With cryptocurrency moving into the mainstream, many small business owners want to know if it’s time to accept it as a form of payment.

Major retailers like Starbucks, Nordstrom, and Whole Foods already accept Bitcoin. Gamers on Microsoft and Twitch conduct transactions in cryptocurrency daily. PayPal has even set up a way for its users to purchase cryptocurrency and may soon allow cryptocurrency payments.

In other words, it’s becoming easier and easier for the average American shopper to access the form of payment.

But should small business owners accept crypto?

What is Cryptocurrency?

For those of you unfamiliar with cryptocurrency, let’s talk about what it is first.

According to Investopedia, “A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend…A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.”

Types of Cryptocurrency

There are several types of cryptocurrency, and they’re not linked. Think of them as different countries with different currencies. You can’t spend Japanese Yen in America any more than you can spend an American dollar in Italy.

Bitcoin isn’t the same as Ethereum, which isn’t the same as Litecoin.

In fact, there are thousands of cryptocurrencies out there.

Bitcoin and Altcoins

bitcoin accept cryptocurrency small business payment formBitcoin is the one you’ve most likely heard about; it’s been around the longest.

There are also Altcoins out there, which means an alternative to Bitcoin. These include Litecoin, Namecoin, and Dogecoin. They run much like Bitcoin with a limited supply.

Some Altcoins have their own systems and protocols, such as Ethereum, Ripple, and Omni. (Source: SoFi)

Things to Consider Before You Accept Cryptocurrency

The very first thing you must consider when accepting cryptocurrency is that it’s unlike any other currency you have received in the past.

Regulatory Concerns

For one thing, it’s not considered legal tender in a majority of the countries around the world, and specifically not in the United States.

The Library of Congress examined more than 130 countries worldwide regarding cryptocurrencies and found most of them don’t accept them as legal tender. As a result, most governments issue a warning about cryptocurrencies, saying they’re highly volatile and unregulated.

You Can’t Deposit Cryptocurrency in the Bank

Because they’re unregulated, you can’t just deposit a cryptocurrency in a bank. You need to sign up for a digital exchange to accept cryptocurrency. After that, you need to create a digital wallet to hold that cryptocurrency. From there you may purchase services or products from a limited number of individuals and businesses that likewise will accept the cryptocurrency that you hold.

Cryptocurrency exists separately from the other currency that you accept. To use cryptocurrency like cash, you need to exchange it for cash.

According to American Express, “Many enterprises today accept more than a dozen payment mechanisms in-store and online (cash, checks, wire transfers/EFTs, multiple credit and debit cards, and a variety of digital mobile wallet and/or payment apps) but none of these share many attributes with Blockchain-based cryptocurrencies such as Bitcoin, Ethereum, Dogecoin, Litecoin, and the rest.”

Cryptocurrency Isn’t Taxed the Same as Business Revenue

Because cryptocurrency is not legal tender, the IRS does not treat cryptocurrency like cash revenue. Instead, the agency treats cryptocurrency as property. So any transaction you do will be “barter” which is the more technical term for trading property (not cash).

That means if you accept cryptocurrency, you need to report the value of it the moment it is received and pay income tax as normal. And, if your cryptocurrency gains value before you use it or sell it, you must report that change in value as a capital gain.

There is no capital gains exemption for cryptocurrencies.

What’s more, if you use a third party to handle all of your digital currency transactions, you may receive a 1099-K form at the end of the year.

High Volatility

accept cryptocurrency small business revenue salesOne of the scariest things about cryptocurrency for a small business is that it is highly volatile.

When accepting the U.S. dollar as payment, what you see is what you get. Inflation and other economic issues have relatively little impact on the value of that dollar. The dollar is even very stable compared to other currencies. That means if you receive $1 today, that dollar is still worth $1 two to three months from now in terms of purchasing power.

You can predict your revenue.

When it comes to cryptocurrency, that’s not true. Take, for example, Bitcoin. On Feb. 1, 2021, a single Bitcoin was equal to $33,533.10. Three weeks later, on Feb. 21, 2021, that same Bitcoin was equivalent to $57,489.10. That’s a 71% increase.

However, a week after that, it was worth $45,260.10. That’s 34% higher than what it was worth on Feb. 1 but 21% lower than what it was just a week earlier.

Do you know how much you should be charging each day?

Bitcoin, along with other forms of cryptocurrency, is subject to massive swings in value. If you do accept cryptocurrency, you have the opportunity for significant gains but also substantial losses.

No Legal Recourse in Case of Loss

If you lose or someone steals your cryptocurrency, there is no legal recourse. Since there’s no agency overseeing cryptocurrency, there’s no one to protect you if something goes wrong.

Perhaps the best example of this is the San Francisco man who made headlines in 2020. The man forgot the password to his 7,002 Bitcoins worth millions of dollars on today’s market. (Source: BBC)

No one’s there to help him find the password so he can access those coins. If he loses them or cannot access them, no one is there to protect him.

The FDIC insures banks, so if someone steals your money, you’ll get some or all of it back. Police officers and the FBI are there to catch someone if they rob you. The SEC is there to make sure stock markets play fair and reduce fraud.

Currently, there’s no agency like that when it comes to Bitcoin and other cryptocurrencies.

Reasons Why You Should Consider Accepting Cryptocurrency

With all of these issues, it’s easy to say cryptocurrency isn’t for you. However, there are some instances where cryptocurrency may be suitable for your business.

How Old is Your Clientele?

If your bread and butter client is a Millennial (1981 to 1996) or part of Generation Z (1997 – 2012), cryptocurrency may be for you.

These generations are more likely to adopt cryptocurrency, and so they’ll be more willing to spend it and pay with it as well.

If you tend to serve an older clientele, say anyone over 40, then cryptocurrency may not be the best choice for your company.

Where is Your Clientele?

Some small businesses find cryptocurrency is a better answer because they deal with clients in many different countries. While national governments do not recognize it, cryptocurrency is something that is recognized by users internationally.

Many times, banks place a hold on payments from other countries. Cryptocurrency arrives in your digital wallet instantly. What’s more, you don’t have to worry about currency exchange when accepting cryptocurrency.

Cryptocurrency is something to consider if you have several international clients.

Diversify Investments

Established businesses with a large emergency fund may consider cryptocurrency as a method of diversifying cash.

In this instance, think about cryptocurrency as an alternative investment (sort of similar to a stock, but much riskier). Like stock, cryptocurrency can grow at a much faster rate than the interest on a savings account. However, also like stock, cryptocurrency can lose value. The major difference is that, unlike stock which is tied to an underlying public company (something of verifiable value), cryptocurrency is tied only to supply and demand. The objective value of cryptocurrency is only related to the amount of effort required to mine the coin.

Cryptocurrency is an uncertain store of value. However, as a volatile asset, it might be able an alternative investment that is worth considering for an allocation of your investment assets.

Inflation Hedge…Maybe

accept cryptocurrency inflation hedge small businessBitcoin supporters argue that cryptocurrency is a hedge against inflation, and that’s the best reason to invest in it. However, recent market trends have proven that that may not be true.

Fortune recently examined this trend. In an article posted in February 2021, Fortune pointed out that recently expectations of inflation have increased, but so has the price of Bitcoin. At the end of February, when the price of Bitcoin fell, inflation expectations did not change.

Given Bitcoin’s short history, it’s tough to determine if it’s genuinely a hedge against inflation like proponents claim. A better claim is not that it is counter to inflation, but rather it is independent of inflation.

Conclusion

Each small business will have to weigh the good with the bad when deciding whether to accept cryptocurrencies as payment.

Remember that cryptocurrencies can be highly volatile, with immense highs and lows. Cryptocurrency is not a legal form of tender in a majority of countries around the world.

In America, cryptocurrency is taxed as an investment and as income. What’s more, there is no legal recourse if something goes wrong with your cryptocurrency because there’s no central bank overseeing the currency.

Accepting cryptocurrency most likely isn’t worth the risk if you work with an older clientele who are not early adopters of technology. Cryptocurrency might be worth the risk if your clients are younger and have already adopted cryptocurrency as an acceptable payment form.

For small businesses that run month-to-month or even quarter-to-quarter, cryptocurrency can be a considerable risk. More stable companies may find cryptocurrency as a way to diversify funds or possibly hedge against inflation.

