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We hope you find this arcthve useful. A subscription to The Small Business Advisor Newsletter is free. Subscribe now - it's easy! The Small Business Advisor Newsletter for October, 1998 CONTENTS
NOTES/TIPS/etc LONG DISTANCE. Here are a couple of numbers to try for long-distance service. Both claim to have very, very low rates. 800-447-9476; 800-524-4685. And, remember, no matter which carrier you use, check your rates with each billing since rates can change without your knowledge. BUSINESS FINANCING. Don't forget your credit union! Nearly all credit unions allocate some percentage of their total assets to commercial lending. ENROLLED AGENT? These folks are licensed by the federal government and specialize in business tax matters. They can be an alternative to a CPA at a lower cost! Check for an agent near you by calling the National Association of Enrolled Agents at (301) 212 9608. They have about 10,000 members. Also check their website at http://www.naea.org TRADESHOWS. Tradeshows provide a universe of opportunity. However, locating the best trade shows to attend or exhibit in can often require extensive and time-consuming research. To make your task easier, our site, The Small Business Advisor, provides a summary of the leading tradeshows in 106 industries, including event descriptions, dates, locations, contact information, histories, press releases, exhibitor lists, attendee demographics, conference info and more! Some companies charge up to $500 per year to access this type of comprehensive tradeshow information. We do it for free. Check it out at http://www.isquare.com. QUOTE TO REMEMBER: "The pessimist sees the difficulty in every opportunity. The optimist, the opportunity in every difficulty." -- Winston Churchill ANOTHER TELEPHONE CAUTION: Ensure that your ISP does not utilize "roll-over" telephone exchanges that are outside free calling area. For example a roll-over exchange might be one that is in your "extended call" area and subject to additional "local" charges. Heed our previous warnings: Carefully check every telephone bill. COPYRIGHTS &
TRADEMARKS. Copyrights and Trademarks are often misunderstood and confused with each other. Here is some basic information about to help you understand their importance. A copyright protects a "form of expression" such as writings, designs, and works of art. A copyright is automatic in that anything you write, design, or otherwise conceive, is protected by the copyright laws. This protection generally lasts for your lifetime plus 50 year. A copyright may be registered WITH THE LIBRARY OF CONGRESS, COPYRIGHT OFFICE. Having your copyright registered can help if and when you need to defend it use by others. A trademark is a word or series of words, a design or graphic that relates to your product, service, or company. A trademark must be registered with the Patent and Trademark Office and cost a few hundred dollars. Learn more at the Patent and Trademark website, http://www.uspto.gov or call them at 1 (800) PTO-9199. There is a help line at (703) 308 4357. YOUR BUSINESS
AND INSURANCE PROTECTION [Read this! It's excellent and contains important information you need to know. - Ed] In increasing numbers, 43 million (according to Bureau of Labor statistics) "in home" business owners shed bathrobes for casual attire, merely shuffling from the kitchen to the office down the hall. About 60% of these hardworking folks mistakenly rely on their traditional homeowners or renters policies for insurance protection or don't even give the matter a thought. Sadly, almost half of the "in-home" business owners who have already experienced a claim or loss still lack the insurance they need to adequately protect themselves. Insurance coverage needed. The basic insurance protection needed for "in-home" businesses is property and liability coverage. Property coverage will protect the business owner's real property, dwelling, structures and possessions against claims for theft, fire, water damage and the like. Liability coverage insures against injuries or damage claims from business visitors, clients and other parties. While homeowners and renter's insurance policies are generally similar in coverage from one insurance company to the next, most fail miserably to provide all but a few basic insurance coverages for "in-home" business owners. None address coverage for business liability, in or away from the home business location or claims that may arise from loss of income. Why and where do homeowners and renter's policies fail and what are the potential remedies? Residence, Dwelling, Real Property. With respect to the dwelling, residence or real property itself, generally there is no problem just so long as the place is being used 50% or more of the time or 50% or more of the square footage of the home is being devoted to dwelling or residential purposes. If the residence or dwelling is used more than "incidentally' by virtue of this 50% definition, the home may no longer qualify for homeowners insurance and a regular business owners insurance policy is needed. Detached Garage, Storage Sheds and the like. Because the majority of homeowners and renter's insurance policies are very explicit in their intention not to provide any coverage for detached garages, storage sheds and such, if they are used a little, a lot or completely for business purposes, storage of your business stuff in them can cause serious problems. The remedy is to ask your insurance agent to attach a special endorsement to your homeowners policy called, "Permitted Incidental Occupancies." (Endorsement number HO 04 42) This endorsement eliminates problems pertaining to business conducted on the residence premises, and provides for scheduling a specified amount of coverage for the detached garage, shed or other structure that is used in a business. The other beneficial affect of this endorsement is that it automatically increases the coverage in the homeowners policy for on location business furnishings, supplies, and equipment from the $2,500 automatically provided in the policy, to the same limit of coverage as provided or selected in the homeowners policy for Coverage C, Personal Property (usually 50% of the dwelling or residence insurance value shown in Coverage A, Dwelling.) Yet another limited feature of this endorsement, that will be discussed more fully later, is that it modifies the personal liability and medical payments exclusions in the homeowners policy to apply to the, "necessary and incidental business use of the residence premises" thus providing liability and medical payments protection "on premises only." Other coverage issues. Homeowners and renter's policies do not properly address such issues as money and crime insurance coverages, data processing equipment or computers and the attendant storage of data. Most importantly however, the coverage that you will need the most to continue your salary or income, to pay your bills, overhead, continuing expenses for your business, generally called "business income" or "business interruption" coverage is not available. Sorry no endorsements! Liability issues and answers? The liability coverage provided by most homeowners and renter's policies specifically excludes all claims or losses that arise from "business pursuits of the insured." Therefore, if you have any venture in your home, no matter how small or insignificant, you operate with some degree of continuity and with the expectation of gain, your homeowners or renter's policy does not provide any coverage whatsoever. What can be done? The fact of the matter is that there is no really perfect solution to this liability problem outside of a business liability insurance policy, or one of the new and increasingly popular special "In-Home" Business Insurance Policies. So what's the matter with the endorsement, "Permitted Incidental Occupancies?" (endorsement number HO 04 42 ). Well, as mentioned in the prior paragraph describing the limited liability coverage afforded by this endorsement, the coverage is confined solely to "on-premises" liability. There is no coverage for any claims that could arise away from the described residence such as while delivering goods to a customer, or for the product you may be distributing, selling, manufacturing or even giving away, or for a business meeting at a local restaurant, picking up a manuscript from your author's place of business and similar claims that are pretty easy to imagine. "But my agent recommended another Business Pursuits endorsement." (Endorsement number HO24 71). Will this work ?" No, it will not work. This is the coverage that should be added to your homeowners or renter's policy that eliminates the liability exclusion for business pursuits if you work at home for someone else. Not yourself, or a business owned or financially controlled by you. If you are employed by a company and they allow you to work at home, this is the endorsement or coverage that you will need to properly protect yourself. The coverage offered by this endorsement is designed for employed sales people, telecommuters and the like. So just what are you really telling us? Let's face it, homeowners and renter's polices were not designed for businesses. Even the most careful treatment by endorsement or other modification by skilled professionals really cannot bring the conventional coverages offered by most homeowners insurance companies to an acceptable level for "in-home" businesses. The answer is either to acquire a (commercial) business owners property and business liability policy. Or, one of the new "Home Business Insurance Coverages." There are a multitude of different policies out there from which to select. Prices begin as low as $150 but escalate quickly depending of the coverages and limits of liability you need or select for your "in-home" business protection. Some insurance companies are making these mini-policies endorsements to their