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Not All Surprises Are Good: Know What to Expect on Your Tax Bill
It's virtually unavoidable. When your business makes a profit, you pay income tax.

Some of your business earnings automatically belong to the government, which means you get to hold on to that money only for a limited period before handing it over to the tax collection authority. But you don't have to be surprised by this bill. Plan ahead and use careful accounting to avoid unexpected tax bills.

Examine your business balance sheet regularly. This statement should have a liability account for accrued taxes. Consequently, the true amount of funds available for spending in your bank balance is the total minus the tax liability you must eventually pay.

Since most small businesses operate with cash-basis accounting, accrued liabilities on the balance sheet are not technically correct. Cash-basis expenses are counted only when they're paid, not when they accrue. To keep your books in order, move the reserves for income tax into an entirely separate bank account. In your bookkeeping, you will transfer funds from one asset bank account to another.

This provides the advantage of having government cash out of the business operating account. Instead of an accrued liability for taxes appearing on the balance sheet, the funds available for business functions are simply the bank operating account on the balance sheet. Tax payments are remitted from the tax account.

The optimal amount of money to save for taxes is a subject to discuss with your tax accountant at the end of every year so you can appropriately plan the next year's reserves.

Teamwork on the Fly: Learning to Collaborate with Just about Anyone
In today's 24/7 world, companies depend on remote workers, diverse markets, and global interactions.

Many of us find ourselves frequently teaming with different people, coordinating and collaborating across geographic, disciplinary, linguistic, sectoral, and societal boundaries.

Consider that a typical hospitalized patient is seen by some 60 different providers over the course of a stay. These professionals may come from different specialties, different backgrounds, and different areas of expertise. They may not even know one another, but they work as a team to provide appropriate, timely patient care.

Members of such fluid teams may not have fixed roles or even fixed deliverables. They often come together to deal with urgent, complex, unpredictable issues.

They may be individuals from different professions, different organizations, even different nations, who find themselves working together in the face of a natural disaster, a health emergency, a complicated rescue, a refugee crisis, or some other situation. Despite language barriers, cultural differences, professional egos, and myriad physical challenges, these pseudo teams often produce remarkable results.

So, what does successful teaming require? What's the secret sauce? Researchers point to "true grit" characteristics such as dedication, perseverance, and goal orientation.

Of course, leadership is important, too, but here there is a caveat. Experts note that teaming leaders must exhibit extraordinary situational humility and a willingness to defer to others. They must develop a mind-set of inclusivity rather than competition. Solutions and ideas can come from anywhere, so leaders must be curious, humble, willing to listen, willing to take risks, and open to trying different approaches.

Secrets to a Successful Start-up
Before launching a small business, it is important to develop a sound business plan laying out how you will structure, operate, and grow your business. You'll need it to convince people to invest in and work for your company, as well as to keep the firm on track as you grow. Here are some winning tips to develop this plan:

A simple, one-page business plan should include a vision statement, a mission statement, objectives and goals, basic operational strategies, a proposed budget, a preliminary marketing plan, and a simple action plan.

Be realistic about how much capital you'll need to fund your business and determine where/how you will acquire it. Draft a preliminary budget and open a business bank account.

Decide on a business structure. The legal structure you choose for your business will impact your business registration requirements, your tax liability, and your personal liability. Register your business, obtain federal and state tax IDs, and apply for necessary licenses and permits to make your business legally compliant.

Do some market research on trends and competitors in your sector. Both brick-and-mortar and online businesses need a website, an SEO strategy, and a marketing plan.

If yours is a service-based business, get involved with the local chamber of commerce or small-business chapter and take advantage of opportunities to present your business to the community. Make presentations, speak at local events, or provide distributable marketing materials. Network with potential customers and capitalize on every opportunity to turn your idea into a successful business.

Unraveling the Mystery of Profit Margin Analysis
Why do entrepreneurs own and operate businesses? To make money. But the amount a company makes is not measured by revenue alone.

A business also has expenses. Looking solely at the profit amount doesn't reveal the whole truth. True earnings are what remain after the owner pays for expenses. The foundation for proper income assessment is an examination of the percentage of revenue you retain as profit. This is your profit margin.

Calculating Profit Margin

Profit margin is the ratio of profit to sales, expressed as a percentage. Wise small-business owners maintain judicious scrutiny over both gross profit margin and operating profit margin.

