Category Archives: Administrative

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Open Enrollment: Freelancer’s Health Insurance

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Open enrollment for 2015 Affordable Care Act health insurance began on November 15.  Individuals who earn maximum $46, 680 and families of four (couples with two dependent children) that generate a maximum total income of $95, 400 are potentially eligible for a tax credit that will help defray the cost of insurance premiums. In tax year 2015,  the penalty for not carrying insurance will rise from $95 to $325,  or 2% of household income,  whichever is greater.

Business entities of 50 or fewer employees and located in Delaware,  Illinois,  Missouri,  New Jersey or Ohio can set up a Small Business Health Options Program (SHOP) account by completing an application that determines eligibility and if accepted,  investigate plans and prices and contract with an insurance company.  A 2014 University of Chicago study found that 2013 insurance prices offered through SHOP exchanges in 26 states were on average 7 % lower (about $220) than comparable insurance bought outside of the SHOP exchanges marketplace.

Freelancers and small business owners who did not buy health insurance in 2014 will need information to guide decision-making about the upcoming year.  The Freelancers Union  http://freelancersunion.org,  a New York City-based nonprofit organization that advocates for the interests of self-employed workers,   plans to help its 233,000 members purchase medical and/or dental insurance in all 50 states.

Freelance Union members also have access to retirement plans and disability,  liability and life insurance.  Additionally,  the Union operates two health and wellness centers in New York City,  where members can obtain primary care services at no charge and also participate in classes such as tai chi and yoga.  Membership in the Freelancers Union is free.

I went to the Union website and found that medical insurance is not offered in my state,  but dental coverage is available for $60.77 /month  ($112.32 /married couple and $164.89 /family).  The twice-yearly cleanings are 100% covered as are annual x-rays.  Services such as crowns,  fillings and anesthesia are covered at 80% after a $50 deductible and root canals,  endodontic and periodontal services are covered only after a 12 month waiting period and then at 50 % after the $50 deductible.  The yearly maximum benefit is $1250.

An individual pays about $730 for the year.  I might spend that amount in a year paying out-of-pocket for two cleanings with bi-annual x-rays averaged in.  My gums are not great and I must very soon see a periodontist.  Heaven knows what he will charge but the visits will not be covered,  since only two are allowed in 12 months.  Periodontal work would only be half covered and the maximum annual benefit is only $1250 for a premium that costs $730/year.  In sum,  health insurance is all too often not an advantage,  unfortunately.  Maybe the medical plans are better?  An individual Bronze level plan in New York City will cost $393/month in 2015.

Still,  it appears that Freelancers can benefit in other ways from Union membership (I am not a member).  There are plans over the next five years to open 15 primary care clinics across the country,  including Los Angeles and Austin, TX.  The clinics will not charge co-pays for office visits and will be open to all who purchase health insurance through the Freelancers Union.  There are numerous professional benefits as well.  Maybe I will join before too long.

More good information on health insurance prices is available at the Consumer Reports Health Law Helper,  which walks you through questions to help you understand your options for buying health plans,  with links to marketplace sites   http://healthlawhelper.org.  The American Association of Retired People AARP sponsors the Health Law Answers site,  which provides information for health insurance seekers of any age  http://healthlawanswers.aarp.org/en.  The Kaiser Family Foundation provides the Insurance Marketplace Calculator,  which helps you estimate the cost of health insurance based on your location,  age and income,  along with pricing for various level plans  http://kff.org/interactive/subsidy-calculator/.

Thanks for reading,

Kim

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Year-End Tax Planning: Freelancer Options

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It’s never too early to start a retirement plan and Freelance consultants are encouraged to set aside money whenever possible.  Be advised that contributions to a self-funded retirement plan are guided by your net earnings from self-employment.  If you net $80,000 this year,  then you may contribute 20%  of that amount,  or $16,000,  to a SEP IRA or Solo 401K plan.  If you are age 50 +,  a  “catch-up”  contribution of maximum $5,500  (in 2014)  can raise your total allowed retirement fund contribution  (and tax deduction)  to $21, 500.  The maximum amount that one can contribute in tax year 2014 is $52,000 and $57,500 for those age 50 +.  However,  if you are a high earner and you consult with a savvy tax specialist,  it may be possible to divert lots more tax-deductible dollars to a Solo 401K than is allowed with a SEP IRA.

