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Aren’t You a Safe Investment?

Posted by Suzy Granger Posted on June 22 2017

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If you have a typical 401k or IRA your money is being invested in other people’s businesses. Your retirement hinges on the success of companies over which you have no control and whether or not you are able to retire comfortably is largely out of your hands. You’re subject to the whims of an unpredictable stock market in a volatile economy.  

 

This might work for those happy to continue their day jobs for years to come while waiting for the day they can retire. They’re happy sitting on a big pile of money hoping it doesn’t disappear at the next economic downturn. But if you’re not like them and want to follow your dreams and take the future into your own hands, then DRDA CPA’s has exactly what you’re looking for.

 

What if you could unlock your 401k/IRA (and 403b for teachers) to use as startup funds, tax-free and penalty-free, right now and invest in yourself?

 

With a BORSA Plan you can do just that. A BORSA plan allows you to create a corporation and then buy stock in that corporation using funds from your 401k/IRA. You can use all or some of the money as startup funds, and even combine funds with other people. Your money can then be used to buy a business, start a business, or add capital to a current business. You can also use it for the down payment on an SBA loan.

 

If it sounds complicated, don’t worry. Suzy will walk you through the entire process and be your personal guide along the way. She’s been helping people invest in themselves for over a decade as the National Business Development Officer at DRDA, one the area’s top accounting firms.

 

Your dreams of owning your own business shouldn’t have to wait for retirement. You can invest in yourself right now and start being your own boss.

 

So what will it be? Continue going to work everyday for years and years at a job you don’t really like? Or throw off the chains of corporate America to go out on your own and embrace your entrepreneurial spirit?

 

The money you need is already yours. Let Suzy help you unlock it.  

 

Questions? Don’t hesitate to call Suzy at 281-954-6023 or email suzy@drdacpa.com.

 

ABOUT THE COMPANY

 

DRDA, PLLC is a full-service accounting firm serving clients throughout the greater Houston and surrounding areas. DRDA, PLLC offers services ranging from personal taxes and retirement planning to business valuation, cash flow optimization, succession transition, business owner retirement planning and business or asset purchases with retirement money.

 

One of our business or asset purchasing plans is called BORSA, the Business Owners Retirement Savings Account. The BORSA Plan is a self-directed 401k plan that allows you to infuse equity from your existing 401k or IRA plans tax and penalty free. This equity can then be invested in company stock – into your own business – if you’re looking to purchase an existing business, start-up, franchise, or recapitalize a business.

 

Learn more about the BORSA plan by contacting us today at 281-954-6023. For the latest financial news and tips, please visit our Facebook and LinkedIn pages.

Buy Stock in You

Posted by Suzy Granger Posted on June 19 2017

 

So exactly how does a BORSA plan work? Good question. Below are the general steps for accessing your retirement funds early and without penalty.

 

DRDA CPAs & Business Consultants provides the BORSA (Business Owner's Retirement Savings Account) Plan which allows entrepreneurs to access retirement funds tax-free and penalty-free if they are going to buy, start, or add funds to a business.

 

The ability to do this is based in the Internal Revenue Code (IRC) and the ERISA Law of 1974 (specifically section 408(e) of ERISA). It's a two entity structure and it works like this:

 

  1. DRDA establishes a C Corp for you

  2. DRDA establishes a 401k Profit Sharing Plan for your C Corp

  3. You can roll all of a plan, portions of a plan, multiple plans, and even more than one person can roll - none of that affects the fee or the timing. The funds will roll into the new account established for the new 401k plan

  4. From the 401k plan you will make an investment decision. Instead of buying stock in somebody else's company you're going to buy stock in your own C Corp.

  5. Once the funds are in the corporate checking account they are working capital and available for any purpose, to include leveraging against a loan - SBA or conventional.

 

The entire process takes roughly 30 days. I'd welcome the opportunity to discuss your capital needs. Give me a call at 281-954-6023.

 

ABOUT THE COMPANY

 

DRDA, PLLC is a full-service accounting firm serving clients throughout the greater Houston and surrounding areas. DRDA, PLLC offers services ranging from personal taxes and retirement planning to business valuation, cash flow optimization, succession transition, business owner retirement planning and business or asset purchases with retirement money.

 

One of our business or asset purchasing plans is called BORSA, the Business Owners Retirement Savings Account. The BORSA Plan is a self-directed 401k plan that allows you to infuse equity from your existing 401k or IRA plans tax and penalty free. This equity can then be invested in company stock – into your own business – if you’re looking to purchase an existing business, start-up, franchise, or recapitalize a business.

 

Learn more about the BORSA plan by contacting us today at 281-954-6023. For the latest financial news and tips, please visit our Facebook and LinkedIn pages.

 

How Teachers Can Use a 403(b) to Start Their Own Business

Posted by Suzy Granger Posted on June 01 2017

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Being a teacher is incredibly rewarding, and it can also be incredibly inspiring. For this reason many teachers find themselves exploring new ideas and entrepreneurial pursuits, but the one issue that dampens their drive to build their own business is their financial security.

 

Leaving a steady job is not an easy feat. But knowing that you have a financial safety net, like your 403(b), can give you the motivation you need to fuel your entrepreneurial spirit and transform your thoughts and dreams into reality.

 

If you’re ready to turn your teaching experience into a business that gives you more freedom and flexibility all year long while still making an impact on the lives of young people, it may be time turn your 403(b) into your own business.

 

What Is a 403(b)?

Established in 1958, a 403(b) is a tax deferred retirement plan which is available to employees like teachers, school administrators and school personnel. The name of this retirement plan refers to its section in the Internal Revenue Code.
 

How Your 403(b) Can Become Your Financial Safety Net

Entrepreneurs need to have some way to pay their personal expenses before their venture becomes profitable. Teachers can use their 403(b) in a number of ways to help support themselves and their family while they are getting their business up and running:

    

  • Liquidate your retirement. This is an effective way to receive a large portion of money quickly, but keep in mind that liquidating your retirement accounts could leave you with even less than half of your retirement account balance after paying state and federal taxes.

  • Borrow against your plan. You may have the option to borrow against your retirement plan with all repayments going back towards your     account balance. This loan may be ideal for those with a poor credit score as it is not contingent on passing a credit check, but it is not available for those who have already left their employer.     

  • Roll the plan over to your self-employed plan. If you have already left your employer, you may want to consider establishing your own     retirement account where you can then move your vested 403(b) retirement account into your new plan.

 

Understand the Penalties and the Benefits

When money is withdrawn from a retirement account before the retirement age of 59 and a half, any amounts withdrawn will come with a stiff 10% government imposed penalty. You will also need to pay income tax on any withdrawn amounts which were not taxed previously, and you can miss out on years if not decades of account growth.

 

At the same time, tapping into your retirement account can help you in the short term. For those whose only other option is to take out a high-interest loan or a credit card with a hefty interest rate, cashing out some or all of your 403(b) may be the better financial decision. There are also no late fees and no monthly or missed payments to worry about so you can focus on what is most important -- your new business.


Each aspiring entrepreneur has a challenging journey ahead of them, and the decisions you make about how you will financially support yourself and your new venture will have a significant impact on its success. Before making any drastic monetary decisions, set aside time to speak with an experienced financial adviser to discuss your personal financial options and opportunities.

 

ABOUT THE COMPANY

DRDA, PLLC is a full-service accounting firm serving clients throughout the greater Houston and surrounding areas. DRDA, PLLC offers services ranging from personal taxes and retirement planning to business valuation, cash flow optimization, succession transition, business owner retirement planning and business or asset purchases with retirement money.

 

One of our business or asset purchasing plans is called BORSA, the Business Owners Retirement Savings Account. The BORSA Plan is a self-directed 401k plan that allows you to infuse equity from your existing 401k or IRA plans tax and penalty free. This equity can then be invested in company stock – into your own business – if you’re looking to purchase an existing business, start-up, franchise, or recapitalize a business.

 

Learn more about the BORSA plan by contacting us today at 281-954-6023. For the latest financial news and tips, please visit our Facebook and LinkedIn pages.

 

What Makes a BORSA Plan from DRDA Different?

Posted by Suzy Granger Posted on Apr 28 2017

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When it comes to using your retirement funds, tax-free and and penalty-free, to invest in yourself through a BORSA Plan, why wouldn’t you put your trust in DRDA’s 20 years of expertise successfully guiding countless entrepreneurs to their financial goals?

