Mar
27
2023

Everything You Need to Know About Investing

To become successful with your money, you have to make your money work for you. You sell your labor which in return makes you money. By making each individual dollar work for you, this in return makes you wealthy over time. There are a plethora of investing opportunities out there. The key is to figure out which one is the right one for your financial situation.

Stocks
The most popular of all investing opportunities, are stocks. Stocks are probably the main thing you think of when you hear of investing. When you buy a stock, you buy partial ownership of a company. Stocks range anywhere from $2, to $12,000, which can appeal to a large variety of people. To be successful when trading stocks, you have to buy low and sell high. Of course this isn’t easy, considering the market is always fluctuating. You need to watch the history of the company, know the PE Ratio, the day range, the 52 week range, etc. Knowing this information can help you predict if the stock will go up or down. You can make a lot of money investing in stocks, which means you can also lose a lot of money. You want to keep in mind that most investments in stocks are long term investments. It is very risky investing, but if you do the proper research of the history of the company, you can get a very good return.

Stock Investing Tips

1.) Have the Right Expectations
When you are investing in stocks, you want to make sure you aren’t expecting to become Warren Buffet over night. It just wont happen. You want to make sure you do the proper amount of research, and make sure you know the history of the market as well as the company you are investing in. When investing in stocks, the return is around 10%-13%. You don’t want to make hasty decisions and buy and sell a lot just because you aren’t making the money you expected. Make sure you know how long you are keeping an investment, and then make a commitment. This will help you focus on the principles.

2.) Don’t Listen to the Media
Don’t get caught up in what everyone is talking about and what is being said around you. It will take your decision from being based on research and history, to just “hear-say”. This will hurt your investments immensely. Most of the hype and other things that are being said are just the daily fluctuation of the market.

3.) Stay Focused
You want to make sure you are putting all your effort and focus into your investments. Once you buy a stock, you own part of a company. Make sure you treat it the way it is and make sure you do the proper research of all aspects of what you’re investing in. Doing your research can change your investment of making a profit of $15,000, to losing $15,000. In the end, it’s always worth it to do the extra work.

Mutual Funds
When you invest in Mutual Funds, you are pooling your money with a number of other investors. You then pay someone to professionally manage and choose each individual security for you. There are a variety of different mutual funds you can choose to invest in, which range to fit your investment strategy.
3 Types of Mutual Funds
1.) Open-Ended
2.) Unit Investment Trust
3.) Close-Ended

Mutual Fund Investing Tips

1.) Look at the Fees
Always look at the fees involved when investing in Mutual Funds. When you pay more for something, this usually means that you are going to be getting a better product or service, right? Yes! Makes sure you find the best deal, but make sure you are investing the right amount of money in the right places. It can change the course of the whole investment in the long run.

2.) Research the History
One thing you can do to prepare an investment is to check out the history of the Mutual Fund. Just like anything, the history shows how well it has performed, and can be a good indicator. This can directly tell you if it will be a good investment whether it be long term or short term. Another thing you want to look at, is the asset of the fund. If it’s doing good, and there is a community of people investing in it, it can tell you if its a smart idea to invest yourself. Always check the history of any investment before you decide to purchase.

3.) Look at the Contract
You never know what is all involved until you take a detailed look at the prospectus provided by the fund. You want to make sure you don’t just know bits and pieces of what’s involved, but everything there is to know, and then some. Make sure you know all the fees involved with buying and selling funds, and if there are international fees required. Knowing this can help you determine if the company is a solid company where you can make money, or if you are getting into something you will regret in the future.

Bank Investments
Bank accounts are one of the simplest form of investment. Most banks give you a very small percentage for opening a bank account and giving them your money. This percentage barely beats the rise of inflation, so unless you are keeping hundreds of thousands of dollars in the bank, you won’t be creating any wealth from this form of investment. Another way to invest in your bank is a CD, or Certificate of Deposit. A CD if very similar to a bank account, but they are usually for a fixed amount of time. They can be monthly, every six months, a year, etc. the CD is then held until its maturity date, and paid back with interest. A Certificate of Deposit usually earns more money than an account at which you can withdrawal the money at any time, like a bank account.

