Better Business

A referral is worth a thousand words—and thousands of dollars, too. So it pays to have a strategic referral plan to help keep your dog walking schedule—and your bank account—full.

If you don’t like marketing, that’s all the more reason to cultivate client referrals: Encouraging and rewarding referrals is one of the easiest, least stressful ways to market your business, and it’s a great ego and confidence booster, too. No marketing budget to speak of? Client referrals cost little, and you spend money only when you’re making it.

There’s another advantage, too. If you like your clients, there’s a good chance you’ll also like their friends. As any successful business owner knows, enjoying who you work for is one key to longevity.

If we’ve convinced you, here are some easy tips for putting your client referral plan into action.

Creating Your Referral Plan

Just ask. If you’re like most dog pros, asking for referrals can feel uncomfortable. But it doesn’t have to be. There are lots of simple, unobtrusive ways to let clients know you have open spots. You can include a small message at the bottom on your monthly invoices or in your daily or weekly written communications, telling clients why you’re asking them in particular. For example, “I’ve got a couple spots open in my walking schedule. If you know any clients and dogs as wonderful as you and Fido, I’d be grateful for referrals. Thank you, and thank you for trusting Fido to my care!” A note like this softens the discomfort of asking for referrals by focusing on the client rather than just your request. You can also include similar messaging in your email newsletter, holiday cards, and any other written communications.

Use positive reinforcement. Human clients enjoy treats just as much as canine clients, and positive reinforcement increases behavior no matter what the species. So don’t miss an opportunity to reward referral behavior. It doesn’t have to be anything elaborate. For example, a hand-written note with a gift card to a local coffee shop is a great, simple way to say thank you.

Keep your costs and admin time down. The cost of such gifts is generally lower than discounting your services or offering free walks, and they carry a larger emotional impact for the client. It does require more work on your part, though, so it’s best to organize ahead. Start by pre-purchasing thank you cards (branded ones lend a nice touch!) and ten gift cards. Set a goal to use all ten within a year.

Celebrate Return On Investment. You’ll spend a small amount on gift cards and a bit of energy finding simple ways to request referrals. Chances are, these efforts will generate at least one new regular client during the course of the year, potentially adding thousands of dollars of revenue. Not a bad return on investment!

Maintaining Your Referral Plan

Keep it timely. As soon as you’ve received a referral, jot the name of the client and the source of the referral on your follow-up list for this week to be sure you get a note and a treat out right away.

Keep it relative. For those clients who send referrals frequently, be sure to change up your reinforcement so your thank-you efforts don’t begin to feel forced and stale. Change up the gift card source and, for clients who refer often, up the ante with a larger gift like a dinner certificate, massage voucher, or basket full of dog treats and toys. Work to match the gift to the client, remembering that positive reinforcement only works if the recipient finds it rewarding.

Return all calls. It only takes one person telling their friend that she never heard back from you to dry that well up. Be sure to follow through on every referral sent your way, even if it’s only to offer an alternate referral of your own.

Share results by staying in contact. Place each new client and the client who referred her on your calendar again for a month down the road. Leave a note or send an email to let the referring client know how much you’re enjoying the dog and client she sent your way. It’s a nice touch and may help encourage her to send another friend or colleague your way. Chances are the compliment will be passed on to the new client, too.

Get Started!
Client referral marketing makes building and sustaining your business easier by cutting down on the time needed to search out new clients. So set aside some time now to set up your referral plan, then enjoy the benefits of a growing business over the coming year.

Think of a three-legged stool. It stands—and supports your weight—only because each leg has been built to do its part; it’s perfectly balanced. Remove, or even shorten, just one leg and the stool topples. Like the stool, a balanced marketing plan requires three legs. Unfortunately, it’s rare to see a dog business marketing plan that gives careful attention to all three.

More often dog walking businesses put emphasis in one area, ignoring or underserving the others. Sometimes the focus is on marketing to referral sources, sometimes on getting out in front of the general public of potential clients, but most often on staying in touch with current and past clients. But the most powerful marketing plans balance a bit of all three, because each has a specific role to play in the success of your dog walking business.

Referral Sources
Referral sources—other dog professionals who send clients your way— are the most critical audience as you start out, and they’re what will feed your business for long-term sustainability as well. Get a few good referral sources on your side and your business will build much more quickly.

