Tax Deduction Considerations for Small Businesses

It's almost end of the year. Now is the time to make your last-ditch effort to maximize your tax deductions for next year. Here are some things you can do:

- If you are self-employed with no employees other than your spouse, you can open a Self Employed 401K. The main benefit of the self employment 401K is that generally, you can deduct the entire amount of your plan contributions from your taxable income each year. You can read more of how you can take advantage of the tax benefits of this retirement savings tool from the article Self-Employed 401K: A Retirement and Tax Savings Tool for Small Businesses

- Head to the nearest office supplies store and stock up on office supplies. You can then deduct those supplies from your 2006 income. Just make sure you keep all your receipts

- Time to spruce up your home office. Expenses that affect your home office such as repairs and painting are considered by IRS as "direct expenses." Painting the outside of your home is considered an indirect expense and you can deduct a pro-rata share of the cost based on the space allocation of your home office. Note though that home office deductions cannot exceed the business' net income

- Purchase equipment for your business. First year expensing (Section 179 deduction) allows a deduction up to $108,000 in 2006 and $2,960 for a car (certain SUVs the expensing limit is $25,000). So if you are thinking of buying your servers and computers, now's the time to save on your taxes for 2006.

Work from Home as a Virtual Call Center Representative

The call center business is not going entirely to Asian countries such as India and the Philippines. Even in the United States, the call center business is growing. The best part of it all though, is that these companies are turning to home-based people like you as their call center agents! If you are a stay at home parent, physically disabled, or even in-between jobs, you can be a customer service representative and work from the comfort of your home.

Many call center companies are now using home-based agents. As a virtual call center agent, your job is to take incoming calls that will be directed to you and handle requests or close sales. Projects that will be sent your way will often be different -- some clients will be financial institutions while others are retailers (and pay will be dependent on the type of call and industry you will be serving).

To work as a home-based agent, you will need to have the required tools of the trade. While the requirements may vary among various companies, the most common requirements include a computer, high speed Internet access, a land-line telephone to handle incoming calls, and a quiet work space (no crying babies, please!). Some require backup ISPs (in case your main ISP falters), installed software such as anti-virus and firewall; headsets, among others. Carefully review the home office requirements of the company to see if you already have their requirements, or need to spend more to meet their requirements (and they will not reimburse you!)

You will be required to put in a minimum number of hours per week, which can be as low as 15 to 20 hours; though you can opt to work as much as 60 hours a week. Companies differ in how they pay -- some pay based on the number of calls you take while others pay by the hour. The pay range is around $7 to $30 per hour depending on the project, though that can increase if the company offers commissions for sales you have closed. So if you work 20 hours a week at $10/hour, then you can take home $200 per week. Not bad for staying at home.

As always, when choosing which company to join, avoid those that will ask you to pay upfront. However, note that some companies consider their home-based agents as independent businesses (not as employee), and as such require their agents to set themselves up as a business (whether a sole proprietor, LLC or incorporation). If you choose to work with these companies, understand that they will not reimburse you for the incorporation fees that you will incur. And you will be responsible for paying your taxes.

Here are some companies that work with home-based agents:

• VIPDesk.com http://www.vipdesk.com = will ask you to shoulder the required credit and background checking fees.
• Working Solutions http://www.workingsol.com/ = no fees required but considers their agents as independent contractors, thus requiring applicants to be self employed
• Alpine Access http://www.alpineaccess.com = no fees and you will be considered as an employee, not as an independent contractor
• LiveOps http://www.liveops.com/ = considers agents as independent contractors; no upfront fee but requires applicants to pay for the background check
• WillowCSN http://www.willowcsn.com/ = requires their agents to work as independent contractors and incorporate

If this is something that interests you, I suggest you study the offerings of the above companies (and several more in this business) and compare to see which one will give you the best deal for your work.

Business Idea: Starting a Yoga Center

Ten years ago, mention the word "yoga" and the first thing that comes to most peoples' minds is that yoga is all about "weird poses" that is part of Eastern mysticism. Now, people have greater awareness of what yoga is and yoga classes are now being taught in gyms, health clubs, county recreation centers, aside from yoga studies or centers.

