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4 Posts authored by: Ebong Eka

Ebong Eka Headshot.pngAs a small business, it's very important to charge what you are worth. Yes, it’s easier said than done but I want to share what your prices say about you, your expertise and your business.

 

A small business owner is challenged by charging what you are worth, having a healthy enough profit margin and collecting on sales. In a previous post I discussed the importance of cash management. Cash management includes collecting from your accounts receivables, or from the bills that your clients owe you for services that you've already provided.  Higher prices and a larger profit margin allows for more growth for your business.

 

One of the many things your potential customer thinks about when considering doing business with you is, "Will I receive value greater than the price that I'm going to pay?" There are two reasons people spend money:

 

  1. To get a desired result
  2. To solve an important problem

 

How well you solve that problem, or how much they want that desired result will dictate the price that they are willing to pay.

 

Some clients have said to me, "…but Ebong, if I'm the lowest price, maybe they'll come and buy from me, and then I can eventually charge them more." This never happens and never works. I'll give you a recent example.

 

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Earlier this year, a personal finance app company announced they were going to start charging $3 a month for their app that was initially free. The app helps users save money and make better financial budgeting decisions.  The level of negative complaints from consumers in response were astronomical. People were more upset about paying $3 a month, or $36 a year, for a tool that helped them save thousands of dollars every year.

 

 

The company believed if they charged for their app, their customers would see the value and pay. But no one wants to be surprised. The customers’ expectation is that it would be free, so they expected it to be free. When you change that expectation, people get angry.

 

Now let's apply this to your business.

 

Your customers have a lot of questions when you have lower prices than your competitors:

 

  • Why is this person’s price so cheap in relation to the next competitor?
  • Is this a new business?
  • Do they have the requisite expertise necessary to do what I need to have done?

 

74127740_s.jpgCustomers don’t want to feel they are making a buying mistakes – so they’ll go with the higher price

because it’s a safe bet.

 

Here’s another example:

 

If I had a luxury car for sale for $25,000 and the Kelly Blue Book stated the same car should be worth about $40,000, you would think something is wrong.

 

RELATED ARTICLE: THE 4 CASH FLOW MANAGEMENT MISTAKES THAT FAIL SMALL BUSINESSES

 

Is there an engine in it? Does it have brakes? Does it have wheels? What am I missing? Is it stolen?

 

You know why? Mainly because it's not congruent to what I expect for the value I'm trying to receive.  The same thing is happening to your business.

 

Here's a simple tip that you can use to check pricing. Research your nearest competitor’s prices. Match the price that they charge, and then provide more value. And value doesn't have to be in the form or a discount. Value can be in the form of additional services that doesn't cost more.

If you're a graphic designer and you provide design services to create a logo, maybe you could add additional revisions to the logo as a bonus. In reality, you may charge several hundred dollars extra for that, but say, "Look, for this particular package, I'll give you three revisions for free. If you want unlimited revisions, it's going to be double the price."

 

The bigger goal is being able to provide something that people want and value. Customers spend money for a desired result or to solve a problem. It’s almost never because of price. The successful competitors in your industry are charging more than you are because they understand this principle.


About Ebong Eka

Ebong Eka is no stranger to the world of personal finance. As a certified public accountant and former professional basketball player he offers a fresh perspective to small business planning and executing. With over fifteen years of accounting, tax & small business experience with firms like PricewaterhouseCoopers, Deloitte & Touche and CohnReznick, Ebong provides practical money solutions tailored to the everyday person, the aspiring entrepreneur or the small business owner.

 

Ebong is the founder of EKAnomics, a sales, pricing and leadership firm. He is also the founder of Ericorp Consulting, Inc., a tax and management consulting firm. Ebong is the author of “Start Me Up! The-No-Business-Plan, Business Plan.

 

Web: www.ebongeka.com or Twitter: @EbongEka.

