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Utah has been running an experiment where a good portion of their government workers work for 10 hours four days per week. They were expecting this to drastically lower their energy costs. It turns out their energy costs didn’t go down much. Many buildings could only be partially shutdown, so much of that expense was still there. Also the cost of electricity and gas didn’t go up as much as they were anticipating. However, they did get a huge benefit they weren’t expecting.
Their overtime dropped dramatically. By the end of a 10 hour day, most employees were ready to go home. I’m guessing that the incentive of having Friday off helped everyone work just a bit harder. Some of this improvement might be due to the Hawthorne effect where employees work harder when you are paying more attention to them. But, many employees love the new schedule. One pointed out that they really didn’t have much time to do things in the evening on a 5 day work week, but with 4 days they had a bunch more options. They were happy to give up some of their evening time to get an extra day off.
Utah isn’t sure if they are going to keep the schedule. They are examining it closely. While they recognize the benefits, they are trying to get a feel for what the public thinks and if having government offices closed an extra day causes a lot of inconvenience to the population.
In today’s downward market there are some businesses that are doing well. For example, some companies that sell brown bags for taking your lunch to work are seeing their sales increase by about 40%. As workers decide to save money by not eating out, they are buying products that let them take their lunch to work. Plastic food container sales are probably on the rise as well.
Another area where sales are growing is in alternate energy. Companies that install solar equipment are getting lots of calls as people look for ways to cut their energy expenses. Windpower and other alternative power sources are doing well also.
There are many technologies that haven’t been cost effective in the past, but with high oil prices are now looking attractive. Land that previously wasn’t worth using for oil may now be considered a great place to drill.
Oil companies are offering incredible concessions to environmental groups in order to get approval to drill. These include things like turning large swaths of land into parks and game preserves as well as clean up of equipment abandoned by other companies.
Overall there are some major shifts in how people are spending their money in response to economic downturn. It isn’t always rational, but the savvy business person can take advantage of these changes if they know where to look.
It is common to hear people talking about creating an offshore company in order to avoid paying taxes in the US. There can be some tax advantages to forming a company outside the US, but it doesn’t automatically make you exempt from US taxes.
US citizens are taxed on their income regardless of what country it comes from. So if you are a citizen of the United States and you earn money from Belize, you are still liable for paying taxes on the money you earn. There is an exemption of about $80,000 for people who live outside the US for the vast majority of a year or who have established bona fide residence in a foreign country.
The place where you can save money on taxes is on corporate tax. If your business is truly located outside of the US, it will not have to pay US corporate tax. This is good for your company, but it doesn’t help you much because once, you move any of the profit into your personal accounts, it becomes taxable income.
Also keep in mind that many of the countries popular for offshore businesses, have their own tax for local businesses. Many times these taxes are waived for corporations that conduct no business locally. There are some countries that have no tax for local or foreign businesses. These countries could be attractive places to form a corporation to build assets to be distributed later. This type of arrangement might be beneficial if you plan to be in a lower tax bracket in the future than you are currently. However, since taxes generally go up, your total liability might be much higher ten years down the road.
If you are dealing with a small business and plan to spend a great deal of time overseas, you might be able to create the business, but only take a salary during the years where you will meet the requirements for the $80,000 exemption. If you and your spouse both take the $80,000 exemption, then you could move about $160,000 per year into your pocket without a tax liability in the US. However, the expense of meeting the requirements to be eligible for the $80,000 exemption may be greater than the taxes you would save.
For most organizations, going offshore has very little real benefit because the costs are greater than any tax savings. In addition it may make your company look suspicious to the IRS and increase the chances of an audit by the US government.
One of the biggest benefits employees look for in a job is health care insurance. Employers on the other hand see health insurance as once of the biggest expenses. However, by understanding the the value of insurance for your employees, most employers can come up with a plan that offers great benefit to the employees without letting the cost get out of hand.
High Deductibility Health Insurance
The more an insurance company expects to pay, the more they charge you. So if you look for a plan that pays for every single health related expense, the premiums will be quite high. On the other hand, the less the insurance company expects to pay the lower the premium. By choosing a plan with a high deductible, you can offer insurance with a low cost per month.
