As you are working on your business’s budget for the new year, you may be looking for expenditures that you can afford to cut back on in 2012—particularly if you are still feeling the strains of the sluggish economic environment. One item that may look tempting to your cost-cutting axe is your travel budget. After all, with the preponderance of no, or low-cost, web-based solutions for everything from client meetings to employee training, how much value are you really getting for your business-travel dollar?
While this might sound like a purely theoretical question, the research firm of Oxford Economics actually commissioned an exhaustive study based on two separate surveys of corporate executives and business travelers—and on an advanced econometric analysis—to provide us with a real-world answer, and that answer will be probably surprise quite a few of you. They found that for every dollar invested in business travel companies realize $12.50 in incremental revenue and $3.80 in profits. That is the kind of return on investment (ROI) that should have you thinking twice before making any drastic cuts.
The study also found that cutting back on business travel can have serious and long-lasting negative repercussions. For example, if a company were to completely eliminate business travel for two years it would experience a 17% decline in profits in the first year of the shutdown, the negative impact would get worse over the next two years, and it would take several years after travel is reinstated for profits to stabilize.
Of course not all business travel is created equal and you still have to work with a finite budget, so you’ll want to analyze which business trips provide the greatest benefit for your company. In order to achieve this you’ll want to focus on travel that can help in one or more of these four areas:
1.) Keeping clients
2.) Converting prospects into clients
3.) Increasing your network of business contacts
4.) Improving the skills of your employees
Visiting existing clients and making sales trips to see prospects are two obvious types of business travel to cover areas one and two, and not surprisingly they also deliver the highest ROI (estimated at $15-$20 in incremental revenue for each dollar spent). In addition, executives and business travelers say that 40% of their prospects are converted to clients with a face-to-face meeting compared to 16% without a meeting, offering proof that even in the digital age there is no good substitute for an old-fashioned sit-down with prospective clients.
Think twice about canceling your trade shows and conferences. In addition to helping with all four of the key areas in a single trip, they too offer a respectable ROI — estimated at $4-$6 in incremental revenue for each dollar spent. In fact, a majority of business travelers stated that 5 to twenty percent of their new clients were the result of participation in trade shows.
When you compare the overall ROI of business travel to other possible uses of your corporate dollar—as well as the negative consequences of cutting back on travel—you’ll probably find that business travel stacks up pretty favorably, and you may find yourself swinging that axe somewhere else.
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As the owner of a small business you are used to planning for the future when it comes to budgets, growth forecasts and the like. But have you taken the time to develop a plan in the event that a natural disaster or other emergency strikes?
Threats to your business can come in many forms, from weather-related disasters, to human-caused mayhem, to large-scale technology malfunctions. Events such as these, while relatively rare, can pose a very serious threat to the livelihood of small businesses. Yet an Ad Council survey found that 62% of respondents do not have an emergency plan in place for their business. It should not come as a surprise then, that according to the Insurance Information Institute, up to 40% of businesses that are affected by a natural or human-caused disaster never reopen. Being prepared for these events can make the difference between surviving with your customers and reputation intact, versus incurring permanent damage to your business.
An emergency-preparedness plan should include both a set of policies to ensure that disruptions to your business are minimized if a catastrophe does strike, and a business continuity plan for getting up and running again as quickly as possible in the aftermath.
The specifics of your emergency plan will depend on the size, scope, and location of your business but at the very least it should include the following.
- Communication Plan – Information including phone numbers and email addresses, as well as computer and internet passwords, needs to be available to all key personnel in both electronic and hard-copy format, and be accessible both on-site and remotely. When a disaster occurs, after insuring that all of your employees are accounted for, it is critical to reach out to customers and suppliers as soon as possible to update and hopefully reassure them as to the status of your business. Your communication plan should identify everyone that you will want to contact in an emergency and assign responsibility for making those contacts to senior people within your organization.
- Data Access – All data and software that is key to running your business should be backed up, both on-site and off, and accessible remotely. Ideally you will have identified alternate work locations in case your office is inaccessible. Once you have this part of your plan is in place, you can test its effectiveness by having yourself and/or other key employees work remotely for a day or more and seeing whether or not they can accomplish their duties seamlessly.
- Continuity Plan – Suppose that all of you business capabilities are knocked out and you need to start over from scratch. Do you know what you would do first? You can start by identifying the actions that are necessary for you to fulfill all of your legal and financial obligations in order to maintain your cash flow. Then move on to those activities that are critical to maintaining market share and reputation. Come up with a realistic assessment of how much time you could tolerate operating without key products, services, and personnel, and then formulate a plan to get them back online within the allotted time frame. Again, this is something you can test as part of a disaster-preparedness scenario, and you should assign senior personnel the responsibility for getting key areas functioning in the aftermath of a disaster.