You can read more articles from Ebong Eka by clicking here

 

Bank of America, N.A. engages with Ebong Eka to provide informational materials for your discussion or review purposes only. Ebong Eka is a registered trademark, used pursuant to license. The third parties within articles are used under license from Ebong Eka. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.

         

Bank of America, N.A. Member FDIC.  ©2017 Bank of America Corporation

Ebong Eka Headshot.pngOne of the most frequently asked questions about taxes I receive this time of year is: “What if I can’t pay all of my taxes on Tax Day?”

 

Great question – I get it, life happens and sometimes for many small business owners, cashflow is sporadic and in some unfortunate cases anemic.

 

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So what do you do if you didn’t pay what you owe the IRS on tax day?

 

1. Don’t panic and don’t bury your head in the sand. The IRS isn’t trying to ruin your business, yet panicking or avoiding the issue will only lead to more troubles in the long run. Clients I’ve represented before the IRS could have avoiding large penalties if they had immediately dealt with the issue instead of putting it off.

 

2. File your return on time and pay as much as you can. Hopefully, you filed a valid extension to avoid the “Failure to file timely” penalty. You may still be subject to the late payment penalty if you don’t pay everything you owe by the filing date. Paying as much as you can upfront could also decrease the interest charges as well.

 

3. Consider obtaining a personal loan or credit card to pay what you owe. Why? Credit cards and personal loans generally have lower interest rates than the interest rates provided by the IRS.

 

RELATED ARTICLE: BEWARE THE NICKEL & DIMERS

 

18022330_s.jpg4. Don’t wait for the IRS - Contact the IRS for an installment agreement. The installment agreement is a payment plan to pay the taxes you owe on your tax return. Visit the IRS.gov for Form 1127 – “Application for Extension of Time for Payment of Tax Due to Undue Hardship.” Form 1127, and its supporting documentation, should be filed as soon as you’re aware of taxes you owe or a tax deficiency you can’t pay without causing undue hardship.

 

Also, visit the IRS.gov for Form 9465 Installment Agreement Request. The IRS charges a fee to set up the installment agreement.

 

5. Don’t ignore letters or bills you receive from the IRS. Contact the IRS immediately if you receive letters or bills from them. Your situation will only get worse if you ignore bills or letters from the IRS. Additionally, IRS correspondence will provide instructions on what to do as well as what information they need from you. Contact your tax advisor or CPA if you have any questions.

 

Speak to your tax advisor if you have a problem with paying your taxes on time, need an installment or payment plan or have general questions about notices/letters you receive from the IRS. As a reminder Certified Public Accountants (CPA), Enrolled Agents and Lawyers are the only people who can represent taxpayers in front of the IRS. Just remember not to panic if you have a tax issue because help is only a quick email away!

 

About Ebong Eka

Ebong Eka is no stranger to the world of personal finance. As a certified public accountant and former professional basketball player he offers a fresh perspective to small business planning and executing. With over fifteen years of accounting, tax & small business experience with firms like PricewaterhouseCoopers, Deloitte & Touche and CohnReznick, Ebong provides practical money solutions tailored to the everyday person, the aspiring entrepreneur or the small business owner.

 

Ebong is the founder of EKAnomics, a sales, pricing and leadership firm. He is also the founder of Ericorp Consulting, Inc., a tax and management consulting firm. Ebong is the author of “Start Me Up! The-No-Business-Plan, Business Plan.

 

Web: www.ebongeka.com or Twitter: @EbongEka.

You can read more articles from Ebong Eka by clicking here

 

Bank of America, N.A. engages with Ebong Eka to provide informational materials for your discussion or review purposes only. Ebong Eka is a registered trademark, used pursuant to license. The third parties within articles are used under license from Ebong Eka. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.

          

Bank of America, N.A. Member FDIC.  ©2017 Bank of America Corporation

Ebong Eka Headshot.pngThe Affordable Care Act (ACA), also known as Obamacare, provides affordable health insurance across the U.S. through subsidies to consumers as well as offering tax credits to small businesses.

