How Can Competitive Analysis Help You Grow Your Business?

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Scrutinizing the competition is a valuable tool. Learn the importance of competitive analysis and what it can add to your business strategy.

No matter what your customer base looks like, chances are they are moving more and more toward doing everything digitally, including how they find companies, products, and services. Your customers now have instant access to a host of brands to compare, so it’s more important than ever to stay ahead of the game and keep your competitive edge.

When attempting to grow or sustain your business, one of your main concerns should be finding out what the competition is up to. Almost all Fortune 500 companies (90 percent) have some kind of competitive intelligence strategy, according to research published by Emerald Publishing. And if the big companies are doing it, there’s likely a very good reason.

Studying what competitors are doing right is helpful to any growing business. But it’s equally worthwhile to analyze what these other organizations are doing wrong. This opens up a world of opportunities for entrepreneurs who are trying to stand out.

Here’s a look at how competitive analysis works and the key benefits of the practice.

Identifying key competitors

Before you can perform a competitive analysis, you have to know which companies and brands you should be analyzing. This involves identifying both direct and indirect competitors:

  • Direct competition: These are the companies that provide the same or very similar services to your business. You’re essentially targeting the same audience, and clients will compare you with these organizations when making a final decision.
  • Indirect competition: Indirect competitors are businesses that provide different products or services from you, but who are still vying for the attention of the same audience. They may be in the same industry as you, for example, even though exactly what they provide is different.

While direct competitors are the most important entities in competitive analysis, your indirect competition is still worthy of an evaluation.

Finding your closest competitors takes research. It’s smart to get feedback from your clients or potential customers when possible, asking them who else they are (or were) considering for certain goods or services. You can also ask them questions about how they were unhappy with another company, giving you more insight into how to stay competitive.

Another way to identify competitors is to engage with your customer base on social media and track the conversations they’re having. This also helps you figure out which competitors are using which social media platforms.

Measuring online metrics

Keyword research is one of the easiest ways to find competitors and evaluate the strategies they’re employing for marketing and outreach. What kinds of keywords are they using, and what are they not using? This can open you up to opportunities to bring in new keywords and outperform your competition, or to show you what part of their strategy is working.

Once you have this information, doing a simple Google search with these keywords will give you new insights and will also reveal competitors that you may not yet be aware of.

Another strategy for evaluating competition is using pay-per-click ad monitoring. Using a tool like Spyfu allows you to see what kind of advertisements your competitors are purchasing. This tool also shows you which keywords companies buy on Google AdWords.

Other metrics to track and analyze include your competitors’ backlinks, the questions their customers are asking online, social media mentions, and their online reputation overall.

The benefits of a competitive analysis

Now that you know the basics of how to get started, let’s go over the benefits of competitive analysis.

  1. Identify and take advantage of industry gaps. When you know what your competitors are doing, you can think through what they’re not doing, too. These gaps in the market give your company more opportunities to stay competitive by taking a different angle or offering something that’s missing.
  2. Keep up with industry trends. One of the most important parts of running is business is making sure you’re keenly aware of what’s going on in the industry. Competitive analysis keeps you on top of current trends and what’s no longer popular. This keeps you closer to your customer base and its needs.
  3. Market more effectively and grow your business. When you can reach more of your ideal audience and sell more of your products or services, this keeps your business on the path for continued growth.

Using the Entrepreneurial Operating System

Any entrepreneur knows how challenging it is to manage every part of your business while trying to focus on growth and outreach. The Entrepreneurial Operating System (EOS) has all the tools you need to stay competitive, improve the skills of your leadership team, obtain focus on what matters, and continue growing. Part of the EOS is ensuring you have the data you need for better decision-making, both within the business and about how to challenge your main competition.

At Provident CPA & Business Advisors, we are committed to helping you keep your business on track. We help you implement the EOS so you can define and achieve your vision. Contact the Provident team today to learn more about how we can help.

The 2 Faces of KPIs: People and Organizational Performance

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KPI can refer to key performance indicator or key person identification. Both of them are important for business growth and performance

The success of a business depends on a multitude of factors, from marketing to growth strategy to operational efficiency. But people really drive performance, and learning how to identify and measure weak links is a crucial step in the path to growth.

The term KPI is largely used in two different business contexts. Key performance indicator is a well-known term in the marketing world, as well as within operations management and analytical decision-making. And key person identification is also vital for many business strategies.

Though these definitions of KPI represent different concepts, they’re related. Knowing how to capitalize on both of them can make all the difference to performance.

Key performance indicator

Key performance indicators (KPIs) help a business track its progress toward specific goals and growth. A KPI is some kind of measure that tracks performance, allowing businesses to understand whether or not goals are being reached. KPIs help team members focus on a specific part of the business to measure success and help them create and evolve strategies and tactics based on data.

These kinds of KPIs require target setting and progress tracking, as well as indicator improvements and updates throughout the process. KPIs that improve business performance must show evidence of progress, must accurately measure the targets that have been set, and must be able to track important factors of operations including quality, timeliness, and efficiency.