If you are looking for more help in crafting your disaster-preparedness plan, the Federal Emergency Management Association (FEMA), the Red Cross, and your state and local government offices can all be excellent sources of information to help you plan for a day that will hopefully never come.
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We often have clients call in with questions on banking. Once you form your company, you’ll need a bank account to do business. Here we will address some of the most common banking questions.
What do I need to open a bank account?
Typically, when opening a bank account in the US, the bank will require the approved Certificate of Incorporation/Formation, the tax ID number (EIN) and for an individual from the company to appear in person. Although banks are regulated by the Federal Government, they are also regulated by State banking laws too.
Banks can be different in what they require. We often tell clients to contact the bank of your choice to see what they require. Other items that banks may ask for can be:
Certificate of Authority: The Certificate of Authority, also known as a foreign qualification, is obtained through registering your business as a foreign entity in the state in which the company is operating and/or banking. Most banks require the valid Certificate of Authority (achieved through qualification) in order to open an account to those who show record of filing outside that respective State. The bank account is the point where revenue is channeled and is considered part of a company’s operations. Since every State has their own requirements for foreign qualification, let Harvard take care of this detail for you. Harvard Business Services has specialists who can assist you with the entire process.
For more information on foreign qualification, click HERE.
A Certificate of Good Standing: The Certificate of Good Standing, also known as a Certificate of Existence, is a Certificate provided by the Delaware Secretary of State’s Office stating the company is current with all Delaware franchise taxes, filings, and registered agent services. Many banks will require a Certificate of Good Standing when applying for a loan, line of credit or opening a merchant account. Also, before signing a large contract, a company may be asked to present a Certificate of Good Standing.
To order a Certificate of Good Standing for your company follow this link: https://www.delawareinc.com/ourservices/goodstanding.cfm
Do I have to open a bank account in Delaware when I form a Delaware Company?
No. Clients will often open a bank account where it is most convenient for them. This is generally the State in which they are doing business. It is common for Delaware companies to operate all over the world, and banks will typically understand that. This is where your Certificate of Authority will come in. This lets the bank know that even though the company was formed in Delaware, it is registered to operate in your home State as well.
These are some of the most common questions we receive on banking. If you have any other questions, Harvard Business Services will be happy to assist. While we do not directly open the bank account for our clients, we can assist in obtaining some of the documents that the bank will ask for.
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As a result of the recent economic crisis and real estate crash, prices for corporate real estate in many markets now looks more attractive than they have in several years. Add in historically low interest rates, and it is easy to see why many small-business owners may have an eye on the corporate real estate market. If you are in the market for commercial space for your small business you should start by considering the lease-versus-buy question.
The lease-or-buy decision is ultimately an economic one, driven by return on investment (ROI). Because the purchase of corporate real estate involves tying up a large chunk of money for a long time, you’ll want to realistically assess what kind of return you can expect to gain from that investment and compare that to the return you could get from investing in your core business. Make sure not to fall into the trap of assuming too high of an appreciation rate for your real estate investment, a lot of people who did this got burned when the real estate boom turned into a bust.
In addition to the ROI equation you’ll want to consider carefully the tax consequences. While lease payments are typically 100% tax-deductible, principal payments on a business mortgage are not. However, operating expenses and depreciation are tax-deductible when you own, and certain municipalities can offer tax breaks and incentives to the purchasers of corporate real estate. Make sure to go over all of the numbers with a finance expert and a tax professional.
If the numbers stack up favorably toward buying you’ll still want to consider a few qualitative factors before taking the plunge. Buying your own office immediately launches you into a new role with a new set of responsibilities: that of corporate real estate manager. Make sure that you are comfortable handling things like legal compliance, and health and safety issues that may be outside your area of expertise.
And be sure to consider the likelihood that your business may need to expand, contract, or relocate at some point. These can all become more difficult when you are the owner of an illiquid asset like an office building.
If you decide to become a buyer you should put together a small team of trusted experts to help you with finding and purchasing the right property for your business. That team should include an accountant, an attorney, a commercial real estate broker and a lender or mortgage broker.
When looking for the “right” property it pays to heed an old maxim: location, location, location. While you’ll want to consider a variety of factors such as physical condition, allowable use, availability of parking, and potential for expansion or subleasing, location is still the most important issue. The type of business you own will of course help determine the ideal location of your office. Is it most important for you to be located in an area with high pedestrian traffic, one with easy access to highway, rail, and shipping lanes or one that is convenient to access for a pool of highly skilled workers?
Once you have found your ideal property it is time to lean on your team of experts. Your commercial broker should help you come up with a sensible offer, while your attorney and accountant can make sure that all of your funding and documentation is in order so that you can get the best available interest rate that your lender has to offer.
By conducting your due diligence to determine if buying is right for your company, and then working with your trusted advisors you should wind up with a building that suits your needs and finances both now and for the foreseeable future.
