Fine-Tuning Your Business Processes Helps to Rev-Up Your Bottom Line

There are three key business processes involved in operating an entrepreneurial enterprise-management, strategy and operations. Ideally, all three business processes are tightly integrated. The management process provides a framework for hiring, training, and managing employees. The process not only helps employees become more effective in their positions, but it also helps to improve employee retention levels. The strategy process establishes both short-term and long-term goals. It clearly defines where you want to take your business in terms of earnings, sales, and revenues, and it also clearly defines how you plan to get there. The strategy process becomes your road map. And finally, the operation process provides the tools and the resources for achieving your goals.

A business enterprise should be thought of as an entity--one that is operating as a whole. Although individual projects and processes appear to be working independently, they are interrelated and are focusing on the company's short and long-term goals. Effective project and process management is about the systematic breakdown of the business operations into smaller, well-defined parts --components that are more manageable on both a macro and a micro level. The macro level's focus is on achieving high-level organizational goals/objectives and on creating processes that enable the business to better achieve those goals/objectives. The micro level's focus is on breaking down the various jobs, as well as their individual tasks, into smaller steps/components.

Breaking down complex projects and/or processes into more manageable parts is a valuable key business practice since attempting to deal with multiple, complex problems simultaneously results in inefficiencies, delays, confusion, and stress. Achieving short and long-term goals, meeting targets, and handling day-to-day issues become much easier when tasks are divided into mini-steps. When each mini-step is completed, employees experience a sense of accomplishment rather than feelings of frustration that often arise when dealing with the whole versus its individual parts.

Standardization better positions your business to succeed.

Many early-stage entrepreneurial enterprises, as well as established companies, under-perform! They are typically characterized by having an informal management system, ad hoc procedures, and, at times, an absence of standardized systems and processes. In order for enterprises to flourish into profitable businesses, standardization of processes and procedures is essential. Very few businesses can manage effectively without standardized processes. Without standardization, most likely, things will not get done on a timely basis.

Effective and efficient business processes depend on standardization. Standardization means that all your employees will perform a task in the same way, every time the task is performed. Setting standards for how things should be done, and then, documenting the steps of the process to meet those standards, are critical initiatives that your company must take if it is to grow and reach its potential. Once basic systems are in order, jobs and tasks are done more efficiently and effectively, and decisions are made with greater ease and with greater reliability.

The absence of standardized systems is a major yet very common cause of under-performance by businesses. "Flying-by-the-seat-of-your-pants" management creates inconsistencies and ultimately leads to chaos. When basic systems and processes are developed for performing easily replicated, day-to-day tasks, your business is better positioned to produce more consistent results.

Standardization of business processes applies to procedures, standards, work instructions, and guidelines for various business functions. Standardization is about creating a clearly defined system that enables everyone to do their best work. Proper standardization of the business processes also includes the creation of an Operation Manual.

The Operation Manual is a written document which clearly explains to all employees the standards of operation, and identifies the operational tasks required to establish and operate the business. The Operations Manual supports and promotes the use of consistent and uniform, day-to-day procedures within the business unit for the purpose of maintaining the quality of its services and products. The Manual further defines the company's system of standard processes, procedures, and guidelines. It outlines the procedures for hiring as well as the procedures for employee training and development.

Simplifying your business operations is critical.

In today's competitive market, how you deliver your products/services is most often what differentiates your company from your competitors. Is your company efficient and productive? Or have your company's processes become cumbersome, unwieldy, and out of control?

Business growth does not necessarily equate itself with business growth complexity. Success sometimes hinges on elegant simplicity. Many times, when companies expand as a result of rapid, unplanned growth, they do so without a carefully orchestrated plan. The absence of an adjusted plan--that meets increased business demands-- creates complex, inefficient operational results.

Many businesses find themselves with staff, resource, and equipment redundancies; lack of formal systems; duplicated efforts; and no clear line of sight to the strategy driving the business. The solution to this problem is to assess the business from a big-picture perspective and streamline its operations. In order to effectively simplify your business operations, consider these tips:

• Analyze existing business processes. • Identify gaps in efficiency and productivity. • Develop a solid plan that redesigns and formalizes processes. • Prepare and obtain support from partners, investors, managers, and employees for necessary changes. • Prepare your company for change. • Establish performance benchmarks. • Roll out the plan using a phased approach. • Monitor and evaluate progress. • Consider outsourcing processes that you cannot handle in-house.

