Tag Archives: small business

Business Consultancy Services: 4 Secret Tips To Turbo Charge New Business Growth

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In recession not many business management consultancy representatives discuss business growth consulting. However it is the proactive business owners seeking new business growth that are grabbing opportunities missed by others to turbo charge their growth in business.

Business development consultancy and business consultancy services linked to a business growth plan are a valuable asset to a growth business.

Business growth services are booming. Small business consultancy should always wherever possible be structured around achieving new business growth from as many free business growth services as possible.

Your business consultancy services agency should factor in issues like free online and offline marketing strategies into your business growth plan.

The very best and most profitable growth in business is achieved when a proven business management consultancy expert minimises your sales and marketing spend and maximises your bottom line profit margin.

By partnering with a business development consultancy agency a growth business should be transformed into a long term sustainable profitable concern. If you appoint the right business growth consulting individual or agency then you will often be presented with a partner that provides far more value than actual cost.

In times of economic hardship many business owners are finding it hard to contemplate never mind achieve new business growth. One of the first things that any business in trouble has to achieve is to get itself out of trouble.

Be wary of any business consultancy services agency that advocates spending your way out of trouble as this is often a recipe for disaster.

All growth in business should be carefully planned and should form the backbone of your business growth plan. This business growth plan should only be finalised after your business development consultancy representative has identified tips to ensure the long term sustainable growth mentioned previously.

If yours is a small business, then you are better seeking out the business growth services of a small business consultancy agency or individual business consultant. One of the very best, but least utilised business management consultancy secret tips is that of advertising from self promotion.

Think about the likes of Donald Trump, Richard Branson, Katie Price Jordan and you will see masters of the art of self promotion. Self promotion has many up-sides, not least that it is usually achieved free of charge. Any competent business growth consulting agency should be aware of the benefits of free self promotion advertising for a growth business.

Business Consultancy Services 4 Secret Tips To Turbo Charge New Business Growth # 1 Free Self Promotion

Don’t make the mistake of thinking that only A-List celebrities can achieve free self promotion advertising as there are strategies which can be implemented by even the smallest small business consultancy agency.

Before you rush out on your self promotion tour it is wise to understand a few useful pointers. The most successful self promoters have two recognisable characteristics.

1: You Are Who You Associate With.

Ever heard the phrase, guilty by association? If so, then you know that super successful business people don’t associate with losers or negative business associates. You need to align yourself with business associates who are proactive and decisive decision makers.

Plan every day around meeting someone of influence who can make or introduce a positive difference to your growth in business. To achieve new business growth it is worth sitting down with your business development consultancy representative to identify who you can meet who can help you achieve your business goals and succeed with your business growth plan.

During your business management consultancy session try and ascertain if this person of influence is a business associate with high level contacts or a small business consultancy prospective client or customer.

Never choose the easy route of meeting with business people who are the easiest to access because they are often not the right people to assist you achieve a growth business. Think out of the box and reach out to business people who will help you fulfil your business goals.

2.    Demeanour And Style

Ensure you always portray a positive and memorable first impression with every business associate you meet with. Everyone you meet for the first time will take just 1 to 4 seconds to form a vivid and lasting first impression of you. You only get one chance to make a positive first impression so don’t blow it.

Business Consultancy Services 4 Secret Tips To Turbo Charge New Business Growth # 2 Free Offline Advertising

Every regional newspaper and magazine is screaming out for local interest news features and every business receiving business development consultancy support should capitalise on this free offline advertising medium.

Frequently business owners and directors make the mistake of approaching these publications to run a press release about how great their business is. The highest percentage of these press releases are pre-programmed for failure.

However if you link your business success story to something of local interest then the publication is much more likely to feature your story. If it does then it will ultimately support your business growth plan.

Small business consultancy agencies are particularly adept at achieving success with regional publications.

Business Consultancy Services 4 Secret Tips To Turbo Charge New Business Growth # 3 Free Online Advertising

There is currently no better way to achieve a cost effective growth in business than by capitalising on free online advertising.

Whenever your business management consultancy representative mentions you should pay for online sponsored advertising or pay per click as it’s known. Ask him/her about getting free online advertising by writing articles about your business and submitting them to all the major online search engines.

This form of free online marketing is called natural or organic search engine optimisation. Business growth consulting should be able to demonstrate to you how having a first page natural Google ranking can assist your business growth services.

Business Consultancy Services 4 Secret Tips To Turbo Charge New Business Growth # 4 Free Business Support

No UK business owner can deny we are in the midst of the longest recorded recession in business history.

Many business owners are suffering from this economic downturn including several business development consultancy and small business consultancy agencies who are also looking for theirs to become a a growth business.

Many business management consultancy directors are receptive to a discussion about engaging them at a reduced rate which is balanced out by a potential profit share based on the success of the growth in business.

In some cases your business growth plan may be exciting enough to tempt a business consultant to provide free business support for a share of your future profits attributable to their business growth consulting and  business growth services.

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Developing the Financial Projections for a Business Plan

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Developing the financial projections for your business plan may seem a daunting task. After all, how can you know what type of revenue and costs your business will encounter in its first year of operation, let alone the first five years? Putting the projections in the plan and presenting it to funders also seems so final, as if saying you promise stand by these numbers. How can this be the case when you feel extremely uncertain about the projections?

This is a common way for entrepreneurs to feel at first. It is important to understand the mindset of funders who are reading your plan, how you can feel better about your projections, and how to present projections in a way that shows why you feel they are probable outcomes, even though the future is uncertain.

Funder Mindset

Funders do understand that all financial projections are uncertain, and will not lose all trust in you if your projections do not pan out. They are mostly interested in knowing what your targets are and how you can support these projections through reasonable and rational assumptions about the future.

In a sense, reading the financial projections is a way for funders to understand your thought process when it comes to predicting future outcomes. If your thought process seems sound to funders, they will understand if there are variances from the projections you state. If your thought process seems to have no logic, funders will not want to work with you, regardless of how impressive the returns you project are.

Creating More Reasonable Projections

You can move toward creating more reasonable projections by basing your numbers in documented research. Costs are often much easier to research than revenues. You can make calls, do online research, and speak to others in the industry about both the startup costs and operating costs of a business. To project ahead over the next five years, you can rely on the average inflation rate (unless you are in a country where this rate is not at all steady).

Revenue projections should be based on a sense of the market size and how many potential customers your marketing will reach. Then use reasonable conversion rates based at least partly on research for how those customers reached will convert into paying customers.

Presenting Projections Well

Finally, explain the assumptions and research behind your financial projections in notes within the plan. Rather than hiding this thinking, make it transparent. Even if it is logical, funders may still find reasons to argue with it, but they will have the basis for conversation with you. Without explaining your assumptions, funders will be left to assume your projections are based just on wishful thinking and may drop your plan without even a call back.

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What to Look For When Hiring a Business Plan Writer

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A business plan is an important document, which requires enough time and proficiency. Writing a business plan is not an easy task. Until or unless you don’t have years, of experience you will be unable to write a good and winning business plan that will take your business towards success. Many entrepreneurs feel fatigued in writing the business plan due to lack of time and poor writing skills and that is why they hire business plan writer who helps them in writing the good quality business plan.
There is a big difference between a business plan writer and a professional business plan writer. If you are writing the business plan to attract investors and lenders than it is necessary that your business plan writer must have knowledge and skills or writing a good and high-quality business plan that will attract your investors and lenders.
Following are some negative and positive aspects of the business plan writer. It is necessary to consider these aspects before hiring him or her:
POSITIVE ASPECTS:
•    A business plan writer must have the knowledge and skills of writing a professional business plan that can take your business towards heights.
•    He must be capable of saving your precious time and money. You hire a business plan writer due to shortage of time; if he is unable to save your precious time then he is useless. He must complete the business plan in a set time.
•    He must know the format of writing the professional business plan and he must be creative and can add valuable ideas in your business plan.
NEGATIVE ASPECTS:
•    The key area of your business plan is mission and vision statement and it is necessary that it must be creatively written. There are many business plan writers who may not clearly understand your business mission and vision and not able to present it clearly.
•    Most, business plan writers use a cookie cutter template for writing a business plan. Make sure your business plan must be unique and creative.
•    Business plan must be according to the changing trends of the business world and for this, it is essential that the business plan writer must be familiar with those changing trends. Verify that the business plan writer you hire must be with the needs and changing trends of your specific industry.
Above are some pros and cons of business plan writer. It is necessary to tread carefully when hiring a business plan write to avoid future hurdles.

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How to Build a Strong Business Credit Profile

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There’s much more to building a strong business credit profile then just paying your invoices on time. While this is an obvious way to establish a positive payment history there are many other factors that can dramatically impact the strength of your business credit file.

If I were to ask you what a strong personal credit profile would look like you would probably say that it’s having a few credit cards with no more than 30% debt to credit limit ratios, a mortgage loan, and an auto loan with excellent payment histories. In other words a healthy blend of credit which shows you can personally handle various forms of financing responsibly.

Now it’s important for you to understand that when it comes to your business credit file a similar approach is needed in order to show that your company can handle various forms of business financing responsibly. A strong business credit file is vital to your business and it affects your ability to obtain funding.

Here is couple of other things that it can have an influence on:

- The amount of your loan approvals and what interest rates you’ll pay – Your business insurance premiums – Whether suppliers will extend credit terms – Whether a personal guarantee is required when applying for business financing – Making it easier for a  potential business partner to determine the risk of doing business with you

Here are the key account types you need in order to show the best blend of credit in a strong business credit file:

*Suppliers *Credit Cards *Line of Credit *Loans *Leasing *Insurance

Suppliers

Your payment experience with suppliers also known as vendors show your business’s ability to handle short term financing from Net 15, Net 30, Net 60, Net 90, or even Net 120 payment terms. However, with the balances being paid in full on or prior to the due date it doesn’t show your ability to handle revolving debt.

Credit Cards

Your payment experience with revolving accounts like credit cards shows how your business handles revolving debt. This account type along with supplier accounts can further display the diversity of credit responsibility your business can handle. Even if you don’t carry credit card debt and choose to pay off the balance each month, these account types will still benefit your profile due to the type of account it is.

Line of Credit

Having a line of credit reporting can dramatically increase the strength of your profile. This can also play a significant role in qualifying for additional lines of credit with other banks. Once a bank pulls your report and sees that you have already gone through the scrutiny required for a business line of credit with another lender the greater the chances you have for approval.

Loans

This account type has a similar benefit to a line of credit meaning that it shows your business’s ability to face strict documentation requirements set by lenders. Not to mention it also shows your ability to handle a set repayment schedule determined by the lender.

Leasing

A lease can enhance your profile and status to the lending community by improving your debt-to-equity ratio and earnings-to-fixed assets ratios.

Insurance

Insurance premiums reporting on your profile will show that your business is responsible when it comes to carrying the necessary insurance protection and making timely premium payments. This can range from liability, property, accident and health, crime, auto, workers compensation and employer liability.

Building a strong business credit file requires this special blend of account types which can properly showcase your business’s ability to properly handle its financial obligations, face scrutiny, and show responsibility while maintaining a reasonable debt to income ratio. A strong profile is the foundation for your company’s longevity and success. Go for it!

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Small-Medium Business: 10 Golden Rules For Managing People For Best Business Results

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Small-medium businesses have unique characteristics that require special responses. They are not underdeveloped big businesses. This is particularly so in people management. If employees don’t respect each other’s work and contribution, you’ll have “people problems”.

1. Compatibility Is Vital. You don’t want clones of you. But you do want people you can get on with both personally and professionally. You can’t escape from them or they from you.

2. People You Trust Absolutely. Even though you may own your small-medium business, you simply can’t do everything yourself. You have to give others responsibility and accountability. If you don’t have staff you trust, your business will stagnate.

3. Flexibility and Adaptability. You’ll employ people because they bring specialist skills to you. But they must be prepared to “fill-in” and “help out” in areas outside their speciality.

4. On Job Training. I happen to believe that the most effective training occurs on the job. This is particularly true in small business. Your people need to understand that they’ll learn new things by doing them. Avoid people who want to go to “courses” to learn.

5. Limited Opportunities. Most staff in a small-medium business can’t have long term careers in that business. Recognise that valued employees may leave for “greener pastures”. To limit the damage, introduce incentive and reward schemes including profit share if possible.

6. Systematize, Systematize, Systematize … “There are few poor people, but lots of lousy systems” so the saying goes. Do your best to introduce systems that make it impossible for your people to fail. Good systems reduce stress, increase self esteem and build confidence in all who use them. They improve profitability too.

7. Openness and Information. Keep your staff informed. If you don’t, rumours will develop to replace fact. Ensure your staff know what you and they are trying to achieve and how well you’re progressing. There’s no need to reveal the most secret parts of your business. But your staff are all close to your business. They deserve to know.

8. Sensitivity. Staff will have personal problems. Sometimes they’ll interfere with their job and your business. Show concern. See if you can help without “playing favourites”. Other staff will judge you harshly if you seem cold and unfeeling.

9. Develop a Sound Network. You need other business managers you can talk to and exchange ideas with. This is important for general business ideas and especially so for sound business management.

10. You’re The Role Model. That’s the fact. Because your business is small you can’t escape scrutiny. They’ll do what you do, not what you say. They’ll treat customers the way you do; not how you say they should be treated. This applies to all aspects of your behaviour.

Conclusion. There’s little room for textbook management in small business. The people management textbooks are written for managers in big business, not for small business managers desperate to grow their business and make a worthwhile living. Sound people management helps a lot.

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Five Effective Online Advertising Strategies For Your Small Business

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Did you know that 83% of consumers conduct research online before making a purchase locally? Are your potential customers finding you, or are they finding your competitor? Here are five effective online advertising strategies you can use to increase your visibility and your profits.

1. Search Engine Optimization – Assuming your business has it’s own website, search engine optimization (SEO) can help your site rank higher in search results, which is essential if you want to be found online. If your site doesn’t show up on the first page of the results, chances are your customers are not finding you.

SEO is not complicated, but it can be confusing for those who don’t have the time to study the methods various search engines use to rank web sites. It is possible to spend a small fortune with very poor results. Before embarking on any SEO journey, enlist the help of a qualified professional. Be sure to check references and ask for proof of results before agreeing to work with any SEO firm.

2. Pay Per Click – Pay per click advertising works by driving potential customers to your business’s website through ads placed on other sites and in search engine results pages. Each time a potential customer clicks your ad, you pay a fee to the PPC network. The amount of the fee varies and will depend on the popularity of the keywords you target, and the competition among advertisers for that keyword.

It is worth noting that pay per click can be a risky business, since the advertiser pays regardless of whether or not a sale is actually made. It would be wise to consult an expert before beginning any pay per click advertising program.

3. Affiliate Programs – Whether you sell a physical product (think car parts or power tools) or provide a service, offering an affiliate program can be a good way to improve your sales. Affiliate programs essentially provide a business with a stable of sales people who all work on straight commission. When your customer makes a purchase through an affiliate link, the affiliate earns a small percentage of the total sale.

Affiliate programs are typically managed by an affilate manager who is in charge of providing promotional materials to affiliates, and who is available to answer any questions and handle any commission disputes that might arise. You can choose to host your own affiliate management software to track clicks and sales, or you can join an affiliate network like Commission Junction or Share A Sale to avoid any technical hassles and to take advantage of their existing network of affiliates.

4. Banner Ads – Banner ads refer to any ad space you buy (or rent) on a website. Ads can vary in size from very small to nearly full screen. Some ads pop up or under an open web page, some have moving graphics, some are interactive and change depending on the movements of the mouse pointer.

Banner ads can be purchased on individual web sites for a set period of time, but unless you can easily target the sites your potential customers are reading, this can be tricky. Banner advertising can also be sold through advertising networks. Similar to affiliate networks, advertising networks manage the technical details for you in exchange for a fee. Some popular advertising networks are Value Click Media and BlogHer.

5. Internet Yellow Pages – Internet Yellow Page Directories are increasing in popularity as more and more consumers turn to the Internet first in their search for local businesses. One recent study commissioned by comScore showed that Internet Yellow Pages gained in popularity in 2009, with 21% of respondants citing Internet Yellow Pages as their primary source of local business searches online.

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What’s Marketing All About?

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But if that’s all it took, wouldn’t we all be attracting enough clients?

I’m sure you’ve tried one or more of these things at least to some degree. And I’m sure you’ve had at least some successes now and again. But are you able to make it work consistently for your business?

If not, what could be going on?

First, let’s agree to a definition of marketing. Here is my favorite one for small, service-based businesses:

“Marketing is the use of strategies to generate a constant supply of high-quality leads for your service business.” Simple to understand and speaks directly to the results we want.

OK, so doesn’t this definition take us right back to what we said we already knew about marketing… a web site, Yellow Pages advertising, networking, etc.? Well maybe, but first it’s important to understand why your current marketing activities aren’t producing consistent results.

Put your message and materials to the “So What?” test.

Start with your core marketing message. Pull out your most frequently used marketing tool and read it out loud. Put it to the “So What?” test.

After you read it out loud, is it possible that your intended audience could respond with… “So What?”… “Why do I care?”… or “What’s in it for me?” If your message doesn’t tell your intended audience what solutions you are providing to address their issues/problems/challenges, and how it relates to the benefits they’ll receive from your services, then a “So What?” response is exactly what you might expect.

Messages and materials that are all about who you are and the history of your company and what services you offer and why you’re so qualified to provide these services and how you partner with your clients to achieve superior results, etc. are likely to fail the “So What?” test.

Challenge all of your current marketing materials. Remember, it’s the intended audience that counts. What’s in it for them? Why should they care?

Listen, if your marketing is consistently generating all the high-quality leads you can handle, then don’t change a thing. But if you haven’t quite figured out how to generate a constant supply of leads for your service business, then you owe it to yourself to challenge your current marketing tools by putting them to the “So What?” test.

Try these ideas:

* Challenge all of your marketing tools that aren’t contributing to consistently generate leads for your service business – even the ones that have worked in the past. Could you improve the message and get a higher return? Put it to the “So What?” test.

* Try the X’s and O’s test (especially with the last letter you wrote). Mark an X every time your marketing piece mentions your name, company name, or the words “I” or “me”. Mark and O every time it mentions the prospects name, company name, or the word “you” or “your”. If the X’s outnumber the O’s, rewrite it before using it again.

* Try gathering up a group of people you can trust to give you very honest feedback. You’re not just looking for proof readers, but individuals who will give you honest feedback on whether your materials pass the “So What?” test.

* Be prepared for some negative feedback, but more importantly, be prepared to do something about it.

* Don’t just accept opinions, but try to get down to realistic response. For example: “I think this part is too wordy and detailed.” (opinion) versus “I got pretty lost and confused with the level of detail in this part.” (response)

* Remember that it is the intended audience that counts. If it’s not clear who the message is intended for when it’s received, then how can it pass the “So What?” test.

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Understand Exactly What Your Business Has to Offer

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Every business started for a reason and every business did so because they felt they could offer people something that no other company was able to. When a company first starts out they are more likely to keep that idea close to them.

Everything they do will likely be centered on this very idea. However, the longer a company exists the further they start to drift from that idea. I have talked to people from companies before where I quite literally asked them what it was that their company could do that no one else could, and they just gave me a blank stare.

This is and always should be your chief selling point. Now, this is not always going to remain the same as it did when you first started your company. For one thing, if you happen to originally offer something that no other company does, but once you are successful, you get a lot of other people following your lead, you have to change what makes you unique.

The very first company to get catalog printing done and send them right to a person’s home had the benefit of saying that they offered people a level of convenience that no one else could. The very idea of being able to shop right from your home was unique and immediately grabs a person’s attention, leading to a great selling point for those first few companies.

Catalog printing is hardly a rare thing now, and if that is all you have going for you than you are not likely to get a lot of interest. Those companies had to eventually alter their key selling point by improving on their catalogs rather than just keep focusing on the exact same thing.

This was no different when the internet became mainstream and stores began opening up cyber counterparts to their actual locations. This in and of itself was their selling point initially, while now it has become a given that stores will certainly have an online version.

All of this means that a selling point needs to evolve. Nevertheless, for it to evolve you first have to know what it is that you are evolving from, which is why it is so important to know what your stores strength is at all times.

The best way to keep track of this is to be sure that every marketing push is centered on your selling point, and that when you do alter this selling point, you are still taking into account what the first selling point was. Let us use that first example of catalog printing.

Because innovation and convenience was part of the first selling point for those first catalogs the natural way to improve this would be to find some new way to alter the catalog that made them easier for people, which was what quickly happened.

Figure out the best way to improve upon your selling point, and never forget what makes your company unique.

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Passive Income Generation : A Basic Project to Start with

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How to generate income on the internet is the million dollar question of the day. Over the past 3-4 years, internet users have been using the flexibility and anonymity of the Internet to generate sizable income. Many beginners want to know if there is a straight answer. After spending much time, effort, and money, they find out that there isn’t a short answer, not to mention get rich scams, irritations, and unecessary riff-raffs.

However, people do make money on the internet and lots of it. The question is how to get on the bandwagon with the rest of the so-called internet gurus out there. Passive Income Generation is one method that I use and recommend to many people I know or get aquainted with. With PIG, you can always concentrate your efforts on your day job until your internet venture grows sufficiently and this perhaps is the most practicable approach. PIG is efficient and least time consuming for a budding entrepreneur on the internet. It is termed so because it will earn you money whether you are asleep or abroad, on the earth or on mars. Here is a hands-on example of how to start a PIG project. Starting by owning a simple website. Even a free one that a provider like Geocities or Lycos lets you build for free. If you are to make money, then 2 essentials need to be met -

The product/information that you sell on your website
The amount of traffic you get to your website

Each one is complimentary to the other and you cannot raise money with out anyone coming to your website, neither can you if you just have people visiting your site and they have nothing to do there. The bottom line is that you have to concentrate on both aspects.

I would start from your strengths. Say, for instance you work in a frozen-dinner factory – so you know everything about how a frozen dinner starts its life to it reaching the consumer’s plate. Make a simple webpage that explains how frozen dinners are made, how they are packaged, what standards are met in preparation stages, etc. You should have about 9-10 pages of content with pictures and links to external sites that can give technical or related information. Make it look like a place you would come to if you wanted to know about frozen dinners.

Now, there isnt much to sell on your website. You have information that people will read and look at but, over all you’ve got nothing they’re going to pay you money for. You’re not likely to sell frozen dinners on your website, its probably easier and less cumbersome to buy it from the local store and that way they can also ensure quality. So how can you make money? You can put advertisements that pay you for everytime they are clicked. These are called Pay-Per-Click advertisements – some examples are Google Adsense, Yahoo Ads, MSN adcenter, Chitika, Clicksor, etc.Whenever you get a visitor they are likely to read your content and click on an advertisement that you have displayed in turn earning you money.

The best way you can get people to your site is to use the following strategies. Start a blog that belongs to a major search engine like Google or Yahoo, example blogspot and 360 respectively. Post a blurb every day relating to your theme and that has a link back to your web site. Exchange your website’s link with other websites that are in a similar theme. You can write articles about your website and submit them to article directories. All of these will help you be picked up by a search engine soon. These practices will also help you make money over a long range of time.

Using the modest of math calculation, you would earn about $5.00-$6.00 every day, a month from this website alone, without you having to do anything after you get a regular stream of visitors every day. $5.00 isn’t much a day and adds up to $1800 a year. This needs to be repeated atleast 10 times. $5.00 a day, you can easily purchase domain names, hosting, and even some content writers to put up your websites. Choose interesting themes, choosing a theme like cars or planes or something too broad will not draw in much traffic as you would be competing with ford and boeing.

The bottomline being Passive Income Generation needs to be done in large-scale. 1 or 2 sites will give you little money, but more importantly the much needed confidence. The real sticky part is picking the theme for which you can make a site that will bring you revenue. These are niche themes. Passive Income Generation is totally possible and with a little perseverance – you will succeed.

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Beware of the Tax Man

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Let’s say you own a small business. You think you’re successful. You’re a pillar of your community.

Or you’re self-employed and doing well.

Or you just can’t resist putting money into overseas investment vehicles

The folks at the Internal Revenue Service want to get to know you much better. Not because they’re mean. (Well, maybe some auditors are.)

The larger reason is that some of you underreport your income. And according to the agency’s just-released 2010 game plan, they’re coming to get ya!

There is a gap between what taxpayers should pay every April 15 and what they actually pay. It comes to about $345 billion a year, Chris Wagner, the commissioner of the IRS’ Small Business and Self-Employed Operating Division, told a recent conference.

About 44% comes from small-business underreporting, he added.

His division, which is responsible for 41 million self-employed workers and 9 million small businesses with assets of less than $10 million, is investing heavily in personnel. By the end of 2009, the division expects to have hired 4,000 more people, including 1,100 revenue agents and 1,100 revenue officers. Revenue agents investigate possible criminal violations; revenue officers conduct noncriminal investigations and collections.