In fact, yoga is now big business. A survey conducted by the premier yoga magazine called Yoga Journal found that:

• Annual spending of Americans alone on yoga classes, equipment, clothing, media (DVDs, videos, books and magazines), and other products reach $2.95 billion a year.
• In 2005, about 7.5% of U.S. adults, or 16.5 million people, now practice yoga. This is an increase from 5.6% in 2004 and and 43% from 2002.

If you want to join the yoga bandwagon, you can start your own yoga center or become a franchise. Note that this is a business that requires substantial capitalization. Depending on the size of your center, you will need:

• great and relaxing ambiance
• plenty of floor space
• changing rooms separate for men and women
• possibly workshop rooms
• quality instructors (this can make or break your center)
• boutique to sell yoga outfits and equipment (if so desired)

One option could be to franchise. An example of a yoga franchise is the Sunstone Yoga, the cost of which ranges from $147,000 up to $327,000. They offer a cheaper alternative if you simply want to convert your existing yoga center into their system.

For more information on starting a yoga center, check out the following books and articles:

• So You Want to Open a Yoga Center
• The Business of Yoga: How to Start and Grow Your Yoga Business
• USA Today article on the business of yoga
• Yoga Center Business Plan

Search Marketing Strategies

As the year comes to a close, I'm sure you are now strategizing how to improve your website's performance next year.

At the top of the list typically is how to improve your search engine rankings (both organic and performance of your paid listings). A good start is to read MarketingSherpa's Search Marketing Benchmark Guide 2007. While the 200+ page report is pricey, you can read a 19-page excerpt of the study which has some nuggets of wisdom in terms of keyword trends, using press release wire services, and even eyetracking heatmap.

Are You Cut Out to be an Entrepreneur?

If starting a business is part of your plans for next year, you need to be sure that you are ready for entrepreneurship and all the ups and downs that goes with it. There are a million and one things that can happen -- from hitting on a winning business idea to finding a dud; or from earning a million in a year or finding yourself in the unemployment line asking for doleouts.

Ask yourself the following questions to see if you are ready for all the challenges of starting a business:

• In the event the business fails, am I willing to lose out all the money I invested? If I borrowed the money from family and friends, will I be able to face them and tell them I lost their money? If I wiped out my family's bank account, can I face my children at the dinner table and explain to them that all they're having for Christmas is a loaf of bread? Will I lose the house if the bank asks for the money they loaned to me?
  
• Am I willing to work longer days (and nights), even seven days a week if needed? Do I have the motivation and stamina to go beyond the 9-to-5 working hours of a corporate employee?
  
• Can I handle pressure and make fast decisions if needed? Can I be calm, cool and collected when things go haywire? How can I let off steam? What can I do to relax and focus on the tasks at hand?
  
• How long am I willing to wait for the business to succeed? Do I bail out in six months if it is not showing the kind of profit I was hoping? Or can I stick to the business for two years and hope that it will turn in the profit I need by then? When do I throw in the towel and admit that I can't get it to work?
  
• Do I have the skills, know how and talent to make the business work? Can I sell? What are my best traits, and if I don't possess the skills I need, where and how will I get them?

Prison: A Captive Market for Small Businesses

If you are looking for a captive market, look no further than the prison system.

Prison has become more than a place to lockup felons, criminals and other misfits of society (including those wrongly accused, of course). The prison system is a hot growing market full of business potentials, estimated to be about $37 billion serving more than 2 million inmates. States spend more than $30 billion annually for their prison system and about $5 billion is spent for the federal inmates. This is a sector that never runs out of customers -- in fact, a study showed that 52 percent of released convicts were back in jail within three years! This is a tremendous market to crack!

The needs of this sector of focuses on a variety of things, including security, medicine, education, food service, maintenance and technology. A December 2006 article in Business 2.0 entitled "The Hard Sell" looks at some of the products and services that have penetrated this market:

• Outside Connection http://www.outsideconnectioninc.net/ , a prepaid phone service serving both the inmates and their families
• Compudyne http://www.compudyne.com/ , which provides electronic and hardware security products including modular prefab prison cells
• Incarceration Optimization Program International in NY http://www.iop-nyc.com/index.html whose business is to prepare white collar criminals how to survive in prison including coursework, physical and mental training, self-defense and even role-playing.

The downside of this sector is the tremendous bureaucracy and government contracting process that a small business has to crack to be able to do business with the prison system. There is also the ups and downs of dealing with the federal and state budget system. Plus the sector is known for sticking with what works and slow to adapt to new technologies and innovative ideas. But still, the sector is ripe with all sorts of possibilities and opportunities.