Efficiency and profitability go hand-in-hand. The more efficient the operations become, the more profitable businesses become! When a business demonstrates efficiency, it is far more productive since waste and effort of its valuable resources (time, money, and people) are at a minimum. That is why businesses with fine-tuned business processes are some of the most profitable companies in their respective industries.

Business Process Mapping

You want to find that new restaurant downtown that everyone has been raving about, but you've never even heard of the little side street it calls home. What do you do?

You break out a map and figure out how to get from your front door to the restaurant. You look it up on Google maps, type the address into your GPS system or, if you're old school, you reach for that folded up paper map you keep in the back of the utility drawer.

You don't just hop into the car and head off in the general direction of downtown. If that's your plan, you can count on the night ending in frustration and a trip by a drive-through window.

Maps are our friends. That principle doesn't just apply to that new Spanish joint with the great tapas, either. It's a key part of doing business.

Maps work because they provide an understandable, efficient and accurate means of seeing how things fit together. Business process mapping recognizes this undeniable fact and leverages it for increased productivity and efficiency.

Although there are parts of your business that are one-of-a-kind or one-time affairs, most of what you do is a little more predictable. There are processes that you follow to get the results you need.

Those processes may develop organically over time. If you kept driving downtown every night for a few weeks, you might eventually find those tapas in time to get a table. You'd then have a system in place for finding the place again.

However, you could have found your way there much earlier if you started with a map, right? It would've saved a lot of time and you could've avoided a few trips to McDonald's, too.

There's also a strong chance that the route you finally discovered to the restaurant isn't the best one. You may not have figured it out yet, but there could be a faster and more efficient route from your place to the restaurant. Map it out. See what happens. It's never too late.

Let's get back to your business. You have processes in place. Some were developed in chunks based on a combination of luck, skill and experience. You also need to formalize other processes. Right now, you're still struggling to find your way from Point A to Point B.

And that's why it's important to remember that maps are your friends.

Business process mapping involves organizing and breaking down your processes into formalized, easy-to-follow steps. It's a matter of finding repeatable and optimized systems to reduce complication and to increase your ability to handle regular challenges effectively.

When you have those maps, things get done and they get done the right way-every time. You don't get lost and you never arrive at a restaurant two hours after it's closed for the evening.

Are you creating organized systems to accomplish regular events in your business? If you're not, you need to make a point of engaging in some serious business process mapping.

The Benefits and Risks of Business Process Outsourcing

Businesses now outsource many of their non-core processes to survive rising costs and difficult economic conditions. Outsourcing companies provide high quality, competitively priced back office solutions for a wide range of operations - from data entry and document management to medical and legal transcription, medical billing and coding, and much more. However, business process outsourcing comes with both benefits and risks. Read on to get an idea of both sides of the picture.

Outsourcing Help Businesses Face Global Competition

The latest trends in outsourcing say that businesses are looking beyond the cost advantage. They want innovative solutions that will help them get an edge over their competitors, and business process outsourcing companies are going all out to provide that. A list of the many gains that outsourcing offers:

• Infrastructure cost savings: The buyer would not have to set up the infrastructure necessary for back office operations. The BPO company is usually specialized in a wide range of tasks and would have the resources, technology and manpower to offer professional services. This offers the buyer a high degree of flexibility.

• Increased productivity: Internal resources and personnel can be directed to core tasks. Administrative burdens are eased and valuable time saved. The focus is on increasing productivity and revenue.

• A paperless office: Electronic documentation paves the way for a space-saving, efficient, paperless office. Official records and important documents are easily retrievable with document conversion and document scanning solutions.

• Innovative solutions: As mentioned earlier, reliable service providers are geared towards providing their clients with innovative solutions. They are equipped with the latest technology and a skilled workforce that can provide customized solutions to take your business to the next level.

• Competitive pricing: Am established service provider can offer competitively priced BPO services to save their clients up to 40 percent on overhead.

