Tag: franchise direct

Tax Benefit of Owning a Business

Owning a Side Business can save you hundreds of dollars every year.

You don’t need to invest hundreds of thousands of dollars to open a business. It doesn’t need to be a full-time business to take advantage of the tax savings. It can be a part-time or side business that may grow to a point where it becomes full-time.

Most people don’t think about owning a business unless it will make them a lot of money. Making a profit is extremely important when starting a business because nobody starts a business with the idea to lose money. It may take two to three years to show a profit and start replacing your salary. But what if you could save money each year with your business while it is making very little profit or no money at all?

There are tax savings involved in running a business that many do not consider. Being an employee is the worst way to save on taxes because Uncle Sam takes a large portion out of your paycheck before you get anything. With a business, you can pay for many things using pre-tax dollars, which can save you hundreds of dollars every year. So, while on paper, your business is not making money, you are getting the savings of buying goods with money that is not being taxed.

Some of the most common deductions include:

  • Home Office Deductions
  • Business Use of Vehicle
  • Equipment
  • Business Trips
  • Health Insurance

Put Up, or Shut Up

What you really what to see are some numbers. According to the Bureau of Labor Statistics (BLS), the average income for a family 2016 was $74,664 and the most common tax bracket is 15%. This means you are paying $11,199.60 to Uncle Sam before you take home $63,363.40. The BLS estimate that the average family has $57,311 in expenditures every year. It is not surprising that the average family is struggling to get by.

Let’s see how much an average American can save by owning a business. We will look some of the expense costs (per the BLS) for the average American family and look at just a few common deductions you could see by owning a business; Auto Mileage, Home Office, Travel, and Equipment.

Transportation

According to the BLS, the average American spends $9,049 on Transportation and drives 13,474 miles per year. Let’s assume you are using 20% of your miles for business purposes. This would allow you to deduct 2,695 miles and with the 2017 IRS mileage deduction of 53.5 cents per mile, you would have a $1,442 tax deduction.

Housing

According to the BLS, the annual expense for Housing is $18,186. By working out of your home, you are able to take advantage of many tax deductions. If you were to assign 20% of your home to dedicated business use, your deduction would be $3,637.20.

What about utilities such as water, gas, electric and a dedicated phone line? The average American will spend about $2,400 on utilities. We will assume a 20% deduction which is a $480 savings per year.

Food

The average American family spends $3,008 on dining out. My wife and I are always discussing our business whenever we eat out. As a result, we expense some of our meals every month. We will assume the average American can expense 20% of their meals. The IRS only allows you to expense 50% for meals and entertainment, this would equal at 10% deduction equal to $300.80.

Travel

Financial experts suggest that the average family spend about 5% of their total income on travel, or $3,733.20. You are not able to deduct the expense for travel that is purely for pleasure, but with proper planning, you can make the trip business related. We don’t have a breakdown of the $3,733.20 (airfare, lodging, food), so we will assume that 70% is deductible. This would give the average American a total deduction of $2,613.24.

Equipment

Thanks to the new tax laws, the Section 179 provision is continued and has increased its threshold. Computer equipment and furnishings can be expensed 100%. If you need a new laptop, printer or desk, you can deduct 100% of that cost the year in which you put it in use. If we were to assume that the average American spends $1,900 on equipment and 20% is used for business, the total deduction would be $380.

How much can I save?

There are many more areas in which a business can save you money and my assumptions are on the conservative side, but if you total up just a few examples we have here:

$1,442.00 + $3,637.20 + $480 + $300.80 + $380 = $6,240.00

Based on an average income of $74,664 in the 15% tax bracket, you would be saving $1,026 per year even if your business is not making any money. Even if the business is part-time.

You will need to document every expense carefully and you should work with an accountant. There are easy to use software programs, such as Quickbooks, that make this process simple. Oh yeah, you can deduct the cost of your Quickbooks software.

Finding a business to suit your lifestyle and budget is not as hard as you think. This is one reason why you should use a Franchise Broker because they have more information than you can find on the Internet.

What is Stopping Your from Buying A Franchise?

Question about buying a franchise

The answer could be fear.

As a franchise broker, we often ask this question and we hear answers such as “There is a lot of competition in this market” or “I don’t know if people are interested in these services” and most commonly “I don’t know if I can make enough money to live on.”

When the smoke clears, it is not about the product or services that are being sold or even the money – it is about fear. The fear of failure. We tell our clients that if you don’t have a little fear, we would be worried. But too much fear can cause decision paralysis. Fear can be a good thing and it has it place – in moderation. Don’t let fear keep you from your dreams.

There are ways to overcome your fear of failure and be able to forge ahead. First, face your fears in order to change your attitude. Secondly, make a plan for success.

Facing your Fear of Failure

When it comes to business, the biggest fear is that you will lose all your money and possessions. Another fear is shame, which can elicit feelings like anger, frustration and regret. Failure does not make you a bad person nor does it physically change you. The fear of losing all your possessions/money is not very likely. You are able to structure your business in a way to limit liability and protect yourself. You will need to know how much money you are comfortable losing in the worst-case scenario. Nothing is ever guaranteed.

There are two things you can do: face the fear and focus on aspects you can control.

Face the fear. Accept that failure makes you afraid and ashamed. Find advisors you can trust and bring these feeling to the surface with them.  This will help prevent your unconscious from sabotaging  your efforts and it will get assurance from them that can bolster your self-worth and minimize the threat of disappointing them.

Focus on the aspects that you can control. For example, worrying about whether people will want your product or service. A franchise can minimize this fear because they have already forged a process that has proven successful to others.

Make a Plan for Success

You already know how to fail by doing nothing. You need to learn how to succeed.

