According to me, the main reason small business owners have a high washout rate is that too many investors don’t put enough emphasis on getting the best return for every dollar and hour they invest in their business. They seem to be more focused on frivolous things like the color of their business cards. Failure is inevitable in any business venture. This is because of a lackluster focus and an inability to prioritize tasks. Complacency, coupled with a lack of focus, can lead to a slowing down and stagnant business. To me, every American real estate investor should adopt the catchphrase “easier. faster. and cheaper”. This is because I have learned the hard way that in order to achieve consistent high rates of return on my time and money, I must constantly analyze, improve, and tweak every aspect my operation to make it more efficient, faster, cheaper, and more profitable. My business is like a high-performance automobile engine. It must be tuned and turned properly to ensure it runs at maximum speed and efficiency. It takes experience to run a small business efficiently and profitably.
1. Financial and personal discipline
2. Skills in organization.
3. Management knowledge.
4. Meticulous planning and attention for detail.
5. Prioritization of tasks based on their potential profit.
6. Maximize the use of technology available
7. Accurate record keeping.
8. Small business owners can make maximum use of the tax benefits available to them.
To run a business at maximum efficiency and profitability, it takes discipline
To run a small business efficiently and profitably, you need to have financial and personal discipline. To be successful as a self-employed person, you must have the ability to take initiative and follow through. Work smart so that you don’t waste time on tasks that aren’t worth your while. Also, you shouldn’t waste your time cleaning up around the office when you could be looking for customers. You must also have the financial discipline to ensure your small business is profitable. You can only control your spending by:
1. Adopting a bottom line mentality that is completely focused on maximising your business’ profitability
2. You can run your business with a minimum budget by purchasing all the equipment, supplies and services you need at the lowest prices in your local area.
3. Keep an eye on operating expenses and review all invoices carefully for errors, overcharges and bogus charges.
Prioritize tasks based on their profit potential
When you work in a small business, the number one question you should ask yourself is: What am I doing right now that will make me the most money? Many small-business owners fail because they aren’t able to prioritize tasks in a way that maximizes their profit potential. Because they can’t differentiate between what’s essential and what’s secondary, they end up losing money. A general rule of thumb is that any business function that does not directly impact my bottom line is low priority. It’s best to leave it for after-hours. To put it another way, if the task isn’t related to the completion of a real estate transaction that will ultimately end in me going to bank, I put it off until later.
Do not reinvent the wheel every time you need to complete a routine task
No matter what you do, you shouldn’t let yourself fall for the trap of trying to reinvent the wheel every time you have to finish a repetitive task. Re-inventing the wheel is a term that refers to creating something new. One example of reinventing a wheel is retyping purchase agreements over and over, rather than storing them in a Microsoft Word file that can be printed as needed. This is how to be smart and make your operation as efficient as possible.
You can start your small business on a tight budget
A slipshod management style without financial controls is a sure way to fail small business owners.
Before you make a purchase, do a cost-benefit analysis
I suggest that you do what I always do, before I ever part with any of my hard-earned money, and ask yourself this very poignant question: How exactly is this-(fill-in-the-blank)–going to have a direct impact on the profitability of my business? If you are unable to justify why this purchase will make a difference to your bottom line immediately, you should not hold on to your money. This process of decision-making is known in business schools as “cost benefit analysis.” It means that if the price tag exceeds the benefits, the item should be avoided. This is something to keep in mind when you feel the need to spend.
How to Set up a Small Business.
I’m willing to admit that an owner could run their small business without having access to the essential amenities of a high-tech office. It would still be an inefficient operation and small business owners would spend a lot of time retyping the same documents. I don’t know if you’re a small-business owner, but I have never seen anyone type their way to success as a small-business owner. These six items are essential for any small business owner who is serious about making consistent money with their business.
1. To make calls from mobile phones, you can use a prepaid calling card or telephone service.
2. Personal computer running Microsoft Windows operating system.
3. Microsoft Word software.
4. Internet connection
5. Inkjet or black-and-while printer
6. Financial calculator.
It is difficult to succeed in a digital world using horse-and-buggy technology
Computer technology is here to stay. If you want to be a successful small-business owner in today’s digital age, you need to embrace new technology and learn how it can work for you. If you are computer-illiterate, I recommend that you purchase a cheap personal computer (PC), and then get started learning how to use it. Anyone can use a computer even if they are not technical like me.
How to run a small business at maximum efficiency
The SBA estimates that 80 percent of new small businesses fail within five year of their opening. Business owners are often guilty of failing to plan and organize their businesses properly. Although I don’t want to appear like a killjoy, you can’t just throw together a business without planning and organization. You have to expect it to run efficiently. To set up small businesses efficiently, it takes careful planning and attention. You can only have a smooth-running business if you do the little things right.
