How to Save a Failing Business

Failure is a very real possibility for small businesses. It’s a reality that will test your resolve as a business owner as well as the durability of your business strategy. When giving up feels like the only option, here are some tips to turn a sinking ship around.

Network

Connect with other business owners, influential people in your industry, and even professional business consultants. The chances are highly likely that you’re not the first business owner to be going through this phase. Be willing to ask questions and be open to new ideas.

Execute A Strategy

Do you have a clear vision of your overall strategy and the bigger picture for your business? If not, consider working with a professional marketing agency or consultant to help develop an effective plan to nurture client relationships and keep customers engaged in the long game, which will translate to consistent sales.

Invest in Employee Trust and Motivation

You wouldn’t have made it this far without significant contribution from your team, but be sure all employees are on the same page. Do they understand your business model and long-term goals? Are their contributions and talents valued? A dedicated and active team will build company morale and translate to better sales, better products, and better output.

Know Your Client Base

Business survival is dependent upon fulfilling customer needs and expectations, so it’s important to always be in tune to the pulse of industry current events, news, products, advertising trends, and overall awareness. Likewise, it’s crucial to keep your ears open to customer engagement, feedback, and satisfaction. Partake in market surveys, meet the customers you’re serving, have one-on-one meetings with clients, and invest in low-cost advertising methods.

Realize the Potential of Your Assets

If you find your business in dire circumstances, relief may come in the form of your company’s assets, which are meant to supply capital for your business. Trading assets might just prove to be the lifeline you need to keep from going under. For example, you can lease out buildings, office space, or machinery for a generous stipend. If at all possible, negotiate a rental or leasing arrangement rather than sell completely. However, if you’re convinced that selling is the right move for you, strive to maintain some proprietary rights in the property.

Go Back to the Drawing Board

Try to determine where things went awry in your business. If you collect data and monitor negative feedback, the trends will give you a clue. Start asking difficult questions about salaries, the amount of staff you’re employing, and compensation packages. What additional cost-cutting actions can you take?

What Employers Need to Know About the Relaxed PPP Rules

Congress passed the Paycheck Protection Program Flexibility Act (PPPFA) on June 5, 2020, amending several provisions in the original PPP loan program. Along with granting business owners more flexibility and time to spend the PPP loan proceeds, the Act permits funds to be used on a wider-ranging variety of expenses while still allowing for loan forgiveness. Here is how this will affect businesses moving forward with a PPP loan.

Extended Covered Period

Originally, borrowers had 8 weeks from the receipt of loan proceeds to spend funds on forgivable expenditures. Now the covered period specifies 24 weeks after the origination of the loan, or December 31, 2020, whichever is sooner. To qualify for forgiveness, however, borrowers must maintain payroll levels for the full 24-week period. Borrowers do have the option to stick with the 8-week deadline, and they must likewise maintain payroll levels through the full 8 weeks to qualify for the full loan forgiveness amount.

Additional extensions include the timeline for eliminating reductions in workforce and wages, as well as restoring workforce levels and wages to pre-pandemic levels required for loan forgiveness (both extended to December 31, 2020).

Changes to Percentage of Payroll Costs

The PPPFA reduced the payroll expense requirement from 75% to 60%, which means that 40% of the PPP loan funds may now be put towards forgivable non-payroll expenses such as mortgage interest, rent, and utilities. Note that the expenses originally designated as forgivable have not changed.

Changes to Repayment Period

For borrowers whose loans are not forgiven, the PPPFA increases the repayment timeline from two years to five years. The 1% interest rate remains the same.

Changes to Rehiring Requirements

The PPPFA also extends the rehire date to December 31, 2020 and allows for a reduced headcount. Rather than basing loan forgiveness on a borrower’s ability to rehire the same number of employees on payroll as was used to calculate the loan, the PPPFA allows for loan forgiveness amount to be determined by documentation showing that the borrower was (1) not able to rehire former employees and unable to hire similarly qualified employees, or (2) not able to return to pre-pandemic levels of business activity in response to federal guidelines related to COVID-19.

Changes to Payroll Tax Deferment

The CARES Act originally prevented borrowers who received PPP loan funding from deferring additional payroll tax once the lender decided to forgive the loan, but the PPPFA eliminates this restriction, and borrowers can now defer the payroll tax for the period from March 27 to December 31, 2020.

Overall, the PPPFA will ease the burdens of businesses that received PPP loans, but it doesn’t fix everything or answer all the questions, so expect more regulations and changes to the PPP program in the near future.

Could the Coronavirus Lower Home Prices? Well, Maybe.

Since early March, the COVID-19 pandemic has been making a substantial financial impact on millions of people across the country.  With 22 million jobless claims in just one month and a slowly moving economy, many homeowners are left wondering if their properties will see a decline in value as workers continue to lose their jobs and minimize personal spending. Spring is traditionally the prime time for buying and selling homes, but thanks to COVID-19, listings have dropped significantly. 

