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Business Valuation

Navigating Bank Failures in Your San Francisco Bay Area Business Right Now

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Memorial Day was this week. The unofficial start of summer. I like to remember that when things are unpredictable and even a bit hairy (like a shifty economy, bank failures, debt ceiling crisis), normal life still goes on.  People will still prep their grills. They’ll whip up their mom’s potato salad recipe. Celebrations with friends and family in the backyard will still happen across the 50 states. It’s always good to keep that in perspective.  As a business owner, you’ve probably gotten good at managing crazy for a while now. Running a business in our post-pandemic economy takes a special kind of chutzpah.  That’s why I want to jump into part 2 of my banking crisis articles. I’ll get back to the second half of our talk about the new FinCEN reporting requirements soon.  But today, my goal is to help ease your mind about the topsy-turvy economy and equip you to navigate it. Naturally, I won’t cover everything about navigating bank failures in this article. There’s a lot more to be said. If you want to talk about your business goals for this year or how to take this whole bank failure impact in stride, let’s get something on the calendar:Patti (408) 775-7790  Gale 408-775-7800 Until, then, I’ve got some thoughts on how you can carry your San Francisco Bay Area business forward in this present moment… Navigating Bank Failures in Your San Francisco Bay Area Business Right Now“Banking is very good business if you don’t do anything dumb.” – Warren Buffett It takes a lot of moving parts to keep a business running, no matter how small or gargantuan it may be. Some of those things your business relies on involve outside institutions. (As much as we like to think we operate in our own bubble… that is rarely the reality.) Aside from your utility companies, your bank is probably the outside institution that’s most vital to your small business. Which is why, in the midst of a banking crisis, you might ask, “Is my bank in trouble?”  Accusations keep flying on Capitol Hill as lawmakers grill bank execs. Warren Buffett himself has warned that the banking crisis isn’t over (though he adds that depositors generally shouldn’t worry).  A recent survey showed small-business owners divided between those who have confidence in America’s banking system and those who don’t. Almost a third said they weren’t going to open a new bank account anytime soon. A slight majority think their business capital is secure — but fewer are finding it easy to actually access the capital they need. Throw in nagging inflation and frequent hikes in interest rates (though both might be slowing this summer)… and the banking crisis can feel like a worry that’ll break the camel’s back.  Allow me to comfort you, if I may: It isn’t.  Navigating bank failures is possible for you and your company… with perspective, caution, and a sharp eye for options. Navigating bank failures means new kinds of risks When bad asset allocation, sketchy investment, and lax risk management rattle banking — and Congressional inquirers think all of those apply to the current crisis — it’s only natural that other businesses like yours start thinking about new kinds of lenders. For instance:  Approaching one of these institutions means you have to weigh a fresh source of capital against new and unknown risks, a common problem when a mainstream industry as vital and big as banking hits troubled times. How much help is the FDIC? But even when navigating bank failures, common sense still prevails. If you are looking for a new bank, you don’t want to jump too quickly only to find yourself at a new institution with hidden higher fees and other problems you didn’t have time to spot.  You should also know that your money also has a backup (within certain conditions). The Federal Deposit Insurance Corporation, created 90 years ago as thousands of banks failed in the Great Depression, insures bank deposits up to 250,000 dollars. The insurance amount is per depositor, per insured bank, for each account category. Seems simple, and maybe it is for individuals. But is it still giving enough coverage to businesses these days? The FDIC itself has suggested “Targeted Coverage” for different levels of deposit insurance across different types of accounts, with a focus on higher coverage for business payment accounts. The FDIC also noted how individuals can often do what businesses can’t: Diffuse their accounts and their money across multiple banks to make sure every account is under the threshold of FDIC coverage. For now, until some sort of Targeted Coverage becomes a reality, it could be a smart move to try doing this as much as possible with your business accounts.  Does size matter? In one of those surveys we mentioned, small-business owners are fairly split in preferring to work with large, regional, and community banks, but they did report that right now the regionals and community banks were harder to access capital from. That’s also the order in which respondents expressed confidence in their bank now — “bigger” does seem more secure. But is it? Unrealized losses are on the books of many regional, mid-sized banks — yet some benefited from the business transferred from the likes of Silicon Valley. Small businesses also still get more loans approved by small banks than by big ones. Navigating bank failures involves getting creative If you don’t want to go through a bank at all for capital, think about the U.S. Small Business Administration, online lenders (where terms are usually easier but the interest rates and fees are higher), or a credit union.  Credit unions also offer traditional banking services and come in sizes ranging from small and local cooperatives to large institutions with a nationwide presence and thousands of participants. Compare credit unions using the same factors you’d use when shopping for a bank: fees, customer service, branch locations, online access, and so on. They’re also not-for-profits, so your fees might be lower, which is a nice little cherry on top. Finally, there’s the more

Business Tax Planning

New FinCEN Reporting Requirements for San Francisco Bay Area Businesses (Part 2)