The Risks of Outsourcing

• Security: Breach of security is one of the most important risks of outsourcing. The client allows the BPO company access to its valuable data. Misuse of the data and network access privileges is therefore one of the most important risks that the client faces. This can have serious legal consequences for clients in health care industry where patient confidentiality is crucial.

• Intellectual property risks: Client companies face the risk of theft of their source code and confidential design documents of a key product to which the vendor has access.

• Vendor organizational risks: If the business process outsourcing company faces internal organizational issues, this could affect the client company too. Operations may get stalled and services would not be delivered on time.

How to Get the Best out of BPO

Given that business processing outsourcing has both benefits and risks, both clients and service providers should look to mitigate them. Clients should take care to partner with an established company that can provide safe and effective solutions. Checking out the track record of the vendor company is important. The BPO company should have every measure in place to ensure the confidentiality and security of client information.

Offshore Business Process Outsourcing - New Opportunity To Save On Costs

The necessity to look for ways of reducing costs for various financial services is now higher than ever. Nowadays, the global market today is constantly changing and growing, that is why every business seeks to increase productivity. Banks, insurance offices and capital markets are urgently searching for ways to quickly reduce costs without losing the quality of their services, therefore many are thinking of hiring the offshore business process outsourcing, which can help not to lag behind the times and retain competitiveness. The non-core but still important processes which take up a lot of time are better to be outsourced to offshore business process companies, which are often viewed as more flexible, quicker, less expensive and more productive.

Taking into consideration that a great number of employees at offshore business process outsourcing centers are a better educated in highly specialized fields labor force, which constantly upgrades according to the needs of the time, as well as the possibility of using the world-class telecommunications, the typical services bought offshore can become an improvement in the quality and level of services, offered by your company.

Offshore business process outsourcing companies are normally situated in the in the countries with low average-sized wages, such as India, the Philippines, Brazil, Russia, the Czech Republic, and China. The companies may provide instant cost saving possibilities, which are available because of the great number of competing businesses, often without the need to make serious initial investments. For the businesses striving to decrease their production costs the variant of employing offshore business process outsourcing is one of the best options on the way to achieving savings, taking into account that nearly every firm has at least one area or task, which can be successfully outsourced. The most common examples of offshore business process outsourcing include such spheres as call centers, human resources, accounting and payroll outsourcing, mortgage processing, financial analysis, accounting, legal research, paralegal services, legal transcriptions, insurance claims processing, market and competition analysis, product launch, publishing services, patents , storage, lease management, lease abstraction, real estate management and several other services.

The clients who finally decide to employ offshore business process outsourcing can often get almost complete control of the policies, workflow processes, reporting, systems and data with the help of the modern means of information. Some of the businesses buy or develop their own Internet-based project management tools, allowing the real-time control of all your offshore tasks. This actually destroys the assumption that it nearly impossible to control the work of offshore business process outsourcing centers due to their distant location and time difference.

Business Process Improvement

Today, more than ever before, using technology to improve your business processes is paramount to business success. Luckily, there is a simple approach that can help you determine how to go about planning your improvements - and accomplishing this as efficiently as possible.

So, how do you go about improving your business processes -- particularly in tough economic times? We suggest that you begin with a thorough look at each of your processes, and the people and technology that are involved with each one of them. We refer to this process as a "Technology Roadmap." A Technology Roadmap is actually just that - a very detailed document that maps out exactly where you are today from a technology perspective (your "As Is" state), where you desire to be technologically (your "To Be" state), and the resulting gap that exists between these two states.

Once you have your Technology Roadmap clearly defined, you can then assess the best way to prioritize the resulting tasks or projects that will bridge that identified gap. You will examine your budget and your human resources, and then develop a project plan to prioritize the projects based upon those two constraints. Once you've done this, you will be well on your way to improving your business processes. And, you'll be able to do it in a timeframe that fits with your existing resources or determine what resources that you may need to bring in to help you accomplish your business goals.

