Author Archives: freelancetheconsultantsdiary

Survival Strategies , ,

Keeping Tabs on the Competition

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Merry Christmas! No matter what business you’re in,  it is important to be aware of the activities of competitors.   We can learn a lot from them,  lessons of  both the what-to-do and what-not-to-do variety.   But be mindful that it is inadvisable to base your marketing strategies and sales stories on what competitors do and say.  Such an approach is reactive.  Your business interests are better served when being  proactive.

In other words,  it’s smarter to be yourself.  That takes a certain amount of confidence,  yet there will be no real success in life or business without a secure and healthy sense of self.  Without that character trait,  one cannot be authentic.  Clients respond best to authenticity.

To help yourself stay true to yourself,  start by acknowledging your strengths and remind yourself of where you excel.  Next,  as you monitor the competition,  rather than obsessing over what they are doing, pay attention instead to what they’re not  doing.  Where and how can you deliver value that clients will value and how can you best package and deliver it?

Another big way to beat the competition is to create a good experience for the client.  Think about how it may feel to do business with yourself.  Do you make it easy? Do your business practices inspire trust and confidence? Are you able to anticipate and show empathy for client needs?

Do some reality-testing  while on an assignment and ask your client this:  “What can I do to make things better,  easier,  faster?”  This little question let clients know that you’re willing to go the extra mile and provide services that make their lives easier.  You’ll  look like a hero,  you’ll strengthen client relationships and you’ll position yourself to grab some all-important repeat business.  You may even tweak your business model if you find out that certain of your practices can be an inconvenience.

If you have friends and family who in their jobs hire Freelancers,  ask them what they’d like to see more of and less of in the vendors they work with.  Ask them about what types of behaviors they consider red flags and deal-breakers.   Ask them if they could hand-craft the experience they have when interacting with their Freelance consultants,  what would it look like?

I’ll let you in on a few pearls that were recently shared with me:

  • Let the client know how you will work
  • Answer frequently asked questions before the  client has to ask them
  • Set up a timetable to let them know when they can expect the deliverables and when key milestones will be reached

Aim to make your clients feel guided and taken care of.  This inclines them to trust you and allows them to relax and know that a professional is in control.  You look like a real pro because you are always a step ahead.  You know how to land the plane,  the project is in expert hands and they look like a genius for hiring you.  This also supports premium pricing because you demonstrate in all ways that you are worth the money.   Ta-dah,  you can and will beat the competition!

Thanks for reading,

Kim

Professional Development , Leave a comment

Four Rs for the Holidays

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Freelance consultants usually have to grapple with downtime that is imposed upon us during the Christmas holiday season.  After the first week in December,  it can be impossible to drag a project to the starting gate.  Clients will either shift into party mode or year-end mode and concentrate on wrapping up their own projects before December 25.  Unless the client is facing a January deadline ( thank goodness I’ve got one of those this year,  even if the project is miniscule),  they will put the brakes on things until after the first week in January and there isn’t a blessed thing we can do about it.

But time is our most precious resource,  unrecoverable when wasted.  So the question is,  how do Freelancers make hay during the Holidays?  In fact,  there is no reason that the Holiday season should be less than productive for your consultancy.  I offer here a few suggestions of activities that will pave the way to a stronger and more satisfying New Year:

Reflect

Use the Holiday season downtime to reflect on the events of the year,  professional and personal.  How do you feel about how things turned out? Did you recognize good opportunities?  Did you have the moxie to create still more opportunities? Were you able to overcome obstacles,  or dodge adversity?  Did you achieve you financial goals? Did you pick up any good clients?  Did you get repeat business? Did you enter into any good relationships?

Take an inventory of your year.  Make a list of what you consider to have been your major accomplishments of 2012.  What fell into place for you,  what ambitious plans did you initiate and carry out? How did you reward yourself for your achievements? How did those achievements impact how you feel about yourself and your abilities? Look for patterns of behavior that put you on the path to either success or frustration.  Find the lessons and make note of what you must and must not do again in the future.

