Every Great Entrepreneur has a “Numbers Guy” (So Why Don’t You?)
Entrepreneurs don’t just have to be creative to start a business, they have to be numbers-driven as well.
They not only have to think on their feet when it comes to business ideas, but also financial ones. It is important for them to know about taxes, assets, and liabilities, among other things. Unfortunately, many people, when starting a business, may not realize what they are getting into.
According to a study conducted by Sage in 2014, younger business owners enlist mentors to help them with a startup, meanwhile long time business owners recruit accountants, lawyers, and bankers.
Every great entrepreneur should have a numbers guy
They help with taxes
This is what most people think of when they think about the tasks an accountant can help them with. Taxes are a frequent topic of discussion when it comes to talking business numbers — and they can get quite specific. Do we really need to convince you that accountants can help you with your taxes? Always go to an accountant if you are struggling. They can not only answer the questions you have about organizing your tax forms, applying deductions, and getting refunds, but they can also help you file them when the time comes.
Moreover, the rules and regulations of taxes are always changing. Keeping an accountant on your side ensures you are staying compliant and not missing anything.
They help you make a plan
Thousands of businesses fail every year because they lack a solid plan. A good accountant will partner with you to look at the data, measure your progress, and help you create a fiscal plan for your business. All good plans come from reliable and quantified data; if your data isn’t being analyzed correctly, you’re not going to have a good plan.
Accountants see hundreds of businesses and industries in their lifetime, so they know what works and what doesn’t. They also offer a new perspective on your business that you may not be able to see, because you’re too involved. An accountant is a third party entity that doesn’t have stock in your company. Their insights will likely be unbiased, and may even help you come up with the next big idea.
They help predict the future of your business
While it can be argued that it’s the entrepreneur’s job to make predictions about the market surrounding their business, accountants are useful for giving you the data and anticipated trends you can’t see yourself. They’ll observe the current revenues, operating costs, and assets being used to run the business. From that information, they can predict what those stats may be in the future, based on your business’s growth or the growth of the market.
These predictions can unify and motivate a business toward a singular goal that is both measurable and actionable. They can also be tracked over time and used to make even more predictions about the changes in the environment. Most importantly, these projections will simplify what you’ve accomplished and point out the shortfalls you experienced while running your business. Your accountant should be able to separate what really matters from the disruptive data that has no bearing on how your business is running, but too many entrepreneurs focus on.
They help you find a good work-life balance
When you’re an entrepreneur, you don’t want to spend your whole day pouring over data and statistics. You need to use that time work on your business, managing your employees (if you have any), and doing the creative stuff that you set out to do in the first place. Entrepreneurship is hard work, but it should be the kind of work you love doing. If you’re not enjoying work, then what was the point of leaving your 9 to 5?
An accountant can help you focus on the work you want to do by relieving you of tasks that still need to be done. They can review all the numbers for you, and draw conclusions as to what you should be doing creatively to help your business grow. In addition to their traditional duties of taxes, profit and loss runs, and other fiscal responsibilities.
It isn’t a common benefit that is discussed, but by relieving you of a vital section of your business responsibilities, that absolutely needs to be attended to by someone who understands, they give you more time to establish a life outside of your company. Instead of waking up and going straight to work to crunch numbers before the day begins, you can establish a healthy routine that keeps you productive and active in both your home and work life.
They help with the buying and selling process
Most importantly, for most of you reading this post, they can help you with buying or selling a business. If you’re looking to buy, your accountant can look through the website’s books to make sure everything looks good before you make the commitment. While this may seem a little pointless for a small Adsense or Amazon business (because that data is pretty easy to find), when it comes to larger, six figure businesses who use different monetization methods, an accountant is crucial.
When looking to sell a business, you can employ an accountant to clean up the possible discrepancies in your books before you put it on the market. For instance, if you have a portfolio of websites all flowing through the same LLC, you might want an accountant who can separate one business from the rest of your books, correctly.
Think about it. You wouldn’t buy a used car from someone without have a mechanic take a look. Who knows what you might have missed, from not understanding how everything works below the hood. And you would probably increase the sales value of your vehicle if you have a recent “clean bill of health” from a mechanic to verify the quality. Or point out issues that should be fixed before you put a sign in the windshield.
Accountants are trained to know what decisions will affect your business and its finances. So listen to them when making important decisions.