At first look, this seems like it isn’t giving your employees much of a benefit. If you chose a plan with a $5,000 deductible, they could be liable for $5,000 per year in medical expenses. For a younger person, it is likely that all their health expenses will be below the deductible amount, so the insurance will pay nothing. However, most people overlook the price negotiation that insurance companies do.
Health Insurance Contract Pricing
Most insurance companies have negotiated rates with health care providers. In other words they go to each hospital and doctor and say, “We’ll send our people to you if you are willing to accept our standard payment rates”. So instead of charging $300 for an office visit, the insurance company may say that they will pay $60.
If your insurance is structured correctly your employees will get the lower negotiated rate even if they never meet their deductible. That means if they would normally have had $5,000 in medical care for the year, the negotiated rate could easily be only $1,000.
This way, the insurance is helping save them money, even if insurance doesn’t end up paying for anything.
Getting the Insurance Company’s Pricing
To help make sure your employees get the insurance company negotiated rate for health care, you need to try to find an insurance company that handles the billing–even for items that are below the deductible. Some companies basically just say, “pay for everything yourself and start sending us the bills once you go over the deductible.” Unless they have changed, this is how Humana works. The problem with this is that the doctor and hospital are charging you directly, so they are going to charge you the higher rate.
Employer Self Insurance
Sometimes it makes sense for an employer to “self insure”. This means that they employer will pay for medical expenses directly or reimburse their employees for medical expenses. When large companies do this, they still will take out an insurance policy to cover expense that go over a large amount–say one million dollars. Smaller companies will often self insure for dental benefits because the expenses tend to be much lower.
For a small company the best mix for self insurance is to get a health insurance with a high deductible. For example, say that each employee is given an insurance policy with a $10,000 deductible. This insurance will probably cost the employer very little because the deductible is so high. The company then reimburses each employee for the first $10,000 of medical care. Optionally the company can establish their own deductible. For example, the company can offer to pay for all expenses after the employee pays for the first $2,500. Since insurance kicks in at $10,000 the company would only be liable for $7,500 of health expenses per employee.
In setting up a system like this, it is important for the employer to make it very clear what is covered and what is not. Usually following the same standards as your insurance company is the easiest. Also make sure that employees are billing their medical care first to the insurance company so you are only paying the insurance company contracted rates as discussed above.
Health Savings Accounts
Another benefit of high deductible insurance policies are the health savings accounts. These are special savings accounts that employees and employers can contribute to with pretax dollars. The accounts can be used for health related expenses. Unlike some of the older types of health savings accounts, the money stays with the employee until they spend it. It doesn’t zero out at the end of the year and it stays with the employee even if they change employers.
By offering your employees insurance with a high deductible along with a health savings plan where you make contributions, you can let them see the benefits you are providing. If they see an account where you are putting an extra $100 per month for them to use for health care, it is much more noticeable than spending an extra $100 per month on insurance to try to lower the deductible.
Health savings plans appear to be more liberal in what they will pay for than most insurance companies, so they will often give your employee the ability to pay for items that wouldn’t be covered by insurance anyway. Also if an employee doesn’t use all the money in their savings account it will accumulate and they can eventually use it for other things when they retire.
In summary, health insurance can be one of the most daunting and expensive part of dealing with employees for a modern small company. By doing careful research and understanding the system, employers can offer their employees more value while spending less money. When looking at changing or implementing insurance you should consider the age and health of your average employee to find a plan that will give the greatest benefit to the most people possible.
Business cards don’t need to be fancy or expensive, but you need to have them to help present you and your business. You can get business cards online for free with an add on the back, but it is recommended that you get your own cards without other advertising. These will usually cost $15 to $20 for a basic card. You can spend more and get a photo, cool design or even metal business card. If you want to go beyond the basic card, adding your company logo is probably the best bet.
Be sure to keep business cards with you. Keeping a small stash in your computer bag, glove compartment, and travel bags is a good idea to help make sure you don’t find yourself without a card. Hand out the cards when you introduce yourself. If someone forgets your name, they have your card to reference.