  • Do your research – While you cannot possibly have every piece of information, collecting the most important data will help you make a smarter decision and help alleviate the fear of failing. A franchise has already completed a lot of this information and has used it to makes its franchisees successful. As a broker, we will help you in gathering all the data and information to help you make a smart decision.
  • Create a Plan -Writing a business plan is not easy but it is worth the time and effort. The business plan can act as a roadmap to success. Many franchises have already created business plan templates you can use, you will just need to customize it to your market.
  • Make a Plan B – Making a Plan B is NOT setting you up for failure. It shows that you are a smart business owner. Starting a business is taking a measured risk and by planning accordingly, you can build your confidence in your decisions. Your Plan B does not have to be an alternative course that you take if you fail. It can be a tool to help you consider alternative paths.
  • Get Support – When to starting a business alone you can get stuck in your own self-doubt. You will need a support system to help you on your journey. This is the beauty of a franchise, you are in business for yourself but not by yourself. You are buying into an already existing and successful support system.

My point is that fear is not a bad thing. It can help you be more successful. It can take outside your comfort zone to learn something valuable. Owning a franchise can be one of the most rewarding experiences of your life and we would not want you to miss out just because of a fear of failure.

Our role is to help you through this process and to help you face those fears. As franchise owners for 16 years, we have faced those fears. We had our doubts. But in the end, it was the best decision we ever made.

More Research

Were we being too hasty? We had only visited 1 franchise and there was one more like it we knew about. Why not look at the competitor? What was their corporate culture like? We seemed to fit in with Comfort Keepers. Calls were made to some of the franchisees, we asked my Dad, who is a CPA to look at their Profit and Loss and Balance Sheet for us and to give us questions to ask about the soundness of their company.

We still had jobs. We were beginning to hate what we were doing and how we were being treated. The thoughts of taking control of our lives was dominating our conversations. The fear of doing something new would always bring us back to the fact that we still had jobs. One by one our colleagues began to disappear. Mike and I realized the clock was ticking faster and it was time to say yes.

In the beginning

Time for a change

We never looked back

We bought our first franchise (YTD we have owned 6) back in 2001 pre 911. The economy was about to go through a Tech Bubble and we lived in Northern Virginia – just about a perfect storm. There is never a perfect predictorIn th of how outside conditions can influence your outcomes.

I knew my job at US Office Products was going to disappear as we were purchased by Corporate Express and I did not fit their corporate mold and Mike knew his days were numbered as the Tech Startup he worked at was cutting fat in order to be sold (laying off employees with false stock promises). This was in May of 2001.

At that time we began to look at our resumes riddled with jobs that lasted 3 to 5 years and the thought of having to look for another job every few years was most unappealing. That was the beginning of the “new economy.” We needed to break the cycle.

We took inventory of our skills and experiences. We did a SWOT analysis. We searched the internet. We visited some franchise brick and mortars. We researched and researched and then we asked my Dad for advice. We bought a book about franchising and read that cover to cover. Then we began to trust our instincts.

Our personal journey to buying a franchise

Mike and Laura

We never looked back.

We would like to share with you our journey to buying our first franchise with this three part series.

We bought our first franchise (YTD we have owned 6) back in 2001 pre 911. The economy was about to go through a Tech Bubble and we lived in Northern Virginia – just about a perfect storm. There is never a perfect predictor of how outside conditions can influence your outcomes.

I knew my job at US Office Products was going to disappear as we were purchased by Corporate Express and I did not fit their corporate mold and Mike knew his days were numbered as the Tech Startup he worked at was cutting fat in order to be sold (laying off employees with false stock promises). This was in May of 2001.

At that time we began to look at our resumes riddled with jobs that lasted 3 to 5 years and the thought of having to look for another job every few years was most unappealing. That was the beginning of the “new economy.” We needed to break the cycle.

We took inventory of our skills and experiences. We did a SWOT analysis. We searched the internet. We visited some franchise brick and mortars. We researched and researched and then we asked my Dad for advice. We bought a book about franchising and read that cover to cover. Then we began to trust our instincts.

Our First and Only Corporate Visit

At the time it seemed to be a waste of time. We understood the concept – non-medical in home care for seniors. We knew it was going to involve managing a lot of people. We knew they had a system in place and other franchisees were successful even though it was a new franchise. We jumped in our car and decided to take a road trip out to Dayton, Ohio to visit Comfort Keepers. Why not combine seeing America and have a little fun on the way (I fell in love with the city of Pittsburg, it is really a neat city).

We drive up to the office building excited. We were not sure of what to expect and what type of dog and pony show we were about to see. Clustered together with some other couples we were herded into the conference / training room and the founders began to talk about how their company started and the need the fulfilled in their community. We began to relate their experiences with our own family members and saw how we can make a difference in the lives of others. SOLD.

More Research

Were we being too hasty? We had only visited 1 franchise and there was one more like it we knew about. Why not look at the competitor? What was their corporate culture like? We seemed to fit in with Comfort Keepers. Calls were made to some of the franchisees, we asked my Dad, who is a CPA to look at their Profit and Loss and Balance Sheet for us and to give us questions to ask about the soundness of their company.

We still had jobs. We were beginning to hate what we were doing and how we were being treated. The thoughts of taking control of our lives was dominating our conversations. The fear of doing something new would always bring us back to the fact that we still had jobs. One by one our colleagues began to disappear. Mike and I realized the clock was ticking faster and it was time to say yes.

If you would like to begin your journey, we are here to help. Take the first step and complete a no obligation application. We will work closely with you during the entire process to help ensure your selection of the franchise that is right for you.