The Entrepreneur Track

January 29th, 2015

The Entrepreneur TrackWhen I was in high school in the mid-60s, the New York City school system had three tracks: academic (for those planning to go to college), commercial (for those planning to become secretaries and bookkeepers), and general (for everyone else; those planning to go into the trades or automotive, or join the military).

I think there are three tracks for startups as well: lifestyle businesses, scalable businesses, and businesses that change the world. Let me explain what these are and why it’s important to know this at the outset:

Lifestyle businesses

Lifestyle businesses comprise the vast majority of businesses in the U.S. (The term was coined in 1987 by William Wetzel, a director emeritus of the Center for Venture Research at the University of New Hampshire.) Lifestyle businesses are set up and run to essentially provide a paycheck for owners and enable them to support their families. They are the mom-and-pop dry cleaners, pizzerias, landscapers, and boutiques; consultants, freelancers, and independent contractors; and most other closely-held businesses. Sure, these businesses hope to grow from year to year, but their goal is primarily the owners’ own support; they don’t have large expectations.

Many owners of lifestyle businesses ‘DIY’ for most or all of their business tasks, including marketing, HR, and government compliance. They want to know what they need to know so they can run their business well and stay out of trouble.

Books I like:

  • Become Your Own Boss in 12 Months, 2nd Ed., by Melinda Emerson
  • E-Myth Revisited by Michael Gerber

My book, J.K. Lasser’s Small Business Taxes 2015, is also suitable for business owners who want to know how to factor tax results into their business planning.

Scalable businesses

These are companies that can grow, often duplicating themselves for multiple locations or becoming franchises. They’re also referred to as growth businesses. Can you say Subway? For these businesses, the sky’s the limit; some may even go public and provide tremendous wealth for owners. They don’t necessarily have a core idea that’s radical; they simply do something better than their competitors.

Owners of scalable businesses want to know how to grow dramatically. Owners must learn to delegate responsibilities in order to achieve their goals.

Books I like:

  • Let Go to Grow by Doug and Polly White
  • Grow to Greatness: How to Build a World Class Franchise System Faster by Steve Olson

Change-the-world businesses

These are companies that are game changers, such as Apple, Facebook, and Uber. Ultimately, if they succeed, they become big businesses (even though all obviously start out as small businesses).

Owners of these businesses need to understand venture capital, which is essential for their growth.

Books I like:

  • The Creator’s Code by Amy Wilkinson (pub. date is February 17, 2015)
  • Venture Deals, 2nd Ed., by Brad Feld


Like students in my high school, those on one track could pursue another life course than the one dictated by their track (e.g., many college graduates in the 60s went to Katherine Gibbs for job skills; many of those who went into the military ultimately finished college).

A lifestyle business could expand and become scalable (my cousins transformed their parents’ local art supply store into a national retail and online art supply company). But an owner who knows his or her track can pursue the tools and information to help with success.

What to Do About Sec. 179 Uncertainty

January 22nd, 2015

Here’s the catch-22 for businesses: in order to increase their capital good, equipment is necessary, but to get the equipment, businesses may lack the capital and need tax incentives to help pay for it … and those incentives are currently up in the air.

The extension of the favorable dollar limit on first-year expensing (the so-called Sec. 179 deduction), which was enacted on December 19, 2014, has already expired!

The $500,000 limit that was extended for 2014 no longer applies; instead the dollar limit is set at $25,000, unless Congress takes action. Businesses that depend on the tax savings from this upfront deduction for their capital purchases face tough choices. are some options to consider:

Wait and see

Businesses that need the write-off to help pay for equipment and machinery costing more than $25,000 may want to wait and see what Congress does about extending the favorable dollar limit for the Section 179 deduction. With the new makeup of Congress, serious tax reform in the coming year is possible (but not certain). This could include a permanent, or at least long-term, extension of the $500,000 limit.

Lease instead of buy

The Sec. 179 deduction applies only for businesses that purchase equipment. Those that lease instead of buy can write off all of their lease costs. This fixes the monthly cost for the equipment, which may turn out to be less than the cost of buying it.

This option doesn’t make sense in all cases:

  • Leasing may not be an option for certain equipment.
  • Businesses are essentially locked in for the term of the lease, which is a detriment if the equipment becomes obsolete before the lease ends.

Buy and finance

If a business needs the equipment now but lacks some or all of the cash to buy it, financing options should be explored:

  • Seller-financing. The company selling the equipment may offer financing to swing the deal.
  • Working capital loans. For example, Kabbage offers lines for small businesses from $2,000 to $100,000, with a prompt approval based on real-life data, such as your bank account or QuickBooks data (not necessarily a credit report).

