Employee Health Care Remains in Reach for Small Businesses

Health care was once almost a routine employee perk. But as costs have spiraled over the years, businesses of all sizes have cut back on their coverage or increased the employee’s contribution; some have eliminate the benefit altogether.

According to the U.S. Department of Health and Human Services (HHS), less than half of U.S. businesses with fewer than ten employees offer health insurance. Only 15 percent of companies with 25 to 100 workers do. But as competition for talented employees intensifies in the coming years, small businesses will have to find ways to lure good workers, and keep the ones they already have. And health coverage may well be an important bargaining chip.

One solution is to take advantage of high-deductible health insurance plan (HDHP) with a health savings account (HSA).

Less costly than conventional plans, HDHPs cover major health and medical expenses for those who can afford some up-front medical costs. Participants have the option to open and make pre-tax contributions to an HSA. Withdrawals are tax-free when spent on qualified medical expenses. Unspent HSA funds carry over, so the accounts have the potential to accumulate significant balances over time.

What’s more, employer contributions to a tax-favored HSA are exempt from payroll taxes, though the employee retains full control over the account. As a result, premiums can be 40 percent lower in a high-deductible HSA-qualified health insurance plan than those in a conventional co-pay plan

More than 13.5 million already utilize HSAs, which are largely unaffected by the Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Tax Credits Reconciliation Act. Expenses incurred for over-the-counter (OTC) medications without a prescription are no longer eligible for payment or reimbursement from an HAS, and the penalty on account withdrawals no use for qualified medical expenses has increased from 10 percent to 20 percent.

However, the Act will change rules for HDHPs in the coming years, and employers should monitor sites such as HHS’s HealthCare.gov for news and detailed information.

The National Association of Health Underwriters (www.nahu.org) has a helpful HSA section on its Website with basic information on how HSAs work, insurance firms offering these plans and assistance with finding an agent. Firms also have the option of setting up their own plans, and arranging for employee HSAs.

To learn more about human resources issues facing your small business, contact Raleigh SCORE, “Mentors to America’s Small Business.” We can be reached at 919-856-4739 or if you’d like to make an appointment to talk with our counselors, go to our website, http://raleigh.score.org and request a meeting.

Boost Your Business Knowledge with a Board of Advisors

Everyone needs good advice when starting and running a small business, even those who have done it before. And it has nothing to do with size. Executive managers of large companies routinely consult highly experienced and respected advisors for unbiased feedback before making key decisions or implementing major changes.

So why should you be different? You can get the same kind of experience and insights, without the high fees of professional consultants, simply by forming an advisory board for your small business.

Unlike a board of directors, an advisory board is an informal group that has no financial interest in your business. They are mentors, people who can provide knowledge, skill, and experience to help you be more competitive, think strategically, and advise about specific issues. They can provide feedback on ideas, assist with a problem, or simply offer thoughts about what’s happening in the world, and how it might affect your business.

Anyone can be an advisor, though it is best to have a diverse range of perspectives and backgrounds. It may be an individual who’s mentored you in other areas of your life, someone you’ve gotten to know through networking, or a person you already have a business relationship with, such as an attorney or accountant. The qualities you’re looking for include honesty, objectivity, specific knowledge outside your skill set, good reputation in his/her field and/or community, and well-connected with networks that can be leveraged to assist you.

Be careful about using family members as advisors. Their judgment may be clouded by their natural desire to see you succeed. And limit your advisory board to three to five members; too many, and you risk receiving conflicting advice.

Don’t assume your prospective advisory board candidates want to be “on call” when you need them. Invite them to participate in writing and explain how you hope to benefit from their knowledge. Be explicit as to whether any kind of honorarium is involved. Most advisors freely give their time, but you shouldn’t assume that’s the case.

You will also want advisors to sign a non-disclosure and/or non-competition agreement. This may sound excessive, but such documents are necessary to ensure the confidentiality of your discussions.

Consulting with advisors individually is fine on occasion, but the real benefits derive from meeting with them as a group. Arrange a mutually convenient time and location, and prepare an agenda that addresses priorities without being excessive. Be sure to include plenty of time for questions—both to and from your advisors. They may raise issues that hadn’t occurred to you, and pose scenarios that the group can collaborate on.

