Take heart that the news is better than feared. For small businesses, a 2013 plan can be created with these financial details in mind.
Fortunately as of early New Years Day 2013, the news appears to be far more positive than originally anticipated.
According to Newsmax, "The measure would raise taxes by about $600 billion over 10 years and delay for two months across-the-board spending cuts." Consider how your business will be affected by the good, the bad, and the ugly.
- Income taxes for business owners making over $400,000 and couples making over $450,000 have retained their tax cuts at least for now. (The agreement between the Senate and the President is still tentative.)
- Taxes on capital gains and dividend income only increased five percent rather than the feared 58 percent increase in capital gains. The tax moved from 15% to 20%.
- Medical businesses have a one year reprieve. The proposed 27% cut in Medicare reimbursements to doctors has been delayed by one year. (Doctors are already openly declining taking on any new Medicare patients. Increasing the patient load with the onset of ObamaCare requirements and taking a huge cut in pay at the same time has numerous medical professionals considering closing their practices. If this occurs, it will intensify the problem for the remaining doctors.) This reprieve is good even if it is only for a year.
- Payroll taxes will increase to 6.2 % which means a two percent tax increase on the employer's share of payroll tax for every employee and a four percent tax increase on the employer's payroll.
- Unemployment benefits will be extended for the long-term unemployed. This is great news for the unemployed, but the employer will be paying for this benefit through their unemployment insurance on both a state and federal basis. At this moment, employers have not received notice of the increase in unemployment insurance rates; however, it is a guarantee that the notice will be in the mail the minute the agreement is finalized. Neither the states nor the federal government seem to have the funds to absorb this increase; the employer will be footing the bill. This is especially difficult for the employer who was forced to lay off employees due to a lack of funds to continue their employment.
- Government spending will continue in its current pattern for at least two more months before any spending cuts start impacting the Pentagon. The details of the delay in $109 billion worth of across-the-board spending cuts have yet to be revealed. Currently child tax credit, earned income tax credit and up to $2,500 tax credit for college tuition will not be included in the cuts.
- The deal is only tentative at this point. Potential changes are still possible.
What does this mean for small business owners?
Take heart that the news is better than feared. A 2013 plan can be created with these financial details in mind.
- Readjust the expense budget. Calculate the additional payroll expense and unemployment insurance expense.
- Calculate which properties, if any, should be placed on the market. A 20% capital gain tax is only one-third of the feared rate. With this in mind, selling a property to maintain cash flow may once again be an option.
The best option for covering expenses is to offset them with additional revenue. Start planning your marketing campaigns for 2013.
- As an immediate measure, design a sales flyer to be posted strategically in highly visible areas which your target market would frequent and mail the sales flyers to your "A" list of clients. Add a perforation and include a coupon or entry form. This form will assist in tracking the response rate and encourage your customers to take action rather than merely reading the sales sheet.
- Create a series of follow-up campaigns to continue keeping your name visible in the marketplace. Stagger the campaigns among your A, B and C customer lists. Add to the variety by mailing a postcard campaign which ties to a social media blast, a sales flyer with a QR code to your product order page and another postcard campaign with a code for a special discount or special bonus offer.
The best way to offset expenses is always to increase revenue. Regardless of the decisions of the government, increasing revenue with effective marketing is always an excellent strategy.
Bio: Elaine Love's credentials include Masters Degrees in Applied Communication and Alternative Dispute Resolution, 30 years of entrepreneurial awards including "International Innovator of the Year," the designation of World Class Certified Speaking Coach, the author of Emotional Ice Water and author for PrintPlace.com.