The agency expects to hire at the same level in 2010. And those folks are all after your money.

Wagner reported that IRS auditors will zero in on filers of Schedule C, the prime form used by self-employed people. Auditors will concentrate on deductions for meals and entertainment, and for travel, auto use and home office expenses.

How you can defend yourself

Now, don’t panic. Don’t get mad. You’re honest, right?

Well, here’s the secret word on how to deal with the IRS: preparation. Preparation means substantiation. If you have your receipts and checks in order, you have nothing to fear. Here’s what to do:

  • Meals and entertainment. A meal or tickets to entertain clients that cost $75 or more must be backed up with a piece of paper. Any expense under $75 can be substantiated with an entry in your day planner or diary. In both cases, you need the date, the restaurant or entertainment facility name, the address, the amount paid, the person or people you were with, and the business discussion. If there’s no business relationship or connection to your expense, you get no deduction. The tax pros call it the business “nexus.”
  • Travel. Here you’ll need copies of your bills and checks to prove they were paid. You’ll also need to establish the business nexus for the expense.
  • Auto use. This is easy. The IRS wants a contemporaneous record of the business miles and the total miles you put on your vehicle. Only the business miles, or the business percentage based on total miles driven, is allowed. Many of my clients keep a pocket tape recorder to record the miles driven and their purpose. They later transcribe the tapes and record the miles. Handing the transcripts and the tapes to an auditor usually eliminates the auto use issue.
  • Home office. This also should be easy. Diagram your office and have someone take a picture of you in it holding up the local newspaper with the date as clear as possible. Better still, display a copy of The Wall Street Journal to help justify your deduction of The Journal as an investment expense.

Remember, you can be audited up to three years after you file. So a 2009 return filed on time may be audited through April 15, 2013. You may have moved in the interim. Or perhaps you decided to discontinue your home office. In either case, the picture with the date establishes that you did have an office in 2009.

Watch out for the “regular and exclusive” use rule. If you use your office as anything other than an office, you lose your home office deductions.

If you’re asked if the computer in your home office is used 50% for business and 50% for personal use, or 90% business and 10% personal, the only right answer — if you want to keep the home office deduction — is 100% for business.

I also recommend that you have a sign-up book to establish that customers or clients have come to your home office.

A problem: What you don’t tell them

In every self-employed or small-business audit I’ve had in the last three years, the IRS has gone after unreported income.

The auditor is going to ask for all your bank statements, checking, savings and investment accounts. The IRS position is that every deposit is income.

We all know that’s ridiculous; even the IRS knows it is ridiculous. Deposits can be transfers between accounts, gifts, bequests, loans, etc.

But the IRS wants you to prove that it’s not income. Otherwise, it may tax the deposit.

Personally, I keep a record of every check I deposit. I note whom it’s from, and, if it’s not income, why it isn’t. That’s a lot easier to do when I get the check than if I have to reconstruct it two years later in the middle of an audit.

About your account in Switzerland . . .

The IRS has begun aggressively tracking down taxpayers who try to hide their wealth overseas. The IRS is also going after the promoters who push these schemes. (See “The hazards of hiding money overseas.”)

If you have a financial interest or signature authority over a bank, securities or other financial account outside the United States, you may be required to report that account under the Foreign Bank Account Reporting Act, or FBAR.

FBAR reporting normally applies only to accounts with at least $10,000. But President Barack Obama’s tax plan for 2010 contains a provision that creates a rebuttable presumption that all foreign bank accounts contain $10,000 and must be reported, unless you can affirmatively show that the account has less than $10,000. Once again, the burden is being shifted to you.

The feds are looking for unreported income. Reporting the account is an invitation to be audited. But not reporting an account that should be reported is even worse.

The civil penalty for willfully or knowingly failing to file an FBAR account is up to the greater of $100,000 or 50% of the value of the account at the time of the violation. You can also be hit with criminal fines up to $500,000 or 10 years in prison, or both, for willful failure. Knowingly failing to file the form can cost you $10,000 or five years in prison, or both.

So, yes, the IRS is coming to get ya. You’ve been warned, so get prepared — now.

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