 

At DRDA, we are not a one-size-fits-all firm simply trying to send you along the sales chain. There are no sales pitches or monthly quotas here. But rather, a real human connection with a real interest in helping you achieve your goals.

 

No doubt, we want your business at DRDA, but we want it the right way. If a certain financial situation might not work out, we’ll tell you. We always give clear, direct answers and work with you to make an honest assessment of your BORSA options. We won’t sell you something you don’t need.

 

You get a personal guide and financial mentor at DRDA. We are with you every step of the way. More than that, we hold ourselves accountable to you through stringent reporting and ongoing compliance.  

 

And when you do have a question, the answer is just a phone call away. You won’t have to leave a message and hope it gets passed along to the right person. You won’t have to wait for a response from someone you might have never even talked to before. When the phone rings at DRDA, you’ll be talking to the right person right away.

 

If you’re interested in honest answers about using a BORSA Plan to start your own business, give Suzy a call at 281-954-6023 and let’s start this journey together. Or, if you’ve grown frustrated with your existing firm, we can help with that too. It’s time to put your goals in the hands of someone who treats them like their own. Doesn’t your financial future deserve to be more than part of a salesperson’s commission?

 

Click or call us at 281-954-6023 to learn more and put 20 years of local, dedicated BORSA expertise to work for you.

 

ABOUT THE COMPANY

 

DRDA, PLLC is a full-service accounting firm serving clients throughout the greater Houston and surrounding areas. DRDA, PLLC offers services ranging from personal taxes and retirement planning to business valuation, cash flow optimization, succession transition, business owner retirement planning and business or asset purchases with retirement money.

 

One of our business or asset purchasing plans is called BORSA, the Business Owners Retirement Savings Account. The BORSA Plan is a self-directed 401k plan that allows you to infuse equity from your existing 401k or IRA plans tax and penalty free. This equity can then be invested in company stock – into your own business – if you’re looking to purchase an existing business, start-up, franchise, or recapitalize a business.


Learn more about the BORSA plan by contacting us today at 281-954-6023. For the latest financial news and tips, please visit our Facebook and LinkedIn pages.

Alternative Sources of Financing: 401k/IRA Funds

Posted by Suzy Granger Posted on Apr 26 2017

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Houston is a city of many thriving industries and a diverse economy full of opportunity.  Many people that have transitioned out of Corporate America are hesitant to go right back in.  They feel that now is the time to live their entrepreneurial dream and run a small business themselves.  For most entrepreneurs a Small Business Administration loan is going to make the dream come true.  The most common SBA loan type 7(a) is going to require the entrepreneur to put down 20-25% to obtain the loan.  

Finding the equity injection can prove to be challenging.  Many have not saved enough "hard dollars" for this type of investment.  A large number of people have the bulk of their savings tied up in their 401k or IRA plans.  It is possible to use those funds as a down payment on their SBA loan WITHOUT any tax or penalty.  Using DRDA's BORSA Plan we can assist entrepreneurs in accessing qualified funds to use as their equity injection and also working capital for their new business.

Call me today at 281-954-6023 if you'd like to learn more.  If you are a lender, I'm happy to walk through this process with you or your whole team via a webinar.  If you are a business broker, let's talk about how you can earn commission with referrals.

 

ABOUT THE COMPANY

 

DRDA, PLLC is a full-service accounting firm serving clients throughout the greater Houston and surrounding areas. DRDA, PLLC offers services ranging from personal taxes and retirement planning to business valuation, cash flow optimization, succession transition, business owner retirement planning and business or asset purchases with retirement money.

 

One of our business or asset purchasing plans is called BORSA, the Business Owners Retirement Savings Account. The BORSA Plan is a self-directed 401k plan that allows you to infuse equity from your existing 401k or IRA plans tax and penalty free. This equity can then be invested in company stock – into your own business – if you’re looking to purchase an existing business, start-up, franchise, or recapitalize a business.


Learn more about the BORSA plan by contacting us today at 281-954-6023. For the latest financial news and tips, please visit our Facebook and LinkedIn pages.

Video Blog - TSA

Posted by Suzy Granger Posted on Mar 31 2017

Kathleen McMordie is passionate about helping people become better swimmers. She turned her passion into a business that started in her backyard and grew from there. When it became time to expand, she started exploring her options through SCORE Houston and the local Small Business Development Center.

 

She was led to DRDA and a BORSA plan. With guidance and support from Suzy and DRDA, she was able to use her 401(k) to fund the expansion of her business and build a facility that kept up with her goals.

 

A BORSA plan is a self-directed 401(k) plan that allows you to infuse equity from your existing retirement plan(s). This equity can be invested in qualifying employer securities (stock) in your company.

Learn more about how the BORSA works to fund your new business or franchise by visiting us at http://www.drdacpa.com/borsa

 

ABOUT THE COMPANY

 

DRDA, PLLC is a full-service accounting firm serving clients throughout the greater Houston and surrounding areas. DRDA, PLLC offers services ranging from personal taxes and retirement planning to business valuation, cash flow optimization, succession transition, business owner retirement planning and business or asset purchases with retirement money.

 

One of our business or asset purchasing plans is called BORSA, the Business Owners Retirement Savings Account. The BORSA Plan is a self-directed 401k plan that allows you to infuse equity from your existing 401k or IRA plans tax and penalty free. This equity can then be invested in company stock – into your own business – if you’re looking to purchase an existing business, start-up, franchise, or recapitalize a business.

 

Learn more about the BORSA plan by contacting us today at 281-954-6023. For the latest financial news and tips, please visit our Facebook and LinkedIn pages.

 

Can I Use Retirement Funds to Buy A Business Without a Loan?

Posted by Suzy Granger Posted on Mar 21 2017

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DRDA CPAs & Business Consultants provides a self-directed 401k plan that we call the BORSA (Business Owner's Retirement Savings Account) Plan.  The IRS refers to this structure type as a ROBS (Rollover as Business Start Up) Plan. By whichever name a BORSA Plan allows entrepreneurs to access retirement funds TAX AND PENALTY FREE if being used to start, buy, or fund an active business.

 

Many people use a self-directed IRA to make passive investments in real estate. This structure is fine for some but there are several severe limitations:

 

  1. You cannot be materially involved

  2. You cannot direct

  3. You cannot derive a salary

 

A BORSA Plan on the other hand allows you to do/be all three.  If you are going to be in the active business of Property Management - either buying and leasing commercial or residential properties or buying and flipping properties a BORSA Plan could work for you.

 

The basics of how it works are these:

 

  • DRDA Establishes the required C Corp and 401k PSP for the client

  • Client rolls from a prior 401k/IRA/other qualified plan(s) into the new 401k plan we establish.  This is a qualified rollover so there are no tax or penalties.

  • Client invests from his 401k plan.  Instead of buying stock in IBM or someone else's business they are going to buy stock in the newly formed C Corp.

  • Funds are now working capital and available for any purpose to include leveraging against a loan.

 

Are you considering real estate investments?  Give me a call today and let's chat!  Suzy Granger 281-954-6023.

 

ABOUT THE COMPANY

 

DRDA, PLLC is a full-service accounting firm serving clients throughout the greater Houston and surrounding areas. DRDA, PLLC offers services ranging from personal taxes and retirement planning to business valuation, cash flow optimization, succession transition, business owner retirement planning and business or asset purchases with retirement money.

 

One of our business or asset purchasing plans is called BORSA, the Business Owners Retirement Savings Account. The BORSA Plan is a self-directed 401k plan that allows you to infuse equity from your existing 401k or IRA plans tax and penalty free. This equity can then be invested in company stock – into your own business – if you’re looking to purchase an existing business, start-up, franchise, or recapitalize a business.

 

Learn more about the BORSA plan by contacting us today at 281-954-6023. For the latest financial news and tips, please visit our Facebook and LinkedIn pages.

 

What to Look for in a Provider When Considering a (Rollovers for Business Startups) ROBS Plan

Posted by Suzy Granger Posted on Feb 15 2017

DRDA CPAs & Business Consultants provide a self-directed 401k plan - The BORSA Plan (Business Owner's Retirement Savings Plan)- which is a ROBS (Rollovers for Business Startups) type structure.  This type of structure allows individuals to access retirement funds without tax or penalty regardless of age to use as equity in a business start-up, purchase, or recapitalization.

 

The issue of using retirement funds in this manner is allowed - the IRS, Department of Labor and Small Business Administration all agree that this is approved.  The scrutiny, by the IRS, is in the on-going compliance of the plan.

