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Business Growth

Patti ONeill and Gale Bergado’s System To Turn Upset Clients Into Happy Clients

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I am simultaneously eager while also being slightly horrified that tax season has officially begun. Horrified, simply because the IRS has been significantly behind the 8-ball this year, and I still can’t believe that we’re already halfway through February 2021. EAGER … well, because there are so many new credits available to San Francisco Bay Area business owners this year, and I’m pretty thrilled about the opportunity to save YOU some money on your tax obligations. That said, the newest round of PPP loans have been plagued by delays and confusion, and while there are fantastical rumors of the next round of stimulus … I’ll believe it when I see it. And it might not be as weighted to SMB owners as previous rounds have been. We’ll keep you posted. This has been an interesting year (to say the least). Even in the middle of the intensity of the busy tax filing season, we can occasionally become the target for somebody’s frustration. Over the years, and especially when things are busy and stressful, we’ve had to learn how to best handle matters when a San Mateo client is becoming (for some reason or another) very upset. Again, this is rare — but in some cases, the client displaces their anger towards the IRS and puts it into their interactions with us. (“No, John, we actually aren’t the ones who are sending you all of that audit correspondence. That would be the nice people at the Department of Treasury.”) However, what we’ve discovered is that when we handle it rightly, we can leave upset clients even happier with us than even some of our most “reliable” and happy clients. And I should hasten to add that “John” is a fictional name, and we wouldn’t ever be as rude as what I just typed up there. 🙂 No, we have tried to train our people with an actual plan for handling such matters, so that in the rare instance it does occur, we handle things properly. Patti ONeill and Gale Bergado’s System To Turn Upset Clients Into Happy Clients “Always forgive your enemies; nothing annoys them so much.” -Oscar Wilde In ANY San Francisco Bay Area business it is inevitable that there will be an instance of misplaced expectations between the customer and business. And you can choose to allow these interactions to happen at random, trusting in the emotional competency of your staff … or, well, you can develop procedures that will make things right and do so almost every time. We came across a simple system years ago that I’ll share with you now — because no matter what level of frustration comes forth, this is truly the best way to regain happy clients. It can be summarized by the acronym “HEAR”… 1) Hear the customer and don’t interrupt. You don’t interrupt for two reasons: A. It’s rude to interrupt B. When people are upset they practice what they are going to say. And they practice it from the beginning. If you interrupt, they are going to start all over again and go off script.  So … don’t interrupt. Obviously, if the client is getting loud and unruly you may need to quietly interrupt. But, in almost all cases, don’t. 2) Mirror back (Empathize) with something like: “I can understand why you’re upset.  I would be upset too.” Or, “I’m really sorry that happened to you.” 3) Ask: “What can I do to make this right?” It doesn’t get much easier than that. Often, you won’t even have to ask the question because it’s pretty obvious what needs to be done. What’s most important in this step is that the attitude is right. Empathy is everything! 4) Resolve – Unless the request is absolutely ridiculous, DO IT! What’s so great about this approach (and this has been studied, proven, and established with myriad scholarly studies): Often you leave the San Francisco Bay Area customer even HAPPIER with you than before the problem occurred! Yes, that’s actually a likely scenario because they will appreciate how you bent over backwards to make them happy again. When you put in place a regularized plan, good things happen. We’re here to help. Let me know if you have any questions. Use this:(408) 241-4100  I’m grateful for our partnership and for your referrals. Warmly, Patti ONeill and Gale Bergado (408) 241-4100 ONeill & Bergado Feel free to share this article with a San Francisco Bay Area area (or beyond!) business associate or client you know who could benefit from our assistance. While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.

Business Growth, Business Tax Planning

Patti ONeill and Gale Bergado’s Three Business Tax Penalties To Avoid When Possible

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With May 17th behind us (though for those in Texas, Louisiana and Oklahama — this was just another day. June 15th is coming at us fast!), we’re turning towards the planning and optimization part of our calendar. But before we leave taxes in the rearview, let’s address an unfortunate reality: as a business owner, you have a greater number of tax reporting obligations than a regular person has. (Of course, you have MANY more tax-savings opportunities as well.) But with those increased obligations comes increased opportunity for things to slip through the cracks, potentially resulting in business tax penalties and interest charges from the IRS. Some of these penalties are straightforward and simple. Others get really complex in how they’re calculated. Of course, your best course of action is to just let us deal with all of this for you. This is, after all, what we do. But just in case there’s any question in your mind about what your filing and payment responsibilities are to the IRS for your business, let’s run through them from the perspective of the business tax penalties that can be assessed if you don’t take care of them. Buckle up, partner. There’s lots in here… Patti ONeill and Gale Bergado’s Three Business Tax Penalties To Avoid When Possible“Tell me and I forget. Teach me and I remember. Involve me and I learn.” – Benjamin Franklin Your San Francisco Bay Area business may have a variety of tax return filing requirements. The exact forms you need to file will depend on the legal structure of your business, whether you have employees or utilize independent contractors, and the dollar amounts of some of the taxes you have to pay. There are over 150 different penalties in the Internal Revenue Code. In this Strategy Note, we’ll cover the most common ones you need to be aware of. Business Tax Penalty #1: Income Tax Return Penalties Just like you need to file a 1040 return each year for your personal income taxes, your San Mateo business has tax return filing requirements, too. If you operate your business as a sole proprietorship, your business tax return is the Schedule C that gets attached to your personal 1040 return. If you don’t pay in enough tax money throughout the year, you may end up owing an Estimated Tax Penalty from your self-employment income. In addition, you could be subject to Failure to File and Failure to Pay penalties, which we’ll go into detail below. If your business operates as a partnership, you must file a Form 1065, Partnership Income Tax Return, each year. If you file this partnership tax return late, you’ll be charged an IRS penalty of $210 for each month it’s late, times the number of partners. This penalty is maxed out after 12 months of being late. So, for example, if your business has four partners, and you file the tax return 14 months late, your penalty would be: $210 x 4 x 12 = $10,080. That’s a big check to write to the IRS for a tax return that normally doesn’t have any taxes due! But wait, there’s more! Since each partner in the partnership is required to receive a Form K-1 from the partnership, reporting their share of income, the IRS imposes additional penalties for failure to provide these K-1 forms. This penalty starts at $280 per K-1, and increases significantly if the requirement to issue the K-1 was “intentionally disregarded.” This intentional disregard is difficult for the IRS to prove, but if they can do so, the maximum penalty against the partnership can be up to $3,392,000. That’s not a typo. The maximum penalty can be over three million dollars. Such penalties are incredibly rare, but they do happen. If your business operates as a subchapter-S corporation, you must file a Form 1120S each year to report the business’ income, expenses, and other information. The same $210 per month penalty applies, multiplied by the number of shareholders of the corporation during the year. In addition, the same $280 penalty can be imposed for not providing the appropriate Form K-1 to shareholders on time. Bottom Line: File these returns on time! There is usually no income tax due on a 1065 or 1120S return, so you should have no concerns about paying a balance due. The issue that most businesses face is that their bookkeeping isn’t up to date to get these returns prepared. We can help you get caught up and get returns filed to avoid these massive penalties. Business Tax Penalty #2: Employment Tax Penalties If you have employees within your San Francisco Bay Area business, then the payroll taxes that you pay to the IRS in relation to those employees are one of the highest enforcement priorities for the government. Over half of all the tax debt owed to the IRS is employment tax debt. These taxes consist of income tax withholding from your employees, plus both halves of Social Security and Medicare taxes. Depending on your total payroll tax liability for each quarter during the previous year, the frequency with which the IRS expects to receive employment tax payments from your business can change. However, the vast majority of small businesses must deposit these taxes on a monthly basis. If your business fails to make the required tax payment, you may be subject to a Failure to Deposit (FTD) penalty. This penalty is pretty stiff, and increases the longer it takes you to pay. The penalty is: In addition to making these routine tax deposits, most businesses also need to file a quarterly tax return to report wages, income tax withholding, and Social Security and Medicare taxes, among other items. If you file this tax return — Form 941 — after the due date, you can also be subject to a Failure to File (FTF) penalty of 5% per month, which caps out at 25%. On top of these two penalties, the IRS will charge you a Failure to Pay (FTP) penalty on top of the FTD and FTF penalties. This penalty will accrue at the rate of: This FTP penalty has a maximum cap of

