So, you have decided that scaling your business is what you want – you want the growth, the additional revenue, the dynamism of it – and, ultimately, the freedom that scaling up can offer you, if you do it right.

Why Scale?

Why Scale? Because scaling your business up – done properly – can allow you to enjoy the fruits of your labor, because ultimately you can either:

  • Work on your business, rather than in it – i.e., up to your eyeballs in day-to-day, hands-on involvement in the daily tasks. Instead, you can take a bird’s eye view – see the big picture, and evaluate strategic opportunities for further growth as the day-to-day tasks are handled by your crackerjack team.
  • Sell your business – either to retire or start a new venture. Because a profitable self-running business, not needing an owner’s involvement in the daily operations, is a very attractive proposition to buyers.

 

Why Scaling is Hard

Scaling is Hard Scaling won’t be easy – and for some entrepreneurs, it goes against what made them entrepreneurs in the first place – the control being an owner affords.

That can be a two-edged sword, though. It’s true that the can-do, rugged individualist mindset is part of what makes an entrepreneur who s/he is, what empowers them to strike out on new paths, to seek new ideas, new solutions, new methods.

But it’s also true that believing you, and only you, can get things done the way you want them done can get in the way of growth. It can keep your head down, your nose to the grindstone, when what you might need is to look up, look ahead, and get yourself to a vantage point where you can look down at your business as a whole, and from that view, scan your horizon for opportunities.

And, really, how much do you need to control directly?

For example, as a business owner, you likely delegate at least a few tasks to others. These might most typically include, among other tasks, delegating or outsourcing:

  • Bookkeeping/accounting. Even if you are a CPA yourself, do you really need to keep your own books, run your own monthly, quarterly, and annual reports?
  • Payroll. It’s so cost-effective to have a payroll processor to generate your payrolls and reports, make direct deposits to your team’s bank accounts, create your tax forms (e.g., W-2s, 1099s), file payroll tax returns for you, that even the smallest companies often find this a huge benefit.
  • Billing. There are so many solutions available – software packages, cloud-based platforms which incorporate methods for more seamless receipt of customers’ payments, that this is another way to streamline your operations effectively at less cost than doing it yourself, or in-house, would demand.

 

So, yes, you can still maintain overall control while delegating responsibilities to others.

And, if you’re serious about scaling your business, it’s time to think about delegating more of them.

Dan Sullivan has a great book on how accelerating teamwork can help you grow your business, Who Not How, which I highly recommend.

It’s also time to think about evaluating the skills you’ve developed over the years, and fine-tuning them so that they will serve as tools for growing your business.

What Management Skills Will Help You Successfully Scale Your Business?

Vision, Purpose, Strategy, Implementation

Your Path

  • You need to have a vision – a coherent, fully-formed vision – of what scaling your business up will mean, what it will look like, what it will feel like. What it will mean for your team, what it will mean for your clients. How it can be made to benefit everyone connected with your business – and that includes your family, and, of course, yourself.
  • You also need to have a clear purpose – not only for scaling your business, but for the business itself. because, when it comes down to the basics, most businesses exist at all because they can solve problems other people have. That holds true whether you manufacture hard goods, distribute grocery products to supermarkets, or provide needed services.
  • You need a strategic plan to help get you where you want to be. One that lays out clearly every step you need to take to get your business and your team to the next level, and one that can be revamped, once you reach that level, to incorporate the steps necessary to take things to the next level, and the next, and the next, until you reach your ultimate goal.
  • And you need to know what to do to implement your plan – how those strategic steps will be implemented, who will be responsible for implementing each specific step, and a deadline for getting each step accomplished.

Persuasive Communication

Persuasion

  • Once you have fully formulated your vision, your purpose, your strategy, and how to implement that strategy, you need to be able to communicate them to others in a manner that compels their enthusiastic participation. This may not be the case with every single person on your team, in which case you will need to re-evaluate that team member, your own communication style, and proceed to next steps only when you’ve fully weighed your options.
  • Clients need hand-holding sometimes, and to be talked through issues and problems toward solutions. Sometimes you’ll encounter resistance. Never take a hard line unless absolutely necessary – persuasion, combined with explicit empathy for what your clients are feeling, even if it’s not necessarily the most sensible approach, is the best way to gain trust. Which, in turn, leads to more business – you’ll continue serving that client’s needs because they trust you, not just to solve, but to care, and they’ll be likelier to refer others to you due to the level of trust you’ve built.
  • You will also have to be able to generate the same sort of enthusiasm in partners, whether they are your business partners, or strategic partners and centers of influence. These are the people who can steer the right people to you – those whose problems need your and your team’s skillsets, those who will appreciate the value you can add to their business and personal lives, and are willing to pay for that value.
  • If your plans to scale require it, you will also need to present a compelling case to potential lenders and/or investors. Buy-in matters, whether it’s lenders/investors, strategic partners, clients, or team members.
  • And you need to be able to listen, too. To your clients’ needs, their concerns, their own visions and goals. To team members’ and strategic partners’ concerns – and also to their ideas. You never know who might have the precise solution to what you are finding a thorny path. And if you don’t listen, you may never know.

 

Team Building

Team Building This is one of the most crucial elements of business scaling. You need to build the right team – made up of individuals who can not only enter into your vision and purpose, but bring expertise to the table which can attract more business for your organization.