 

Keeping your ROBS structure compliant is the main consideration.  The IRS produced what is called the ROBS Memorandum that lays out those compliance points quite clearly.  

 

DRDA, a 34 year old CPA firm, has always been viewed as the most conservative provider of this type of structure.  We have to be.  We have skin in the game like no other provider (thru our license) to make sure our clients understand and are capable of maintaining this ongoing component of the plan.

You Don’t Have to Wait Until You’re Retired to Start Your Dream Business - Let DRDA CPA’s Help You Get Started Today!

 

DRDA, PLLC is a full-service accounting firm serving clients throughout the greater Houston and surrounding areas. DRDA, PLLC offers services ranging from personal taxes and retirement planning to business valuation, cash flow optimization, succession transition, business owner retirement planning and business or asset purchases with retirement money.  

 

One of our business or asset purchasing plans is called BORSA, the Business Owners Retirement Savings Account. The BORSA Plan is a self-directed 401k plan that allows you to infuse equity from your existing 401k or IRA plans tax and penalty free. This equity can then be invested in company stock – into your own business – if you’re looking to purchase an existing business, start-up, franchise, or recapitalize a business.  

 

Are you trying to figure out a way to move forward following a divorce? Learn more about the BORSA plan by contacting us today at 281-954-6023.  For the latest financial news and tips, please visit our Facebook and LinkedIn pages.

 

What's the Minimum Amount to Access In a ROBS Type Plan

Posted by Suzy Granger Posted on Jan 13 2017

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DRDA CPAs & Business Consultants provide a self-directed 401k profit sharing plan (The BORSA Plan) which allows entrepreneurs to access retirement funds tax and penalty free if they are being used to buy, start, or recapitalize an active business.

 

Many of my prospects are interested to know if the amount of funds they are accessing for a ROBS (Rollovers for Business Startup) type plan is appropriate.  In our opinion the minimum amount to access from retirement funds is $50,000.  Our opinion is based upon the entrepreneur being under 59 1/2 which would create a 10% penalty and the tax is assumed to be 30% (most of my prospects are in that bracket).  In Texas this would create a tax/penalty erosion of 40%.  In other states with state income tax the tax/penalty erosion amount will be higher.

 

If we compare chasing out below age 59 1/2 and taking the tax/penalty hit to utilizing a BORSA Plan at an upfront cost of $4,995 and $1,550/year in compliance costs for 10 years the client will come out ahead at $50,000 and above.  Below the minimum of $50,000 a BORSA Plan does not make economic sense for my client.

 

I typically see $100,000-$200,000 moving.  It's also important to know that the client can roll an entire plan, portions of a plan, more than one person can be rolling into the plan - none of which affects the fee or the timing of our work.

 

DRDA, PLLC is a full-service accounting firm serving clients throughout the greater Houston and surrounding areas. DRDA, PLLC offers services ranging from personal taxes and retirement planning to business valuation, cash flow optimization, succession transition, business owner retirement planning and business or asset purchases with retirement money.  

 

One of our business or asset purchasing plans is called BORSA, the Business Owners Retirement Savings Account. The BORSA Plan is a self-directed 401k plan that allows you to infuse equity from your existing 401k or IRA plans tax and penalty free. This equity can then be invested in company stock – into your own business – if you’re looking to purchase an existing business, start-up, franchise, or recapitalize a business.  

 

Are you trying to figure out a way to move forward following a divorce? Learn more about the BORSA plan by contacting us today at 281-954-6023.  For the latest financial news and tips, please visit our Facebook and LinkedIn pages.

 

ABOUT THE COMPANY

 

DRDA, PLLC is a full-service accounting firm serving clients throughout the greater Houston and surrounding areas. DRDA, PLLC offers services ranging from personal taxes and retirement planning to business valuation, cash flow optimization, succession transition, business owner retirement planning and business or asset purchases with retirement money.

 

One of our business or asset purchasing plans is called BORSA, the Business Owners Retirement Savings Account. The BORSA Plan is a self-directed 401k plan that allows you to infuse equity from your existing 401k or IRA plans tax and penalty free. This equity can then be invested in company stock – into your own business – if you’re looking to purchase an existing business, start-up, franchise, or recapitalize a business.


Learn more about the BORSA plan by contacting us today at 281-954-6023. For the latest financial news and tips, please visit our Facebook and LinkedIn pages.

How a BORSA Plan Help When You've Been Downsized

Posted by Suzy Granger Posted on Jan 12 2017

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It's all too common to see articles like this one in the Houston Business Journal: "MD Anderson to Cut 1,000 Jobs in Houston" The price of oil still remains low and there is a lot of uncertainty about the new administration both of which can drive layoffs in our area.

 

Facing downsizing or the fear of being let go is not a good place to be – regardless of your age. In the case this happens to you, how will you be able to replace the income your family depends upon? At DRDA CPA’s & Business Consultants, we are able to help you understand how to utilize your retirement funds to create income.

 

Our Firm, DRDA CPAs & Business Consultants provides a Business Owner's Retirement Savings Account (BORSA) Plan. This structure allows individuals to access retirement funds tax and penalty free if they are using it to buy or start a business.

 

A BORSA Plan works like this:
 

1)   DRDA establishes a C Corp - the operating business
 

2)   DRDA establishes a 401k Profit Sharing Plan for the Corp - the plan
 

3)   Client rolls in 401k/IRA or other qualified funds into the new 401k plan via a qualified rollover WITHOUT tax or penalty.
 

4)   Client makes an investment decision - thru their 401k they are going to buy stock, not in IBM or Apple Computers but in their own C Corp. The funds are now in the corporate checking account and available for any purpose - to include leveraging against a loan if that is part of the deal requirement.

 

How does this information help someone that's been downsized? It gives them the opportunity to flip their 401k/IRA/other qualified funds into a small business or franchise thereby providing an income stream for them and their family. You would be able to either buy the business outright or leverage it against an SBA or conventional loan for a larger deal.

 

Would you like a chance to talk to us about this? Give Suzy a call at 281-954-6023 or email suzy@drdacpa.com for a free consultation.

 

 

ABOUT THE COMPANY

 

DRDA, PLLC is a full-service accounting firm serving clients throughout the greater Houston and surrounding areas. DRDA, PLLC offers services ranging from personal taxes and retirement planning to business valuation, cash flow optimization, succession transition, business owner retirement planning and business or asset purchases with retirement money.

 

One of our business or asset purchasing plans is called BORSA, the Business Owners Retirement Savings Account. The BORSA Plan is a self-directed 401k plan that allows you to infuse equity from your existing 401k or IRA plans tax and penalty free. This equity can then be invested in company stock – into your own business – if you’re looking to purchase an existing business, start-up, franchise, or recapitalize a business.

 

Learn more about the BORSA plan by contacting us today at 281-954-6023. For the latest financial news and tips, please visit our Facebook and LinkedIn pages.

 

Thinking of Starting a Business? DRDA CPA’s Can Help

Posted by Suzy Granger Posted on Dec 21 2016

If you are thinking of starting your own business, you certainly have questions about the best business to start, how to get started and where to get funding.  At DRDA CPA’s, we can assist with the funding portion.

Funding Your New Venture

DRDA CPAs & Business Consultants provides the BORSA (Business Owner's Retirement Savings Account) Plan which allows entrepreneurs to access retirement funds tax and penalty free if they are going to buy, start, or add funds to a business.

The ability to do this is based in the Internal Revenue Code (IRC) and the ERISA Law of 1974 (specifically section 408(e) of ERISA). It's a two entity structure and it works like this:

  • DRDA establishes a C Corp for you
  • DRDA establishes a 401k Profit Sharing Plan for your C Corp
  • You can roll all of a plan, portions of a plan, multiple plans, more than one person can roll - none of that affects the fee or the timing. The funds will roll into the new account established for the new 401k plan
  • From the 401k plan you will make an investment decision. Instead of buying stock in somebody else's company you're going to buy stock in your own C Corp.
  • Once the funds are in the corporate checking account they are working capital and available for any purpose, to include leveraging against a loan - SBA or conventional.

 

Don’t wait for retirement to start living the life you want. A BORSA® Plan can turn your existing 401K/IRA into the money you need to start your own business. All with no taxes or penalties.

The entire process takes roughly 30 days at a fee of $4,995. We welcome the opportunity to discuss your capital needs. Give Suzy a call at 281-954-6023. 

