A New Consideration For Real Estate Investors
Clocks and calendars seem to be less accurate lately. Is it just me or does the morning alarm go off annoyingly early?!?!
Regardless, this is shaping up to be a superb time to make adjustments to your investing business.
Despite all the challenges in the world right now, we’re incredibly optimistic about the future.
Next Steps for Businesses
Right now, is a great time to devote yourself to a business review. Look at your business finances and make improvements that’ll put you in a better position for the future. Here are a few “what ifs” to mull over, in the coming months.
1: What if you could reduce some business expenses?
It’s very rare for a business to be operating as lean as it possibly could be. There’s also a point of diminishing returns when it comes to reducing your operating expenses. Your tax pro can help you find a happy medium.
Let’s discuss how to:
- Eliminate software that you’re paying for but don’t actually need.
- Identify things that you’re doing yourself that could be done better and cheaper by hiring another company to do it -- and vice versa.
- Seek out ways to reduce the cost of the administrative work that is required to run your business.
- Look at what could be automated in your business -- without sacrificing quality of work.
Some cost reductions are simpler than others. For example, switching company cell phone plans or finding a cheaper credit card processing service are the low-hanging fruit.
But with some analysis, you might be able to find other ways to save money without introducing any negatives.
2: What if you could streamline some business processes?
We’ve worked with businesses in a lot of different industries over the years. In that time, it’s been interesting to see both the differences and similarities in what makes each type of business “tick.” One of the most fascinating things is that ideas from one industry can often be applied to a totally different industry to make significant improvements in the efficiency of how that business operates. Read and study 'outside' your field.
For example, analyze who does what within your business to ensure you have the right people doing the right tasks. How is information communicated at all levels of your business, finding ways to reduce unnecessary back-and-forth stuff, and eliminating wait times for key decisions. You likely have workflows that can be digitized to make them more efficient, too. These are just basic examples of the type of process improvements to review.
Around here, we like to say that Efficient Business = Profitable Business. Your tax pro knows your business and can help you evaluate some of your business processes to identify areas for improvement helping your business become more profitable. And all without paying the insane management consulting fees that a giant consulting firm would charge you!
3: What if you could increase your prices?
You may have noticed that the prices of everything from food to lumber to used cars has gone up lately. While Jerome Powell of the Federal Reserve recently shared that these price increases are short-term as the economy reopens, I think it’s easy to see that some prices will never come back down.
When was the last time you evaluated your own prices? Your supply costs have likely increased, as have your labor costs. Not to mention the fact that you need to increase your own net profits in order to maintain your own lifestyle as costs go up around you. So, take a serious look at all the inputs into your business and determine whether it’s time to raise your prices and exactly how much.
4: What if you could build up some cash reserves?
A year ago, many small businesses were running really, really tight. In fact, news articles at the time showed that most small businesses had only 29 days of cash on hand. That meant when lockdowns hit, they didn’t have the cash reserves to survive.
If your business has an emergency fund, then you could weather most short-term economic shocks. If you’ve ever seen gigantic corporations report taking multi-billion-dollar losses during a quarter and wondered how on earth they can do that, it’s because they are either:
- Have huge cash reserves, or
- Have access to huge lines of credit.
As an example, a little computer company you may have heard of called Apple has over $195 billion in cash on hand. That’s…wow… Yeah, that’s a LOT of money. It’s so much money that it’s hard to envision anything being able to destroy Apple as a company, short of an asteroid obliterating the entire planet.
While you may not need to hoard that much cash, wouldn’t it be nice to have a 3–6-month cushion in case something else happens? This week, set up a segregated account at your bank or credit union and "seed it" with 5% of last month's gross.
So, just because your business tax return is filed and done, doesn’t mean there isn’t still work to do. There are plenty of ways to fine tune as you are going forward.
BE THE ROAR not the echo®
Janet Behm
Comments