One person entrepreneurs can always count on for good advice is a Raleigh SCORE small business mentor. They can offer free, confidential advice on a wide range of industries and business issues, plus point you to training, information resources, and more. For more information, visit our local website at http://raleigh.score.org or call us at 919-856-4739.

An introduction to Preparing Federal Proposals

Bill Wagner, Raleigh SCORE Mentor, attended a presentation on Federal Proposals, led by Robbie Watlington, President of HLC Government Services. HLC provides training for companies to be able to do government business, including proposal development.

Robbie indicated the advantages of government contracting to a small business include: adding new customers, eliminating some of the challenges in the private sector to like reducing competition; steady to growing revenue; stable cash flow; and getting paid on time. But government contracting requires a huge commitment, and is not a short term fix.

Preparation for government contracting requires:

• Registering as a government vendor – sam.gov ( instructions on line; ask PTAC for help)
  • Position your business – target your market and buyer; utilize NAICS codes, and SIC codes; prepare capability statement.
  • Locate solicitations – FBO.gov lists all federal contracts above $100k; interested vendor list; check city, county, state websites
  • Implement correct strategies
  • Respond to solicitations effectively – read the solicitation carefully and answer the questions completely.

The most important messages Robbie shared were:

• Develop relationships with contracting officers, Small Business Liaisons and other resources. There are many resources available to help you: SBA; NCMBC; PTAC; SBTDC, OSBDBU
• Attend site visits and meet key government people and other vendors
• Get advance notice of upcoming contracts; from contracting officers, sources sought and pre-solicitation notices. Check websites of city, county, state governments.
• When you do not win a project, find out why you were not selected. Request a debrief
• Find out who wants your products/services. Which agencies are currently buying these.
• GSA schedules –find one that matches what you offer and get qualified as a vendor.
• Teaming – partner with other firms to pursue specific contracts. Your team will show up stronger in qualifications, experience
• Consider entering government contracting business as a subcontractor to a prime who is established as a government contractor. Learn the requirements and gain the experience at the same time.

If you’d like to talk more about government contracting, schedule a mentoring appointment with Raleigh SCORE by going to our website at http://raleigh.score.org.

Social Media Marketing for the Small Business – Webinar

Do you feel like you’re missing out on the opportunity to connect with your target market online because you don’t know anything about Social Media Marketing?

You are not alone!
Join us from 2-3PM on April 17th for our first  live webinar event and find out how to use Social Media platforms, such as Facebook, Twitter, Linkedin and Pinterest, in your small business or organization to engage with your target audience and stay “top of mind” with your existing customers.
If you are a new or existing business owner who is looking for ways to use social media, whether you want it done in-house or you’re in the process of selecting a firm, then this webinar is for you!

Get ready to discover ideas for how to put the latest tool, Social Media, on your side to reach your market more effectively. You can register by going to the Raleigh SCORE website, http://raleigh.score.org and clicking on Workshops and Events.

Speaker Biographies

Jeremy Sisk

Jeremy has a wide variety of corporate, higher education and small business experiences. As president of Xperience4Higher Inc., he’s responsible for local and national small businesses’ long-term success. His company was founded to bring results-oriented marketing to small businesses across the country. Jeremy understands that the right combination of people, execution and experience leads to serious results. Everyone at Xperience4Higher is held accountable to high standards ensuring each customer’s success. His staff enables small businesses to compete, and win, against their much larger competitors. Jeremy believes in his company, team and small business so much such that he guarantees each client’s success personally, and contractually.

Tamara Riddle

Tamara Riddle began her internet marketing career in 1998. During the past 15 years, she has operated 4 ecommerce stores, built over 200 websites and self-published more than half-a-dozen “How To” e-learning video courses and special reports designed to educate small business people on topics such as how to use WordPress to build websites, how to start and grow an email list, and how to use online marketplaces to self-publish and market downloadable digital products. Tamara joined SCORE as an Ambassador, counselor and presenter to share her online marketing knowledge with local small business people, to help them discover ways they can market their products and services on the internet and enhance their online presence by using social media and video marketing.

 

Markup vs. Margin. What is the Difference?

Markup vs Margin Differences
Is there a difference? Absolutely. More and more in today’s environment, these two terms are being used interchangeably to mean gross margin, but that misunderstanding may be the menace of the bottom line. Markup and profit are not the same! Also, the accounting for margin and mark-up are different! A clear understanding and application of the two within a pricing model can have a drastic impact on the bottom line. Terminology speaking, markup percentage is the percentage difference between the actual cost and the selling price, while gross margin percentage is the percentage difference between the selling price and the profit.

So, who rules when seeking effective ways to optimize profitability?. Many mistakenly believe that if a product or service is marked up, say 25%, the result will be a 25% gross margin on the income statement. However, a 25% markup rate produces a gross margin percentage of only 20%.

How to calculate markup percentage
By definition, the markup percentage calculation is cost X markup percentage, and then add that to the original unit cost to arrive at the sales price.

For example, if a product costs $100, the selling price with a 25% markup would be $125:

Gross Profit Margin = Sales Price – Unit Cost = $125 – $100 = $25.

Markup Percentage = Gross Profit Margin/Unit Cost = $25/$100 = 25%.

Sales Price = Cost X Markup Percentage + Cost = $100 X 25% + $100 = $125.

How to calculate gross margin percentage
Gross margin defined is Gross Profit/Sales Price. In this example, the gross margin is $25. This results in a 20% gross margin percentage:

Gross Margin Percentage = Gross Profit/Sales Price = $25/$125 = 20%.

Not quite the “margin percentage” we were looking for. So, how do we determine the selling price given a desired gross margin? It’s all in the inverse…of the gross margin formula, that is. By simply dividing the cost of the product or service by the inverse of the gross margin equation, you will arrive at the selling price needed to achieve the desired gross margin percentage.

For example, if a 25% gross margin percentage is desired, the selling price would be $133.33 and the markup rate would be 33.3%:

Sales Price = Unit Cost/(1 – Gross Margin Percentage) = $100/(1 – .25) = $133.33

Markup Percentage = (Sales Price – Unit Cost)/Unit Cost = ($133.33 – $100)/$100 = 33.3%

Reprinted from WikiCFO.com.

Should you need help sorting out the difference, Raleigh SCORE would enjoy talking with you. Call us at 919-856-4739 or go to our website, http//:raleigh.score.org and schedule an appointment to talk with our counselors.

Raleigh SCORE Helps Train Military Veterans on Entrepreneurship

Two mentors from Raleigh Chapter of SCORE recently participated in a training program designed to help military service members start or run their own business. This training was conducted at Seymour Johnson Air Force Base, with about 20 students. It will soon be offered at Ft. Bragg and Camp Lejeune as well.

Called “Boots to Business”, this program was developed by Syracuse University, in cooperation with the U.S. Small Business Administration. It was developed to introduce and train transitioning service members to business ownership. Key elements include: a 2-day Session entitled “Introduction to Business Ownership”, followed by an in depth 8 week online training course. Participation is voluntary, but initial estimates are that about 15% of transitioning service members will choose to participate in this program.

The program will offer training in the following:

• Core component parts required to develop a business or nonprofit organizational plan.
• The interrelationship/interdependency of marketing, accounting/finance, operations/production, and human resources required to formulate a business plan for either a “for profit” business or a nonprofit organization.
• Introductory concepts in entrepreneurship will be covered, such as: idea creation, why the business plan matters, accounting for start-ups, securing financing, marketing on a shoestring budget, and more
• Developing and writing an objective, cohesive, and integrated business or nonprofit plan.
• A number of analytical tools, methodologies, and frameworks useful in creating a great business plan.
• Presenting to prospective investors, lenders, or other financial backers of the proposed business or nonprofit organization.

If  you are interested in learning about starting a new business, or in growing your existing business, SCORE can help. Visit our website ( www.raleigh.score.org) for a list of workshops on many aspects of starting or growing your business, and consider signing up for  free, face to face mentoring sessions at one of our 7 locations in the Raleigh- Durham area.

Consider Your Options: Contractor or Employee?

A great option for small businesses that don’t have the resources or need for full-time employees, are independent contractors. In fact, your small business may be built entirely on serving as an independent contractor to other enterprises.

