Monthly Archives: November 2010

Marketing , , 2 Comments

Diversify Under Your Brand Umbrella

by

“Show me a company with more than 10 % of its business with one customer or more than half of its business in one industry and I’ll show you a company at risk of being (adversely) impacted by one company or one industry.”

Paul Weber,  CEO Advertising Group    Kansas City, MO

In the Freelancer’s favorite dream,  we somehow manage to sign a nice group of steady clients who all offer multi-week projects that carry us smoothly through the year.  We smile as we sign our contracts and deposit our checks…

In the rude awakening that is the  “new normal”  economy,  however,  the realization of our dream is slipping further from our grasp.  Client behavior is more fickle than ever and outrageous fortune can oh,  so easily snatch a good account away from us,  no matter how well we work with the prime contact or how long the association.

A departmental  shake-up can cause  someone new to enter the Garden of Eden,  who will cast us out and bring in their own hand-picked specialist.  Other times,  industry changes,  shifting organizational priorities or even a technology upgrade can render our services obsolete. 

Knowing our primary customer groups and industries where our services are most welcome is essential branding knowledge for every Freelancer.  Nevertheless,  underneath the umbrella of your brand,  it is wise to keep eyes,  ears and mind open for new sectors of enterprise.  Where else might you find an open door?

I liken it to cross-training in fitness:  participating in different activities expands our competencies,  guards against boredom and makes us less vulnerable to injury.  Cross-training makes us  stronger,  more versatile and ultimately,  healthier.  Under the umbrella of fitness,  it is possible to run,  swim,  bike,  row,  ride the elliptical,  weight train,  core train and practice yoga.  It is wise to apply that principle to your body and your business.

Here are five activities that will help you to apply the cross-training principle to your business and help you to diversify your client base:

1.   Cold call  by reaching out to clients you haven’t worked with in a while or re-approaching prospects who liked your services but weren’t ready to take you on at the time.

2.   Energize your PR  by sending out press releases that announce your speaking or teaching engagements to media followed by clients that you want to reach.   Get involved with an event sponsored by a local business or business association and send press releases to your targeted media outlets.  Remember to make follow-up phone calls and create an opportunity to develop relationships with the media along with the participating business owners.

3.   Network face to face  and meet people.  Approach new contacts with the mindset of helping them to achieve their objectives by making introductions and sharing information.  Your generosity can pay off in referrals,  no doubt to new clients and possibly new industries.

4.   Collaborate  with complementary businesses to broaden or deepen your professional reach and get introduced to new clients or industries.

5.   Volunteer  for a cause that resonates with you or join the local Rotary Club.  Your network of professional relationships will increase,  others will see your expertise in action as you apply your talents to various projects and referrals may eventually come your way,  giving you entrée to new clients and industries.

Thanks for reading,

Kim

Business Strategy , , , Leave a comment

Go to the Front of the Pack

by

I’m a little bit of an egghead and every once in a while I like to read a good study,  to keep myself current,  or even ahead of the curve,  on matters of health,  business or anything else that catches my eye.  Recently,  I read an interesting study on strategic competitive positioning,  a survey study done this year at Babson College’s Babson Executive Education.

Lead author H. James Wilson competes in triathlons and he used those competitions and their participants as the study framework.  Triathletes assess competitors in a clean and simple fashion:  who is Front of the Pack,  Middle of the Pack or Back of the Pack?  The first two groups are ranked as actual competitors and the latter is seen primarily as new to the triathlon scene and nothing to worry about.  MOPs and BOPs have one goal and that is to improve their time in every event they enter and move up to the FOP.

Wilson applied the FOP,  MOP and BOP classifications to 300+  global companies that had recently reported facing intense competition within their respective industries.  He segmented the companies as follows

  • FOP if they achieved greater than 15%  annual revenue growth in FY09  (5%,  16 companies)
  • MOP if they achieved 1-15%  annual revenue growth in FY09 (48%,  145 companies)
  • BOP if they showed flat or declining revenues in FY09 (47%,  144 companies)

The essential question of strategy is,  are you heading in the right direction?  Wilson knew that the FOPs were doing more than a few things right and to get to the heart of it,  he analyzed the FOPs and identified three ways in which they outpace the also-rans.  He then developed the following survey questions based on those strengths.