Business Growth

Patti ONeill and Gale Bergado’s Tips for Building a Business Emergency Fund

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Pretty sure we’ve said this before. We’ll likely say it again, too. If there’s one thing the past year has taught business owners, it’s that the “unexpected” can occur at any time. Managing your San Jose area business during good times is hard enough; rough times make it all the more difficult. To get you through the next rough time — and there will be another one — you need to have contingency plans in place. And one of the best ways to protect yourself from economic calamity is to have cash reserves (aka a business emergency fund). But before we get to that, just a quick reminder that second-quarter estimated tax payments are due June 15. If you operate your business as a sole proprietorship, then you may have an estimated tax payment obligation. Give us a call to discuss this if you haven’t already. Now, let’s talk about that business emergency fund. Patti ONeill and Gale Bergado’s Tips for Building a Business Emergency Fund“Luck is what you have left over after you give 100 percent.” – Langston Coleman Prior to the economic fallout from 2020’s happenings, the typical American small business only had 28 days worth of cash reserves on hand. Meaning, the average small business in this country couldn’t survive for a full month if revenue was suddenly turned off. As a result, Congress had to prop up small businesses through programs such as the EIDL and PPP loans that you’re sick of hearing about by now. As the economy rebounds strongly, it’s a good time to set aside a business emergency fund for your San Jose area business to tide you over during the next period of economic upheaval. This isn’t doom and gloom thinking, it’s simply the reality of the business cycle: There will be another recession at some unknown point in the future. You Need To Know How Much Is EnoughIn many ways, your business emergency fund follow the same rules that your personal emergency fund should. We typically advise both individuals and businesses to maintain an emergency fund equal to at least three months of expenses. These monies should be held in something like a business savings account, business money market account, or other readily accessible, low-risk account. What expenses go into that three-month calculation? Take a look at the income statement that we provide to you, and add up all the recurring expenses for a typical month. Don’t include rare expenses, such as big-ticket repairs, and don’t include sales taxes. But definitely include payroll, payroll taxes, supplies, materials, rent, utilities, fuel, your favorite accountant, and the like. Then, multiply that number by three. This is going to be your initial target. After saving three months of cash reserves, we’ll then going to encourage you to build up to six months of reserves. But we’ll start with the easier goal first. How to Actually Save Up the CashBuilding a business emergency fund starts the exact same way as any other savings process: With action and discipline. Successful companies create documented processes to be used for repeating activities, including how revenue is allocated each month. The biggest tip we can give you is this: Treat your savings goal like any other fixed expense. For example, if the lease on your office is $5,000 per month, then every month you know you need to cough up that $5,000. The same goes with, say, monthly insurance premiums. It’s a fixed expense that you know you need to budget for every month. Treat the amount that you’re going to stick into the reserve fund every month as a similar fixed expense. In fact, we’d suggest taking this a step further and set aside your reserves first. Meaning, at the start of each month, sock away whatever fixed amount. It may take you a while to get there, but by paying your emergency fund first each month, it will prioritize this “expense” item for you and help you build resiliency for your business in the long run. Is it going to take you a while to get there? Yes, it might. As an example, if you have $20,000 per month in base costs to run your San Francisco Bay Area business, your business emergency fund target is $60,000. If you can set aside $5,000 per month, it’s going to take you 12 months to build up your cash reserve. That might sound painful right now, but your business will thank you later. Once you develop this savings habit in your company, an interesting thing will eventually happen: You’ll get by just fine without spending that money every month. When to Call Upon Your ReservesWhile many San Jose companies and small business owners might have already thought the process out this far, the next step in the process is actually the most difficult. You should create a set of rules for when and how you’ll use the cash reserves. This business emergency fund shouldn’t be used for non-emergencies, obviously. By having written criteria for when you’ll use it, you’ll avoid the temptation of dipping into it when you shouldn’t. For example, you might create a written rule that these reserves can only be touched after you’ve done one round of layoffs during a recession. That’s a harsh stance to take, but a necessary one in planning to survive an economic downturn. By taking the time to create and document the process and having the discipline to treat business emergency fund contributions as a fixed expense that’s non-negotiable, a significant amount of liquidity can be put away for emergencies. In some cases, those funds should remain strictly liquid, but in other cases, having them invested in easily liquidated, low-risk investments can help ensure your money continues to work even when it’s in “reserve.” Need some help determining how big your business emergency fund should be? Are you looking for other smart ideas to make your San Jose area business more resilient in the event of future economic uncertainty? Let’s connect, and put together a workable plan for the future of your business: Patti (408) 241-4100 Gale 408-775-7800 To getting things done, Patti ONeill and Gale

Business Growth

How To Digitize Your Business by Patti ONeill and Gale Bergado

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It seems as if the world is getting drenched in tech. It’s literally falling from the sky (we’re looking at you, rocket boosters). Because there is so much technology around us, it can be easy to become numb to it. We can quickly start to view it as just a “thing” that’s always there, rather than taking the time to contemplate how best to use it. In business, technology can help you operate more efficiently. And I like to say that in business, efficiency = profitability. Oh, and you know, I like that. Embracing technology and digitizing various aspects of your San Francisco Bay Area business can be daunting, I get that. But as you’ll see in today’s strategy note, it doesn’t need to be as scary as you think. Let’s leave the paper behind… How To Digitize Your Business by Patti ONeill and Gale Bergado “It’s amazing what you can accomplish if you do not care who gets the credit..” – Harry S. Truman The last 30 years has seen a massive shift in how we interact with technology. Tech used to be a thing that was mostly “in the future”, but now it’s part of all aspects of our lives. From how we communicate to how we make purchases to how our cars work and more, tech is ubiquitous. While most big companies have embraced all things digital, many San Francisco Bay Area small businesses have struggled to keep up with tech. Sound familiar? As a small business, it’s just more difficult to pick and choose what technologies to embrace — not to mention that some things end up being a bigger part of your budget. I get it, since we face the same challenge in our business.Tax preparation software, accounting software, tax planning software — these things are all expensive for us to purchase and keep our staff trained on. But, we use them because they help us do a better job for you. What are the equivalents in your business? What can you digitize to make things better for your clients? While there is no one-size fits all answer, there are certainly general areas to consider for going digital. Garbage In, Garbage Out (GIGO) More than just a classic computer phrase, this is a philosophy about going digital. To understand what you can digitize, you need to view your business as a series of systems. If you haven’t yet taken the time to create systems in your business, this is the first place to start. By analyzing how your business operates and creating processes to do things, you can then look at which of those processes can be digitized. Sure, things like mail, invoices, contracts, and the like can all be scanned to the cloud, for example, but if you’re used to just shoving paperwork in a drawer and sorting it out later, digitizing all that may not make a whole lot of sense. But with an actual system in place, it becomes more about utility, rather than just organization. So, what exactly is “digitizing”? For starters, it could mean becoming a paperless office. This isn’t just about “going green”, but also about saving money and time. One study, by Nucleus Research, found that small businesses that go paperless see a return of more than $8 in cost savings for each $1 they spend on digitization. That adds up in a hurry. Other studies have shown that paper creates more data breach risks than being digital. In large companies, paper records account for nearly ⅔ of all data breaches, according to the US Department of Health and Human Services. Final data point: According to research firm IDC, the time wasted by employees from handling paper leads to an average productivity loss of 21.3%. That’s basically an entire day out of each work week that is unproductive due to the way in which paper actually impedes workflows. OK, so how do you start going paperless? To start with, consider the low-hanging fruit: Where you go from the basics will depend on your industry and line of work. If your business is capable of running with a remote workforce, then you could become a virtual operation and use a variety of digital technologies for communication and project management. The last year has taught us that more people can work remotely than was previously anticipated, with entire companies moving into the cloud and actually saving money on commercial real estate costs in the process. Digital Reporting No, I’m not talking about the new journalism division of your business. Think about all the information that flows through your company. Your bank already provides account information digitally. You make your payroll tax deposits online via EFTPS. You might even renew your business license online, pay your state taxes online, place orders for parts and inventory online. In short, you’re probably doing more digitally than you think. Look back on all the things that you do with data. Sit down with pen and paper — errr, I mean, a Word document — and make a list of all the information streams that you interact with digitally each week or month in the process of running your San Francisco Bay Area business. Then, critically analyze the workflow around that data. Are there bottlenecks caused by doing things in an “analog” fashion? For example, all accounts receivable and accounts payable should run through a software system. Bills that need to get paid are entered into the software, and then never again shall they see the light of paper, if that’s how the bill came in. Then, to track the health of your business, reporting should be done electronically through the software — there’s no need to physically print the data. What about information related to production, deliveries, or sales? There may be industry-specific software you can use, or find a project management or customer relationship management (CRM) software to your liking to handle these tasks for you. These systems can manage this information more efficiently, and help you actually use your data for better