Alternative Investments
Apart from the basic investments, there are other special securities. These investments include gold/silver, real estate, etc. These investments are speculative and can be very high profit, however; you need to have the knowledge.

1.) Gold & Silver
The first thing you want to do before you invest in gold or silver, is to look at the market and decide if now is the best time to invest in precious metals. You can also talk to a professional and decide when the best time to buy and sell would be. You want to make sure you are familiar with the variety of ways to invest in silver. You can invest in silver mining companies, silver ETF’s, silver futures, silver bullion, and also silver coins. You want to make sure the Exchange Traded Funds (ETF) are backed by physical gold and silver. Another thing to remember, is to not just own a paper owning, but the actual precious metal as well.

Mar
26
2023

A Brief Introduction to Captive Insurance

Over the past 20 years, many small businesses have begun to insure their own risks through a product called “Captive Insurance.” Small captives (also known as single-parent captives) are insurance companies established by the owners of closely held businesses looking to insure risks that are either too costly or too difficult to insure through the traditional insurance marketplace. Brad Barros, an expert in the field of captive insurance, explains how “all captives are treated as corporations and must be managed in a method consistent with rules established with both the IRS and the appropriate insurance regulator.”

According to Barros, often single parent captives are owned by a trust, partnership or other structure established by the premium payer or his family. When properly designed and administered, a business can make tax-deductible premium payments to their related-party insurance company. Depending on circumstances, underwriting profits, if any, can be paid out to the owners as dividends, and profits from liquidation of the company may be taxed at capital gains.

Premium payers and their captives may garner tax benefits only when the captive operates as a real insurance company. Alternatively, advisers and business owners who use captives as estate planning tools, asset protection vehicles, tax deferral or other benefits not related to the true business purpose of an insurance company may face grave regulatory and tax consequences.

Many captive insurance companies are often formed by US businesses in jurisdictions outside of the United States. The reason for this is that foreign jurisdictions offer lower costs and greater flexibility than their US counterparts. As a rule, US businesses can use foreign-based insurance companies so long as the jurisdiction meets the insurance regulatory standards required by the Internal Revenue Service (IRS).

There are several notable foreign jurisdictions whose insurance regulations are recognized as safe and effective. These include Bermuda and St. Lucia. Bermuda, while more expensive than other jurisdictions, is home to many of the largest insurance companies in the world. St. Lucia, a more reasonably priced location for smaller captives, is noteworthy for statutes that are both progressive and compliant. St. Lucia is also acclaimed for recently passing “Incorporated Cell” legislation, modeled after similar statutes in Washington, DC.

Common Captive Insurance Abuses; While captives remain highly beneficial to many businesses, some industry professionals have begun to improperly market and misuse these structures for purposes other than those intended by Congress. The abuses include the following:

1. Improper risk shifting and risk distribution, aka “Bogus Risk Pools”

2. High deductibles in captive-pooled arrangements; Re insuring captives through private placement variable life insurance schemes

3. Improper marketing

4. Inappropriate life insurance integration

Meeting the high standards imposed by the IRS and local insurance regulators can be a complex and expensive proposition and should only be done with the assistance of competent and experienced counsel. The ramifications of failing to be an insurance company can be devastating and may include the following penalties:

1. Loss of all deductions on premiums received by the insurance company

2. Loss of all deductions from the premium payer

3. Forced distribution or liquidation of all assets from the insurance company effectuating additional taxes for capital gains or dividends

4. Potential adverse tax treatment as a Controlled Foreign Corporation

5. Potential adverse tax treatment as a Personal Foreign Holding Company (PFHC)

6. Potential regulatory penalties imposed by the insuring jurisdiction

7. Potential penalties and interest imposed by the IRS.

All in all, the tax consequences may be greater than 100% of the premiums paid to the captive. In addition, attorneys, CPA’s wealth advisors and their clients may be treated as tax shelter promoters by the IRS, causing fines as great as $100,000 or more per transaction.

Clearly, establishing a captive insurance company is not something that should be taken lightly. It is critical that businesses seeking to establish a captive work with competent attorneys and accountants who have the requisite knowledge and experience necessary to avoid the pitfalls associated with abusive or poorly designed insurance structures. A general rule of thumb is that a captive insurance product should have a legal opinion covering the essential elements of the program. It is well recognized that the opinion should be provided by an independent, regional or national law firm.