A word on resources . . . sometimes in order to improve your business, an outside perspective is necessary. This is true no matter what business you are in. Because we love what we do for a living, we can sometimes become too inwardly focused when examining our own businesses. Despite our best intentions, we tend to want to do things the same way because we are inherently averse to change. It's simply human nature. As you are considering your business and improving your business processes, take a hard look at your internal capabilities to thoroughly examine the processes and poke holes in them to cause change.

Once you've done some soul searching you may well determine that you can effectively build your Technology Roadmap internally. However, if you get the feeling that having an outside consultant to manage the process, by all means do it. Simply select a consultant who you trust (and be sure to check references) and who has a specific background in business process improvement.

When looking externally, an additional factor to consider is the consultant's ability to pay attention to the details. We've found that many consulting firms take a purely strategic approach - providing a high-level overview of how to positively impact your business processes. While this isn't bad, we've found that in order to positively change your business processes for the better, attention to detail is paramount to your project's success. Accordingly, select a consulting firm that can help you with strategy but also work through the details and tasks to get each project done on-time and on budget.

Fundamental Rethinking And Radical Redesign Of Business Process Through Process Modeling Software

Every business requires starting anywhere, and one of the things we require to do when modeling processes is to determine how your business processes get kicked off. To create a model, you need to start by defining what the process is aiming to achieve, and how it fits with other processes. The modeling software / tools are the best to recognize and handling for business models. The key concepts for modeling software are as follows:

• Recognizing process beginning points • Recognizing touch points with other systems - for example, how BPM and SOA interact • Simulating a new business process • Follow the industry Business Process modeling notation and standards • Identifying changing job roles • generating a structured model for execution • Recognizing where ROI will be generated and how to track it

Modeling tools in short process drastically improves the business productivity for process modeling and analysis. These tools are designed for BPR and IT experts of industrial and service enterprises who require decreasing the time and risk it takes to service customers, fulfill demand, and develop new products. mapping is another advanced features of modeling software allows enterprises to visually map their current businesses, allowing them a comprehensive overview of what actually happens. This allows users to look at design from an objective point of view and enables them to identify areas of concern and possible methods of improvement.

Modeler builds it simple for business and operations managers to map and document their business processes easily. With the Process Modeler, creating high-value models that are used in tactical and calculated decision-making is now within the reach of any company. Solution-specific forms, pattern and reports assist the capture and maintenance of process knowledge in a way that lets business users, regardless of technology aptitude, produce information-rich models with the same or less efforts used to generate static flowcharts and narratives.

Reasons Why Business Process Mapping and Optimization Is Crucial

Business process mapping and optimization is a set of activities that looks into essential aspects of a business, including objectives and the people and steps required to achieve them. One defining characteristic of this strategy is its reliance on visual representations. As human beings are 60% dependent on visual stimulus, BPMO is deemed crucial to the effective management of large companies through the following:

1. Identification of Problem Areas

Large businesses are made up of many different departments, which perform both independent and interdependent functions. Hence, it may be expected that each of these departments give rise to varying problem areas that may be difficult to identify without the use of effective tools. With flow charts, graphs and other visual depictions that are part of business process mapping and optimization, these areas can be easily spotted and understood.

2. Timely Risk and Damage Control

Apart from identifying problems within a company, sound business strategy mapping also enables decision-makers to affect appropriate remedies through business process reengineering so as to control risks and damages to the concerned departments or to the business as a whole. In simple terms, this means problems are resolved more quickly, and the company is able to restore normal functions and continue to maintain company standards in half the time.

3. Strengthening of Existing Best Practices

Business process optimization can also be used to pinpoint areas where the company has been

exhibiting good performance so they can be further improved or enhanced. This means, not only does the strategy help managers correct problem areas, but it also lets them detect existing best practices. As a result, the company's strengths can be magnified, customer satisfaction can be maintained, and performance can only get better and better in the long term.

4. Training of Human Resources

Business process optimization can also be used to make employees more effective in what they do. This benefit of BPMO is especially useful during the process of training newly hired personnel who have a lot to learn about their new job or the company itself. Instead of relying on thick handbooks or lengthy training guides or manuals, a company can make use of visual depictions to make employees learn faster and more effectively.