Reposition

Once you’ve taken stock and accounted for successes and missteps,  you will be ready to incorporate the wisdom into repositioning yourself,  or otherwise refining and polishing your image.  While you’re at it,  take an objective look at your website,  your LinkedIn page and other social media and  your printed marketing collaterals.  Recite your standard elevator pitch out loud and listen to how it sounds.  If someone walked up to you and gave you that spiel,  what would be your reaction?

Do your marketing materials and elevator pitch address the concerns of your clients and prospects as we approach 2013 and the Fiscal Cliff? Are you relevant? Maybe it’s time to tweak and present you and your skills in a way that will remind clients that your value proposition remains valuable.

Reconnect

The Holidays can be the perfect time to arrange to cross paths with prospects and former clients with whom you would like to forge or renew relationships and get them thinking about ways to do business with you.   If you read last week’s post,  you may have already sent greeting cards to former clients.  There may still be time to make the rounds of selected late season parties,  where you might get an introduction to a prospect you’ve been trying to meet since first quarter.  Check the websites of the more selective networking organizations and see where you might roll the dice.  Even if you don’t meet The One,  you might meet Another One,  who might be less elusive and ultimately more valuable to your bottom line.

Relax

By all means,  unwind and enjoy yourself.  Spend quality time with family and friends,  but earmark some time to be alone as well.  Dolce far niente,  as the Italians say—it’s nice to do nothing,  as least once in a while and we owe that to ourselves.  Catch up on sleep,  schedule a massage or facial if you’ve got the budget.  Downtime is important as a way to reduce stress and recharge our batteries,  which has a positive effect on our resilience and creativity.  When January rolls around,  you will be ready to take it on in style.

Thanks for reading,

Kim

Marketing , , 2 Comments

Holiday Greetings!

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Freelancers know that our business is only as good as our relationships and our relationships are our responsibility to cultivate and nurture.  One of the ways we do this is by sending December holiday cards to clients.  Show appreciation for the business you’ve been awarded and make this small,  yet important,  gesture that is a good relationship building block. 

Sending physical holiday cards,  as opposed to email greetings or e-cards,  demonstrates that you are a gracious and thoughtful professional,  willing to take the time to properly acknowledge and thank your clients at this special time of year.   When you send to your clients a genuine holiday card,   it shows that you understand and respect business etiquette.  Sending  holiday greeting cards is good for business relationships and for business.

 Holiday cards are an inexpensive and effective marketing tool.  They don’t take much time to write.  Your clients will be flattered to receive one from you.  Many business owners and Freelance consultants do not send December greetings to their clients any more  (or if ever),  so when you make the effort to send the card,  you communicate an important statement about who you are and your approach to doing business.  Sending holiday cards helps to distinguish you from competitors,  guards against your being viewed as just another vendor,  enhances your brand and shows clients that you value them.

When shopping for your card,  take special care to select one that will represent you well and will leave the desired impression with the client.  Because it is possible that you’ll have on your list clients who are neither Christian nor particularly religious,  avoid cards that depict a nativity scene or other Christian imagery,  or cards that contain a religious message. 

Scenes of winter or Poinsettias (for example),  with  “Seasons greetings”  or  “Happy holidays” printed within is the business-appropriate choice.  Spend the money to buy a good quality (but not lavish) card.  A small and tasteful card will be perfect.  Expect to pay about $20.00 for a box of 8 cards.

Next,  consider who should receive a card.  Along with current clients,  you’ll also include any clients you’ve worked with during the year.   I send cards to all clients I’ve worked with over the past five years,  as a way to keep my name in front them and remind them that they have not dropped off of my  radar screen.  Later in the new year,  when they’re thinking of whom to call for a project,  I want my name at top-of-mind,  if possible.  BTW,  it’s good to verify that clients from the past are still in the same posts,  so a visit to the organization website or call to the main switchboard will save you from wasting a card.