Risk Shifting and Risk Distribution Abuses; Two key elements of insurance are those of shifting risk from the insured party to others (risk shifting) and subsequently allocating risk amongst a large pool of insured’s (risk distribution). After many years of litigation, in 2005 the IRS released a Revenue Ruling (2005-40) describing the essential elements required in order to meet risk shifting and distribution requirements.

For those who are self-insured, the use of the captive structure approved in Rev. Ruling 2005-40 has two advantages. First, the parent does not have to share risks with any other parties. In Ruling 2005-40, the IRS announced that the risks can be shared within the same economic family as long as the separate subsidiary companies ( a minimum of 7 are required) are formed for non-tax business reasons, and that the separateness of these subsidiaries also has a business reason. Furthermore, “risk distribution” is afforded so long as no insured subsidiary has provided more than 15% or less than 5% of the premiums held by the captive. Second, the special provisions of insurance law allowing captives to take a current deduction for an estimate of future losses, and in some circumstances shelter the income earned on the investment of the reserves, reduces the cash flow needed to fund future claims from about 25% to nearly 50%. In other words, a well-designed captive that meets the requirements of 2005-40 can bring about a cost savings of 25% or more.

While some businesses can meet the requirements of 2005-40 within their own pool of related entities, most privately held companies cannot. Therefore, it is common for captives to purchase “third party risk” from other insurance companies, often spending 4% to 8% per year on the amount of coverage necessary to meet the IRS requirements.

One of the essential elements of the purchased risk is that there is a reasonable likelihood of loss. Because of this exposure, some promoters have attempted to circumvent the intention of Revenue Ruling 2005-40 by directing their clients into “bogus risk pools.” In this somewhat common scenario, an attorney or other promoter will have 10 or more of their clients’ captives enter into a collective risk-sharing agreement. Included in the agreement is a written or unwritten agreement not to make claims on the pool. The clients like this arrangement because they get all of the tax benefits of owning a captive insurance company without the risk associated with insurance. Unfortunately for these businesses, the IRS views these types of arrangements as something other than insurance.

Risk sharing agreements such as these are considered without merit and should be avoided at all costs. They amount to nothing more than a glorified pretax savings account. If it can be shown that a risk pool is bogus, the protective tax status of the captive can be denied and the severe tax ramifications described above will be enforced.

It is well known that the IRS looks at arrangements between owners of captives with great suspicion. The gold standard in the industry is to purchase third party risk from an insurance company. Anything less opens the door to potentially catastrophic consequences.

Abusively High Deductibles; Some promoters sell captives, and then have their captives participate in a large risk pool with a high deductible. Most losses fall within the deductible and are paid by the captive, not the risk pool.

These promoters may advise their clients that since the deductible is so high, there is no real likelihood of third party claims. The problem with this type of arrangement is that the deductible is so high that the captive fails to meet the standards set forth by the IRS. The captive looks more like a sophisticated pre tax savings account: not an insurance company.

A separate concern is that the clients may be advised that they can deduct all their premiums paid into the risk pool. In the case where the risk pool has few or no claims (compared to the losses retained by the participating captives using a high deductible), the premiums allocated to the risk pool are simply too high. If claims don’t occur, then premiums should be reduced. In this scenario, if challenged, the IRS will disallow the deduction made by the captive for unnecessary premiums ceded to the risk pool. The IRS may also treat the captive as something other than an insurance company because it did not meet the standards set forth in 2005-40 and previous related rulings.

Private Placement Variable Life Reinsurance Schemes; Over the years promoters have attempted to create captive solutions designed to provide abusive tax free benefits or “exit strategies” from captives. One of the more popular schemes is where a business establishes or works with a captive insurance company, and then remits to a Reinsurance Company that portion of the premium commensurate with the portion of the risk re-insured.

Typically, the Reinsurance Company is wholly-owned by a foreign life insurance company. The legal owner of the reinsurance cell is a foreign property and casualty insurance company that is not subject to U.S. income taxation. Practically, ownership of the Reinsurance Company can be traced to the cash value of a life insurance policy a foreign life insurance company issued to the principal owner of the Business, or a related party, and which insures the principle owner or a related party.

