From a Debtor’s and Creditor’s Perspective

By James Pruitt, Senior Staff Writer

The pandemic has not quite ended. However, the light at the end of the tunnel looms bright. Unfortunately for some business owners, the light shines brightest for creditors. After months of accommodations, many business owners are now seeing collections time on the horizon. Most hard-hit may be owners of restaurants, small shops, and entertainment venues.

In the case of the pandemic, most economic transactions remained stagnant for most of 2020. That status may lift as restrictions ebb and eager consumers rush back to their pre-pandemic lives. During the long hiatus in economic activity, many small businesses saw their funds run dry.

Creditors mostly retreated for the meantime. Legal restrictions often prevented collection efforts. Also, knowledgeable creditors generally do not collect until their debtors have something to collect. During the Pandemic, most creditors simply did not bother with economically inactive debtors. They knew better. Creditors bided their time, as the economy would not stay inert for long.

In their defense, creditors need to eat too. Creditors rarely accommodate out of charity. When economic circumstances leave both parties helpless, collections tend to stop. Most purveyors of loans and forgivers of debts, negotiate willingly with their partners.  However, collectors always perk their ears at leads their obligations can be satisfied.

Paradoxically, bankruptcies and other collections tend to increase during recoveries. Most common are Chapter 5 bankruptcies. Chapter 5 governs individuals and most corporations. Chapter 11 bankruptcies allow for a restructuring under the guidance of the bankruptcy court. Under Chapter 11, the business owner shelters more of their assets from creditors. However, the court needs a coherent restructuring plan before a court order forgiving any debts. The debtor needs to demonstrate a sincere plan for regaining solvency. Any hint of fraud gets you thrown out of court.

Even before bankruptcy, manifold options provide debtor relief. Generally, options vary with repayment. Debtors can settle with a fraction of their debt. Trustworthy lenders usually offer repayment plans. The only caveat for the debtor is honesty. Bad intent in the mind of the debtor (or creditor) can bring legal troubles.

On the horizon come hard choices, including selloffs and layoffs. As creditors start to collect, some businesses may not meet their payroll. Many companies may liquidate office equipment and even physical facilities. Despite the improving economy, some businesses may fail. Strangely, some of these failures may come as a result of the increased economic activity.

Wise use of funds from PPP loans may buy time. These loans have flexible terms, allowing many businesses to play catch-up as the economy normalizes. Fortunately for all of us, this experiment in pausing the economy does show many signs of success. News reports indicate we are off to a stellar year.

As we all get back to work, business owners and those they pay should buckle down on strategies for settling economic scores. We have all compromised during the Pandemic over the past year. Educated payment and debt practices ensure the survival of all economic participants. As we get through the last few months of these restrictions, Veteran Business Owners should carefully ponder strategies to step up business while communicating with those who’ve patiently waited for payment.

VAMBOA, the Veterans and Military Business Owners Association hopes that this mini-series on “Strategic Planning” has been valuable.   We work hard to bring you important, positive, helpful, and timely information and are the “go to” online venue for Veteran and Military Business Owners.  VAMBOA is a non-profit trade association.   We do not charge members any dues or fees and members can also use our seal on their collateral and website.   If you are not yet a member, you can register here:

https://vamboa.org/member-registration/

We also invite you to check us out on social media too.

Facebook:  https://www.facebook.com/vamboa

Twitter:  https://twitter.com/VAMBOA

Don’t forget that VAMBOA members receive significant discounts on technology needs.   Check them out here:

https://vamboa.org/dell-technologies/

By Debbie Gregory

The COVID-19 pandemic has led many people to ask themselves if “Now is the time to start their business?”  This has been driven by factors such as safety, job security, life purpose, future goals, and work-life balance.

Do you dream of creating your own product line? Setting your own hours? Being your own boss? Starting your own business can really help you take control of your life and work, take charge, add flexibility, learn new experiences, connect better with peers, and broaden yourself as a person.

Business owners are not special super humans, they are normal people who have big ideas and work hard to turn those ideas into reality. Every business owner is different but there are a few key traits that they all seem to have in common. To help you decide if starting a business is right for you, below are some good questions to ask yourself before making this huge leap of faith.

1.) Can you make important decisions quickly?

Problems arise all the time in business, and it is very important that the business owner can respond to them quickly, decisively, and with a clear head. You will also need to be able to handle any consequences that may occur after the problem has been resolved.