Wilson’s data indicate that if you can answer yes to each of the survey questions,  you’re on your way to the FOP.  How do you stack up?  Something to think about.

1.  Are you/is your company becoming more effective at meeting the needs of clients/customers?

Despite the economic downturn that spawned the planet-wide recession (depression?),  FOPs have maintained the trust,  confidence,  loyalty and dollars of their customers.  FOPs understand what customers want and they are better at anticipating future needs and trends.  They put resources into keeping a finger on the pulse of the customer and they know what resonates.  FOPs are proactive in market research and customer outreach.

2.  Have you/has your company recently implemented a significant innovation campaign or launched numerous small-scale innovation pilots?

Brainstorming ideas for new services,  fresh approaches,  an innovative marketing campaign or self-development plans is an important beginning.  It is always necessary to think things through,  examine the big picture and weigh the possible outcomes of your actions.  Just remember that  “implement”  and  “launch”  are the key words.  How many good plans have you left to languish on the drawing board?  FOPs understand that results come from deeds,  not words.

3.  Are you/is your company becoming more collaborative with other Freelancer colleagues/other organizations?

High levels of cross-company interactions distinguish FOPs more than any other factor studied.  FOPs are also more likely to inform those in their network about business opportunities.  As a result,  FOPs receive the benefits of reciprocity more than most,  when referrals come their way.  Think of  how you might include selected non-competing colleagues in business opportunities that would be mutually beneficial.  Perhaps this is the smartest way to scoop bigger contracts for both?  Plus,  you’ll gain exposure to another’s business methods and perspectives and that information will make you even more savvy and competitive.

Thanks for reading and Happy Thanksgiving,

Kim

Administrative , , , , Leave a comment

The Roth, The SEP and The Solo 

by

As you begin to ponder your inevitable retirement from the Freelance life,  you’ll  need to examine options for saving.  Those who generate an income large enough to make planning and saving for the future an obvious course of action probably have an investment counselor to act as guide through the minefield.  

Yet at some point,  less wealthy Freelancers must also understand how to finance the next phase of their lives.  Choosing the best retirement plan option is confusing and subtle differences can magnify both at tax time and when it’s time to retire.  I hope that you find this post useful as you formulate the plan for your future.

The Simplified Employer Pension Plan

Somewhat similar to Solo 401K,  the SEP IRA retirement plan may be used by Sole Proprietors,  LLCs,   C  Corporations,  S  Corporations and Partnerships.  As an added bonus,  the SEP IRA may be used not only by those who have both W2 and self employment income,  but also by business owners who employ more than just the spouse.

Contributions to the SEP IRA are made pre-tax and contributions are tax deductible.  It is permissible to contribute up to 25 %  of W2 earnings plus up to 20%  of self employment income,  to the maximum annual contribution of $49,000.00 in 2010.  There is no  “catch up contribution”  provision with SEP IRA.

If you have a job,  including one where you are able to participate in a retirement plan,  along with a sideline business,  then SEP IRA is your option of choice.   Up to the maximum,  the amount you choose to contribute,  or even if you choose to contribute,  in a given year is up to you.  Contributions are held tax deferred and withdrawals made after age 59 1/2 are taxed as ordinary income.  Withdrawals made prior to age 59 1/2 are subject to the customary 10 %  premature withdrawal penalty and additionally,  will be taxed as ordinary income.

Small business owners with employees may institute a SEP IRA for themselves and their employees.  Business owners are able to make generous tax deductible contributions to the company SEP IRA on behalf of themselves,  the on-the-payroll-wage-earning spouse and other employees.

The business owner decides at what level to fund the plan,  up to 25%  of annual compensation.  The %  of funding for the business owner must equal what is offered to employees.  Each employee has an individual SEP IRA account and the business owner pays the entire contribution.  The pre-tax money paid into each SEP IRA account is tax deductible for the business and is a tax free benefit for the employee.