1. The IRS may apply the sham-transaction doctrine.

2. The IRS may challenge the use of a reinsurance agreement as an improper attempt to divert income from a taxable entity to a tax-exempt entity and will reallocate income.

3. The life insurance policy issued to the Company may not qualify as life insurance for U.S. Federal income tax purposes because it violates the investor control restrictions.

Investor Control; The IRS has reiterated in its published revenue rulings, its private letter rulings, and its other administrative pronouncements, that the owner of a life insurance policy will be considered the income tax owner of the assets legally owned by the life insurance policy if the policy owner possesses “incidents of ownership” in those assets. Generally, in order for the life insurance company to be considered the owner of the assets in a separate account, control over individual investment decisions must not be in the hands of the policy owner.

The IRS prohibits the policy owner, or a party related to the policy holder, from having any right, either directly or indirectly, to require the insurance company, or the separate account, to acquire any particular asset with the funds in the separate account. In effect, the policy owner cannot tell the life insurance company what particular assets to invest in. And, the IRS has announced that there cannot be any prearranged plan or oral understanding as to what specific assets can be invested in by the separate account (commonly referred to as “indirect investor control”). And, in a continuing series of private letter rulings, the IRS consistently applies a look-through approach with respect to investments made by separate accounts of life insurance policies to find indirect investor control. Recently, the IRS issued published guidelines on when the investor control restriction is violated. This guidance discusses reasonable and unreasonable levels of policy owner participation, thereby establishing safe harbors and impermissible levels of investor control.

The ultimate factual determination is straight-forward. Any court will ask whether there was an understanding, be it orally communicated or tacitly understood, that the separate account of the life insurance policy will invest its funds in a reinsurance company that issued reinsurance for a property and casualty policy that insured the risks of a business where the life insurance policy owner and the person insured under the life insurance policy are related to or are the same person as the owner of the business deducting the payment of the property and casualty insurance premiums?

If this can be answered in the affirmative, then the IRS should be able to successfully convince the Tax Court that the investor control restriction is violated. It then follows that the income earned by the life insurance policy is taxable to the life insurance policy owner as it is earned.

The investor control restriction is violated in the structure described above as these schemes generally provide that the Reinsurance Company will be owned by the segregated account of a life insurance policy insuring the life of the owner of the Business of a person related to the owner of the Business. If one draws a circle, all of the monies paid as premiums by the Business cannot become available for unrelated, third-parties. Therefore, any court looking at this structure could easily conclude that each step in the structure was prearranged, and that the investor control restriction is violated.

Suffice it to say that the IRS announced in Notice 2002-70, 2002-2 C.B. 765, that it would apply both the sham transaction doctrine and §§ 482 or 845 to reallocate income from a non-taxable entity to a taxable entity to situations involving property and casualty reinsurance arrangements similar to the described reinsurance structure.

Even if the property and casualty premiums are reasonable and satisfy the risk sharing and risk distribution requirements so that the payment of these premiums is deductible in full for U.S. income tax purposes, the ability of the Business to currently deduct its premium payments on its U.S. income tax returns is entirely separate from the question of whether the life insurance policy qualifies as life insurance for U.S. income tax purposes.

Inappropriate Marketing; One of the ways in which captives are sold is through aggressive marketing designed to highlight benefits other than real business purpose. Captives are corporations. As such, they can offer valuable planning opportunities to shareholders. However, any potential benefits, including asset protection, estate planning, tax advantaged investing, etc., must be secondary to the real business purpose of the insurance company.

Recently, a large regional bank began offering “business and estate planning captives” to customers of their trust department. Again, a rule of thumb with captives is that they must operate as real insurance companies. Real insurance companies sell insurance, not “estate planning” benefits. The IRS may use abusive sales promotion materials from a promoter to deny the compliance and subsequent deductions related to a captive. Given the substantial risks associated with improper promotion, a safe bet is to only work with captive promoters whose sales materials focus on captive insurance company ownership; not estate, asset protection and investment planning benefits. Better still would be for a promoter to have a large and independent regional or national law firm review their materials for compliance and confirm in writing that the materials meet the standards set forth by the IRS.

