3 Questions to Answer Before You Start a Business

You know you have the inspiration and the drive to launch a business. But it takes more than that to survive and thrive over the long term. Here’s what you should know to make sure it starts off in the right direction and keeps on going that way.

What is the ultimate goal?

There are many reasons why people decide to start their own business:
• Do what you love doing for the rest of your life
• Do something that makes the world a better place
• Make a pile of money and retire early
• Be your own boss

If you don’t define your ideal outcome, you won’t be able to plan a strategy for working towards it, or even see when you’ve achieved it.

A goal-based strategy can be a big help in keeping you on track. For example, if your goal is to create a smart, efficient business that allows you to spend more time with family, then it would be counter-productive to get bogged down in routine tasks that could easily be automated with a small investment in the right software. If your forte is interacting with people and selling your product, you shouldn’t spend hours alone in the backroom doing paperwork.

How are you different/better?

The key to competing successfully in any market sector is to stand out from the other businesses selling the same products or services that you do. Some possible answers include:
• Higher level of expertise — “25+ years of real estate experience”
• Better customer service — “I personally respond to every client”
• Affordability — “We beat their prices every day”
• Unique product benefits — “Patented technology for faster results”
• Benefits the community — “Made with 100% organic, sustainable ingredients”

Once you’ve established your USP (unique selling proposition), your marketing plan will flow from there. You’ll know who your customers are, where to reach them, and how to talk to them. And you’ll avoid wasting money on trial-and-error strategies.

How will you track progress?

You may not like thinking about numbers, but they really are the only way to gauge the financial health of your business. Financial reports clearly show you when and how to take the next step toward your ultimate goal.

Problems can be nipped in the bud: budgets reallocated, expenses trimmed, profit margins adjusted, cash flow bottlenecks removed. Opportunities can be seized: capital purchases timed for tax savings, operations expanded, working time reduced.

Now that you’ve answered these three questions, you’re ready to break ground. With a defined vision, targeted strategy, and measurable goal, you’ll make the right decisions to achieve success for your business and your life.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

KPIs: Tailor Made Measures of Success

How healthy is your business? What areas need improvement? Where are the opportunities for future growth? These are some of the questions that key performance indicators (KPIs) can help answer.

What is a KPI?

It’s a measurement, number, or statistic that reports on some aspect of your business. Sales volume, customer satisfaction ratings, debt ratio — those are all KPIs. They tell you whether you are meeting your goals. Plug those numbers into a timeline graph, and they reveal trends.

Any business can benefit from using KPIs because you can customize them to reflect your unique situation. If your business is providing customer services, you’ll want to include some metrics on customer acquisition and retention. If you are a retailer, your KPIs should track inventory turnover.

In addition to measuring business performance overall, you may also want to set specific KPIs for different departments. For example, you might want to monitor specific activities of your sales force or work crews.

Choosing your KPIs

Key performance indicators can help you increase profitability, decrease inefficiencies, reduce your financial and credit risks, and much more. There are three general types of KPIs:
• Efficiency: Staff productivity; wastage/shrinkage; overhead costs; resource management
• Growth: Sales volume, gross revenue, and net revenue; business equity
• Health: Debt-to-equity ratio; average margins; net profit percentage; inventory levels vs. payables; debtor days
• Marketing: Website traffic, online conversion rate, email open rates

When thinking about the KPIs your business will utilize, you should also bear in mind:

• Your industry
• Where you’re located
• The size of your business
• What business life cycle stage you’re in (launch, expansion, maturity)
• Short-term goals
• Long-term goals

Keep the big picture in focus

Although these metrics are extremely useful, they must be viewed through the lens of your experience. For example, a drop in sales during the summer months may be perfectly normal if your business is snow removal. There’s no need to look for a remedy if there’s not really a problem.

It’s also important to review your KPIs on a regular basis. You don’t want to find out you have an inventory shrinkage problem when it’s been going on for a year already.

