Billions of stimulus dollars are up for grabs by small business

Want a new customer?  The world’s biggest buyer of anything and everything is somebody you already know. His name is Uncle Sam, and thanks to new economic stimulus legislation, he’s got more money to spend than ever before — hundreds of billions of dollars in new spending on top of federal government purchases that already totaled over $425 billion per year. And he’s itching to spend it.

The big deal for small business is this: By law, at least 23 percent of all government buying must be targeted to small firms. Billions sometimes go begging because the government can’t find enough qualified small businesses to take the money. Selling to the government — the business-to-government (B2G) market — can provide serious revenue for your business. And it may not be as complicated as you think.  What’s more, this isn’t only for “big” small businesses. Even one-person or home-based small businesses can be awarded contracts. 

Still, you can’t simply raise you hand to get money (unless you’re a bank, perhaps); there is a formal “process” with plenty of rules.  Your three basic steps are these:

1) Get comfortable with how the contracting process works;

2) Find out if your business is qualified to sell to the government, and whether it’s the right move for you;

3) Register and start pursuing opportunities.

Must-Know Government Websites:

Start at the U.S. Small Business Administration website which has an excellent introduction to government contracting opportunities for small business. It includes these key components:

• How small businesses sell to the government
• How the government defines a “small business” for this purpose
• Myths and realities of government contracting

To start the process, you’ll need to first classify your business, and then register your company to take part. This Government Contracting Checklist for Small Business can help you sign up, start up and smarten up.

Federal Business Opportunities (FedBizOpps.gov) is the U.S. Government’s central online marketplace for government contracting. At FedBizOpps, commercial vendors (that’s you) and government buyers (the guys with the money) can post, search, monitor and retrieve opportunities. Anyone can search for opportunities without having to register or login (but you’ll have to register to actually apply for contracts). Once you register, you can search for specific opportunities for your type of business, organized by NAICS code.

NEW! Economic Stimulus Act Opportunities:  This is brand new to the FedBizOpps site, and has the absolute latest of selling opportunities coming out of the economic recovery bill. In the time it took me to write this, another dozen showed up.  

Central Contractor Registration (CCR) is the primary registrant database for the entire U.S. Government. It collects, validates, stores and disseminates the information to a variety of government agencies.

Government Contracting Field Staff:  Government contracting is full of acronyms that stand for a variety of officials involved in the process – PCRs, CMRs, COCs, and more. This explanation of who does what will help.

Private Sites that Offer an Assist

Given the size of the government contracting market, there are hundreds of firms and websites that offer training in the process, consulting and access to listings. You’ll find a wide range of helpful options under “Government Procurement” at Business.com.

Onvia.com helps businesses find government as well as private sector contracting opportunities. Their new site Recovery.org is devoted entirely to tracking economic recovery spending at all levels of government – and includes real time access to projects available for bidding.   

TargetGov.com offers tools that help contractors connect to the right people within federal, state and local governments. Search the Government Buyers Guide to find the specific procurement officials for your category of products or services.

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We're talking PURLs, but not this kind

Customers expect a lot these days (especially the tech-savvy type) and personalized attention — from your first marketing message to post-sale followup — can provide your business with a huge marketing boost. “Personalized URLs” —  or PURLs — are a marketing personalization tactic that’s been used by big companies, but now becoming available to small business, along with custom landing pages and so-called micro sites.

PURLs are a natural Web extension of a market tactic that’s been happening for years.  Just think of all those personalized credit card pitches you used to get in the mail. But as personalized marketing firm OnDialog, Inc. points out, few small and medium-sized businesses have had the budget to conduct personalized marketing campaigns in the past. New Web-based systems are changing that equation, offering easy and low-cost ways for small business owners to pursue this powerful tactic.

Using demographic details from your customer or prospect lists, OnDialog’s service, for example, can generate PURLs that take prospects to a Web page that describes a specific offer or promotion in greater detail. An example of a PURL would be www.YourBiz.CustomerName.com, or it could contain other personalized info.  PURL technology is one of the latest tools for small businesses looking to expand their Web-based marketing, and can be used in combo with direct mail (for example) to boost response rates and improve tracking.

The OnDialog software-as-a-service approach is making it possible for even small companies to talk one-on-one to customers and prospects via the Web.  The company’s whitepaper on PURLs explains how it works in greater detail.

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Our special blog guest offers his commercial auto insurance advice

Business owners, professionals and startup entrepreneurs often ask me about commercial auto insurance —specifically, if and when they need it, rather than personal coverage.  It’s a tricky question, and the answer has lots of “it depends…”  So I turned to my new bud the GEICO Gecko for his sage advice on the topic.

Sure, sure, I know. Your typical tropical or sub-tropical lizard isn’t generally known for insurance expertise. But the Gecko is a real go-getter in the field, and happens to represent one of America’s top three private passenger auto insurers.  In case you’re wondering, by the way, the Gecko first went to GEICO in ’99 because people kept confusing the name “GEICO” with “Gecko.”  (He’s mum on how he gets along with Caveman.)

He does have a particular penchant for clams, however (check out his personal bio), so with the promise of a few, he cheerfully offers up these tips about commercial auto insurance, and when you need it. 

Who’s the registered owner?:  The Gecko says this is a slam dunk in at least one case: “When the vehicle is registered in the name of the business, you definitely need commercial auto insurance.”  But don’t assume the reverse. If it’s registered in your name,  “it does not automatically mean that you should get personal auto insurance on it,” says the Gecko. “A lot of times a solely owned business will have a vehicle registered in the name of the owner.  If the vehicle is being used primarily for the business though, you will need commercial insurance. ”

Who drives?: Another sign that you need a commercial policy is if other employees at your company are driving the car.  Commercial insurance policies allow you to list employees as drivers. 

Business Use: The next question the GEICO Gecko says to ask is this: “Is the vehicle getting regular business use?” Regular business use is defined as use for commercial purposes, on average, more than 3 times in a 1 month period. If your answer is “Yes,” then commercial insurance is right for you.  

Those are the basics, but there’s more to know so you can also see GEICO Gecko’s complete and uncensored guide to knowing when you need commercial auto insurance at Business.com.  It includes key examples of business vs. personal usage for real estate agents, lawyers, home health care workers and others.

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IRS audits of small business tax returns are up – way up, and headed even higher. The Internal Revenue Service has said loud-and-clear that it believes roughly $100 billion of income from small business, home office and other solo-operator sources goes unreported each year.

Small business tax audits are up; Don't be next!

As a result, the tax collecting agency has amped up an enforcement effort aimed squarely at a wide range of small business returns, including S-corporations, LLCs, partnerships and especially sole proprietors, who generally use a Schedule C to a personal 1040 return to report business-related income. The audit stats get ugly. Sole proprietors – the most dominant form of small biz ownership – are 10 times more likely to be audited than other business entities.

It’s little wonder. The IRS spends less to pursue big corporations, wealthy tax cheats and money-laundering drug lords combined than it does going after small business owners.

If there’s “good news” here, it’s this: You can lower your odds of a tax audit by taking certain steps with your tax return, and avoiding others – you just need to be “DIF” score savvy. DIF is hush-hush Fed-speak for “Discriminate Information Function,” the super secret IRS sauce that decides if your small business related tax return is ripe for an audit. While DIF details are, well, secret, the steps below can help you avoid the audit hook. Each choice you make (how to file; when to file; what deductions to claim) has an impact on your audit odds. Here are 16 things you can do:

• 1. Be accurate, thorough, neat and on-time (but not early). Sloppy returns, math errors and rounded numbers raise flags. Using tax preparation software makes your return look more professional and helps you avoid mistakes. Filing early only gives the IRS extra time to look it over. Accuracy starts with keeping good records; if the IRS ever questions anything on your return, the burden will be on YOU to prove it’s right. If your records are sloppy, this will be difficult.
• 2. Avoid filing electronically. Sure, electronic tax return filings are convenient, and in some cases even required. But the IRS hires temps to enter data from millions of paper returns, and they capture only about 40 percent of the info. Electronic filing gives IRS fast access to 100 percent of your return.
• 3. Explain yourself clearly. Avoid vague expense categories such as the infamous category some business owners use called “miscellaneous.” If your business is claiming unusual deductions of some kind – anything an IRS reviewer might not have come across a thousand times before — provide an explanation or documentation.
• 4. Make your estimated tax payments and issue 1099 and W2 forms on time. Late quarterly and estimated payments, non-payments and underestimated amounts draw IRS ire. Know the deadlines and meet them. File 1099s and W-2s using easy online tax services such as FileTaxes.com which are cheap and easy.
• 5. File on time: This is kind of a no-brainer. Late returns raise flags. It’s easy to file for an extension, so there’s little reason to miss the initial deadline. Just remember that any money you owe is still due by the original filing deadline; the extra time is for doing the paperwork.
• 6. Beware of your income-to-deduction ratio. Your tax audit odds for a small business rise if the difference between expenses and income exceeds about 52 percent. But total deductions are only part of it. One especially large deduction can also raise flags, even if others are small or in line with other businesses in your industry.
• 7. Inc. yourself. Sole proprietors who file a Schedule C for each business get audited most. To avoid the higher risk of sole proprietor audits, consider making your business a corporation or limited liability company (LLC).
• 8. Hire a CPA or other tax pro. Tax rules that affect small business are impossibly complex, far-reaching and downright confusing. Even for relatively straightforward situations, getting professional tax preparation advice can be a huge help in avoiding audit triggers for your particular case or industry. Check online sources for different types of accounting firms and CPAs specializing in your area.
• 9. Be wary of taking a home office deduction. Tax returns that include a deduction for a home office are a prime IRS target, so if you plan to take a home office tax deduction, make sure you know the rules. A home office must be a completely separate room or area used exclusively for business. Here again, a CPA can be invaluable in helping you do it right, or perhaps deciding that the benefits aren’t worth the hassle.
• 10. Avoid the independent contractor trap: Another favorite IRS target – one they are convinced yields a lot of extra cash – is miss-classified workers. If your business uses freelancers and other types of independent contractors, make absolutely certain they qualify for independent contractor status or the IRS may determine they really are employees and stick you with a big bill for back payroll taxes plus penalties.
• 11. Watch those startup cost deductions: Many startup entrepreneurs and new business owners assume that money they’ve spent to get the business up and running can be deducted immediately. But that’s not always the case – many startup costs must be “depreciated” over time. (Check out the latest “bonus depreciation” tax rules for small business included in the 2009 economic stimulus bill.)
• 12. Don’t “forget” to report income: The one thing the IRS hates above all else is unreported income. And don’t kid yourself – the tax agencies are far more sophisticated about tracing money than they’ve ever been. Also remember that the IRS has extensive data on typical income levels and deductions for every type of business that exists. If yours is out of line with others like you, an audit could result.
• 13. Don’t mix personal and business deductions: The IRS is on the lookout for small business owners who try to deduct travel, entertainment or other costs (cell phones, merchandise, etc.) that are really personal, and not business related. Remember that only business-related expenses can be deducted. Make sure you understand the rules on what portion of business entertainment costs are allowable as a deduction. And avoiding taking mileage deductions for personal use of a vehicle…another IRS audit hotspot.
• 14. Make your hobby a true business: If the business you are claiming all those deductions for looks more like a hobby to the IRS, you could trigger an audit and end up owing back taxes. A real business has revenues at least some of the time, and looks, acts and spends like a business as well.
• 15. Report barter and auction income: The fair market value you receive through business barter transactions may indeed be taxable, even if you did not receive cash. Likewise, income generated from selling items via online auction websites needs to be reported.
• 16. Be honest. Every year, the IRS gets better at using high-tech means to track your business income. And some things are just obvious. If you claim lots of expenses, but show little revenue to pay for them, the tax folks get curious.

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What Works? Price and Value!  Big retail brands — especially at the high end — are struggling; often as a result of their own discount strategies. Consumers who’ve cozied up to deep discounts won’t buy anything at full price.  Oddly enough, consumers are seeking the two things they’ve always looked for…price and value.  Result:  Retailers with a business model based on affordable quality are seeing sales rise.  A few are even knocking it out of the park. Those selling exclusively online have another advantage; less overhead, meaning the savings can be passed along.

What Works for Business came across three examples of web-based retailers that are seeing big revenue jumps they attribute to a marked consumer shift toward better value:

The Tie Bar:  Since the site launched in 2004, The Tie Bar has been selling department-store quality 100% silk ties that typically retail for $50-$80 for around $15 each.  In 2008, one of the worst years for retailers in a generation or more, The Tie Bar says that its sales rose 55%.  What’s more, the online tie retailer reports an astounding 70% sales increase so far in 2009, making it one of the largest necktie brands on the Internet. 

Coastal Contacts: Now one of the web’s fastest-growing vision care suppliers, Coastal Contacts sells designer eyewear (from names such as Gucci and Christian Dior) at 50-70% off prices seen on these items elsewhere.  Over the past year, Costal captured sales of $31.3 million, an increase of 24 % from a year earlier.

Wine Chateau: An online wine and spirits retailer, Wine Chateau sells wine from its huge selection at up to 50% off retail prices of brick and mortar wine stores. The site often features promotions such as 10 bottles of wine for under $10; or 15 bottles under $15.  Wine Chateau reports sales of $15 million for 2008, a 250 percent increase from 2007.