If you like,  it is possible to convert a SEP IRA to a Solo 401K,  something you may choose to do when you turn 50 and want to make those catch up contributions.  Other retirement accounts can be consolidated into the SEP IRA,  with the exception of a Roth  401K,  which is an after-tax fund.  It is not possible to borrow against the value of the SEP IRA.  April 15  is the deadline to establish and fund your SEP IRA account in order to receive a tax deduction for the previous year.

Roth 401K

 Unlike SEP and Solo 401K,   Roth 401K contributions are made with after-tax income.  Which option you choose will,  like most of life’s choices,  depend upon how much money you generate.  Depending upon your financial situation,  you may decide to split the difference and have both a  (pre-tax)  Solo 401K and an  (after tax)  Roth 401K. 

It is permissible to use the salary deferred portion of your Solo 401K to make a Roth 401K contribution.   Remember that the maximum annual contribution is $16,500.00  for those younger than 50 years and $22,000.00 for those 50 years and older.  Profit sharing Solo 401K contributions are not eligible to be made as a Roth 401K contribution,  since they are made pre-tax and are tax deductible and you cannot commingle the two.

While Roth 401K income deferred contributions are NOT tax deductible,  withdrawals you make after age 59 1/2 years are tax free IF five years have passed since your first contribution to the Roth (known as the 5 year rule).  Roth distributions must begin at least by age 70 1/2,  unless you roll over to the Roth IRA.

BTW,  if you transition into a job that offers a retirement plan,  you may be tempted to roll your SEP IRA or Solo 401K into the new retirement account.  Be advised that may or may not be a smart move.  Maintenance fees will be much lower for an account attached to a large company vs. that of an individual;  but there is much more investment flexibility available in your Solo 401K vs. what is available to a big corporation. 

Thanks for reading,

Kim

Administrative , Leave a comment

The Self Employed 401K Plan

by

Freelancers are the CEO of our solo business empire and we wear many hats.  In addition to promoting our business services,  networking and prospecting for new clients,  managing our brand,  remaining relevant in a fluctuating marketplace and BTW,  actually working on projects that give us the billable hours that allow us to eat and maintain the roof over our heads,  we must also define,  fund and manage our retirement strategy. 

A March 2010  SBA study found that we Freelancers are much less likely to make adequate financial preparation for retirement.  That’s probably because most of us are either on our spouse’s retirement plan,  or are not generating enough income to incorporate saving into our lives. 

If you’re unmarried and able to spare a few thousand dollars a year,  do set up a retirement account.  It is essential that we have cash available to us as we get older.  Inevitably,  the day comes when one is too old and frail to work.  Plus,  a retirement account  keeps money out of the hands of the tax man,  for a while anyway. 

The Self Employed 401K was created in 2001 and made available on January 1, 2002.  The Self Employed 401K offers benefits that compare well to the traditional 401K plan.  This retirement plan option may be used by Sole Proprietors,  LLCs,  S  Corporations,  C  Corporations and Partnerships.  Solo 401K may also be used by small business owners whose only employee is the spouse.  The spouse must be on the payroll and receive income from the business.

Solo 401K consists of two types of contributions,  salary deferral and profit sharing,   both of which are tax deductible.  Funds deposited into the account are held tax deferred.  As with the typical 401K plan,  you may begin to draw down after age 59 1/2.  Those withdrawals will then be taxed as ordinary income.  Withdrawals made prior to age 59 1/2 will incur the 10%  premature withdrawal penalty and will additionally be taxed as ordinary income.

The Self Employed 401K,  or Solo 401K,  allows Freelancers younger than age 50 to contribute a maximum $16, 500.00 tax deferred annually.  Freelancers aged 50+ are eligible to contribute up to $22,000.00 tax deferred income each year,  known as the  “catch up”  contribution.  Money deposited into a Solo 401K must be generated by self employment only and not salary.