Your dedicated CPA team at Xendoo can help you choose the smartest KPIs for your business. What’s more, our automated software, 24/7 access, and timely reports make it easy for you to monitor those KPIs. You’re empowered to make the right decisions at the right time, and watch your business thrive.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

eCommerce Sales Tax: 5 Steps to Making It Worry-Free

Selling online used to be a breeze. Get the order, collect the money, ship out the product. No hassles with sales tax like a brick-and-mortar retailer have to deal with. Nowadays, unfortunately, it’s up to 46 times more complicated for an eCommerce business. That’s because 45 U.S. states plus Washington, D.C., now require you to collect and submit sales tax — each with its own set of laws that you need to follow.

The process can be daunting — and time-consuming — for a small business. Here’s how to make it more manageable.

1. Determine which states you need to collect tax in.

As of June 21, 2018, that’s any state where you have customers. Before that date, each state had a set of criteria known as “sales tax nexus,” which determined whether you would have to collect tax in that state. The criteria included such things as the physical location within the state, distributor, or sales rep location and total sales value.

However, the old rules are now out the window. With the Supreme Court’s decision in favor of South Dakota (in the case of South Dakota v. Wayfair), physical presence in the state is no longer required.

Many questions on how this will play out remain unanswered. For example, the decision includes language that the state tax system should not discriminate against or place an “undue burden” on out-of-state businesses. It may take states a year or even longer work out their new rules.

In the meantime, learn more about sales tax nexus here.

2. Determine which products qualify as taxable.

Again, rules vary by state. Some of the most common non-taxable items are:

• Grocery food
• Clothing
• Certain types of books (textbooks, religious books)
• Prescription and non-prescription medicine
• Magazines and subscriptions
• Digital products (books, music, movies)

3. Register for state sales tax permits.

In each state where you’ve determined you need to collect sales tax, apply to the state’s department of revenue for a sales tax number. You need this number in order to legally collect tax from customers.

Make a note of each state’s tax due dates. You may have to file monthly, quarterly, or annually. This information will be included with the tax permit the state sends you.

In most states, your sales tax permit is also a resale certificate. That means you can buy items tax-free at retail, as long as you intend to resell the items.

4. Update your website’s shopping cart to collect sales tax.

For sales within the state where you’re physically located, check whether your state uses origin-based or destination-based taxation.
• Origin-based: You charge the state, county, and city rates that apply to the location you’re shipping from.
• Destination-based: You charge the rates that apply to the shipping address.

In some states, shipping charges are also taxable. Most shopping carts allow you to add this function.

If you use drop shipping, you’ll have to work with your dropshipping supplier to decide who will be responsible for collecting sales tax.

5. File your return.

File a return for every state and every due date, even if you had zero sales in that state or time period. If you don’t file, you could be slapped with a penalty, or even lose your tax permit.

Be prepared to fill in the tax return form by county, city, and other special taxing districts. This is where automated software can make your life a lot easier.

Save money by filing on time or early. Some states give a discount for filing on time. And some need a few days to process payments. So even if you file on the due date, the money won’t reach the state’s bank on that day and you will be charged a late fee (plus interest on the amount of tax due).

Xendoo makes processing sales tax easy for eCommerce businesses. By integrating with both your business software and your bank, transactions are entered automatically in your books. Plus, each entry is tax coded as it happens, so there’s no last-minute rush at filing time. With the hassles out of your way, your time and energy are free to focus on growing your business.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

Got Profits Power of 3

The power of 3 concepts was originally adopted by major, Fortune 500 companies, and can be
implemented at the small business level in order to increase profitability.

Understanding Profit

Most small business owners don’t understand the difference between profits and cash flow.
Here are some alarming statistics from SBA.gov:
• 93% of small businesses manage their business from their bank account.
• 90% of small businesses that close were profitable but mismanaged their cash flow.
• 46% of small businesses fail from lack of pricing strategy, nonpayment of taxes, poor recording
keeping, and excess expenses.
Profit is not cash flow. There may be cash in your accounts, but that may belong to payables. Rather
than the cash available, it’s important to keep in mind that receivables are what’s contributing to your
profit.

Profit and Loss Statements

Your P&Ls help predicts your profit and cash flow months in advance. These provide a scorecard for what
happened that month, and should also show year-to-date performance. To track the health of your
business it’s important to look at 3 KPIs (key performance indicators).