Some ways to attract (and keep!) top talent:

  • Making a competitive offer with regard to salary and benefits is a given. Do your homework – what are others in your field – and in your area – offering? What can you offer that they don’t?
  • But today’s workers increasingly see their job, not just as a way to earn their living, but also to truly make a difference in the world. You need to convince potential hires that your business is a great place to do that.
  • Your business needs to have a culture which promotes and encourages this view – as noted above, business is all about problem solving on behalf of others. And that does help make a better world, especially if you can assemble a team of those who enthusiastically buy into your culture, your vision, and give them opportunities for personal and professional growth as part of that vision and culture.
  • If it’s at all feasible for your business, offer team members the freedom to work remotely at least part of the time. This is a growing concern for workers, and most of them would welcome that option. Some employees would seriously consider job-switching, if the new job would offer them that option, and their current employer does not.
  • Ensure that your team members have clear paths to development and growth, and that there are no dead-end jobs. If you have some jobs you don’t feel have promotability within your business, be prepared for turnover in those positions. Or mix positions’ job duties up to offer promotability to everyone, if you find it feasible.

 

The High-Vantage View

High Vantage

  • You need to position yourself above the day-to-day minutiae of your business’ operations.
  • You don’t need to involve yourself in scheduling details, you don’t need to drop everything to answer an email, you don’t need to answer every phone call in the moment, you don’t need to reconcile bank accounts and credit cards.
  • You do need to draw back enough so that you have a bird’s eye view of your business overall, in order to develop effective strategic plans for your business’ growth.
  • You also need to keep an eye on the horizon for opportunities for growth, expansion, branching out, whichever serves you best, in whatever form your vision takes you toward.

 

Adaptability and Flexibility

Adapt This is also vital to scaling. Because the road to growth is always rocky, and all of us being human, we will make mistakes.

  • “If at first you don’t succeed . . .” we all know how that ends. But I’d like to rewrite the end a little – if at first you don’t succeed, consider trying a different approach toward your goal. Trial and error may not look like the most efficient means of transport toward making your vision a reality, but there’s a reason it’s used by scientists all the time, all over the globe. Because there’s nothing like the reality of a mistake to help you find a better way – if you let it.
  • Be flexible, adaptable, to attract top talent. If it’s at all possible, allow team members to work remotely, at least some of the time. Some of the best workers want to work fewer than 40 hours a week, and will consider taking less in salary to have that benefit – can you take this in stride? For the right team member, it may well be worth it.
  • And we all know how important it is to be adaptable when dealing with clients. Their needs will change, their moods may change, and their situations will definitely change over the course of your relationships with them. It’s crucial for business growth that you grow along with your clients’ needs. You can’t expect to serve them optimally if you’re stuck in some past version/vision of their lives.

 

Trust and Confidence

Trust

  • In yourself, first and foremost, of course, in your vision, your purpose and culture, and in your plans to implement your business strategy.
  • In your team – trust them to do the work you delegate to them. You chose them for good reason. Avoid micromanaging them. Correct errors, by all means (better still, have supervisors/managers do that and report to you if – and only if – necessary), but in ways which keep you all a team. Maintain collegial relationships, and don’t get trapped by circumstances or feelings into an adversarial mode. That leads to poor communication, and it’s toxic to team trust.
  • But – and this is important – have a trusted advisor in your corner you can go to, who will tell you up front, “I don’t think abc will work best for you and your business – and here’s why. You might consider trying xyz instead.” And, at least, seriously consider their counsel – especially if you can’t coherently explain why your idea is likelier than theirs to succeed – in your own unique, individual business. Maybe that’s true – but it won’t help you if you can’t articulate it even to yourself.

 

Final Thoughts

Grow! Scaling a business takes work, focus, effort and energy. And it’s not easy. But, if you get it right, the benefits and the freedoms can be worth everything you dedicate to the process, and more.

It’s important to keep in mind that it will take about the same amount of work to double your business as to multiply it by a factor of 10 – so, why not aim high?

Are you ready to plan, seriously, to scale your business? We invite you to let RFG’s team be your trusted advisors – and help you to grow your business toward your unique vision and goals. We understand the challenges – and the rewards.

Please click here to email us directly – how can we help? We are here for you – helping you, after all, is our purpose and our mission!

Until next time –

Peace,

Eric

Mardi Gras has come and gone – but what it promises us New Orleanians has not quite – officially – arrived yet.

Because for me, anyway, Mardi Gras means spring is fast approaching. Many of our more northern neighbors may see snow for Mardi Gras, whenever it falls on the calendar.

What does spring mean? Well, rebirth, and hope, for starters. Flowers begin to bloom, and then to drip from galleries and balconies. Trees put forth green shoots, then blossoms.

Can anyone, walking in the French Quarter, or in Audubon or City Park (to name just a few of New Orleans’ lovely vistas) in the spring, not feel a lift of spirit? A sense of hope, of optimism?

Our New Years’ post for 2024 discussed the importance of mindfulness, as we look ahead. And I won’t walk that back one inch. But there’s a need in all our lives for more than what the mind alone can bring to the table.

We need hope – and not just the hope we’ll be able to obtain more/better material goods, more financial security, more current prosperity.

Hope is a word we use loosely. It can, depending on who says it, and the circumstances, mean no more than a wish.

But it can also mean much more than that. Hope, to me, means a sense of promise – and a path toward the future.

And that sense can lead us upward and onward in the best frame of mind and spirit. We can promise, too – we can promise ourselves that we won’t lose sight of the great, though brief, gift of life, in all its challenges and all its rewards, both material and spiritual.

The promise of flowering trees betokens a fruitful future. Let’s promise ourselves that we, too, will be fruitful this year. Yet, without our hopeful flowering – no fruit is possible.

Spring is the time to make sure we, like our trees, like the plants which drip sweet fragrance from our galleries, open ourselves to the sun, to life, in order to thrive and bear the fruit of productivity in every area of our lives.

Let us do our work with fuller hearts and hopeful zeal. Let us embrace our friends and families with greater gifts of love, time and attention. Let us remember that, as Rudyard Kipling wrote:

“If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the earth and everything that’s in it . . .”

And let us fill every one of those minutes with something fruitful – whether the fruit of the moment is better and more successful work, deeper and closer relationships with our loved ones, or simple enjoyment of life. Let’s have them all!

Doesn’t spring make you feel, if you take a minute to experience it, that life is worth living?

And – as a reminder of another spring inevitability – remember to send us your tax information!

What does spring mean to you?

Click here to email me directly – I’d love to know your thoughts – and your feelings about this hopeful time of year.

Until next time –

Peace,

Eric

Having highly-skilled, talented workers is key to any business. But hiring talent for your business these days can take some doing. Even more so, if you are looking for experienced team members with specific and well-developed skills. If you have a strong company culture (and if you don’t, please seriously consider establishing one), you also need team members who fit into that culture.

Why is It Hard to Find the Best Team Members For My Business?

UnemploymentThere are a number of factors that come into play in the current market.

Some of these are:

  • Extremely low unemployment rates. According to the U.S. Department of Labor (USDL) Bureau of Labor Statistics (BLS), as of the end of January 2024, the total unemployment rate was 3.7%, unchanged since the end of November 2023. This is close to historic lows for recent decades, though the trend has ticked up slightly since 2022.
  • Labor force participation. The USDL also reports that as of January 31, 2021, labor force participation was 61%, down 1.5% from the December 31, 2023 rate of 62.5%. While this is certainly an improvement over the early-pandemic low of 60.2% recorded for April 30, 2020, and the trend has generally (and unsurprisingly) been on the upswing since that time, it has not rebounded to pre-pandemic rates of January 31 and February 29, 2020, which for both months was 63.4%.
  • More jobs than workers to fill them. According to the BLS, as of January of 2024 there were ~9 million jobs available, with ~6.1 million unemployed American workers to fill them. That’s a significant gap.
  • This means workers can be picky – and they are. Of considerable import, as the USDL reports, more and more people want the option of working from home, at least part of their work week, and not all businesses have adjusted to this new reality.
  • With the youngest Baby Boomers (those born between 1946 and 1964) turning 60 this year, more and more “boomers” are retiring and/or engaging in part-time or consulting positions.
  • Younger workers – e.g., Generation X (those born between 1965 and 1980), Generation Y or “Millennials” (born between 1981 and 1996), and Generation Z (born between 1997 and the early 2010s) make up a huge portion of talent in today’s market, and they want more than the flexibility to work remotely, stock options, a good salary, bonuses and healthy retirement plans. These are people to whom a firm’s culture and values matter, as well.

 

Other Economic Factors:

Inflation

Inflation

  • The Consumer Price Index (CPI) rose 0.3% from December 31, 2023, to January 31, 2024, following a December increase of 0.3% over November 30, 2023.
  • As of January 31, 2024, unadjusted CPI increased 3.1% on a year-over-year basis from 2023, and core CPI (which excludes food and energy prices) also rose 0.4% in January 2024, following 0.3% increases for December 2023, and November 2023.
  • Rising interest rates are a factor. In an effort to combat inflation by raising interest rates, and thereby prices, the Federal Reserve has increased its key short-term interest rates by 5.25% basis points (bps) to a rate of 5.25% to 5.50% since March 17, 2022, when rates stood at 0.00% to 0.25%, where they had stood since March 16, 2020. The last time the Federal Reserve’s rates were over 5% bps was 2006.
  • Rising interest rates have dramatically increased the cost of capital – and capital is the lifeblood of any business. Which means it’s more expensive to buy a business, and more expensive to acquire the best talent for your existing or newly-acquired business.

 

People Are Not Changing Jobs as Much

I Love My Job

  • In the immediate aftermath of the worst of the pandemic, the U.S. saw workers changing jobs more frequently than historic averages. As the combination of returning and newly-created job opportunities combined with a drop in labor force participation and demand for workers led to opportunities for significant pay increases, reaching a record of median pay gains for job switchers at 16.4% in June of 2022.
  • But the bloom for new hire pay increases is beginning to fade, and more workers are staying longer with their current employers. By January of 2023, the salary gain had dropped to 14.7%, and by September 30, 2023, to 9%. Predictions are that job stayers, rather than job-changers, will continue to increase.
  • This means you need a compelling value proposition – a reason why a talented, seasoned, skilled person should leave a position they are at least relatively satisfied with and come work for your team instead.
  • And, again, in today’s labor market, the value offered must go beyond the material (though never discount the necessity of making a competitive case dollar-wise, too).

Even so, it is not as hard as it was during the height of the pandemic to hire skilled talent.

Hiring the Right Talent is Still Key To Your Success – But, So Is Your Leadership!

Be a Talent MagnetAgain, no business can flourish without a strong team. It’s one of the biggest drivers to success a business and its owner(s) can have in their pocket. But it takes real leadership to understand that:

  • You aren’t going to find one “magical’ talent to make everything go smoothly. Not even one of these (if they exist – I suspect they are more like unicorns, more an idea than a reality) for every department of your business will accomplish that for you.
  • “Everything” never goes smoothly. And beware if it seems to – real boats rock. That’s why you want the best people, not the “magical” ones – people who can steady the boat when it rocks too far.
  • For a business to thrive, all its team members must thrive. Make sure you have policies and processes in place to ensure there are no “dead-end” jobs – that there is growth and advancement available to all.
  • There’s more involved in filling the right position with the right person than merely ensuring they have the right resume. They need to fit within the company culture – and it will matter to the best workers what that culture is, and how it is implemented.