Websites are becoming modern day business cards. You need to have a website at your own url that matches your email. This doesn’t need to be fancy or complicated. It needs to give people enough information about your company that they will know who you are and what you do.
If you want to use your website to start drawing in customers you need something a big more complicated. Have a site with a blog is a good first step. The blog gives you a way to easily add content on a regular basis. If you use it to provide value to your current and potential customers it can help keep your brand in peoples minds when they need services you provide.
If your product is something that can be sold over the web, an online store may be a good choice. You can try to host your own store, but often it is best to use a store service from a company that specializes in online stores. Yahoo has a good store platform like this available for a low monthly fee.
Email is one of the most important forms of communication in todays world. Make sure your email portrays the image you want people to have of your business. I’ve seen many people ruin their business professionalism by using a hotmail.com address, or sending email in a very unprofessional manner. Here are some tips for making email help your professional business image:
- Use your own domain — Real businesses have email from their own domain. You should be able to send and receive mail from firstname.lastname@example.org. This is less expensive to setup than it might seem. You can go through your isp to set this up or contact Xeric Corporation for information about their business class email plans.
- Use a business like signature — The signature is what shows up at the end of each of your emails. A short signature with your name, title, company name, telephone number and email address will help convey a professional image.
- Don’t use stationary — Some email software tries to help dress up your email with background images. You want your messages to look crisp and business like. Since you don’t know what software your recipient will be using, sending your message in plain text helps you avoid any strange formatting issues.
- Spell check — People will generally forgive small errors in email, but the more you can avoid the better. Make sure your email program has a spell checking capability. The best ones check your messages as you type them and underline misspelled words in red.
- >Check email regularly — People expect to hear back from you when they email. You should check your email at least once each day and respond to messages
- Spam filter — Make sure you have a spam filter to keep you from losing hours of work just deleting emails. Make sure it works correctly and doesn’t accidentally block emails from your customers.
Email is becoming more and more important, but a business telephone is still important. Some people prefer to make contact by email and some may prefer to make contact by phone. Make sure you make it easy for people to contact you however they are most comfortable.
It is fairly inexpensive to get a 800 number that forwards to an existing telephone line. An 800 number helps customers feel like they are dealing with a business that is used to doing business outside of just their local area.
A vanity 800 number is one where the letters spell something related to your company. This can increase your branding tremendously. Usually you will have to pay an additional charge to set this up. RingCentral has a tool that lets you easily look up vanity numbers to see if they are available.
When someone calls your business they shouldn’t get a busy signal or no answer. Good voicemail systems can make sure that you get the message even when you are away. Advanced systems can handle call routing based on the time of day and even “hunt” for you by ringing a list of numbers until you answer. This can be useful if you are a small business and want calls to normally come to the office, but want to be able to pick them up from your cell phone if you have to step out of the office or drive out to a customers site.
Ideally you want a voicemail system that will send you a voicemail as an attachment in your email. This helps give you a single place to check for messages both written and verbal. It also make it easy to forward your messages on to someone else if necessary–even if they are not on your local voice mail system.
Many small businesses find that a cell phone is the only phone they need. If you have a physical office you may be better off using a voip phone as your main number and just forwarding it to your cell phone when you are out of the office. If you do a small amount of talking on the phone a cell phone may provide all the minutes you need a a low enough price to make it difficult to justify another line.
If you have multiple employees, you may want to look for a plan that allows you to pool minutes. This works best with 5 or more people. Minutes used come from a pool, so if one employee is very busy on one month and another is gone on vacation you don’t have to pay extra for the busy employee and have unused minutes for the one on vacation.
Many people still use fax technology instead of email. This is especially true when you need to send signatures back and forth. If you just need to receive faxes you can pay for an inexpensive service that will give you a phone number and email you any documents faxed to that number. eFax, CallWave, and RingCentral all have this feature. Some of these companies will even let you fax documents to others by emailing a document to a special email address or uploading your document on their website. If you don’t do a lot of faxing. One of these services and an inexpensive scanner can cover all of your faxing needs.