KPIs

• Sales
• Cost of Goods
• DSO (Daily Sales Out)
Example: Say you have $30,000 of receivables and an average of $1,500 in sales per day. Your DSO
would be 1 month of Monday-Friday sales, which translates to a DSO of 20 days.
A great DSO is usually 17-18 daily sales out. If you are over 45 days out, you’ll have a lower chance of
collecting your receivables.

So what is Power of 3?

The power of 3 ultimately boils down to these three rules:
• Increase your price by 3%, decrease your cost of goods by 3%.
•  Increase your production by 3%, decrease the hours worked by 3%
•  Increase efficiencies and decrease fixed expenses by 3%

Actual Xendoo client results example.

By increasing the prices by 3% and decreasing the costs of goods by 3%, this client exponentially increased their profitability by 36%.

Increase Prices

Many businesses are hesitant to increase their prices. Here is an example that may help quell concern.

Say you go and buy a bottle of water. Instead of buying the water for $1.00, it’s $1.03. Your customers will not walk out, and more than likely it’s not even noticeable.

In the client example above, the sporting goods retailer had an average ticket of $30.  After the 3% increase, this resulted in an average ticket of $30.90.  Most customers will not even recognize this price increase.

In order for this to work exponentially, this should be done in tandem with decreasing costs.

Decrease Costs

In our example above, the sporting goods retailer was not tracking inventory.  They were purchased last minute and not forecasting sales. After better educating the client on their cash, they were able to take advantage of manufacturer deals.   Similar to retailers, manufacturers and wholesalers also offer sales and discontinued pricing. By understanding their cash flow versus profitability it allowed them to take advantage of new purchasing behavior which led to a decrease in costs of over 3%.

Shipping alone can bring down the cost of goods by 3%. For example, instead of choosing 2ndday, order it with ground shipping.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

How Will the European GDPR Impact Your Business?

We’ve all seen the news reports about companies collecting and sharing customers’ personal information without their knowledge or consent, not keeping sensitive information private, and not adequately protecting their systems from hackers. Now the European Union has done something about it, by enacting the GDPR (General Data Protection Regulation) in May 2018.

But what does that mean to you?

If you have customers, employees, suppliers, or other business associates who live in the EU, obviously you will need to change your business practices to comply with the GDPR. (The UK will have similar statutes after Brexit.) Even if you don’t, it’s a good idea to become familiar with its mandates — so you’ll be ready when the U.S. institutes its own regulations.

What the GDPR protects

Any type of personal data is covered by the GDPR. This includes names, contact info, credit card/bank account numbers, medical records, and more. It requires businesses who collect this data to:

• Have a legal reason for doing so and use it ONLY for that purpose. For example, a customer might give you his email address so that you can send info about your products.

• Make user terms and conditions (such as for your website) clear, easy to understand, and easy to find.

• Respond within one month to individuals asking to know what information on them the business is holding; and not charge a fee for doing so.

• Erase all stored data about a customer upon their request unless the data is needed for legal reasons such as tax filing.

• Provide a digital copy of personal data to individuals upon request; they can use it in any way they want, including moving their account to a different business.

• Report certain types of the data breach to the relevant supervisory authority.

• When transferring data to a U.S.-based company for storage or processing, the company must be certified with Privacy Shield.

What steps you should take

A comprehensive review of your data collection, storage, and usage will be needed to ensure GDPR compliance.

• Find out which of your products and services are collecting and processing personal data.

• Analyze whether they have a legal basis for doing so.

• Check that these systems are secure from hackers and unauthorized users.

• Develop response procedures for customers’ data requests, such as disclosure, erasure, and portability.

• Update internal and external notices and contracts to be GDPR compliant.

• Assign responsibility for data protection to someone in your business.

• Provide data privacy training for all staff who work with the data.

As you can see, there are many aspects of data protection, but what they all boil down to is treating your customers’ privacy and rights as if they were your own. Maintaining mutual respect and high ethical standards is not just the law, it’s good business.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.