 

SIMPLE IRA

The Savings Incentive Match Plan for Employees Individual Retirement Account is a type of traditional IRA that is tailored for small business owners and self-employed Freelance consultants.  As with a traditional IRA,  contributions are tax-deductible and savings held in the account are tax-deferred until retirement withdrawals are made  (age 59 1/2 the youngest and age 70 1/2 the oldest).  If you have employees,  they may contribute to the SIMPLE IRA themselves and you the employer are required to make annual contributions as well,  whether or not the employee chooses to contribute.  You may make a 100%  match of the employee’s contribution,  but the maximum is 3% of your  net earnings,  or you may limit your employer contribution to 2%  of your  net earnings.

Any business entity that employs 100 or fewer workers may establish a SIMPLE IRA for employees and the owners,  too.  If you anticipate growth in your business that will likely cause you to hire even one full-time employee,  then consider a SIMPLE IRA,  because adding employees to the plan is relatively easy,  unlike other retirement plans.  The big downsides to SIMPLE IRA are 1).  the $12,000 annual contribution limit is considerably lower than that of SEP IRA and Solo 401K and 2). the  $2,5000  “catch-up contribution”  for Freelancers and business owners who are age 50 + is paltry by comparison as well.

However,  as a business owner or self-employed Freelance consultant,  you are your own employer and you may contribute to your SIMPLE IRA as both employer and employee.  You may add in up to 3% of net earnings,  in this example up to $2,400,  to contribute $14,4000 in 2014 and $2,500 extra if you are age 50 +.  Finally,  if you don’t make much money but you still want to set aside a little something for retirement,  if your net earnings from self-employment are $12,000 or less,  you may contribute 100% of the amount of your net earnings to your SIMPLE IRA.

ROTH 401K

A designated Roth Retirement Account is an individual retirement account that exists under the umbrella of your 401K,  solo or traditional  (if the 401K is set up to allow it).  Unlike SEP and Solo 401K,  Roth 401K contributions are made with after-tax income and when you are ready to access the account,  you will draw down tax-free money.   The 2014 maximum Roth 401K contribution is $5,500  ($6,500 for those age 50 +).

Your selection of a Roth designation within your 401K will depend upon your financial circumstances and you should meet with a reliable financial adviser in advance.  An individual or couple might choose a Roth when there are insufficient deductions to itemize at tax time,  thus negating the tax deduction benefit of the other retirement accounts .  The Roth,  paid with after-tax dollars,  gives account holders the benefit of tax-free income during retirement.   Wealthy Freelance consultants who are concerned about minimizing taxes during retirement may also benefit from the Roth.

You may have both a  (pre-tax)  Solo 401K and an  (after tax)  Roth 401K and it is permissible to use the salary-deferred portion of your Solo 401K to make a Roth 401K contribution.  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 made after age 59 1/2 are tax-free IF five years have passed since your first contribution to the Roth  (known as the 5 year rule).  One is NOT required to take distributions at least by age 70 1/2 and that feature may be useful for retirement cash flow planning.

Thanks for reading,

Kim

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Year-End Tax Planning: Funding Your Retirement

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Happy November.  The year will soon end and it is time to put together a tax planning strategy while there is still time to plan and execute.  There may be business equipment to purchase,  upgrades to make to your website or a seminar to attend,  but we self-employed workers must also fund our retirement.  Traditionally employed workers must also fund their retirement,  but they get help from their employers.  Freelancers are our own employers and we must step up and do all that we can to stash a few tax-deductible dollars in the cookie jar,  so that we can eat when we’re 75.

Whether you’ll squeeze a few thousand dollars out of modest billable hours or you’re looking for a place to roll the overflow from a lucrative year,  saving for retirement is a superb tax planning strategy.  It is also a superb life planning strategy.  Under no circumstances do we want to be old and broke in America.  If one is single,  that is a real possibility.  This is not Europe and the government will not give us any financial assistance in a time of need,  even though we have been tax paying citizens our entire lives.

The good news is that there are good retirement plan options available to Freelancers with a few thousand dollars to spare and the discipline to save.  Also,  the retirement money can be invested in stocks,  bonds,  mutual funds or even real estate.  You might get lucky and see your investment really grow.  Taxes will not be paid until it’s time to draw down on the account  (age 59 1/2 the youngest and age 70 1/2 the oldest).

SEP IRA

The Simplified Employee Pension Individual Retirement Account is modeled after the IRAs that every employer offers.  They are evidently the easiest type of retirement account to set up and there are minimal IRS reporting requirements involved.  Your job will be to find a brokerage firm that will set up the plan,  process your deposits,  maybe give you some investment advice and not kill you with administration fees.

Contributions are limited to 20% of your net earnings  (before the self-employment tax).  Contributions are capped at $52,000/year for tax year 2014 and the limit will increase every year or two,  to adjust for inflation.  A married couple who run a business together,  or are each Freelancers,  may open a joint account and save an annual maximum of $98,000 tax-deductible retirement dollars in 2014.  One cannot borrow against a SEP IRA.

SOLO 401K

The Individual 401K is modeled after a traditional 401K and once again,  the IRS filing requirements are uncomplicated and your job is to find a brokerage firm that will set up the plan,  process your deposits and not kill you with administration fees.  One may contribute money a little differently to a Solo 401K,  in that you may give yourself a  “salary deferral”  in a good year and stash up to 20% of your net earnings into the Solo 401K,  but the annual maximum contribution remains $52,000 in 2014  (the limit will rise modestly to adjust for inflation).  However,  Freelancers aged 50 +  can take advantage of the  $5,500 (max)  “catch-up contribution”  feature,  which allows those who are able to set aside more retirement dollars to do so and contribute up to $57,500/year in tax-deductible dollars.  Another big advantage of the Solo 401 K is that one may borrow against maximum one-half of the assets  (you must repay the loan with interest, to yourself).  Additionally,  a married couple who run a business together can start a Solo 401K retirement plan for the two and contribute up to $98,000 annually as of 2014 and $10,000 more with the catch-up contribution if both are age 50 +.

Next week,   we’ll look at the SIMPLE IRA and more retirement plan options.

Thanks for reading,

Kim

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“Sorry, I Really Don’t Have Time To Meet…”

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Although Summer officially ends on September 22 this year,  by custom the season ends on the day after Labor Day and this year we are back to work early on September 2.   If you were a smart and ambitious cookie,   you met with a good prospective client or two during Summer and you have plans in motion that will improve your chances of having a profitable 4th Quarter.  But maybe there are still a couple of people you’d like to connect with?

We all have someone on our prospect list whom we have been unable to reach.  This prospective client is often prestigious and holds the promise of green-lighting a big payday.  It is frustrating when we can’t get added to this person’s calendar.  Yet there are sometimes ways to capture lightning in a bottle and schedule that much-desired prospect meeting.  Good luck and timing will be involved,  but these will be aided by your ingenuity.

If you have not yet met your prospect,  then try to arrange a personal introduction.  Personal introductions are more effective than self-introductions and an introduction made by someone who is trusted by the prospect will be the most effective.  Tap into your LinkedIn connections and scroll through the connections of your connections.  It is a tedious process,  but you may discover a shared connection who could arrange to introduce you to your prospect.

Second,   conduct an internet search to find out what has been written about the prospect.   You may learn that this individual sits on a board where you have a friend who can facilitate an introduction.  You may learn that your prospect will present or moderate at a conference.  If that is the case,  then you should attend,  if possible.  Take notes at the presentation and ask a good question.   After the talk,  follow-up and speak with the prospect.  Your question will make your self-introduction easy to do and your good question will give you credibility.

Once you’ve met your prospect,  you will ask for a meeting.  Your prospect is a C Suite dweller who has many demands on his/her time.   In order to earn a sliver of that person’s time,   you must demonstrate that you will bring value,  that your meeting request is not all about you.   Find out what subjects may resonate with your prospect by searching for news about the prospect’s company;  for articles that your prospect may have authored;  for articles in which he/she was quoted;  and read postings on the company’s Facebook page and Twitter feed.  In addition,  visit the company website and find out if any interesting news has been posted.

Information gleaned from your research will be used to devise and present your value.   If you can teach your prospect something that he/she would like to know about,  then you are sharing  knowledge and insight and not just attempting to extract  a favor or a contract.  If you found that the prospect has authored an article or book,  or that he/she has been quoted,  then offer compliments and comment.  Because you will have made it known that there will be something in it for the prospect,  he/she will be more likely to agree to meet with you,  however briefly.

Offer to buy your prospect coffee or a quick breakfast and state what you’d like to discuss.   Additionally,  state that perhaps he/she would appreciate information on the subject that you’ve identified as potentially relevant.   Ask for 30 minutes of time.  If you learn that the prospect is on the way to another meeting,   offer a ride if you have a car and get another chance to not just talk,  but build a relationship.

24 hours after the meeting,  send written thanks.  An email may suffice,  but if the meeting was especially productive,  then send a short hand-written note on your company stationery or in a small note card that appears business-like.  Reconfirm any agreed-up actions and the time-table.  No matter the outcome of the meeting,   use the encounter to build the foundation for a lasting business relationship.

Thanks for reading and happy Labor Day weekend,

Kim

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Headline Hooks That Reel In Readers

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Whether you’ve written an email,  blog post,  newsletter,  white paper or press release,  your primary job is to persuade your intended readers to read what you’ve written.  Anyone worth writing for is buried in potential reading material.  Prioritizing and skimming are the norm.  Use yourself as an example.  When sorting through business or personal reading material,  what persuades you to stop and read?  The headline!

The headline is the hook that reels in readers.  Dull headlines do not grab attention.  They do not resonate with or intrigue your intended readers.  They do not communicate the value of the content that you’ve spent time to research and write.  Package and sell your content with a headline that makes your intended readers know that your content,  email or press release contains valuable information.

Headlines alert intended readers to subjects of interest.  Attention-grabbing headlines cause us to read even articles that we may conclude are a waste of time and which we may abandon,  but the subject line was like a siren song to our eyes.  Consider what would be most appealing,  or alarming,  to your intended readers and also descriptive of the content.  The perspective from which you must create your subject line / title is from the intended reader’s ultimate vetting question,  “What’s in it for me”?

The right headline gets you more attention,  more readers,  more buzz and more results.  Keep these headline categories in mind as you create the headline for your next important communication:

I.     How-to headline

Content that instructs and informs will benefit from a headline that motivates intended readers to take action

  • Cold Calling Dos and Don’ts
  • Five Tactics Guaranteed To Make You A Better Networker
  • Headline Hooks That Reel In Readers

II.    Challenge headline

Headlines that pose a question that intended readers are presumed to want answered,  because they likely grapple with the predicament that the content addresses

  • Is Your Business Model Still Relevant?
  • Will Producing Content Take Over Your Life?
  • Would You Like To Scoop Your Biggest Competitor’s Biggest Client?

III.  Targeted headline

Needless to say,  targeting is the basis of marketing and customer outreach and the more specific the headline is to the interests of the intended readers,  the greater the probability that the content will be read

  • Financial Management Tips for the Finance Phobic
  • PR Strategies for Cash-Strapped Start-Ups
  • Teaching Brings Cash and Credibility to Freelance Consultants

IV.   Warning headline 

“Shock and awe”  headlines put intended readers in a head lock and drag them in,  often times even if they would rather not.  Many newspapers and magazines specialize in such headlines

  • What Your Clients Won’t Tell You About Your Sales Pitch
  • Why Your Advertising Budget is Only Money Down the Drain
  • You Can’t Retire On Less Than $2 Million