Up to the maximum,  you may decide the amount of your annual contribution.  If you’re unable to make a contribution in a given year,  then don’t make one.  When billable hours are strong,  add extra money to the account whenever possible.  The profit sharing feature allows you to deposit up to 25%  of your annual income,  which is tax deductible and held tax deferred.  That equals maximum $49,000.00 a year for those under age 50 and $54,500.00 yearly for those age 50+.

A solo 401K retirement plan is easy to set up and there are no complicated administrative requirements for us to micromanage.  We are responsible for making the contributions and deciding where to invest.   The deadline for establishing your Solo 401K is December 31 of the year in which you would like to receive the tax deduction (fiscal year end for corporations).  When researching 401K plans,  look for the following:

  • Low expense ratios.  Check out http://morningstar.com for a rate comparison.
  • No or low set-up fees and annual costs
  • Investment flexibility.  You should be able to invest in stocks,  bonds,  index funds and mutual funds.

It is possible to borrow against the plan’s account balance,  maximum $50,000.00 or 50% of the account balance.  If the loan is paid back on time,  there will be no penalty charges or taxes assessed to the transaction.  It is also possible to transfer funds from another retirement account into your Solo 401K and consolidate your holdings.

We’ll delve further into this topic next week.  Thanks for reading.

Kim

Professional Development , Leave a comment

Become a Mentor

by

In Greek mythology,  Mentor was a trusted friend and adviser to Odysseus.  When Odysseus left Ithaca to fight in the Trojan War,  Mentor helped Penelope,  wife of Odysseus,   raise their son Telemachus.  He became a protector,  teacher,  counselor and trusted friend to Telemachus as the youth grew into manhood.  In Homer’s Odyssey the goddess Athena,  disguised as Mentor,  protects Telemachus as he sails the Mediterranean Sea in search of his father.

Perhaps you have reached a level of professional success where you feel ready to  “give back”,  to take someone less experienced under your wing,  show that person the ropes and set him/her on the road to great achievement.

Or perhaps you feel yourself stagnating professionally,  spinning your wheels and blocked from entering the winner’s circle.  You long for a rewarding project to sink your teeth into,  to demonstrate your relevance to colleagues and decision makers and remind yourself that you are still valuable and deserving of success.

Choosing to become a mentor may be the best response to both scenarios.  The process of mentoring provides many benefits,  tangible and intangible,  for both mentor and protegé. 

The less experienced and often (but not always) younger protegé will learn to hone his/her business acumen,  receive introductions to those who can help further his/her goals and finesse the unwritten rules on which success  so often hinges.

The mentor will likewise benefit handsomely.  Strengthened leadership skills,  such as the opportunity to gain a fresh perspective on one’s leadership style or learning to relate to,  collaborate with and/or manage colleagues  and workers from backgrounds other than one’s own,  are among the more practical benefits that accrue to a mentor.

Mentoring can help you bridge the generation gap,  become more attuned to gender differences as they relate to expectations or perspective and break down barriers between you and those of other ethnicities and religions.  As our nation’s workforce becomes more diverse,  these competencies can only grow in value. 

Moreover,  your protegé will no doubt have a few skills to teach you and may be able to introduce you to a few of the right people as well.  You’ll gain an ally,  expand your professional network and influence,  enhance your reputation and leave a lasting and positive legacy. You’ll experience the deep satisfaction that comes from seeing those whom you’ve mentored succeed,  perhaps beyond what they dared to dream.  Formerly dismissive decision makers may come to view you in a new,  more favorable,  light.

So share your wisdom and experience and help someone who needs support and guidance to achieve their goals.  Challenge your protegé to think in new ways,  consider options previously unknown,  open up to new perspectives,  gain new insights  and develop judgment and confidence.

When you notice someone who is bright,  talented and motivated,  yet seems to need some  wise counsel,  get to know that individual.  See if the two of you click,  if the communication between you flows.  Asses how that person responds to and processes advice.  

Be advised,  however,  that a potential protegé could reject that role,  or prefer to not go there with you.  Respect boundaries and if the mutual agreement is there,  gradually ease into a mentoring role.  Both you and your protegé will receive many benefits and it will be a feather in your cap.

Thanks for reading,

Kim