 

Balance is Key to Company CultureSo, plan strategically. Have the cash on hand so you can make the right offers to the right candidates. Make sure you offer a value proposition your existing employees as well as the new ones you hope to attract can get behind. Screen carefully, as even the most skilled and talented worker may not be the best fit for your team and your business’ culture – and your team needs to function well together for your business to thrive.

What strategies do you use to attract the right talent for your business?

Please click here to email me directly – I’d love to hear your strategies.

Until next time,

Peace,

Eric

Would you like to rent out your home and not pay taxes?

Well, you can! And it’s due to a little tax provision known informally as the Masters Rule, as it was created with influence from those living in Augusta, Georgia.

What is the Masters Rule?

Tax Free Home Rental In a nutshell, the Masters Rule allows a homeowner to rent out their home without reporting the income on their tax return.

The rental must comprise, in total, no more than 14 days – rent your home for 15 days, and all the rental income is considered taxable.

Multiple Properties – Can You Rent Out More Than One?

Rent Out Multiple PropertiesTechnically, you can rent out multiple properties for 14 days or fewer each – provided you make regular use of each property as your own residence, and have no other rental agreements covering the property in question.

What Types of Residences Can You Rent Out Under the Masters Rule?

Types of Properties You Can Rent OutYou can rent out:

  • Your primary residence
  • Your qualified secondary residence
  • Your vacation home
  • Your RV
  • Your boat

 

As long as:

  • The property is in regular residential use by you, the property owner, during the year
  • No other rental agreement applies to the property
  • The property represents a true dwelling unit, providing eating, sleeping, and toilet facilities

 

How Much Rental Income Can You Exclude From Your Taxable Income?

How Much Can You Exclude?That is the beauty part – as long as the rental is for no longer than 14 days, there is no limit to the amount of rental income you can exclude.

However, be sure you are pricing your rental home at a reasonable market value – a recent court case substantially reduced a claim under the Masters Rule as the amount of rent charged was well above the market rate for comparable space.

That said, there are times of the year when a residential rental in a specific area may be highly coveted and sought-after – and premium rental rates (as appropriate for your rental market in that time frame) may be legitimately charged and remain unreported as taxable income.

How Do You Protect Yourself?

Protect Yourself!That’s a question you should always ask when considering a plan to exclude income from your tax return – no matter how thoroughly legal your plan may be.

It’s also a question you should always ask when you consider renting out your home.

We recommend:

  • Keeping meticulous records of each rental – the names of your tenants, addresses, contact information, etc.
  • Have a formal rental agreement drawn up and signed by yourself and your tenant(s) – and ensure it specifies very clearly a rental period of 14 days or fewer. The agreement should include any limitations as to the number of tenants permissible, and any provision for tenants’ guests (this provision may simply be a blanket prohibition if you choose).
  • Get a healthy security deposit upfront from your tenants – one sufficient to cover any likely damages. This is especially important for those homeowners renting their residences out during events such as Mardi Gras, JazzFest, or sporting events which are likely to involve celebrations including alcohol consumption. You can write a provision into your rental agreement to provide you with recourse for additional recovery of damages if the security deposit does not cover everything.

 

Final Thoughts:

Final ThoughtsRenting our your home is a very different animal from renting out an investment property acquired for that purpose. You may think no amount of money is worth the angst – and for you, that might be the best decision.

But you may instead think this is a great idea, and be raring to go for it.

In either case, if there are any questions at all in your mind, we strongly recommend you consult with your CPA or virtual CFO before a final decision is made. Your financial advisor has the facts and resources to ensure that you make a well-informed decision – and information is one of the most powerful tools there is.

S/he can also help you draft a rental agreement which will thoroughly protect you and your home, and advise on the propriety of renting out other dwellings you own under the Masters Rule.

Thinking of renting out your home to make some extra money? Please click here to email us directly – let us advise you – that’s what we’re here for!

Until next time –

Peace,

Eric

On February 4, 2024, after winning the Grammy for Best Folk Album of the Year (for Joni Mitchell at Newport – her first live set in 20 years), Joni Mitchell wowed the crowd with Both Sides Now, one of her many great songs – for her debut Grammy performance. She won her first Grammy in 1969. This year’s award makes 17 Grammys all told, and came all of 22 years after she was awarded one for Lifetime Achievement.

Joni Mitchell’s blonde hair is white, now. The voice, famously noted by a reviewer as marked by “astonishing highs and lows, and an attenuated middle,” has shrunk – the high notes are gone, only her alto range remains.

She is older – a long way from the 22-year-old singing to us from Laurel Canyon. But I hope I am still as vital as she is when I get to her age.

And her courage is something we can all admire, and work to emulate.

Joni Michell’s path hasn’t always been an easy one. She was hospitalized for weeks on end at age 9, with polio.

At 21, she found herself pregnant, with little money, abandoned by her boyfriend. All alone in a small apartment. She gave her daughter up for adoption. Mitchell’s Little Green sings about that experience. Birth-mother and daughter reunited, but only decades later.

More recently – about 9 years ago – Joni Michell suffered an aneurysm which left her unable to speak, unable to walk. She didn’t remember how to get out of a chair. She had to relearn everything – like a young child. But summoning all her courage, and doing the hard work required, she did relearn these things. Speech came back within a few months; the physical recovery took far longer, but she got there.

Have I mentioned the courage of this lady? It can’t be noted and admired too often, for me.