Being a business owner requires you to have confidence under pressure but not arrogance. You need to be able to be part of the team you build, have confidence in each other’s skills, accept that mistakes do happen, and be able to learn from those mistakes to move forward. If you struggle to make effective decisions quickly, owning a business will be much more challenging for you.

2.) Do you have high energy? 

Running a business is a lot of work. You need to be energized, passionate and excited to grow your brand. If you are the type of person who is constantly seeking after-work hobbies, weekend projects, and other activities, you may have the kind of energy to start a new business.

3.) Are you creative?

Creativity is a key aspect of owning a business. As the owner, you will be required to constantly come up with new ideas, whether they are new product ideas, lead generating strategies, marketing thoughts, revenue boosting activities, improving the company culture, and more. If you are usually bursting with new ideas, a business is a outstanding way for you to share those ideas with the rest of the world.

4.) Do you like to solve problems?

A business owner is basically a full-time problem solver. As we touched on in point #1, problems constantly arise in business. These problems should be viewed as opportunities instead of setbacks. As the owner, you cannot afford to be easily discouraged by setbacks or bad news. You need to be able to push forward and continue working hard. So, if you love solving problems and are not easily discouraged, business ownership could be for you.

Regardless of how you have answered these posed above, we hope that you can see that business ownership is not out of your reach if it is something you are interested in. If you are even slightly creative, energetic, and love to solve problems in addition to having a great idea for a business, now is always a wonderful  time to get started.

VAMBOA, the Veterans and Military Business Owners Association hopes that this mini-series on “Strategic Planning” has been valuable.   We work hard to bring you important, positive, helpful, and timely information and are the “go to” online venue for Veteran and Military Business Owners.  VAMBOA is a non-profit trade association.   We do not charge members any dues or fees and members can also use our seal on their collateral and website.   If you are not yet a member, you can register here:

https://vamboa.org/member-registration/

We also invite you to check us out on social media too.

Facebook:  https://www.facebook.com/vamboa

Twitter:  https://twitter.com/VAMBOA

Don’t forget that VAMBOA members receive significant discounts on technology needs.   Check them out here:

https://vamboa.org/dell-technologies/

By James Pruitt, Senior Staff Writer

What is Depreciation, and How Can I Benefit from it?

Any new item in a business’s repertoire likely depreciates over time. Owners may write off this decline in value during tax season. Also, services and other intangibles may qualify as tax deductions.

For example, vehicles, equipment, and buildings inevitably require maintenance, as well as accounting for any loss of value. These assets may endure wear and tear during the early stages of your business. Guess what? Both the maintenance costs and the loss of value may qualify business owners for a tax write-off.

Oil changes, paint jobs, and worn-out parts can reduce your tax liability. Similarly, loss in inherent value can relieve proprietors come tax season.

Methods for Calculating Depreciation

The straight-line method is the most common way to calculate depreciating resources. This method simply divides the initial cost of an asset by its years of useful life. This asset may be a vehicle, a piece of equipment, or a piece of real property.

Other methods of calculation may fit different circumstances. Variables such as “useful life” and “value” may not always calculate simply, based on the nature of the asset.

Many calculation methods other than straight-line depreciation can reduce a veteran entrepreneur’s tax burden.

• Sum-of-Year’s-Digits (SYD) Depreciation

The Sum-of-Year’s method accounts for the salvage value of an asset. This method is complex, and business owners should apply this method to their taxes only very cautiously.

• Units of Production Method

This method accounts for the wear-and-tear of a piece of equipment. Essentially, this accounting practice considers the productivity of a piece of equipment. The depreciation of the equipment depends on the quantity of resulting product.

• Declining Balance Depreciation

Consider the cliché that a car loses much of its value after leaving the dealer’s lot. This method allows users to subtract most of an asset’s value during the first few years of use. After this period, often the depreciation of an asset flattens. However, the largest tax breaks for depreciation may come early on.

• Double Declining Balance Depreciation

This method is a hybrid. Generally, this method combines straight-line depreciation with declining balance depreciation. Usually, business owners use this method for equipment with a short useful life.

• Straight-Line Depreciation

The straight-line method is by far the most common method for calculating depreciation. Most small business owners use this method. This method of depreciation even reduces to a simple formula: (asset cost – salvage value) / useful life in years = annual depreciation.

Which Method to Use?

The straight-line method provides the best calculation method for the majority of small businessowners. However, the relevant variables themselves may not always seem readily apparent. How do we calculate, for example, “asset cost,” “salvage value,” or “useful life in years?”

Consider a small business that manufactures t-shirts. Imagine an embroidering machine. Perhaps the “units of production method” may provide a more useful method come tax season to gain that useful write-off. Lacking sophisticated expertise in gauging the declining value of this piece of equipment, a small business owner could legitimately resort to calculating the deterioration of the machine by the number of t-shirts produced.

Bottom Line

The straight-line method provides by far the most common method of calculating depreciation. However, straight-line depreciation is not always practical.  Variables such as “asset cost,” “salvage value,” and useful life in years” may themselves present difficulties. These values may depend on the type of equipment and the nature of the business. The owner’s discretion inevitably provides the best fit for the optimal tax and accounting methods.

VAMBOA, the Veterans and Military Business Owners Association hopes that this article on Depreciation has been valuable.   We work hard to bring you important, positive, helpful, and timely information and are the “go to” online venue for Veteran and Military Business Owners.  VAMBOA is a non-profit trade association.   We do not charge members any dues or fees and members can also use our seal on their collateral and website.   If you are not yet a member, you can register here:

https://vamboa.org/member-registration/

We also invite you to check us out on social media too.

Facebook:  https://www.facebook.com/vamboa

Twitter:  https://twitter.com/VAMBOA

Don’t forget that VAMBOA members receive significant discounts on technology needs.   Check them out here:

https://vamboa.org/dell-technologies/

By James Pruitt, Senior Staff Writer

Just how much work brings a business idea to life? Many new business owners today assume unrealistically that no amount of work is enough. Following the initial exuberance of a spark of inspiration, some may see creating and managing their vision from the outset as not full-time job, but an all-time commitment. Life comes first, and when the stress of their own perceived obligations runs a manager down, a small business could stay down with them until their own welfare becomes a priority.

Business owners should manage their priorities wisely. The first such priority is health. Excessive overtime does no favors for either a service-provider or their clients. Sluggish thinking tends to prevail when overwork is the norm. Such thinking leads to mistakes, numbs innovation, and creates apathy. Many a medical resident or air traffic controller has learned this lesson the hard way. No business owner benefits from 12 hours a day hustling for work that may not exist.  Small business owners need to work smart instead of long and this is good advice.

The owner’s commitment should therefore match the realistic scale of the enterprise. Early in the history of a business, the time-commitment may in fact be minimal. A new business owner may in fact need to feel out the scope of demand for their services before planning for a larger, more sophisticated organization.

Often for a brand-new entrepreneur, the most exciting aspects of the business may in fact provide the greatest rewards. In other words, dry planning for infrastructure development may for some hinder rather than help development. Such development may not end up a great fit for the needs of a new business.

Perhaps later, business may grow.  The necessities of a new enterprise may change. A sole proprietor often must direct every function of their enterprise. A larger organization tends to rely on specialists. Any mid-size or large corporation likely has several departments, such as Human Resources, Legal, or Marketing. As a sole proprietor develops their new business, they often must assume each function simultaneously and wear many hats.

The direct needs of the business could more directly impact the proprietor. The more demanding a business becomes, the more carefully we should balance the needs of the business with our own capacity to function in a healthy, productive manner.

A 2012 Slate article, “Bring Back the 40-hour Work Week,” noted that for most of the 20^th century, business leaders such as Henry Ford noted the deleterious effects of overwork for their employees, as well as presumably themselves. The current ethos of overwork in many sectors does nothing to improve on these sentiments.

Those who run a business should have a sense of their own proclivities. Consider those habits that may sharpen your senses and increase your enthusiasm, as opposed to those that leave you exhausted and sluggish. For example, some people work best in the mornings, while others need time to adjust and plan their day. Breaktimes and lunch may provide opportunities to get to know your healthiest, most productive, and happiest routine. Additionally, managers should know how to mesh work life with down-time and recreation.

Generally, those who deliver vibrance to their own business creations are fonts of life themselves. Your own inner world dictates the energy you radiate. Self-care and mindfulness about your own well-being colors the life of those within your sphere. Hence, consider the dangers of the cult of overwork, and remember that the management of your own well-being matters as much as management of your business.