But before you hire one or more independents, make sure that relationship fits entirely within the IRS’s definition of contract labor, and that both you and your contractors understand the rights and responsibilities of everyone involved.

Deciding who can legitimately work as an independent contractor and who must be given employee status has become a difficult matter for small business owners. You can’t simply choose what’s best for you. The IRS and equivalent state agencies are strict on worker classification issues.

Remember that independent contractors work for themselves. They operate their own business. You are their client, not their employer. You don’t dictate their hours or control how they perform their work. In the eyes of most government agencies, a worker is an employee unless you can prove otherwise.

Contractors control when and where they work. Avoid setting a pattern of daily or weekly work hours dictated by your business. Also, independent contractors do not usually have a permanent or continuing relationship with the business and have time to pursue other clients. Plan to compensate contractors on a per-job basis, not weekly or monthly.

And since contractors are paid to complete a set task, they may bring in others to help, at their discretion and on their payroll. They also should use their own tools and technology and be responsible for their incremental expenses.

Contractors can’t be fired as long as they produce results that meet their contract specifications. Do not include them under any insurance or benefits coverage you have for employees. Independent contractors are subject to making a profit—or suffering a loss—based on their own skills and expertise. Always require an invoice before making payment.

Understanding the requirements of using independent contractors will help you better determine whether such relationships are right for your current business needs, or if you need to hire them as employees. Also make sure your contractors understand the rights and responsibilities involved as well. This will help prevent misunderstandings and potentially costly disputes over benefits and compensation. 

Getting sound advice on management issues such as independent contractor status is vital for your small business. For help, contact the Triangle’s free and confidential source of small business mentoring and coaching. Raleigh SCORE is a nonprofit Chapter of more than 60 business experts who volunteer as mentors. SCORE offers free mentoring and low-cost workshops in several locations locally. Contact us at 919-856-8739, or schedule a counseling session on our website, http://raleigh.score.org.

The Basics of Small Business Financial Reports

As SCORE mentors, we have the opportunity to see a wide variety of small business ideas. In nearly every discussion with a start-up client, we eventually get around to discuss the need for a sound business plan. The plan plots a road map for the entrepreneur and summarizes the business opportunity for a prospective investor or lender. A critical part of every plan is the financial projections.  The three most important are :

1. The projected cash flow statement
2. The projected income statement
3. The beginning balance sheet

Preparation of these reports is usually difficult for most start-ups. They can require many  assumptions and they force the entrepreneur make some tough decisions on financing, marketing, sales, pricing, operating expenses and even the location of the business. Let’s briefly describe each of the three reports.  A good starting point for both projected cash flow and income statement is preparation of a first year sales projection.

The Projected Cash Flow Statement

The cash flow statement simply tracks the projected movement of cash into and out of the business each month. Normally this is done for at least one year. You start with a cash balance on hand at the beginning of the first month, add estimated revenue (sales) , subtract disbursements (expenses) to calculate a new cash balance at the end of the month. The ending cash balance for this period becomes the starting balance for the next period. After doing this for 12 months, you’ll quickly see if the business model is viable. If you have several months with negative cash balances , you may need to revisit your sales assumptions, reduce projected expenses or increase the working capital you’ll need for start up, or a combination of all three. Done in a spread sheet format (like EXCEL), this can be a powerful tool to simulate different business scenarios. This projection is probably the most important report provided to a prospective lender.

The Projected Income Statement

The income statement is a different view of the new business. The horizon of the statement may be for the entire year, or for 12 individual periods (months).  Unlike the cash flow statement, it matches actual sales with the cost of the product or service sold in each period. For example, if you sell ten widgets in a month, the transaction is recorded as a sale that month, regardless of when you are actually paid for it. The cost of producing the ten widgets gets recorded as an expense in that month, no matter when it was acquired or produced. Month to month, the income statement may look very different than the cash flow statement  because of when cash is actually received or disbursed.  It is conceivable  that a new business is reporting a month to month profit, but is in financial trouble because of cash flow timing.

The new business needs to be profitable and generating positive cash flow to be successful.