Business Growth

Patti ONeill and Gale Bergado’s Tips for How to Raise Your Prices Properly

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Did you hear the news from last week’s inflation report? Consumer prices increased more than 5% between May 2020 and May 2021. Given the Federal Reserve’s 2% inflation target, that’s a pretty steep increase. Have you taken a look at your own cost of doing business lately? Your cost of labor, materials, supplies? Chances are, those are all going up, meaning it’s time to raise your prices, too. But how do you actually go about doing that without nuking your San Jose area business? Let’s dive in. Patti ONeill and Gale Bergado’s Tips for How to Raise Your Prices Properly“Do not let what you cannot do interfere with what you can do.” -John Wooden When you’re the one out purchasing goods and services as a consumer, you obviously want to pay the lowest price you can for the desired quality.  But as a San Francisco Bay Area business owner, the reality is that you need to charge high enough prices to cover all of your costs, plus generate a profit. Simply put, the raw materials and labor it takes to produce a specific result in your business cost money, and that can lead to difficult conversations and difficult decisions regarding your own pricing. Maybe it’s just us, but it seems like there was a different attitude about price increases a generation ago. Not only did customers expect prices to go up over time, it was often a great marketing tactic to let customers and clients lock in pricing for a period of time. Today though, consumers have become conditioned to look for lower prices. Many years of low inflation, combined with the ability to research pricing and quality online, have combined to make price increases seemingly more difficult to implement without sparking outcry from customers. So, how do you go about this? The first thing to do is understand where your pricing structure already is and, from that information, determine where it really should be. How to Raise Your Prices Tip #1: It’s Not a Level Playing Field By far, the biggest worry for companies in respect to price is the cost of goods sold.  How much does it actually cost you to provide the solution your company provides to customers? More and more items can now be considered a commodity, and value-conscious buyers often have access to a greater number of similar products and services than ever before. Understanding how labor and material costs impact your bottom line is a critical first step in arriving at any price increase – but it’s not the only step. Increased competition is a major factor in what prices you can charge. For example, a small town hardware store two generations ago might have had little – if any – competition. Today, most Americans are within an hour drive of a big box home improvement store, not to mention the fact that much of what they need will come directly to their home with a few mouse clicks. This increased competition creates downward pressure on prices. But at the same time, like we’re seeing more recently, other factors can drive increases in price. Labor costs across the country are increasing. Supply chain disruptions are increasing the cost of raw materials. It’s important for you to study what’s going on in your own industry. Take a look at benchmarking studies published by trade organizations in your industry, as well as research reports and analytics published by various consulting companies. We can help you locate this kind of data if this is completely new to you, so don’t hesitate to ask us for help on this. Once you have the data about various price pressure factors, and how those factors are trending into the future, you’ll be able to stay a step ahead on forecasting your cost of doing business. This makes it easier for you to set future prices, and spread out price increases to minimize sudden shock to your customers. How to Raise Your Prices Tip #2: Overcoming the Objection Ultimately, though, no matter how well you understand the market for your products and services, the fact of the matter is that, yes, you have to raise your prices. Here’s what tends to surprise business owners: In many cases, your highest-value customers will have little, if any, objection to the actual increase. These customers are smart cookies, and they know that prices rise over time. They understand that inflation is a reality, and they understand that you need to raise your prices to stay in business. Most of the time, the only vigorous objections will come from your less profitable, higher maintenance clients – likely the same ones that frustrate you already and don’t value your services. It’s at this point that you can make a decision as to whether to retain these customers, or use the price increase as an opportunity to free up space for better customers. How’s that for a change in perspective? How to Raise Your Prices Tip #3: Managing the Message Once you’ve determined you need to raise pricing, it’s critically important you and your team can effectively share that message far in advance. Sales teams should be talking about price changes in their regular conversations with existing customers. Not only should they be saying a price change is coming, but they should also be transparent about the factors driving the increase. Maybe even going so far as to make suggestions to clients on how to mitigate the costs in the short term (if applicable to your particular products/services). More than anything else, everybody on your team needs to present a united front when it comes to raising your prices. If you have a sales team, they can’t simply blame “the head office” for the price increase. They need to be able to articulate why prices are going up. Again, transparency is the winning formula here. Additionally, your team needs to be ready for ongoing follow-up with customers in order to ensure that there aren’t any perceived changes in the quality of your products or services. You want to assure