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Memorial Day doesn’t always mean rest for the small business owner — depending on what kind of industry you’re in. There’s often a lot of hustle around national holidays (special promotions, big sales, holiday weekend shopping). And debt ceiling deals to make, apparently, since that’s what our government was working on over the weekend. Some notables: What a way to spend a holiday weekend. Even with any “extra” in your arena, I hope you had a moment to enjoy some beginning-of-summer weather and something off the barbecue.  A few weeks ago, I promised a part two on the FinCen reporting requirements. And today, I’m going to deliver. As of next year, thousands of small companies will have to start reporting information on their owners, thanks to the Financial Crimes Reporting Network (FinCEN). The agency looks to fight financial criminals, and therefore wants small companies and corporations to share information in the spirit of saving us all from the crooks. Before I share too much, let me say: This is something you’ll want to make sure you pay attention to. There are some exemptions, so read on to know if your business falls in that purview. And if it does, my team and I can help with the nuances of it for your San Francisco Bay Area business. When you’re ready for that, we’re right here:Patti (408) 775-7790 Gale 408-775-7800 So, what does that look like for next year, and what do you need to know?  Let’s have a look. New FinCEN Reporting Requirements for San Francisco Bay Area Businesses (Part 2)“With great power comes great responsibility.” – Uncle Ben, “Spider-Man” If you don’t know about this new requirement popping up for scads of small businesses, it might come as a bit of a surprise — which is why we’re going to look at it today. A few weeks ago, we quickly overviewed this reporting requirement. Let’s look at a few more details about what exactly the feds want to know.  ‘Corrupt actors’ To refresh your memory: FinCEN looks to implement parts of the Corporate Transparency Act that govern the access to beneficial ownership information, or BOI. The reporting regulations kick in next January 1. They require most small corporations, LLCs, and similar entities created in or registered to do business in the U.S. to report information about their beneficial owners. The information will go into a database that helps track “criminals, corrupt actors and anyone trying to hide ill-gotten gains in the United States” to the inspection of law enforcement here and in other countries.  The feds claim that the states (the level of government where shell companies register, if they register with anybody) can’t currently do enough to track international bad guys who might be setting up shop. Who do they want? So, they want information on beneficial owners. Who exactly is that?  In general, a beneficial owner directly or indirectly exercises “substantial control” over a company — or owns or controls 25% or more of the “ownership interests” of the reporting company.  “Substantial control” can involve all the company’s senior officers or anybody directing or with most of the influence over big decisions for the company. “Ownership interests” can include simple shares of stock and equity as well as more complex debt instruments and trusts. You’ll have to report four pieces of information about each of your company’s beneficial owners via a FinCEN website:  These documents include a valid driver’s license or government-issued ID, which includes a U.S. passport. If you don’t have any of those, your reporting company can use the ID number from a non-expired passport issued by a foreign government.  Reporting companies created after next January 1 will have to provide these four pieces of information and document images for company applicants. An “applicant” can be whoever files the document that creates or first registers the reporting company and whoever is primarily responsible for directing or controlling the filing of the document.  No reporting company will have more than two applicants (for example, the founder and the filer of documents).  Does my company need to report? The rule identifies two types of reporting companies: domestic and foreign.  A domestic reporting company is a corporation, limited liability company (LLC), or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe. It’s the same for a “foreign reporting company” except that it’s formed under the law of a foreign nation and is registered to do business in any state or tribal jurisdiction.  FinCEN expects reporting companies will also include limited liability partnerships, limited liability limited partnerships, business trusts, and most limited partnerships.  Twenty-three types of entities are exempt: certain types of banks and credit unions; some securities brokers and other types of companies registered with the SEC; some companies associated with insurance; and public accounting firms and some utilities. (You can see a list and more details here.)  (Many of these, by the way, are already regulated by the government and already disclose their BOI information.) Reporting companies created or registered before January 1, 2024, will have just until New Year’s Day 2025 to file their initial reports. Companies created or registered after January 1, 2024, will have 30 days after receiving notice of their creation or registration to file.  Observers have said that roughly 32 million reporting companies are anticipated in the first year of reporting.  Yeah, that’s a lot. Is the database safe? Naturally, you’re probably concerned about how safe this database is. Generally, FinCEN can release your BOI “under specific circumstances” to:  FinCEN says the IT system will be cloud-based and “will meet the highest Federal Information Security Management Act (FISMA) level” — which basically admits that a breach would have “a severe or catastrophic adverse effect.”  You can’t argue with that, no matter how you may feel about the new regulations.  It’s natural that you’d have more questions on this FinCEN reporting requirement and now would be the time to sort out the details as they