VAMBOA, the Veterans and Military Business Owners Association hopes that this article has been valuable.   We work hard to bring you important, positive, helpful, and timely information and are the “go to” online venue for Veteran and Military Business Owners.  VAMBOA is a non-profit trade association.   We do not charge members any dues or fees and members can also use our seal on their collateral and website.   If you are not yet a member, you can register here:

https://vamboa.org/member-registration/

We also invite you to check us out on social media too.

Facebook:  https://www.facebook.com/vamboa

Twitter:  https://twitter.com/VAMBOA

Don’t forget that VAMBOA members receive significant discounts on technology needs.   Check them out here:

https://vamboa.org/dell-technologies/

By James Pruitt, Senior Staff Writer

No mere cliché can provide a solution to the difficult project of planning for a company’s future. Each business differs both internally and in relation to its circumstances. Many strategists recommend a four-step process for assessing strengths, weaknesses, opportunities, and threats. For convenience, we can refer to this process as a “SWOT” analysis.

Wise business owners carry this analysis through a discussion phase, development phase, and a review and updating phase. This adaptable framework ensures the bases are covered for entrepreneurs laying out their plans for success.

The Discussion Phase

At the discussion phase, remember to involve employees in discussions about strengths and weaknesses. The initial phases may require the most painful analyses of the SWOT process, requiring sincere feedback from diverse sources. The leadership can consider available human assets, as well as material resources and available business networks. Managers can gauge strengths and weaknesses through careful assessment by those overseeing each business process.

Following the assessment of strengths and weaknesses, the business is ready to gauge opportunities. The earliest assessments of available opportunities can provide an exciting chance to sound out the aspirations of all involved. Certain team members may have skills or talents that could propel the company in a new direction. Maybe the team possesses technical expertise that allows partnership with nearby potential rivals. At this stage in the SWOT analysis, the business owners can perform a wholistic assessment to connect the wealth of the company’s resources with the surrounding economic landscape.

Finally, a SWOT analysis assesses threats. Potential threats may include market saturation, logistical challenges, and labor shortages.  Threats are often more difficult to identify than opportunities. Leadership should prepare to roll up their sleaves and face any hard truths in this discussion.

The Development Phase

The development phase allows the leadership to implement the knowledge gleaned in the discussion phase. Here is where the strategic plan takes shape. Many analysts consider five components essential to a strategic plan: a vision statement, a mission statement, goals and objectives, and details regarding a cycle of regular updating and review. The goals of the business should be clearly measurable. Also, a company’s goals should anchor in realistic assessments of its capacities.

The Reviewing and Updating Phase

The review and updating phase assess the cycles by which the company will adapt and evolve. Strategic plans are fluid, living documents, and periodic reviews ensure the strategy maintains relevance in the current environment.

The management should designate a certain person to oversee the regular updating of company policies and strategies. The company’s vision should actively engage with surrounding realities, and react as necessary to shifts in values, economic opportunity, or goals of the stakeholders. These updates can occur yearly, monthly, or biannually as needed. Owners must not allow strategies and policies to go stale. Running a business is a dynamic process. Without thorough periodic reviews, any number of changes can sneak up on a business, possibly even challenging its relevance.

Importance of a Strategic Plan

Maintaining relevance is a dynamic process. However, the above framework can walk the management through the process and cover the main priorities while allowing flexibility with the specifics of the business. The process should begin as soon as possible, in order maintain direction through all phases of a business’s development. Preparation is key, and wise strategic planning is necessary to ensure healthy engagement with any challenges ahead.

VAMBOA, the Veterans and Military Business Owners Association hopes that this mini-series on “Strategic Planning” has been valuable.   We work hard to bring you important, positive, helpful, and timely information and are the “go to” online venue for Veteran and Military Business Owners.  VAMBOA is a non-profit trade association.   We do not charge members any dues or fees and members can also use our seal on their collateral and website.   If you are not yet a member, you can register here:

https://vamboa.org/member-registration/

We also invite you to check us out on social media too.

Facebook:  https://www.facebook.com/vamboa

Twitter:  https://twitter.com/VAMBOA

Don’t forget that VAMBOA members receive significant discounts on technology needs.   Check them out here:

https://vamboa.org/dell-technologies/