Business Growth, Business Tax Planning

Patti ONeill and Gale Bergado’s Tips for Creating a Business Disaster Plan

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The past year and a half has been stressful for everybody in San Francisco Bay Area. And I would argue it’s been doubly so for San Francisco Bay Area business owners. The thing is though, these things happen. Quite regularly. Maybe not global pandemics, but disasters in general. So, as the person in your corner who might be one of the only ones asking you these questions — What happens to your San Francisco Bay Area business if the building next door catches on fire? Are you prepared for the next hurricane, tornado, or hail storm? Every business needs to prepare for these eventualities. Do you have a plan? If not, let’s get you one… Patti ONeill and Gale Bergado’s Tips for Creating a Business Disaster Plan“Remember, today is the tomorrow you worried about yesterday.” -Dale Carnegie Every year, millions of new businesses are started across the country. Yes, millions. Unfortunately, a higher percentage of them will be out of business within five years. Most businesses close due to issues such as a bad business plan, poor execution, and other controllable factors. But in a typical year — 2020 being an aberration — approximately 10% of businesses close due to a specific external event. The unfortunate fact of the matter is that disasters can strike anywhere, any time. And this impacts businesses that aren’t prepared for it. So how can you prepare? Obviously, different business models call for different resources, but there are some generalities that apply to all businesses. Business Disaster Plan Tip #1: Cash Is King The first step is the most important: A business needs capital to operate, and while it’s easy to think you can simply bootstrap all the funding you’ll ever need if your ideal client can’t pay you, the money has to come from somewhere. Enter cash reserves. As a baseline, all businesses need at least three months of operating capital reserves available to them in cash or easily liquidated securities. These funds are earmarked only for emergencies and can be the difference between staying afloat while your business handles whatever disaster has befallen it.    At the same time, it’s important for you to understand two other important resources that can provide capital after a disaster. One is your insurance policy. Know what types of coverages you have, how to make a claim, and store copies of important policy documents away from the business location — such as scanned and uploaded to the cloud. The second is to know what resources will likely be available to you from local, state, and federal government agencies, including FEMA and the SBA. Contact our local emergency management agencies to learn more about what resources — including possible grants and emergency loans — are usually made available after local disasters. Learning about this stuff now will better equip you to navigate all the red tape later. Business Disaster Plan Tip #2: Know Your Customer The events of the past year will be studied for generations due to the impact the pandemic has had on businesses of all sizes. While many companies were forced to shutter their operations, other businesses were able to shift their operations into new markets and actually grow business while the economy shrank. In addition, many new businesses were started, as crazy as that sounds. The lesson here is simple: You must know your customer. This is critical for being able to survive a disaster situation. By knowing and understanding your customers, you’ll be prepared to do what is necessary to shift your operations to continue serving them. For example, a restaurant might be forced to close their dining room, but can they still handle take-out orders? Or, for example, could that restaurant cater meals for first responders, even if they couldn’t be open to the general public? OK, in light of recent events, maybe that’s the too-obvious example. So, how about a factory? Can production be shifted from one product line to another to meet the needs of the changing business climate? OK, maybe this is obvious, too, as some businesses were able to quickly shift production to make ventilators, masks, and hand sanitizer last year. Take the time now to learn more about your customers. Find out how they would respond in certain situations. Learn about what kind of support, products, and services they need and how their consumption changes during a disaster situation. Business Disaster Plan Tip #3: Secure Your Supply Chain It’s also important to understand how your suppliers will fare in a disaster. If you rely solely on one supplier for a key item, and that supply line is upset, your business could be forced to close. A far better plan is to foster relationships with multiple suppliers to ensure there are no challenges to you. Remember when the Suez Canal was closed this spring?  While this wasn’t a “disaster” in the traditional sense of the word, it created challenges for many companies that relied too heavily on only one means of bringing in supplies. At the same time, it’s also wise to know how your suppliers plan on dealing with disasters, too. What type of situations could affect them (which are different from what can affect you) due to location? Will they shut down a production line themselves – or shift production to other products? Where does that leave you, and what will you do about it? If you’re scratching your head on any of these questions, that’s OK. That’s the whole point of a planning exercise like this — to make you dig deep and find the answers now, rather than after disaster strikes. Business Disaster Plan Tip #4: Creating The Plan Common sense would dictate that no one can create a plan to handily cover all disasters – in the last year, we’ve seen monstrous wildfires, cities torn apart by riots, a global pandemic, and transportation and supply line disruptions. Every one of them impacts somebody’s business, and a hurricane offers a far different “type” of disaster than a localized riot. Any disaster plan simply starts with asking “What if?” and beginning to think about

Business Growth

Thoughts on How San Francisco Bay Area Business Owners Can Achieve Business Solvency

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With our nation celebrating its 245th birthday on Sunday, and all of this talk about “independence” flying around, I have a question for you — one that I think you should think hard about: Are you achieving the independence you wanted in your business? As you know, it’s hard — and it’s LONELY — to be a San Francisco Bay Area business owner in this environment. Achieving business solvency can seem like a formidable task as you see the constant barrage of chaos and fear the media throws at your customers (and maybe even trickling into your own consciousness as well). Which is why it’s so important for you to have a clear handle on the bottom line for your business — and on ALL of the tax implications you’ll be facing under the new tax code, and how to get ahead of them. In short, how to achieve business solvency. For instance, are you taking every deduction possible for this year … and, if so, are you properly accounting for them? For example, one of the big last-minute tax strategies a lot of my clients like is the “heavy vehicle” write-off. When you purchase a heavy vehicle (defined as a vehicle with GVWR of over 6,000 lbs.) that is used 100% for business — well, then you can write off 100% of it. To do this, we use Section 179 in conjunction with bonus depreciation. And, if your vehicle is used 70% for business, then you can write off 70%. But this only works with a “heavy vehicle.” If you don’t have a heavy vehicle but use your vehicle for business purposes, you can still get a deduction, it just won’t be as much. You don’t even need to pay cash for it. You can finance it and still get that write-off. But here’s something that can cause a little problem: What happens when you sell the vehicle? Well, I’ll tell you: Before you sell, you have to calculate how much of a “gain” you’ll have. Estimated sales price:  xx,xxx Less: Cost of sales       ( x,xxx) Less: Basis                  (   000) Gain:                           xx,xxx Gain is taxable. In the past, it was possible to trade in your vehicle for a new vehicle. It was a “like-kind” exchange for vehicles. Effective 1/1/2018, like-kind exchanges only worked for “real property.” If you “trade in” a vehicle, the value given to the old vehicle is taxable. Another strategy is to distribute out the vehicle at fair market value. It’s distributed to a business owner. Of course, this only works if you have a pass-through entity. If the vehicle got hard use and/or a lot of miles, the vehicle’s fair market value will be lower. Look up the value using the Kelley Blue Book. The FMV could be taxable to the shareholder or could be treated as a payment against a shareholder loan. These are the kinds of analyses that we can make for you — and help you to plan for so that you can get on the path to business solvency. And look … I write about many things in these notes — from adding to your revenue line (sales, marketing, etc.) to all of the many other items that matter to you and other San Francisco Bay Area small business owners.  But one of the BEST ways to grow your bottom line is to avoid all of the unnecessary expenses and taxes, which so many San Mateo businesses end up paying, simply because they didn’t plan ahead of time. This is our passion here at ONeill & Bergado. When I meet with a business owner, I often wear many hats — CFO, Marketing Advisor, COO, etc. — truly whatever fits the need of my client most precisely. Because business owners can make rash decisions in times of perceived crisis (like during “tax season”) — they often have unforeseen complications down the road. All of which gets in the way of achieving business solvency. Let’s get ahead of the process for you, (408) 241-4100. Warmly, Patti ONeill and Gale Bergado(408) 241-4100ONeill & Bergado