Health insurance is one reason you should consider creating a corporation if you work for yourself. There are certain advantages that corporations get that are not available to you as an individual.
One of the advantages of creating a corporation is the way you can access insurance. .
As an individual you can get insurance, however there are special laws that govern group insurance in most states. As an individual, insurance companies have much more freedom to charge you higher rates. With group insurance their maximum rates are limited by state law.
For example, if you and your wife apply for insurance as an individual and your wife is pregnant, the rates are likely to be very very high. Either that or they won’t cover the pregnancy. However, if you use your corporation to sign up for a group policy, some states limit how high the insurance company can raise the rates. These states also keep the insurance company from excluding you for a pre-existing condition.
So lets say that your premium would normally be $250 per month. The insurance company wants to charge you more because your wife is pregnant, but the state limits them to only raising the premium by 50%. So the insurance company can charge you $375 per month, but they can’t deny you coverage or charge you $2000 per month.
The laws vary from state to state, but most of the time group insurance will be a much better deal than buying as an individual. Group insurance is something you will need to purchase as a business not as an individual.
Most of the time you are required to have at least two employees to qualify for group insurance. This means you and your spouse will probably need to both be employees of the corporation and have separate insurance policies if it is just the two of you.
Tax Deduction for Insurance
At one point individuals were unable to claim a tax deduction for money spent on health insurance and health care. Most of this has changed now, and you can claim a deduction for your health care costs as an individual. However, by keeping your medical expenses within your corporation, you are less likely to drawn the attention of an auditor because traditionally businesses have had deductions for healthcare while individuals have not.
Your company can choose to insure you and pay for out of pocket medical expenses as well. This means the company can cover your co-payment and other healthcare expenses. Just keep in mind that you will probably be required to treat every employee in the same way. So you can’t have your company cover the deductible for you and your spouse, but expect other employees to cover it on their own.
High Deductible Insurance
The lower your deductible the higher the cost of insurance. By choosing a plan with a high deductible and setting up your company to cover all of the expenses not covered by insurance, you can usually save the most money if you are reasonably healthy.
By choosing a high deductible of several thousand dollars per person, you will have a low monthly payment. Just make sure you set aside the money within your company to cover the cost of the deductible should you or one of your employees need medical treatment.
Corporate Policy for Healthcare
When setting up health insurance it is important that you document your policy. Most of the time you must have the same policy for everyone. As owners of the company, you cannot give yourself one set of healthcare benefits, but give everyone else something else. There are certain ways around this, like tying healthcare to a minimum term of service or creating two companies–one for your employees and one for yourself. However, what will look best if you ever end up in an audit is a clear policy where everyone is treated fairly and in the same way.
With all the taxes and paperwork involved in dealing with your own payroll, there is a lot to keep track of. The government requires that you deduct certain taxes from your employee’s paychecks and send it to them along with your portion of the taxes. Most accounting packages can help you do this, but it still requires a lot of paper work and filing with the government.
For many businesses, the amount of time required to understand the payroll process isn’t really worth it. If payroll is going to detract you from working on things that actually help your business make money, you should probably consider using an outside service to process payroll.
Many local accounting firms can help handle processing your payroll, but there are also some really good firms that handle the entire transaction over the internet. Here are some things you should look for when evaluating payroll companies:
- Direct Deposit – By directly depositing the money into your employees bank account, you save yourself the trouble of working with the paper, waiting for things in the mail, etc.
- Bank Transfer – You want to find a company that can directly take the money out of your checking account to pay employees and taxes. Otherwise you’ll have to be writing and mailing checks.
- Login for employees – If the company offers an employee login, this can save you time because employees can check their payment details themselves.
- Import for Accounting System – You definitely want to use a company that lets you import payroll information into your accounting system. This helps insure that everything is accurate and saves you a lot of time over entering in each thing manually.
- Government Filing – Most payroll companies should handle filing the paperwork with the government. Most of the time they are setup to make these filing electronically.
- Experience – One of the big advantages of going with a payroll company is to minimize any problems with the IRS. You want to work with a company that has enough experience to keep you out of trouble. This doesn’t mean you shouldn’t use a smaller firm, but make sure they know what they are doing.