Make your decisions wisely based on your customers’ habits and your risk tolerance.

NOTE: Towne Advisory Services is not an investment firm, so we do not offer advice regarding investments or taxes. The information provided in this article is designed to be educational and may not be pertinent to your specific situation. As always, do your research, form your plans and then ask your investment and tax professionals. 

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As the COVID-19 crisis continues to impact small businesses in the Towne Advisory circle, we take a look at another business that’s found a way to thrive during these tough times.

sarah tetlow firm focus small business success covid 19Sarah Tetlow is the founder of Firm Focus, a company designed to help business professionals, especially lawyers, find proactive ways to control their workday. By leveraging and controlling their billable hours, business professionals are less overwhelmed, experience less stress, and ultimately, less burnout.

When things shut down in March, Sarah saw many of her revenue streams slow down to a trickle. Many of her clients put off hiring consultants because they were simply trying to stay afloat themselves. Other clients were dealing with furloughs, layoffs, and more. Sarah also saw the speaking engagements she booked months ago, pushed out indefinitely.

Sarah didn’t let the setback stop her. She reevaluated and went virtual. While she used to hold that first client meeting in-person, she has now shifted to client intake via video conferencing. She holds video presentations instead of in-person speaking engagements and she has changed the way she approaches her business.

Changing Her Business to Fit the Climate

Now, she successfully helps business professionals navigate the pitfalls of working from home. The boundaries between work and everyday life have blurred, so she is teaching clients to rethink what being “productive” means and shift what productivity looks like. This includes focusing on what the professional does best and outsourcing everything else. When it comes to team management, it’s about playing to a team member’s strengths.

Sarah is focusing on business professionals struggling with the work/life balance. She is offering complimentary 30-minute consults, as well as a cost-effective program she calls ApPEERing Productive.  The next ApPEERing Productive program is scheduled for Wednesday, September 2, 2020 and is focused on the #WFH “Parent Edition”.  To find out about a complimentary call or the ApPEERing Productive program, visit the Firm Focus website at www.firm-focus.com or email Sarah at sarah@firm-focus.com.

Towne Advisory is very proud to know great business owners like Sarah. If you would like to find more small business owners who are doing their best in times of crisis, check out our previous posts. Orion Stang, owner of Dilecta Wines, who has figured out how to transform his wine tastings to deal with the difficult times. While Security & Cabling Solutions is helping small businesses stay safe through new safety monitoring measures. Meanwhile, SchillerLearning is offering parents of young children an alternative to the current distance learning that many parents are experiencing. Way to go everyone!

In this week’s small business success story, we check out a business that practically ground to a halt during the shelter in place.

Business at Dilecta Wines in Paso Robles, Calif. froze in March when Governor Gavin Newsom issued the stay at home order. The tasting room was suddenly closed and there was no word on when it would reopen. Overnight, owner Orion Stang found himself facing an uncertain future.

Orion says it was scary in the beginning. He took quick action by cutting payroll and streamlining the workflow. He also spent much of his time planning for what to do when things reopened. Now that restrictions are easing, he has a plan in place to succeed.

small business success dilecta wines orion strang paso roblesA Plan for Success

Even before the shutdown, Dilecta Wines offered tasting appointments so clients could receive the wine maker’s personal attention and story. Now, those tasting appointments are spaced out and have smaller groups to allow for social distancing. While that might seem detrimental to business, it has had the opposite effect. Clients are receiving a deeper level of connection with the winemakers and that’s translating into sales. It’s also offering a unique experience that visitors don’t get with other wineries.

Orion says he expects to book more in-home wine tastings in the future. He is developing more one-on-one experiences for club members and tasters. He’s also exploring the idea of a satellite tasting room in another city or a pop-up tasting in a desirable vacation spot.

How the Past Shaped the Future

Orion built Dilecta Wines slowly, from the ground up, so it’s no surprise that he’s weathering this storm too. He released his first vintage in the fall of 2011 but took his time before opening his tasting room in 2017.

Along the way, Orion has used pieces of his past to help further shape his business. Growing up with an artist mother, he used his unique eye to create the artistic labels that grace the front of each bottle of wine.

Orion is both a sommelier and a professionally trained chef. He has used that experience to add extra flavor to the handcrafted Rhone wines Dilecta specializes in.