KPIs can be related to varying aspects of the business including:

  • Financials
  • Customer metrics
  • People or employee metrics
  • Process and operations
  • Strategic measures
  • Project tracking

Key person identification

Now let’s look at the other definition of KPI: key person identification. This concept involves identifying who should be considered key personnel within the organization—those who perform essential functions for the business. Because the most important business operations and decisions are made by individuals, this knowledge is a crucial part of establishing a high-performing organization.

In the event of a disaster, for instance, you must know what tasks must be completed and by whom. This version of KPI asks: Who is performing vital functions?

Identifying these individuals first requires businesses to create a list of vital functions, and then recognize the personnel who perform them. It’s an important part of any company’s emergency preparedness plan. The contact information of these people should be saved with the plan, as well as a second list of individuals who could perform these functions if the key personnel aren’t available for some reason.

This is not limited to having redundant skills or retaining individuals to deal with emergencies, however. Placing the right key individuals in the proper roles—and, ideally, duplicating their skills in others—is vital to both consistent operation and scalable growth. Many businesses are limited by the centralized talents of certain employees or the fact that they put the wrong individuals in the wrong positions.

Key personnel have usually been with the organization for a long period, they have performed well in their role, they are trustworthy, they know where important business information resides, and they have a lot of knowledge about their given department and the business as a whole.

KPI helps businesses avoid the risks of key-person dependency (KPD), which include losing valuable knowledge and even revenue if a key person is lost. KPD risk occurs when a business could see losses in productivity, profits, or even reputation if a key person leaves.

These risks can be combated with back-up plans, having multiple key people learn and do the same tasks, and instituting a succession plan. Another strategy is purchasing key person insurance, which helps a business pay its bills and function while it finds a replacement after the loss of a vital employee.

The 2 faces of KPI are related

Business performance depends on both types of KPI. If measures can be identified and used for decision making, and if a plan for key personnel is put into place, your business can see big impacts on performance and steady growth. Tracking key performance indicators helps you to identify key personnel, so one informs the other.

The EOS (Entrepreneurial Operating System) is a solution that helps your business identify key people and key performance indicators.

You can create and share your vision so that everyone is aligned across teams, ensure that the vision is being executed, and help leaders become and stay effective. Quarterly rocks, annual goals, and three-year goals, as well as many other benchmarks, are assessed, in part, by defining key performance indicators.

The People Component of the EOS focuses on the individuals who drive performance. It provides an accountability chart that delineates the structure, roles, and responsibilities of employees to help keep you on track to growth. Also included is the People Analyzer, which helps you identify whether or not your people are right for the business, a specific role, and your vision. It evaluates an employee’s GWC: whether a person Gets it, Wants it, and has the Capacity to do the job.

Provident CPA & Business Advisors helps entrepreneurs utilize the EOS to get the most out of their business, helping them evaluate their people and performance components to ensure they have the tools for success. Contact us today to learn more.

Why the Wayfair Ruling Matters for Sales Tax

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Physical presence in a state no longer determines the sales tax that’s due. What does this mean for retail businesses?

Sales tax is not always a straightforward topic for today’s retailers, especially with online retail booming and all of the uncertainties in the market due to differing state economic nexus laws.

According to a Deloitte poll, 75 percent of retailers said that their business isn’t or is only somewhat prepared to adequately calculate, collect, and remit sales tax after the South Dakota v. Wayfair case last year. This ruling overturned the precedent that physical presence is required in a state for a retailer to collect sales tax from that state’s purchasers. A third of respondents in the survey said that decisions regarding taxability would be their biggest compliance challenge after Wayfair.

The Wayfair ruling definitively removed the physical presence requirement for state sales tax to be imposed and there are other important compliance considerations for retailers moving forward. Let’s take a look at what the Wayfair case was all about and how it will continue impacting retail businesses in the future.

What happened in the Wayfair case?

In June 2018, South Dakota won a suit brought against the e-commerce giant Wayfair that had escalated to the Supreme Court. The case was centered around the argument of whether or not businesses have to be physically present in a state in order to collect and remit state sales tax.

The court’s ruling overturned a 1992 Supreme Court decision that had interpreted the language “substantial nexus” as a physical presence requirement for a state to impose sales tax on retailers. The new Wayfair ruling determined that an “economic” presence in a state creates sales tax nexus, not just a physical presence.

The outcome essentially eliminated physical presence as a requirement for sales tax in South Dakota, as long as the seller meets the following economic criteria:

  • Gross revenue from tangible personal property sales, products transferred electronically, or services delivered into the state is more than $100,000.
  • Tangible personal property was sold, any product was transferred electronically, or services were delivered into the state in 200 or more separate transactions.

In short, as long as these revenue and transaction thresholds are met, retailers are obligated to collect and remit state sales tax if they do not have a physical presence in South Dakota.