If you are interested in this sector, check out the resources available at American Correctional Association http://www.aca.org/

Profile of Home Business Entrepreneurs

I've always known that the home business market is wide, which the latest Survey of Business Owners conducted by the Bureau of Census confirmed. According to their study, almost half or 49 percent of the nation’s businesses are operated from home. Imagine that -- almost half!

Other very interesting statistics on home businesses:

• Home-based businesses made up 56 percent of American Indian- and Alaska Native-owned firms, 56 percent of women-owned firms, 53 percent of black-owned firms, 53 percent of Native Hawaiian- and Pacific Islander-owned firms, and 45 percent of Hispanic-owned firms. In contrast, 2-in-3 Asian-owned firms reported they conducted business from nonresidential locations.
  
• Top industries for home-based businesses were: professional, scientific and technical services, construction, and retail trade and other services (such as personal services, and repair and maintenance).

Check out the other useful statistics on entrepreneurs from the latest Survey of Business Owners

Tapping the Gay Consumer

In the recent issue of Forbes Magazine, they tackled the growing market of the gay, lesbian, bisexual and transgender (GLBT) in both the corporate and consumer marketplaces. According to the article "Courting the Gay Consumer," 175 Fortune 500 brands advertise specifically to gay and lesbian audiences.

Big companies such as American Airlines' AAVacations.com, Volvo, American Express and others are no longer ignoring the power of the gay consumer because:

• Gay buying power is estimated to be about $641 billion in 2006
• While on average they do not earn more than other Americans, this market has more disposable income (hence bigger buying power) because fewer are raising children.

Setting aside any moral objections or issues about this group, GLBT is a market that small businesses can consider. Hyperion Interactive Media has a guide on the various niches that can be tapped to reach the gay market. They have a 2006 report, but the 2005 version is available for free on their website.

8 Tips to Holiday Online Selling

I am almost done with my online shopping for Christmas, 100% of which was done online. I just find it so much easier to jump from one website to another and shop -- something that is very hard to do in the mall when you have 2 toddlers pulling you in all directions.

But the shopping season is still underway. If you are operating an ecommerce site and want a piece of the increasingly massive online shopping ca-ching, we have some tips to grow your holiday selling by leaps and bounds:

1. Analyze your past holiday selling experiences.
2. Plan your promotional activities for the period.
3. Get your website ready.
4. Clarify your holiday hours and shipping information.
5. Check your inventory to ensure that only available items are posted on your site.
6. Get positive reviews from shopping comparison sites.
7. Tap the blogosphere.
8. Use transactional emails to cross-sell your products.

For details, read the article "8 Tips to Holiday Online Selling"

Business Idea: Selling Merchant Accounts

One business you can do from home, whether full time or part time, is to sell merchant accounts. There are a number of merchant account providers, including big companies such as Card Service International or smaller outfits such as Vantage Card Services.

In this business, you tap businesses accepting credit cards processing to use your merchant account provider or to shift to your provider in case they are already using another provider. Basically, you're a salesman.

But merchant account salesman is not an easy work. You have to know business owners -- which is not an easy task. You can't just go into a nail salon or restaurant or dry cleaner and ask them to change their credit card merchant provider. Many businesses are against soliciting, so you'd be turned away right at the door.

To get accounts, the business owner must be familiar with you, know you, or you must come in highly recommended. If you have contacts with a lot of business owners -- e.g. you are a member of a business networking group -- then this would be a great fit for you. For example, getting restaurant owners to shift their credit card processing entails a lot of dining and wining in that restaurant - just so owner get to see you and become familiar with you (they are more likely going to give you the business if you are their loyal customer). You need to win the trust of the business owner -- before they give to you their merchant account bill so you can analyze where you can help them save money.

Your earnings will depend on the profit of the merchant account provider after paying off the fees of Visa, Mastercard, Discover, American Express and other credit card companies. What typically happens is that Visa for example sets a rate, and the merchant account provider gives a higher rate to their customers. That difference is their profit -- and you as their salesman, will only get a percentage of that profit.

