I am not much for resolutions. But, in the spirit of the New Year I would like to offer one that makes a lot of sense for small business owners. First, here is a little history. Over many years small business owners have been working to get some certainty about tax credits and deductions. Some will know this as “tax extenders” others might know Section 179 expensing. Essentially, small business owners have been working to try and get Congress to make some of the provisions permanent or to at least get multi-year extensions.
When I spoke before the Small Business Subcommittee in March of 2015 I talked about the economic outlook and challenges that small businesses like mine face. I specifically mentioned how important it is for my company to deduct the cost of the asset in the year that we purchase it, especially since technological equipment (video cameras, lights, etc.) needs updating sooner than the 5 to 7 years that it is required to be depreciated over.
Business is hard enough and when you add in uncertainty it is difficult to plan. Many business owners I know were waiting, literally until the last minute to see what was happening before making buying decisions. That meant a “shopping spree” in the last few days of the year. Talk about stress at the holidays! I talked about this very thing to a reporter from the Associated Press who interviewed a number of sources across the country. It’s worth a read. http://bigstory.ap.org/article/a3645e8ce6c241e89be02841ffe1c427/small-bu…
The good news is that all that has changed. In December, right before the Christmas holiday, small business owners got a nice present from Congress. It approved legislation and made some of the tax extenders permanent. It was part of a bi-partisan deal and you can find out more about it at www.nsba.net or Protecting Americans from Tax Hikes (PATH) Act of 2015.
So what is the resolution? I think a great one is to use this present wisely. For the first time in many years small business owners, like me, can take a more thoughtful approach to buying decisions. We can look at investing in our businesses with a long-term lens. To get started, I would like to share a couple of the strategies I have employed that might be useful.
Don’t make buying decisions in a vacuum. Business owners should work with those on the front lines to determine what the organization really needs. In my company, I regularly sit down with my videographers and editors to find out what they want. I ask them to do the research on the products and make recommendations. I encourage them to do their own cost/benefit analysis. After they make recommendations I review them and make the final decision. This gets everyone thinking like an owner. Sometimes, they decide we do not need a specific piece of equipment other times they say it is imperative that we do an upgrade.
Don’t just look at cost. Too often business owners look at the price tag instead of the value that a purchase can offer. Does the purchase make your operation more efficient? Will it improve your security? Help differentiate your organization from the competition?
Consult your advisors. While the tax consequences may guide your buying decisions, they should not be the only consideration. Get the full picture and then make the best decision based on the information.
The bottom line is this. Lots of people worked really hard to get this legislation passed. Make a resolution to take advantage of the win and move your business forward in 2016.