If you are a very organized Freelancer and had the foresight to order holiday cards printed with your name and business name back in November  (unlike your Diarist),  personally sign your name to the card anyway and write a brief handwritten message.  Along those lines,  do not use pre-printed address labels.  Keep the personal touch going by handwriting the client’s name and address on the envelope.  Verify job titles and always use honorific titles  (Mr. or Ms.).

Lastly,  get your cards stamped (no religious stamps,  use holiday stamps if available)  and to the post office no later than December 15.

‘Tis the season,

Kim

Administrative , , , , , 5 Comments

The Freelancer’s Dilemma : W2 or 1099

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So we continue with the get-your-house-in-order year-end organization.  This week,  you can think about your tax status in an even more elemental way:  are you a Freelance consultant who is on a very long assignment,  or are you an employee?  The federal government continues its focus on the proper classification of employees and contract workers.  Businesses are cutting back on hiring workers who must be paid benefits and the feds are snooping around.  Improper classification of workers violates the Fair Labor Standards Act (FLSA).

As you know,   Freelance consultants are not covered by federal or state wage or hour laws;  are ineligible for employee benefits such as health insurance and retirement plans; and cannot form or join a union.   Our employers are not required to make any withholding whatsoever and so we do not receive unemployment benefits and no one pays into our social security or medicare accounts,  no one deducts federal and state taxes for us.

The good thing is that we have 100%  of our money in hand when the check arrives and that has probably saved you more than once!  The downside is that we are left with a tax bill,  including self-employment  tax,  every quarter.

Businesses may be totally flummoxed about how to classify workers.  For example,  the Internal Revenue Service may classify a worker as an employee and determine that he/she is entitled to participate in the company retirement plan under the Employee Retirement Income Security Act (ERISA).  State government officials may classify that same worker as an independent contractor when determining whether or not that worker is entitled to unemployment benefits.

There are different tests for distinguishing independent contractors from employees.  A big factor is whether the worker or the company controls the manner in which the work is performed.  The more the Freelancer,  as opposed to the employer/client,  controls where,  when and how the work is performed,  the more likely that an independent contractor arrangement exists.   To further clarify,  individuals who are free to provide services to other clients and are able to sub-contract their work are more likely to be classified as independent contractors.

Other considerations include:

  • Whether the worker uses his/her own supplies and equipment to perform the work wherever it is convenient  (like on a computer in a library,  or a cell phone in a coffee shop).
  • Whether the worker can reject an assignment without  fearing termination of the work arrangement.
  • Whether the worker pays his/her own business and travel expenses.

The above conditions would incline that worker toward classification as an independent contractor.  Whether or not a worker has independent contractor or employee status has huge economic implications for both the employer/client and the W2/1099 worker.  Unfortunately,  in today’s job market,  workers are in a vulnerable position,  regardless of the government’s heightened scrutiny of possible mis-classification.

Very few Freelancers who ought to be classified as employees will turn in an employer who is offering steady work,  particularly if the hourly rate is considered acceptable.   We will put up with a few things to get a reliable check.  If you suspect that you are really a W2 who is treated as a 1099 by a business that wants  (or maybe really needs)  to save money,  look at the big picture.

Are you happy working there?  Is the money good?  Is the work good for your CV and the name good for your client list? Are you able to squeeze in work for other clients  (with or without that employer’s knowledge)?

Without exactly letting on that you know the employer is breaking the law,  you might be able to bargain for a few perks,  such as less face time in the office,  or perhaps a shot at working on better projects.  It’s a touchy situation and you don’t want to kill the golden goose.  I’d probably speak with an employment attorney to figure out a strategy.  You don’t want to lose either a regular revenue stream or a reference.  Chalk it up to what one does to remain in business.

