Tag Archives: profitability

Here’s why I still do my own taxes by hand

By Aaron Hoos on June 15, 2012 in Finance

It’s tax day today at my house.

Most Canadian personal income tax forms are due on or before April 30th, but the exception to that rule is if you own a business in Canada. Then your personal income tax forms are due June 15th. So I’m completing my taxes today and sending them in. (I didn’t mean to leave it until the last minute but some of the numbers for these forms are derived from my corporate income tax, which I just received back from my accountant on Tuesday afternoon).

It surprises people when they hear that I still do my taxes by hand — I write them out on the forms in pencil for the rough copy and in pen for the good copy. Very old school!

There’s a very simple reason for it:

When I used to be an employee (years ago), I would get my paycheck, look at the after-tax (take-home pay) number and be happy with that. I completely ignored the pre-tax amount and the enormous amount of taxes I was paying. And, like most people, I got excited when I received my tax refund… as if I had just won the lottery. But tax refund money is MY money and I had inadvertently loaned to the government as an interest-free loan. That’s why I think it’s a good idea to owe the government money on your income taxes.

After I started my business, I quickly became aware of the inordinate amount of taxes that one has to pay; I became increasingly aware of the disparity between my pre-tax income and my post-tax income. And, I started to learn about all the ways that businesses can legally reduce their tax exposure (i.e. with deductions for business expenses).

That knowledge (of my pre-tax and post-tax income, as well as opportunities to legally reduce the tax I pay) is worth thousands of dollars to me every single year. That knowledge is something I don’t want to lose. I want to be regularly reminded about the impact that every incoming and outgoing dollar has on my income tax. I want to be reminded that a big chunk of every dollar I earn is going to other things. I want to understand the influence that tax has on my business. It’s similar to why I mostly remodel my own home. The knowledge is very useful to have.

I could have my personal income taxes done by an accountant. Or I could do my taxes on software. But I know my myself well enough to know that as soon as I remove myself from sweating through those numbers with pen and paper in hand, that’s the moment I stop paying attention to taxes in my business. And before long, I’ll join the many people who mistakenly look forward to tax refunds and miss out on additional legal tax-reduction strategies.

So today, I’m sweating through some numbers and I’m probably in a bad mood (because I generally think I’m over-taxed and today of all days I definitely think that!). But it’s a good practice that I intend to maintain for as long as Canada Revenue Agency accepts paper forms.

Forget profit… Just do the first deal

By Aaron Hoos on June 13, 2012 in Business, Finance, Real Estate

Entrepreneurs put a lot of pressure on themselves to start a profitable business. Although that is the ultimate goal, it can be a huge obstacle at the very beginning. And I’ve seen that obstacle actually PREVENT entrepreneurs from starting a business — they’re so focused on “how do I earn a profit on this deal?” that they freeze up and don’t actually complete the transaction.

I thought about this problem from time to time but never put words to the idea until a real estate investing client of mine mentioned a similar problem that occurs among real estate investors. He says that aspiring real estate investors will similarly freeze up and avoid doing the first deal because they can’t figure out all the details and they’re worried about how they’ll make money on it.

The same can be said for first-time capital market investors who buy a stock and then watch that stock drop. (And there’s some kind of rule in investing that almost guarantees it WILL drop!!!)

There is a solution… and I have to attribute this solution to my friend and client, the real estate investor I mentioned above: Mark Evans (‘The DM’). Mark gives his real estate investing students some great advice that is as true in the financial and business world as it is in the real estate investing world: He tells his students not to bother trying to make any money on their first real estate deal. If they do, great. But if they don’t, don’t worry about it. Instead, just do the deal. See how it works. Work out the bugs. Watch how the money flows. You can always make money on your second and third and fourth (etc.) deals.

Entrepreneurs and capital market investors should learn the same lesson: Profit is important in the long run but in the short run, the more important lesson is getting started and learning how the business/stock/property/deal/whatever works. That takes the pressure off of making money the first time. Use whatever income you do make to cover some of your costs, but consider the real value of the transaction to be educational rather than financial.

Do the deal. Forget about profit for the first time… and learn.

I’ve recently started up a couple of other businesses and that is my initial goal. If you are starting a business, or buying a new real estate or financial investment, or even if you’re trying something new (like a new line of business or a new style of investing), steal this idea: Forget profit on the first deal. Just do the deal and “profit” from your new-found knowledge.

100 small business strategy questions

By Aaron Hoos on May 18, 2012 in Business

Many small businesses are fueled by passion. They start because an entrepreneur has an idea (or is sick of working for a boss), they grow because their ideas solve a problem and somehow that solution is communicated to the marketplace.

Unfortunately, many small businesses fail… even ones that are seemingly successful and make profitable sales. The reason is, they’re simply existing day-by-day, sale-by-sale, without any real strategy or long-term vision to give their existence any direction.

If you’re an entrepreneur, answer these 100 small business strategy questions. The answers will help you to highlight areas of opportunity that you can exploit and areas of concern that you can mitigate. Bookmark this page and come back to it regularly to work through these questions every 3 to 6 months.