The IRS can look back several years to abusive materials, and then suspecting that a promoter is marketing an abusive tax shelter, begin a costly and potentially devastating examination of the insured’s and marketers.

Abusive Life Insurance Arrangements; A recent concern is the integration of small captives with life insurance policies. Small captives treated under section 831(b) have no statutory authority to deduct life premiums. Also, if a small captive uses life insurance as an investment, the cash value of the life policy can be taxable to the captive, and then be taxable again when distributed to the ultimate beneficial owner. The consequence of this double taxation is to devastate the efficacy of the life insurance and, it extends serious levels of liability to any accountant recommends the plan or even signs the tax return of the business that pays premiums to the captive.

The IRS is aware that several large insurance companies are promoting their life insurance policies as investments with small captives. The outcome looks eerily like that of the thousands of 419 and 412(I) plans that are currently under audit.

All in all Captive insurance arrangements can be tremendously beneficial. Unlike in the past, there are now clear rules and case histories defining what constitutes a properly designed, marketed and managed insurance company. Unfortunately, some promoters abuse, bend and twist the rules in order to sell more captives. Often, the business owner who is purchasing a captive is unaware of the enormous risk he or she faces because the promoter acted improperly. Sadly, it is the insured and the beneficial owner of the captive who face painful consequences when their insurance company is deemed to be abusive or non-compliant. The captive industry has skilled professionals providing compliant services. Better to use an expert supported by a major law firm than a slick promoter who sells something that sounds too good to be true.

Mar
25
2023

Car Finance – What You Should Know About Dealer Finance

Car finance has become big business. A huge number of new and used car buyers in the UK are making their vehicle purchase on finance of some sort. It might be in the form of a bank loan, finance from the dealership, leasing, credit card, the trusty ‘Bank of Mum & Dad’, or myriad other forms of finance, but relatively few people actually buy a car with their own cash anymore.

A generation ago, a private car buyer with, say, £8,000 cash to spend would usually have bought a car up to the value of £8,000. Today, that same £8,000 is more likely to be used as a deposit on a car which could be worth many tens of thousands, followed by up to five years of monthly payments.

With various manufacturers and dealers claiming that anywhere between 40% and 87% of car purchases are today being made on finance of some sort, it is not surprising that there are lots of people jumping on the car finance bandwagon to profit from buyers’ desires to have the newest, flashiest car available within their monthly cashflow limits.

The appeal of financing a car is very straightforward; you can buy a car which costs a lot more than you can afford up-front, but can (hopefully) manage in small monthly chunks of cash over a period of time. The problem with car finance is that many buyers don’t realise that they usually end up paying far more than the face value of the car, and they don’t read the fine print of car finance agreements to understand the implications of what they’re signing up for.

For clarification, this author is neither pro- or anti-finance when buying a car. What you must be wary of, however, are the full implications of financing a car – not just when you buy the car, but over the full term of the finance and even afterwards. The industry is heavily regulated in the UK, but a regulator can’t make you read documents carefully or force you to make prudent car finance decisions.

Financing through the dealership

For many people, financing the car through the dealership where you are buying the car is very convenient. There are also often national offers and programs which can make financing the car through the dealer an attractive option.

This blog will focus on the two main types of car finance offered by car dealers for private car buyers: the Hire Purchase (HP) and the Personal Contract Purchase (PCP), with a brief mention of a third, the Lease Purchase (LP). Leasing contracts will be discussed in another blog coming soon.

What is a Hire Purchase?

An HP is quite like a mortgage on your house; you pay a deposit up-front and then pay the rest off over an agreed period (usually 18-60 months). Once you have made your final payment, the car is officially yours. This is the way that car finance has operated for many years, but is now starting to lose favour against the PCP option below.

There are several benefits to a Hire Purchase. It is simple to understand (deposit plus a number of fixed monthly payments), and the buyer can choose the deposit and the term (number of payments) to suit their needs. You can choose a term of up to five years (60 months), which is longer than most other finance options. You can usually cancel the agreement at any time if your circumstances change without massive penalties (although the amount owing may be more than your car is worth early on in the agreement term). Usually you will end up paying less in total with an HP than a PCP if you plan to keep the car after the finance is paid off.