 

What Type of Business Should I Start?

Now that we can help you fund your business, what type of business should you open? In Leonard Kim’s article, “10 Business Trends That Will Grow in 2017”, he shares his insights on the top business trends in the new year.  He credits the rise of millennials and their effect on how businesses are operating for the recent trends.  Click here to read his article: http://www.inc.com/leonard-kim/10-business-trends-that-will-grow-in-2017.html

 

Here are some examples of business start-ups we have seen in recent years:

  • Cupcake shop
  • Coffee shop
  • Consulting business
  • Yoga/fitness
  • Buy a Franchise
  • Landlord
  • Photographer
  • Local Organic Farmer

 

Learn more about the BORSA plan by contacting us today at 281-954-6023.  For the latest financial news and tips, please visit our Facebook and LinkedIn pages.

 

ABOUT THE COMPANY

DRDA, PLLC is a full-service accounting firm serving clients throughout the greater Houston and surrounding areas. DRDA, PLLC offers services ranging from personal taxes and retirement planning to business valuation, cash flow optimization, succession transition, business owner retirement planning and business or asset purchases with retirement money.

 

One of our business or asset purchasing plans is called BORSA, the Business Owners Retirement Savings Account. The BORSA Plan is a self-directed 401k plan that allows you to infuse equity from your existing 401k or IRA plans tax and penalty free. This equity can then be invested in company stock – into your own business – if you’re looking to purchase an existing business, start-up, franchise, or recapitalize a business.

 

Learn more about the BORSA plan by contacting us today at 281-954-6023. For the latest financial news and tips, please visit our Facebook and LinkedIn pages.

Veteran Transitioning Back Into Civilian Life?

Posted by Suzy Granger Posted on Nov 18 2016

Learn How Your Thrift Savings Plan Can Help!

Established during the Federal Employee’s Retirement System Act of 1986, the Thrift Savings Plan (TSP) offers federal employees and members of the armed forces the same benefits that 401(k) plans do for private citizens.

 

Defined as a contribution plan, the income or balance of your TSP account will depend on how much you, and if eligible your agency, put into your account during the time you were working and contributing.  If you are a veteran looking to transition back into civilian life your TSP may be able to provide you the means to purchase or start a your own business.

 

DRDA CPAs & Business Consultants provides a self-directed 401k plan that allows individuals to access retirement funds, tax and penalty free, if being used to buy, start, or recapitalize an active business.

 

We call this type of structure a BORSA (Business Owners Retirement Savings Account) Plan. The IRS calls it a ROBS (Rollover as Business StartUp)

 

Based in the Internal Revenue Code and the ERISA Law of 1974 this tool is being used around the country by entrepreneurs desiring to access their retirement funds as a source of equity for this endeavor.

 

A BORSA Plan works like this:

  • DRDA establishes C Corp for Client

 
  • DRDA establishes 401k Profit Sharing Plan for C Corp

 
  • Client rolls all of a plan (401k, TSP, etc), portions of plans, or multiple plans into the new 401k plan. In addition, more than one person can roll their plan(s) into this new 401k plan. This is a qualified rollover and is not subject to tax or penalty regardless of the client's age.

 
  • Once funds are in the new 401k account, the client directs funds (all or a portion) into the new C Corp checking account. That's the physical movement of the money. What's actually happened is the 401k plan bought stock in the C Corp. The Plan holds the shares and the C Corp has the money.

 

The client has now funded his C Corp and is ready to buy or start a business. Many of my clients will leverage these funds against a loan (SBA or Conventional) to buy their business.

 

Many transitioning servicemen and women consider business or franchise ownership a great goal and a way to pivot the skills they have learned in service to our Country into a profit center for themselves. While most of our clients will use 401k or IRA funds in a BORSA Plan we have many veterans that accessed their Thrift Savings Plan (TSP) tax and penalty free and turned it into equity for their new business or franchise.

 

DRDA, PLLC is a full-service accounting firm serving clients throughout the greater Houston and surrounding areas. DRDA, PLLC offers services ranging from personal taxes and retirement planning to business valuation, cash flow optimization, succession transition, business owner retirement planning and business or asset purchases with retirement money.  

 

One of our business or asset purchasing plans is called BORSA, the Business Owner’s Retirement Savings Account. The BORSA Plan is a self-directed 401k plan that allows you to infuse equity from your existing 401k or IRA plans tax and penalty free. This equity can then be invested in company stock – into your own business – if you’re looking to purchase an existing business, start-up, franchise, or recapitalize a business.  

 

Are you a transitioning service man or woman? Learn more about the BORSA plan by contacting us today at 281-954-6023.  For the latest financial news and tips, please visit our Facebook and LinkedIn pages.

Honoring Our Service Men and Women

Posted by Suzy Granger Posted on Nov 11 2016

The Arkansas Military Veterans Hall of Fame recently held an induction ceremony recognizing 15 Arkansas servicemen. My father, Bobby B. Porter, Major General (deceased) was one of the serviceman who was honored that night.

 

The room was full of American flags and peopled with folks of every stripe. There was not one mention of the upcoming election, even though there were elected officials involved and in the room. Instead we heard 15 incredible stories of courage, strength, and honor. I could not hold back my tears as the impact of all these deeds had on me personally.

 

We live as a free citizens in the greatest nation on earth. We are  free to love who we choose to love, free to worship how we choose to worship, and free to work in the industry of our choice.

 

None of these things would be true without the sacrifices of the men and women who serve our country. Their families have also sacrificed. My deepest gratitude to all service men, women and family members living and dead who have gone before us to provide so much.

 

DRDA, PLLC is a full-service accounting firm serving clients throughout the greater Houston and surrounding areas. DRDA, PLLC offers services ranging from personal taxes and retirement planning to business valuation, cash flow optimization, succession transition, business owner retirement planning and business or asset purchases with retirement money.  

 

One of our business or asset purchasing plans is called BORSA, the Business Owner’s Retirement Savings Account. The BORSA Plan is a self-directed 401k plan that allows you to infuse equity from your existing 401k or IRA plans tax and penalty free. This equity can then be invested in company stock – into your own business – if you’re looking to purchase an existing business, start-up, franchise, or recapitalize a business.  

 

Are you a transitioning service man or woman? Learn more about the BORSA plan by contacting us today at 281-954-6023.  For the latest financial news and tips, please visit our Facebook and LinkedIn pages.

 

How a BORSA Plan Can Help Generate Income After Divorce

Posted by Suzy Granger Posted on Oct 26 2016

Divorce can bring about many life changes. For those individuals who have been out of the workforce for a significant period of time, suddenly having to generate income may seem like a challenging hurdle to overcome. If owning a small business is something you see in your future, a BORSA (Business Owner’s Retirement Savings Account) Plan from DRDA CPAs & Business Consultants may be for you.

 

Deemed a ROBS (Rollover As Business Start-up) structure by the IRS, a BORSA Plan allows individuals to access retirement funds tax and penalty free to be used in a business start-up, purchase, or recapitalization.

 

Often time’s after a divorce individuals are awarded a portion of an ex’s retirement fund as part of the divorce settlement. Using a combination of retirement funds and possibly an SBA (Small Business Association) loan, you can invest in the small business of your dreams.

 

DRDA, PLLC is a full-service accounting firm serving clients throughout the greater Houston and surrounding areas. DRDA, PLLC offers services ranging from personal taxes and retirement planning to business valuation, cash flow optimization, succession transition, business owner retirement planning and business or asset purchases with retirement money.  

 

One of our business or asset purchasing plans is called BORSA, the Business Owners Retirement Savings Account. The BORSA Plan is a self-directed 401k plan that allows you to infuse equity from your existing 401k or IRA plans tax and penalty free. This equity can then be invested in company stock – into your own business – if you’re looking to purchase an existing business, start-up, franchise, or recapitalize a business.  

 

Are you trying to figure out a way to move forward following a divorce? Learn more about the BORSA plan by contacting us today at 281-954-6023.  For the latest financial news and tips, please visit our Facebook and LinkedIn pages.