But she couldn’t sing, couldn’t play her guitar or her piano, and she missed music greatly.

In 2018, Joni Michell attended a tribute concert given for her 75th birthday. There, she met fellow musician Brandi Carlile, about half Mitchell’s age, who sang A Case of You as a duet with Kris Kristofferson. Carlile has performed whole concerts of Mitchell’s albums (as well as her own, original work); this time, she was actually performing for the woman who’d both inspired and influenced her.

Soon after the tribute concert, Joni Mitchell dined out with Brandi Carlile and her partner. Mitchell mentioned all the wonderful instruments lying around her house, unplayed. It wasn’t, she said, that she was sad for herself, it was for those silent instruments. She asked if Carlile would maybe want to gather people – musicians – to come to her house, drink wine and hang out, and play her instruments while she listened.

Taking this – rightly – as an invitation to friendship, Brandi Carlile said, “Yeah, absolutely.” Joni Michell laid a hand on her arm. “Really? Are you in?” Carlile has said she’ll never forget that moment.

Brandi Carlile reached out to musician friends, who eagerly agreed. The first jam session happened about two weeks later, and the “Joni Jams” continued. Over time, Paul McCartney stopped in, as did Elton John, Bonnie Raitt, Herbie Hancock, and many more. Non-musicians, including Meryl Streep, came by to drink wine, hang out with Joni and the gang, and listen.

Gradually, Joni Mitchell began to participate – to play and sing, with her friends. Once, she was handed a beautiful guitar, and Brandi Carlile tried to take it to tune it for her. Mitchell swatted the helping hand away. She would tune it herself, to one of the special tunings she’d developed decades before, to compensate for the weakness in her left hand – a result of her childhood polio.

A few years later, Joni Mitchell, who had not appeared live since 2002, played at the 2022 Newport Folk Festival, with Carlile and a group of “Joni Jams” regulars backing her up. The session was recorded, and the album won Joni Mitchell her 17th Grammy.

But I really want to talk about a song I haven’t mentioned, which Joni sang as the final track on the album awarded the 2024 Best Folk Album Grammy, and the story of how she came to write it.

In the 1960s, a 20-year-old aspiring singer/songwriter, then-unknown Neil Young, playing gigs in the local Winnipeg folk club circuit, met a fellow Canadian singer/songwriter – Joni Mitchell – a couple of years his elder, playing at the same club he was. She already had gigs booked across Canada. He had a song he’d written recently, and played it for her.

That song was Sugar Mountain, one of Neil Young’s most famous and loved ballads. It’s a beautiful song, but a sad one – a young man realizing that his carefree days – the days as a child enjoys them – are behind him. He is, at the song’s end, looking toward a future which seems bleak in comparison with the balloons, the barkers, the cotton candy of Sugar Mountain and childhood.

Joni Mitchell was impressed with the song, and the talent behind it, and she was just a couple of years past 20 herself. But, though she had already suffered hardship and heartbreak, she didn’t think her path, or adulthood itself, had to be sad. She didn’t feel that way – she had hopes, she had dreams. She knew we can’t go backward in life, and looked ahead toward life’s hopeful possibilities.

So she wrote a song in response to Sugar MountainThe Circle Game. In the song, Mitchell acknowledges that we grow older, that being 20 is not the same as being 10, but she sees that life, for us all, at any and every age, will always have ups as well as downs – just like the painted ponies of the carousel. The 20-year-old at the end of her song, though he’s learned that dreams don’t always pan out exactly as we hope, still has dreams and hopes for his future.

No, we can never return to the past. We can look back on it, and perhaps learn from it, if we’re lucky. But we can also look ahead joyously – if we have the courage.

Because we can only keep ourselves fully alive if we remain open to hope, to dreams, to a future with promise. In short, we need to stay open to life.

Joni Mitchell, having survived polio and a debilitating aneurism, having been reunited with the daughter she gave up for adoption and, with a little help from her friends, old and new, restored herself to her music, winning her 17th Grammy, making her debut performance at the awards show at the age of 80 – shows us we can keep that openness to life, that courage, that hope, those dreams, going. She does!

And if she can, so can we!

Joni Mitchell and Neil Young are still close friends, they talk on the phone frequently. And, I’m glad to say, Young’s outlook on adulthood is no longer what it was at 19 or 20 – two decades after he first recorded Sugar Mountain, he released his Harvest Moon album – and the title track reveals a very different mindset indeed.

Did Joni Mitchell, and perhaps The Circle Game, have anything to do with Neil Young’s vision changing toward a more hopeful, happier view? I don’t know, but I’d like to think so.

We can only hold onto the best of our youth by continuing a journey of openness, of growth, of hope – the way a child does – as we age. Because there’s nothing youthful about stagnating at any point – we need to grow, and hope, and dream, through all our years, to stay vital and engaged with our beautiful, brief mortal existence.

Sometimes we only need to slow down a little, take a moment to breathe, to open ourselves, and be grateful for all of life’s great, all-too-short journey.

When I listen to Joni Mitchell sing, I can feel her gratitude for her life, her embrace of all of it. For me, she captures the joy of being alive. It’s inspiring to me, and her music is one of the many things I’m grateful for.

Life’s journey offers us gifts, of so many kinds, at every step – but only if we are willing to accept those gifts on life’s terms. We can’t impose our own terms on life, and it’s futile – a waste of our limited time and energy here on earth – to try.

But we can enjoy the carousel ride, accepting both the highs and the lows, as the seasons of our lives go round and round.

How do you stay open to and engaged with life? What is The Circle Game, for you?

