David Brown: Get the IRS off Your Back

When is your break-even date? 

BY DAVID BROWN

Published in the June 2012 issue

Congratulations. It’s April 30, you’ve just finished working for the government. One-third of a year. For an average business owner, that is how long it takes to meet all your tax obligations and reach the point where you can start making money for yourself in any given year.

Now this is a simplification but it is a very sobering way to see how much time and energy you spend providing for others. When you consider that jewelry stores usually make the most money over December it would, on average, be even later than this before the typical store owner has made enough money to meet all his government obligations and start providing for himself.

Now, if you really want to depress yourself you could look at this in terms of sales dollars, and how much goes back out to other people before there is anything left for you.

Let’s take the typical store, which makes about an 8 percent profit after tax from its annual revenue. In this case, the store is working hard providing for vendors, staff, utilities and of course, the beloved government, until after the end of November — and that’s assuming that revenue comes in equal installments each month, (and I’ve yet to meet a jeweler where this happens).

Truth be known, most stores’ break-even date is somewhere in December — this makes your holiday season trading all the more important.

Of course, the rosy flipside of this is that each extra sale you make after meeting your purchase costs, is all yours (excluding additional variable costs such as packaging). The main thing is you’ve met your primary obligations and you’re now working, and earning, for yourself.

So what’s the advantage in knowing this? Getting the IRS off your back can be a powerful motivator during the year. There’s nothing like frustration to keep you focused on moving your business forward and generating more sales.

Take time out to celebrate the passing of the allotted day. (Yes, it’s a little arbitrary but circling a date on the calendar can keep you on track during the year, and you can do the same for other expenses you get off your back).

Beside your Taxes Paid date you can set arbitrary dates for when you have met your obligations for Staff, Rent and other expenses for the year. Make sure you celebrate each event with a bottle of wine or a meal out, and remind yourself that you are one step closer to having no other obligations other than to yourself.

It can be quite a satisfying feeling when the last payment is met and the profits start to flow!

About the Author: David Brown is President of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports contact Carol Druan at carol@edgeretailacademy.com or Phone toll free (877) 5698657 Edge Retail Academy, 1983 Oliver Springs Street Henderson NV 89052-8502, USA