The Beginning Balance Sheet

The balance sheet is a snap shot of the health of the business at any point in time. It lists the assets of the business (what is owned and what is owed by others), subtracts the liabilities (what the business owes to others) to calculate a net equity (assets-liabilities=net equity). Healthy businesses have a positive net equity position.

Our Raleigh SCORE mentors would be happy to explore these concepts more completely with you and assist with the preparation of a start-up business plan. Feel free to call us at 919-856-4739, or go to our website, http://raleigh.score.org and sign up for a free mentoring session.

An Objective Review of Our On-Line Marketing Workshops and Webinars

In an attempt to assure our website is providing useful, relevant information to the small business community, one of counselors, Patricia Mckay objectively evaluated the on-line Marketing workshops and webinars offered  on our website, raleigh.score.org. Pat has extensive background in the marketing field, so she was a great resource to perform the review. We thought a local review would be helpful, since this workshop content is not generated locally, but provided by the SCORE National office in Virginia.

She found eleven outstanding workshops and webinars worthy of your consideration.

Under the general topic of Marketing Basics,

-Promoting Your Business (webinar)

Under Marketing Ideas

-Marketing for Less: 10 Tactics to Get the Growth You Want from Resources You Have (webinar)

Under Finding Customers,

- How to Generate Great Word of Mouth (workshop)

-10 Simple Steps to Finding Customers and Delivering the Goods (workshop)

Under On-Line Marketing

-How the Web Changes Marketing (webinar)

Under Pricing Strategy,

-Loss leader Pricing Strategy (workshop)

-60 Second Guides: Developing a Pricing Strategy (workshop)

-Pricing Products and Services (webinar)

Under Search Engine Optimization (SEO),

-Expert Tips on Search Engine Marketing (workshop)

-9 Ways to Boost Your Local Search Results (workshop)

-When Social Goes Local: Tapping the power of Social Media to Promote Your Business Locally (webinar)         

In the months ahead, we’ll try to do similar reviews of other on-line workshop categories.

Feel free to call Raleigh SCORE at anytime at 919-856-4739 with questions about your small business or make an appointment for our free counseling services at http://raleigh.score.org

Financing Can Help Veterans With Their Small Business Dreams

Every veteran knows that the key to success in any mission is preparation and having the tools necessary to complete the job.

Success in the world of small business ownership is no different. Every start-up begins with a thoroughly researched strategy—the business plan—and resources to carry it out, among the most important of which is financing.

Contrary to popular belief, there are no grant programs or other sources of “free government money” available to aspiring small business owners. However, veterans and other members of the military community can take advantage of a variety of low-interest loan programs tailored specifically for their needs.

Among the most popular of these is the Patriot Express Loan Pilot Loan Initiative, created by the U.S. Small Business Administration to provide expedited loans of up to $500,000 via a nationwide network of lenders. To qualify, a business must meet the SBA’s 7(a) loan eligibility requirements, and be at least 51-percent owned and controlled by veterans or members of the military community.

Patriot Express loans feature the SBA’s lowest business loan interest rates—generally 2.25 to 4.75 percent over prime depending upon the loan’s size and maturity. The loan can be used for most business purposes, including start-up, expansion, purchases of equipment and/or inventory, working capital, or business-occupied real-estate purchases. Following approval by the lender, most Patriot Express applications receive SBA approval within 24 hours.

Patriot Express is available to military community members including veterans, service-disabled veterans, active-duty service members participating in the military’s Transition Assistance Program, reservists, and National Guard members, as well as their spouses. A widowed spouse of a service member or veteran, who died during service, or of a service-connected disability, may also apply.

For reservists who are already small business owners and expect to be called-up, the SBA and its resource partners can help with preparing their businesses before deployment, managing their businesses, selling goods and services to the government, obtaining other SBA financing and financial assistance, and obtaining loans for economic injury. Military Reserve Economic Injury Disaster Loans provide up to $2 million for small businesses sustaining economic injury because an owner or essential employee has been called to active duty as a military reservist.

Veterans can learn more about financing and other small business issues from Raleigh SCORE, a non-profit association that offers information resources, training, and free, confidential counseling. For more information, call us at 919-856-4739 or visit our website at http://raleigh.score.org.