What We Already Know

Beginning in March, mortgage rates have fluctuated significantly. They’ve fallen to record lows—the average for a new 30-year fixed-rate mortgage currently falls near 3.33% – and may continue to drop. For those who already own homes, applications to refinance their homes are up almost 168% from March 2019. 

Mortgage rates and home values, while related, are two separate entities. History shows us that home prices are likely to fall during recessions, but to what degree is specific to your local market. If available homes in a particular area are already highly sought-after (places like San Francisco, Los Angeles, or Seattle), it is unlikely homeowners will see their property values go down much at all. That said, with such low mortgage rates available, buyers who haven’t suffered from layoffs or unemployment could find their opportunity to purchase a property. If there is still a demand for homes in an area, home prices are likely to remain steady. 

Past research from Zillow shows us that during previous pandemics in the US that home prices remained stable with only small declines in home prices. The research also showed that there were fewer real estate transactions and NOT sales happening at a loss. 

COVID-19 is already an oddity, and its impact cannot be denied around the world. With that, all homeowners with interest in selling should be prepared for the likelihood of home values dropping until this pandemic passes and the economy settles. While a drop in home values could leave sellers in a challenging situation, it’s also not ideal for anyone who may be looking to draw upon their home equity in the not-so-distant future. 

While so much of our lives remain up in the air, and while the economy is so unsettled, this is an opportunity to pull back and see what happens. If the panic around COVID-19 dies down sooner than anticipated, buyers and sellers may not even notice a change in the market. 

Protect Your Retirement from Coronavirus – 3 Ways to Preserve Your Cash

The Coronavirus Aid, Relief, and Economic Security (CARES) Act passed by Congress at the end of March provides direct economic assistance to Americans during the COVID-19 pandemic. In the bill, certain provisions allow people to withdraw from their retirement accounts, including their 401(k)s and IRAs, without the usual early withdrawal penalty. Individuals must have been directly affected by coronavirus – through personal, spousal, or dependent diagnosis or furloughed, laid off, or reduced hours from their job to be eligible for the fee-free withdrawals.

While pulling from retirement funds seems like a simple and fast fix, it may not be the best option based on an individual’s circumstances. Those who stand to suffer the most amid the pandemic are those who are nearing retirement and those already in retirement. The unexpected ups and downs, current unemployment, and new potential health costs in this unprecedented time leave many Americans wondering how they’ll be able to retire comfortably in the current economic climate. 

Consider these Options to Counteract the Effects of COVID-19 on Retirement Funds

Keep Current Costs Low

Take a look at current expenses and determine if anything can be eliminated or reduced. Any unused subscriptions? Are you paying for the right amount of insurance? Consider shopping around for lower rates. Can you negotiate any current bills – cell phone, credit cards, internet, anything with an interest rate, even your cable? Hold off on any major home or equipment upgrades and work with what you already have before adding on another expense. 

Use Your Home

Assess your risks for taking out a second mortgage or a reverse mortgage. If your mortgage is already paid off, look into home equity loan options. A cash-out refinance may also be available if you’re still paying the mortgage. Over one-third of Americans have their wealth tied up in their homes, so it may be worth it to see if downsizing your home is an option. If so, it might be possible to pay for your smaller home in cash and use the remaining proceeds from the sale of your old for any outstanding debts or liabilities as you near retirement. The location of your home should also be considered – the cost of living can vary significantly from state to state, so moving to a new state or country may bring you more bang for your buck. 

Plan for the Long-Term

Health care and long-term care can be an extreme cost for senior citizens. Assisted living and nursing home facilities usually top $60k+ for just one year. Long-term care insurance is costly but can help prepare you and your loved ones to pay the necessary costs. With Americans living longer each year, it’s worth it to plan on trying to stretch your retirement savings to last until age 90. Calculate how much you (and/or a spouse) would need with the assumption you’ll live to be 90. It’s also worth looking at final expense insurance, which could help cover final expenses at the end of your life. Planning for the event in advance can take the financial stress off family members left behind, whether it’s through final expense insurance or setting up a savings account with the express purpose of paying for any final expenses. 

While we’re in a global pandemic, everything isn’t all doom and gloom. COVID-19 has hit the country, and our bank accounts hard, but people will bounce back after this economic crisis – much like investors after other recessions in our nation’s history. 

COVID-19 Stimulus Checks: Who Qualifies and What to Expect

The U.S. Government has already started sending stimulus payments to Americans from the $2 trillion coronavirus stimulus bill known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on March 27, 2020. But there is still some confusion surrounding the details. Here are some things to know about the stimulus payments.

Income Requirements

The stimulus plan outlines that individuals will receive the following: $1,200 for individual tax payers with an adjusted gross income of up to $75,000; $2,400 for married couples filing jointly with an adjusted gross income of up to $150,000, and $112,500 for heads of household. Additionally, families will receive $500 per qualifying child under the age of 17. Dependents over the age of 17 who are claimed under someone else’s tax return will not receive their own payment, which means that most college students won’t qualify to receive a check. If your adjusted gross income (AGI) is more than what’s outlined above, you’ll fall into the “phase out” category—the more your AGI increases, the more the stimulus amount granted decreases, specifically by $5 less for every $100 over the limits noted above. The total phase out amounts based on AGI are: $99,000 for single filers, $198,000 for married couples filing jointly, and $136,500 for heads of household. The AGI will be based on your 2019 tax return, or your 2018 tax return if you haven’t filed 2019 yet.