This is a significant ruling, as there are a massive number of internet retailers that sell within states where they have no physical locations. The court found that the law in South Dakota “minimizes the burden on interstate commerce,” according to the Tax Foundation, and other states will likely follow suit, or the broader economic nexus laws they already have in place will stay standing.

How does this impact retailers?

Because of Wayfair, online retailers will likely be required to collect and remit sales tax in more states than they did before the ruling. More careful attention will need to be paid moving forward to ensure that these businesses are collecting and remitting all necessary sales tax on these transactions, which can become complicated.

Deloitte outlines actions that retailers can take to ensure they’re aligned with the changes brought by Wayfair. Key among these are:

  • Identifying and prioritizing all of the jurisdictions where the retailer’s business takes place
  • Making sure that practices are aligned with the statutory regimes within those jurisdictions
  • Updating policies to align with any new tax-filing procedures and requirements
  • Coming up with strategies to become and continue to be compliant
  • Considering other indirect tax impacts that may arise because of these changes

Other steps you can take include educating stakeholders, identifying any new technology and IT system requirements, and developing a plan to deal with any gaps and increased exposures in the business.

It’s also important to continue to monitor any changes in state regulations to ensure that you’re not putting your business at risk for liabilities related to uncollected or unreported tax. While economic nexus laws haven’t been applied retroactively to online retailers, it’s time to ensure you’re compliant moving forward.

Your best bet? Talk to a tax professional to come up with the right action plan. This will ensure that you’re not missing anything crucial for your tax liability as state sales tax laws may continue to change.  Get in touch with the team at Provident CPA & Business Advisors to discuss your options and your plan for the future.

How Business Partnerships Are Taxed

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Working with a partner brings its own particular set of tax rules. Entrepreneurs should be aware of them to avoid penalties and risks

A partnership is a particular type of business structure that has its own set of tax requirements. There are several benefits to forming partnerships, including the combined skills, knowledge, and resources of the co-owners. And understanding how they operate is key to understanding each year’s tax responsibilities.

The IRS classifies partnerships as pass-through entities, meaning that they are not separate entities from their owners. Each partner contributes something to the business, whether it’s property, labor, or money, and then receives a share of the income or loss.

Instead of partners receiving a regular salary, as they would as an employee, they get a certain amount of money each year based on their share of the partnership, which is usually outlined in a partnership agreement.

Tax reporting requirements

Come tax time, partnerships don’t have to pay income tax themselves. All income and losses are passed through to the partners, who then report that income or loss on their personal income tax returns, Form 1040, Schedule E.

Even though partnerships don’t pay federal income tax, an annual information return must still be filed with the IRS which reports the business’s income, deductions, gains, losses, and more. The forms that partnerships are required to submit are Form 1065, an informational return, and Schedule K-1, which delineates the partners’ shares of the business’s income and losses. Schedule K-1 is then filed with each partner’s personal tax return.

Partnerships also may need to file a state tax return and pay excise, franchise, or sales taxes. Since each state has different requirements, it’s important to work with a tax professional to ensure that you’re covering all aspects of your responsibilities.

Estimated taxes for partners

Because partners don’t have an employer taking out income taxes throughout the year, they must pay estimated quarterly taxes to the IRS on their share of profits. This amount is known as a partner’s distributive share, which is outlined in the partnership agreement. It’s important to note that even if this amount doesn’t match what a partner actually withdrew from the business, that is still the estimated amount on which taxes are owed.

These estimated self-employment taxes consist of Social Security and Medicare contributions that would normally be taken out by an employer. The bad news is that partners could end up paying twice as much in taxes than they would if they were a regular employee since the contributions made by employees are usually matched by the employer. The good news is that half of a partner’s self-employment tax contribution is deductible, helping lower the tax burden.

Pass-through and other deductions

As a partner, you may be able to deduct 20 percent of business income with the pass-through deduction that was introduced by the Tax Cuts and Jobs Act, known as the qualified business income (QBI) deduction. Owners of sole proprietorships, partnerships, S corporations, and some trusts and estates that meet certain qualifications can deduct up to 20 percent of their QBI, plus 20 percent of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income.

For 2019, $321,400 is the income threshold if a taxpayer is married and filing jointly, and $160,700 if they are single. As long as income is under this threshold, the pass-through deduction is 20 percent of QBI.

Other applicable deductions are the costs of the partnership operations, including travel expenses, start-up costs, and other small business tax deductions. These deductions lower your tax burden by lowering the profit you report to the IRS.

Working with a tax professional

Knowing the basics of how partnerships are taxed is important, but it’s a good idea to meet with a tax professional to ensure that you do everything correctly. Paying estimated self-employment taxes and claiming deductions are complicated for partnerships, so you never want to risk making a mistake or overlooking a tax break. This is especially crucial if you’ve just formed a partnership and are filing the informational tax return or are paying estimated self-employment taxes for the first time.

For strategic tax guidance, get in touch with Provident CPA & Business Advisors. We help clients pay the least amount of tax legally possible, help you get the most out of your chosen business structure, and work with entrepreneurs to maximize growth and profit.