 

What’s the Timing on Using Retirements Funds as a Down Payment on an SBA Loan

Posted by Suzy Granger Posted on Oct 11 2016

A BORSA (Business Owner's Retirement Savings Account) Plan allows you to access retirement funds (401k/IRA/others) WITHOUT tax or penalty erosion. DRDA CPAs & Business Consultants will work with you to transfer funds from an existing fund into a new 401K plan using the following steps:

  1. DRDA will establish a C Corporation in the state you will be doing business
  2. DRDA will establish a 401k Profit Sharing Plan for that C Corporation.
  3. You will roll retirement funds (all of a plan, portions of plans, multiple plans) into the new 401k plan account.  This is a qualified rollover - from plan to plan - so there is no tax or penalty.
  4. From the 401k plan you will make an investment decision.  Through the new 401k plan you will buy stock - in your new C Corporation!
  5. The dollars have now transitioned into your corporate checking account and available for any business purpose, including leveraging against a loan.

The majority of clients using BORSA are actually doing this to come up with their down payment in an SBA 7(a) loan. A frequent question is "What about timing?".

The process takes 30 days from the time you engage to the time you have funds in hand ready to go to closing.  It's important that you and the lender both understand this 30 day timeline and make sure of the following before proceeding with a BORSA Plan:

  1. You have your deal together
  2. You have somewhat of a nod from your lender

DRDA, PLLC is a full-service accounting firm serving clients throughout the greater Houston and surrounding areas. DRDA, PLLC offers services ranging from personal taxes and retirement planning to business valuation, cash flow optimization, succession transition, business owner retirement planning and business or asset purchases with retirement money.  

One of our business or asset purchasing plans is called BORSA, the Business Owners Retirement Savings Account. The BORSA Plan is a self-directed 401k plan that allows you to infuse equity from your existing 401k or IRA plans tax and penalty free. This equity can then be invested in company stock – into your own business – if you’re looking to purchase an existing business, start-up, franchise, or recapitalize a business.  

Learn more about the BORSA plan by contacting us today at 281-954-6023.  For the latest financial news and tips, please visit our Facebook and LinkedIn pages.

What is Alternative Lending?

Posted by Suzy Granger Posted on June 25 2015

After the recent financial crisis, traditional banks are sometimes still reluctant to fund small businesses.  Entrepreneurs need not be discouraged though, as a new trend has emerged in the world of finance:  "alternative lending".  What exactly is alternative lending and is it right for your business? 

Alternative lenders  are non-bank lenders.  With faster underwriting and shorter decision processes, alternative funders have grown increasingly popular.  Banks tend not to loan amounts less than $200,000, so alternative financing appeals to small business owners in need of smaller loans.  

Types of alternative funding include term loans, merchant cash advances, factoring and equipment loans.  You can apply for alternative financing online.  Applying for online business loans requires less paperwork with a shorter wait period.  You can often learn your fate in five minutes and receive funding in 24 to 48 hours.  However, interest rates are often higher than those of traditional banks.  Sources of online financing include:

  • Non-profit lenders

  • Invoice Financing

  • Online Business Loans

  • Loan Matching Sites

  • Crowdfunding

If you are in need of a small business loan in amounts of $200,000 or less, give us a call at 281-488-2022.  We can help you explore these alternative funding options.

What is Alternative Lending

IC-DISC - Tax Incentive for US Exporters

Posted by Suzy Granger Posted on June 25 2015
Learn Tax Incentives for US Employers

US businesses earning profits from the export sale of US manufactured products, or from certain qualifying services, can benefit from an Interest-Charge Domestic International Sales Corporation (IC-DISC).  Despite is rather intimidating name, an IC-DISC can provide small and medium business owners with significant federal tax savings on their net export sales.  Specifically, IC-DISCs provide an opportunity for a company to reduce the tax on 50% of its export income by more than 50%.  Since IC-DISC profits are taxed at the qualified dividend rate (currently at 20%) as opposed to ordinary income tax (top rate currently 39.6%, before the Medicare surcharge of 3.8% on net investment income).  In today's global marketplace, IC-DISCs serve an important role in promoting domestic job creation and retention, and in assisting US companies competing for global business opportunities.

What is an IC-DISC? 

An IC-DISC is a corporation organized by a US exporter that elects treatment as an IC-DISC.  The new company serves as a commission sales company for the exporting company, and under the IC-DISC rules, is presumed to have participated in the export sales activity, entitling it to a commission.

The exporting company's commission payments are deductible expenses.  Generally, three types of companies can take advantage of the IC-DISC provisions:

  • A company that directly exports goods it manufactures.

  • A company provides architectural or engineering services that are conducted in the US for a construction project taking place outside of the US.

  • A company that manufactures a good that is a component of a product that is exported.

How does an IC-DISC achieve its tax benefit?

Under safe harbor pricing rules, the IC-DISC's commission determined under the agreement with its related exporter can be established as the greater of i) 50% of the next export sales income, or ii) 4% of the gross export sales revenue, limited to the combined taxable income before the commission expense.

The IC-DISC pays no federal income tax on commission that it distributes to its shareholders.  Those shareholders are taxed on the IC-DISC distribution of the net commission revenues (actual or deemed) at the "qualified" dividend rate of 20%.  Typically, dividends should be paid on an annual basis.  The exporting company receives the benefit from the reduction of its taxable income by the amount of the commission, while the IC-DISC shareholder is taxed on receipt of a qualified dividend, as opposed to receiving its allocable share of taxable ordinary income from an S corporation/flow through entity, or the distribution from a regular corporation that has already paid a corporate level tax.

Tax deferral is available on commission income derived from gross export sales revenues up to $10,000,000 where the commission income is not distributed to its shareholders.  This deferred income will be taxed as a dividend when distributed to the exporter.  Interest will be imputed on the deferred amount and taxed currently to the shareholders (i.e., the "interest-charge").   To be clear, however, the tax benefit from the rate differences discussed above applies on total export sales as long as the "excess" commission income is distributed.

Who benefits from an IC-DISC?

For exporting companies doing business as a closely-held corporation, IC-DISCs are typically established by the exporter's shareholders.  The available tax benefit is the different between the exporting company's corporate tax rate and the qualified dividend rate of the individual shareholders (35%-20% plus 3.8% healthcare tax = 15%).

S Corporations, partnership, or limited liability companies treated as a partnership for tax purposes, can establish the IC-DISC as a separate corporation owned by the exporter's shareholders, or as a wholly-owned subsidiary of the exporter.  IC-DISC dividends to the IC-DISC shareholders as direct dividends (or indirectly, as a pass-through distribution from a partnership or limited liability company) will be taxed as qualified dividends and taxed at a reduced rate. The tax benefit is the different between the marginal individual tax rate for the individual shareholder/member and the qualified dividend rate for the individual shareholders (39.6% plush .9% healthcare tax, and the 20% qualified dividend rate plus 3.8% healthcare tax = 16.7%).

Does your company qualify to use this unique strategy?  Give us a call at 281-488-2022.

Ways to Make Financial Forecasts More Realistic

Posted by Suzy Granger Posted on June 25 2015
Ways to Make Your Financial Forecasts More Realistic

It's a rare entrepreneur who enjoys working on financial forecasts.  Many feel that their time is better spent on developing and running their business.  Still, forecasts are a necessity.  Entrepreneurs need them to attract investors, but more importantly they help the business owner develop long-term strategic plans.

Unless the forecasts are fairly accurate they are not at all helpful.  Inaccurate forecasts can lead to upset investors, mismanaged expenses, and potentially running out of cash.  Here are six tips to help you make your forecasts as accurate as possible:

  1. Use multiple scenarios.  Every business owner has a strong temptation to be optimistic when forecasting growth.  To counter this, many entrepreneurs end up using extremely conservative estimates.  In reality, neither is the only option you should forecast.  You should devote your predictive energy to at least two scenarious, one optimistic and one conservative.  This is especially true when there is uncertainty surrounding major factors that can impact your growth.
     

  2. Start with expenses.   It's generally much easier to predict your expenses than your revenue.  Start building your forecast model by outlining your fixed expenses, things like rent, utilities, and insurance.  You can be almost certain these costs will occur in the coming quarter/year.  From there think about the costs that could fluctuate directly with revenue.  If revenue grows by five percent, you can probably expect your cost of sales to grow by about five percent.  Finally, project the expenses over which you have the most control.  This is the one place where multiple forecasts can come in handy.  Identify which discretionary costs you might slash if business is rough or where you will invest for future growth if you exceed expectations.
     

  3. Identify your assumptions.  Any forecast requires you to make assumptions about things that are outside your control.  The best way to manage these assumptions and avoid subconscious bias is by explicitly identifying and writing them down.  The assumptions you should list include how much the market will grow or shrink, changes in the number of competitors and technological advancements that will impact your business.
     