The main disadvantage of an HP compared to a PCP is higher monthly payments, meaning the value of the car you can usually afford is less.

An HP is usually best for buyers who; plan to keep their cars for a long time (ie – longer than the finance term), have a large deposit, or want a simple car finance plan with no sting in the tail at the end of the agreement.

What is a Personal Contract Purchase?

A PCP is often given other names by manufacturer finance companies (eg – BMW Select, Volkswagen Solutions, Toyota Access, etc.), and is very popular but more complicated than an HP. Most new car finance offers advertised these days are PCPs, and usually a dealer will try and push you towards a PCP over an HP because it is more likely to be better for them.

Like the HP above, you pay a deposit and have monthly payments over a term. However, the monthly payments are lower and/or the term is shorter (usually a max. of 48 months), because you are not paying off the whole car. At the end of the term, there is still a large chunk of the finance unpaid. This is usually called a GMFV (Guaranteed Minimum Future Value). The car finance company guarantees that, within certain conditions, the car will be worth at least as much as the remaining finance owed. This gives you three options:

1) Give the car back. You won’t get any money back, but you won’t have to pay out the remainder. This means that you have effectively been renting the car for the whole time.

2) Pay out the remaining amount owed (the GMFV) and keep the car. Given that this amount could be many thousands of pounds, it is not usually a viable option for most people (which is why they were financing the car in the first place), which usually leads to…

3) Part-exchange the car for a new (or newer) one. The dealer will assess your car’s value and take care of the finance payout. If your car is worth more than the GMFV, you can use the difference (equity) as a deposit on your next car.

The PCP is best suited for people who want a new or near-new car and fully intend to change it at the end of the agreement (or possibly even sooner). For a private buyer, it usually works out cheaper than a lease or contract hire finance product. You are not tied into going back to the same manufacturer or dealership for your next car, as any dealer can pay out the finance for your car and conclude the agreement on your behalf. It is also good for buyers who want a more expensive car with a lower cashflow than is usually possible with an HP.

The disadvantage of a PCP is that it tends to lock you into a cycle of changing your car every few years to avoid a large payout at the end of the agreement (the GMFV). Borrowing money to pay out the GMFV and keep the car usually gives you a monthly payment that is very little cheaper than starting again on a new PCP with a new car, so it nearly always sways the owner into replacing it with another car. For this reason, manufacturers and dealers love PCPs because it keeps you coming back every 3 years rather than keeping your car for 5-10 years!

What is a Lease Purchase?

An LP is a bit of a hybrid between an HP and a PCP. You have a deposit and low monthly payments like a PCP, with a large final payment at the end of the agreement. However, unlike a PCP, this final payment (often called a balloon) is not guaranteed. This means that if your car is worth less than the amount owing and you want to sell/part-exchange it, you would have to pay out any difference (called negative equity) before even thinking about paying a deposit on your next car.

Read the fine print

What is absolutely essential for anyone buying a car on finance is to read the contract and consider it carefully before signing anything. Plenty of people make the mistake of buying a car on finance and then end up being unable to make their monthly payments. Given that your finance period may last for the next five years, it is critical that you carefully consider what may happen in your life over those next five years. Many heavily-financed sports cars have had to be returned, often with serious financial consequences for the owners, because of unexpected pregnancies!

As part of purchasing a car on finance, you should consider and discuss all of the various finance options available and make yourself aware of the pros and cons of different car finance products to ensure you are making informed decisions about your money.

Mar
24
2023

How To Start A Service Business

Setting Up A Service Based Business For Beginners

Although there are exceptions where both entities are entwined into one, most basics of the business is built around one unifying category so that the intentions and goals are clearly and visibly set.

This distinction allows the individual to then decide of the accompanying tools that should be chosen for the purpose of enhancing the business experience and also to contribute positively to the ease of running the business entity.

Most service based forays are labor intensive which the business entity revolves around. This is either packaged as the selling of expertise in a particular field or the selling of the actual “engines” that produce the desired outcome that bring in the revenue.

Either way the quality, efficiency, attention and detail that is exercised within the business are the eventual elements that are going to make or break the business foray into the revenue churning mechanism.

Basically offering the time frame required to create a particular service or to provide the content of the project itself is how the cost factor is calculated and the profits are gained in the service based business.

Therefore, the individual would have to factor in the cost of business entity by the labor intensive tool it provides, in order to provide a suitable base line for the eventual calculation of the profits and the pricing suitable to be demanded.

Alternatively the value of the service based business can be calculated on the value of the service being provided in a consultancy capacity which is evaluated against the insights the said service will bring to the company with the intention of creating a system thereby the said company is able to save or be more cost effective.

Being able to identify a suitable and good service based company is very important if the new business or existing business owner intends to hire its services to help enhance the site’s potential.

Identifying the characteristics of a particular service based company and matching them to the needs of the site in question will allow the business owner is make an informed decision of the merits of the chosen service.

Do Your Research First-

Customer perception of a company is very important to the progress and eventual success of any business endeavor, therefore it is very important to be able to identify the appropriate service based one to best suit the individual’s needs.

Being able to provide good service should always be the prime concern of any business entity especially if its revenue earning power depends on this one factor.

Market research is often the best way to identify the companies that have good track records and are capable of delivering what they promise.

This information can easily be sourced over the internet as these companies will be active in presenting their achievements for all interested parties to view.

It is also an excellent platform for potential clients and competitors alike to note the merits of the presenting service based company.

Being well-placed on the search engine rankings will allow the service based company to be more visible and thus make it easier to garner the intended customer base to ensure its consistent success.

The features of a good service based company would have to include the value added by the business entity from the input stage to the output stage where the results are then measured by its success rates.

These input stages are often regarded as the commodity phase and the processes that it is designed around have to ensure the successful output stage which is where the end desired results are more than adequately met.

Making a sale or pushing a business proposition is never an easy task to accomplish for some, therefore having the relevant assisting tools at hand should provide the individual with some encouragement to see the process to success.

Marketing Skills-

The following are some tools that can prove to be of great assistance to any individual intending to beef up their marketing skills:

Making use of as many online tools as possible to promote the business or product intended is one way to start the enhancement of the marketing skills venture.

Using blogs to create the interest and visibility for the item is something that should be considered as this is one way to get the attention of the target audience without much cost incurred.

Working together with others is another way to beef up an individual’s marketing skills. Being part of a team effort where the individual’s talents and contributions are noticed and acknowledged is definitely an encouraging factor and helps the individual to be more adventurous and keen on honing his or her skills further.

Availing one’s self to be listed on freelance job sites is also another way of beefing up the marketing skill of an individual. The fact that the visibility factor the site can bring to the individual will help the person focus more on ensuring the eventual connections made are optimized and locked in at the earliest opportunity.

Social websites are also a good platform to introduce one’s marketing skills to the masses.

Because of the competitiveness of all the participants in this particular platform the individual will subconsciously be forced to step out and ensure his or her participation leaves a positive impact on the interactions.

Showcasing all the positive skill of the marketing process will eventually earn the respect and attention of others looking for such services.

Create Your Website-

Creating a website can be a challenging feat for those not very internet savvy, however it is not altogether a task that is formidable in nature. With a little startup knowledge and tips anyone can successfully attempt to put together their own website.

The following are some guidelines that will help ease the process:

Registering the suitable domain name is the first step to take when designing a website.

The choice of this domain name should ideally take into consideration the relevance the name has to the intended site, an easy to remember reference, one that is short yet descriptive and whether it has the right extensions tagged to it such as.net,.com,.org.

The next step would be to set up a web host account and this would entail the picking one that can provide the services the individual would need for the website.

Although cost is always a factor for every business endeavor, it would be advisable to avoid using the cheaper and inexperienced ones available as this might end up costing the individual in the future.

The follow up step would be to point the domain to the web host in place.

This is a fairly simple exercise, however if the individual faces any potential problems along the way there are always assisting platforms to tap into to get the relevant help or explanations.

Getting a word press linked to the site is another important step to incorporate into the setup. This word press is a free platform that is used by bloggers and allows the individual to build the website with the minimum of effort while making it user-friendly always.

Last but by no means the least, would be for the individual to organize the website.

This process would involve the backtracking exercise to ensure there are no defaults that would cause the viewer to be put off when visiting the site.

