Category Archives for "Business Tips"

3 Ways to Minimize Tax Season Stress

Tax season is around the corner. Getting everything together and filed can be really stressful, especially for business owners; but it doesn’t have to be. You simply need to know what you need and have it ready by the start of the filing season.

Primarily, you’ll need to:

  1. Know your numbers
  2. Know your mileage
  3. Know your home office expenses

Know Your Numbers

Your “numbers” are your annual net profit, to be exact. Hopefully, you are able to produce a Profit and Loss statement for the year because you’ve kept really good track of your books or had a bookkeeper working with you.

The Profit and Loss statement (P&L) will tell you (or your tax preparer) how much the business made in revenue, how much was spent in business expense, and the difference (profit or loss); all of which is needed to prepare the business portion of your tax return. An accurately-completed balance sheet is also helpful, but the P&L is critical.

Know Your Mileage 

If you use your vehicle 100% for business, tracking vehicle expenses are easy. But if you use it for both business and personal reasons, you’ll want to track the number of miles you drove for business and separate that from the personal miles. Your tax preparer will need this number to give you credit for the business use of your vehicle (56 cents/mile for 2021). If you didn’t keep good track of your business miles, use your calendar to track old appointments and meetings, and get the total for those miles driven throughout the year. You’ll also want to report the parking and toll fees you incurred during the year. 

Know Your Home Office Expenses

You may get a deduction for the business use of your home, but you’ll need to be able to provide some information to take advantage of it. Typically, these items should not show up on your P&L, but you can still use them to reduce your taxes. In order to claim the home office deduction, you’ll need:

  • The total square footage of your entire home
  • Square footage of your home office space
  • Annual total for mortgage interest/property tax or rent
  • Annual totals for all utilities
  • Totals for certain repairs and improvements

Typically, you’ll be able to get a deduction for these expenses based on how much space your home office takes up (i.e. you’ll be able to deduct 8% of the total annualized expenses if your home office takes up 8% of your home).

To learn more about the home office deduction, you can get more information on the IRS website or ask your tax preparer.

Having all of these numbers ready in advance will save you a lot of stress, time, and potentially some money. So start early! And while you’re at it, start setting up some systems for next year so you’re gathering this information year-round. If you need support with this, be sure to contact us!

Money and Mindset for the Holidays

I know this is no surprise to you, but the holidays come around every year. Just like your birthday and your anniversary. You have plenty of time to plan ahead for saving up to buy gifts and for taking time off. But every year, it seems like it sneaks up on you. Right?

It doesn’t have to be that way and the last two months of the year do not have to be the most stressful of the year. All it takes is a little bit of planning for Parkinson’s Law.

First, let’s take care of this year’s holiday season; it’s right around the corner. How can you be ready for those last few weeks of the year–both financially and with tasks and projects?

And since we all know that what’s going on in your personal life bleeds over to business and vice versa, we’re going to talk about both.

Start Where You Are

Most people put the holidays and vacations on credit cards. Let’s break that cycle. If you haven’t been saving for holiday purchases, start now. (Better late than never!) You may not have a lot to set aside, but something is better than nothing. And you can find creative ways to gift your friends and family with what you have–instead of what you can put on plastic.

At the same time, we usually spend more money on groceries and eating out in November and December so it might be smart to watch your spending in other areas to make up for that.

Also remember that you don’t have to buy gifts for everyone, and you don’t have to spend money to show appreciation. Sometimes just some quality time together is gift enough. Some families draw names so they don’t have to buy gifts for everyone. Others get gifts just for the kids, since the adults can just buy themselves what they want. Here are some other ways to make the most of the money you have.

In your business, find unique ways to show your appreciation without impacting the bottom line. That might look like some paid leave for employees during your slower months. (If you have a subscription-based business plan, your revenue will stay the same so there’s no hit to your bottom line.)

And as for the work you need to get done before taking off for the holidays, remember Parkinson’s Law. And fight it! 

First, make a list of priorities and know what you can delegate to others or let go of completely. Then set a schedule for yourself to get the work done. Actually plug it into your calendar so you don’t overbook yourself and you actually have time to get the tasks done.

You may also want to find an accountability partner who can hold you to your schedule. That could be a biz bestie or a team member who is tasked with checking up on you. (It works!)

Plan for Next Year

Once we’re past this holiday season, January 1 is not too soon to plan for the next one. In fact, we recommend this! You can Profit First your personal finances so you have money set aside when it comes time to shop, set a holiday budget, and do some creative things to cut your expenses so you can increase your holiday budget.

In your business, create a business that allows you and your team to take time away so everyone can enjoy the holidays. This looks different for different businesses, but some ideas include:

  • Build out a subscription model. Clients pay a monthly fee for your services, whether they use them or not. You won’t see a dip in your revenue when things slow down over the holiday months. And fewer clients to see means you won’t have to work as much!
  • Create tools clients can use at home. If you’re in the fitness industry, this could look like at-home workouts. If you’re a wellness practitioner, this might be mindset work and meditations. Think about how you can serve your clients without being face-to-face with them? That way you’re still providing value even if you’re technically not working.
  • Do a Profit First assessment on your allocations. If you want to have a certain amount set aside to make up for a slower season, you might want to adjust your allocations so the money is there when you need it. And we recommend having three to six months of expenses set aside…just in case.
  • Don’t feel like you need to buy for your team. It’s so hard to buy for people we only know professionally. Sometimes the best gift for your team is a year-end bonus using your profit distributions. After all, December 31 is profit distribution day anyway!