V.      Story headline

Entice intended readers with a headline hook that communicates the theme of your compelling narrative

  • A Back Bay Grande Dame Celebrates Her 125th Birthday
  • The Client Wore Black
  • From Living in a Car to Living at the Taj: An Uncensored Story of the Entrepreneurial Life

Thanks for reading,

Kim

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Business Meeting Etiquette

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We are now on the other side of Memorial Day Weekend.  For many Freelance consultants,  the start of Summer means that work assignments wrap up and one wonders not only how to make good use of time,  but also how to create the conditions for a profitable September and fourth quarter.  Over the years,  I’ve found that a surprising number of decision-makers are also less busy in Summer and are therefore more amenable to scheduling a meeting with me.

On the other hand,  you may be very busy working with a client who must have a certain initiative up and running right after Labor Day.  You may be leading a team and thus responsible for achieving milestones,  disseminating information and maintaining team member enthusiasm and focus during steamy Summer days,  all of which will cause you to occasionally schedule meetings.

Regardless of your motive,  take steps to ensure that your meetings are perceived as worthwhile by those who attend.  Define a clear purpose and use that to create an agenda.  If you are a project leader,  you must identify questions that need answers,  confront current or potential roadblocks,  or possibly evaluate the need to make adjustments to the project scope or its time-table.  Next,  decide who should attend and begin the scheduling process.  Invite only the stakeholders: those who are carrying out the project,  the project sponsor and those who will be directly impacted by its outcomes.

To win a client meeting,  your agenda is to articulate the value of what you propose and convince the prospect to meet with you and ultimately,  offer you a contract.  A telephone call in which you propose a meeting is the simplest approach,  unless you can arrange to  “accidentally” encounter him/her at some location and  make an in-person request.

When bringing together your team,  a group email is the preferred method of contact and within it state the purpose of the meeting;  who will be asked to present;  any materials that team members should bring along;  and the expected length of the meeting.  In both scenarios,  offer two or three possible date/time options.  When a date has been chosen,  immediately send a confirmation email and reconfirm 24-48 hours before the meeting date,  with an agenda and relevant reports attached for the team meeting.

Set a good tone by opening your meeting no more than 5 minutes after the official start-time and by warmly greeting participants and thanking them for attending.  Remember at the start to properly introduce any guests or anyone who is new to the team,  stating proper names,  job titles and role on the project.  Have hard copies of the agenda and any meeting materials available for each attendee,  no matter that those were sent with the confirmation email.

Move through the agenda items and get resolution on each one,  even if that means follow-up is needed.  Encourage attendees to participate and enforce good manners.   Make certain that no one gets shouted down and that everyone who would like to contribute gets a respectful hearing.  Ask that only one person speak at a time and that those who would like to speak first raise their hand to be recognized by you,  the presider.   End the meeting on time,  unless participants agree to stay longer to complete unfinished items.

If the meeting is held in a restaurant,   you called the meeting and you pay the bill.  If you are a consulting project team leader,  confirm reimbursement procedures with your company contact in advance.  If you meet with a client,  arrive at the restaurant 15 minutes early and arrange a discreet payment protocol with the host,  so that an awkward moment is avoided.

Enlist a meeting note taker,  or take them yourself.   Within 72 hours after the meeting,  send to all participants a draft copy of the notes and invite corrections.  When corrections have been made,  send the final copy to all who attended and also to the project sponsor,   whether or not s/he attended.  If meeting with a client,  send a thank you letter that is hard copy or an email,   in which you document any agreements and action items.  Make sure that all meeting participants carry through with their follow-up commitments in a timely fashion.

Happy Summer and thanks for reading,

Kim

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Cash-Flow Woes and Antidotes

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Lucky you.  Your sales pitch to prospects is working and clients are stacked up like planes landing at O’Hare.  Receivables are numerous and the balance sheet rocks.  So how can it be that you almost didn’t make payroll  (again)?  How can you come up short on cash,  with all the business you’ve created?