For any type of financing, check terms and conditions carefully.


It’s become the norm for businesses to operate without the ability to plan because Congress has failed to fix tax laws for the future. Let’s see what happens now.

Are You Prepared for … ?

January 15th, 2015 Rumsfeld, Secretary of Defense under Bush 2, said:

“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. These are things we don’t know we don’t know.”

In business things are constantly changing, because of technology, legal developments, and Mother Nature, creating a never-ending pool of unknown unknowns. Here’s what we know so far and should prepare for (i.e., how to deal with the known unknowns).

Virtual currency
According to a survey by SMB accounting technology research firm Software Advice, 25% of consumers would use virtual currency, such as bitcoin, if it becomes available. Yet half of small and mid-sized businesses aren’t prepared to accept digital currency.

Decide whether accepting bitcoin as payment makes sense for your business after doing your homework and understanding the risk, namely fluctuation in bitcoin value. If you want to go forward, recognize that preparedness means having a mechanism in place to process virtual currency payments and knowing how to spend the bitcoin you receive. You’ll need a bitcoin merchant solution for this purpose. Find a list of options here.

Even more challenging, however, is having a system in place to comply with IRS reporting requirements. Work with your accountant and check out IRS rules for bitcoin.

Natural disasters
Institute for Business and Home Safety estimates that 25% of businesses do not reopen following a major disaster. Yet only about 64% of small businesses have any disaster preparedness plans.

Review or institute plans for action in case you experience a natural disaster. These plans should also include action in case of riots (think about the small businesses in Ferguson, MO) or other man-made disaster. Check out the SBA’s Emergency Preparedness Guide and the Toolkit from the Institute for Business and Home Safety.

Hack attacks
Verizon’s 2012 Data Breach Investigations Report found that 71% of data breaches occurred at companies with fewer than 100 employees. The incidents include web app attacks (attackers use stolen credentials or exploit vulnerabilities in web applications such as content management systems, cyber espionage to obtain intellectual property (e.g., patent information), point of sale instructions to capture customers’ credit card information, and physical theft and loss of laptops and other equipment with sensitive data.

The 2014 report lists actions you can take to better protect your data.

Stay alert to continual changes in the business environment. Hopefully, the unknowns can become knowns and you can prepare for them.

Ideas for Protecting Sensitive Employee and Contractor Data Before E-File Season

January 8th, 2015 laws and common sense dictate that you take action to protect information about your employees and independent contractors. As the deadline approaches for providing W-2s or 1099s to workers, it’s important to safeguard keep security of their Social Security numbers and other sensitive information.

eFile4Biz, an IRS-authorized e-file provider for online processing of 1099s and W-2s, shares these guidelines:

  • Keep only the information you need. Eliminate or archive older data.
  • Set routine procedures for tasks, such as when/how to dispose of tools that contain house sensitive info.
  • Protect paper documents from a security breach or identity theft. Lock cabinets in which papers are kept.
  • Keep an inventory of your information sources. Make sure as a small business owner you know where your important data is at all times.
  • Review your network setup. Protect your business with a strong firewall and strong security programs.
  • Provide access to information only on a “need to know” basis. Protected information includes not only employee/contractor data, but also your passcodes.

It’s also a good idea to use encryption when you transfer data via email. If so, give the password to the recipient by phone or a separate email.

Resources to help with security for your sensitive information:

Five New Year’s Resolutions

January 1st, 2015 few keep them, it doesn’t stop us from making them every year.

Here are my five favorites. (This is adapted from an article published in Big Ideas for Small Business® in 2011.)

1. Listen better

There are a variety of reasons why people fail to listen when other people talk: they’d rather talk, they get distracted, they are preoccupied with their own thoughts and conclusions, or they find the other person boring. Still, other people, especially your staff and customers, may have something valuable to say and you need to listen carefully.

Become an “active listener” by paying attention and keeping your mind on what’s being said. Use online tools, such as MindTools, to help.

2. Think more

We all fall victim to Michael Gerber’s criticism that most small business owners spend more time working in the business than on it. To avoid this flaw, schedule time for strategic planning to focus your attention on ideas and not on routine or even pressing business matters.

Here are some activities you might do in the coming year that make you think more:

  • Write or revise your business and marketing plans.
  • Set up an advisory board to discuss strategic planning for your business; fix a regular time for the board to meet.
  • Take time off to concentrate on business planning without company distractions.

3. Learn new things

While technology is bombarding us with new developments every day, it’s important not to become shell-shocked. Make a resolution to learn how you can better use technology, such as integrating social media into your marketing plans.
New things are not restricted to technology. Consider spending time to learn a new language, take a writing or sales course, or hone some other skills.

4. Pay attention to details

Little things matter. Spending just a few minutes a day, each day, can add up to big results over the course of a year.

  • Keeping good books and records throughout the year can entitle you to greater tax savings when you complete your tax return.
  • Maintaining control over clutter by filing and tossing may require a few minutes each day but you’ll gain more time in easy access to your stored information.

5. Maintain perspective

For many entrepreneurs, their company is their baby and they take losses, criticism, and other bad news too seriously. Remembering that the worst that can happen to a business is that it goes under — the owner isn’t put in debtor’s prison or burned at the stake — may help you keep perspective.

Don’t forget to laugh, and to celebrate your achievements.

Here’s wishing you a prosperous New Year, and I hope all your dreams are realized.

Good Wishes

December 25th, 2014 is a federal holiday in the U.S. and a religious holiday for many people around the world. It’s a time to express good wishes. In today’s PC world, doing this in a business context can be tricky.

Holiday etiquette
I have no idea what is the right thing to say or do. There are lots of opinions on this topic.

See what some of the experts say:

Email etiquette
For work-related email, whether for the holidays or any other reason, be sure to follow etiquette.

Mailtime, an app that makes email on smartphones more like text messaging, found the following:

  • Most people expect responses to work emails within 24 hours (52%)
  • 19% of people expect answers to work email within 12 hours
  • Almost no one tolerates answering business email within one week (3%)

The bottom line is to express sincere wishes and respond in a timely manner to the wishes you have received.

Heed Minimum Wage Rules or Else

December 18th, 2014 was the message from Labor Secretary Perez in a December 4 speech at the Center for American Progress in Washington, D.C. The U.S. Department of Labor (DOL) has increased its staff for enforcing minimum wage and overtime rules under the Fair Labor Standards Act (FLSA), indicating that DOL is very serious about enforcement.

A study from the Eastern Research Group found that 3.5% to 6.8% of workers are victims of minimum wage/overtime violations, so there are many businesses that fail to comply with the FLSA.

Small business owners I know want to do the right thing. Unfortunately, there are some traps that can snag owners in pay policies. Here are some that I found:

  • Giving comp time. Overtime pay cannot be avoided by private-sector employers by giving a non-exempt employee (an employee subject to minimum wage rules) comp time (time off at a later date in lieu of overtime pay). (There are only very limited exceptions in specific situations.)
  • Paying a salary. Figuring compensation on a yearly basis and calling someone a salaried employee does not make the person a non-exempt employee; minimum wage and overtime rules continue to apply if an employee’s wages and job classification make him/her a non-exempt employee.
  • Giving wage advances. Repayments to an employer of wage advances in many states are factored in for minimum wage purposes and can cause wages for the repayment period to fall below FLSA minimums.
  • Failing to factor in minimum wage increases for exempt workers. What? When California raised its minimum wage on July 1, 2014, it included a provision that effectively changed the definition of an exempt employee (one who is not subject to minimum wage rules). The definition says such an employee earns a monthly salary equivalent of no less than two times the state minimum wage for full-time employment (2080 hours per year). In other words, to keep an exempt worker exempt when the minimum wage increased, a worker’s salary also had to be increased to keep him/her above the 2.5 times threshold.

Check state law
The minimum wage rates and rules vary from state to state, and rates are set to increase on January 1, 2015, in nearly two dozen states. If your state’s minimum rate and other rules are stricter than the federal FLSA, then the state rules apply.

The federal minimum wage is still $7.25 per hour and applies in states that do not have a higher rate. However, the rate for payments by federal contractors rises on January 1, 2015, to $10.10 per hour. If you have questions about minimum wage and overtime rules, talk with an employment law attorney.

Social Media in Hiring Decisions

December 11th, 2014 may be able to discover the “real” person applying for a job with you by viewing the person’s postings on social media sites such as Facebook, LinkedIn, Instagram, and Twitter. But there are questions about whether you should, or even can, do this.

What you can and cannot do with public postings
It’s not difficult to track down a person who has tweeted or made other postings open for anyone to read. The dilemma is how to use the information you learn from social media—wisely and legally.

It’s a fact that today hiring managers and recruiters are using social media information. Go-Gulf, a web solutions company, posted some interesting statistics on how the information is being used.