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As you may know, the economic stimulus law passed in February includes key provisions that allow struggling small businesses to re-file their taxes to carry back net operating losses (NOLs) up to five years.  Result: Qualifying small businesses with losses can get immediate refunds of income taxes paid in prior years.

But how, exactly, does it work? There are decisions and deadlines you have to make.  For an expert view on how to take advantage of this stimulus bill tax break for small business, we’re including a guest post below from William Massey, Sr. Tax Analyst in the Tax & Accounting arm of Thomson Reuters, a top provider of tax info and solutions to accounting and tax professionals.

From William Massey, Senior Tax Analyst, Thomson Reuters:

Important decisions must be made for an eligible small business to achieve maximum tax savings from this provision. The IRS has issued favorable guidance on this provision and says that it will act quickly to get refunds to businesses carrying back losses under the new rule. But, in addition to making correct choices, a business must follow certain filing procedures to qualify for this important tax break and, in some cases, must do so before April 18, 2009.

Details of the new NOL carryback:In general, NOLs may be carried back two years and forward 20 years (different rules apply for certain specialized types of losses and the carryback period may be waived). For NOLs arising in a tax year beginning or ending in 2008, the Recovery Act permits eligible small businesses (ESBs) to elect to increase the NOL carryback period from two years to three, four, or five years. For calendar year businesses, the election is available only for 2008. A fiscal-year taxpayer whose year ends in 2008 can make the election either for its fiscal year ending in 2008 or its fiscal year beginning in 2008 and ending in 2009, but not both.

An ESB is a trade or business (including one conducted in or through a corporation, partnership, or sole proprietorship) with average annual gross receipts of $15 million or less for the three-tax-year period (or shorter period of existence) ending with (as clarified in the IRS guidance) the tax year in which the loss arose (as opposed to the tax year before the year of the loss, as some had read the statutory language). The IRS interpretation generally is more favorable to taxpayers because, for example, more calendar year taxpayers would qualify using 2008 receipts rather than 2005 receipts, when economic conditions were much better.

In determining whether a partnership or S corporation qualifies as an ESB, the gross receipts test applies at the partnership or S corporation level but the election is made by the partner or S shareholder, as the case may be.

Deadlines for making the election:A taxpayer who already filed a 2008 return may still make the election to use a three, four or five year carryback by the later of: (A) six months after the due date of the return (determined without extensions), or (B) April 17, 2009. A taxpayer who previously elected to waive the normal two-year carryback period may undo it and make a new election no later than April 17, 2009. A taxpayer who has not filed a return for the year of the loss, has until the later of: (A) the due date (with extensions) of the return for the year of the loss, or (B) April 17, 2009 to make the election.

Deciding which choice or choices to make:Small businesses with a qualifying NOL must decide whether to waive the carryback period or to use a two, three, four or five year carryback period. Fiscal year filers have the added choice of which year to use. These choices are quite complex and require a detailed examination of the tax picture of the business. The key factor in deciding whether to elect to carry an NOL back three, four, or five years should be which election will result in the largest tax savings. It is especially important to make the right choice because once made, the choice is irrevocable.

Getting a quick refund: Corporations making the election can get a quick refund by filing Form 1139. Individuals use Form 1045 to get a quick refund. The IRS has supplied detailed instructions as to what information must accompany these forms.

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Here’s our latest collection of What Works for Business 10-Second Solutions:

Scanners Get Smarter: Fujitsu just launched two new SnapScan scanners for PC and Mac users with great new small biz features. Convert stacks of different docs to digital images without having to change settings — scanner auto-adjusts to sizes, page orientation, colors, 2-sided, etc.  Speeds up to 40 images per minute. SnapScan S1500 and S1500M ($495) available at Fujitsu site.

crowdSPRING Draws a Crowd: The new online marketplace for creative design services (logos, websites, brochures, etc.) says it just hit $1 million in total deals done since May ’08.  Works this way: Post what you need, when you need it and how much you want to pay. Money goes to escrow.  Creatives from a pool of 17,000 worldwide will submit actual designs – not bids or proposals – for you to review, sort, rate, provide feedback and collaborate on ’til you find the “the one.” Money back if you don’t get at least 25 entries.

Get Notice of Packages or Mail: I keep a mailbox at a UPS Store as a convenient place to receive packages and some types of mail. But I hate making a trip there for an empty box. Now UPS Stores (there are 6,000 worldwide) will send a text message or an email when there’s a package — great What Works for Business time saver.  And contrary to popular belief, you can get regular mail or FedEx deliveries there, too. Locations and details at The UPS Store website.

How to Send Big Files over the Web: YouSendIt is a monthly subscription service that many biz owners are using to cut costs of sending documents via courier or overnight. A medical consultant, for example, saves some $8,000 yearly sending files digitally rather than large binders, paper manuals or burned CDs. Companies of all types of using this technology to cut costs and speed projects along.

Get Tech Security via the Web: Computer security — like anti-virus protection — isn’t a service most small and mid-sized businesses think about getting via the Internet. But Panda Security, a giant global IT security solutions company, now offers simple, cost-saving ways for smaller businesses to get hosted computer security solutions they can tap into online. Details at Panda Security site.

Digital Signage can Spark Retail Success: Amazing (and affordable) new digital signage technology is a great way for small businesses to turn heads, and attract customers.  A small firm called advancedMethod has a new express digital signage system that’s easy to use and includes the basic player and software needed to create your own content right out of the box, plus industry-specific templates.

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Now here’s a new website that truly taps a business pain point — naming a product, service, website or company.  It’s called NamingForce, it just launched, and it’s free (kind of). I don’t know about you, but I’ve spent hundreds of hours (at least) over the years brainstorming names for all kinds of things.  After a while, the well runs dry.  But NamingForce uses “crowdsourcing” to help businesses of all sizes, as well as startup entrepreneurs, find great names. Crowdsourcing is web-speak for telling the world what you’re looking for, and letting the denizens of Webdom line up to offer their ideas.

Name submitters — called recruits — are offered incentives to participate.  NamingForce itself pays a reward for each naming idea that is eventually selected; generally, it appears, about $25.  Businesses that submit a naming assignment to the site can also tack on an additional reward if they wish, to boost submissions.  Pony up $75, for example, and your name search is worth $100 to the winning recruit.

But NamingForce adds another element as well. Once you submit a naming assignment, and recruits have submitted suggestions, the public can then vote on the submitted names.  So while you still pick any “winner” you want, you also get the benefit of a straw poll showing you what others think about the various names.  Successful recruits can earn a spot on the site’s Top Recruits List and earn more money (a 25% bonus) when businesses specifically ask for their submissions.

Already have a name you want to test out? In addition to finding names, NamingForce lets you test the popularity of names you’ve already created, for free.

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Jobvana.com — which just received a new jolt of venture juice — is a terrific new online marketplace where service providers, solo entrepreneurs and other biz owners or professionals can market their wares and find new customers — for free. Electricians, contractors, guitar instructors, nannies, business consultants, lawyers, insurance agents and many others are already on Jobvana.  John Chapple, a Yahoo board member, is a backer via Hawkeye Investments.

Jobvana is kind of a combo social site and biz services marketplace, and seems especially well-suited to solo operators, because, 1) they give you a beefy lineup of tools to market your biz, including a home page; 2) the site’s social features leverage the best qualities of social linking to help generate leads and connections; 3) it’s free.   It’s still new, so traffic to the site isn’t big…but it’s growing.

Jobvana gives buyers handy tools to find you — including the ability to filter by cities and categories such as Professional (computers, finance, legal, medical), Skilled Trade (plumbing, construction, landscaping), Creative (writing, music, photo), Instructional (sports, fitness, personal improvement)and Family/Domestic (children, pets, food, home).

It’s worth a trip to the site to poke around and see what’s there.

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When it comes to managing their personal finances, many entrepreneurs become notorious numskulls. Most are so caught up in business-building that their personal ledgers are lame. Software such as Quicken or Microsoft Money can save the day.  But you’ve gotta buy, install, use, update and apply add-ons to these programs, which takes time, effort and a bit of cash.  So many entrepreneurs stick to the old “envelope” filing system.

Mvelopes offers an alternative — a way to effectively manage personal finances online.  It’s been around a while — launched in 2004 as an online subscription service — flying largely under the radar. But tough (an understatement?) economic times are spurring more biz owners to seek help budgeting, paying bills, reducing debt and generally taking better control of their personal bottom lines.

Here at What Works for Business, we  love useful web-based apps, and this one has years of upgrades already under its belt.  The $129 it costs annually ($189 for 2 years) is pocket change compared to the time, money and financial pain it could save you.  Features you get:

• View all of your transactions and balance info in one place. Plan and track purchases.
• Automatically retrieve, rename, and assign transactions from all your online accounts.
• Receive, view and pay your bills all online. Up to 15 payments per month are included in the cost.
• Track IRAs, 401(k), stocks, mutual funds, as well as your mortgage and auto loans.
• Unlimited live customer support and product coaching via chat or email, or view product tutorial videos, online help manuals, or the Member Forum to find answers and information.

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