Click here to email me directly – I’d love to know your thoughts.

Until next time –

Peace,

Eric

Inflation has been a dark cloud over the economy for a few years now. But even the darkest cloud must have at least a little bit of silver lining – and the IRS has adjusted income tax brackets for 2024 upward by 5.4%, based on the consumer price index (CPI).

2023-2024 Income Tax Brackets

Income Tax Brackets – 2023 – 2024:

  Income Thresholds
  Individuals Married Filing Jointly
Income Tax Rate 2023 2024 2023 2024
37% $578,126 $609,351 $693,751 $731,201
35% $231,251 $243,726 $462,501 $487,451
32% $182,101 $191,951 $364,201 $383,901
24% $95,376 $100,526 $190,751 $201,051
22% $44,726 $47,151 $89,451 $94,301
12% $11,001 $11,601 $22,001 $23,201
10% $11,000 or less $11,600 or less $22,000 or less $23,200 or less

Standard Deduction:

Standard DeductionThe standard deduction is also increased – for individuals, to $14,600 for 2024 from $13,850 for 2023; for married joint filers to $29,200 for 2024 from $27,700 for 2022. Taxpayers over age 65 can claim an additional standard deduction amount of $1,950 for single filers and $1,550 for an individual joint filer.

Gift & Estate Exclusions:

Gift & Estate ExclusionsThe annual gift tax exclusion will rise to $18,000 from 2023’s $17,000 limit.

The estate tax threshold will increase to $13,610,000 per individual from $12,920,000 in 2023.

Alternative Minimum Tax:

AMTThe Alternative Minimum Tax (AMT) exemption for 2024 is increased to $85,700 from $81,300 in 2023 for individuals, and to $133,300 from $126,500 in 2023 for married couples filing jointly. Phase out begins at $609,350 for individuals and $1,218,700 for married joint filers, compared with $578,150 and $1,156,300 in 2023, respectively.

Final Thoughts

Tax Planning
These, of course, are only some of the significant changes the IRS has announced for 2024. Most tax credit limitations have been increased for 2024, though some items are by statue not indexable to inflation.

In addition, if you itemize, we want to remind you that one of the provisions of 2017’s Tax Cuts and Jobs Act (TCJA) was to remove the limitation on itemized deductions. Take advantage of this lesser-known benefit while it lasts!

There may be additional opportunities to leverage these increases to find you ways to keep even more of your hard-earned money – consult with your virtual CFO or financial planner to develop the best strategy (or strategies) for you and your family.

If you are interested in developing new tax planning and estate strategies for 2024, or updating your existing plans, please click here to email us directly – we are here to help .

Until next time –

Peace,

Eric

We hope you have all enjoyed carnival season, and will through its culmination with tomorrow’s Mardi Gras.

Mardi Gras can happen any Tuesday between February 3 and March 9. This is because it is tied to Easter, which in the canonical calendar is celebrated the first Sunday following the first full moon after the Vernal Equinox. In between these two celebrations is the season of Lent, of repentance, atonement, and fasting.

Some claim Mardi Gras – and Carnival season – descends from such pagan traditions as Saturnalia and Lupercalia (this last was a Roman festival celebrated on February 15), and incorporated, as many pagan holidays were, into the Christian religion and calendar. The word “carnival” does derive from the Medieval Latin carnelevamen, roughly translating to “doing without flesh,” as in those days Lenten fasting meant no eating of warm-blooded animal protein for the duration of the season.

It is certain, though, that in 1582, under Pope Gregory VIII, Mardi Gras was established as part of the canonical calendar, and that it has been celebrated in New Orleans, in one form or another, since at least the 1730s.

Of course, this is a special time for us in New Orleans. We take our kids to the parades to watch their eyes get bigger as the floats go by, collect throws, attend historic balls.

We feast, we make merry.

We also put things off, sometimes. And one of the things we may be putting off is thinking about our income taxes.

So, just a gentle reminder – after Ash Wednesday, please get us your personal and business tax information as soon as you can, so we can get to work for you.

How does your family celebrate this very, very New Orleans holiday?

Click here to email me directly – I’d love to know your traditions.

Until next time –

Peace,

Eric

On Tuesday, January 16, 2024, Chairman Jason Smith (R-Missouri) of the House Ways and Means Committee and Chairman Ron Wyden (D-Oregon) of the Senate Finance Committee announced agreement on a ~$78 billion deal for tax relief, both for businesses and families.

On Friday, January 26, 2024, the Ways and Means Committee approved the resulting bill, with a vote of 40-3, and on Wednesday, January 31, the House of Representatives passed it, 357-70. The legislation would amend, in part:

Business’ Research & Development (R&D) Expenses:

R&D Expenses
Prior to enactment of the TCJA, Section 174 of the Internal Revenue Code (IRC) enabled businesses to deduct 100% of R&D expenses in the year they were incurred.

After the enactment of the TCJA, – i.e., under the law at present – most R&D expenses incurred for tax years beginning after December 31, 2021, must be amortized over a 5-year period (15 years in cases where certain R&D or experimental expenses are attributable to foreign research), beginning at the midpoint of the tax year in which the expenditures were made or incurred.

The proposed changes would restore R&D expenses to full deductibility in the year the expenditures were made through the tax year ending December 31, 2025 – including, retroactively, tax years 2022 and 2023.

According to the R&D Coalition, a cross-industry partnership among small, medium, and large business concerns, every $1 billion spent on R&D supports ~17,000 U.S. jobs earning ~$1.4 billion.