Business Growth

A Step-by-Step Guide to Business Loans

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Ever feel like the whole world is taking a summer vacation except you? That’s real: Small business owners can’t always afford to step away from the helm to take those long, glorious vacations you see on social media (maybe beach and Europe photos are already popping up in your feed?). Whether you do have some breathing room in the next few months, or whether this is your busy time of year, I just want to remind you: Your work matters. And as a business owner in San Francisco Bay Area, the opportunity you have to make a difference in the lives of your employees and customers is full of beautiful, astounding potential. Also — you may want to take a few moments to think back to your quarterly or annual company goals for this year. Now that 2023 is half over, how are things going? Have you met expectations, exceeded them, fallen behind on other goals? What things could you shift this summer to set your business up for success in the latter part of this year?  If you want to brainstorm and strategize about this together, you know where to find me:Patti (408) 775-7790  Gale 408-775-7800 And if getting some more funding for your business happens to be on the list of things you’d like to see this year (there are more of you than you might think), let’s seize the moment by looking at a few options for that. (This is, of course, just the starting point.) A Step-by-Step Guide to Business Loans“It is thrifty to prepare today for the wants of tomorrow.” – Aesop So, you’d like to get some more funding for your business. Or maybe you’re just curious and want to know what your options are. From evaluating your need for a loan to ticking all the boxes correctly on the final application, securing financing for your small business is a job you want to get right from the start. Because business loans aren’t a one-size-fits-all type of scenario, let’s look at the steps you must take (and what order to do those in). Next time, we’ll flesh out some other funding options, so you can be fully aware of what your choices are and choose what is best for your business.  Step 1: Why do you need a loan? Your business might need money for many reasons. You’re likely thinking of capital improvements, daily operations, starting a new line or a spin-off company…  But a bank loan isn’t necessarily the answer to all of them — a key point as interest rates are up and borrowing has become costlier for San Francisco Bay Area business owners. Traditional bank loans, for instance, tend to have higher borrowing limits, making them better for collateral-secured funding best for a large purchase (such as equipment). If you’re looking to cover day-to-day operations with fluctuating but smaller spending needs, a business line of credit might be better as you can tap it as needed. Traditional lenders also often don’t like to lend to startups, so you may need a personal loan or a business credit card if the project in mind doesn’t have enough of a track record.  (I’ll dig deeper into other types of business funding in my next note. Today is all about traditional business loans.)  Also — limit your loan search. Applying for too many can ding your credit score. Find out various lenders’ qualification criteria first and then cherry-pick a few best options. Ask lenders about their credit-check policies, too, since the deeper they probe the more likely they are to affect your credit score. Step 2: Do you qualify? Before starting your applications, take a hard look at some of your company’s financials.  Here you’ll need to consider your cash flow and your ability to make your loan payments. (This calculator can help.)  Step 3: Compare lenders Traditional bank options include term loans, lines of credit, and commercial real estate loans. The U.S. Small Business Administration also guarantees certain small-business loans through banks in its 7(a) program. Additionally, the SBA has a 504 loan program for fixed assets such as land, buildings, or equipment.  Weigh all options for funding before applying, with an eye to the best terms versus convenience — and the possibility of actually getting the loan. Again, banks can be among the strictest lenders for conditions and can take the longest for approval and access to the money. Credit unions may be almost as good as banks for loans but may have membership requirements.  Find out as much about the terms as possible — interest and repayment schedule, for starters, as well as possibilities for early repayment (there can be a penalty for this). Compare lenders of similar types and sizes.  Step 4: Assemble your paperwork You’ll need business plans, a year’s personal and business bank statements, personal and business tax returns for at least a couple of years, and details about any previous and current business loans.  Also gather your business licenses and legal documents, articles of incorporation, owners’ details, P&Ls and financials, and other documents pertaining to your business such as leases or deeds.  A detailed proposal on how you plan to use the loan will help, too. You can never have too much paperwork on hand right before applying. Then check with the lender to make sure you left nothing out. (As I’m sure you’ve noticed by now, different lenders might have different requirements.)  Step 5: Apply You may be able to do this online. For significant business loans, many lenders want the application done in person or at least over the phone. This will vary depending on which lender you go with. Before submitting your application, have a knowledgeable third party give it a once over. You may find such a person in your business network or from the local chamber of commerce. And of course, we’re always happy to lend a hand.  You may very well find that a business loan is the way to go for your company. If you want to look into that, we’re here to walk

Business Growth

Alternative Small Business Financing Options for San Francisco Bay Area SMBs

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I’ve talked to you before about the ERC scams running rampant and how to steer clear of them, but there’s a recent update worth mentioning: They’re also partially responsible for the IRS’s delay in issuing ERC refunds — especially for small businesses. And funds like that could be exactly the kind of boost needed for struggling businesses.  Now, maybe the ERC credit isn’t for your San Francisco Bay Area business (or you’ve already received it), and you’re still in need of a cash flow infusion. The banking crisis certainly isn’t making that easy for you. Which is why I want to talk about some alternatives to bank loans in today’s article. Before I do, though…  Besides getting capital, another strategy you might consider to boost your biz is working with large businesses. The U.S. Chamber of Commerce is hosting a little forum on June 22 to talk more about that. It seems big businesses see the value in working with and creating partnerships with small businesses like yours. Take Apple. They’ve recently been working on Tap to Pay capabilities for secure payments for businesses (among other things). And they’re not the only ones making moves to help improve various aspects of business operations. And though I’m no big business, I am here, looking out for you and your business’s future especially when it comes to tax obligations. If we haven’t talked yet about optimizing your tax situation for next year’s filing, let’s make some time. Reach out to me here:Patti (408) 775-7790 Gale 408-775-7800 Now, for a look at alternative small business financing options for your San Francisco Bay Area business… Alternative Small Business Financing Options for San Francisco Bay Area SMBs“Fortune befriends the bold.” – Emily Dickinson Sure, banks come to mind first when your small business needs capital. But in these days of higher interest rates and tighter lending, it pays for you to know where else to turn for financing.  Because sometimes, banks are the best option. And sometimes, they aren’t. Last time, we looked at the process for getting a bank loan. Today, let’s examine a few lenders for your business other than banks. Alternative Small Business Financing Option 1: Small Business Administration The U.S. SBA offers a ton of loan programs through lenders. One of them is the 7(a) Program for “businesses with special requirements.”  The SBA bills it as a good option when real estate is part of a business purchase, but it can also be used for short- and long-term working capital, refinancing debt, and purchasing of machinery, equipment, furniture, and supplies. The max amount for a 7(a) is 5 million dollars.  Eligibility is based on what your business does for income, credit history, and where you operate. Repayment is usually monthly, and generally these loans require a 10% down payment (potentially more for startups).  To apply, you’ll need an SBA form and much the same paperwork as for a bank business loan (though this can vary by lender): financial statements (including personal and projected), P&Ls, owners’ info, business licenses, loan application history, and tax returns — among other documents.  The SBA also has other biz financing, including its SBA Express Loan. Approval times can be faster depending on the lender. Repayment terms vary with loan and purpose. Interest depends on the lender but does max out at prime plus 6.5% for loans of 50,000 dollars or less, and prime plus 4.5% for loans greater than that. Express loans for more than 25,000 require collateral. Funding speeds also vary by lenders, but you often get your money within 90 days.  (If you’re interested, you can find SBA loan application info here and a lender-match tool here.)  Alternative Small Business Financing Option 2: Online lenders Just like about everything else, business lending has blossomed on the internet. These lenders can give faster access to money for your business — sometimes in just days — but at (not surprisingly) higher rates and fees and lower maximums.  Often the lenders are financial tech companies rather than banks. Their eligibility requirements can be more flexible and the documentation requirements easier. No interviews will be in person (up to you if this is a plus or a minus). They’re also more likely to work with startups or businesses whose credit has been dinged.  Typical online financing options include:  For businesses, rather than individuals, paying extra to get the fiscal fuel for initiatives may be worth the price. (Nerdwallet has a good interactive layout of various lenders where you can wash a few of your company’s specifics to see what you get.)  … Still more small business financing options Each alternative small business financing option has its pros and cons, but the point is: You’ve got a lot more options for funding than just the bank. If you are on the hunt for more funding for your business, we’d love to sift through the options with you and discover what would be the optimal fit. Don’t hesitate to reach out and let us know how we can help. Here for you, Patti ONeill and Gale Bergado

Business Valuation

Business Valuation: Knowing Your San Francisco Bay Area SMB’s Worth

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Although it’s a relatively new federal holiday, Juneteenth carries with it a weighty significance. In the official declaration via the Emancipation Proclamation, Abraham Lincoln wrote: “I do order and declare that all persons held as slaves within said designated States, and parts of States, are, and henceforward shall be free…” This holiday which we celebrated nationwide this week marks the crucial moment when our nation took a big step toward valuing ALL people as equal and free.  Imbuing value where value hasn’t previously been given is something that often means making a stand and fighting until it’s recognized. It’s why 340,000 UPS workers are threatening a strike. They feel undervalued, so they’re fighting for their company to officially rethink their value.  It’s not enough to simply know your own value. Others need to see it too.  And that’s why I want to talk about the value of your San Francisco Bay Area business. Knowing what your business is worth — while not about intrinsic human worth or worker’s rights — is essential to how you will operate and how others will see you as well. Because there are moments in your business’s lifespan that will require you to stand on that valuation including the day that you think of selling it or passing it on.  That’s something we can and should discuss:(408) 775-7790 Let’s start here… Business Valuation: Knowing Your San Francisco Bay Area SMB’s Worth“Try not to become a man of success, but rather try to become a man of value.” – Einstein Determining the economic value of your small business is a key part not only of your ongoing operations but also of many milestones in the company’s life, including its eventual sale. What is a “business valuation”? There are two general kinds with different purposes: Let’s look at what details of your business you should be prepared to show for a valuation.  What’s looked at Basically, a business valuation stacks up your company’s assets versus its liabilities, the value of everything your business owns minus its debts or liabilities. Areas to be examined include:  Capital structure: Your company’s balance of owner/staff equity, debt, and reserves. (A company with a higher debt-equity ratio is highly leveraged.)  Earnings current and potential: What are your levels of sales, especially compared with other similarly sized companies in your industry?  Two common methods of calculating earnings are EBIT (earnings before interest and taxes) and EBITDA (Earnings before interest, taxes, depreciation, and amortization). Another method is discounted cash-flow analysis, which looks at the business’s projected annual cash flow discounted to today’s value. (We’ll talk more about this in the next article.)  Management: Their length of tenure, work ethic, and time spent on business operations day to day, as well as their investment such as stock options and your managers’ goals as spelled out by the mission statement. Another key factor: compensation by industry benchmark.  Market value of assets: This could include equipment/furniture, property, intellectual capital (the biggest problem here can be outdated equipment). Non-operating assets can include commercial real estate, stocks and bonds, related entities, and surplus cash, so be prepared with documentation on these as well.  You should also be prepared to discuss less-tangible aspects of your company’s worth, such as location, community presence, marketplace reputation, and so on.  Documents you’ll need The more paperwork you can provide for your business the better, but the basics include three years’ income tax returns; a current P&L statement and balance sheet; three years’ P&Ls and/or balance sheets; a YTD income statement with a comparison to last year; an estimate of your company’s current inventory at cost; a list of intellectual capital; and an asset listing of furniture, fixtures, equipment and sellable inventory at approximate current market value.  A new notes:  Your advisor may also need details of major contracts; equipment leases and depreciation schedules; business plans and forecasts; property deeds and leases; property appraisals; loan agreements; and details of pending litigation.  Who and when Your company’s valuation is critical and unless you really know what you’re doing, a DIY approach is not best. You’ll need a professional. More than one, usually. Getting input from multiple professionals will ensure you get an accurate valuation, better negotiating power for the valuation, and all the information you need to make the right business decisions (like selling your business, raising capital, expansion, etc).  Next time, we’ll get more into what to ask when finding the right people for you, but generally, you’ll be looking among attorneys, CPAs (we’re happy to help), business brokers, M&A advisors, even appraisers. Keep in mind: Your valuation might take up to six weeks.  We’ll also look at when and under what circumstances you might need a business valuation in the next article. Be on the lookout for that.  And, as always, my team and I here at ONeill & Bergado are here to help provide whatever you need to run your San Francisco Bay Area business. Looking out for you, Patti ONeill and Gale Bergado

Business Growth

When Your San Francisco Bay Area Business Might Need a Valuation

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We’re nearing June 30 (the mid-year marker), which is a very smart time to move into a different gear in examining your business’s financial situation. Because, like the good business owner that you are, I’m sure you kicked off Q1 with a bunch of exciting goals and objectives for 2023. So, now that we’re nearing the end of H1, it’s a good idea to check in on those goals.  Consider how you’re feeling about your business right now. Are you making progress toward the growth you initially envisioned? Or are you growing in ways you didn’t anticipate? And don’t forget about all those valuable business and client relationships. Measure those too. Take some time to reflect. If your business isn’t quite on the path you intended in Q1, it’s not a crisis. Adjust. And I’m here to help you do that: (408) 775-7790 Doing regular checkups on your San Francisco Bay Area business means you can find a firmer footing as you move ahead. It’s one of the reasons I am continuing to address business valuation and why you should consider it.  Today, let’s dive more into when said valuation would be really helpful to have… When Your San Francisco Bay Area Business Might Need a Valuation“People know the price of everything and the value of nothing.” – Oscar Wilde  Your business will have many milestones when you’ll have to know how much it’s worth. What are some?  Last time, we looked at how a business valuation examines your company’s assets and liabilities, earnings potential, management, and assets’ value. When done right, valuations are expensive for even such non-litigious purposes as a sale, a merger/acquisition, or an owner’s exit. You might still need a valuation of your business in situations you haven’t thought of.  You want one ready when the time comes. Let’s look at the why and the when.  Sale price We business owners know that buyers and sellers entertain wildly different ideas about how much something is worth. The first and obvious occasion where you’ll need a valuation is if you’re planning to sell your company, especially if your company is worth more than similar companies in the same market. You’ll need an accurate starting point for negotiation which allows you to sift prospective buyers faster.  This can also be important when you’re planning to exit your company – whether you’re thinking of selling soon or several years from now, it’ll help you to have a solid idea of what your business is worth.  Looking ahead, if you’re like most business owners, your business constitutes a lot of your personal net worth. Knowing your equity in your company as far ahead as possible makes the planning of taxes and retirement (if you are retiring) easier. Two points:  Financing Getting a loan from a bank or capital from investors is another time a valuation comes in handy. Beyond lending you credibility, a documented and objective measure of your company’s worth, strengths, and future will usually speed up the approval process. (By the way, the more substantial the credentials of the appraiser who did your valuation, the more seriously a lender or investor will take your valuation.)  If your company looks for a loan through the U.S. Small Business Administration, you can perform your own valuation if you look to finance a quarter-million dollars or less. You do need “an independent business valuation from a qualified source” for greater amounts or “if there is a close relationship between the buyer and seller,” such as deals between family members or business partners.  Other reasons Litigation: A document that you want to stand up in court for divorce, a lawsuit, or a partnership dispute must be excruciatingly detailed. Your valuation will be used in discovery, and there may be legal requirements regarding its type and depth.  Expect to pay more for this kind of valuation – and make sure to have it done by the most experienced and credentialed valuation expert you can find and afford: That professional’s credentials will have to stand up to a dispute in front of judge and jury.  Company initiatives: Nothing helps you know where you’re going better than knowing where you are. A complete valuation helps you plan your company’s sales and operational initiatives for the future. Clearly, biz valuations can help you in many situations. But how can you make sure you’re getting the best one for your money? We’ll help you out with that next time.  I’m here to help with whatever your San Francisco Bay Area business needs, whether it’s talking more about setting up a valuation or analyzing your financial data to make sure you’re on track to reach your business goals this year. In your corner, Patti ONeill and Gale Bergado