Disbursing Payments

Stimulus checks will be direct deposited into the bank account listed on your 2019 tax return (or 2018, if you have yet to file for 2019) beginning mid-April. The IRS will send a physical check to your most recent address on file if a bank account is not listed on either tax return. For those whose banking information has changed since then, the IRS is developing a web-based portal where individuals can provide their banking information to the IRS online to ensure that as many people as possible can take advantage of receiving a direct deposit rather than waiting for a check in the mail. This tool is expected to be available around April 17.

You will receive a notice of payment from the Treasury approximately two to three weeks after your payment has been disbursed, which will be sent to your last known address. The notice will include the method by which payment was delivered (direct deposit or check), the address where payment was sent, and a phone number to contact the IRS if, say, your banking information has changed but hasn’t been updated and therefore you did not receive the payment.

Back Taxes

As long as you meet the income guidelines, you should still receive a stimulus payment if you owe back taxes, even federal, state, and student loans. The one exception is for those who owe child support payments.

Who doesn’t Qualify?

In addition to high wage earners and college students, other individuals may be left out of receiving a stimulus check: senior citizens and disabled people who are claimed as dependents by someone else; non-resident immigrants, temporary workers, and immigrants who are in the country illegally (immigrants with green cards, H-1B, and H-2A work visas qualify to receive payment); unemployed high wage earners: those who earned more than $99,000 last year but are now unemployed will be eligible for a rebate on their 2020 tax returns if they earn below the phase-out limits this year; Too, parents of babies born in 2020 won’t receive their $500 payment for that child until next year.

Low Income Earners

Individuals who make less than $12,000 a year are not required to file taxes. If you fall into this category and haven’t filed taxes in the last two years, you are still eligible to receive a check, but there’s an extra step involved. First, if you receive social security benefits, you will automatically receive a stimulus check. But for the estimated 10 million Americans who fall into the “low income” wage earning bracket, don’t receive social security benefits, and haven’t filed taxes for the last two years, the IRS has set up a web portal that will allow you to register for a stimulus check. Visit IRS.gov and look for “Non-Filers: Enter Payment Info Here”. The IRS has also partnered with TurboTax to set up a web page where individuals can answer a few questions and then choose to receive their payment via paper check or direct deposit.

How Entrepreneurs Can Manage their Personal and Business Finances

Entrepreneurs are tasked with not only managing their business finances, but their personal finances as well, and when needs, circumstances, and priorities don’t align with the two, managing it all can feel overwhelming. To keep personal finances from getting pushed to the side, below are some tips to help you handle your own money while overseeing your business’s.

Plan for Rainy Days

Building an emergency fund for rainy days is not novel advice, but business owners might want to stash away even more than the recommended three to six months’ worth of living expenses. Are you prepared for circumstances like irregular fluctuations in cash flow, loss of a major client, or a national pandemic? Keep in mind that the purpose of an emergency fund is not to earn a big yield on this money but to be sure it’s there and accessible, so keep it in an FDIC-insured cash bank account.

Separate Business and Personal Finances

When you first start a business, open a business bank account and apply for a business credit card for business expenses. In addition to helping you build business credit, this will streamline your tax prep during tax season, lend more credibility to your business as an actual business, remove personal liability in case of adversity, and eliminate the burden of your business’s financials from your personal accounts.

Automate Bill Payment Schedules

A common personal financial tip is to automate your bill payment schedule, so consider carrying this practice over to your business finances as well. This will hep to prevent you from getting overwhelmed with both personal and business bills, thereby avoiding late payment fees and knocks to your credit score.

Manage Your Personal Credit

You know how crucial good credit is for your business, so it makes sense to keep your personal credit in check as well. Be sure to pay bills on time even if there are months when you can only make the minimum payment. Also be aware of your credit utilization (the percentage of credit that you’re actually using versus your total available credit limit). Keeping your credit utilization below 30% will keep your credit in good standing for loan approval.

Save for Retirement

Although it’s typical for business owners to invest profits back into their business, you still need to prepare for retirement, and investing and diversifying your savings may help you save more money for retirement than you could as an employee. SEP IRAs, SIMPLE IRAs, Solo 401(k)s, and SIMPLE 401(k)s are all retirement plan options available to small businesses. Research each one to determine which would be the best fit for you and your business. As for diversifying investments, look into options like stocks, bonds, ETFs, and money market mutual funds. Allocating your assets into different funnels will give you some breathing room should your business experience a struggle period.

Look to Tax Professionals

It’s no secret that U.S. tax laws are complex, and different business entities have different taxation rules. An accountant or tax professional can help you determine what your obligations are. To streamline the process, be sure to keep clear and organized records all year long.