What Are Some Things Accountants Seem to Just Know
Justin and Joe often get asked questions about taxes and financing, and most of the time they have to defer to an accountant. They may be the brains behind Empire Flippers, but when it comes to the nitty gritty of economics, it’s better to get an expert involved.
They brought Mario Lucibello, a CPA at GreenHaus, Riordan & Co, LLP, onto the Empire Podcast a little while ago to answer some of the questions we receive most in the past. This is just a sampling of some of his replies, and there’s a ton more that could have been discussed. But there’s only so much three men can do in one hour. (i.e. This should, in no way, be considered a comprehensive guide for your financial decision making.)
Should I create a business entity for my website portfolio?
If you’re just getting started with building your portfolio, the money is likely going to run through you personally and taxes will be pretty standard. However, if you are building your portfolio to sell, or starting to see some big returns, separating your business from your personal finances is crucial.
You want to make it easy to trace what is happening financially to your business — what your expenses are and what your revenue is, without having to sift through bank accounts to figure out what numbers go with what purpose.
If you have all of your businesses going through one bank account, the selling process becomes messy. By separating your businesses into entities, you also make them more attractive to buyers and it may increase the value of your company. If they have to do less work, chances are they will pay more.
Another reason separating is important is because of the legal reasons. If by some unfortunate circumstance you get sued, you want them going after one business, not your whole portfolio — and house!
What should I do with my taxes when buying/selling a website for the first time?
When you’re buying a website, you’re buying a business. On the tax side, this is referred to as a section 197 intangible asset purchase, meaning it is a depreciable asset that will decline in value over 15 years. On the sell side, you’ve sold a section 197 intangible asset, and it will be capital gain instead of ordinary income.
The depreciation all depends on what assets you’re buying. For instance, if you’re buying training along with your business. The training would be deductible for the buyer and would be ordinary income for the seller versus capital gain.
What if I buy and sell a site in two different tax years?
If you hold it longer than a year, you will have to depreciate the asset for that tax year. Say you bought a site for 10,000 dollars in 2015 and sold it for 20,000 dollars in 2016. It will have depreciated by about 1,000 dollars in that year. You will have made 11,000 dollars on that site. Therefore, you will have 1,000 dollars ordinary income and 10,000 capital gain. You will not have been able to take advantage of your full depreciation because you didn’t wait the full 15 years, and you’ll have to pay for the earnings you made on that site
What’s better: a stock sale or an asset sale?
It’s almost always better to do an asset sale, because with an asset sale, you are waving all the liabilities and issues you inherit when you commit to a stock sale. If you’re buying stock, you’re buying all that has happened to that company before your purchase. If they’ve pissed someone off and gotten sued, you’re inheriting that case.
On the tax side, when you buy assets, you can depreciate those assets and get deductions. If you’re buying stock, you can’t get a write off for the purchase unless they already have tax benefits. However, you may want to do a stock sale if the company qualifies for a qualified small business stock sale. In that instance, you have a much greater chance of getting tax benefits.
How do taxes work on a bitcoin to bitcoin sale?
Bitcoin is treated as property for tax purposes. So it’s almost like buying a site in foreign currency. Say you buy bitcoins for 100 dollars and a few years later buy a site for 10,000 dollars with that bitcoin due to bitcoin increase. The seller will pay taxes on the 10,000 sale. The buyer will have a capital gain of 9900 dollars, and have a depreciable asset of 10,000 dollars. It’s basically treated like the buyer selling their bitcoin for 10,000 dollars.
If I sell my site for a loss, can I claim those losses?
That would be a 1231 loss, which will be an ordinary loss. You’ll be able to deduct your loss, which will offset any other income you have received. You could also carry that loss back to the previous year to get a refund on the previous year. You get to go back two years and can even carry it forward if you’re expecting to have higher income in the next year.
But Do You Need an Accountant?
If any of this went over your head, you may need an accountant.
Accountants can help answer these questions and make the complicated stuff easier. If you don’t have an accountant, you’re missing out on potentially game-changing financial input. Accountants can be extremely useful to a business owner, and not just for tracking the nickels and dimes.
They can take a lot of time off a busy entrepreneur’s shoulders by “doing all your numbers” for you. They can help them with taxes and liabilities, making sure you pay what you owe and not a penny more. They often can help you go through a business before you buy a new website or business. They may be able to help you figure out leaks and overspends on your expenses to optimize for better profits.
If you want to be a great entrepreneur, you need a numbers guy that will have your back.
So what are you waiting for?
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