5. Increase Predictability

The inability to accurately predict results of actions within a company can give rise to unmet objectives and ultimately, the downfall of the organization. With business process mapping and optimization, predictability is increased as managers clearly see what is happening within the business, detect patterns and, thus, gain full control in allowing or not allowing certain patterns to be repeated, depending on what is deemed good for the company.

Briefly, business process optimization allows a company to take a snapshot of its current performance to see how it can be improved and what lies ahead when certain actions are taken or not taken. Because the strategy mainly makes use of graphical representations, the entire process becomes easier, tasks are completed faster and productivity is increased significantly.

Start a Business

Many of us have dreamed about going into business for ourselves. Utilizing our talents, the skills we have honed over the years and the knowledge that we have accumulated. Unfortunately, very few of us will do something about it, only 5%. We are going to explore self-employment to determine if it is right for you.

The reasons people go into their own business vary. Most of us have the desire to be our own boss. We want to get compensated for our efforts instead of getting a stipend while making money for someone else. We are interested controlling our own destiny. We want to grow and develop a business so that we can create wealth and build equity, live the life we want to live and perhaps even leave the business to our children. Whatever the reason, we all seem to have that urge to be our own boss.

So why do only 5% go into business for themselves? Fear is the main factor. They create many reasons (fear) why they shouldn't go into business but in fact these are reasons they should go into business for themselves.

How often have you heard; there is so much competition in the business I want to start. Well, the good news is that it means there is a lot of interest in that industry and that no one has carved out the market as theirs. When the competition advertises that creates interest in the industry for everyone and will help create awareness for your business. Another reason that there are a lot of competitors is that no one has solved the customer's needs to the customer's satisfaction. This allows you to create an opportunity to better fit the customer's needs, whether it be personalized service or your ability to move quickly to meet their needs without going through a series of steps.

Or you have heard that going into a business is risky. There is always risk in everything you do but you need to remember that if you have a good plan, solid financial resources, have professional and personal support, you are open to ideas, have the willingness to learn, are flexible in your efforts, if you have focus and the desire, drive and discipline to work the business you can be successful.

I am not certain that I am qualified to own a business? None of us are experts in every aspect of the business; that is why there is so much business support available in today's market. There are business organizations, clubs, coaches, consultants, books, seminars, schools and if you have employees, they have accumulated knowledge to help you with your business.

I am sure you have been told or you knew someone who had failed or it is simply a bad idea. There will always be those who will tell you that it won't work, but they are one's who will not try. Thomas Edison had many failures, but he kept going. His innovations have impacted every part of our life. Akio Morita and Masaru Ibuka started a company to make rice cookers, they never sold one-the idea didn't work. Decided to make tape recorders, then transistor radios, televisions, stereos; the company is Sony. Dick Schultz had an electronics store that was struggling, ready to go out of business, was on credit hold. A tornado destroyed one of the locations which made him change the way he did business. In his home market was the largest consumer electronics firm in the US, Schaak Electronics with over 100 locations nationally, they are out of business. Two other large consumer electronics stores, Highland and Circuit City, came into the market, they are out of business. The name of his company, Best Buy.

There will always be reasons why you can't, you can live in fear or ignore them and create atmosphere of success.

There are 4 ways to get into your own business.

1) If you are lucky enough you can inherit a business from your relatives or friends.

2) You can purchase an existing business from someone who is getting out of the business.

3) You can start your own business from scratch.

4) Or you can invest in a Franchise.

So how do I start? There are a lot of questions you will need to answer to determine if self-employment is right for you. We will address these as we go along to help you determine your which is best way for you. You may even determine that self-employment is not right for you.

What kind of business should I get into? Should I look at a business type where I am currently employed or should I consider a business where I have an interest or hobby? To answer this question you will need to determine what are your goals, needs and expectations. What is the lifestyle that you wish to live, how much income will I need to support my lifestyle, do I want to build equity and create wealth for my family?

The money question, how much is it going to cost and where do I find the money to get started? The amount of investment will be determined by the type of business. If you are looking at retail you have to consider inventory, POS, CRM, advertising and promotion drivers, employees, compensation, building expenses to name a few. If you look at home based opportunities your investment will be less. In between you have office/industrial park opportunities where you do have building expenses which are less than retail, because they are "service" based concepts with high gross margins.