Thanks for reading,

Kim

Administrative , , , 2 Comments

2012 Year End Tax Planning

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OK folks,  it’s time to think about what  to do before December 31,  so that you can reduce your tax burden.  If you retain an accountant or a business and tax attorney,  make an appointment to discuss year-end tax planning.  You will have a few of the following issues in mind:

Full deduction vs. Depreciation

Depending on how much money you’re on track to make this year and your ability to reasonably project earnings for next year,  you will either make purchases before December 31,  or wait until after January 1.   Further,  you will either take the full up-front deduction on business equipment,  or depreciate business-related purchases and spread the deductions out over several years,  to soften the tax bite on future earnings.

If you did well financially this year,  you’ll probably take the full deduction on business equipment such as your new computer,  printer,  scanner and/or smart phone this year,  to add more expenses to charge off against gross earnings.   But if subsequent years appear more financially rosy,  then use the depreciation method and spread those deductions forward.

Remember all selling expenses

With the passage of time,  it is easy to allow a few expenses associated with generating revenue to get lost in the shuffle.  Did you attend a professional development conference this year,  or take a course?  Did you buy business books?  Pay to attend networking meetings?  Pay dues to join the chamber of commerce or Rotary club? 

You may deduct these expenses.  Proper labeling and immediate filing of receipts and posting of expenses into QuickBooks,  Excel or even an old-school ledger ensures that you will take all legal deductions in the quarter where they should be documented.  Make it easy for yourself to take advantage of every allowable deduction.  If you have not been on top of this stuff,  start looking for receipts now,  before you get tied up with Chanukkah and Christmas,  and record the transactions,  so you’ll be all set for the January 15 quarterly tax filing.

Retirement plan contribution

Especially if you had a good year,  make the maximum retirement fund contribution.  If you are 50+ years old,  or will celebrate your fiftieth birthday on or before December 31,   you are eligible to make the catch-up contribution of $5, 500.00 maximum.  If revenues generated were not stellar,  try to make the largest retirement fund contribution you can manage  (if you can manage). 

It’s not always possible to set money aside for retirement,  unfortunately.  Making money is often difficult,  slow paying clients ruin cash flow and living  expenses are rising.  It’s been reported that 40%  of the self-employed have no retirement funds available.   Many drew down to stay afloat while re-engineering  professionally,  following a lay-off.  Others used retirement money to launch their business enterprise.   As a result,  the retirement fund deduction is much underutilized,  according to the IRS.

Home office expenses

If your fancy smart phone or land line with bells and whistles are dedicated to business,  then you may fully deduct their purchase and monthly billing charges.  Ditto for your office supplies,  internet connection and other office expenses.  You may also deduct a portion of your heating and electricity expenses  (based on the square footage of your office space as a percentage of your living space).

Create boundaries

The fail-safe way to keep track of business expenses is to open up a separate business checking account and maintain a business-only credit card and thus separate your business and personal spending.  Automatically,  there will be a record of all business expenses.  Most business credit cards will provide a year-end summary of charges,  to help you along  (AmEx does this regardless).

Before the year ends,  get your arms around your business expenses,   allowable deductions and the impact on your tax burden.  As millionaires know,  it’s not just what you make,  but also what you keep.

Thanks for reading,

Kim

Marketing , , 6 Comments

Guerilla Market Guru

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We’ve made it through a very competitive presidential election and we witnessed quite a battle.  The President remains in office because he was the more strategic.  He ran the better campaign,  he had the better ground game,  his get out the vote initiative was superb.  In sum,  President Obama had the better marketing plan.

He didn’t execute as ruthlessly as political strategist Dorie Clark recommends (see the October 30 post),  but he took full advantage of a few key situations,   most notably the well-timed  (for him, anyway)  Hurricane Sandy.  He hopped onto Air Force One,  landed in hard-hit New Jersey (what an entrance!),  reassured numerous devastated and frightened residents and in the process,  managed to have sworn nemesis Governor Chris Christie eating out of his hand,  all with the TV cameras rolling.  New York City mayor Michael Bloomberg,  officially an Independent but really a Republican,  went so far as to endorse the President for re-election.  Talk about fortune smiling.

So the 2012 presidential campaign provides a blueprint for Freelance consultants who are trying to survive and thrive as the economic assault on the middle and working classes continues.  The only possible way to keep your business alive is to survey your unique set of circumstances and leverage all resources to strengthen your position.

One major factor in competing strong in a weak economy is remaining visible.  Longer lapses between assignments,  especially when combined with the insult of smaller projects and fewer billable hours,  are a dynamic that slashes your available money.  Yet one must do all that is possible to preserve the marketing budget,  for that is when we need it more than ever.

When marketing on a limited budget,  be very objective.  Review your marketing strategy and make sure that activities align with current conditions in your business environment.  Contact media outlets that have been just beyond your reach and inquire as to what your budget will support now.  I’m willing to bet that there are deals to be had.  Also,  advertisers can expect to receive some editorial space,  so when you purchase an ad,  expect at some point to be asked to give quotes or even write an article that will showcase your expertise.

Evaluate your core message and verify that it addresses what clients are most interested in when they consider hiring for your service category.  Be aware that client budgets and priorities may have shifted along with the economy.  Examine your website and print collaterals.  Sometimes a client will check you out before calling,  so make sure to communicate a message that will optimize every potential opportunity.

To both improve your reach and save on your marketing budget,   review your social media strategy.  Perhaps this is the time to explore Google + and figure out how it can help you engage clients and prospects,  or at least keep you visible in the best ways.  Google + invites client interaction,  making your marketing a two-way conversation that can enhance your brand by showcasing you as a trusted adviser and authority.

On the traditional media front,  write and distribute press releases to announce your participation in any business-related public event.  Oh yes,  and do make sure that you schedule yourself to speak at conferences whenever possible and conduct workshops and take on teaching opportunities.  Call your local adult learning center,  community college and neighborhood business association to figure out how to get on teaching and speaking calendars.

It is also very important to maintain good relations with current,  or previous clients.  Just last week,  as I finished up with a client meeting,  one of the principals asked if I’d mind if her daughter called me.  The daughter is a dancer with a mid-sized company that needs marketing strategy and PR work.  That meeting itself was the result of up-selling services that expanded billable hours with the client.

Superior service and excellent relationships matter more than ever in a highly competitive business environment.  Christmas and Chanukkah are coming.  Plan to send holiday cards to all clients you’ve worked with in the past five years.

Devise marketing moves to position your consultancy to win as much available business as possible.  Be a fierce competitor not by spending more,  but by being shrewd and recognizing opportunities.   Make every marketing move strategic and create good luck.  Only the strong and the lucky will survive and thrive.

Happy Thanksgiving,

Kim

Sales , , , Leave a comment

That’s My Story and I’m Sticking To It

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When your objective is to bring someone around to your way of thinking,  tell that person a story.   Effective storytelling allows us to communicate with listeners in both an emotional and intellectual way.   As a result,  barriers between people break down as they are brought together in a shared experience that strengthens relationships.  A well-crafted and delivered story allows speaker and listener to understand and therefore trust one another.

Stories are used to build confidence in a person or agenda,  motivate listeners to think a certain way and perhaps do certain things.  Storytelling is the original call to action.  Those of us in business are advised to create good stories,  narratives that can be used to persuade others of our integrity and expertise.

When putting together your story,  think first of its ending.  You can choose where in the arc of your professional development  to begin your story,  but the ending is the most important component.  You must present a strong and memorable take-away anecdote,  lesson,  or triumph that listeners will remember,  believe and act upon.

It is advisable to create a  “portfolio”  of business-themed stories.  Your most basic story is your elevator pitch,  the story that describes what you do,  the goal you help clients achieve and the types of clients you work with.  Another,  more detailed,  story will tell listeners about you and the development of your business.   Other stories in your portfolio illustrate your expertise and professionalism.

The story of how you built your company will tend toward the inspirational.  That story might describe what motivated you to go into business and give a brief behind-the-scenes look at an obstacle you had to overcome on your way to becoming successful.  Don’t be afraid to reveal mistakes made along the way.  Let your listener experience your humanity and authenticity.

To demonstrate your expertise,   tell stories that show how you helped a client make money,  save money,  avoid disaster,  or discover a niche market.  Both types of stories build your credibility and are useful relationship builders and sales tools.

When developing and presenting a story,  be clear about its purpose in your communication strategy.   Know what you would like listeners to believe,  understand or do after you’ve told the tale.  For example,  if you want to convince a prospective client that you offer superior service,   perhaps write a story about how you worked through a holiday weekend,  so that a critical deadline would be met.

When you tell that story,  describe first why the goal of excellent service had to be met,  its importance to the client.  Then spell out the obstacles you overcame to achieve it.   Add a little drama to your story to encourage listeners to identify with the client and picture themselves in his/her shoes.   Remember to keep your story uncomplicated and easy to follow.

When writing your stories,  be mindful that there will be a beginning,  middle and end.  A well-designed story also has a person who must do or confront something;  a place,  where the action will occur; a time frame,  so that listeners can distinguish between “then” and “now”; and a hint of its direction,  to allow listeners to anticipate the outcome.

Be sure to identify and describe the turning point in your story,  the decision you made that made it possible  to achieve the goal.  Take special care not to confuse the turning point with the end of the story,  however.  The turning point triggers the successful outcome that makes the happy ending possible.  The end of the story,  the culmination,  describes how that goal was achieved.  Describing how the goal was achieved paints the picture of the take-away you want to leave listeners with,  namely that you provide superior service every time,  especially when the client needs it most.

Storytelling is a powerful business tool,  one that enriches business conversations and presentations as we communicate with listeners in both an emotional and intellectual fashion.  Stories help us to explain new ideas and concepts,  win support for projects and convince prospects to become clients.  Learn the art of building and relating stories and make clients know why they want to do business with you.

Thanks for reading my story!

Kim

Business Strategy , , , Leave a comment

You Are the President

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Today is Election Day in the US and an 18 month long  (or thereabouts)  presidential campaign will finally draw to a close.  I take voting seriously and view it as both a right and a responsibility.  It is only in the past 50 years or so that true voting rights were extended to the general population.  For 150 years,  only land-owning males of Euro-American descent who were literate in English were eligible to vote.   As a result,  the vast majority of citizens have been unable to vote for most of our history.  Vestiges of restrictive voting laws linger today, unfortunately.  For example,  why isn’t Election Day a paid holiday for all workers,  full-time,  part-time and contract? 

In our last episode,  I left you with a cliff-hanger and promised to take a look at what is most likely the most important part of your Personal Presidential Campaign.  Dear readers,  that would be relationships.  Pay particular attention to whom you know and who knows you.  Business is political and politics is all about relationships.  Identify and affiliate with organizations that will bring you into contact with people you need to know.  That could mean the chamber of commerce,  house of worship,  nonprofit organization board,  or a fitness center.   Figure out where the right people congregate and then evaluate where you will have the best chance of access and acceptance.

Something else you can do: search your VIP’s name and you might discover that he/she will speak at a local conference.  Be there if it’s open to the public and within your budget.  If you’re able to attend,  take notes on the presentation so that you can ask a good question during Q & A.  Your intelligent question will pave the way for a post-talk conversation that will set the stage for relationship-building.

Along the way,  you must also get a handle on what you can offer the VIPs you want to bring into your camp.  Objectively evaluate what it is about you that higher-ups will appreciate.  Maybe you have a skill that nonprofit boards covet  (beside check-writing ability):

  • Are you a silver-tongued salesperson,  who might therefore be an adept fundraiser for the VIP’s favorite charity?
  • Do you possess the  excellent organizational skills that would make you a key player on an event committee?
  • Can you build a website or put together an e-newsletter?

Or maybe you know an influential person or two and you can connect your VIP to someone he/she would like to know?  Whatever it is that you can do,  discern your value-added and work it,  even if it’s helping out with crossword puzzles.

Social media can also play a role in your relationship-building strategy.  If your VIP has a Twitter feed,  definitely sign up to follow and eventually join the tweets and re-tweets.   If LinkedIn is your thing,  resist the temptation to right away ask your VIP to join your network.  Be more subtle and try to find out if you have any connections or groups in common.   If so,  tap your common connections to obtain some useful background info.   Follow group discussions to see if your VIP participates.  If you can intelligently add to discussions in the common groups then do so,  as your VIP could be following and it could be an opportunity to look good.  You can do the same in the general Answer forum.

In closing,  please know that I do not advise you to coldly manipulate those people whom you feel will be useful to your ambitions.  To the contrary.  Relationships must be a two-way street and win-win is the goal.  Take the time to build authentic relationships and provide value to others as you campaign to be the President of your professional life.

Thanks for reading. Cast your vote.

Kim

Business Strategy , , , Leave a comment

Campaign for President

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I am rather a political junkie and pride myself on keeping up with important local,  national and sometimes international elections.  On Tuesday November 6,  those of us in the US will cast our votes for President in the culmination of a contentious and mind-bogglingly expensive race for the White House.  There are also a few important Senate races to resolve as well.

Dorie Clark  (no relation),  corporate strategy consultant and adviser to the gubernatorial campaign of MA Governor Deval Patrick and the presidential campaign of Howard Dean,  says that business owners and executives should pluck a few lessons from electoral politics to better position themselves for business and career success.

Clark urges those of us in leadership positions  (and every Freelancer is a leader)  to  observe and follow the behavior of the best politicians,  from Lyndon Johnson to Ronald Reagan: set clear and reasonable goals;  identify and cultivate supporters;  build and exercise influence;  and execute relentlessly to achieve your ambitions.  You may not be running for public office,  but it’s a smart idea nonetheless to manage your career as if you were campaigning for president.

First,  choose a professional goal.  If you find it advisable to alter your goal down the road,  that’s OK;  you just need to propel yourself forward and start your campaign.  Those in business most likely want  to earn more money and that may mean acquiring more clients who dole out lucrative contracts.   So maybe your prime objective will be to sign three Fortune 100 clients,  to support the goal of accessing higher paying and more prestigious projects that enhance your brand and your bottom line.

However,  you may eventually decide that your organization is not ready to pursue Fortune 100 clients.  Instead,  you shift your sights to Fortune 1000 clients,  because that is more realistic for you.  The point is,  you’ll position yourself to sign clients who can offer bigger budget projects and maintain your goal of enhancing both your reputation and your revenues.

Next,  set important milestones for your campaign.  A presidential candidate is advised to win the Iowa caucus and New Hampshire primary because performance there impacts future campaign success.  Candidates who succeed in those races vastly improve their chance of reaching the White House.  What interim projects can you pursue and win,  projects that when on your CV will persuade bigger clients to  trust your expertise and feel comfortable enough to hire you?

While you work on getting yourself into some stepping stone projects,  take a look at your skill set,  your personal and professional network and your marketing materials.  Identify and resolve any gaps and need for upgrades.  Observe those who have arrived at the place you want to be and check out their skills,  education level,  marketing materials,  relationships,  professional organizations,  etc.  Fill in as many missing elements as possible.

Make an action plan and hold yourself accountable by attaching dates.  Maybe you should become a better public speaker or obtain a certain professional credential? Maybe there are books, blogs or magazines you should read to stay current in your business (or that of your target clients)?  Find out when and where the course will be offered and its cost.  Enter registration dates into your calendar.  Budget the money.  Visit the library or book store.

Next week,  we’ll take a look at what may be the most important component of your presidential campaign.