Industries Benefitting from R&D Tax Relief:

One of the beauties of R&D tax relief is that many industries will benefit. Some R&D-heavy industries are:

  • Technology & software
  • Manufacturing
  • Pharmaceuticals and biotechnology
  • Agriculture
  • Construction

Business Interest Expense Limitation:

Business Interest Expense Limitation
IRC Section 163(j) limits the deduction of certain business interest expenses. Prior to 2017, these limitations were largely in place to prevent multi-national entities from shifting earnings to lower-tax jurisdictions from higher-tax jurisdictions. The applicability of Section 163(j) was limited only to certain entities and under specific conditions.

However, the TCJA made significant changes to Section 163(j), applying limitations to the deductibility of business interest expenses to all U.S. businesses, starting with tax year 2018.

The Tax Relief of 2024 proposes to restore a less restrictive limitation on business deductions for net interest expense, returning to a 30 percent limit based on EBITDA (earnings before interest, taxes, depreciation, and amortization) rather than EBIT (earnings before interest and taxes); the tighter limitation based on EBIT took effect beginning in 2022, and the proposal would allow companies an election to use the looser limitation for 2022 and 2023 and require the EBITDA-based limitation for 2024 and 2025.

100% Bonus Depreciation:

100$ Bonus Depreciation
Under the TJCA, qualified property placed into service after September 27, 2017 and before January 1, 2023 (January 1, 2024 for certain longer-production property and certain aircraft) were eligible for 100% bonus depreciation in the year the property was put into service.

This bonus depreciation was to phase down by 20% each tax year beginning with 2023. The bonus depreciation was to have been as follows:

  • 2023 – 80%
  • 2024 – 60%
  • 2025 – 40%
  • 2026 – 20%
  • 2027 – 0%

Under the proposed bipartisan tax relief, as proposed, the 100% bonus depreciation would be extended to include property placed into service after December 31, 2022 and before January 1, 2026 (January 1, 2027 for the longer-production property and aircraft as noted above).

Other Notable Business Tax Relief Provisions:

These include:

Increased Limits on Expensing Depreciable Bonus Assets:

Depreciable Bonus Assets
IRC Section 179 permits expensing the cost of qualifying property rather than recovering the cost via depreciation. Under current law, the expensing of such costs was capped at $1 million per tax year for tax year 2018, and was limited to cover qualifying property costing $2.5 million per year. These amounts were adjusted for inflation; the expense for 2023 was limited to $1.16 million, and the cost total qualifying property limited to $2.89 million.

The proposed tax relief would increase the expensing of qualifying property for 2024 to $1.29 million, with a cost cap for such property of $3.22 million. These amounts would be inflation-adjusted for tax years after 2024.

Increase in 1099-NEC and 1099-MISC Reporting Threshold:

1099 Threshold
For tax years beginning after December 31, 2023, the threshold for requiring the issuance of 1099-NEC and 1099-MISC forms would rise from $600 to $1,000 (which we think almost everyone we know would be glad of!).

There is, of course, much more in the tax relief proposal, including an expansion of the child credit and increased funding for low-income housing, among other items.
The proposed tax relief is in theory effectively revenue-neutral, its costs to be offset by changes to the Employee Retention Tax Credit (ERC).

Final Thoughts

There is much still to be worked out, and we will wait with interest for further details as they emerge. There is at this point some pushback in the Senate against the delicate balance of competing interests, and there is no guarantee the House bill will result in enacted legislation.

However, we think this would be a step in a good direction for the nation and the economy – in other words, for all of us. And there is a lot here that businesses can, should all the business-friendly provisions of the proposal be enacted into law, leverage to their benefit – it wouldn’t hurt to consult your CPA now, rather than waiting, particularly if there may be a need to amend prior-year tax returns.

Having passed in the House Ways and Means Committee by a vote of 40-3 on Friday, January 26, 2024, the bill for tax relief has moved to the full House of Representatives for a vote.

Stay tuned for further information as it becomes available.

If you would have any questions concerning how one or more of these provisions could be leveraged to your business’ benefit, please click here to email us directly – we are always here to help you!

Until next time –

Peace,

Eric

The IRS has increased retirement plan contribution limits for 2024, adjusted for inflation (it’s a tiny scrap of silver lining, but let’s be thankful for it anyway).

The 2024 contribution limits are:

IRAs:

IRAs
Traditional and Roth: the 2024 annual contribution limits rise to $7,000 from $6,500 for those under 50, while those age 50+ can contribute an additional “catch-up” of $1,000 per year, for a total contribution limit of $8,000. Note that this limit applies to all IRAs held by a single taxpayer, not each individual IRA – i.e., if you want to contribute to more than one IRA in 2024, the total amount contributed cannot be more than the limit for your age ($7,000 or $8,000, depending on whether you are over or under 50).

SEP IRAs:

SEP IRAs
The contribution limit for 2024 (made by the employer on behalf of an employee) is the lesser of 1) 25% of the first $345,000 of compensation (with some minor adjustments), or 2) $69,000 per employee (an increase from the 2023 limit of $66,000). No catch-up contributions are permitted.

SIMPLE IRAs:

SIMPLE IRAs
The 2024 maximum contribution will rise to $16,000, up from $15,500 for 2023. If you are over 50, a catch-up contribution up to $3,500 – unchanged from 2023 – is permitted.

Employer-Sponsored Retirement Plans:

ESRPs
The 2024 contribution limit for 401(k), 403(b), and most 457 plans will rise from $22,500 in 2023 to $23,000 for employees under 50. For those over 50, a catch-up contribution up to $7,500 annually is permitted – no change from 2023 – allowing you to contribute up to $30,500, assuming your employer-sponsored retirement plan is structured to allow catch-up contributions.

