Expenses are Going Up! Revenue Up!

 As American small business teeters on the precipice, we have choices to make.  The initial facts about the Fiscal Cliff deal between President Obama and speaker of the House Boehner have been revealed.  The major impact for small business owners is detailed below; beware of the similarities between this and an iceberg.  Numerous subtleties lurk beneath the surface.

 

Facts: Taxes are Increasing

 

Taxes are totally impartial about your political beliefs.  2013 will see tax increases for all Americans.  Uncontrollable expense increases hit small business owners the hardest.  Even corporations are not immune from the escalating expenses.  Businesses are undergoing a slimming down process which makes all of the weight loss programs look feeble.  Layoffs and closures are coming.  Boeing will lay off 30% of their executives, U.S. Cellular will cut 980 jobs, Vestus Wind Systems will reduce headcount by 3,000, Bristol-Myers Squibb is predicted to lay off 480 and at least 18 companies announced closures in the 2 day period between November 6 and 8, 2012.   Imagine getting that news in your Christmas stocking or even worse as you sit down to a “thankful” holiday meal.

 

Why such a wave of closures and cutbacks?  Tax increases are expenses businesses cannot control except by cutting back staff or closing doors.  What are some of these expense increases and what can business owners do to mitigate the stabbing pain in their bottom line?

 

Payroll taxes

 

Payroll taxes are increasing from 4.2 to 6.2 percent for employees; employers will pay an additional 4% because they pay both the employee and employer portion.  Employers are also hit with the additional 2 % for the employer’s share of all employee wages. From the business owner’s personal standpoint this adds up to a 6% increase in expense – 6% reduction in the personal bottom line.

 

State and Federal unemployment tax either has increased or will increase.  Unemployment benefits were extended for an additional year; business owners will be picking up the tab.  Unfortunately some of those unemployed were the result of the small business owner needing to downsize in order to stay financially afloat. Paying more money for wages they did not have the money to pay in the first place is a “double ouch.”

 

Capital gains and Dividend taxes

 

The Capital gains tax and Dividend tax increased from 15% to 20%.  Good news is that it did not increase to the feared 58% reported by Newsmax prior to the “deal.”

 

Income tax

 

Taxes for incomes over $400,000 for an individual or $450,000 for a couple will increase from 35% to 39.6%.  The days of June Cleaver staying home are gone; over 67% of American households have both spouses working.  More households would have two income earners if they could find a job, especially if they could secure employment equal to the position they held previously.

 

It is more the norm than the exception for small businesses to form an LLC taxed as an individual rather than a corporation.   Business income plus both spouses’ incomes increase the likelihood that the total will hit the $450,000 mark.  A tax originally designed to impact the rich is reaching down into the upper middle class. 

 

ObamaCare

 

ObamaCare will require employers to furnish health insurance if they employ 50 or more full time employees.  This will be an additional expense for many small businesses. Employee health care is a highly desirable addition to the employee benefit package which had been cut by many businesses.  If the choice was to employ more individuals or add an additional benefit for the remaining staff, many employers had previously chosen to retain staff.  This is no longer an option.  Providing health care benefits is now a requirement.  (Specific criteria exists which requires an entire article in itself.)  For now, just know that employee health care benefits are a reality.

 

Choice

 

Expenses are unavoidably going up.  Two main choices remain: Give up or find a way to make Revenue Go Up.  We may be Fools, but we are not stupid.  Increasing income is our only viable option.  The two most viable ways to increase revenue and thus offset the inevitable expense increases are investment income and sales income.  Since this is an investment publication, let’s focus on an investment option first and follow with the investment in marketing in a subsequent article.

 

Investment Revenue

 

In the words of Mike Maloney, CEO and founder of GoldSilver.com, “When paper money becomes too abundant, and thus loses its value, man always turns back to precious metals.  During these times there is always an enormous wealth transfer.”

 

As the owner of a seasonal property management business in a ski resort, it was important to find an investment which would appreciate and yet be liquid.  Fortunately, I became acquainted with Mike and GoldSilver.com in early 2008. Since that time the price of gold eagles has fluctuated but over the long term gold has shown a steady increase.  Indicators are that it will continue to increase for the foreseeable few years.  In the last year gold eagles have ranged from $1555 to $1796.  How long will gold increase?  Every bubble must burst at some time, but for now, gold is providing an escalating value and yet remains liquid. 

 

Richard Russell, the Godfather of newsletter writers, told his subscribers today that gold and silver are on the verge of accelerating.  Check the News tab at GoldSilver.com for a plethora of additional articles on gold and silver.

 

If inflation increases as predicted and 3 month T bills stay flat at nearly nothing, gold looks like a very viable option for small business short term investment.  Investigate the educational resources available on GoldSilver.com and make your own investment value judgment. 

 

Undisputed Facts

 

Expenses are unavoidably increasing.  Savvy business owners agree that the best way to mitigate the impact of increased expenses is to increase revenue.  Increase revenue through wise investments, increased market share, seizing marketing opportunities and capitalizing on sales opportunities.  Investments like gold which have a significant ROI and yet remain liquid provide the financial flexibility which business owners require in this volatile economic climate.