 

Even though the Trump Administration seeks to repeal and replace the ACA, it will take time for the political process to occur. Thus, there is still an opportunity for your small business to benefit from the tax deductions or credits for the 2016 tax return year.

 

What’s the difference between a Deduction and a Credit?

 

Before we go into how the ACA affects your small business, let me be clear on the difference between a tax credit and a tax deduction. A tax credit directly reduces your tax liability. For example, if you owed $1,000 in taxes to the IRS and received a $500 tax credit, you would only have to pay $500. Tax credits are dollar-for-dollar reductions in your tax liability.

 

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A tax deduction is different because it indirectly reduces your tax liability by reducing (through increasing) the expenses used to arrive at income. I've always told clients that having or receiving a tax credit is always better and more lucrative than having a tax deduction. Please speak to your tax advisor for what works specifically for you.

 

Do you qualify for ACA tax credit?

 

As a small business owner, you may be eligible for the small business healthcare tax credit if you meet the following conditions:

 

  1. You cover at least 50% or more of your employees' insurance premium costs;
  2. You must have fewer than 25 full-time employees;
  3. Your full-time employees' annual wages are less than $52,000 each in the 2016 tax year. Your credit may be limited or phased out if wages are higher;
  4. You must purchase health insurance coverage through the Small Business Health Options Program (SHOP) Marketplace.

 

Finally, here's a shared responsibility payment notice: If you have fewer than 50 full-time employees including full time and equivalent employees, i.e., you have two part-time employees who split a full- time job, you're not subject to the employer's shared responsibility provisions. If you employ fewer people, you have other incentives as well.

 

RELATED ARTICLE: THE TOP 7 TAX SCAMS OF 2017 YOU MUST AVOID

 

How much of a difference does the tax credit make for your business?

 

32147912_l.jpgFor tax years beginning in 2014 or later, the maximum credit increased to 50% of premiums paid for small business employers and 35% of premiums paid for small tax-exempt employers. Additionally, the credit is available to eligible employers for two consecutive taxable years.

 

For example, if you pay $50,000 a year toward employees’ health care premiums — and if you qualify for a 50% credit, you save $25,000 per year. Imagine what you can do for your business with that money!

 

Tax credits are advantageous because they help you save money on taxes which you can use to hire more employees or purchase more equipment. 

 

Regardless of where you sit politically, if you are a small business owner, there's a great opportunity for you to save money on your taxes by way of the small business healthcare tax credit.


Speak with your tax advisor about your eligibility for the tax credit and how much may be available to you before the ACA is repealed and/or replaced.

 

About Ebong Eka

Ebong Eka is no stranger to the world of personal finance. As a certified public accountant and former professional basketball player he offers a fresh perspective to small business planning and executing. With over fifteen years of accounting, tax & small business experience with firms like PricewaterhouseCoopers, Deloitte & Touche and CohnReznick, Ebong provides practical money solutions tailored to the everyday person, the aspiring entrepreneur or the small business owner.

 

Ebong is the founder of EKAnomics, a sales, pricing and leadership firm. He is also the founder of Ericorp Consulting, Inc., a tax and management consulting firm. Ebong is the author of “Start Me Up! The-No-Business-Plan, Business Plan.

 

Web: www.ebongeka.com or Twitter: @EbongEka.

You can read more articles from Ebong Eka by clicking here

 

Bank of America, N.A. engages with Ebong Eka to provide informational materials for your discussion or review purposes only. Ebong Eka is a registered trademark, used pursuant to license. The third parties within articles are used under license from Ebong Eka. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.

                 

Bank of America, N.A. Member FDIC.  ©2017 Bank of America Corporation

Ebong Eka Headshot.png“Dear Mr. Eka,

 

We received your tax return. Please confirm the following information so we can process your refund.

 

Sincerely,


The IRS”

 

If you ever received a letter like this from the IRS, you may want to celebrate your coming refund. Unfortunately, it had the opposite impact on me: I had not yet filed a tax return for 2015, so I should not be expecting a refund.