  4. Outline each step in your sales process.  Your revenue projections should go through the entire funnel of your sales channel rather than just guessing a top-line number.  You should create projections for each step of the sales funnel, and use that to arrive at the top-line number.  As an example, the revenue projection for a pet supply store might involve the following steps:  a)  identify the total number of pet owners in the area, b) estimate what percentage of that market can be reached through marketing efforts, c) estimate what percentage of pet owners exposed to the marketing actually come in to the store, d) estimate what percentage of people who come into the store will make a purchase, and e) estimate how much the people who do make a purchase will spend on average.
     

  5. Find Comparisons.  You can assess the plausibility of your financial forecasts by comparing your projections to the results of comparable companies.  Look at certain key financial ratios such as gross margin, revenue per square foot (for retailers), and total headcount per customer.  If your projections include one of these ratios improving by over 10 percent, you might be getting too optimistic.
     

  6. Constantly reassess.  These forecasts should not be static.  Don't make on at the beginning of the year and forget about it over the next 12 months.  Regularly evaluate how close your operating results mirrors those forecasts and make changes to reflect any new information.  The more up to date your forecasts are the better prepared you will be to make informed, strategic descriptions.  Also, you will become more skill in the process over time.

Are you operating a small business and would like to discuss forecasts with a  knowledgeable Business Consultant?  Give us a call 281-488-2022, we're here to  help. 

Three Steps to Getting an SBA Loan

Posted by Suzy Granger Posted on June 10 2015
Three Helpful Steps to Get an SBA Loan

Small businesses are a vital part of the American economy.  Small business employs half the workforce and create 60% of net new American jobs.

The Small Business Administration (SBA) has several loan programs to assist the small business owner.  There are a variety of different loans to choose from, but the 7(a) General Small Business Loan is the most common.  Here are three steps to assist you in getting an SBA loan:

     1.  Prepare – before you apply for a loan, there are several things you may want to get in order.  During the small-business loan application process, you may be asked for some or all of the following:

  •     Personal background information including previous addresses, other names used, criminal record and educational background, among other things
  • Resume

  • Business plan

  • Your personal credit report

  • Your D&B business credit report

  • Income tax returns (most loans will require three years of both business and personal returns)

  • Financial statements

  • Bank statements (most lenders will require personal and business statements for the past year)

  • Collateral document describing the cost/value of personal or business property that will be used to secure the loan

  • Legal documents such as business licenses and registrations, articles of incorporation, copies of contracts you have with any third parties, franchise agreements and commercial leases

     

You also should be prepared to answer questions from your lender such as:

  • Why you're applying for a loan

  • How the proceeds will be used

  • What needs to be purchased and who your suppliers are

  • What debts you have and who your creditors are

  • Who is on your management team

     

     2.  Find a lender – because the SBA doesn't lend directly to businesses, you will need to find a lender.  Once you've found the right one contact one of the lender relations specialists at the SBA to get started

 

     3.  Apply – once you're prepared and have found a lender, you are ready to actually apply for the loan!

If you are looking for funding for  your small business, please give us a call at 281-488-2022.  One of our experienced Business Consultants will be happy to assist you in preparing the package and finding the right lender. 

 

 

Small Business Basics

Posted by Suzy Granger Posted on June 10 2015
Small Business Start up Basics for any Business Owner

Success in business depends upon knowing the basics – the things you absolutely must master in order to succeed.  Here are some key factors every business owner should know: 

1)  What do you get for your money?  Regardless of the type of business, it's critically important to always track your return on investment (ROI).  This means keeping tabs on:

 

  • What you spend your money on to operate your business?

  • How much you spend in each category?

  • What you get in return for every dollar you spend i.e. revenue generated or dollars saved elsewhere?

 

Understanding the ROI that comes with every expense makes it easier to decide where to spend money in the future.

2)  Respect the saying "Cash flow is the lifeblood of every business".  Nothing else is as essential to running a small business  as unimpeded cash flow.  Savvy small business owners do everything they can to ensure they have sufficient cash on hand to cover expenses for at least 90 days.  As part of their cash flow planning they take into account that they don't always get paid in full right away, and they have to manage the time-lag between delivering a product or service and getting paid.

3)  Become good at hiring the right people.  Since hiring employees is a key area of ROI, business owners must know what to look for (and what to avoid). This is a necessary but at times a costly endeavor, since it encompasses the expenses incurred in recruitment and training, salary and benefits, and the time needed for a new hire to successfully integrate into the workplace.  Hiring a "bad employee" and/or having ongoing employee turnover can seriously impact a small business, no matter how well sales are going.

4)  Embrace social media.  There is no denying that in today's market place social media can be a fundamental element of success.  Whether your business is ecommerce or brick and mortar, you may benefit from establishing and maintaining a social media presence on Facebook, LinkedIn, Twitter, etc.  This is where existing and prospective customers hang out – and they can't find you if you're not there.

5)  Have a disaster plan in place.  Bad things happen all the time and not just to other businesses.  A time may come when some natural disaster disrupts or even halts your business operations.  Do you have a plan for disaster and business continuity during times of disaster?  Your plan should include, at the least, contingencies for covering employees who cannot come in to work, as well as alternative lines of communication with vendors in order to preserve your supply chain.  You should also maintain an up to date inventory of business assets and IT equipment.  The more you plan for disaster the more quickly you can recover. 

Managing profits and cash flow can be a big concern for small business owners.  If you would like assistance in improving profits and cash flow give us a call at 281-488-2022.

Start-up vs. Franchise: Which is Right for You?

Posted by Admin Posted on June 03 2015
Business Start-up or Franchise - Which is Right for You?

Becoming a small business owner is exciting.  It's a time filled with the freedom to make your own choices and create the life you want.  But it can also be intimidating for many who make the leap from employee to employer, filled with lots of major decisions.  One of the first of those decision is determining what type of business you want to own. 

Do you want to start a business from scratch, or do you want to  join a franchise system?

To make that decision, it's important to evaluation the pros and cons associated with both.  A few of the major factors to consider are: 

1.  Ownership Model

A start-up owner must be comfortable being the sole decision maker for their business.  They have to determine what they will sell, the best way to market their products or services, how many employees the business needs, etc.  In other words, an independent business owner must rely on his/her own business savvy to make educated guesses.

A franchisee doesn't have the same freedom to change their products or services, but they are able to rely upon a proven business model that the franchisor has developed and found to be the most successful.  While franchising sacrifices some of the independent start-up owners experience, the security and stability that come with franchising are sometimes more beneficial for entrepreneurs who are better suited to follow a system.

2.  Cost

Since they are building a business from the ground up, an independent business owner will likely need to invest more money to get the business going.  However, they also have more control over investment options and business plans in general so it's easier to delay the opening date or downsize the project until capital needs are met.

Franchise buyers may have lower upfront investment amounts, but they are required to meet the franchisor's requirements.   That means it's not easy to postpone opening dates or adjust the scope of the project.  In addition, franchisees are required to pay ongoing royalties to the franchisor.

3.  Brand Recognition

Franchises have the advantage over independent businesses when it comes to brand recognition.  For start-ups it will take time to build brand awareness.  But buyers also need to understand that brand recognition can have a dark side.  If the franchisor or other franchisee does something that results in negative publicity for the brand all of the franchisees can suffer.

4.  Past Experience

Because the success of independent businesses relies so heavily on the owners' knowledge, it's important for any entrepreneur wanting to own a start-up to have a deep understanding of business basics and apply that knowledge to everyday decisions.

Franchises, on the other hand, have detailed systems and processes already in place, it makes it easier for first-time owners to jump in without the steep learning curve.

Are you struggling with the decision of what type of business to buy?  Give us a call at (281) 488-2022.  One of our Business Consultants would be happy to discuss these and other considerations with you.

How You Should Not Spend Your Time

Posted by Admin Posted on May 25 2015
How to NOT Spend your Time on Your Business

What a Study of 14,000 Businesses Reveals About How You Should Not Be Spending Your Time

In an analysis of more than 14,000 businesses, a new study finds the most valuable companies take a contrarian approach to the boss doing the selling.

Who does the selling in your business? My guess is that when you're personally involved in doing the selling, your business is a whole lot more profitable than the months when you leave the selling to others.

That makes sense because you're likely the most passionate advocate for your business. You have the most industry knowledge and the widest network of industry connections.