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Today it has been three years since we started The HBS Blog! During that time we have built a rich archive of hundreds of articles for your reading enjoyment. We decided that it was time for a new look, so we have changed the font and layout. A major priority for the redesign was to make it easier for you to find articles of interest. Now you can search the archives by terms, tags, categories, authors and date. Another new feature is that at the bottom of each post you will see related posts. This is an easy way to read more on the topic you are interested in with out doing the digging. You can also find us easier by clicking on the links to our Twitter, Facebook, YouTube and LinkedIn pages. There are lots of other new details to check out so be sure to explore and enjoy!
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The deadline for paying and filing the annual franchise tax report for all INCs is March 1, 2012.
This means that if you have a Minimum Stock, Maximum Stock, Non-Stock or Exempt Company incorporated in the State of Delaware, the annual franchise tax report must be paid and filed by this due date. This deadline does not apply to Limited Liability Companies (LLCs) or Limited Partnerships (LPs), which have a June 1 tax deadline.
HBS offers a service to assist with the filing of the annual reports for an additional fee. If you have not paid and filed your Delaware franchise tax report yet, you need to take care of this TODAY! Our website address for making franchise tax filing arrangements is:
To ensure that all franchise tax filings are taken care of with the State of Delaware by the deadline, we must impose a cut-off time. This will allow us to accurately process all annual reports in our possession before the deadline.
Our office schedule on March 1 is as follows:
- At 2 pm EST, we will no longer be accepting any new franchise tax payments via telephone, fax or email. The ONLY filings we can accept after this time is via our website at: www.delawareinc.com/payft.
- At 5 pm EST, our office will be CLOSED. We will be unable to answer any telephone calls, correspond via live chat, respond to emails, etc.
- At 8 pm EST, our website WILL NOT accept any more online franchise tax payments.
After 8 pm EST on March 1, HBS will no longer be able to take any franchise tax payments in any form. You will need to contact the State of Delaware directly to make payment and filing arrangements. Their contact details are as follows:
Website: corp.delaware.gov
Telephone: 302-739-3073
If you have any questions about the franchise taxes and the deadline, please telephone our office at 1-800-345-2677 or 1-302-645-7400, extension 6901. You can also email your questions to franchisetax@delawareinc.com.
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For Your Convenience: Pay BOTH Annual Maintenance Fees In One Easy Step!
NOW, submit your Delaware Franchise tax and HBS registered agent payment with ONE easy transaction on Delawareinc.com. Just follow this link; www.delawareinc.com/payft
You will be guided through the quick and easy steps on our online tax form and before you complete your order, our system will offer the option to include another year’s Registered Agent Fee. It’s just that simple.
Not sure when the HBS registered agent fee is due for your company?
If you formed your company through Harvard Business Services, Inc., the registered agent fee is due each year on the anniversary date of the formation of your company. If you formed your company through another agent, and changed to Harvard along the way to take full advantage of our FIXED $50 annual agent fee, your anniversary is counted from the date you switched to HBS. But don’t worry, once all the company details are provided and confirmed by you for the March 1st deadline; you will see a statement listing your next due date for HBS registered agent services. You will be provided options for 1 year, or the convenience and savings of 2 or 3 years of agent service. If the due date has passed, you will find that the late penalty will be waived if included with your current franchise tax balance.
Choose the option that suits you. Enter your payment details and you can be sure the rest will be taken care of by HBS. Your confirmation receipt will be sent to the email address provided with your order.
We have received great reviews regarding this addition to our online franchise tax service. We hope you find it beneficial and will take advantage of the convenience. And you’ll leave our website knowing your annual fees have been taken care of…so that’s two fewer things on your desk and on your mind.
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This is an urgent reminder that if you have a corporation incorporated in the State of Delaware, the annual franchise tax filing is due by March 1st. This applies to every Minimum Stock, Maximum Stock, Non-Stock and Exempt Companies, which are required to file an annual franchise tax report each year. If you have not paid and filed your annual franchise tax report yet, you need to take care of it right away.
This deadline is NOT for Limited Liability Companies (LLCs) or Partnerships. The deadline for them is June 1st.
Regardless of whether your company has a profit or a loss, has conducted business activity, has obtained an EIN, has opened a bank account, or has filed a Federal Tax Return, the annual franchise tax report must be filed and paid every year.
Any company that was in existence as of December 31, 2011 is required to file and pay the 2011 franchise tax that is due by March 1, 2012. If your company was formed in 2012, then your first franchise tax filing will be March 1, 2013.
Failure to file and/or pay an annual franchise tax report by the March 1 deadline will result in a $125 late penalty plus 1.5% monthly interest imposed by the State of Delaware. This will render the company in a delinquent and non good standing status. Additionally, any company that does not file and/or pay the annual franchise tax report for two years in a row will be voided by the State of Delaware. In order to restore the company back into a good-standing status a “Certificate of Renewal” will have to be filed and the past due franchise taxes, late penalties and interest will have to be paid upon filing.
