5_Ways_to_Set_Your_Business_Up_for_Success_in_2018

How to Take Advantage of Business Opportunities and Navigate Challenges in 2018

Along with a flourishing economy, 2018 ushered in newly-passed tax reform and other changes that may present both challenges and opportunities for business owners.

Consider these five steps to keep your business on the right foot this year.

Update Your Business Plan

As every business owner knows, companies are constantly evolving and every year brings new opportunities and challenges. The more you can use your business plan to help you strategize for the year, the better prepared you'll be, said David Cameron, head of business banking at City National Bank.

“You want to do this every year," Cameron said. “Business plans are a living document."

Companies should be reviewing their plans quarterly, to know if they're meeting their own expectations, and then come to a reckoning in early fourth quarter before they start looking toward the year ahead.

Business owners should set a road map that includes every line item on their balance sheet or financial statement, said Cameron. Every product or offering that represents at least 5 percent of sales, every major market you sell into and every vendor and customer needs to be reviewed.

The idea is to identify new markets, come to better terms with vendors and find new customers.

“You want to look at how to diversify, whether that's new products or finding new vendors," said Cameron. “The more diversified a company is, the more valuable it's going to be."

Take a close look at costs, too. The beginning of the year is a good time to see if there are places where you can cut expenses: Maybe renting equipment isn't as economical as buying, for instance, or perhaps investing in a piece of technology can help you save money down the road.

Review Your Taxes

Yes, you probably just did this late in 2017, but with the tax reform legislation that took effect on Jan. 1, you may need to reevaluate.

Start by looking at your corporate structure—and determining whether you should make a change.

There are different tax filing rules for LLCs, Limited Partnerships, C Corporations, S Corporations and business entities. So it's imperative to understand, if you don't already, the kind of business entity you're running.

For instance, S Corps and LLCs are "pass-through" entities, meaning that profits and losses pass through the corporation and are claimed on the owner's individual income tax return. The tax reform law created new opportunities for such entities that you may want to explore with your attorney and tax advisor.

Once you have a handle on your business structure, you'll be able to determine what kind of deductions you're able to take. If you operate a pass-through business and are accustomed to itemizing deductions to lower your tax liability, some of the deductions you usually take may be unavailable. If you own property, your property tax deduction will be limited to a certain amount. If you pay state or local income tax, those deductions will also be limited.

While many of the deductions you may depend on to lower your taxable income will no longer be available, the standard deduction is increased to $24,000 in 2018 for married couples filing jointly. In 2017, the standard deduction was $12,700 for married couples filing jointly.

Consider Valuations

The first part of the year is also a good time to review your company's valuation — and start thinking about how to raise it. This is especially important for business owners who may want to sell their company in the next year or two.

While valuation of a business can be fairly easy — you can hire a firm to do it — increasing the value of your business is harder to do.

The first place to start? Make sure your metrics show positive trends, said Cameron.

“The companies that sell for the highest multiples are emerging companies," he said. “These businesses have bright futures."

Boosting valuations means either turning negative numbers into positives, or making positive numbers even better. That could mean adding new product lines, finding ways to acquire new customers or writing off old inventory so obsolete items languishing on your books don't put off potential buyers.

“You want the business to be running at an optimal level," said Cameron. “The more positive the trends, the higher the valuations."

Plan for Staffing

As 2018 began, 18 states now require employers to pay higher minimum wages. States including Arizona, California, Colorado and Washington passed laws increasing minimum wage requirements, while other states including Montana and South Dakota are seeing increases because their minimum wages are tied to the inflation rate.

If your business plans for growth during the coming year, adding staff may be a priority.

In a late 2017 survey by researchers at Pepperdine University's Graziadio School of Business and Management and Dun & Bradstreet Corp., 42 percent of responding small business said they planned to add one to two staffers in the next six months.

However, payroll may be more expensive than it has been in the past. Even if your open positions aren't minimum wage positions, you may find that it's necessary to boost your compensation package in the current competitive hiring environment. With unemployment at a low 4.1 percent, your business will need to offer a competitive package to lure the high-performing staff you may need to keep growing.

Review Retirement Plans

The first quarter of the year is also the time to review whether or not you have the right retirement plans for your staff. There are so many different types of retirement plans – 401(k)s, profit sharing plans, Simple IRAs — and what worked before for employees may not work now or as your company grows.

Retirement plans are an important part of your employee retention strategy, an important consideration in a job market operating near full employment.

Learn how to create a strategic plan for your business and ways to improve your leadership skills to set your business up for success in the year ahead.

City National Bank, its managed affiliates and its subsidiaries, as a matter of policy, do not give tax, accounting, regulatory or legal advice. Rules in the areas of law, tax, and accounting are subject to change and open to varying interpretations. You should consult with your other advisers on the tax, accounting and legal implications of any proposed strategies based on your particular circumstances.

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