The Design Builder's Blog

Unhappy With Government Policies and Regulations Affecting Remodeling Business?

On February 5, 2013, the nonpartisan Congressional Budget Office released a projection that the economy will remain slow this year. Unemployment is expected to remain above 7.5% through 2014 for a sixth consecutive year, the longest stretch in the past 70 years. While the CBO forecasts that the nation’s yearly deficit will dip below the trillion dollar threshold, it is projected to rise again later in the decade. Responsible spending reductions are needed to change that trajectory. By 2023, the national debt is projected to equal an unsustainable 77% of the nation’s economy (Gross Domestic Product), and still be going up.

Recently, the House Small Business Committee launched a new resource to help small businesses help shape federal regulations and add some real world common sense to the process. This initiative, “Small Biz Reg Watch,” will highlight proposed regulations that will likely affect small firms, and inform business owners of how to make comments to the appropriate federal agency.

Chairman Sam Graves Discusses Small Business and the Economy

Make Your Opinion Known

Most small businesses do not have lawyers or lobbyists to help them with regulatory compliance, like some larger corporations do. Not all regulations are bad, but many can be unnecessarily burdensome, so it is important that small companies get to express their concerns before rules become final. Small businesses bear a regulatory cost that is much higher than the cost of compliance for large businesses. This initiative will help small companies make their voices heard. 

On select proposed rules that impact a large number of small businesses, the Committee will communicate about the regulatory comment period via email, social media, and even district events around America. Small businesses are also encouraged to join the hundreds of small firms that share insights with the committee at their interactive web platform, “Small Biz Open Mic.”

Note:  Most of the content of this blog post comes from the Weekly Update email newsletter published by Sam Graves, Chairman of the House Committee on Small Business.  Click here to sign up for the weekly e-mail newsletter and other e-mail alerts.

Contractors: Try This Self Quiz To See If A Properly Setup Financial System Can Help You:

Unfortunately, the facts show that about 85% of residential construction business have no idea what it costs to be in business and cannot properly and accurately track where they are making and or losing money.  If only these contractors had and would use a properly setup financial system they would reduce a lot of the stress related to owning and running a construction or remodeling business.

Here are my simple questions for those of you who don’t have an adequate Financial System:

Not sleeping well due to money issues and is it affecting your ability to do your job and have a life?

Would you rather go to bed at night wondering if you’re screwed, or knowing that you’re screwed?

Take this self quiz to see if a properly set up financial system would benefit you and your business:

• Do you know if you will make a profit this year? 
• Do you know how much money will pass through your company at any given time?  
• Do you always have enough money to pay monthly bills on time or meet payroll (cash flow)?  
• Do you know whether you are buying rather than selling projects? 
• Do you know how and when to predict increasing costs of doing business?
• Do you know what your options are for smart business growth?
• Are you confident about making it through the current recession?
• Will you and your business be ready to thrive when the economy turns around and the volume of work picks up?

How did you do?

If you answered no to one or more of these questions, you are definitely not alone.  For many Construction Business Owners financial management skills are not necessarily part of their educational background.  Plus, have you ever tried to get an accountant to explain this stuff to you? 

A properly designed and setup finacial system would give you the ability to answer yes to all of the above.

What are you waiting for?

If you do not have the financial system you and your business needs, ask yourself why.   If you need help setting one up, get the help you need.   If you want to work with someone who can explain things to you in a simple way, help you understand your options and get your system set up; contact me today to discuss your needs.

Remodelers, Make Sure To Pay All The Taxes You Can This Year.  Really?

The holiday season is now upon us.  For small business owners, in addition to celebrating the holidays with family and friends, it’s also the time of year to start making plans and doing budgeting for next year.  To increase your after taxes net profits next year you might want to consider paying more taxes this year.  Here is why.

At the end of September I posted a blog about the impending Fiscal Cliff.  In that blog I pointed out several ways the Fiscal Cliff decisions might affect remodeling businesses.  I also pointed out that how our country’s leadership ultimately decides to deal with the pending changes would depend quite a bit on who won the presidential election.  The election is over and President Obama will be our leader for the next four years.   With that in mind I suggest small business owners re-read that blog post and look into the list of possible tax changes that are now more likely to occur with President Obama remaining in office.

(Click here for a pretty good Fiscal Cliff summary by NPR)

A Few Ways You Might Be Affected:

The House Committee on Small Business has offered a chart on its web site to show the potential changes and affects on small businesses if the current Bush Era Tax Cuts are not extended.   Remodelers could be hit really hard because many of them are organized as “pass-through” entities, where their business gains or losses are reflected on their individual tax returns. Several that could really affect the after tax profitability for remodelers includes:

• An increase in capital gains from 15% to 20% (33% increase!)

• An increase in tax rates on business dividends received by individuals will be treated as ordinary income (higher rates) rather than as capital gains, currently 15%.

• Tax rates in the top four brackets will be increased to (from current rate): 39.6% (35%), 36% (33%), 31% (28%), 28% (25%)

• Small businesses with undistributed taxable income will no longer be taxed at the current rate on dividends (currently 15%), but rather will be taxed at the highest individual tax rate (up to 39.6%).

What To Do:

So, to limit your tax liability I suggest remodelers speak with their accountant ASAP to fully understand how the potential changes and ultimately any actual changes will affect you and your business.   Remember, profits can be used to reinvest back into your business, but you must pay tax on those profits first, leaving only the remaining profit available to invest.   The same holds true if you were planning to use business profits for other personal purposes such as paying for your children’s’ college education or buying a new home or RV.  Back when I owned my remodeling business my accountant helped me strategize how to claim certain revenues and profits in one year versus the other depending on my effective tax rate for each respective year.  By doing so in one year I saved over $20,000.00 the next year!

Make Sure You Have The Right Accountant:

There nothing worse than the feeling of working really hard to earn a profit only to find out that you could have reduced your total tax burden (and the amount of profit you get to keep) by taking advantage of simple and completely legal tax strategies.   A big lesson for me when I owned my remodeling business was making sure I had the right accountant and financial advice.   Saving money on an accountant’s fees might just cost you far more in taxes than the money you might save if you have chosen your accountant based on price rather than value, strategic advice and timely services. 

My second accountant cost me twice as much as my first.  It was well worth paying the difference because of the money I saved in taxes.  It still is!