If your goal is to maximize your company's profit at all costs, you may have come to the conclusion that you should spend most of your time out of the office selling, and leave the dirty work of operating your businesses to others in your company.  

However, if your goal is to build a valuable company—one you can sell down the road—you can't be your company's number one salesperson. In fact, the less you know your customers personally, the more valuable your business. 

The Proof: A Study of 14,000 Businesses

We've just finished analyzed our pool of Sellability Score users for the quarter ending December 31. We offer The Sellability Score questionnaire as the first of twelve steps in The Value Builder System, a statistically proven methodology for increasing the value of a business.

We asked 14,000 business owners if they had received an offer to buy their business in the last 12 months, and if so, what multiple of their pre-tax profit the offer represented. We then compared the offer made to the following question:

Which of the following best describes your personal relationship with your company's customers? 

  • I know each of my customers by first name and they expect that I personally get involved when they buy from my company.

  • I know most of my customers by first name and they usually want to deal with me rather than one of my employees.

  • I know some of my customers by first name and a few of them prefer to deal with me rather than one of my employees.

  • I don't know my customers personally and rarely get involved in serving an individual customer. 

2.93 vs. 4.49 Times

The average offer received among all of the businesses we analyzed was 3.7 times pre-tax profit. However, when we isolated just those businesses where the owner does not know his/her customers personally and rarely gets involved in serving an individual customer, the offer multiple went up to 4.49.

Companies where the founder knows each of his/her customers by first name get discounted, earning offers of just 2.93 times pre-tax profit.

When Value Is the Enemy of Profit

Who you get to do the selling in your company is just one of many examples where the actions you take to build a valuable company are different than what you do to maximize your profit. If all you wanted was a fat bottom line, you likely wouldn't invest in upgrading your website or spend much time thinking about the squishy business of company culture.

How much money you make each year is important, but how you earn that profit will have a greater impact on the value of your company in the long run.

If you'd like to know how your company performs on The Sellability Score, simply complete the complimentary 13-minute questionnaireAll information is totally confidential.

 

What Keeps You Up at Night?

Posted by Admin Posted on May 25 2015
What Aspect of Your Business Keeps You Up at Night?

The professionals at DRDA are constantly reviewing industry news to find ways to better serve our clients.  Bob Coleman is the editor of a great Small Business Lending Industry publication - The Coleman Report.  Here is the link to his recent article about what keeps a small business owner up at night.  Maybe you can guess the #1 reason - cash flow.  If cash flow is keeping you up at night, give us a call 281-488-2022 for a consultation regarding Profit and Cash Flow Optimization.

Hurricane Season: Emergency Preparedness and Disaster Recovery Plan

Posted by Admin Posted on May 25 2015
Emergency Preparedness and Hurricane Disaster Plan Hurricane season officially begins on June 1st and runs through the end of November with the peak months being August and September.  Planning ahead can help you protect yourself, your family and your business during hurricane season. 

Since its inception in 1953 the US Small Business Administration (SBA) has served to aid, counsel, assist, and protect the interests of small businesses.  While SBA is generally known for the financial support it provides to small businesses, it also plays a critical role in assisting the victims of natural and other disasters.  SBA provides disaster assistance through capital, counseling, and contracting services.  Its Disaster Loan Program helps homeowners, renters, businesses of all sizes, and private non-profits fund their recovery. 

Here are a few things you can do, at no cost, to jump-start your business continuity plan:

  1. Determine your greatest risk potential – it might come from wind damage or inland flooding.  Your business could suffer financial losses due to road and bridge closings.  Power outages are a major threat, especially to businesses in the food and hospitality industries.  What would happen if you had to shut down your business for several days?  Look at the building where you do business – inside and out – to assess the risks.

  2. Calculate the cost of business interruptions – for one week, one month, and six months.  Once you have done that you'll be able to investigate insurance options or build a cash reserve that will allow your company to function during the post-disaster recovery phase.  It's also a good idea to develop relationships with alternative vendors, in case your primary vendor can't service your needs.

  3. Review your insurance coverage – contact your agent to determine if your policy is adequate for your needs.  When buying insurance ask "how much can I afford to lose?".

  4. Build a crisis communications plan – so you are able to make sure your employees, customers, vendors, and contractors know what's going on.

DRDA's experienced Business Consultants can assist you with this.  Please give us a call at 281-488-2022 for a consultation.

DRDA Exhibits at NAGGL

Posted by Admin Posted on May 25 2015
DRDA Attended Nat'l Assoc. of Gov't Guaranteed Lenders Conference

DRDA's Firm Principal Doug Dickey, CPA recently attended the National Association of Government Guaranteed Lenders Conference in San Antonio.  DRDA has been a member of NAGGL for the past 10 years.   This year's conference focused on changes to the new Standard Operating Procedures of the SBA as well as highlighting new features aimed at getting capital into the hands of small business owners quickly.  The conference also awarded Jim Ely of Stultz Financial the Financial  Services Champion of the year.  Having worked with Jim for many years we know this award is very well deserved. Congratulations Jim!

Small Business Tax Deductions

tax
Posted by Admin Posted on Mar 19 2015
Small Business Tax Deductions to Consider

Starting a new business?  Following are a few of the deductions available to small business owners:

  • Organizational and Start-up Costs - $5,000 can be deducted in your first year of business for each type of cost (reduced by the excess of each type of cost over $50,000).  Any remaining organizational and start-up costs are amortized over 180 months.
  • Auto Expense – 57.5 cents per mile in 2015, up from 56 cents per mile in 2014.

  • Business Meals and Entertainment – 50% of the cost can be deducted when meeting with current or prospective customers.  The primary purpose must be business-related.

  • Business Travel – 100% of costs such as plane fare, cab fare and lodging.   The 50% limit applies to meals associated with business travel.

  • Credit Card Purchases –Business purchases made with a credit card are fully deductible even if the credit card balance has not been paid.  This applies whether you use the cash method or the accrual method of accounting.   Interest paid on credit card business purchases is fully deductible.   

If you have questions about these deductions or any other element of business ownership give us a call at 281-488-2022 to speak with one of our experienced Business Consultants.

What is an SBA 504 Loan?

Posted by Suzy Granger Posted on Mar 19 2015
What is a Small Business Administration 504 Loan?

The US Small Business Administration (SBA) created the 504 loan program in 1980 to provide accessible financing for growing businesses that seek owner-occupied commercial real estate.

The funds in a 504 loan can be used for the following:

  • Acquisition of an existing building (51% occupancy)

  • Building expansion or renovations

  • Equipment

  • Fixed assets from business acquisition

  • Land and new construction

The 504 program as the following goals:

  • Job creation

  • Expansion of lending to women, minorities, and veterans

  • Assisting US manufacturing

  • Rural and undeserved area development

  • Expansion of lending to businesses that "Go Green"

The Go Green qualifications are:

  • LEED certified buildings

  • Projects that reduce energy consumption by at least 10%

  • Projects that generate renewable energy

  • Qualify for purchase of multiple properties (no cap)

  • Unlimited total project cost (SBA portion capped at $5.5 million)

Borrower contribution expected to be:

  • As little as 10% down payment for most loans

  • 15% for start-up businesses (within 2 years) or special use properties

  • 20% if project is a start-up and a special-use property.

Are you qualified?

  • Private, for-profit businesses in the US

  • Business net worth less than $15 million

  • Business net profit after tax (2 year average) no more than $5 million

  • Seeking financing for equipment or an owner-occupied building (minimum 51%)

If you are curious whether an SBA 504 loan is right for you, please give us a call at 281-488-2022.  One of our experienced Business Consultants will give you a free initial consultation.

How Important is the Site Selection Process for a Small Business Owner?

Posted by Suzy Granger Posted on Mar 19 2015
What to Consider for Site Selection for a Small Business

Have you ever wondered why the small business lender asks about the location of a business whether the business owns or leases the facility? We've all heard that the success of a business is "location, location, location".  That's why the lenders ask.  The lender understands that choice of the location will affect your ability to earn enough income to make the payments on a small business loan.

Different types of businesses require different types of locations.  The challenge is to find the most cost-effective opportunity in the market in which your business must compete.  Many retail businesses might have to pay more for real estate expenses (loan payment or lease) just to be where their target customers are.  On the other hand, a manufacturing business may compete well by locating on less expensive real estate closer to its low cost labor source. 