When you explore a job applicant’s social media presence, here are some issues to consider:

  • Is it a good idea to make initial determinations based on what you see online? For example, if postings are foul-mouthed, do you even want to interview this person? Is it better to wait until you’ve met the job candidate before searching online? Continuing the example, the person may use appropriate language in the workplace; if you’d never interviewed the person you wouldn’t know this.
  • What’s legal? Federal and state laws prohibiting discrimination do not stop at social media gateways. You cannot use online information in a discriminatory manner. For example, if you find out a person’s religion in a posting, you cannot use this information to discriminate against the applicant.

Private postings
Can you ask a job applicant for his/her username and password on social media sites to read private postings? It depends where you’re located. Six states (Louisiana, New Hampshire, Oklahoma, Rhode Island, Tennessee, and Wisconsin) have barred this action (and Maine has authorized a study on it). As of mid-November, similar legislation is pending in more than two dozen states.

Final thoughts
In my view, it’s probably wise to use information gleaned from social media to supplement rather than supplant a resume and personal interview. The added information may display passion for a particular type of work, good moral character, or other factors that may be a tipping point in making a job offer.

Be sure to keep records of any postings you use in the hiring process. And ask an employment law attorney to review your hiring practices so you know you’re operating within the law.

The Sharing Economy — What It Means to Your Business

December 4th, 2014

Technology has enabled people to share homes (Airbnb), rides (e.g., Lyft, Sidecar, cars (e.g., RelayRides, Getaround), bicycles (e.g., CycleHop), home wifi networks (e.g., Fon), and more, easily and inexpensively.  Technology has enabled people to share their money with worthy causes through crowdfunding (e.g., LendingClub). And businesses are getting into the sharing economy, also referred to as collaborative consumption. The purpose: Only pay for what you need.

Sharing space
Businesses can use well-outfitted commercial space when they need it at a modest cost. For example, with WeWork, an office, as well as a community of other small businesses, are available for $250 a month. The number of co-working spaces in the U.S. increased in the past year by 83%.

Sharing equipment
Businesses may need certain equipment all of the time and could use it on an as-needed basis. For example, Shared-Use Farm Equipment (SUFE) Pool and Maine Farmland Trust lends out large farm equipment. TechShop in nearly a dozen locations nationwide provides manufacturing space and equipment for a monthly fee.

Not all cities and towns are embracing the sharing economy when it intrudes on their ability to impose permits and collect taxes. Cases in point:

  • Airbnb has been hassling for a couple of years with NYC over tenancy laws.
  • FlightCar, a service that lets a car owner allow a traveler into San Francisco Airport to use the vehicle (which, by arrangement, has a $1 million liability policy) — the airport isn’t happy because no fees are being paid as compared with rental car companies. And the town where the company is based isn’t happy, pulling a conditional permit because of noncompliance issues. The company and airport are now in court.

It’s clear that the sharing economy is here to stay, although to date, many opportunities are limited to certain urban areas. The only question for business owners is whether it makes sense to become a part of it and how to do this successfully.

Being Grateful: A Business Perspective

November 27th, 2014 this Thanksgiving Day, there are many things to be grateful for. Family, friends, good health, and freedom top my list. Thinking about my business brings several other things to mind that I’m grateful for.

1.    Business associates
I’ve been at this for a long time, and I’m pleased to say that I continue to work with a number of the same folks for many, many years (e.g., almost 38 years with one person; over 30 years with another). It’s a blessing to have these long associations, and to be able to count on these people.

2.    Stimulating subject matter
I’ve repeated it often: I’ve never been bored a day in my life. That’s due in part to focusing on small business matters, and taxes in particular. Things change every day. There are new developments and lots to pay attention to. While not every piece of news is fascinating, there are enough “wows” on a regular basis to keep things very interesting.

3.    Flexibility
Having my own business has given me flexibility to run my life on my terms. While I work many hours more than 9 to 5, I can (usually) arrange them for my convenience. This was especially helpful when I was raising my children; it’s great now, too, because I can enjoy the sun (I’m in Florida) and more.

4.    Financial rewards
Being in business has given me the financial success that I probably couldn’t have achieved in a more corporate position. This has enabled me to provide an education for my children, live comfortably, and give to charity. While I’m not a one-percenter, I’m grateful for what I have.

5.    Learning opportunities
One thing that contributes to staying young (at least in heart and mind) is learning new things. Technologies and business practices are always changing, and I enjoy keeping up.

In the words of Thornton Wilder:

“We can only be said to be alive in those moments when our hearts are conscious of our treasures.”