Business Growth

Patti ONeill and Gale Bergado’s Insights on Financial Planning for Business Owners

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Last week in the start of our series on financial planning for business owners, we got a little carried away by all of the talk of “independence.” So, we took the opportunity to ask you a simple question: Are you achieving the independence you want in your business? But there’s another side to this question that you should consider, and it’s this: Have you considered paying yourself more out of your business? In some cases, it actually might make more sense to pay yourself less — but bring home more at the same time. It all comes down to starting on the right foot when it comes to financial planning for business owners. If you’re not clear on how you could accomplish that, then reading this blog right now could be very important. We spoke last week about cost basis, but these considerations are just one aspect of financial planning for business owners like you who are growing the tax-profitability of your business. When we meet with a San Francisco Bay Area business owner, we often wear many hats — CFO, Marketing Advisor, COO, etc. — truly whatever fits the needs of our client most precisely. Because business owners can make rash decisions in times of perceived crisis (like during “tax season”) — and they often have unforeseen complications down the road… Which is why it iscriticalthat we take a look at how things are set up for you and your San Francisco Bay Area business for the rest of 2021. Here in the middle of summer (and BEFORE the fall rush) is the perfect time to take a clear-eyed look at things and plan for the best outcome for your business come January. With almost-certain-to-be-drastic changes on the horizon, there may be expiring opportunities for San Jose businesses to save on their bottom line as it relates to tax and other aspects of their financial picture. Frankly, we’d like to avoid all of the unnecessary expenses and taxes which so many San Jose businesses end up paying, simply because they didn’t plan ahead of time. Or it could be as simple as saving on expenses — all with the goal of paying yourself MORE, however you get there (which, as we mentioned, could be just what you need this year). Or these upcoming changes could mean that we want you to pay yourself less. But we won’t know until we talk. Warmly, Patti ONeill and Gale Bergado(408) 241-4100   408-775-7800ONeill & Bergado

Business Growth

Patti ONeill and Gale Bergado’s Business Negotiation Skills FTW

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Alright San Francisco Bay Area business owners, we’re going to move aside from tax-related things today (though there will be PLENTY to talk about as Congressional plans unfold) … and circle back into the nitty-gritty of how business works and share with you some business negotiation skills we’ve learned over the years. We write about this stuff because we don’t see a business relationship as merely transactional; we’re here to serve and advise San Jose business owners in a variety of situations. Occasionally, we’re pulled on to work through business valuation discussions, business succession planning, M&A transactions, etc. These are inherently complicated situations, of course … and they’re also inherently adversarial. It sure would be nice if business deals like these could always be amicable, and like playing pattycake … but sometimes business negotiation skills require that you strap on the armor and battle a little. And not just when it comes to buying or selling a business — this adversarial dance comes into play a great deal in the course of a business day. In which case, we have thoughts for you today… Patti ONeill and Gale Bergado’s Business Negotiation Skills FTW“Discussion is an exchange of knowledge; an argument an exchange of ignorance.” – Robert Quillen No matter what industry you’re in, or how far you go in your career, the ability to effectively negotiate can make the difference between success and mediocrity. Whether it’s a multimillion-dollar contract, a job offer, or a luncheon, here are some trenches-tested business negotiation skills that will bring you or any other San Jose business owner closer to your ideal outcome: • Know what you want in advance. Don’t go to the table without a clear, realistic idea of what you want to achieve. It will help you negotiate with confidence. • Ask for what you want. Don’t be afraid to make the first offer. You’ll set the tone for the discussion, and studies (and our experience) suggest that the negotiator who goes first usually comes closer to getting what he or she wants. • Understand what your partner wants. A successful negotiation should satisfy both sides. Instead of trying to crush your competition, find out what he or she hopes to get, and try to work together toward a solution that works for you both. • Don’t concede unilaterally. Usually, one side or the other has to give something up. If you do that, be sure to get a comparable concession from the other person. Giving away something for nothing will be taken as a weakness to be exploited. • Don’t rush. Time can be your friend if you’re willing to wait for the right deal. If the other side senses a deadline, he or she may be motivated to hold out until the last minute or try to force you into accepting unreasonable terms. Be patient and let the time pressure work against your partner. • Be ready to walk away. This can take a certain amount of courage, but it’s necessary to avoid being backed into an agreement you don’t want. If possible, keep an ally in reserve–someone with the power to approve or reject the deal. This can give you an out if you need to turn down a deal or motivate the other side to provide you with a better offer. If you’re a San Jose business owner getting into negotiations and want a little more of our wisdom to help you brush up on your business negotiation skills, let’s chat about it:Patti (408) 241-4100  Gale 408-775-7800 To getting things done, Patti ONeill and Gale Bergado(408) 241-4100ONeill & Bergado