Orion also spent years in the wine industry before opening Dilecta. He did everything from hoeing weeds to driving a tractor to doing spreadsheets. That experience helped him streamline when he needed to.

Orion is confident in where Dilecta is going in the future and his experience and spirit make us confident as well. Cheers!

If you’re interested in a remote tasting, please reach out to Orion Stang at Dilecta: orion@dilectawines.com or visit the tasting room virtually at www.dilectawines.com.

Towne Advisory is very proud to know great business owners like Orion. If you would like to find more small business owners who are doing their best in times of crisis, check out our previous posts. Professional Coach Amber Setter is tackling new challenges in the work from home reality. While the Securion Group is helping small businesses deal with the pitfalls of these difficult times. Meanwhile, Killroy Pest Control is offering new services to help people deal with their latest worries. Way to go everyone!

In this week’s small business focus, we’re talking to someone who was perfectly positioned to help small businesses when the shutdown happened. Regina Unegovsky is the founding attorney of Regal Tax & Law. They’re tax controversy specialists that help businesses out with issues like wage garnishments, bank levies, income tax penalties, and bankruptcy. Basically, if owning someone money is stressing out a client, Regina helps slay those dragons.

Regina closely followed what was happening with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in Washington, DC. The minute it was approved, she acted. Regina recognized that the provisions within the CARES Act would have a profound impact on her clients. She started reviewing older returns and getting client refunds right away. It helped get cash into the hands of her clients long before government relief loan funds had gone out.

As the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) portions of the CARES Act started to take effect, Regina was ready to help clients maintain their payroll and take on that cheaper debt.

Regina Unegovsky Regal Tax and Law small business successNow, she’s working with clients to figure out what’s next. Funds are running out for many small businesses. She’s helping them navigate the difficult decisions like bankruptcy or litigation against non-paying vendors. Regina is also finding them relief from tax debt and helping them renegotiate settlement programs.

Advice for Business Owners

Her best advice for business owners is that this may not be it. There could be a second wave of financial pressure and business owners need to think ahead. The deal to avoid rent now will eventually be due.

Regina thinks many people may consider bankruptcy and if they do, she says get a lot of opinions and get them now.

“Most professionals will give you half an hour or something to get their view. Use this. People are mostly happy to share a little bit of knowledge. Do this ahead of any problem so you have the resources,” said Regina. “You go to the dentist when you notice something wrong, you don’t wait for the root canal. Procrastination is not a strategy.”

As for Regal Tax and Law, Regina is looking towards the future. As a smaller firm, she is already operating lean and mean. She recognizes bigger firms may be laying off quality talent and she’s ready to expand if the right person comes along.

Regal Tax & Law is just one of the many small businesses in the Towne Advisory circle that quickly pivoted and prepared to help clients in the midst of a crisis. For more small business success stories, check out how SchillerLearning began offering options for parents forced into home school. Or how the Wine & Liquor Mart evolved their business to deal with COVID-19. There’s also Security & Cabling Solutions, which is offering safety options for businesses moving forward.

The outbreak of the novel coronavirus and the shutdown that followed forced businesses to take a hard look at their business model. Even small and medium-sized business owners who made it through relatively unscathed are considering cost cutting measures. They’re looking at what they have, what they need, and what they need to do.

We spend a lot of time working with businesses in various stages of development. From the startup to the generational businesses, we’re hearing a lot of the same things from owners. They know they’re doing okay now, but they’re worried about the future.

Longtime business owners know that they need to think long term. They’re not just looking at next week or next month, but next year and three years after that.

Is it Time to Upsize or Downsize?

cost cutting finance accounting saving money small businessDuring times like these, it is tempting to think that cutting is the only solution. However, for some businesses, cutting costs can be more detrimental than helpful.

Before you decide to cut, make sure it’s the right business move. Look at the 1-year and 5-year plan for your business. Ask yourself some of the following questions:

  • What awesome plans do you have in place to grow your business through and out of the recession?
  • What will a strategic pivot or expansion require from your finance and accounting team?
  • What core competencies are you missing from the team to support this growth?
  • How will your new efforts rely on your finance and accounting team?
  • Is there enough capacity on your current team to absorb new people quickly?