We strongly recommend contributing the full amount available to you into your retirement account(s) – as close to the limits as possible, if you can’t absolutely max out.

Further, we would advise checking into all retirement options available through your employer – public schools, colleges, universities, churches, hospitals, and other tax-exempt organizations may offer more than one option, including 401(k), 403(b), and/or 457 plans, and may also allow you to participate in and contribute to more than one employer-sponsored plan – e.g., offering you both a 401(k) and a 403(b) plan.

If you have both a 401(k) and 403(b) plan account, be aware that the total annual contribution to these employer-sponsored retirement plans is $23,000 for 2024 – or $30,500 if you are over 50. However, it may still be a good idea to have more than one employer-sponsored plan account, especially if one or more of the plans does not allow catch-up contributions. In such a case, you can contribute the amount of your catch-up to the second retirement plan account – the IRS permits you to treat this additional contribution as a catch-up for their purposes, even if your plan does not.

However, if your employer offers you both a 401(k) plan and a 457 plan, a deferred compensation plan, you can contribute $23,000 to each plan in 2024, not counting catch-up contributions. If you have this option available, and are over 50, you can contribute up to $30,500 tax-deferred to each account for 2024 – $23,500 plus $7,500 in catch-up. This would mean that, for those over 50, a total tax-deferred contribution of $61,000 can be made for 2024.

Final Thoughts

Retirement Plans
There are certain strictures and limits on income eligibility to be able to fully deduct contributions from your taxable income for some retirement plans. Consult your virtual CFO or financial advisor to ensure you get every possible benefit you are legally entitled to.

If you have any questions on leveraging these new contribution limits to maximize your retirement assets, reduce your tax liabilities, and plan for a secure and happy retirement, our vCFOs / financial planners are always here for you.

Please click here to email us directly – let us know how we can help .

Until next time –

Peace,

Eric

As virtual CFOs, we meet a lot of business owners, obviously. Many of them are eager to grow their businesses. Some, but not all, owners of small and medium-sized businesses have the best mindset for growth – and those who don’t have that mindset can acquire it if they want to.

You Have to Decide

Some business owners truly enjoy being a one-person operation. It provides a certain control that many entrepreneurs are comfortable with. You know your own capabilities, you are the ultimate known quantity in a team member. There is not a thing in the world wrong with staying in that lane!

But, bear in mind that not every hat you will have to wear will fit your head equally comfortably. You, and only you, will be responsible for:

One-Man Shop, or Growth?

  • Sales and marketing, which, while two prongs of the same fork, are two different tasks with their own responsibilities.
  • The work you are marketing and selling – every bit of it. You have no-one to delegate to.
  • Your bookkeeping (this is a bigger job than you might imagine, when you consider you will be making deposits, scheduling payments, reconciling bank and credit card statements, updating customer and vendor accounts, etc., etc., etc.).
  • Fielding telephone calls, and returning calls to those who’ve left voice messages.
  • Monitoring and replying to emails.
  • Dealing with at least some of your IT needs and issues.
  • Handling all customer service – not just the work itself, but the effort that is always needed to ensure a customer is satisfied, feels that their worries have been heard and their needs will be met.

 

Your other option as a closely-held business owner, is, rather than to remain a rugged individualist, to choose a team approach (see below).

I Want to Grow! How Do I Start?

First things first – in order to grow in a directed and focused way, which will lead to the fulfillment of your goals, you need:

I Want Growth!

  • A clear culture for your business, based upon your core values, and a clear understanding of whom you want your business to serve.
  • A vision of where you want to take your business – that’s your overall goal.
  • A strategy designed to get you there – the interim goals – monthly, quarterly, annually, which will mark your progress.
  • A plan for implementation to ensure those goals are met. We strongly recommend monthly or at least quarterly goals, to be reviewed at the end of the period, so that you can analyze your progress.

 

You’ll keep tracking that progress as you move from one goal to the next, monitoring where you are, where you need to get to as the next stage, and making sure you know what steps will get you there.

Build a Team

To best scale your business up, you need one thing further, and it’s absolutely key. You need a team to help you achieve your ultimate goal, and you want the very best team you can assemble to help you do it.

Build Your Team!

Because that goal is going to require that your mind is available for big-picture thinking. You can’t be mired in the details of reconciling your operating account (focusing in) and look to the horizons for opportunities (focusing out) at the same time.

That is the difference between working in your business and working on your business. Your team is there to do the former, while you devote your efforts to the latter.

The work gets done, the clients are happy, and you are out there promoting the business and seeking out new ways to grow. Your team grows, both in numbers and personal development, as its members take on more and more responsibility and more and more work comes in to be delegated. Everyone benefits you, your clients, and your team!

Final Thoughts

A one-person shop is great. So is growing a business. It is for you alone to decide what you want, what you are best at, what fulfills your life and brings you joy.

Solving Others' Problems
Also, and this is my own take, applicable (or not, as you please) to all business owners – if you are going to run a business, no matter its structure or purpose, you are going to be making your living solving other people’s problems. My experience is that, if you embrace that as purpose, you will achieve better business results than if you are merely looking for the money brought in.

Maybe that is because focusing on the work, rather than the reward, making that the center of your mindset, means the client’s needs come first. And a client who feels heard and helped, who feels it matters to you that their needs are met, is likelier than not to come to you when a new need arises.

Interested in scaling your business? Give us a call and let RFG’s team be part of your own – we can help you grow, and would love to do just that!

Please click here to email us directly – let us know how we can help you.

Until next time –

Peace,

Eric

2024

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