Actually, Now’s the Time to Focus on 2024 Taxes
And Gene Marks has a long list of ways you can save, some of them new this year — but don’t wait until the last minute.
Good Morning!
Here are today’s highlights:
Are you still trying to run your business off your checkbook?
A lot of business owners wonder why their employees always need to be told what to do. Daniel Marcos has an answer.
The business world may never formally adopt the four-day workweek, but we’re kind of edging in that direction.
On Monday, California will begin to see the impact of a big hike in the minimum wage.
PROGRAMMING NOTE
The Morning Report will not publish on Good Friday. It will return on Monday as will the Dashboard podcast.
TAXES
Gene Marks has a long list of ways you can save on taxes: “Though filing your 2023 taxes may be on your mind this time of year, it’s also a good time to consider ways to cut your tax bill for next year. 2024 is still young, and it’s a good time to meet with your accountant or tax advisor and discuss these strategies. That will give you time to make these moves so that you can minimize your tax liabilities by the end of the year.”
“Buy capital equipment: The ‘bonus’ depreciation deduction available for businesses has been significantly reduced for 2024, but it still remains a significant benefit. This year if you purchase and put into service certain machinery, equipment, office furniture, software, hardware, and other assets you can deduct more than half of it on your 2024 tax return. The remainder would need to be depreciated over the life of the asset.”
“Buy a ‘clean’ vehicle: Thanks to the Inflation Reduction Act individuals and their businesses can now get up to a $7,500 tax credit on the price of certain qualified plug-in or fuel-cell electric vehicles. Better yet, the credit can now be taken right at the dealership. If you’re looking for a new car for your business, this incentive is significant.”
“Get a credit for research: The Research Tax Credit was expanded under the Inflation Reduction Act so that small businesses can apply the credit against either their income or payroll taxes owed. It’s available for any business in any industry that’s developing new products and considers expenses such as wages, materials, outside contractors, and overheads.” READ MORE
MANAGEMENT
Lou Mosca says, in the video above, most of the business owners he meets manage their businesses by their checkbook: “While it’s not a bad method for managing your household budget or startup, it’s the absolute wrong move for running a business. Looking only at what’s going in and out of a company’s bank account doesn’t accurately reflect available funds. There’s a lot you just don’t see. For a growing business, a comprehensive understanding of all financial inflows and outflows is crucial.”
Daniel Marcos, CEO of the Growth Institute, says entrepreneurs often wonder why employees don’t pick up the ball and run with it: “Well, maybe that's because they are not entrepreneurs. Most team members don't thrive in an environment of constant change and misdirection. If you want them to execute a vision, there must be buy-in and constant alignment. A 30-minute all-hands meeting once a month will just lead to chaos and constant firefighting. At my company, we use a system called Scaling Up by Verne Harnish. It uses a single document called a one-page strategic plan where we list, in columns, our core values, core purpose, and a 10-year big, hairy, audacious goal. Communicating these helps guide everyone on the team to act consistent with our culture. Then we list our three- to five-year objectives, our one-year initiatives, and our quarterly objectives. Everyone buys into these metrics and keeps focused on the results.”
“The plan is not enough on its own, though. We meet each year for a few days, each quarter for one day, each month for half a day, each week for two hours, and we have a 15-minute daily huddle. This rhythm ensures everyone knows how they fit in the overall goal and keeps anyone from drifting too far away.”
“It takes a bit to implement this system, and many benefit from a coach--but it frees the entrepreneur from being solely responsible for the direction of the company. That means having more time and brain power to be strategic and self-focused.”
“Salespeople doing their own thing in their own way is a recipe for chaos and inconsistent revenue. I learned a long time ago from Jack Daly, sales guru and author of Hyper Sales Growth: Street-Proven Systems & Processes. How to Grow Quickly & Profitably, that a sales playbook is a simple way to get our salespeople to say the right things in the right way to the right people.” READ MORE
HUMAN RESOURCES
Yes, we’re working less on Fridays, but neither worker productivity (nor the sky) is falling: “Growing evidence suggests it’s because taking it easier one day of the week can supercharge performance on others, plus mitigate the costs of worker burnout and turnover. Some bosses are even discovering their staff work more effectively when they’re left to sort their Fridays on their own. Companies have largely ceded Fridays to the work-from-home camp as a compromise. Shorter Fridays at work are showing up in other facets of life, too.”
“None of this makes Luke Liu, founder and chief executive of Albert, an interactive learning platform for grades 5-12, lose sleep over his all-remote staff’s productivity. He moved to a half-day Friday policy in 2022 to alleviate worker burnout, reasoning that Friday afternoons were the least productive part of the week anyway. ‘On paper, it’s a 10-percent loss of time,’ he says. ‘In reality, it’s a 2-percent to 5-percent loss.”
“Many of Albert’s 50 employees use the extra half day to take care of medical appointments and other errands, leaving more time to recharge on the weekend and to focus on their jobs during the rest of the workweek.”
“[Nicholas Bloom, an economist at Stanford University] points to a 2022 study he co-wrote of more than 1,600 professionals at a large tech firm weighing whether to adopt a hybrid-work model. For the six-month experiment, half the staff worked full time in the office, the rest had the option to work remotely Wednesdays and Fridays. On their days working from home, typically one day a week, employees tended to work two hours less than the full-time office group.”