Often one of the biggest expenses on the profit and loss statement, which a small business lender must evaluate, are the business' monthly lease or ownership real estate costs.  The best approach for addressing a lender's evaluation of the business' repayment ability is to be prepared with good answers.  When the lender asks about lease expenses or when you document the assumptions in the financial projections, be prepared to justify the cost of your facility.  You can convince the lender, with data, research, and facts, that the site selection was carefully chosen to cost-effectively compete in your market.  You can also convince the lender with a thorough and effective business plan for managing your business.  Small business lenders must document your loan file with all their investigation and analysis of the feasibility of the loan request and probability of repayment of the loan.

Give us a call at 281-488-2022, DRDA can help answer your questions about this or other issues that you might have as a small business owner.  One of our Business Consultants will be happy to assist you and will offer a free initial consultation. 

What's so special about the million-dollar mark?

Posted by Admin Posted on Mar 19 2015
When To Sell Your Business and the Million Dollar Mark

If you're wondering when is the right time to sell your business, you may want to wait until your company is generating $1 million in earnings before interest, taxes, depreciation, and amortization (EBITDA).

The million-dollar mark is a tipping point at which the number of buyers interested in acquiring your business goes up dramatically. The more interested buyers you have, the better multiple of earnings you will command.

Since businesses are often valued on a multiple of earnings, getting to a million in profits means you're not only getting a higher multiple but also applying your multiple to a higher number.

For example, according to our research at www.SellabilityScore.com, a company with $200,000 in EBITDA might be lucky to fetch three times EBITDA, or $600,000. A company with a million dollars in EBITDA would likely command at least five times that figure, or $5 million. So the company with $1 million in EBITDA is five times bigger than the $200,000 company, but almost 10 times more valuable.

IRS Releases New ACA Employer Reporting Requirements

tax
Posted by Jeanne Breaux Posted on Mar 19 2015
IRS Releases New ACA Employer Reporting Requirements New reporting requirements have been added to the Internal Revenue Code by ACA:

Code section 6055 – which requires reporting of the health coverage that an individual receives

Code section 6056 – which requires large employers to report on whether they are complying with the Employer Mandate.  It is this reporting that helps the IRS determine whether:

An employer is providing minimum coverage to its employees in compliance with the employer mandate.

  • An individual has health coverage through his employer, thereby satisfying his Individual Mandate obligation

  • Whether an individual is eligible for premium tax credits under the Exchange

Have more questions?  Give us a call at 281-488-2022 or 409-765-9311 and we will be happy to help!

Starting a Business Later in Life

Posted by Suzy Granger Posted on Mar 10 2015
Starting a Business When You are Later in Your Years

Before moving forward put together a business plan.  It's not necessary to expend a lot of time on this document, as long as you can clearly state your intended strategy and clearly define the scope of your intended sales, marketing, and financing efforts.

Starting a business at any age can be a daunting experience, but doing so after age 50 offers its own challenges and opportunities.  The risk factor is as high as it is for a business owner of any age.  On the other hand, you have a depth of experience and knowledge that is not present in most budding 25-year entrepreneurs.

If you are considering a startup of some kind in your fifties or later be sure you can answer the following questions.

Are you prepared?

This is no time to jump into the marketplace just to see what happens.  If you think you have a great business idea then test it against a thorough market analysis.  You need to know who your potential competitors and customers are, but even more critically, if there's likely to be a genuine demand for your product or service.

Before moving forward put together a business plan.  It's not necessary to expend a lot of time on this document, as long as you can clearly state your intended strategy and clearly define the scope of your intended sales, marketing, and financing efforts.

Do you have passion?

For business owners aged 50 and older, there is no getting around a simple fact:  you're just not as young as you used to be.  Starting a business requires the stamina to put in many long hours upfront.  Not everyone can meet the physical demands of hard work and lack of sleep.  You must have passion for this new business.  Making money cannot be your sole motivator – since you may not see profits in the early stages.

Have you looked at the costs?

You are going to need start up funds.  Whether you put up your hard dollars, obtain a loan for financing, or tap into your retirement funds tax and penalty free you need to find an accountant experienced in new business ventures to realistically assess the likely startup costs.  The plus side here is that by age 50 or greater many have managed to put away a substantial amount of money in their 401k/IRA accounts.  DRDA's self-directed 401k program – the BORSA Plan – would give you access to these funds without tax or penalty erosion.

How can you build on your experience?

Starting a business later in life gives you the unique opportunity to draw on a lifetime of experience.  By now you have a much better sense of your strengths and weaknesses.  Chances are you have also accumulated a network of contact who can help you along the way, either directly or through referrals to people who can help you.

Are you considering business ownership at age 50+?  One of our Business Consultants would be happy to offer you a free initial consultation. Give us a call at 281-488-2022.

Reasonable Compensation Determination

Posted by Peter Vollers Posted on Mar 03 2015
What is the Reasonable Compensation Determination

As your tax and financial advisors, DRDA wants to make you aware of your responsibility to accurately determine and document your Reasonable Compensation for the services you provide to your business.  Reasonable Compensation is the salary or wages that you, a shareholder-employee of an S Corp, or LLC, pay yourself for the work you perform for your company.

The IRS requires that all shareholders of S Corps who perform services for their company pay themselves Reasonable Compensation, and it should be paid prior to taking any distributions. 

DRDA is here to assist you with this issue and have tools available that can help you accurately determine your Reasonable Compensation figure. 

Please contact Peter Vollers at 281-954-6021, or Rene Lewis at 281-954-6007 if you would like to discuss this issue further, or to order a Reasonable Compensation Report.

Using 401k/IRA Funds to Start or Buy a Business

Posted by Suzy Granger Posted on Feb 09 2015
Use Your 401K Fund to Start or Buy a Business

Using Rollovers for Business Start-ups (ROBS) such as DRDA’s BORSA Plan to finance a business isn’t new, but it is unfamiliar to many. As a result, there are a lot of myths swirling around about the use of ROBS structures that may be stopping would-be entrepreneurs from chasing their dreams.

BORSA Plans involve using money from an eligible retirement account to finance the purchase of a business or franchise. To summarize, a corporation is formed, and that corporation then sponsors a 401(k) plan. Funds are rolled from an existing retirement account into the new 401(k) without triggering a taxable distribution. This new 401(k) purchases (or invests in) shares of the corporation, which can then purchase a business or franchise.

In essence, a BORSA Plan allows you to invest in your own business where you have control rather than investing in the market where you have no control.  Here’s the truth behind the most common ROBS myths:

1. It’s not tax avoidance.

Using a BORSA Plan isn’t a way to evade taxes by any means. The Employee Retirement Income Security Act of 1974 (ERISA) was set up explicitly to encourage investment in small businesses – businesses that pay taxes.

2. BORSA Plan is an investment, not a loan.

With a BORSA Plan, you’re investing in your new business or franchise, not taking on debt. This means you won’t have to make monthly loan payments or incur interest.

3. You can use a BORSA Plan to diversify your nest egg.

You don’t have to take every penny from your existing retirement fund for a BORSA Plan to work. Many people only use a portion of their retirement assets, and this arrangement can be used in conjunction with a small business loan or other financing option.  So, you can diversify your investments.

4. Getting funded using a BORSA Plan can take as little as four weeks.

Depending on the state in which you’re filing, and how fast you’re able to file the necessary paperwork, funding can take as little as a few weeks.  Most are completed in less than 30 days.

5. BORSA Plans are not the same as Self-directed IRAs.

While it’s possible to finance a business with both self-directed IRAs and a BORSA Plan, there are some major differences between the two. If you use an SDIRA, the owner may not work for the business or take a salary. The investment amount is also potentially liable for the unrelated business income tax (UBIT), which can get very expensive. With the BORSA Plan, the 401(k) owner must work for the new business, and UBIT doesn’t apply.

6. A BORSA Plan can be used to fund start-ups.

A BORSA Plan is a great option to finance not only start-ups, but also purchases of existing businesses and franchises.

To some, the BORSA process can appear to have complex rules and regulations. But if you have a qualified retirement plan with a balance that’s sufficient for your start-up needs and work with an experienced company to support its formation, it can be a great option to start or re-capitalize your business debt-free.

Are you interested in learning more about DRDA’s ROBS structure, the BORSA Plan?  Give our experienced team a call today 281-488-2022 for a free consultation.

 

Welcome to Our Blog!

Posted by Admin Posted on Apr 16 2014
This is the home of our new blog. Check back often for updates!