There are many ways to "find" money. There are venture capitalists (normally for innovative, high tech opportunities with risk), angel investors (family and friends), banks and lending institutions who may offer SBA and Heloc's. You may also have savings, whole life insurance, stocks, bonds, or a 401-K (that you may be able to rollover to start your own company).

Today there is resource material everywhere. There are magazines specifically written on entrepreneurship, newspaper articles on small business, TV shows enticing you to go into business for yourself, radio talk shows, how to books on getting started and the internet that will provide access to and about business opportunities. You can go to the library, local business clubs, contact the government to find help. At any given time you will be able to find a number of resources; but will they provide you the correct information to assist and guide you to make the right decision for you and your family?

So you will start to look for a business that will meet your interests. You will look for those opportunities that will utilize your skills, knowledge and talent, help you capitalize on your own resources. You want to find that opportunity that will help you reach your goals, both personal and professional, help you meet your needs and fulfill your expectations. But not many will do a combination of all of those. Now what are you going to do? More research.

There are many people who will come to your aid to help you with research. There are brokers and consultants who can show you opportunities but can they assist and guide you to find the clarity in what business will be right for you? Brokers represent the business that is for sale; consultants will do the work for a fee and tell you which opportunity is best. A business coach works for you, the client; they are a NO Cost NO obligation resource. The Coach will assist and guide you through the experience with an inside out approach to find that opportunity that will provide you with the income to support your lifestyle, help you create wealth and build equity in your portfolio. Because the coach works for you, they have your best interest in mind, whether it the outcome is self-employment or staying in the job market.

You have developed and honed your skills, you have accumulated knowledge and expertise in business; you have used your talents to help someone else accumulate wealth. Why not use what you have developed and honed for your own opportunity, because you owe it to yourself.

So let's look at your options.

You probably have a good idea of how each of these opportunities will work for you to get into business.

Inherit-probably not.

If you purchase an existing business, this is normally through a broker, you will need to do due diligence, ability to understand P&L's, evaluate the client list, learn about their culture, see if there are loans and liens against the business, inventory value and integrity, accounts payable, receivables, there are many things to evaluate to determine the value of the opportunity.

If you start from scratch you will need to create your own business plans, develop marketing strategies and tactics, create processes, establish systems, develop support mechanisms, define your ideal client and create market analysis to determine the feasibility.

Achieve Massive Business Growth

What is your ultimate business plan? Do you want to increase sales, improve profit, grow your business and create wealth? Let me outline how you might go about achieving massive growth in your business - no matter what business you are in.

Twenty five years as a business advisor across most industry groups has shown me that while most owners are fantastic at running their day to day business operations, they never spend enough time working on improving the performance of their business.

Sadly, most business owners I have worked with are just so busy working to keep the wheels turning that they never make the money they deserve. Many struggle to draw commercial wages for their efforts, many never reach their profit potential, and most never sell their business for what it could really be worth.

My question to you is - are you making enough money right now? Do you even know how much profit your business is capable of making? Perhaps even more importantly, do you have a plan of how to grow your business profit and business value into the future?

I think you will be amazed at how easy it is to achieve massive business growth if you simply focus on what is important. In fact, let me cut to the chase and show you how easy it can be - let me show you an example of a business that grew its profit by 75% after making 5% improvements in each of its 5 key profit drivers.

Before implementing a business improvement plan, this manufacturing business had 800 customers purchasing from them 6 times a year and spending on average $500 each time. This gave the business a sales turnover of $2,400,000. With a gross margin of 50%, their gross profit was $1,200,000. After paying $800,000 in overheads, their net profit was $400,000.

By understanding the 5 underlying profit drivers in this business, this business introduced various strategies aimed at improving the results of each profit driver by at least 5%:

They increased the number of customers buying from them from 800 to 840 - a 5% increase;

They increased the number of times the customers purchased goods from them from 6 times a year to an average of 6.3 times a year - a 5% increase;

They increased the average amount of money each customer spent during their sales visits from $500 to $525 - a 5% increase;

They increased the average gross profit margin on each sale from 50% to 52.5% - an increase of 5%, and,

They decreased overheads from $800,000 to $760,000 - a decrease of 5%.