Examine these questions. If downsizing is going to hurt the growth of your business and impede your plans, then it may be the wrong solution.

What if I Need to Downsize?

If you’ve looked at these questions and still think downsizing is the right option, then it’s time to evaluate your business. The following are some of the most common mistakes we’ve seen small and medium-sized businesses make with their financial teams.

The Difference Between a Bookkeeper and a Controller

Most often we see business owners that don’t know the difference between a bookkeeper and a controller. Many small companies employ people with bookkeeper skills but give that person the title and salary of a controller.

What is a bookkeeper?

As Monster.com explains, “Bookkeepers oversee a company’s financial data and compliance by maintaining accurate books on accounts payable and receivable, payroll, and daily financial entries and reconciliations. They perform daily accounting tasks such as monthly financial reporting, general ledger entries, and record payments and adjustments.”

In other words, a bookkeeper is responsible for the day-to-day financial tasks a company may require.

What is a controller?

Conversely, a controller does much more high-level accounting work. According to Investopedia, “A controller is an individual who has responsibility for all accounting-related activities, including high-level accounting, managerial accounting, and finance activities, within a company. A financial controller typically reports to a firm’s chief financial officer (CFO); although these two positions may be combined in smaller businesses.”

In other words, a controller is closer to the CFO of your company than it is to the bookkeeper. A controller is responsible for helping prepare operating budgets and overseeing financial reporting. He or she can analyze financial data.

Are You Paying Your Bookkeeper Too Much?

When evaluating your company, examine the level of skill your “controller” has. If that person only has the skills of a bookkeeper, you’re paying too much. If you need more guidance, Robert Half and Associates (which normally places finance and accounting workers) publishes a great guidebook of salaries by title, function, and location.

As the employer, it’s your job to assess the skills of your people and make an honest appraisal of where they fit into your business based on those skills. Make a skills gap analysis to identify unmet needs.

Are your employees in the proper roles within your financial team? Are they getting paid the salary their skill demands and not what their title demands? Compare the skill sets of your current team to what you will need in the future.

You want to make sure you have the right employees in the right roles and that those employees have the room and ability to grow into larger roles in the future.

Cost Cutting by Utilizing Part-Time Roles

Many small companies that we work with are in a transitional stage. They are too small to require high-level employees like a controller but too big to go without them. Going without stops the growth of the business. We have seen a lot of companies hire a full-time controller and then have that person fill a hybrid controller-bookkeeper role. The person does high-level work like cash flow projections, but also work much below their level like writing checks and Quickbooks entries. They are paid at a controller’s salary.

Don’t make this mistake. When a high-level employee uses their time on menial tasks, important issues are often missed or pushed aside. On the finance side, you’re paying extra money for lower-level work.

There is a better option. Consider part-time roles. A part-time accounts payable employee would help free up your controller for higher level, higher value work. Meantime, a part-time controller or CFO can help with month-end closes and quarterly budgeting without the full-time pay.

If you’re worried that these guys don’t exist, don’t worry, they do. In fact, it’s a service that Towne Advisory offers all the time.

How Cost Cutting is Blocked by the “Trust Premium”

We also notice that small business owners reward loyalty or relationships much more than large corporations. Many small businesses we have worked with place a long-time employee or relative in a top leadership position because the owner trusts them. We call this the “Trust Premium”. Many times, this employee doesn’t have all the skills needed for the job, but the trust is worth more.

Paying a premium for your peace of mind makes sense to many small business owners, but often they’re not seeing the financial burden it puts on their company. If your long-time bookkeeper makes little mistakes because of a lack of skill, your CPA is the one to clean it up. That means you’re paying extra professional fees to clean up the work of your employee.

There’s also the worst-case scenario, one that doesn’t get talked about a lot because it’s an uncomfortable topic. With the right opportunity, environment, and motivation, even good people commit fraud. Because the person committing fraud is often trusted, it usually takes small business owners longer to recognize that it’s happening.

According to the Association of Certified Fraud Examiners (ACFE), fraud within a company lasts approximately 18 months before it is reported. Worse yet, a 2016 study by ACFE found small businesses suffered the same median fraud loss ($150,000) as companies with more than 10,000 employees. The ACFE says 87% of the people committing that fraud are first-time offenders.

It is okay to pay a “Trust Premium”, but if you do, also pay for an outside CFO to look at the books once a month. Reconciliations like this can relieve the pressure on an internal employee and give you better information. It will also reduce the risk of costly mistakes or even fraud.

Cost Cutting Through Geography

cost cutting finance accounting savings small business downsizingDo you live in an area that has a high cost of living? Does your team have to live in that same area? If parts of your team can work remotely, why shouldn’t they? In some cases, your financial team will perform just as well with a college grad living in Salt Lake City as it would with one living in Palo Alto.

What if you had accounts payable running out of Salt Lake City, your controller sitting in Wichita, but your CFO sitting down the hall? We’ve seen it work many, many times. Once only feasible for multinational corporations, outsourcing to other parts of the country is now an option for companies of all sizes.

Recent events have forced a taste of this on all companies, so why not try going all the way?

Accounting is unique in that it has its own language. That language can transcend an accent or a foreign language. Given the current economic state, there will be plenty of high-quality talent on the market. Do not disregard a potential employee simply because she lives 1,000 miles away or even 3,000 miles away.

Don’t Let Technology Be a Barrier to Finance & Accounting Savings

As you consider outsourcing, do not allow a lack of technology to become a barrier.

Finance and accounting pros know that it’s important to get the right information to the right people at the right time so decisions can be made. However, because that mission is so critical, we’re often slow to change. Many finance people operate in an “if it ain’t broke, don’t fix it” philosophy.

It’s time to change that way of thinking.

We live in an age of technological marvels that are relatively inexpensive and save a lot of time. Software like Bill.com speeds up your working capital inflow, while Expensify allows for automation of expense reimbursements. There’s file-sharing software like Google Docs and Egnyte and timekeeping software like TSheets and Harvest. There’s so much to choose from!

It may seem hard to justify spending an additional few hundred dollars per month on software licenses but think about the savings. What’s more? The $500 a month you’re spending on licenses or the $2,000 a month you’re saving because your accounts payable manager lives in Salt Lake City instead of Palo Alto?

Cost Cutting by Financing Your Lumpy Expenses

Many small business owners we meet hate payment plans. The idea of being indebted to anyone is scary. However, there are times when it makes sense.

Consider financing your lumpy expenses. Instead of writing your CPA a check for $3,000 every April, what would happen if you paid $250 per month? Monthly payments are often much easier to manage and they may be beneficial to you. A quick call here and there during the year won’t add to the overall bill but will get you better service throughout the year. Speaking from experience, most CPAs are really bad about billing those short phone calls! Just be clear what is in the scope of the arrangement to make sure you know what’s included and excluded from the deal.

Still Unsure?

If you’re still not sure of where to go or what the next steps for your business are, please feel free to reach out to us here at Towne Advisory. We’re always happy to talk through any questions you may have.

This week, we’re featuring a business in the Towne Advisory circle that was called to the forefront when the COVID-19 crisis struck.

ShillerLearning is a company that offers Montessori homeschooling curriculum for kids ages 3 to 13. Whether it’s math or language arts or anything in between, the lessons require zero preparation from parents. That’s an ideal situation for many parents like me, who suddenly found themselves working a full-time job while trying to homeschool.

Larry Shiller Owner ShillerLearning Montessori Learning COVID19For Larry Shiller, founder of ShillerLearning, the COVID-19 crisis led to an uptick in business, but it also required him to pivot his focus. ShillerLearning normally focuses on meeting parents and teachers at conventions. With social distancing becoming a norm, he transitioned his business to 100% online.

Now, instead of solely paper-based products and lessons, he’s doing primarily digital delivery. He’s selling and shipping homeschool packs that include multisensory and interactive kits to parents.

Larry was also insightful enough to not lose sight of the human aspect. He knows parents are stressed and he’s trying to help. He’s offering a free fractions kit for parents, which you can find here. He also offers tips and tricks to the Montessori teaching method on his YouTube channel.

Larry is hoping that this latest crisis will help parents discover the Montessori method of teaching. With his digital downloads, as long as the students can read, they can construct, guide, and self-grade. It’s entirely independent and it doesn’t require any screen time.