Business Growth, Business Valuation

Patti ONeill and Gale Bergado’s Insights on Reducing Business Expenses

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No matter how far around the block customers are waiting, in business, only one line counts. The bottom one. That’s why reducing business expenses is critical. Getting a grip on the costs of doing business brings you benefits both short- and long-term. “Cost controls” generally mean saving money (who doesn’t like that?) and laying the foundation for greater efficiency and profitability in the future. But how do you start? Well, the good news is that here at ONeill & Bergado … we eat this stuff for breakfast. Patti ONeill and Gale Bergado’s Insights on Reducing Business Expenses “There are so many things hiding in plain sight that are routinely pointed out to us to no avail.”  – Megan O’Grady You have two kinds of basic costs in business: fixed and variable. A fixed cost could be the monthly payment for your long-term lease. An example of variable costs might be what you pay a supplier. So, some great ways to start reducing business expenses is by looking at the financial blueprint of your business. All budgets in order? Does every department know what they have to spend? More to the point, do you know what they have to spend? Next, make sure you have a good reason for reducing business expenses before you start to implement cost controls. Why areyoutrying to save cash? Looking to save in one area to spend (and improve, you hope) another part of your business? Set up a spreadsheet with one axis for your departments and another for expenses. Assuming no one figure leaps out at you, you’re off and running. Question the prime suspects Reducing business expenses is easier in some areas of your San Jose Area business than others — staffing, purchasing, and property, to name a few. (You’ve probably got your own list in mind.) Starting to reduce business expenses first means examining each of these areas. Staff. Two standbys might help your San Jose Area business here: outsourcing or turning to freelancers to reduce FTE staff, and using technology to do the job of people. Check standards of your industry, too, to avoid overpaying even in this tight labor market. Right out of the gate these seem like tough decisions. But one big step in starting to reduce business expenses is scrutinizing all aspects of your San Jose business, with the current bottom line and eventual profitability your highest priorities. It’s not fun. It is business ownership. Purchasing. Are your suppliers cutting you the best possible deal? Is there another supplier just as good, but cheaper? There’s strength in numbers when buying, too. Can you partner with other San Jose Area businesses and get yourself volume discounts? Property. This category is a moving target right now. As businesses continue to recover and resume more normal operations, one question on everyone’s mind is whether recent work-from-home practices can continue. You’ll have to answer this one for yourself and your business/industry, but can some of your employees continue to work from home to cut your office/workspace expenses? Don’t forget to factor in utility costs – sometimes there’s cash to be found in just turning off the lights. These are just a few examples of areas that could be overspending. One giant red flag: Is any area of your business running over its original budget? Who to bring in Reducing business expenses takes a team. Your managers and employees, for instance, are boots on the ground for your budgets. Ask them where to save money and time. You’re also more likely to get their buy-in if you’re open and honest about the process right from the start. Your customers know more about your products and services than anyone. Ask them what you offer that they never need or use (no need for you to keep paying for that). Suppliers and vendors probably work with your industry a lot; ask their opinion, too. Then there’s the consultant question. An objective third-person is great, but consultants aren’t cheap. And even the best of them often produce reports that go on a shelf and nobody reads. As always when hiring most professionals, go with references from others in your industry. Remember to negotiate their fee. Always remember that you’re not trying to control costs in a vacuum. You have to identify what else will be impacted in your San Jose business if you decide to reduce business expenses. Will a cutback create a problem elsewhere? As you can see, this job is more than setting up a spreadsheet. Reducing business expenses is a never-ending job, but this should get you started on the process. If you’re wanting somebody who can take an objective look at your books and set them up RIGHT — to control for the proper things — let’s chat about it: Patti  (408) 241-4100  Gale 408-775-7800 To your bottom line, Patti ONeill and Gale Bergado (408) 241-4100 ONeill & Bergado

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