As a result of these improvements turnover increased from $2.4M to $2.8M and the underlying business profit increased from $400,000 to nearly $700,000 - that is an increase of $300,000 or 75%!

Even more amazing was that the value of the business (based on a sale multiple of 3 times net profit) also increased by 75% - increasing from $1.2M to a massive $2.1M!

Can you imagine what your business would look like if you were able to increase your profits by 75% year on year? Can you imagine how much better your family life would be with that result?

Now I know what you are probably saying to yourself just now - great story, but I could never achieve that result in my business. Well I am here to say that the above 5 step growth strategy will definitely work in your business.

I know it will work for you because I have seen this 5 step growth model used successfully on all sorts of businesses, in all kinds of industries and through all economic cycles over the past 25 years as a business advisor in Australia.

If you apply the 5 step system I guarantee that you will achieve massive growth in your business. Of course not everyone will achieve a 75% improvement in their profit result - some will achieve less, and some will achieve much, much more!

The results you can achieve in your business will depend on your particular profit drivers, the opportunities to improve these drivers, and most importantly, your ability and commitment to implement the 5 step system in your business.

Business Structures

A Sole Proprietorship is a one-person business. There is no paperwork to fill out to accomplish this. The profit or loss from the business is carried to the personal tax return of Sole Proprietor. The Sole Proprietor is liable for all debts and other liabilities of the company.

A Fictitious Name Registration (DBA = doing business as) is required in most states. You must file your fictitious name registration before starting the operation of your business. In some cases, it must be filed within 30-40 days of your first business transaction. In addition, several states require that you publish your DBA statement in a local newspaper, and then file proof of publication with the proper government office. The purpose of the publication requirement is to ensure the public is informed of new businesses in the area, their legal name and ownership.

A Partnership has two or more people involved. The profit or loss is divided between the partners and carries to their personal tax returns. Each partner is personally liable for the debts or other liabilities of the company.

A Corporation is a separate and distinct legal entity. That means that a Corporation can open a bank account, own property, and do business all under its own name. Corporations are managed by a Board of Directors which is responsible for making major business decisions and overseeing the general affairs of the Corporation. Directors are elected by the Shareholders of the Corporation. Officers who run the day to day operations of the Corporation are appointed by the Directors.

The main advantage of the Corporation is that its owners, known as Stockholders or Shareholders, are not personally liable for any of the debts or liabilities of the Corporation. For example, if a Corporation gets sued or it is forced into bankruptcy, in most cases, the owners will not be required to pay the debt with their own money if the assets of the corporation are not enough to cover the debts. The creditor cannot, in most circumstances, go after the Shareholders, Directors or Officers of the Corporation to recover any loss.

Investors in business often risked everything they had if the new business turned bad. When the company was out of money and didn't have the cash to pay creditors, the investors had to make up the difference with their own money. With the advent of the Corporation, investors could avoid this type of liability by forming a Corporation and as a result more people are more willing to invest their money in business ventures. The formation of Corporation as a business entity can help reduce your taxes but more importantly you can provide for peace of mind by protecting your personal assets.

There are two types of Corporation. The IRS allows for a Corporation to be taxed either as a C Corporation or as an S Corporation.

A C corporation's profits are taxed at two levels which is commonly referred to as double taxation. A C Corporation pays the corporate tax on its corporate income then the C Corporation distributes profits as dividends to shareholders who pay income tax on those dividends.

The way to avoid the double taxation of a C corporation is to make a special election with the IRS to be taxed as an S Corporation. This means that your income will be taxed like a partnership or sole proprietor. That way there's only one level of taxation. Corporate profits and losses are passed through to the owners who pay the taxes on the profits at the individual personal tax rates instead. You can use income shifting to take advantage of lower tax brackets

Let's look at an example:

For purposes of this example we will assume that ABC Company is a sole proprietorship and has an income of $100,000. As a sole proprietorship the tax rate is 25%. If it were ABC Corporation instead, let's assume business owner takes $50,000 in salary and leaves $50,000 for profit. The federal corporate tax rate would be (15% of $50,000) The personal tax rate is at (15% of $50,000) as well. This is a distinct advantage of forming a Corporation.