You can find ShillerLearning on PinterestFacebook, and Instagram. You can also check out their videos on YouTube.

A few months ago, we started looking at small businesses within the Towne Advisory circle that are doing great things to help their businesses survive during this COVID-19 crisis. Recently, we talked to Tony Quintong, the owner of Securieon Group.

Securieon is a company designed to deal with times just like the ones we’re facing now. It offers insightful tactics and implementations for founders and investors experiencing pivotal points in their company’s growth. Whether it’s leadership alignment or sustainable and scalable revenue growth, Securieon is there to help its customers succeed.

Tony Quintong Securieon Group small business consulting expertsTony recognized early on that COVID-19 was changing his marketplace. He pivoted his business to focus on business owners facing the difficult question of whether to stick it out or find an exit strategy.

Over the years, Tony has learned that tough times are what precipitate action with business owners. When they feel both an emotional and compelling financial pain, they start to evaluate their lives and business very seriously. As a child, we would play a game and ask for a do-over. An opportunity to learn from a mistake and re-enter the game with a new strategy. Today, COVID-19 presents an opportunity for a “do-over” where business owners can analyze their past mistakes and embrace a new approach to survive. Securieon was there to help them through that.

When he looks at the current business landscape, Tony believes social distancing is here to stay. He thinks there will be a lot less emphasis on in-person meetings for the next three to five years and his company is adjusting accordingly. They’re building and leveraging their technology and being more strategic on the time spent.

His advice for business owners is, you MUST empathize, connect, and lead with a renewed purpose.

“People need hope combined with strategy and decisive leadership,” said Tony. “Life is full of challenges and perplexing situations. In our line of work, you gotta love jigsaw puzzles! Founders need our expertise and years of experience to guide them through the process of fitting the right pieces together for their next move.”

We’re very excited to see our list of featured businesses growing! It’s nice to see so many businesses in the Towne Advisory circle innovating to survive and thrive.

This week we’re highlighting business owner James Basurto, President of Security & Cabling Solutions, better known as SCS. For more than a decade, James’s company has served the Silicon Valley by putting the customer first. It is that customer care that has enabled SCS to be nimble during this latest crisis.

When the stay at home order was issued in March, James sent home his employees and immediately looked at his business model. He realized that clients were going to need new products if they were going to get back to work.

SCS started offering new services, including infrared temperature reading cameras. The move immediately paid off. The company received new construction clients looking to have temperature taking machines installed on construction sites (they kept operating as essential services).

Building off of that, James is investigating FLIR cameras that can take the temperature of retail patrons or employees. The extra security would allow companies to send people home if their temperatures spike.

James believes that many companies may also install check-in kiosks asking people about COVID-19 symptoms before they enter a building. He’s looking into how he can service customers that way.

James has worked in the industry long enough to remember what it was like after the 9/11 attack. There was an influx of business then. He expects to see another surge in industry demand following the COVID-19 shutdown.

James is also preparing for when retail establishments are allowed to reopen. He’s scheduling projects now so that his employees can jump back into work safely when the time is right.

If you missed any of our other small business features, check out Sift+Pour Bakery, Wine & Liquor Mart, Killroy Pest Control, and Professional Coach Amber Setter.

When you’re dealing with a loved one’s estate, there can be a lot of foreign terms suddenly tossed at you. One of them may be alternate valuation date. This phrase may sound like gibberish and the explanation even more so. Figuring all of it out while dealing with your grief can be overwhelming.

What is the alternate valuation date?

All estates are subject to tax law, and some of them have to pay taxes. Usually, when a person dies, their estate’s value is determined by what the assets within the estate were worth on the date of his or her death. So, if an estate is worth $10 million on the date of death, that’s what the IRS will base its calculations on.

However, the estate can be re-valued six months after the date of death. This is what’s called the alternate valuation date. The IRS tax code allows this new value to be used on estate taxes with no penalty to the estate.

IRS 26 U.S. Code 2032

Getting technical for a moment, the section of the IRS tax code that refers to alternate valuation date is called: Title 26, Subtitle B, Chapter 11, Subchapter A, Part III, Section 2032. You can read it here if you want, but it’s a bit of a slog.

What you really need to know is below.

