500, you have a $12,500 limit. If you’re over the age of 50, you can contribute as much as $15,500. Again, Publication 560 will tell you everything you want to know.

Other Options

There are other ways to fund your personal retirement from your company but the SEP and SIMPLE IRA are the most common. There are also profit sharing plans and a self employed 401(k) plan where you and your company make contributions but these are a little more difficult to set up.

Taxes

Assuming you have some kind of formalized business like an LLC, any retirement benefits your company provides to you are a business expense. Your company can write that off as an expense in most cases. How that all works depends on some factors a tax expert will probably have to help you with but it is an expense like any other.

Effect on Pricing

Be honest—as a young or new entrepreneur have you wondered why your competitors are charging so much more than you believe the service is worth? You’re probably beginning to figure out that even a consultant working out of their home has overhead expenses. You have to pay taxes on your earnings and you have to fund your retirement and even insurance. That should drive your hourly rate significantly higher.

Think about it this way. Let’s say that you figured you have to save at least $500 per month for retirement and you’re going to pay about 30% of your earnings in taxes and you work 40 hours per week, and you charge $50 per hour. (For the sake of simple math.)

Just the retirement portion makes your hourly rate $52.50 and taxes add another $15 so now you’re at $67 without taking into account any other expenses. There are surely some other expenses your business incurs like licensing, continuing education, equipment, and more. It wouldn’t be surprising to see that number make it to $80 or more.