From: Pro-Active Tax & Advisory Solutions, LLC <updates@pro-active-cpa.com>

Sent: Tuesday, May 10, 2011 11:37 AM

To: Mark Wyssbrod

Subject: April Update: Pricing Power or Lack Thereof!

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Proactive Updates

Volume 3 | Issue 5

May 2011

Calculator

Dear Mark,

Where's the beef? I am not referring to the 1980's Wendy's commercial; I am talking about first quarter small business performance. The tentative financial information we have begun to review is one sided. Small business owners are happier because revenues are increasing, stable (low, but stable) gross profit margins and bottom lines are beginning to increase. However, the driving forces have not improved the overall position of small business. In other words, many small businesses made money, but have no cash, have minimal working capital, lots of debt, and minimal equity. It makes me wonder where the money will come from to pay the tax on the profits!?

The conclusion from our current round of small business financial performance is we are heading towards a "feel good" recovery. We "feel good" because we have higher revenues, but in reality the business costs and cost of living are rising faster than revenues. The moment of any good economic news oil spikes, interest rates spike, food increases in price and in 2013 federal taxes will increase (state and local have already increased). Small businesses must be careful not to let their "good feelings" derived from increases in revenue distract them from focusing on solutions for other aspects of their business position and personal finances.

The time to prepare for your business and tax challenges is now! Delaying can cause the problem to worsen by building and building upon itself, just like a snowball. We urge small businesses to prepare for these challenges as soon as they can!

We hope your business blossoms like the Spring,

Sincerely,

Mark Wyssbrod, CPA

The Importance of Working Capital
Four Ways to Boost Your Working Capital

stack of money Hard work and capital doesn't mean you have working capital, but it's a good start! Working capital is your current assets less current liabilities. You want working capital to be a positive number! Your current assets include cash, collectible accounts receivable, sellable inventory, investments and other items which can be converted into cash within 30 days. Your current liabilities include accounts payable, credit cards payable, short-term portion of long-term debt, lines of credit and other bills which you need to pay in the next 30 days.

How can you boost your working capital? Below are four suggestions that can help:

Use profits to build cash and\or reduce debt - Be careful! To avoid cash flow surprises be certain you are using after-tax profit to do so.
Sell non-performing assets - Use the funds to build cash and\or reduce debt.
Reduce owner compensation and equity distributions - The sacrifice now will be well worth it! The sooner you can strengthen your working capital, the less dependent you are on a financial institution to survive. Additionally, you can self-fund your future growth and be rewarded with larger cash flow!
Raise Capital - Use new equity to build cash and\or reduce debt. But, be aware! Raising capital will dilute ownership of the business and most small business owners like being fully in control, not having to justify their actions. Of course, a little accountability can be a good for a business as it make management talk through and form plans instead of acting on "gut" feelings.

To discuss these ideas and more customized solutions for your business give us a call! We look forward working with you and using our human capital to build your working capital.

Merge and Succeed!?

Challenging Times for Small Business Mergers

Stock Market compass The stock market continues to march forward no matter what apocalyptic event occurs (earthquakes, tsunami, nuclear meltdown, revolution after revolution, etc.). A part of the continued advance is the merger and acquisition market is heating up. That is large corporations continue to get larger. Perhaps small business should look at this for an opportunity. Mergers and acquisitions work well then the companies can be easily combined (cultures, services, products, values, etc.). The mergers hopefully lead to overhead savings and increase in gross profit and net profit margins.

However, small business mergers and acquisitions seemed to have a more challenging time. The power struggles which occur between owners can destroy the atmosphere and morale of the employees. Unrelated owners may believe they are working harder than the other owners and are not being compensated fairy. A "business divorce" is more emotionally and financially draining than a "marital divorce".

Look for opportunities, but complete due diligence before beginning a joint venture, merger or acquisition.

Deadline Reminder

Important Dates to Remember

May 15 - Non-profit tax returns (or extensions) due with annual year-ends
May 20 - Georgia sales and use tax returns due
June 15 - 2nd quarter estimate tax payments due

Black Swan Events

Bet You Didn't See These Coming!

Only white swans existed, until a black swan flew in. Black swan events are events which were unforeseen. Unforeseen events are not taken into consideration in forecasting models. How accurate can models predict if Black Swan events happen on a regular basis? Below please find a list of recent Black Swan events:

Wednesday, April 27, 2011 - The Chairman of the Federal Reserve holds a press conference to provide information directly to the public and states future press conferences will be held on a regular basis.
Sunday, May 1, 2011 - US Special Forces raid and kill the FBI's most wanted person, Usama Bin Laden (Osama Bin Laden).

IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein