Bringing a business to fruition and — even better — profitability, is a momentous accomplishment. You’ve not only achieved a dream, you’ve made that dream a successful reality.
Often, the next step is growth. You figure, “I’ve come this far, why not go bigger?” Unfortunately, growth isn’t always as simple as we expect. The tools you used to survive in the beginning may not serve you in your attempt to scale. You’ll likely need to make foundational changes in your organization to grow the way you want.
In this episode of Mind The Business: Small Business Success Stories, hosts Austin Hankwitz and Jannese Torres-Rodriguez, and guest, Chris Triebes — founder of The WC Social Club, discuss business growth. Check out these highlights, then listen to the full episode below.
The DIKW pyramid
“The DIKW pyramid represents the relationships between data, information, knowledge, and wisdom,” says Hankawitz, who has used the tool to help guide his own business decisions.
“Each is a building block towards a higher level of understanding of your business needs. First comes data, which is really just raw information regarding your business operations. This brings us to information, which includes making sense of your data with tools like QuickBooks. Once you have that valuable information, you can turn it into knowledge, and knowledge is power, especially as it relates to running a small business.”
From there, the final stage of the pyramid is Wisdom. “Wisdom is why we make the decisions that we do,” says Torres-Rodriguez. “Essentially, it’s the knowledge applied in action.”
Start with the data
Whether you’ve heard of the DIKW pyramid or not, it makes sense to start your growth journey by gathering and studying your business data. It’s all part of making an informed choice.
Triebes is the creator of a sustainable indie rock company in his hometown of Chicago. He’s gone from being an independent concert promoter to a venue manager and talent buying entrepreneur.
In his line of work, Triebes has had to build data from all kinds of observations. “[I] look at comps, so to speak, like comparable artists [and] comparable shows in other areas of the country,” he says. This information helps him decide which bands to book, and how much to spend on their events.
Triebes looks not just at a band’s current following, but also their fans’ enthusiasm. He also considers the band’s growth over time. “An artist may have a bunch of hot tracks, but then you go look closer and [see that those tracks came out] like eight years ago. Well, is that relevant? Sometimes it is, sometimes it isn’t,” he says.
Similarly, small business owners must evaluate their own history to see what parts of their past data are relevant to future growth. What were the biggest successes? Are those successes still relevant today?
Own the entire value chain of your business
As Triebes began to better understand the industry, he realized that if he wanted to increase his income, he needed to own his value chain.
Owning your “value chain” means controlling all of the activities that a business employs to create a product or service. For Triebes, that included everything from creating his own ticketing software to purchasing a venue.
“I think owning the value chain and being vertically integrated is something every small business owner should strive for,” says Hankwitz. “It relates to what I do with my small business, in trying to own that entire value chain. It’s not only having the distribution right, which is my TikTok, my newsletter, [and] my social media channels, but also owning what I am distributing, which could be equity in these cool FinTech companies or other creator economy companies that I believe in and obviously own equity in.”
If you’ve not yet taken the time to identify all the parts of your business’s value chain, here are some tips to get started:
- Determine what activities and individuals support your business, then figure out the value and cost of those activities.
- Understand your customers’ perception of value, and see what gaps could be filled by you.
- Analyze your competitors’ value chains, then identify opportunities to gain a competitive advantage.
Be patient
Scaling a business takes time, just as solid growth strategies aren’t built in a day. That can be a tough lesson for eager entrepreneurs to learn, but in the end, it’s part of what makes up the Wisdom portion of the DIKW pyramid.
“One thing I’ve learned is patience,” says Triebes. In this business, I used to shoot from the hip, and I’ve really learned to be patient and look for the right scenario. The WC is a great example of that. If I go larger, I just need to be even more careful.”
This article originally appeared on the Quickbooks Resource Center and was syndicated by MediaFeed.org.
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Did you freelance last year? Don’t miss out on these tax deductions
Freelancers often work hard for their earnings.
But if they keep good financial records (including all those 1099s), and prepare their tax returns correctly, freelancers can often tap into a number of deductions that can help lower their taxes and allow them to keep more of their hard-earned income.
Because taxes for people who are self-employed can get complicated (and tax laws can change from one year to the next), it can be helpful to enlist the help of a tax professional who specializes in freelance and small business taxes when preparing your return.
These professionals can inform you on which expenses you can deduct from your business income, and which ones you can not.
But whether you choose to work with a tax pro or go it on your own, it can be very beneficial to know what self-employed tax deductions are generally allowed.
This can help you maintain better records, prepare for a meeting with a tax accountant, and even influence some of your business decisions throughout the year.
Here are things to consider when you do your taxes as a freelancer.
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When considering whether an expense is deductible or not, you may want this rule of thumb in mind: The Internal Revenue Service (IRS) guideline for freelancer tax deductions is that expenses must be ordinary and necessary.
If you would have an item or incur an expense even if you weren’t running your freelance business, it likely would not qualify for a deduction.
Below are some key deductions you may be able to qualify for.
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One of the most common deductions for freelancers, in order to claim a home office on your taxes, the designated space must be used regularly and exclusively for business operations and must be the principal location where business is conducted.
You can take this deduction whether your own or rent. You can use the simplified method, which has a rate of five dollars a square foot for business use of the home, with a maximum deduction of $1,500, according to the IRS.
Or you can use the regular method, which divides expenses of operating the home (including mortgage/rent, real estate taxes, utilities, home insurance) between personal and business use.