homeowners policies and there are any number of stand-alone policies available. No matter which you acquire, be wary of those that limit liability protection to "on-premises" only. These are few and far between but you need to make sure you understand what you are buying. Typically, "In-Home Business policies provide limited amounts of coverage for business property you own (inventory, furniture, computers et cetera), property belonging to others that may be in your care or for which you are responsible, business property that you may have leased so long as there is a contract requiring you to insure it, and coverage for such things as valuable papers and manuscripts Coverage is often available for Business Income or Business Interruption as just described, and for Extra Expense or those extra out-of-pocket expenses you will most likely have when you experience a loss or claim. Effective business liability coverage is included (watch out for any "on-premises" limitation) and so is protection for premises operations, advertising injury and the all important personal injury coverages such as libel, slander, invasion of privacy, wrongful eviction and wrongful detention. Most importantly, these polices generally include coverage for your products and completed operations. Workers' Compensation & Employers Liability, Liability Insurance for Non-Owned Automobiles, Professional liability, malpractice or errors and omissions coverage is generally not offered by these endorsements or policies, but a special endorsement crafted for the burgeoning Home Day Care business is readily available. So what do you need to do? Now that you are in the know, call your insurance agent or broker. (Written by Mike Mansel, CIC; ARGO INSURANCE BROKERS, INC. (925) 682-7001, Fax (925) 682-7024, E-Mail Argo @ argo-inc.com) [Contact Mike for additional information - ed] TRAPS IN THE
RECENT IRS REFORM LAW 1) Accountant-Client Privilege The recent passage of the IRS Restructuring and Reform Act gave a powerful new tool to you and your accountant. Besides shifting the burden of proof in many tax court cases to the IRS, it grants to accountants the privilege of client confidentiality. Until now, only attorneys enjoyed this advantage. Not surprisingly, some segments of the legal profession were not happy. Many are reluctant to share such prerogatives with non-attorneys. But be warned! This provision stops far short of assuring blanket confidentiality for all discussions between tax preparers and their clients. Things to watch out for: * The privilege does not apply in matters involving the promotion of tax shelters. * The privilege is only for civil tax proceedings involving the IRS. If criminal charges are involved, or if another regulatory body (such as the SEC) is seeking information, client/accountant communications are not privileged. * The privilege is considered waived if the communication is voluntarily disclosed to any third party not entitled to the privilege. * The privilege is limited to the accountant's duties as a tax advisor - you can't assert the privilege if you hired the accountant to perform non-tax duties. Valuable information to know if the situation ever arises. Don't blindly assume your accountant will be aware of these exceptions! You can bet some won't understand all the limitations. Use this as a qualifier when considering a potential tax pro. If they don't know about the holes in the privilege rules - keep looking! 2) Burden of Proof Another significant provision of the bill is "shifting the burden of proof" from the taxpayer to the IRS. As you might expect, this is laden with misconceptions as well. Political posturing and media coverage would lead you to believe the burden of proof has totally shifted to the IRS. This simply isn't true! I've heard people say - "Great! Now I won't have to keep such detailed records. The government has to prove I owe additional taxes." Don't believe it! Nothing could be further from the truth. THE BURDEN OF PROOF WILL SHIFT ONLY UNDER A NARROW SET OF CIRCUMSTANCES. The IRS will bear the burden of proof only when disputed cases reach the U.S. Tax Court, and then only under certain conditions. For routine audits, the IRS will still demand documentation and evidence to substantiate what you've reported on your income tax return. In fact, experts predict the IRS will request more records than ever. Why? Since the burden of proof could shift to them in Tax Court, auditors may seek to strengthen their case during the audit. Expect IRS agents to seek "more rather than less; sooner rather than later." In reality, the "burden of proof" provision may actually put an additional paperwork burden on the taxpayer. Despite the new reforms, don't expect a docile IRS. You may have more rights than before, but until an alternative tax system becomes a reality, their charge is to enforce the tax laws and collect tax revenue. They still have a lot of bite. It's nice to see progress on the tax front, but don't read more into it than is actually there. As they say - "the devil is in the details." (Dan Rodriguez, CPA, CFP is the Founder and CEO of Profit Growth Solutions, Inc. Dan publishes a twice monthly ezine, The Savvy Entrepreneur. For a free subscription mailto:savvybiz@intersuccess.com.) INCREASE YOUR
SALES BY REVERSING THE RISK You may be losing a lot of business without knowing it. It happens every time a potential customer decides not to buy from you because they may not get all they expect from your product or service. You can save much of this lost business by reversing that risk. One way to reverse the risk is to guarantee every claim you make. For example, tell your prospects: "If for any reason (product or service) doesn't deliver every claim or promise we made, we'll refund 100% of what you paid." You'll be amazed at how much more business you'll get with this simple guarantee. Reversing the risk breaks down your customer's resistance and instills confidence that your claims must be true. It enhances your credibility because you certainly wouldn't guarantee a full refund if your product or service didn't deliver as promised. Maybe you're reluctant to provide a money back guarantee because you're afraid some people may take unfair advantage of it. I've learned by experience that you don't have to worry about refunds if you offer a quality product or service at a fair price. The buyers who take advantage of a money back guarantee represent only a tiny percentage of the total increased business generated by the guarantee. MAKE YOUR OFFER BETTER THAN RISK FREE Did you ever decide to buy something then change your mind at the last minute? Maybe you even had your checkbook or credit card out but stopped at the very last second. Some of your potential customers do this. You can convert many of these "almost sales" into customers by offering a guarantee enhanced with a bonus. TV informercials use this technique all the time. You can copy it to increase sales in your business. To use this technique, add something extra to your offer as a bonus and tie it into your guarantee. If your customer is dissatisfied and uses your guarantee, he or she can return the product or cancel the service and get a full refund. But, they don't have to return the bonus item. Now your offer is better than risk free. This "free bonus you can keep" motivates many "almost buyers" to take action and become customers. Sometimes you can offer a guarantee your customer automatically gets from somebody else. It may be a guarantee from the manufacturer or even a legally required guarantee. For example, most states require life insurance companies to refund 100% of the premiums paid when a policy is returned within 10 days after delivery. Many insurance agents persuade prospective buyers to submit an application with the premium payment based on this guarantee. This is a good example of a guarantee provided by somebody else (government regulators). It's also an excellent example of reversing the risk from the buyer to the seller. REVERSING THE RISK FOR A SERVICE BUSINESS Removing the risk by providing a money back guarantee works well when a product is involved. But, how do you provide a guarantee when the transaction involves a service? Your customer can't return yesterday's plumbing job. The work was already performed. Instead of offering a money back guarantee, a service business can provide a guarantee to solve the customer's problem. For example, our plumber in the example above can guarantee to come back without charge as often as necessary to stop the leak. A landscaper can replace without charge any plants that don't survive for at least 6 months. A sales consultant can continue working without charge until the promised sales results are achieved. REVERSING THE RISK FOR A BUSINESS OPPORTUNITY Nobody can guarantee someone else's success in operating a business. But, there are some things you can do to lower the buyer's risk. If you offer a MLM/Network Marketing business opportunity, your company is responsible for any guarantees involving their products or services. However, you can lower the business risk for your new distributors by offering support in sales and recruiting. For example, you can: * Provide free prospect leads. * Recruit their first few distributors. * Conduct 3-way conference calls to help persuade their prospects to sign up. * Provide free recruiting postcards. Any sales or recruiting support you offer reduces the business risk and convinces more people to sign up under you. Start thinking about some of the things you can do in your business to reverse the risk for your potential customers and clients. Then implement them and watch how fast your sales and profits increase. (Bob Leduc is the author of "How To Build Business Fast With Simple Postcards." Contact him at BobLeduc@aol.com Subject: "Postcards" or by phone: (702) 658-1707 after 10 AM Pacific time) Return to top of page - Back to Home Page - Back to Archive Index |