Business Growth

How San Francisco Bay Area Owners Can Measure Business Value Correctly

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There’s this comparative analogy about what makes something American that people like to use: “as American as apple pie.” But, I kind of think we should update that comparison to “as American as starting a small business.”  Not as catchy, I know (or as yummy). But, it’s just the truth. Small business ownership is the epitome of independence. Don’t want to work for someone else? Don’t want to depend on someone else to pay your bills? Don’t want to follow someone else’s rules and regulations?  Then start something where you call the shots and own the profit. And that’s what you did. You had a dream, and you made it happen. And your San Francisco Bay Area small business, along with hundreds of thousands of others, are the spirit and backbone of this economy. So, when you’re watching all those fireworks “bursting in air,” know that, in a way, it’s celebrating people like you who have built something valuable. Your business has value in our way of life beyond the dollar signs it produces.  There might come a time though, when you want to know just how valuable it is and how many zeroes are actually attached at the end. Say you want to sell your little empire or exit it and hand the reins over to somebody else.  That’s when you want to consider getting a business valuation. But when you do, you’ll want to make sure the assessor is taking into consideration all the various aspects that affect business value for you. Even when the assessor is qualified, there are still elements of your business and the market you serve that might get overlooked in the process. Let me explain what I mean here… How San Francisco Bay Area Owners Can Measure Business Value Correctly“When things go wrong, don’t go with them.” – Elvis  In our previous two articles, we covered what goes into a business valuation and why and when you might need one — from M&As to divorce. By now, it’s apparent that a valuation can be an important tool for running your company… So it’s especially important to realize what could go wrong with one. Here’s a look at some of the biggest potential trouble spots to determining business value.  Devil in the details A business valuation is a waste of your time and money if it uses wrong or incomplete models. Let’s go through these here so you can check them along the way — and never hesitate to question your valuation specialist. You’re the one paying for this, after all.  Generally, whether the valuation primarily examines your income/earnings, market standing, or overall assets, it should address your company’s non-operating assets and liabilities, taking into account past litigation, tax problems, interest-bearing debt (especially as rates rise), and owners’ worth as related to the business.  Among other possible business value assessment problems are:  Who to look for and what to ask Just as it isn’t cheap, proper valuation is no ad-hoc skill. Look for the right qualifications.  For valuations for some of its loans, for instance, the U.S. Small Business Administration lists such credentials as Accredited Senior Appraiser, accredited through the American Society of Appraisers; Certified Business Appraiser, accredited through the Institute of Business Appraisers; Accredited in Business Valuation, accredited through the American Institute of Certified Public Accountants; and Certified Valuation Analyst, accredited through the National Association of Certified Valuation Analysts.  The questions to ask your valuation profession depend on why you want your business value. If you are:  If you want to do a little preliminary work before shelling out for a valuation pro, M&T Bank also has an online tool to use for a rudimentary valuation of your company. As you can see, a valuation of your San Francisco Bay Area company is a big job — and a really critical one. These are just a few examples of what to watch for.  Need a valuation for your company? I can give recommendations specific to your situation and help ensure it’s done in the way most beneficial for your business. Just reach out. I’m right here: (408) 775-7790 All the best, Patti ONeill and Gale Bergado

Business Growth

Cutting Costs in Your San Francisco Bay Area Business Right Now

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Though things might be tight economically for your San Francisco Bay Area business, keep in mind, cutting corners can become a real issue. Take for example fake reviews that are so pervasive online. Some business owners are tempted to buy reviews to get their product or service seen online. If you’ve ever done that or been tempted to do that, let me just say: DON’T.  If Google catches it, they’ll not only flag the review, they’ll tank your website rankings. And now, the Federal Trade Commission is proposing to slap big fines on businesses that do it (up to 50k for each fake review… YIKES!).  I also saw during the pandemic that business owners were falsely collecting PPP and ERC loans to get a free handout from the government when they didn’t actually need it. The IRS is on the hunt for those kinds of people right now — look at this 53 million in PPP fraud case in north Texas.  What I’m getting at here is you don’t have to choose these routes to help your business in difficult times. And even though times continue to be difficult financially, there are options for you to help your business survive the inflationary chokehold on it. That’s where I want to go today. Instead of cutting corners, let’s talk about cutting costs and helping you find your way right now. Cutting Costs in Your San Francisco Bay Area Business Right Now“The slightest adjustments to your daily routines can dramatically alter the outcomes in your life.” – Darren Hardy Nobody needs to remind us small-business owners that we’re yet again in tough times… still dealing with inflation at about 4% year over year, coupled with nagging and sporadic supply-chain problems and all the other troubles that go with having your own company. Tough times often mean tough decisions. If you have to make cuts, where and how do you decide to do that — for the good of your company, your staff, and yourself? The following are some areas you should consider. Cutting Costs Tactic #1: Pricing Let’s look at the other side of the coin for a second: raising prices. I know what you’re thinking, but raising prices doesn’t raise eyebrows like it did a few years ago. The key question that remains is: Raise by how much?  Before you calculate your own new higher average costs and just slap that down across the board, ask yourself: Do you stand out? What makes you special? Why should your customer pay you? Special services are worth more, and customers know it. Loyal customers will pay more, too — for a while. What’s your competition’s price point and range, and how does it compare with yours? If yours is higher, don’t automatically assume that you have to match your competitors’ deals. Do you offer your customers something the other guy doesn’t? (Be honest.) What do you offer that draws in most of your new customers?  When raising prices, do it gradually and be upfront with customers about price hikes. People will put up with more if they’re kept informed.  It’s possible that maybe your product line needs a revamp. Low sales figures are your first obvious sign of a poorly performing product. Other signs include marketing costs that are too high or price points that are too low. Also watch for bad customer reviews.  Cutting Costs Tactic #2: Making shifts with suppliers Lately, these folks seem intent on hiking prices at will. You may also be dealing with years of consolidation, another ingredient for our perfect storm.  Suppliers may have a lot of companies wanting their goods right now. What if you don’t negotiate with suppliers but their other customers do? You can wind up with poorer products or service with higher prices as your supplier makes up for deals they cut with your competitors. Before you negotiate with suppliers, though, set a price in your head that you’re willing to pay. Double-check that your payment record is good and learn all you can about your suppliers’ expenses. (Wholesale prices are easing but still went up 2.3% in the past year.)  Cutting Costs Tactic #3: Looking at your staff If it comes to this point, there’s probably more arithmetic in reducing pay/hours than any other cost cutting. Who does what and for how long? Who could do each other’s jobs for less money? Communicate with your team that keeping the lights on is more important than temporary payroll reductions; you might even find one or two people willing to volunteer cuts.  Other moves:  Cutting Costs Tactic #4:Examining additional areas Recurring costs. Rather than utilities and other necessities, these are your subscription services that get renewed automatically, usually every month. If forgotten, they drain a lot of cash. Review them frequently.  Insurance. This cost could change year to year — and auto-renewal might be costing you too much for coverage you don’t need anymore. You can also likely save by bundling coverages.  Supplies. Ordering online has made saving money in this category easier. Amazon’s subscribe and save service is one example of how you can find cheaper prices for a galaxy of stuff and even cheaper shipping when you bundle deliveries. Deciding where to make cuts in your San Francisco Bay Area business is tough, especially if it comes down to having to drop some of your staff. I’m always here to help, answer questions, and offer ideas. Don’t hesitate to reach out:  (408) 775-7790 Cheering you on, Patti ONeill and Gale Bergado

