Yes, that title is a little over the top, but from where I sit, as a tax professional, cash isn’t the best medium to have on hand. It’s losing its value daily, it’s devilishly hard to keep a grip on, and for most people?
It’s a little too convenient.
Now, for business owners, this isn’t about managing down business profits through deductions and purchases, it’s about making smart decisions in your business and in your retirement accounts and investments.
It seems like every year, especially around tax season, I hear business owners lamenting their tax bills (and I completely get those can be overwhelming) and looking for the easy button on their tax liabilities.
Here’s a hard truth: you’ve got to pay taxes.
…But there’s a flip side to that, and it reads, “You don’t have to pay excessive taxes!”
Making the right contributions and structuring your business in specific ways is the real solution to lowering your liabilities, not buying another new vehicle, or a new PC for the office.
And these aren’t really “do it yourself” tasks.
A far more effective way to really save on business taxes begins with one basic step, and it might seem painful, but let me spell it out…
Make more money.
Sales cures all things, and when you build your business to provide robust sales AND ROBUST PROFITS, suddenly, paying taxes doesn’t “hurt” as much.
How about I give you an example?
Let’s say your average client has an annual value of $2,500, and your average annual sales are $200,000. When you try to manage your income and mitigate ALL your tax liabilities, you quit thinking in terms of profitability and merely try to run out of money by the end of the year.
So let’s change that. Let’s rethink the idea and raise the value of the client to, say, $3,500 and build profit (and, subsequently, taxes) into our equation. Now, we can spend more on marketing, staffing, customer acquisition and conversion, and, yes, “supplies” and “equipment.”
…But instead of managing numbers down, we’re managing them up.
We’ve turned that $200,000 into $300,000 and finally are exerting control on our finances, so even if that tax bill is, say, $10,000, well, we’ve made an extra $100,000.
Would you spend $10K to clear $90K?
I thought so.
Let’s get through tax season and quit trying to nickel and dime the tax bill; then? Let’s meet and adopt a new way to think about your business, cashflow, and where the profits really should be going.