Why do I want an alternate valuation date?

If the value is big enough, the estate may owe taxes. However, how much it owes could vary depending on when the value of the estate is determined.

Let’s say the estate we talked about before was worth $10 million on the date the person died. Six months later, the market declines, and now the estate is worth $8.5 million. It’s much better to be taxed on the $8.5 million than it is on the $10 million.

What’s the downside?

Before you get too excited, there is a downside to the alternate valuation date.

You can only choose to take the value of the entire estate on the date of death or the value of the entire estate six months after the date of death. There is no in-between.

The IRS will not let you pick and choose which parts of the estate you want to value at the time of death and which ones you want to value six months after death. This is an all or nothing deal.

That means while some of the assets within the estate may be worth less six months later, others may be worth more. You have to do the work to estimate the value at that later date if you think this could be useful.

What’s the other downside?

There’s another wrinkle in choosing the alternative valuation date and that’s future income. Initially taking the lower estate value requires you to pay less in taxes, but remember that the lower value is what’s applied when the asset is distributed to the estate’s beneficiaries. If you choose to take the alternate (lower) value and that asset is later sold, then the alternate value is what’s used to determine how much profit is made (though possibly at a lower rate).

In other words, either way, the IRS is going to get it’s cut.

Are there any exceptions within the alternate valuation date tax code?

The only exception that the IRS allows for is if an asset within the estate is sold, exchanged, distributed, or disposed of in another way within the six months. If that’s the case, then the asset’s value will be determined based on the date that you disposed of the item from the estate.

Is there anything else I need to know about the alternate valuation date?

You have nine months from the date of death to tell the IRS that you want to use the alternate valuation date. You or your CPA will need to make an election when they file IRS Form 706 if you plan to use the alternate valuation date.

Once you make this choice and the form is submitted, there’s no going back. The election to use an alternate valuation date is irrevocable.

Another fun twist is that you have to exclude changes due solely to the passage of time. If you have a loan due to you, you can’t say it’s worth less only because payments have been made in the six months between the date of death and the alternate valuation date.

Is it better to take the alternate valuation date?

So, with everything you’ve learned about the alternate valuation date, is it better to take the value of an estate on the date of death or six months later?

Unfortunately, there’s no easy answer.

You and your CPA should examine several factors when weighing the alternate valuation date option including:

  • Determine if the estate taxable at all;
  • The tax bracket that the estate falls into;
  • Is it on the estate for a married person;
  • The relationship of the deceased to the estate’s beneficiaries;
  • The future tax implications;
  • The future tax benefits on depreciable assets;
  • And whether the estate’s assets will be sold or passed down through inheritance.

For large estates, talk to a professional about whether or not an alternate valuation date is beneficial to you. Make sure you contact your CPA. You can also talk to us here at Towne Advisory Services about any estate valuation questions.

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Real Life = Work Life + Mom Life

In this week’s small business success story, we highlight Executive Leadership Coach and sole proprietor Amber Setter. Amber is a Professional Certified Coach (PCC) who works with executives and other professionals to help them navigate life transitions.

When the stay at home order was issued Amber’s mom-life and work-life collided. Like many parents, she was suddenly juggling work and family 24/7. She found that many of her clients were experiencing the same problems and her services were needed more than ever.

Amber says while her clients vary, she’s hearing a common refrain. “Our illusion of control is broken. People are being more self-reflective for a moment,” said Amber. She says clients are starting to prioritize and look at what they can and cannot live without.

As for Amber, she’s come up with a game plan for how she handles the stay at home order. Because things are changing so quickly, Amber reevaluates her business needs every week. She knows that being open to flexibility and anchoring back to goals is key to managing in the new normal. She makes every effort to work smarter, not harder.

Amber makes it a point to take care of herself. She sleeps a little more and sets aside time to make decisions during moments of stillness, away from outside influences.

Most of all, Amber hasn’t changed the overall game plan of her business just yet. She keeps her eyes on the horizon, while still being cognizant of the present.

To find out more about Amber, check out this article she wrote for CalCPA aimed at early career professionals.

For a look at some of the other small business professionals we know that are thriving during these difficult times, check out our features on Killroy Pest Control, Wine and Liquor Mart, and Sift+Pour Bakery.