Business Tax Planning

Tracking Your San Francisco Bay Area Company’s KPIs Effectively

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Raise your hand if you or your workers, in any way, still work remotely post-pandemic.  It’s a common enough reality — maybe more so now even than 2020. Working in sweatpants from the comfort of your San Francisco Bay Area home is infinitely better than dress shoes and uncomfortable desk chairs — and cheaper than paying high business space rent prices. But with so many companies going remote and giving up their brick-and-mortar space, it’s caused a bit of an office space crisis in major cities like NYC (up to 20% of spaces being unused nationwide). That’s looking like an 800 billion loss for urban office real estate value —  that’s a KPI to pay attention to… and figure out alternatives for (like converting said offices into rental properties). Getting creative with turning losses into profits is an important skill for you as a business owner these days. And I know you understand that. The past three years have forced you to figure out ways to adapt to new realities.  But you couldn’t do it without these really important things that are really the central figures of your business. Yes, I’m talking about KPIs.  But utilizing these performance indicators the right way is more than just printing a report. It’s knowing which ones to set up, how often to track them, and how to organize them into something coherent you can actually use. And I want you to be able to USE them to keep you sharp and well-positioned for every economic moment — opportune or difficult. Your success matters to you… and to me. So, let’s start that conversation here: (408) 775-7790 Tracking Your San Francisco Bay Area Company’s KPIs Effectively“Performance stands out like a ton of diamonds.” – Harold S. Geneen Measuring performance in your company is an indispensable tool for small business owners. The standard metric for that measurement: the KPI — or “key performance indicator.”  KPIs are performance quantifiers — recorded and tracked numbers — that have a specific and clear value, such as a dollar figure for increased sales over a certain period. They’re how you see at a glance if your company is on course. You create KPIs by setting that goal — such as a doubling of profits in the next three years — and working backward to decide what has to happen and when. In many ways, KPIs formalize an instinctive method you have for measuring incremental success. The concept falls down, though, if you don’t track your progress. So, how should you do that? And how often? Setting it up This depends on your company’s goals, but some common KPIs look at revenue (average profits, total revenue, profit margin); employment stats such as turnover, employee performance, and vacancies; customer service (average call time, customer satisfaction); customer retention and acquisition (and the revenue associated with each); and marketing (sales generation, overall effectiveness). Your specific industry might dictate use of other KPIs, such as website traffic for an e-commerce company, table turns for a restaurant, or rejections for a production line. Among other points: There’s no set number of KPIs you should be tracking. It’s better to use fewer KPIs and make sure the ones you use are accurate. For each goal you set, set only around six KPIs (that of course correlate to that goal).  How often you should be tracking KPIs Basically, you’re balancing frequency and time when tracking KPIs — giving concepts a chance to mature but not so long that they spray too far off course.  Some goals (such as annual revenue or employee tenure) can be tracked quarterly or semi-annually and still have time to make adjustments. Other KPIs are more immediate in their lagging/leading indicators. The actions/initiatives that those measure can have a quicker impact on your bottom line.  Customer retention or conversion rates, for instance, require more constant and steadier attention and lend themselves to faster, easier adjustments. For these KPIs, monthly tracking is better.  Here’s another factor: How much time and money do you need in order to adjust once you spot a problem? Let’s say your KPI shows you need to hire two new salespeople to meet an annual revenue goal. That’s a lengthy adjustment involving advertising, time, interviewing, onboarding, and training. The sooner you spot that KPI, the better — meaning tracking frequently is best. It’s the same for product development to boost sales and revenue for the end of the year.  But suppose your KPI shows your customer service people aren’t answering calls within the specified number of rings or customer service emails are sitting unanswered for too many hours or days? That could be a quick adjustment of bringing the problem to the attention of the department manager or talking to the reps directly. The quicker the needed adjustment is to make, the less frequently you have to track the KPIs.  You have a lot on your plate, I know — so set your calendar app to ping you weekly or monthly when it’s time to look at your KPIs. Do push to track consistently. The whole exercise loses effectiveness if you don’t.   Organizing the info You want to go visual with the reports, rather than using too much text. The quicker the information can be digested, the quicker you can make decisions using it. (This becomes even more important when considering multiple KPIs. Consider using different colors for different departments.) As charts and graphs come in just enough formats to be completely befuddling, it’s best to look at a few examples as you figure out how to report your KPIs. A lot of small businesses also get started with Google Analytics, (which experts do say that like, many freebies, can take you only so far in your presentations).  When you start out tracking and using KPIs in your San Francisco Bay Area business, it can feel as much of an art as it is a science. Give yourself time to get the hang of it, and your future self with thank you for making it so much easier to plan strategically for your

