Omar Group CPA Blog

Hope you had a great Thanksgiving Holiday. Mine was spent in Atlanta, GA with family and friends. It was very enjoyable and we all had a blast.

With the year end rapidly approaching, I have devoted this blog post and the next one to share with you the top five mistakes that I see many business owners make that you should be mindful of. Here they are:

1. Thinking that tax planning can wait until the following year

As we approach the year end, you should already be thinking about the following April 15. It is essential to schedule end of year meetings with your CPA and financial advisor to plan year end strategies and to determine the amount of your tax liability or tax refunds. In the event of a tax liability, it will allow you to prepare for the taxes owed well in advance. The mistake to avoid is to not defer meeting with your team of professional advisors until next year.

2. Ignoring December 31^st when making major purchases

If you are planning on making equipment purchases, either by buying new equipment or any other purchases, make sure you always have tax savings in mind. Purchases made before December 31^st may save you on your 2009 tax bill. However, if you make a purchase in January or February 2010, you will have to wait more than an entire year to see the tax benefits.

3. Making decisions based solely on “tax” consequences, not “economic” consequences

This is a big one. Although making purchases before the end of the year will save you on your taxes sooner, it is only worthwhile if you actually have the cash flow to afford it! Small business owners often apply for loans to purchase equipment, assuming they are justified by the tax write-off. But, if you don’t have the money to pay off the loan in a timely fashion, it will cost you more in the end. Tax benefits should always be considered secondary to your small businesses’ cash flow capabilities. (I see many small business owners not cognizant of this fact and thus have dedicated one of my upcoming emails to share with you ideas to enhance the cash flow in your business.)

It is so easy for a business owner to get caught up in the daily operations of their business. The inventory ordering, order processing, data input, putting out fires and more, can become all consuming. Then, one day you look up and wonder what happened to the business. If you fail to consistently market your business’s products and services, you will be out of business before you know it.

Even if you have a strong customer base that produces re-orders for your business regularly, there is a natural amount of attrition that occurs within a client base. So, if you are not replacing customers and growing with the addition of new ones, your business is at risk of sliding backwards in sales figures and overall revenue numbers.

Marketing is all about future sales. You plant the seed today to reap the benefits tomorrow. If you want a long-term successful business you can hand off to your children, don’t neglect marketing. Every month, set aside at least twenty percent of your time to dedicate toward marketing activities.

Marketing activities include:

-studying and knowing the difference between “good marketing” vs. “bad marketing”

-deciding to expand an existing product line

-dumping unprofitable products or adding new products

-determining where your advertising can generate the biggest return for the investment

-planning your marketing materials and activities for the year ahead

-nurturing your existing customer relationships via a “touch plan” to regularly stay in contact with your customers (I teach my client that an ideal touch plan should have at least 24 “touches” in the course of the year, other than the “touches” when you are servicing them.)

All the activities listed above are crucial functions for your success.

Every year I come across small business owners who throw thousands of dollars into bad, ineffective advertising methods.

For example, I will meet a business owner who advertises in the Yellow Pages and after getting little or no business from it, concludes that the Yellow Pages does not work for his business. Or, I talk to a business owner that just printed 2,500 of their nice, 4 colored brochures and mailed them out to businesses in their area. After not getting much response they conclude that this method does not work. That is simply not true and you will see why in a second.

One of my marketing mentors is John Carlton, one of the leading and highest paid marketers in the world. He says that “America sorts their incoming mail over their trash can.” Anything that looks like junk will end up in the trash. What this means is that the small business has to invest the time to understand the difference between “good marketing” and “bad marketing,” in order to gain the attention of the prospects they are targeting.

What is “bad marketing”? (also known as “Institutional ads”) Institutional ads represent the most common form of advertising. These ads talk specifically about you, the business owner. Yellow Page ads are good examples of this form.  But institutional ads don’t direct the potential buyer to a buying decision.  Thus, they can be a waste of money.

What is “good marketing” (also known as “direct response ad”) Direct response advertising, on the other hand, makes a complete case for the company, product or service. It overcomes sales objections. It answers all major questions. It promises results, backing up the promise with a risk-free warranty or money-back guarantee. Direct response advertising is all about your customer and his or her needs. Its purpose is to stimulate a phone call, letter or a visit. Best of all, unlike an institutional ad, it is trackable so you can make every dollar you spend on it accountable. This then helps to measure the effectiveness of each ad.

So, spend time with professionals who can give you financial insight into which marketing strategies will produce the best possible results for your business. Dedicate at least twenty percent of your week to marketing your business’s products and services. Track your results and make adjustments accordingly on an ongoing basis to ensure that your business is experiencing the levels of success needed to meet your needs.