1. To run your business, you need a master list of things to do.
2. All business records and documents should be computerized.
3. You can avoid having to recreate anything by setting up your business.
4. Organise your office so you have everything at your fingertips
To manage your business, use a master to-do list
If you want your business to run at its best, follow my 20+ year-old advice and keep a master list of things to do. My checklist is kept on my computer as a Microsoft Word document. It acts as both a checklist and an appointment calendar. Each entry on my list lists the task or appointment, along with the meeting date or completion. This ensures that nothing is left unattended and that tasks and appointments are completed on schedule.
You can deduct your home office as a business expense
A home office cannot be claimed as a business deduction by federal tax authorities if it is used for business purposes only. If you are a part-time investor in real estate and a teacher full-time, and you have a home office you can claim as a business expense for real estate investments, but you also use it for your business, such as to grade student papers, then your deduction for your home office would be denied by the Internal Revenue Service (IRS). This is because your home office isn’t being used solely for business purposes. To ensure that your home office passes IRS inspection, you should use it exclusively as your primary place of business. I adhere to the IRS home office use rules. My home office is located in a separate building from my home, approximately 40 steps one-way. It’s used only for business purposes. Although it measures only 10 feet by 10 feet wide by 100 square feet, my home office is compact and serves its purpose well. This arrangement allows me to keep my business separate from my personal life. You can find more information about how to deduct your home office from your business expenses at IRS Publication 587, Home Use of Your Home. It is online at IRS Publications and Forms.
A key part of running a profitable business is accurate record keeping
It is essential to keep accurate records in order to run any business. It’s also one of the most neglected aspects of real estate investing. Record keeping is a last-minute ritual for many small business owners. It’s usually done annually at 8 p.m. on the 14th of April and then forgotten about the 364 other days. This is not the best way to run your business. This is a list of five records real estate investors need to keep in order for their business to run smoothly and efficiently.
1. Income records: These records contain income statements that include bank statements and statements detailing monthly income, expense statements, bank statements and accounting records.
2. Expense records: These records include bank statements, paid invoices, cancelled checks, and accounting records that document all expenses related to running your business.
3. Property records: These records include mortgages and deeds in trust, promissory note, grant and warrant deeds and surveys.
4. Insurance records: These insurance records include title insurance policies and workers’ compensation policies.
5. Tax records: These records include property tax assessments, federal tax returns and federal withholding tax payments.
Keep original copies of records and documents in a safe deposit box
It is a good idea to scan or photocopy all important property records and documents and keep them in a safe deposit container. You’ll be able to locate all your original documents and records in an off-site safe location, where they are easily accessible in the event of an emergency.
To maintain financial records, use generally accepted accounting practices
There have been many court cases over the years involving fraudulent accounting practices. CEOs and corporate high-ups “cooked” the books to boost the stock’s value. If you don’t want to stay in a “Club Fed” hotel, you should stick to generally accepted accounting principles and not use creative accounting methods that are based on fuzzy math. The term “Generally Accepted Accounting Practices” (GAAP) is a set of accounting principles and practices that are accepted in certain industries. A standard accounting software program like QuickBooks financial software is the best way to maintain a straight bookkeeping. You simply need to enter your financial information and the software will balance the books.
1. Identify the source of receipts.
2. Keep track of all tax-deductible expenses
3. Tax returns should include documentation of expenses.
4. Prepare tax returns
All business-related travel expenses are deducted
You must deduct all travel expenses incurred in the operation of your real estate investment company. To document business-related mileage claimed on federal tax returns, the Internal Revenue Service requires taxpayers to keep automobile mileage logs. For business-related travel, the standard mileage rate can be deducted from federal taxes.
You can depreciate all equipment used in your small business
To ensure that your small business earns maximum profits, it is important to take advantage of every depreciation permitted by the Internal Revenue Code. You must claim the maximum amount of depreciation on all equipment you use in your business.
1. Furniture and equipment for offices, such as computers, printers and facsimile devices.
2. Software programs that automate word processing and accounting.
3. Telephone answering machines, cell phones, and telephones with cellular telephones
How to prepare your tax returns
Since years, I have advised small-business owners to get a professional to help them prepare their tax returns. This could be a board-certified or certified tax attorney, an enrolled agent, or a certified public accountant. This recommendation was made because there is a real risk that an unreported bug in an off-the shelf tax preparation software program could cause an investor’s tax return to need to be audited. The investor would then be on their own as no tax preparation software company representative will represent them before the Internal Revenue Service during audit. After using Turbo Tax Business, a tax preparation software program made by Intuit, Inc. to prepare my federal tax returns, I had a change in heart. Turbo Tax Business is very easy to use, fast, safe, economical, and I can prepare my tax returns from the comfort of my own home. It’s also the same tax preparation software that my enrolled agent used to prepare my tax returns. Preparing my own tax returns has made it very unlikely that my chances of having my taxes audited have been increased. If you are not confident in preparing your tax returns yourself, I recommend hiring a licensed tax professional. Turbo Tax Business provides more information about the Turbo Tax Business tax preparation program.