In the end, it’s important to have your mind and your pocketbook prepared for what’s coming up. We can’t prepare for everything, but we can prepare for the things that come every year–taxes and the holidays.

Use your Profit First accounts to your advantage and never feel like you’re scraping together funds for “emergencies” (because you forgot to save for the holidays).

Choosing The Right Business Coach

Working with a coach is a great idea when you’re looking to improve some area of your skillset. Sure, you can google the subject, read a book, or watch a dozen YouTube videos, but nothing can replace real-time human instruction and guidance from an experienced professional who has walked the walk. 

If you’re looking for a coach to help you improve your business or your finances, you will find no shortage of people out there to choose from. The same goes for life coaching or mindset coaching. Technology has made it possible for us to connect with anyone, anytime, anywhere in service-based relationships—but with coaching, I think you really need to have a personality connection more than anything.

Trust and Straight Talk

Your coach needs to be someone that quickly earns your trust because they’re going to hold a lot of information about you and your business. You should feel comfortable revealing all your money baggage to this person. Sometimes when we’re tiptoeing through a financial minefield, we don’t tell anyone (we’re embarrassed, fearful, or insecure). Ask yourself if this potential coach is someone you could tell the whole truth to, and if you’d heed their advice in navigating a safe way out. 

After all, you’re hiring a coach because you’re looking to improve something about your business or financial situation. (If you weren’t, you’d be knowledgeable and confident enough in your abilities to handle it yourself. And I’ll tell you, as a coach…even coaches need coaches!) So you need someone who won’t just fill your sky with sunshine and rainbows because that won’t improve anything. She should be straight with you about where change needs to happen.

I do this with my clients, and I’m humbled by what they share with us in return. Sometimes, I suspect I know more about my clients’ money situations than their own spouses do. That’s a measure of not only how difficult it is to talk about money with the people in our lives, but how important trust is to the client-coach relationship.

We’ve mentioned here before that your coach, as with all members of your business money team, should have a teacher’s mindset. That’s because most business owners aren’t looking for someone to do all the work for them—rather, they want to learn how to do it better themselves. Does that sound like you?

Experience and Expertise

Of course, your coach should have excellent experience and qualifications. (If you want to implement Profit First, look for a certified professional.) In an ideal world, I think money coaches should have to share their own financial data with potential clients to prove they know their stuff. I’ll continue to dream. But while we wait for that to happen, it’s reasonable to ask for details of their experience, including numbers. If you’re vetting a coach who says she ran a business for five years, I’d ask her things like: How big was the business? How profitable? Was it similar to my business? What challenges did you face?

Because ideally, you want a coach who’s been where you are—and is several steps ahead of you. She’s experienced the typical obstacles to successful business ownership (or good financial health), so she knows how to get past the next four or five hurdles that now lay in front of YOU. She’s in a knowledgeable position to help you strategize crossing the finish line.

Speaking of knowledge, I know a lot about some things (like money—I know A LOT about money.) But I don’t know a lot about everything. Rare is the expert in multiple areas. (Be wary of the heart surgeon who says he can also operate on your brain.) I happen to work with a few coaches and consultants to up my game in business and in life, and I don’t confuse my mindset coach with my marketing specialist. 

That said, I am a thorough business coach myself. Even though we don’t bill ourselves as experts in these areas, we will address your marketing, your systems, and your team—because those things all show up in your money, which I’m looking at like a hawk. By reviewing your income statements and Profit First accounts, I can very often tell you what aspect of your business needs addressing, even (and especially) if you haven’t realized it yourself. It all shows up in your money.

Values and Lifestyle

Relatability is important for some people when choosing a coach. I have an entrepreneur client in her mid-40s who feels that Millennials won’t make great coaches for her because they haven’t had the same life experiences she’s had and won’t understand where she’s headed.

Perhaps what my client is really getting at is the importance of having a shared value system with anyone you’re working closely with. If this is important to you, have a look at how they’re showing up on social media. 

The coach who’s on her laptop on a beach in Bali? One business owner might say, “That’s the life I want exactly! I need to hire that coach immediately.” While another might think, “Hmm, does this coach embrace a career helping struggling business owners like me, or I am just a means to an exit plan?” Consider whether you’d be aligned with this person on, say, ideas about what to do with your profits.

I like to feel out whether someone is the “hustle and grind” type because I don’t put in 16-hour days. Any coach I work with should value life and work harmony as much as I do.

But maybe you love the hustle. There’s no right answer. It depends on what you’re looking for and where you want to go in your business. Don’t hesitate to have an extended conversion and ask real and hypothetical questions related to your business, your spending and saving habits, and your lifestyle. The right coach should emerge as simpatico with you.