Gross margin is your profit after paying all the direct costs for completing sales, which is typically called cost of goods sold. Numerous factors may be considered in identifying cost of goods sold. A retail operation has costs for the merchandise it sells. A service organization has costs for labor and perhaps some materials or parts. Regardless of the nature of your business, it has some cost of goods sold.

Still, even a sole proprietor with no employees or inventory may determine a gross margin. This is accomplished by subtracting reasonable compensation as an "employee" of the business from the amount of revenue, then dividing the result by the revenue. For example, a bookkeeper may want to earn $35 per hour for work performed because that's the cost for hiring someone with the necessary skills to provide the effort. If the business receives revenue of $50 for a one-hour project, the gross margin is 30% because only $15 of gross profit remains (15/50 = 0.3 or 30%).

Of course, business owners are responsible for paying general operating expenses, too. The profit remaining after all these overhead expenses are paid is divided by revenue to calculate the operating profit margin.

Analyzing Profit Margin

These calculations should guide business owners in operational decisions. An examination of gross profit margin can lead to smart reforms in pricing and costs. The most knowledge can be gained by calculating gross margins for various types of sales.

Attaining this degree of detailed information requires a bookkeeping system that tracks revenue and direct costs for each product line or type of business. Some companies identify gross margin by territory or for each sales representative. As long as revenue is paired with its associated costs, the data present a straightforward determination of profit margin.

Low gross margins are improved by raising prices, finding lower cost inputs, or even discontinuing an entire line of business. Operating profit margins are stabilized or increased by effectively controlling expenses. Conversely, a fall in operating profit margin is an indication of unsound expense management.

Businesses with strong profit margins maximize the available cash to grow the company by hiring more staff, increasing space, or expanding marketing efforts. Alternatively, operations may use funds from higher profit margins to reduce debt or pay larger distributions to owners.

By contrast, falling profit margins impose burdens on the business. Slashing expenses and downsizing become the byproduct of lower profit margins...along with reduced compensation to ownership.

Ultimately, profit margin is foundational to business success. Close monitoring of this indicator is a key strategy for business owners to optimize resources for a prosperous future.
Michele Ball
Perfect Additions
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Worth Reading
Five Warning Signs That Mean You Shouldn't Take the Job
By Kema Christian-Taylor
It's an all-too-common mistake that people on the job hunt make: being too focused on getting an offer and neglecting to find the right fit. Thankfully, choosing the wrong job can be prevented if you know what warning signs to look out for. These red flags include high turnover rates and a job that doesn't align with your career goals. Learn more about these warning signs.

Nine Reasons CEOs Should Hire Introverts
By Geoffrey James


Did you know that introverts are more likely than extroverts to have the characteristics commonly associated with ideal employees? According to decades of research, introverted people are generally and consistently more creative, they're more reliable, and they tend to work better in teams. Learn more about what sets introverts apart in the workplace and the science that backs it all up.

Unexpected Smart Tech Tools to Help Your Small Business
By Brian Hughes


You might be surprised to learn that there are plenty of inexpensive smart technologies available right now that can help you and your business save time and money. It's true! Whether you're trying to cut back on your utility expenses or looking to improve your customer service, there's a smart tech solution for you. Learn more.

Goal Setting
Have you made any New Year's resolutions? These year-end declarations are often more whimsical than winning. To set goals that will truly impact your business in 2019, tap into these resources:

Not sure how to get started with goal setting? Here are four simple steps:
4 Goal-Setting Tips for Entrepreneurs

For many, goal setting isn't an issue. It's the motivation and action to complete them that pose a challenge. Find out how to overcome these obstacles:
Motivation And Massive Action: Your Goal-Setting Playbook

Do your goals look far enough into the future? Learn the secrets to long-term goals:
3 Ways To Plan For The Very Long Term

Your current goal-setting methods might be holding you back. Find out how:
5 Ways Your Goal-Setting Is Holding You Back

Are you following bad goal-setting advice? This article debunks some common myths:
3 Popular Goal-Setting Techniques Managers Should Avoid
This newsletter and any information contained herein are intended for general informational purposes only and should not be construed as legal, financial or medical advice. The publisher takes great efforts to ensure the accuracy of information contained in this newsletter. However, we will not be responsible at any time for any errors or omissions or any damages, howsoever caused, that result from its use. Seek competent professional advice and/or legal counsel with respect to any matter discussed or published in this newsletter.
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