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The materials you purchase to work in your home office, such as paper, pens, pencils, pads, printer ink, staples, paper clips, etc, can typically be deducted at full cost as long as the items are used for business.
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If you require specific hardware, such as a laptop, personal computer, tablet, or other types of equipment to run your business, these purchases may count as deductions.
You may want to talk to your accountant about the best way to deduct these expenses, as some bigger purchases that will be used beyond one year may need to be depreciated over a set number of years, rather than deducted in full.
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If you have a website and pay fees for web hosting, these expenses can likely be deducted from your taxes. If you use other online tools for your business (such as Dropbox or Zoom), fees you pay for these services can also usually be deducted.
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If you use the internet, a landline phone, or a cell phone for business at least some of the time, these services may qualify for a deduction.
You may want to keep in mind, however, that you can generally only deduct a portion based on your business usage.
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You may be able to deduct up to $5,000 of initial purchases and investments made to get your business up and running. Purchases that exceed that amount can often be deducted over time.
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The cost of paying employees to work within a business can usually be deducted. These costs generally include both wages and benefits.
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Self-employment taxes cover freelancer contributions toward Social Security and Medicare. You can generally deduct the employer-equivalent portion of your self-employment tax, which is half the total self-employment tax.
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The entire cost of ownership and maintenance of any vehicle used strictly for business purposes can typically be deducted from business income (subject to some limits).
Cars driven for both business and personal use can also be deducted, but only for costs incurred while conducting business.
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Also known as bad debt, if your business is owed money that it has no hope of reclaiming, that debt may be deductible.
However, in order for the deduction to be allowed, it must be clear to both parties that the exchange was not a gift.
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Depending on the industry, certain state and federal licenses may be required for a business to operate.
The fees paid annually to state or local governments for obtaining those licenses can generally be deducted.
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Depending on the business, there may be federal, state, local and even foreign taxes that the business must pay. You can usually deduct those taxes as business expenses.
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For freelancers who sell products, the supplies purchased in order to make those products can usually be deducted.
The costs of keeping business supplies and assets in a storage unit can generally also be deducted since storage is an expense factored into the overall cost of the goods sold.
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If you’ve taken out a loan to help fund your business, you may be able to deduct the interest you incur from it as a business expense.
For this to be deductible, however, a freelancer must be legally liable for that debt. In addition, both the freelancer and the lender must intend that the debt be repaid and have a true debtor-creditor relationship.
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Should a particular aspect of a client contract not be fulfilled, and fees or penalties are incurred because of this late or nonperformance, those costs are generally tax deductible.
Government contracts, however, do not typically qualify for the deduction.
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The processing costs a freelancer may incur by accepting credit cards payments is usually deductible as a qualified business expense.
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The fees charged by attorneys and accountants that are related to operating your business are typically considered tax deductible business expenses.
That includes tax preparation fees, as well as any additional tax resolution expenses that pertain to your business.
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The cost of education that helps you maintain or improve skills needed in your present work can be tax deductible. This also typically includes costs for books, supplies and even transportation.
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Fees for attending conferences or conventions that are business related can typically be deducted.
Not only are the admission or registration fees often deductible, but all reasonable travel expenses accrued in order to attend the event may be deductible as well.
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Tools used for marketing, advertising and the general promotion of a business are considered deductible expenses.
Any expenses incurred in order to influence legislation (such as lobbying), however, are not deductible.
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While you generally can’t deduct dues or fees paid for memberships in clubs organized for recreational or social purposes, dues paid to join organizations that align with your specific business industry are usually considered deductible.
This includes organizations, such as boards of trade, chambers of commerce and professional organizations (like bar associations and medical associations).
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Travel costs that are associated with conducting business are considered valid deductions, as long as they are ordinary and necessary.
This can include flights, hotel stays, meals, getting around locally via bus/train/ride sharing services, even dry cleaning or laundry expenses while you’re away from home.
You may want to keep in mind that lavish and extravagant travel conditions generally do not qualify for deduction.
Also, day-to-day commuter expenses between home and business are not typically deductible.
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If you give a gift to a client or vendor as a thank you for conducting business with you, the cost of the gift is generally deductible up to $25 per person per year.
Extra costs such as engraving, packing, or shipping aren’t included in the $25 limit if they don’t add significant value to the gift.
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Self-employed individuals with qualifying policies are typically allowed to deduct premiums for health, dental and long-term care for themselves and their families.
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Just because you don’t work for a large company doesn’t mean you can’t benefit from a tax-advantaged retirement plan. Indeed, freelancers often have even more options for saving this way.
Two self employed retirement options you may want to consider: a traditional IRA (which allows you to contribute up to $5,500 per year in pre-tax dollars if you’re under 50, and up to $6,500 if you’re older) and a SEP IRA (which allows you to contribute up to 25 percent of your income for a maximum of $54,000 per year).
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As a freelancer, you can often lower your tax liability by deducting expenses that were incurred to operate your business.
There are a wide range of deductions you may be able to take, including a home office, supplies for that home office, your computer, your car expenses, and possibly even a portion of your monthly cell phone and internet bills.
Because freelancers are typically required to pay taxes four times a year (in the form of estimated taxes), it can be wise to set up a separate savings account and immediately deposit at least 25% of each paycheck as soon as you get paid.
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This article
originally appeared on SoFi.com and was
syndicated by MediaFeed.org.
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