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Taxes in Business

 

Most people would get pretty excited if they were told they had to spend $54,000 in three days.  But, in all honesty, nothing could be further from the truth when you own your own small business. Today's story doesn't start on January 1st when the fiscal year ends. My story actually starts three months prior to that, around October 1st. That's when I begin my end of year budgeting. This year I planned it a little too tight.

Start Planning October 1

What am I talking about? On October 1st I start to forecast where my gross revenue is going to be and where my expenses are then I try to get those to match up as close as possible to eliminate as much profit as I can from the company. The reason I do that is, Uncle Sam will take 30% of all the profit my company shows. Don't get me wrong, I love what Uncle Sam's doing but I don't feel like giving them 30% of all my hard-earned labour. In fact I just don't think Uncle Sam has the same interest in spending my money the way that I want to spend my money. So that gives me just enough time that I can reinvest all my funds and build my company to where I want to go instead of giving that money away. This year I didn't budget quite right. In fact, I planned too tight. I tried to get those numbers to match up but sometimes you don't see the little things that take you by surprise and that was what happened to me this year. Some major repair bills came in; you've seen that in one of the other videos. When those repair bills came in, it didn't leave me enough funds to pay the necessary things that I could forecast for such as, insurance bill for $20,000.

Be Prepared

I was prepped and ready for that. Also, a fuel bill of $10,000, no big deal, I knew that was coming but when my funds are eaten up by unexpected repairs I've got to now have a quick cash injection. What three days left in the season, I took the money that I had earned off from a demolition job which some of you may be familiar with. I was standing inside of a house talking about doing a kitchen remodel. (We are doing an extreme kitchen remodel today. There's nothing like opening up the view a little bit right?) I used those funds to inject money back into the company so that I could pay my repair bills, insurance, rent, I could make payroll and I could give bonuses to each and every one of my guys. It's those little things that you've got to be ready for. As a business owner, you're going to always have surprises. There's never a dull day. I see some of the absolute best businesses making the most preventable mistakes and that is starting their fiscal planning after the year ends. This means they are being reactive.

January 1st is too Late

So January 1st comes and they start doing their taxes; it's too late at that point. They can't do anything but react to what has already happened. Believe it or not, the chimney is the most dangerous part of a demolition job because it can kick back and kill the operator. Just like we've planned how we're going to take down that chimney safely, you need to pre-plan how you're going to end your fiscal year. If you begin your planning three months prior to the year ending, you may have some budgeting and you may have some issues that you have to address but that gives you enough time to plan so that you can make everything match so there are no surprises.

Taxes are 30% of the Equation

Taxes are 30% of the profit equation. They're 30% of the success or failure of your business. Do not become a victim.  Begin your planning ahead of time. Do me a favor, set yourself a reminder on your super phone right now to start your year and planning around October 1st. When you set that reminder, put in it, watch dirt monkey’s video on why he had to spend $54,000 in 3 days. That should hopefully drive home the message. You need to start forecasting where your gross revenue is going to be, where your expenses are going to be and hopefully get those to match as much as close as possible so that you can keep all of your hard-earned money. It's a struggle each one of us faces. It doesn't matter if you're an employee or if you own a company. We all deserve to keep as much of our own money as possible. When you start planning ahead you have a better chance of doing that. Become proactive, not reactive. I hope this video has helped you guys out. God bless, go get them.  

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