Rick's Business of Audiology Blog

Raising Cash vs Paying

Not that long ago a friend of mine asked me to talk to his son.

His son was about 22 and had just stopped going to school and managed to acquire a job.

His son was about to buy a brand new truck. My friend was hoping his son would keep driving the older car that was available at home.

What to do?

As I visited with his son I realized his son was confusing raising cash for the truck, with paying for the truck.

Vendor Sales People May be Selling Marketing Materials

A recent discussion with a client reminded me Audiologists often don't realize the person selling them marketing products, mailers, fliers, inserts, whatever, often makes a commission on the sale.

If your vendor seems to be pushing mailers it is a good idea to confirm the vendor's sales rep has no financial interest in selling the mailers.

No Commission :  No Quota  :  No Expectations from the company.

I don't pretend to know how it works at every company. But at some companies the sales rep that is selling you hearing aids, also has a financial interest in selling you mailers, inserts, and other promotional material. If the company produces the material, assists in paying for it, the rep may believe he or she is expected to keep the mailing people busy.

Not that this is unethical, but when the Audiologist assumes differently it can be uncomfortable.

Retirement – How other people get rich and powerful at your expense.

Retirement = A way for you to become dependent upon others. The retirement idea is a way for others to keep you dependent upon them and always almost poor. Poor people talk about retirement as a "quit work" and live off others concept.  Wealthy people think of becoming financially independent and using their financial resources to help others.

Examples:

Unions: They say work your ass off now at a job you don't like all that much with no future so you can become dependent upon our retirement fund or the government if we can pawn you off on them.

Congress: They say work your ass off now and pay income taxes to us and hope we are financially solvent so we can take care of you in the future.

Financial Planners: They say work your ass off now so you have enough money to give some to us to manage, because you know you aren't smart enough. Sure we will take our cut now, however if you save enough with any luck you will save enough so you can live off of the money we are managing in the future and retire.

News Media: They say work your ass off now, or perhaps don't work and just complain, but if you read what I wrote here is a strategy you can use this week to sooth some fear you probably didn't know you had. Next week I will have something else for you to read or listen to. News media types need you to think you need something different every day, week, hour, or whatever. Most of them have won't expose their pitiful financial situation to you.

The list goes on and on.

There are a whole lot of people who benefit if they can talk you into having retirement as a dream, or wish, or goal.

Wealthy people don't think this way. Wealthy people realize the way to financial independence is to own, or create, cash generating assets. Wealthy people never quit, but always tend to be doing something they enjoy. Poor people want to spend their family wealth and make their children earn it back, wealthy families think of family wealth as a way to empower their children, charities, or other people to do grand things.

Which do you want to be?

Rick

 

Cash or Income: Which do you need?

People often tell me they want to increase their income. Why I ask? Wellll……..

Increase your income and you increase your tax bill. Therefore Congress, wealthy Democrats, the IRS, and people who make a living giving tax advice and selling tax shelters want you to have income.  Anyone who lives off of the government wants you to have income so you will pay taxes to support them.  Other people's goals for you include you having taxable income.  Is that really your goal?

Cash is what you need to pay your bills. Not income. You can have lots of income, little cash, and become insolvent.

Think in terms of increasing your family wealth, and having enough cash to meet your cash needs. You will have a higher standard of living, more fun, and a relatively lower tax bill.

Rick

Extra Cash – Not!

She said she was going to do it when she had some "extra cash". To me she just said it won't happen.

I suggested she rethink because I know she really does intend to do it.

She owns an Audiology practice where she wants to help everyone in her community hear. She wants to become financially independent.

She will never have "extra cash" because she has so many good uses for any cash that appears.

So if you find yourself saying you will do something when you have extra cash I encourage you ask yourself if you really want to do it.

It is how you choose to allocate the cash you have that will drive what you accomplish. Extra Cash is only for people who don't recognize their grand opportunities.

Rick

All fear isn’t equal.

A little fear is a good thing. It is a powerful motivator. However all fear isn't created equal. Some fear is focusing; some fear is, well just scary.

The fear of being eaten will cause the impala to move really fast. When a cheetah is nipping at its fanny the impala moves away from the cheetah as fast as possible in an erratic manner. It is doing anything not to be eaten. This is like the fear of impending failure. It will cause you to move, but without focus of future direction. At that moment you will do anything not to fail. There are times this is a necessary strategy, but in the long term this isn't much fun.

The fear of not winning is very different. If you set audacious goals and your fear is you won't achieve them then you are experiencing a very different kind of fear. The young Bull Moose with his newly grown antlers sets a goal of collecting a big group of cow moose and mating with all the best ones. He may strive for the big harem, and only end up with a few. But better a few than none, and there is always next year.

Better to dream big and miss the mark, than spend the rest of your days feeling you have a cheetah eating your tail.

 

 

IRS Expense Deductions & Depreciation Section 179

Section 179 Deduction allows small businesses to deduct many capital expenditures in the current year as opposed to expensing them over many years.

This enables a business that purchases qualifying items, in particular things like computers, to reduce current taxable income by the cost of the items.

Audiometers, sound rooms, computers, video devices, surround sound systems, and other tangible property qualify.

If your accountant still has you depreciating items and hasn't offered to have them expensed then you owe it to yourself to talk to your accountant.

http://www.irs.gov/formspubs/article/0,,id=177054,00.html

http://biztaxlaw.about.com/od/businesstaxes/a/section179.htm

Rick

Your Biggest Debt is?

What is your biggest liability? What is your biggest debt?

Most of the time when I ask this question I am given a credit card, or a hearing aid supplier, or even an advertizing vendor.

It is often a surprise when they realize it is their rent. If you have a 5 year lease for $1,500 per month that is most of $100,000, perhaps more if you figure in utilities, taxes, and maintenance.

And that is all cash out of your hands. Once spent it is gone forever.

So many of you sort of think of your rent as …… just something to pay.

If your space is your biggest liability, do you also treat it as your biggest asset? Is your office visible from a road? On a road people recognize? Near a well known or frequented location?

If you are considering renting space, is it the best you can get for your money?

$2,500 may be a lot for a start up's rent. But if it is also a great advertisement, then the advertizing value alone may make it a great value.

Rick

 

 

Facebook and Privacy

If it is online assume anyone can see it. I have been fascinated about all the recent Facebook security talk. Here's why.

Debt, Cash and Opportunity

There is a saying in business: "You never go broke if you have cash."

There is another saying in business: "It takes money to make money."

There is the challenge clearly stated: You must have some cash to make more cash.

Most of our debt problems are not really problems with debt, but problems with the cash debt relationship.

Debt: Monthly Fixed Payments More Risky

If your cash flow changes from month to month, as it often does for owner operated small businesses, then watch out for fixed monthly payments.

Imagine a $10,000 debt with a fixed payment of $500 per month; and imagine the same $10,000 debt with no fixed monthly payment, or just a small monthly interest payment. Both must be paid in full at the same time. Which is more risky for the debtor?

The fixed payment loan is almost always far more risky. Why?

Debt: Friendly vs. Unfriendly

While listening to a client talk about some of his debt it occurred to me how much of his debt was unfriendly debt.

By unfriendly I mean from institutions with no interest in his success, his professional accomplishments, or anything other than finding ways to tack on additional charges to increase their short term profits.

Examples of this person's unfriendly debt:

Debt: Personal vs. Business

Please don't let the popular media mislead you.  All debt isn't bad!

Debt and Risk

Can you manage the risk? Every opportunity isn't for everyone.

What if I were to offer you the opportunity invest in a coin flip for $2 cash. If the coin comes up heads you will win $10; if tails you will win nothing.

You would probably immediately take me up on the offer. You could manage the $2 pocket money loss if it happens and $10 would be nice.

Now what if I were to offer you the opportunity to invest in a coin flip for $2,000 cash. If the coin comes up heads you will win $10,000; if tails you will win nothing.

Make the Bank the Debtor

Hate being the debtor all the time?

Deposit some cash. Become the lender. Make the bank your debtor.

It isn't all that difficult.

$1,000 isn't all that much, but it does mean you aren't always the debtor.

Yes, the little things do matter.

Rick