Other Advantages:

Corporations can provide employee benefit packages for your employees. You can lease assets to your Corporation. The business pays a lease fee and can claim rental income and expenses including interest, depreciation, repairs, maintenance, insurance and administrative costs.

In a Corporation there are no restrictions on the amount of capital or the operating losses that a Corporation may carry back or forward to subsequent tax years. A sole proprietor can't claim a capital loss greater than $3,000 unless he or she is offsetting capital gains.

The money the sole proprietor earns is subject to self-employment taxes. The taxes are currently 13.3% on the first $106,800 of income. In a Corporation only salaries are subject to such taxes, profits are not. This can save you thousands of dollars a year.

Let's look at another example:

If a sole proprietor earns $80,000; 13.3% tax would have to be paid on the entire $80,000. Let's assume that the Corporation also earns $80,000 but $35,000 of that amount is paid in salary. $45,000 is deemed his profit in this case his self-employment tax would not be paid on the $45,000 profit. This saves you over $5,000 per year. It's important to note that you should pay yourself a reasonable salary and take advantage of all the tax benefits that a Corporation offers you. Don't forget however there are responsibilities of owning a Corporation and the Corporate Book is probably the most important one of them. We will talk about that later on.

There are differences in each business structure and you should choose the one that best meets your business needs. The biggest difference between a Sole Proprietorship, Partnership or DBA and the Corporation is taxation. You want to weigh all of your strengths and weaknesses before you decide which business structure to use. Remember that a Sole Proprietor or Partner in a business is liable for all the costs of operating the business. This means that they are liable for all business debts too.

A S Corporation helps avoid double taxation. This occurs where the corporate profits are taxed and then the dividends are sent to the shareholders and are taxed to the shareholder's personal tax return as well. The most important thing to remember is that a C Corporation and a S Corporation can shield you from business liabilities. A Sole Proprietor or a Partner in a Partnership are personally responsible for the business debts. In a Corporation the owners are not responsible for most business debts or liabilities if the business fails.

An important issue to discuss is the Corporate Book. It is a 3 ring binder documenting all transactions or meetings carried out by the Corporation. This means everything from opening a bank account to selling property. The Corporate Book is the corporation's main responsibility. Usually the Secretary or Treasurer of the corporation maintains the Corporate Book. Without documenting the Corporate Book you could possibly lose your status as a Corporation and would be subject to the appropriate tax. This is referred to as piercing the corporate veil.

Under certain circumstances individual shareholders may be liable for corporate debts, for example, if a shareholder personally guarantees a corporate debt then she or he will be liable for that debt if the business fails. If corporate funds are intermingled with personal funds this puts you in a position where the corporate veil can be pierced. Not documenting the Corporate Book can also cause the piercing of the veil. This means the shareholders would be personally liable for all debts and other liabilities of the corporation. There are strict rules and regulations governing corporations and the most important is maintaining the Corporate Book.

For businesses that want to avoid the regulations of a Corporation, the Limited Liability Company was developed. The Limited Liability Company, or LLC, was developed to protect the business owners from personal liability if the business failed. It is a type of business entity that combines the personal liability protection of a Corporation with the tax benefits and simplicity of Partnership.

The LLC has the same tax benefits as a S Corporation with limited liability of the business debts. The owners are called Members. There is no limit on the number of members allowed. LLC's function similar to partnerships with flexibility and the pass-through of tax on profits to personal tax return of Members.

A Limited Liability Company (LLC) is a type of business ownership that combines several features of corporation and partnership structures. It is not a corporation or a partnership. Owners are called Members not Partners or Shareholders. The number of Members are unlimited and may be individuals, corporations, or other LLC's.

Members of a LLC have the liability protection of a Corporation. Members cannot be held personally liable for debts unless they have signed a personal guarantee. A LLC exists as a separate entity much like a corporation.

Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is x/x, the LLC has much more flexibility. The LLC business structure requires no Corporate Book reflecting Minutes or Resolutions and is easier to operate than a Corporation.

All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy. Members with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.