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Client Advisor - July/August 2011


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Inside: How to increase referrals to your business, Succession planning: What should Baby Boomer owners consider? and 10 ways to increase the value of your business.

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Client Advisor - July/August 2011

  1. 1. 3330 W. Esplanade Avenue Suite 100 Metairie, Louisiana 70002 Advisor CERTIFIED PUBLIC ACCOUNTANTS ClientHow to increase referrals to your business July/Aug 2011R alph Waldo Emerson said, “If you build a better mousetrap, the world will beat a path to your door.” If it were only that easy! Ask anyone in business, and they’ll likely tell youthat it takes more than having a good product or service If you haven’t been tracking where your business comes from, start doing it today. A simple question of “How did you hear about us?” can help you figure out where your best referral sources are. 2. Ask for referrals. If your customers like whatto attract customers. you do for them, they are probably more than willing to tell others about you. They may simply not think to do it unless you ask them. Business owners are sometimes S E E reluctant to ask their customers for referrals. They think it sounds desperate or needy. In fact, if you do it right, Succession planning: you can pay your best customer a great compliment in What should the process. Baby Boomer When you’re having a conversation with a good owners consider? customer, tell the customer why you so appreciate Ten ways to working with them. Then tell the customer that you’d increase the enjoy having more customers like them. Chances are, value of your they know people who are like them, and they’ll be business happy to pass your name along. I N S I D E 3. Do something memorable. Human beings like to share stories, especially when something unique has happened. When you give your customer a truly memorable experience, they’ll share the story, and in K the process, they’ll refer business your way. eep your word. Customers The employees of a dry cleaning company had a knack won’t refer you if they for memorizing the cars that their customers drove. By doing so, they could have orders pulled for customers don’t trust you. before they entered the building. Quite impressive, Some companies advertise, which helps bring cus- especially for customers who had been in only once ortomers in, but most business owners will tell you that twice. That’s the kind of service people talk about.they get their best customers through referrals. They There are some basic tenets that you have to abideonly wish they could get more of them. by if you want to get referrals. If you want more referrals for your business, consider First, keep your word. Customers won’t refer you ifthe following ideas. they don’t trust you. 1. Look to the past. Do you know where your best Second, provide value. Whether you offer the highestreferrals have come from in the past? Maybe they came priced product or the lowest priced, make sure yourfrom current customers, or maybe they came from other product provides the value your customers expect.complementary businesses. For instance, a call center That’s something they’ll talk about.owner gets many referrals from marketing companies Finally, be sure to thank your customers for honoringwho are setting up advertising programs. Each new you with their business. You certainly want referrals, butmarketing company can be targeted to generate referrals you also want to keep your existing customers. Don’tfrom them as well. take them for granted. ❚© 2011 CPAmerica International
  2. 2. Succession planning What should Baby Boomer owners consider? We’ve all heard the news. The Baby Boomers have begun plan and timetable. It is sometimes helpful to have a consultant,turning 65, the traditional retirement age. Over the next 19 coach or guide to help keep you on track and hold youyears, all the Baby Boomers will hit that milestone. accountable. The process will not always be easy, and the While not everyone wants to retire at that magic age, it is a temptation to quit will sometimes be strong. The commitmentreminder that time is ticking by and that perhaps plans should to succeed with succession must be just as in the works to allow for retirement when the individual isready. 5. The first choice might not work out. Many business Business owners are not exempt from this issue. In fact, owners experience disappointment when their first successorthey probably need to plan more carefully than most people choice doesn’t work out. Sometimes the successor decides toso they can effectively exit the business when they decide the leave, and sometimes the business owner realizes that thetime is right, or when circumstances such as health concerns choice was not a good one. Either outcome should not lead tocompel their exit. Yet, most business owners seem hesitant to despair. In every circumstance, the business owner can learndiscuss their exit strategy or to plan for it. something that will make the next time better. This is, how- They may have their reasons for avoiding the topic, but ever, just another reason not to wait until the last minute tobusiness owners won’t be able to avoid disaster unless they start. The process will likely take longer than you expect.plan for the succession of their businesses. Here are a fewpoints for the Baby Boomer business owner to consider. 1. Most Baby Boomers grew their careers at a timewhen long hours and “nose to the grindstone” effort reapedthe biggest rewards. Likely successors, being from a differentgeneration, may not have the same mentality about work,and the Boomer may see this as a weakness. The businessowner may surmise that the successors won’t put in theeffort necessary for success and use this to delay the selectionof a successor. 2. The business is likely one of the Boomer’s greatestfinancial assets. Figuring out how to extract the value fromthe business can be a challenge. In many cases, businessowners may find they are dependent on the business’scontinuing success to fund their retirement. That can bescary. Planning far enough ahead allows time to put buy-out plans in place. That will help the successors and thebusiness owner in the long run. 3. Finding a buyer may be difficult. If business owners Bdecide that selling the business is the bestoption, they may find themselves competing usiness owners wont be able towith many others in the same boat. The num-bers of people reaching retirement age at once avoid disaster unless they plan formean that many people will be trying to sell the succession of their businesses.their businesses at the same time. That may be better for theprospective buyers than the prospective sellers. When supply 6. Baby Boomers live to work, and entrepreneurs areis greater than demand, prices fall and terms favor the buyers. often consumed with their businesses. Put those two factors 4. Execution takes time. Even if the business owner recog- together, and you’ll find someone who may have very few outside interests. The Boomer business owner may not havenizes the need to plan for succession, the process is a long one. anything to retire to. It can be scary to think about having noNot only does it take a substantial amount of time to examine office to go to, no customers to call and no problems tooptions and decide on a path, it takes even more time to execute resolve. Without a plan for what’s next, many business ownerseffectively. Selecting the right people for senior positions, will have a hard time letting, transferring duties, and so on don’t happen over-night. And, the business doesn’t stop running while all of these While these issues are serious, they can only be solved by“extra” issues are addressed. It is important to develop a realistic action – and the sooner, the better. ❚July/Aug 2011
  3. 3. Ten ways to 8. Employee involvement – Some of your employees may be very passionate about certain charities or causes, while others may not be as interested. Allow employees to take someincrease the value time off from work to volunteer for their favorite cause. You’ll help the community and help your employees feel good! Value from a sense of prideof your business 9. Enjoying the moment – As a business owner, you’re likely pretty busy. How long has it been since you sat back and looked at what you’ve accomplished? Despite the occasional What is the value of your business? bumps in the road, you’ve likely been very successful. Take time Most people answer that question in terms of the dollar to appreciate the journey and to acknowledge what you’veamount they hope they could sell the business for. That’s one done.definition of value. But, the value of your business can also be 10. Groundwork for the future – Your business can outlastexpressed in its contribution to the community, employees, you if you put in place the people, systems and processes thatcustomers and vendors. Business owners often “value” their allow it to thrive in your absence. What a legacy to leave thosebusiness because of the sense of accomplishment it gives them. who have worked with you. ❚ The fact is, you can increase the value of your business inmany ways, and with respect to all of these definitions. Hereare some ways to build value in each category. Value EnhancersValue in dollars and cents 1. Trained, stable work force 1. Market share – Someone interested in buying yourbusiness will likely be looking for a strong customer base. If 2. Established, creative management teamyour company has loyal customers, the buyer will pay for that. 3. Product/service with a clear competitive advantageMake sure that your sales aren’t too dependent on one or twovery large customers. That increases risk. A diverse, faithful and 4. Stable revenues and profitsgrowing customer base will drive up the value of your business. 5. Clearly defined goals – corporate focus 2. Repeatable processes – A business set up to run smoothlywithout being overly dependent on specific people is a valuable 6. Expanding marketsbusiness. The buyer can expect the wheels to keep turning 7. Opportunity for significant productivity increasesafter the transaction. That’s worth something. 3. Unique products or services – If you have patents or 8. Well-maintained plant and equipmentother exclusive rights to your products and services, and the 9. Effective management information systemsmarket wants those products, you have value. On the other hand,if your products and services are easily replicable, a prospective 10. Barriers to market entrybuyer might find it easier to become your competitor thanyour purchaser. 4. Margins – Top-line sales figures are important, but thebottom line often matters more. Carefully manage your pricing,direct expenses and overhead. Your buyer will want a return,and good margins feed that return. Value Detractors 5. Cash flow – Do your customers pay on time? Do you 1. Low morale and high employee turnoverhave good payment terms with your vendors? Businesses thatgenerate cash are more attractive and valuable than businesses 2. Dominant, autocratic leadershipthat are frequently in need of a line of credit to operate day to day. 3. Highly competitive product/service lackingValue as a good corporate citizen differentiation 6. Providing opportunities – You already provide oppor-tunities for employees and vendors. Perhaps you can also 4. Volatile revenues and profitsprovide opportunities like internships or mentoring to high 5. Lack of a cohesive business strategyschool and college students. You can provide content byspeaking or serving as a panelist for community discussions. 6. Stagnant or declining marketsYou have a tremendous amount of knowledge and experience 7. Limited productivity enhancement potentialin a variety of areas. Look for opportunities to share it. 7. Giving back –Why not choose a community cause that 8. Poorly maintained physical plantfits well within your corporate mission and culture and get 9. Lack of management informationyour employees involved in a volunteer project? Give funds tohelp with expenses and outreach for the charity, and help the 10 Ease of market entryorganization promote the value it brings to the community. July/Aug 2011
  4. 4. What you need to know about filing an amended tax return Having second thoughts about your tax return? Realize original return or within two years fromyou forgot to include something important? the date you paid the tax, whichever is An amended tax return allows you to file again to correct later.your filing status or income or to add deductions or credits 5. If you are amending more thanyou may have missed. one tax return, prepare a 1040X for Here are eight points the IRS wants you to know about each return, and mail them in sepa-amending your federal income tax return. rate envelopes to the appropriate IRS 1. Use Form 1040X, Amended U.S. Individual Income office. The 1040X instructions listTax Return, to file an amended income tax return. the addresses for the campuses. 2. An amended return cannot be filed electronically, 6. If the changes involve anotherthus you must file it by paper. Use Form 1040X to correct schedule or form, you must attachpreviously filed Forms 1040, 1040A or 1040EZ. that schedule or form to the 3. Generally, you do not need to file an amended return amended return.due to math errors. The IRS will automatically make that 7. If you are filing to claim an additional refund, waitcorrection. Also, do not file an amended return because until you have received your original refund before filingyou forgot to attach tax forms such as W-2s or schedules. Form 1040X. You may cash that check while waiting forThe IRS normally will send a request asking for those. any additional refund. 4. Be sure to enter the year of the return you are amending 8. Your state tax liability may be affected by a change madeat the top of Form 1040X. Generally, you must file Form on your federal return. For information on how to correct1040X within three years from the date you filed your your state tax return, contact your state tax agency. ❚ CERTIFIED PUBLIC ACCOUNTANTS 3330 W. Esplanade Avenue Suite 100 Metairie, Louisiana 70002