Harvard Business Services offers a franchise tax filing service in order to assist you with the filing of the annual franchise tax fees for your company. For a small service fee, we will ensure that the franchise tax filing for the company will be filed on time with the State of Delaware, so there will not be any late penalties or interest fees assessed.
To take advantage of this service and make filing and payment arrangements for the franchise tax fees, visit our secure website at: www.delawareinc.com/payft. Payment arrangements can be made through Visa, MasterCard, American Express, Discover or PayPal.
You may telephone our office with your questions at 1-800-345-2677 or 302-645-7400, extension 6901. We are also available via email at franchisetax@delawareinc.com.
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Due to the high volume of annual reports and payments that the State of Delaware receives throughout the year, they use a third party facility to accept all of these types of payments. Recently they contracted this service to a new bank for processing.
Effective January 2012, the new lockbox mailing address is:
State of Delaware, Division of Corporations
PO Box 5509
Binghamton, NY 13902-5509
Courier/Overnight address is:
JP Morgan Chase
Attn: State of Delaware, Division of Corporations-5509
33 Lewis Road
Binghamton, NY 13905
If you have been sending your franchise tax filing and payments to the old lockbox address in New Jersey, you will need to update your records accordingly.
Even better, why not let Harvard Business Services take care of the franchise tax filing for you, so you do not have to worry about it. We have been helping clients for over 30 years file their annual franchise taxes. We have the experience and knowledge to make sure your franchise tax filing is completed with the State of Delaware accurately and efficiently. By filing through Harvard Business Services, you will not have to worry if your filing will be lost in the mail due to an invalid address. You also will not have to be concerned that your payment is potentially being improperly handled at a separate processing facility.
Filing and payment arrangements for your franchise taxes can be made on our secure website at www.delawareinc.com/payft. We accept all types of credit cards, as well as PayPal, for you to take care of this annual obligation.
We are always available if there are any questions regarding the annual franchise taxes. Please contact us via email at franchisetax@delawareinc.com or via telephone at 1-800-345-2677 or 302-645-7400, extension 6901, to speak with a helpful customer service representative.
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Once you have achieved a certain level of success as an entrepreneur you may find yourself weighing whether to put more money into your own business, or to invest in others businesses through the stock market. While we are not here to offer specific investment advice, we would suggest considering the following factors when faced with this decision.
Begin by taking a look at your entire investment portfolio, including the value of your ownership stake in your business, to see if you are sufficiently diversified. While there are no hard and fast rules about what an entrepreneur’s portfolio should look like, a well-diversified one usually includes investments in stocks/bonds, some and enough cash to meet projected needs, in addition to the stake in the business. If you feel that too much of your net worth is wrapped up in your company, then investing outside of it to realize the benefits of diversification (less risk, lower volatility) may make sense.
If you are sufficiently diversified but still weighing whether to invest inside or outside of your firm, then you’ll want to consider the rates of return that you can reasonably expect to receive from different investments. For investments within your firm you’ll want to look at the internal rate of return (IRR) of various projects that you could take on. IRR calculations can get pretty complex, so you’ll want to involve your CFO or other in-house expert, but in general terms you can think of a project’s IRR as the growth rate it is expected to generate.
For investments in the marketplace you’ll want to look at the historic returns of the different asset classes (stocks, bonds, cash, etc.) over a long period of time and see how those compare to the IRR of investing in your own firm. If the gap between your IRR and external market returns is rather large, this can help you to invest your cash in the right direction. Keep in mind that past market returns are no guarantee of future performance and that the actual rate of return you earn from investing in your own company may differ from your projected IRR. Still, comparing your IRR with historical market returns can be a healthy and instructive exercise.
If you decide to invest in your own business, your options, of course, are not limited to taking on new projects. If your firm is profitable but operating below capacity then you may want to increase your marketing budget. In this case you should take a look at the marketing channels you are currently using and the return on investment (ROI) of each one. ROI is a performance metric that can help you evaluate and compare the efficiency of different investments to help ensure that you are funneling your dollars to the strategies that generate the most profit.
Finally, you’ll want to consider the tax implications of the different investments that are available. A 7% return in the stock market, versus a municipal bond with a 7% coupon, versus a project with a 7% IRR can result in vastly different after-tax returns, so consult your accountant or tax advisor for help in determining which investments make the most sense for you and your company from a State and Federal tax standpoint.
While diversification is a worthy goal, losing money in the stock market is disappointing and you gain nothing from the experience. While investing in your own company will always bring you some value, even if your investment doesn’t pay-off. Entrepreneurs are famous for learning how to succeed by failing first.
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