Business Information for Entrepreneurs by an Entrepreneur

Did you start your business to operate in perpetuity? Or did you start a business with the intention of selling it for maximum value and profit once it became successful? All entrepreneurs should have an exit plan when they start their business. Whether you intend to sell or must sell your business, there is always a right time to do it.

Starting a business can be compared to buying stock from the stock market. But rather than looking at historical profit trends and future potential that is in the charge of others, you are in full control of your business and its profit potential. By increasing sales, making operations more efficient, and developing the right procedures, you can increase the value of your business and make it an attractive investment for others.

Factors that Influence the Timing of the Sale

When is the right time to sell? If your exit plan involves selling your business, then you have various influences that can affect the value of your business, such as:

• The profit and growth potential you have created
• Economic factors that could limit or increase the value of your business
• The number of potential buyers in a market

Remember, you can only control the first point. All other economic and market demand factors are out of your control. Thus, you must determine whether your exit plan is ready to execute or whether to wait.

Considering the Market Conditions

For instance, say you started a business in 2003 with an exit plan to sell in 5 years. However, based on a poor economic climate in 2008, your exit plan may not be at its full potential because you cannot sell for your full asking price. You have the option of selling at a lower price and not reaping your small business’s full value or waiting until economic factors are once again in a positive light.

Remember this: when preparation meets opportunity, this is the right time to sell. Whether you have an exit plan or an interested party approaches you to buy your business, you must be prepared with a plan to sell if the time is right for you.

Your business thrives or dies by your cash flow. A consistent flow of cash will help you to keep your debts current and ultimately save money on penalties, interest, and fees.

Of course, one important element of keeping a positive cash flow is collecting on your invoices. One method that many businesses have found to maintain cash flow is through invoice factoring.

What is Invoice Factoring?

Invoicing works much like credit. When you issue an invoice to a business or other customer, you give them a certain amount of time to pay the amount due in full. This can be anywhere from 1 day to 90 days, although typically invoice dates are 30 days from the date of the invoice.

During that time, you do not receive any cash, although your business activities must continue. And while most businesses pay within 30 days, others are chronically late. How can you keep cash in your business while you wait for invoice payments?

Invoice factoring is when a third-party business pays you a portion of an invoice balance, then makes the collection efforts on the invoice. The factoring company then pays you the balance of the invoice, less their fee.

Pros of Invoice Factoring

Invoice factoring has many advantages, such as:

• Keeps cash in your business the moment an invoice is created
• Can help inject a portion of cash at needed times
• Saves time from collecting on outstanding invoices
• Low fees – most invoice factoring groups charge reasonable fees for their services
• Not a loan – invoice factoring groups pay you the arranged up-front percentage, which is up to 90% guaranteed. If the company does not collect on an invoice, they do not owe you the balance, nor are you required to pay the advance back.

Cons of Invoice Factoring

While there can be good benefits of invoice factoring, there are also negatives. Here are a few you might want to consider:

• You do not receive full invoice amounts. – Although you get cash upfront for your invoices, the fees charged by factoring companies reduces your total revenue amount.

• Poor customer service by the factoring company. – Many businesses are concerned about losing customers and damaging relationships due to factoring collections. However, most invoice factoring lenders will work with you to assure that their efforts match the needs of your business.

If you are interested in this type of cash flow help, research potential factoring companies, and find the right facility that can help your business meet its financial needs.

As we begin to approach tax season, it’s time to collect all our tax-related documentation, including those pertaining to your vehicle. After all, your auto-related expenses can add up to be big deductions. Here’s a look at how you can deduct your automobile usage:

Employee Mileage Reimbursement

As an employee, the IRS does not allow you to deduct mileage for your commute to and from work. However, if you use your own automobile for business purposes, such as attending business meetings, you can deduct mileage as set by the IRS. The current deduction amount is $0.55 per mile for 2009.

However, there is a catch to personal deduction of employee mileage if your employer reimburses you for your mileage expenses. If your employer reimburses you less than $0.55 per mile, you may deduct the difference up to that amount. If your employer reimburses your mileage above the $0.55 per mile, good news! You may pocket the overage without having to report it on your personal taxes.

Standard Mileage for Business Use

If you, as a small business owner, use your personal vehicle for business use, you can also deduct the standard mileage rate for all business purposes. Whether you drive to client meetings, go to the bank to make deposits, or visit the office store for supplies, each mile can be deducted.

In addition, you can add parking fees (not tickets), fares, and tolls to the total deduction amount.

However, you may only use the mileage deduction if you use less than five vehicles during the year, and if you have not used a depreciation deduction (explained below) on the same vehicle in a previous year.

Actual-Cost Deduction Method

You may find that the Actual-Cost method can save you even more on your taxes. Using Actual-Cost, you can deduct depreciation of the vehicle and other actual expenses, such as oil changes and other maintenance costs, fuel, insurance, registration, and license fees. You must keep detailed records of your trips, including odometer readings and all receipts. Your actual business deduction is the percentage of use your vehicle for business purposes during the year.

If you use a “heavy” vehicle with a 6,000 gross-vehicle-weight rating (GVWR) for more than 50% of your business use, you can save even more. Larger vehicles are allowed a larger depreciation deduction as follows:

Year 1: 20.00%
Year 2: 32.00%
Year 3: 19.20%
Year 4: 11.52%
Year 5: 11.52%

Also, with the Section 179 Deduction allowance passed with the American Recovery and Reinvestment Act of 2009, you can deduct up to the full depreciation amount in the same year if the vehicle was placed in use as of 2008 or later.

Vehicle deductions can mean big tax savings for your personal taxes. Be sure you take the maximum deduction allowed by the IRS.