 

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That's when I realized someone filed a fraudulent tax return with my information and social security number. If you are a small business owner, identity theft and tax fraud are increasing and could be problematic for you and your business. Every year, the IRS releases a list of currently prevalent tax scams. Here are 2017’s top seven tax scams and how to protect yourself against them.

 

1. Phishing. Still the most popular trick because it keeps working. Crooks and scammers send a fake email directing you to a website to enter your information. They then steal your information to either file false tax returns or file false tax refunds. If something does not look right to you, don't click on the link in the email.

 

2. Phone scams. As a small business owner, my office phone number is readily available. As a result, I receive phone calls from people claiming to be IRS officers. The caller may threaten to have you deported, seize your assets and property, or threaten criminal prosecution and a variety of other things. If you receive a phone call from the IRS and it doesn't sound right to you or they're trying to receive information from you, hang up and call the IRS back by going to the IRS.gov website to find more information and then see if actually you were called. The IRS doesn't normally call you. If it's a first time, they will send you a letter in the mail.

 

RELATED ARTICLE: FIVE IRS-APPROVED IDEAS TO MINIMIZE YOUR SMALL BUSINESS TAXES

 

3. Identity theft. It is important to be aware about identity theft during tax time. I felt violated when it happened to me. I received letters from the IRS and from the state that I filed tax returns asking me to confirm whether I filed the tax returns. The IRS aggressively pursues criminals that file fraudulent tax returns using somebody else's Social Security number so contact them if you may be a victim of identity theft.

 

4. Return preparer fraud. One of the biggest problems that reputable tax return preparers like myself and others is the number of unscrupulous tax preparers who mislead tax payers. These tax preparers try to encourage tax payers to falsify expenses and deductions so they can receive credits they may not be entitled to.

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5. Fake charities. Some scammers pose as a fake charity so you can donate money with the hopes that you can get a tax deduction for your donation. You should receive a receipt after your donation which you must keep for supporting documents. Visit the IRS.gov website and search for eligible charities that have been registered with the IRS that allows you to get the tax deduction for donating funds to that particular charity or for any contributions.

 

6. Inflated refund claims. If you're a taxpayer, beware of any tax preparer who offers you inflated refunds, including those who promise to get you a large refund or ask to be paid based on the size of your tax refund. People who are either CPAs or enrolled agents are required by law not to get paid on contingency.

 

7. Falsely padding deductions on return. Taxpayers should avoid the temptation to falsify deductions or expenses on their tax return in order to pay less than they owe or to receive a larger refund. It's never worth it. The extra $100, $500 or even $1,000 you may receive is never worth the effort and the headache you would get if caught by the IRS. If caught, you and the tax preparer may be subject to interests and penalties.

 

It's imperative for you to pay close attention and not put yourself in those situations so you can continue running your business and not worry about getting scammed.

 

About Ebong Eka

Ebong Eka is no stranger to the world of personal finance. As a certified public accountant and former professional basketball player he offers a fresh perspective to small business planning and executing. With over fifteen years of accounting, tax & small business experience with firms like PricewaterhouseCoopers, Deloitte & Touche and CohnReznick, Ebong provides practical money solutions tailored to the everyday person, the aspiring entrepreneur or the small business owner.

 

Ebong is the founder of EKAnomics, a sales, pricing and leadership firm. He is also the founder of Ericorp Consulting, Inc., a tax and management consulting firm. Ebong is the author of “Start Me Up! The-No-Business-Plan, Business Plan.

 

Web: www.ebongeka.com or Twitter: @EbongEka.

You can read more articles from Ebong Eka by clicking here

 

Bank of America, N.A. engages with Ebong Eka to provide informational materials for your discussion or review purposes only. Ebong Eka is a registered trademark, used pursuant to license. The third parties within articles are used under license from Ebong Eka. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.

           

Bank of America, N.A. Member FDIC.  ©2017 Bank of America Corporation

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