Like so many business owners,  especially those who are new or who suddenly acquire a competitive advantage that creates a tidal wave of business,  you did not recognize the signs that a cash-flow crash was impending,  regardless of how much money was scheduled to flow into your coffers.  You placed your primary focus on creating business (which is vital),  but neglected to monitor the ebb and flow of revenues and expenses (which are vital).  Every business owner must keep an eye on the money ball and take corrective actions as needed,  if we want to keep the business alive and thriving because quite perversely,  as sales go up,  cash can go down.

Here is one example of how a cash-flow crash might happen.   As business expands,  staying on top of accounts receivable becomes more time-consuming.  Those in service businesses  (like website design or public relations) may find that clients,  oftentimes larger businesses whose names we crave for our client list,  may unilaterally decide to pay receivables in 60 days,  instead of 30 days.   Meanwhile,  you have payroll,  office rent,  phone bills,  auto insurance and numerous other operating expenses that are due somewhere between right now and 30 days.

Another cause of cash-flow crashes is improper pricing.  You may sell a ton of T-shirts but if the profit margin is too thin,  you’ll find that excellent sales volume as demonstrated by number of items sold does not overcome an inadequate mark-up.  Revenues generated will not cover expenses.  It will be necessary to either acquire the product less expensively,  or raise the price.

A growing business brings up still more issues that keep its owner awake at night: capital expenditures.  You will need to decide whether or not and when  (or not)  to upgrade office equipment,  open a new office or move to larger quarters,  or hire more workers to keep up with the growing number of customers.

Fail to invest in capacity and you leave money on the table,  plus dissatisfied customers who are likely to kill you on social media.  Get fooled by the romantic delusion of further growth,  invest in demand that never materializes and you are stuck with potentially crippling debt that can bankrupt the business.

That is quite the dilemma and only the best fortune-teller can give the right answer.  John Terry,  of Churchill Terry business advisers in Dallas, TX,  recommends that the business owner focus on one question only when evaluating the possibility of making large capital investments:  will it bring money in the door?  If not,  find a less expensive alternative or learn to make do without it.  Successful business owners learn to preserve and protect liquidity.  Here is an effective antidote:

  • Hire a savvy bookkeeper or accountant to function as the business controller ( full or part-time)
  • Each week,  collect the data on key financial indicators: accounts payable,  accounts receivable,  available cash and the quick ratio (cash + receivables / current liabilities + payables) to monitor that all-important liquidity
  • Each month,  collect the data on these indicators: accounts receivable turnover ratio (how long does it take to get paid?),  the operating cash-flow ratio (cash-flow from operations / current liabilities)  and the pre-tax net profit margin

It is imperative that you are able to pay obligations when they are due and for that you need cash in hand.  Analyze the above indicators weekly and monthly and learn what is really happening behind the scenes of your business.  Track the available cash trends over time.

Seasonal variations may become evident.   You may have to step up collections of receivables or approach certain clients about speeding up payments.  You may have to request more money up-front before taking on certain projects,  so money will come in faster.  You may need to trim expenses.  You may need to raise prices.  The decision of whether to invest in capital upgrades will become clearer.

There are software programs that will track important data and help business owners resolve problems and set priorities.  Accounts receivable,  cash,  inventory and liquidity can be monitored,  along with confirmation on whether the business is on target to meet budget and revenue goals.  For those businesses that get a lot of repeat business,  it is also possible to track the profitability margins of key clients.

Thanks for reading,

Kim

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Doing It Better: Operational Efficiency = Competitive Advantage

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Many of you may know that I teach business plan writing.  I will begin another session of my three-part  (total six hours)  workshop series  “Become Your Own Boss: Effective Business Plan Writing”  at Boston Center for Adult Education on Wednesdays February 5, 12 & 19 5:30 PM – 7:30 PM  http://bcae.org class ID # 10573.  

I recently upgraded the operations segment of the workshop because like too many business plan resource providers,  insufficient attention was paid to those issues.  For example,  the business plan template displayed on the Small Business Association website does not include an operations segment.  Operations is an important element of every business plan and business,   including those organizations that sell intangible services.  The inclusion of an operations segment to my business plan writing workshop is a quality control/operations upgrade that allows me to better  meet or exceed client expectations and gives me a competitive advantage.