“Many used the time for medical appointments, picking children up from school or exercise. But they made up 1.5 hours by working more over the rest of the week. They also took 15 percent fewer days off for sick leave and other absences, and their performance scores and promotion rates were the same as those of other workers.” READ MORE
Diners are expected to eat the cost of California’s minimum-wage jump: “Chipotle, McDonald’s, Starbucks, Jack in the Box, and Shake Shack are planning to raise menu prices. Fast-food franchisees are laying off employees or cutting their hours. Smaller independent business owners, meanwhile, worry their workers will bolt unless they also increase wages. With California’s mandatory minimum wage for fast-food workers set to jump to $20 an hour on Monday, major restaurant chains are scrutinizing every aspect of their businesses to find ways to offset the extra money they will soon be spending on labor. In many cases, customers will end up eating the cost.”
“‘It’s going to be a pretty significant increase to our labor,’ Jack Hartung, Chipotle’s chief financial officer, said of the new law during the company’s third-quarter earnings call. He estimated that the burrito chain would boost prices by ‘a mid-to-high single-digit’ percentage as a result. ‘We are definitely going to pass this on.’”
“The pay increase established by Assembly Bill 1228 applies to California fast-food workers employed by any chain with more than 60 locations nationwide, and covers corporate-owned and franchised locations. The state has more than 540,000 fast-food workers, about 195,000 of them in Los Angeles and Orange counties, according to the latest May 2022 figures from the U.S. Bureau of Labor Statistics.”
“The current minimum wage in California, regardless of industry, is $16 an hour, meaning many cashiers, line and prep cooks, counter attendants, and baristas will see as much as a 25-percent raise overnight. READ MORE
FINANCE
Ami Kassar thinks there’s something happening in the smallbiz lending market: “Recently, it has been apparent that the market is shifting. Funding Circle, a U.K.-based small business lender that has been lending in the U.S. for several years, recently announced plans to sell its U.S. division. In 2023, the company lent out $491 million in the U.S. and reported a loss of $29 million from those efforts. Ironically, Funding Circle is one of the lenders that lobbied the SBA to change its rules to allow it to enter this market. The lobbying was successful but the company is leaving the market anyway.”
“And Funding Circle is not alone. Amazon recently announced that it will stop underwriting loans for its $140 billion Marketplace business, shutting off an important source of capital for its third-party sellers. A few months ago, Business Insider published an article noting that Amazon’s economists have growing concerns about rising defaults in their portfolio.”
“At MultiFunding, we recently learned that one of our primary SBA lenders, a community bank in California that we have worked with for more than five years, has tightened up its credit terms. What does this all mean?”
“When small business lending starts to decline, it is often a warning of coming economic turbulence.” READ MORE
ECOMMERCE
Has the luxury e-commerce bubble burst? “The implosion of MatchesFashion was the latest messy reckoning for companies that sell luxury goods online. Once the darlings of investors, many are in financial free fall. In December, Farfetch, a one-time e-commerce powerhouse for independent boutiques and beloved by the luxury heavyweights whose websites it powered, staved off bankruptcy thanks to an 11th hour acquisition by the South Korean e-commerce group Coupang and a $500 million bridge loan. In 2021, Farfetch had a valuation of $40 billion.”
“For much of the last decade, luxury e-commerce was heralded as the smart way to shop, offering hyped brands, exclusive products, free returns, and 90-minute delivery services at the swipe of a button. Brick-and-mortar stores would surely crumble. The future lay in clicking Add to Basket, be it for fashion with a price tag of $50 or $50,000.”
“During the first years of the pandemic, consumers splurged through such websites. More recently, questionable management choices, a volatile global economy and soaring luxury prices — and with big brands heavily investing in their own digital operations — constricted retailers’ ability to stand out in a competitive market, let alone make a profit.”
“‘In the end, what cannot stand will fall, and online players need to have lower and more practical ambitions,’ said Luca Solca, a luxury analyst at Bernstein. ‘Matches is bankrupt, Farfetch spent money like there was no tomorrow on debatable acquisitions, and Net-a-Porter is obsolete. Any dreams of becoming an Uber for luxury distribution has turned into a nightmare and has proved impossible to realize.’” READ MORE
OBITUARY
Daniel Kahneman, who pioneered the study of behavioral economics: “The work, done largely in the 1970s, led to a rethinking of issues as far-flung as medical malpractice, international political negotiations and the evaluation of baseball talent, all of which he analyzed, mostly in collaboration with Amos Tversky, a Stanford cognitive psychologist who did groundbreaking work on human judgment and decision-making.”
“As opposed to traditional economics, which assumes that human beings generally act in fully rational ways and that any exceptions tend to disappear as the stakes are raised, the behavioral school is based on exposing hard-wired mental biases that can warp judgment, often with counterintuitive results.”
“Professor Kahneman delighted in pointing out and explaining what he called universal brain ‘kinks.’ The most important of these, the behaviorists hold, is loss-aversion: Why, for example, does the loss of $100 hurt about twice as much as the gaining of $100 brings pleasure?”
“Among its myriad implications, loss-aversion theory suggests that it is foolish to check one’s stock portfolio frequently, since the predominance of pain experienced in the stock market will most likely lead to excessive and possibly self-defeating caution.” READ MORE
THE 21 HATS PODCAST
What to Expect When You’re Expecting a Business: This week, Paul Downs, Jennifer Kerhin, and Liz Picarazzi discuss the challenges couples face when one spouse is building a business. Liz says it was important to let her husband know that she spent years working on a business plan before leaving her corporate job to start her first business. Paul explains why, when times have been tough, he hasn’t always shared the bad news with his wife. And Jennifer says too many couples planning for one spouse to start a business focus on best-case scenarios rather than the more likely worst-case scenarios. She also suggests some important questions for couples to ask themselves, including this one: “Will she still have faith in him if the business fails?
“Plus: Businesses fail all the time, of course, and Paul explains why he thinks it’s usually for one of three reasons. And four years after the pandemic arrived, we take a look back: What was each owner’s toughest moment? What was their best decision? How have their business models changed?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren