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Test
Your IQ
By Jennifer S. Croft |
Questions:
1. What are the 5 elements that make a business card most effective?
2. List three “profit centers” you could create inside
your business. How would they affect your bottom line?
3. What’s gross profit? What’s net profit? What’s
net profit after taxes? What’s the difference between the
three?
4. What’s a 1099? Under what circumstances should you send
one? Who will send one to you or your business?
5. Why could a Yellow Pages ad be one of the worst investments a
business could make?
6. Should every business accept credit cards?
7. What’s wrong with bartering?
8. What’s the difference between direct and indirect competition,
and which one will have the greater impact on your business?
9. Why should you set aside approximately 40% of your net income/profits
for taxes?
10. You’re a sole proprietorship – what’s the
benefit of separating your business money and personal money? Isn’t
it all the same?
11. When you “buy” a mailing list from another company,
are you really “buying” it? What’s “seeding”?
12. Which parts of any contract are the most negotiable?
13. What are the 16 types of taxes and insurance that might be required
by law? How many of them will apply to your business? When are they
due?
14. What two factors most influence whether a direct mail pieces
brings in new business?
15. Why should you never complain about taxes?
Answers:
1. An effective business card has good contact information that’s
easy to read; white space, avoiding clutter; a snappy “tagline”
that highlights what you do; a striking logo; and a rich feel, quality
paper, typesetting, and ink colors.
2. Here are potential “profit centers” that you can
add to your business, all of which will drop straight to your bottom
line. Add extra charges for: minimum orders, assembly, delivery,
shipping, cancellations, rush orders, returns, special orders, short
notice, upgrades, late payments and bundling or unbundling of products
or services.
3. Gross profit on an individual sale is the sales price minus the
cost of goods. For example, if a bookstore sells a book for $10,
one that costs $6 to purchase from the publishing company, the gross
profit for the bookstore is $4. On a monthly basis, all of these
$4 gross profits are added up, to total $6,000 for example. From
the $6,000, all overhead is subtracted (rent, salaries, utilities,
marketing expenses, etc.), and the remaining amount for the bookstore
is net profit. If the bookstore has $1,200 left over as net profit,
it will then pay income or corporate taxes on that amount, $400
for example, and the remainder equals net profit after taxes, or
$800.
4. A 1099 is the end-of-the-year tax form sent out by businesses
to any individuals or unincorporated businesses who have been paid
more than $600 in that year.
5. A Yellow Pages ad can be one of the worst investments a business
can make, because you have to commit to a year’s worth of
ads before you know whether the ad works or not. Because of the
long-term commitment required, there’s no way to test the
ad in a smaller quantity and track the results.
6. Every business should accept credit cards, if the customers or
clients in its target market are used to paying for those types
of products or services with a credit card. While there’s
a slight fee for every transaction (usually less than 3%), customers
often spend more liberally when they’re using plastic.
7. The notion of trading products or services with other businesses
flies in the face of what the IRS will allow; it also devalues what
you’re selling.
8. Direct competitors are the ones most similar to your business;
indirect competitors provide a different product or service, but
nonetheless vie for your customer’s dollars. For example,
the direct competitor to an amusement park would be another amusement
park. Indirect competitors would include: water parks, movie theaters,
sports arenas, aquariums bowling alleys… anywhere consumers
could spend entertainment dollars.
9. The figure of 40% is a rough estimate of what you’ll owe
in potential Federal and State Income taxes. The figure will vary
depending on your state taxing level and your federal income level.
Check with an accountant early on to make sure that you’re
setting aside enough tax dollars throughout the year. You don’t
want to be hit with a crippling bill come April.
10. Technically, yes, those funds all belong to you and you alone.
However, by opening a separate account for your business, you’ll
be able to more easily track income and expenses, making end-of-the-year
accounting a cinch.
11. Typically, when you “buy” a mailing list from another
company to use in your marketing campaign, you’re actually
“renting” the list for a one-time use, not buying it.
Smart companies that rent their lists will “seed” the
list with fake names and addresses, which allows them to catch anyone
who tries to use the list more than once.
12. Every part of a contract is negotiable before you sign it, and
none are negotiable afterward.
13. The 16 types of taxes and insurance include: Federal Withholding
Tax, State Withholding Tax, Social Security/Medicare, “Head”
taxes (generally charged by local municipalities), Federal Unemployment
Insurance, State Unemployment Insurance, Workers’ Compensation,
Federal Income Tax, State Income Tax, Self-Employment Tax, State
Sales Tax, Local Sales Tax, Use Tax, Personal Property Tax, Federal
Corporate Tax, and State Corporate Tax. Many of these taxes can
be avoided by not hiring employees (running a one-man or one-woman
operation); also the types, amounts, and due dates will vary from
state to state and depend on how much you gross. Best advice: Hire
a bookkeeper to help you sort out the tangle of taxes, so that you
can devote your time and energy to growing your business.
14. The two elements that most affect whether a direct mail pieces
works are the target market and the offer. In other words, who are
you sending the piece to and what are you offering as an incentive
to get the recipient to act? Good writing, design, typesetting,
paper choice, and ink colors, unfortunately hold much less sway.
15. You should never complain about paying taxes, because every
dollar you send in means you earned one or two or three more, an
enviable achievement
for any entrepreneur.
©2007
Simple Biz Planning, Inc.
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