Thanks for reading,

Kim

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Corporation Subchapter S–Should Your Business Be an S Corp?

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You may operate your business as a Sole Proprietor,  like 70%  of US businesses do,  or maybe as an LLC.  However,  if business should become fabulous and you begin to rake in some serious cash,  then it could make sense to incorporate,  as a method to lower your taxes and protect profits.

You may be implementing a growth strategy that requires you to take on additional investors,  or maybe implementing your exit strategy,  with a plan to sell your business,  perhaps to employees through an Employee Stock Option Plan  (ESOP).  Either scenario may prompt your accountant or business attorney to recommend that you establish a separate legal entity for your venture and the preferred strategy could be to incorporate.

What does that mean in practical terms?  For a Freelance consultant or small business owner,  incorporating usually means setting up an S Corporation.  Last week’s post discussed Limited Liability Companies  (LLCs)  and there are similarities between the S Corporation and LLC.

The first similarity is that both LLC and S Corporation provide owners with a degree of protection from lawsuits and creditors.  However if negligence is involved,  the  “corporate veil”  will be pierced and the owner(s) will be liable for any damages.

Second,  there are certain similarities in how taxes are handled.  As with the LLC,  S Corporations  (unlike the more common C Corps)  allow a  “pass through”  of business profits or losses to the owner’s  (i.e., S Corp shareholders)  personal tax form 1040 in accordance with the share of business ownership.  There is no separate  (double)  taxation,  as occurs with C  Corporationss.  Both S Corp and LLC owners can deduct pre-tax business expenses such as advertising,  professional services,  travel, etc.  S Corporation owners will file form 1040 schedule E and form 1120S in addition to your usual tax forms.

Yet,  there are a couple of differences that impact the treatment of taxes.  Unlike the LLC and like the C Corporation,  S Corporation owners pay themselves a salary  (that must be deemed reasonable based on industry standards and business revenue)  and they receive dividends  (distributions)  from any additional profits earned.  Dividends are taxed at a lower rate than the salary pay-out and that is one reason that S Corporation tax rates may be lower.

Another difference involves self-employment taxes.  Says Diane Kennedy,  Phoenix, AZ based CPA and author of  “Loopholes of the Rich: How the Rich Legally Make More Money and Pay Less Tax”  (2001),  “If you have a Subchapter S Corporation and you put yourself on the payroll as a W-2 employee,  withholding taxes from each paycheck as you take money out of the corporation,  you can often save a significant amount of money in self-employment taxes”.  Sole proprietors and LLC owners must pay self-employment taxes.

Owners may sell,  transfer,  or gift their shares,  something that cannot be done by LLC owners.  There cannot be more than 100 S Corp shareholder/owners,  but family members who own shares are treated as one shareholder when counting.  Corporations,  regardless of the form,  continue on in perpetuity unless formally dissolved.  Death does not automatically dissolve a corporation,  while LLCs terminate if one owner retires,  resigns,  dies or goes bankrupt, but can be reformed if desired.

On the downside,  S Corporations have more stringent guidelines than do LLCs.  Owners must be US citizens or reside in the US.  There can be only one class of stock and depending on the state in which you’ve incorporated,  there may be additional state taxes.  Businesses that receive 25%  or more gross income from passive income  (think rental income)  and those that receive 95%  or more gross income from exports are prevented from forming an S Corporation.

S Corporation owners must also hold annual board of directors and shareholder meetings and take minutes.  Further,  the owners must strictly separate their personal and corporate bank accounts.  Failure to adhere to all requirements may result in forfeiture of S Corp status and the IRS is looking.

So which business organization strategy is best for your business?  Like I said in the beginning,  it depends on the circumstances.  Throughout the life of you and your consultancy,  it is wise to assess where you are presently and your plans for the future in terms of income,  growth,  exit strategy and taxes and institute the legal structure that will enhance your position.

Thanks for reading,

Kim