Business Growth

Keeping Expenses Separate in Your San Francisco Bay Area Business

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Did you see the Barbie movie or Oppenheimer this weekend? Or jump in with the 200,000 other Barbenheimers and see both? In case you didn’t, your social media feed likely filled you in on what you missed (or didn’t, depending on your view of these things). What a weekend for the movie industry as a whole that hasn’t seen these kind of opening weekend numbers since 2019’s one-of-many in the Avengers series. Seems like a good sign in the midst of inflation, right? Well, whether or not we’re headed for a recession is still in question. I’m sure you have your opinions on the matter. We’ll see how the Fed’s interest rate hikes (including the final one expected this week) have impacted things economically. Keep an eye on the Q2 earnings for big A-list corporations (like Mcdonald’s and Exxon) set to release this week. Their performance will be a helpful indicator of just how effective inflation-slowing efforts have been and if we’ll see the economic ship right itself. While we keep our attention on that, I also want you to remember to not let it consume you. Sure, inflation and recession may force you to make big changes, but change is often a really good thing for a business. Not only does it force creative thinking and more laterally-minded measures, it also pushes you to evaluate your systems and decide where you can streamline them. One area that you might not have considered is your system for keeping business and personal expenses separate.  Because it’s easy as a business owner if you don’t have a (good) system in place, to blur the lines here. Believe me, I’ve seen plenty of people come to me whose books are a mess, which complicates operations unnecessarily. That’s why I’m bringing it up. Now, if you know things are messy and you need help to get them cleaned up, I’m happy to meet with you and do an in-depth dive into it. Just set up a time: (408) 775-7790 But let’s start here with a little about WHY it’s so important for you. Keeping Expenses Separate in Your San Francisco Bay Area Business“In diversity there is beauty and there is strength.” – Maya Angelou When you started your San Francisco Bay Area business, I’m sure you felt that sugar high that comes with it. You have this idea that’s been percolating in your mind for months, maybe even years… and now you finally get to open the doors, make the announcement, close your first sale… It’s such an exciting (and hectic) time that many small-business owners (especially new ones) easily forget one basic fact about having your own company: Keep the money separate.  If we’re honest, treating your business’s money as your personal account (or vice-versa) is so easy to do: depositing a client’s fee paid to your business into your personal bank account, dipping into your business account to pay a personal expense, and not keeping the records because you know where the money went, and everything is doing fine.  The harm comes in the recordkeeping, though… because you might depend on it later to keep your company’s doors open. Here’s how.  A caution against commingling If you’re properly in business, having two pots of money confuses your accounting. And accounting is what you’re going to need first and most obviously to determine your company’s strengths and weaknesses, aka profits and losses down the road.  Separating expenses can also be for your own good if you’ve incorporated them. If — heaven forbid — your company goes bankrupt someday, one avenue that creditors will have to your personal money will be if your business and personal finances were intertwined (piercing what’s called your “corporate veil”).  If you’re a sole proprietor, do yourself a favor and look into becoming a limited liability company (LLC), which can offer you some protection from the fallout of debt. You’ll also need a proper audit trail to prove the deductions and losses you take (and believe me, you’ll need those in the first few years) on your business tax return. While we’re on taxes, if you’ve got even a small online business, this could be the first year you get an IRS Form 1099. For tax year 2023, if you use a third-party payment platform like Venmo or PayPal or sell on sites like Etsy or eBay and make just $600 for professional services, you and the IRS will get a Form 1099-K in January 2024, and you must report the income. If you use a payment platform for personal payments, you won’t get a 1099-K – but there’s no guarantee that mistakes won’t be made in this initial year of the 1099 blizzards. You’re probably beginning to see how keeping good records and separating funds will be especially helpful.  The nitty gritty Bank accounts: From the minute you turn on the lights, get a proper business account that’s completely distinct from your personal accounts. To open a biz account, you’ll need to get a federal tax ID number (EIN) and a state tax ID number, as well as any documents you filed for when you formed your company such as articles of incorporation or a certificate of formation. Business accounts typically give you checking, savings, credit card accounts, and a merchant services account that allow credit and debit card transactions from customers. Other perks should include multiple credit cards for you and your employees (more on that in a sec) and merchant services that keep customers’ personal info secure. You’ll probably get a line-of-credit option for your company larger than what you’d get in a personal account.  A business account in the same bank where you keep personal money may get you a break on some fees, but it depends on the bank. It’s the same for introductory offers and sign-up bonuses (which are taxable). Shop around and study the fine print — and don’t forget non-bank sources, like American Express.  Credit cards: Getting a business credit card separate from your personal plastic is just as important as having a

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