With your answers, create a list of to-dos that you can act on until you come back to these questions again. [Note: Since publishing this list, I have written individual posts about some of these strategy questions so I've updated this list with the links to those other posts.]

  1. What does your business do?
  2. What does your business sell?
  3. What does your business stand for?
  4. What parts of your brand truly reflect your current business?
  5. What parts of your brand do not (or no longer) reflect your current business?
  6. What are the top 10 benefits your business provides?
  7. Who is your perfect customer?
  8. How are you adding value?
  9. What are your products’ or services’ biggest flaws?
  10. How do you define a lead?
  11. Where are your leads coming from?
  12. What demographic are your leads?
  13. How are you creating leads?
  14. How are your competitors creating leads?
  15. How will lead creation change for your industry in the future?
  16. How do you define a prospect?
  17. What is your lead-to-prospect ratio?
  18. What demographic are your prospects?
  19. How is your prospect demographic different from your leads demographic?
  20. How are you turning leads into prospects?
  21. How are your competitors turning leads into prospects?
  22. What objections do your prospects have?
  23. What objections do you NOT have an answer for?
  24. How do you define a customer?
  25. What is your prospect-to-customer ratio (close rate)?
  26. What demographic are your customers?
  27. How is your customer demographic different from your prospect demographic?
  28. How are you converting prospects into customers?
  29. How are your competitors converting prospects into customers?
  30. What has caused you to lose a sale?
  31. How do you define an evangelist?
  32. What is your customer-to-evangelist ratio?
  33. What is your evangelist demographic?
  34. How is your evangelist demographic different from your customer demographic?
  35. How is your relationship with your customers?
  36. What were your 3 most successful marketing campaigns?
  37. What were your 3 least successful marketing campaigns?
  38. What marketing and sales activities are you using in each stage of your sales funnel?
  39. How do you measure company-wide success?
  40. How do you measure personal and/or employee success?
  41. How are you improving your relationship with your customers?
  42. How can you improve the process for receiving and acting on feedback from customers?
  43. How are you encouraging repeat sales?
  44. How are you encouraging upsells?
  45. Who else can use your products or services that you aren’t currently serving?
  46. What is your business model?
  47. What other peer-businesses use the same business model?
  48. What can you learn from peer-businesses that use the same business model?
  49. What other businesses (in other industries) use a similar business model?
  50. What can you learn from businesses in other industries that use a similar business model?
  51. Who are your top 3 competitors?
  52. Who/what are your indirect competitors?
  53. What does the most successful businesses in your industry do that you don’t do yet?
  54. Why would someone buy from you instead of your competition?
  55. When should someone buy from your competition instead of you?
  56. What are your competitors doing differently?
  57. What are your competitors doing better than you?
  58. What are your competitors doing worse than you?
  59. How are your relationships with your suppliers/vendors?
  60. How can your supplier/vendor relationships be improved?
  61. What does your organizational chart look like and what strengths/weaknesses are the result?
  62. What are the next 3 roles you need to hire for?
  63. What was the last thing you tested in your business?
  64. When was the last time you tested a price change and what were the results?
  65. What political changes do you see affecting your business/industry?
  66. What economic changes do you see affecting your business/industry?
  67. What social changes do you see affecting your business/industry?
  68. What technological changes do you see affecting your business/industry?
  69. What financial best practices have you implemented?
  70. How have buying habits changed in your industry?
  71. What trends are influencing buying habits?
  72. How will buying habits change in the future?
  73. How has your industry innovated in the past decade?
  74. How has your business innovated in the past year?
  75. Where does your business plan to innovate this coming year?
  76. How are you investing in your business’ growth (i.e. innovation, new equipment, etc.)?
  77. What is your plan to scale up your business?
  78. If you had to get rid of 90% of your customers, what 10% would you keep?
  79. If you kept 10% of your most profitable customers, what would that demographic look like?
  80. How can you increase your ideal customer base?
  81. How can you decrease your less-than-ideal customer base?
  82. Where are people talking about your business online?
  83. What are people saying about your business online?
  84. What is your plan if your industry suddenly received a lot of bad press?
  85. What is your plan if your business suddenly received a lot of bad press?
  86. What is your plan if your marketing went viral and you suddenly had 10x the customers?
  87. What contingency plans do you a have in place for natural disasters?
  88. What would happen to your business if you were unable to work?
  89. What has changed about your business since you started?
  90. How has your income trended since you started?
  91. How has your profit margin trended since you started?
  92. What plans do you have to increase income next year?
  93. What plans do you have to increase profits next year?
  94. Where do you see your business in 1 year?
  95. Where do you see your business in 5 years?
  96. Where do you see your business in 10 years?
  97. What strengths/assets can you leverage for growth?
  98. Where are your blindspots?
  99. What are the top 3 problems keeping you from advancing to the next level in business?
  100. What about your business, industry, or customers keeps you awake at night?