It's not a flat commission, but your earnings will depend on the profitability of the account. Note though that your income depends on the sales volume of the business owner and the rates that you've given said business owner. The problem lies on the fact that this is a very competitive business, and you cannot give the business owner a high rate. In fact, if you're trying to win the business owner, your presentation will focus on how much they will save if they use you instead of their current provider -- so you lower the rate that was given to them or you remove some of the extra fees that are typically charged. As a result, profitability of the account becomes smaller and your earnings are smaller.

For example, your customer is a convenience store owner whose credit card sales volume amount to $35,000 per month. It wouldn't be too far fetched to earn only $45-$100 a month from this account. Hence to make a lot of money from this business, you need to have a lot of accounts.

One thing to watch out in this business is the requirement for landing new accounts. I've seen merchant account providers that require their sales people to have at least one sale every quarter -- otherwise commissions from previous sales will be forfeited. Imagine if you already have 100 accounts earning you a couple of thousands a month, and you laid low in that quarter, then boom -- that earning will disappear!

Choose a company that you know offers good rates to their clients as well as salespeople. Be sure to look at how well they support their sales people, especially in the implementation and hookup of the new credit card processing system when the business owner changes to your company. Also check how many salespeople they already have in a particular location, so you won't have to compete with other salespeople from your company.

The Wealth Factors

I have heard of the Maui Mastermind seminars where you pay some $30,000 or so to attend this seminar on wealth in Maui. Haven't really bought into it, but the new book by the founders of this seminar has got me looking at this program more closely.

I recently got a copy of the book "The Maui Millionaires: Discover the Secrets Behind the World's Most Exclusive Wealth Retreat and Become Financially Free" by David Finkel and Diane Kennedy. I haven't finished reading the book, but the authors provide a view that allows you to rethink the process of attracting wealth, coupled with practical tips and advices. I'll write more about the book once I finish reading it.

But you can read an excerpt of the book entitled "The Five Wealth Factors" that the book's publisher allowed us to reprint here at PowerHomeBiz.

Brand and Marketing Trends for 2007

ChiefMarketer.com has an interesting article on brand and marketing trends for next year. The trends are more relevant to big marketers, but we small businesses can always learn from the big boys.

Here are the seven trends that marketing firm Brand Keys predict:

1. An ongoing emphasis on “engagement,” which is defined as “turning on a prospect to a brand idea enhanced by the surrounding context.”
2. More reliance on consumer-generated content.
3. More, more branded entertainment.
4. Media planning will become more “touch point” focused.
5. Using technology and engagement to better communicate with consumer expectations.
6. Expanding the potential of Websites, blogs, and the digital world.
7. Innovation and loyalty will matter more.

Read more about marketing trends from ChiefMarketer.com

Collect from Late-Paying Clients

The year is coming to an end, and it is time to close your books. Unfortunately, you may have late-paying or deadbeat clients who need to pay you. Here are some tips on how to improve your receivables collection and avoid delinquent accounts:

1. The first step is to institute controls in your receivables to make sure that you collect everything that is owed to you. Send your client an invoice immediately after the completion of the contract or delivery of product. Track carefully your receivables to make sure you catch which those that are about to become overdue.

2. Prepare a contract or keep a record of what was ordered. One of the reasons clients do not pay is because they feel they did not receive what they ordered or you fell short in terms of deliverables. Having a contract puts everyone on the same page. If you made a mistake and sent them a different item than what they ordered, remedy the mistake. But remind them to keep their end of the bargain and pay you.

3. You may want to try to offer incentives to fast paying clients, e.g. if they pay within a certain time period, they can get a discount.

4. Inquire if they actually received the invoice. If a client doesn't pay you, it may be because they are stalling, don't want to pay you or because they haven't received your invoice. Do not assume that they got the invoice. Call them and check whether they have received the invoice because you have not received the payment as yet.

5. Don't fall into the "check is in the mail" trap. If the client uses this excuse, inquire when the check was indeed placed in the mail. Sometimes, you'd be amazed to find the check placed in the mail ONLY after you made your follow-up call.

6. Get to know the people responsible for cutting the check, especially if you are dealing with a big company. A one-person business is easy because you only follow up with one person. A big company, however, has more complicated accounting procedures where different people are involved in the processing of the invoice to the signing of the check. Be sure that you know who actually control the purse strings -- and make your follow-ups with that person.

For additional tips on how to improve your collection, read the articles "When Customers Don't Pay You" and "How to Double Your Debt Collections".