What do we mean by operations?  Operations is the process by which the items we sell,  whether products or services,  tangible or intangible,  are obtained or produced and made available for sale.  The operations component of a business plan  (and operations departments)  accounts for a wide variety of responsibilities,  including distribution of the product or service to the marketplace  (sharing that responsibility with sales; operations oversees shipping and handling);  inventory management;  quality control;  maintenance of the place of business;  maintenance of business equipment;  workplace safety;  and risk management (sharing that responsibility with finance;  operations oversees aspects other than financial).   A business model includes elements of operations and marketing functions.

Recently,  I suggested to a client a way to use social media to create an operational efficiency that will result in a competitive advantage for her business.  Outreach made by her staff to targeted populations will soon become faster and the number of potentially successful contacts will increase,  as the time and cost of doing so will decrease.  The organization will more easily and inexpensively meet or exceed its clients’ expectations.  This new operational efficiency can be promoted to prospective clients in the talking points of a sales pitch and used as a means to bring in more business.

It is to a Freelance consultant’s advantage to learn how to create operational efficiencies and provide services of the greatest value faster and less expensively.  The time and money saved can be used to directly increase revenue and/or promote the business.  The operational efficiency that I created as I became more experienced and proficient in writing these weekly blog posts caused me to receive the paid opportunity of editing a colleague’s monthly newsletter.

Operations processes are different for every category of business,  so I cannot give specific recommendations of how to create efficiencies within your venture.   Overall,  be mindful of how you source  materials for products that you manufacture,  the wholesale costs of  items that you sell at retail,  or what you pay for supplies.  As your business grows,  look for ways to buy in volume so that you can minimize the cost of goods sold.  Look also for ways to cut production time of products or services that you create and always strive to provide a product or service that meets or exceeds customer expectations.

Thanks for reading,

Kim

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How to Delegate Successfully

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Christmas season notwithstanding,  I am busy this December and it feels so good! Catch my act on Wednesday December 4 when Dalya Massachi of  “Writing Wednesdays” and I talk about the benefits derived when nonprofit leaders write a business plan for their organization.  3:00 PM EST,  2:00 PM CST,  1:00 PM MST,  12:00 PM PST FREE! Register at http://writingtomakeadifference.com/writing-wednesdays

Readers in the Boston area may want to direct clients who are leaders at nonprofit organizations to get essential how-to information on business plan writing at my popular workshop “Become Your Own Boss: Effective Business Plan Writing”.  We’ll meet on three consecutive Wednesdays,  December 4, 11 & 18  5:30 PM – 7:30 PM at Boston Center for Adult Education 122 Arlington Street Boston MA 02116.  Register at http://bit.ly/1bP4uw9 or call 617.267.4430 class ID #10190.

Busy people must learn how to delegate if they intend to get things done.   Often,  there are not enough hours in the day to allow one person to do everything.  Productive people come to know that delegating is necessary if we are to move forward.  Productive people also know what can and should be delegated and how to accomplish that effectively.  What is outsourcing but delegating to a skilled professional tasks that we ourselves cannot complete,   from website design to public relations to cleaning our homes to preparing the food for a cocktail party?

It can be good for business profitability and healthy for organizational development to share the workload.  When time and energy are scarce,  or when we ourselves do not possess the required expertise,  it makes sense from both a time management and quality control standpoint to delegate that project and remove it from our plate and focus on items that only we can do.  If we hoard all the important responsibilities,  it can lead to real or perceived controlling behavior and that is counter-productive.  How to delegate successfully is an important skill and it begins with setting priorities.

Delegate responsibilities and not just tasks  Rather than merely assigning work to someone,  which limits the sense of ownership,  promote buy-in to the project at hand and loyalty to you and delegate the responsibility for leading an element of the project.  Allow that person to shine and display creativity,  analytical ability,  systems and operations talents,  trouble-shooting prowess and whatever else it takes to successfully manage that portion of the project.  You keep an eye on the big picture and do what is necessary to give that person the required resources and authority to do his/her part.

Accept that your way is not the only way   This could lead to some pleasant surprises and a better end result than you envisioned.  Everyone has a unique way of viewing and tackling a responsibility and you are advised to respect those different perspectives and approaches and trust the person to whom you’ve delegated.  Often, there is more than one road to the right solution.  Focus on achieving the desired outcome within the desired time frame.  Never micromanage.

Give clear instructions and sufficient information   Explain the big picture of the project and how the delegated element fits in.  Provide project specifications for what will be delegated and confirm that the person understands.  Make sure that the person has the authority to do what is necessary,  along with the budget, whatever staffing or other resources.  Be clear about milestones and the project due date.  Be available for help,  if necessary.

Teach yourself how to recognize when to delegate a project or elements thereof by first setting goals and objectives for your business,  backed by strategies and action plans that will ensure their realization.  Be candid about your strengths,  weaknesses and the time line.   Outsource/ delegate those responsibilities that you cannot do and focus on the end result.  Build a solid team that is ready to help you achieve your goals.

Thanks for reading,

Kim

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Year End Tax Planning 2013

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Lo and behold it is the first week of November and time for you to begin your year-end tax planning.  If you have an accountant or bookkeeper,  pick up the phone and make an appointment.   If you perform these functions yourself,  then take action now,  before Thanksgiving and Christmas ambush you.  Your mission is to minimize the tax bill payable in April 2014.

Let’s start with your place of business.  Do you work from home?  Then consider taking the home office deduction.

Next,  take a look at revenue generated in 2013.  If this was a lucrative year,  you are advised to push income into 2014,  especially if you expect next year to be less flush.   Study the matter before you invoice late 4th quarter projects.  Call clients to confirm that it will be OK to invoice in January.  Many are not on a January – December fiscal year,  so deferring payment until January may not be a problem.

If you expect no substantive change in revenue generated from 2013 to 2014,  consider investing in your business and creating additional tax write-offs this year,  rather than next.  Remember also  to make a contribution to your Solo 401K,  IRA or Roth retirement account.  Freelancers who have already celebrated their 50th birthday are eligible to make a maximum $22,000 tax-deferred catch-up contribution to their Solo 401K each year,  on money generated from self-employment only.

Further,  those who’ve had a good year and hold a Solo 401K may deposit up to 25% of their income into the account.  The tax-deductible and tax-deferred income limit is $49,000 for those under 50 years and $54,500 for those aged 50 years and older.  See my post https://freelancetheconsultantsdiary.wordpress.com/2010/11/09/the-self-employed-401k-plan/  for more information.

The Affordable Healthcare Act must now be factored into your year-end tax strategy.  Freelance soloprenuers who qualify for a health insurance subsidy (approximate income maximums of $45,000 for a single person household and $94,000 for a family of four)  need not worry about the subsidy being treated as taxable income.  However,  if your insurer refunds to you a portion of premiums paid,  that refund will be taxable and a 1099 will be sent.

Healthcare Act subsidies function to limit out-of-pocket  monthly insurance premium costs for those who generate revenues below a certain threshold.  The subsidy may be requested as follows:

1. Premium assistance credits, to reduce the monthly cost of health insurance

2. Up-front lump-sum payment

3. Tax credit on Form 1040, to reduce any taxes owed and perhaps create a refund

A statement that documents any subsidy will be issued and there will be an annual reconciliation.  If you underestimated your 2014 income,  you will be required to pay back a portion of your subsidy.  If 2014 income was overestimated,  then a refund will be somehow issued.  Visit the website of either your state or federal health insurance exchange to obtain information about how to estimate your 2014 income.

YOU will be responsible for monitoring your annual income and ensuring that you receive the correct subsidy.  Ben Tallman of Tallman Tax Service in Atlanta recommends that Freelancers monitor revenues and expenses at least quarterly and contact their health exchange and get themselves re-certified in the event of a large increase in income generated,  to reduce the chance of facing a subsidy claw-back at tax time.

Thanks for reading,

Kim