The 5 elements you’ll find in every successful sales funnel

By Aaron Hoos on June 28, 2011 in Business

Every sales funnel looks different: One company might sell services through a lengthy relationship-building effort; another company might sell a product as an impulse item at the cash register of a grocery store. However, all sales funnels share a few things in common.

Below, I’ve listed five of the most important elements you’ll see in every successful sales funnel. And if your sales funnel is struggling, check to make sure that you’ve mastered these elements first.

  1. Value: Your potential buyers have problems they want solved or needs they want fulfilled and the sales funnel relationship is your way of telling them that you have the solution or fulfillment they’re looking for. But Prospects are only motivated to buy from you when they perceive value. That is, your ability to solve their problem or fulfill their need must actually make it worth their time, effort, energy, and money to listen to your sales pitch and hand over their hard-earned money. I call this the pickaxe factor.

  2. Target market: No business can be all things to all people so every business must have a well-defined target market. It can be a big target market, and it can even include several different markets, but the target market(s) need to be well-defined. When you know who is most likely to buy from you, you can shape your marketing and sales content to speak to that group in a way that will compel a buying response. (Find out why ‘everyone’ is not your target market).

  3. Clear next steps: A poor sales funnel haphazardly dumps marketing content in a variety of channels (Facebook, Twitter, a blog, an article directory, etc.) and the business hopes that the sales funnel contact will click around to gather enough information to move forward in the sale funnel. But that’s not how it works. A sales funnel contact has a mindset and that mindset slowly evolves over time. The business’ job in marketing and selling is to speak directly to the contact’s mindset and slowly nudge that mindset to evolve toward full acceptance of what is being offered. (Read a previous blog posts about how mindsets work in a sales funnel and how you use steps to move contacts forward in your sales funnel).

  4. Opportunity to buy: I’ve said this before and I’ll say it again: Marketing is sexy and fun and difficult to measure. Selling, on the other hand, is challenging and sometimes a grind, and there can be a lot of rejection. Therefore, businesses tend to do too much marketing and too little selling… and then business owners scratch their head and wonder why no one is buying. A good sales funnel includes moments (in the Prospect stage) where the seller asks the Prospect if they would like to buy. (Read a previous blog post about this very topic — how a lack of selling is causing sales funnel failure).

  5. Profitable sales: Successful sales funnels have a track record of profitable sales. Okay, some of you are reading this and thinking “duh! Isn’t that obvious?” but it may surprise you to learn that it’s not. Businesses use a variety of measurements to define success. Things like: “Do we have a great logo?” or “Is our blog being visited by more than 100 people per day?” etc. Even businesses that do strive for profitable sales don’t always measure profitable sales as much as they measure other things. (I confess, I’ve been guilty of that in the past, and here’s an example of a client whose sales funnel was not focused on profitable sales). But the only thing that should determine whether or not a business is successful is: Does the business have profitable sales? If your business does not have as many profitable sales as you’d like, take a closer look at your sales funnel to determine how you can make more profit from your sales.

Does your sales funnel have all 5 of these elements? If your business is struggling, you might want to think about destroying your sales funnel and starting over again from the ground up to make sure that these 5 elements are there. (Here’s a 3-step process to help you or read about how to retrofit the sales funnel in an existing business).

There are other reasons that a sales funnel might be very successful or not successful at all, but these 5 elements are going to be the 5 biggest factors that you can influence to create watershed change in your sales funnel… and ultimately in your business.

Why your sales funnel is your business’ most important asset

By Aaron Hoos on January 2, 2011 in Business

Your sales funnel is the most important asset in your business (and yet, it’s one of the most overlooked aspects in many businesses, too!).

With a fast flowing, well-connected sales funnel, you’ll sell more products or services in less time and at less cost, resulting in higher revenue and higher profit. No other part of your business has as much significance on the survival of your business than your sales funnel.

When you understand and master your sales funnel, you create new opportunities to:

  • Focus your various marketing and social media efforts on the most promising areas (without wasting time or money on marketing that delivers zero business benefit).
  • Reduce your lead generation effort while increasing the quality and quantity of leads.
  • Qualify your prospects faster and more accurately and send through the best prospects (while making money even on the ones who don’t qualify).
  • Sell more — and more often — to customers who turn into eager evangelists; increase cash flow and profit.
  • Reduce your expenses by focusing on only the most effective marketing and selling efforts.
  • Automate your business to save effort and to allow you to put your focus elsewhere on your business.

And that’s not all. A sales funnel should be the backbone of your business, from which all other aspects of your business spring forth. Your sales should be tied into your sales funnel (which might sound like a funny statement, but many businesses aren’t set up that way). Your marketing should be tied into your sales funnel. Your customer service efforts should b tied into your sales funnel. Your accounting should be tied into your sales funnel. Everything your business does should be done with the sales funnel in mind.

When that happens — when you start with a sales funnel and move outward — you create a tightly integrated, low-cost, high profit business model that is focused on results.