When you consider all of the paperwork involved in processing payroll, having another company do it can be a good deal if you don’t have the expertise yourself. Most charge based on the number of people and the number of times, you have to do payroll each month. Depending on what company you are using, here are a few things that will help minimize the amount you pay for the service:
- Contract – Much of the expense to the payroll company is in getting everything setup initially. Once they have you setup in their system, most of the process is automated. You may be able to get a better deal if you signup for a year long contract or some other period of time.
- Accounting Software Deals – Sometimes the company that provides your accounting software will have a special deal with a payroll company. Sometimes this will result in a lower cost for the payroll service, or free accounting software updates when you are using the payroll service. It is worth calling your accounting software company and asking if they have any special arrangements with payroll companies.
- Fewer Payrolls – Depending on your employees, you may be able to save money by going to a monthly payroll instead of every two weeks. This is especially good if you are just paying yourself and your spouse.
- Direct Deposit – Most payroll companies charge extra to mail a check, so if you can put all of your employees on direct deposit, it will probably reduce the cost of running payroll.
- Shop Around – Make sure you compare the different services. Be aware that the offerings from company to company can vary significantly. For example, a local accounting firm might charge more to do your payroll, but may give you free advice once you are their client.
Many business owners and managers assume that it is easy to change things in their organization as long as they are the boss or the person in charge. This is a very naïve assumption.
Just because someone has the authority to make a change, doesn’t mean that they have the influence to make the change effectively. A manager who just bullies their way through change is achieving short-term successes at the expense of long term effectiveness.
When introducing change to an organization, the first step is to identify who will be impacted by the change and who is likely to offer resistance. Resistance isn’t always noticeable. If you are the boss, resistance may come in passive forms that are hard to identify and notice. That is why it is important to identify resistance ahead of time instead of waiting for it to become noticeable. Some types of resistance is very hard to notice. For example, you may have someone who is resisting your change, but would never say anything. However, they may intentionally or subconsciously perform their tasks less efficiently under your newly implemented system than the old one they like better.
By identifying people who will offer resistance ahead of time, you can take proactive steps to get them on your side. Many individuals offer resistance just because they don’t feel their opinion is being valued. By including them early on, you can get them on your side if they feel like they are having a part in the process of change. Many times a conversation where you ask what they think will go a long ways toward winning over someone who might offer resistance.
There are some people who are going to resist change even if you try to involve them early on. When you have identified these people you need to take steps to minimize their impact on the rest of the organization. This might mean rolling out a computer software update in their department last after all of the other departments have been upgraded. It might mean implementing a change while they are on vacation, so they have less chance to complain during the actual change over.
It is important to realize that one person offering vocal resistance can sway many other individuals who would be supportive or at least not resistive of the change. In extreme cases it might be better to remove or reassign someone if they are going to fight a very important change.
If your change is a change to a process, it is important to implement some type of measurement system so you know the process is actually being performed in the correct manner and also, so you can tell if the change was an improvement or not.
Many managers try to implement small changes just by telling their direct reports verbally what they want done. This may work for some types of changes, but in general a more formal approach is required. There should be some type of written documentation of changes, so there is no ambiguity.
Change is an important part of managing a business. By identifying the people who might be resistant to a change early on and approaching change in a consistent planned manner, you can reduce the difficulties inherent in making changes to an organization.
The basic way that businesses make money is by taking advantage of differences in prices. For example, Wal-Mart makes money by exploiting the difference between the price the can negotiate with suppliers and their selling price of an item.
Import businesses exploit the differences between what an item costs in a foreign country and what it costs locally. Restaurants exploit the difference between the cost of raw ingredients plus labor and the amount people are willing to pay for a meal.
When you start to think of businesses as simply exploiting price differences, you will start to see opportunities in new areas. Instead of looking for a traditional business, you can look for the underlying concept behind business. This type of mindset helps keep you from getting stuck in a rut and helps you redefine the idea of business based on how they make a profit.
If you can identify areas where your cost of obtaining a product or service is less than the price most people are willing to pay for that product or service, you’ve identified a potential business idea.