Learning to build websites isn’t the complex technical process a lot of people think it is. All you really need to do is come to our website and get access to 300+ Tutorials that show you step by step how to build a website, and so much more, and start playing around with building your own websites.

Advertising Ideas-

In order to stay competitive it is necessary to always be able to have fresh views and ideas to present to potential customers and target audiences. Without such innovations the website will become stagnant and outdated thus eventually causing the original high volume of traffic flow to thin out. Brainstorming is one way of gathering and creating new ideas that would benefit any endeavor.

Some of the ways that can be adopted to bring forth interesting and innovative ideas at the brainstorming sessions are facilitated by encouraging the participants to simulate the mindset of the customer or the intended target audience.

By doing this the participant are more likely to anticipate the needs and wants of the customers and target audience and design any changes to fit into this discovery.

Bringing people together to discuss ideas at the same time and in the same place is also another good advantage the brainstorming sessions can facilitate.

Advertising ideas and campaigns can be discussed in “real time” as opposed to having emails flying about which is less effective and time-consuming and even confusing at times.

Brainstorming for advertising purposes, should ideally take into account the following points:

Problem definition and identification should be done at the very onset of the exercise. With this clearly outlined, other factors can then be worked on in line with the initial problem discovery information.

Custom designing can also be worked on within the brainstorming session, as the collaboration of views can contribute to finding the one idea that is going to eventually used to build the campaign around.

Customer Service-

Making a sale is only the first step is the relationship building exercise, which will eventually contribute to either the success or failure of any business endeavor. Therefore, it is important to pay attention to the customer service offered to cement the success rate desired.

The following are some tips as to how to stay on top of the customer service exercise:

Taking the customer for granted is the first and most common mistake most businesses make. This is especially evident when the business has expanded to now successful and comfortable levels. Often forgotten is the customers that brought the business to such heights in the first place.

Therefore, it is very important to keep in touch with the customers so that vital information can be obtained about the current needs and wants of the customer.

In the quest to stay informed and provide optimum customer service another point to consider and exercise is the importance of being fresh and innovative with ideas that are going to keep the customer coming back for more.

When boredom sets in the customer will usually simply look elsewhere for the next new exciting thing that attracts their attention.

Therefore, in order to induce customer loyalty innovative ideas should be a constant feature within the business.

Happy Customers Are Loyal Customers-

Training staff to treat each customer with respect and individuality is well worth the effort. Sometimes this positive treatment is the defining factor that keeps the customer coming back, even if the products are not exactly the best in the market.

Having the protocols in place for quick and efficient responses to a customer’s queries or grievances, is one way of ensuring the individual stays a loyal customer and does not spread negativity about the business or product. Happy customers are loyal customers.

In most cases it is rather difficult to specifically categorize businesses into specific service based styles. This is mainly because a lot of businesses tend to incorporate different platforms and strategies into the actual blueprint of the business format.

However, there are some that can be clearly defined as service based business companies and the following are some of these examples:

Types Of Service Based Business-

Such service companies may include the likes of services provided by doctors, accounts, architects, actuaries, lawyers and other related fields.

On a more creative side one may include the likes of services provided for by fabric designers, fashion designers, color scheme artists and many more as the list of such endeavors can be quite overwhelming.

Most service type companies rarely have appreciable inventory as the purchases for usually made with the objective of facilitating a job thus the need to carry any inventory would not be necessary.

Merchandising companies can also be considered service style enterprises as they to provide a service of sort to the customer base.

However, this service is based solely on providing tangible elements rather than just the action of extending physical service. The generation of revenue is from the actual sale of the inventory rather than from the service extended.

Manufacturing companies also come under the category of providing a service to the industry and the customer needs. In this scenario the products or items are made and sold within the company’s business entity thus ensuring monetary gains are derived both from the product and the service offered by manufacturing the product.

All these different types of basic service providing entities are all in place with one goal in mind and that is to create the platform for revenue earning potential. Therefore, in order to understand and identify which would be best suited for the individual business owner, more research should be done to find the style that best suits the individual’s needs.

OK, so I hope this article gives those looking to start their own online service based business a better understanding on what it takes to set up and grow a successful online serviced based business.

To your great success on your online business journey, Bob