Referral sources such as veterinarians, dog trainers, dog daycares, pet sitters, and pet supply stores tend to come into contact with people precisely when they need your services the most. Potential clients may complain to a veterinarian or dog trainer about their dog’s destructive or hyper behavior, be told by a daycare that their dog isn’t a good fit for group play, or worry out loud to a pet sitter or store clerk about an overly long workday. You want fellow dog pros to have your name on the tips of their tongues when this happens.

When courting referral sources, think about what you might do for their businesses, rather than what you’re hoping they’ll do for yours. For example, ask any potential referral source for 10 minutes to interview them for an article about their business in your newsletter. Invite dog trainers and pet sitters out to coffee or lunch. Ask trainers what you can do to help reinforce their training work on your walks. Surprise a vet clinic or dog daycare with a pizza lunch on a busy day. Starting relationships this way allows you to avoid the discomfort of cold requests for referrals. And referrals will follow if you make other dog pros’ lives easier and find ways to show them your expertise and professionalism.

Potential Clients
Marketing to potential clients is about building your brand awareness and recognition. It takes time for people to become actively aware of a new business or service, so start early and be consistent. Success here requires staying in front of people so they’re already aware of you and know just who to go to when they decide it’s time to hire a dog walker. So the more marketing you do, the more effect it will have.

Don’t confuse marketing to potential clients with marketing to the general public. The more you narrow your focus, the less money and effort you’ll need to spend on your marketing, and the more successful returns you’ll see. You really don’t want all people with dogs to call you anyway. For one thing, you only want people within your service area. Make that too broad and you’ll spend more time driving than walking. And there’s no point in marketing your services to people who can’t afford them, so economic factors come into play as well.

You may wish to further narrow your focus to specific sub-culture groups. For example, you might tailor your message to busy families. Maybe you want to appeal to the green-minded in your community. Or to the gay community or to churchgoers. It’s not necessary to focus your audience in this way, but the more specific you are, the easier it will be to both tailor your message and target your marketing efforts.

Writing articles for the local paper, distributing a printed newsletter, providing informational fliers (Why Hire a Professional Dog Walker, for example, or 5 Things To Ask Before You Hire a Dog Walker) to local dog businesses, distributing custom branded trading cards for the dogs you walk instead of business cards, wearing logo clothing when out walking—these are just a few examples of public marketing projects you might employ.

Current And Past Clients
Retention marketing is key to longevity. This should be the smallest portion of your marketing plan as you start out, because you have few people to keep in contact with at first, but should grow in importance as your business grows. You’ll spend time and resources landing your clients; it makes no sense not to keep them in your marketing loop. This is not only good customer service, it’s also how you build word of mouth over time. Get enough happy clients talking and you’ll end up with more happy clients.

That said, if you’re just getting started and you’ve put all your weight on this leg of the stool, back off a bit and make sure you stabilize the referral and public legs of your marketing plan—you have to get clients first before you retain them!

E-mail newsletters, blogs, and social media outlets like Facebook and Instagram are the most common forms of retention marketing for dog walkers. These tools allow you to show your current clients what you do for them every day. Seeing their dogs out having fun, and getting daily or weekly reports from you via images or anecdotes, cements brand loyalty. It also gives them something to pass on to friends, family, and coworkers—inadvertently spreading the word about your dog walking service.

Building Your Sturdy Marketing Plan
Take a few minutes to consider the marketing you’re currently doing. Which leg of the stool does each project fall under? Given the stage your business is in, which legs could use some attention? Achieving the right marketing balance maximizes your efforts and helps you reach your goals that much faster.

As a dog pro CPA, dog walkers often ask me what types of business expenses are deductible on their tax returns. Vehicle-related tax deductions seem to cause the most concern and confusion. Common questions include “I use my car for both business and personal use. How much of my insurance can I deduct?” “I drive 50 miles per day picking up my clients’ dogs, taking them to the beach, and then returning them home. When does the mileage start to count and how much can I deduct for the gas and tolls I pay during this time?” “Because I’m driving around so much I had to buy new tires for my car. Can I deduct them?” These are great questions, and getting the answers right matters. So let’s take a look to clarify what about your car is—and is not—tax deductible.

Good records matter.
First and foremost, the records you keep are the most important factor in determining the tax deductible portion of your vehicle’s expenses. Your records don’t need to be pretty or even very sophisticated, but they do need to be accurately maintained. You don’t need a printout from a fancy computer program or an Excel spreadsheet to document miles driven for business purposes to justify the expense. A handwritten notebook or log is a completely acceptable record. There are also easy-to-use mileage apps like Mile IQ that make tracking business and personal miles easy. But whatever form of documentation you choose, you must at a minimum keep a record of these three things:

1. Total miles driven
2. Miles driven for personal use
3. Miles driven for business use

Every time you get in your car, note the date, beginning odometer reading, end odometer reading, and how many and what kind of miles you drove—business or personal. If you did a bit of each (for example, a detour for personal errands on the way home after dropping off the dogs), be sure to note how many miles for each. (Apps like Mile IQ do most of this work for you.) If you do this every day (work and non-work days), you’ll have a complete and accurate record of the miles you drove and their purpose, to calculate the amount of your tax deduction at the end of the year.

How much can I deduct?
There are two different methods for determining the amount of your tax deduction. Comparing the two will allow you to choose the one that gives you the greater deduction.

• The standard mileage method
• An allocation of actual expenses

Method #1: The standard mileage method. The mileage method simply multiplies the number of business miles driven by a pre-set amount-per-mile the IRS determines each year. For 2016, the amount is 54 cents per mile. In order to calculate your deduction, all you need to do is multiply your total business miles driven by the mileage rate. Easy? Yup! For most dog walkers with vehicles more than a few years old, or for walkers stacking up a ton of business miles driving dogs to and from the park or trailhead, this method will likely result in the largest deduction.

Method #2: Allocation of actual expenses. Still, it’s best to check both methods to make sure you get the biggest tax benefit. To calculate the amount under the allocation method, you’ll still log all your miles. But in addition you need to keep track of the actual amount spent on:

• Gas
• Tolls
• Parking
• Garage rent
• Repairs and maintenance
• Insurance
• Property tax
• Tires
• Rental fees
• Interest (if you are financing your car)

In addition, your accountant will compute depreciation on your vehicle, which is another deductible expense when using this method.

Again, record keeping is paramount. If you are of the George Costanza variety and like to keep receipts in your wallet, that will do the trick. But using a business debit or credit card is the easiest way to track gas purchases and the like—and your card is much less likely to blow away on a windy day.

How do I know whether miles are personal or for business?
Here are a few typical situations to help keep your personal and business miles straight:

• Travel from home to pick up or drop off your clients’ dogs is of course business.
• Travel between clients’ homes is business.
• Travel to the location you take your clients’ dogs for walks is business.
• Travel to the gym after you drop off your last dog but before you go home would be considered personal (and should be subtracted from the total miles driven that day for business purposes).
• Travel to the store to buy harnesses for your dogs would be considered business, but travel to the grocery store for food (unless it’s for making dog treats for your walks) is personal.

Situations in which mileage or a vehicle-related expense could be considered business or personal (or a bit of both) may require careful reasoning and judgment. Keeping good records and discussing them with your tax professional will help guide you when the answer murky, keeping you out of trouble and making sure you aren’t missing any legal deductions.

 

Marie Poliseno is the Managing Partner of Dollars & Scents Accounting Services. She is a Certified Public Accountant (CPA) as well as a professional dog trainer (CPDT-KA) and honors graduate of the SF/SPCA Academy for Dog Trainers (CC). To work with Marie on your financial and tax matters, e-mail [email protected] or visit www.dog-pro-cpa.com to learn more about her services.

 

By guest author Marie Poliseno, CPA, of Dollars & Scents Accounting Services.

Don’t have the money to pay your taxes this year, for whatever reason? Maybe you’ve just started your new dog walking business and are struggling with cash flow issues. Or your trusty dog walking vehicle gave up the ghost, forcing you to clear out your savings to replace it. Or it could be that you were genuinely blindsided by the number you owe. Whatever the reason you’ve fallen short this year, you’re not alone. Millions of taxpayers find themselves in exactly the same position, and it doesn’t have to mean the end of the world. There are people and resources available that can help you deal with the situation—and avoid it, too.

Avoiding nasty surprises: Understanding how your taxes are calculated
I often hear clients express surprise when their tax returns are prepared. Perhaps these sentiments are familiar: “I don’t understand. I always got a refund in the past, why do I owe taxes now?” or “I barely made any money last year, how could I possibly owe taxes?” All too often people focus on the amount of the refund or the payment due as being their “tax.” This too-simplistic understanding of liability is often part of the problem.

As a small business owner, you have more than one tax applied to you. Here’s how it works: There’s your personal income tax—what most people think of as the “tax bracket” they fall into. Next, there’s a self-employment tax that is added to your personal income tax. This is where a lot of confusion comes into play. Regardless of the tax bracket you’re in, if 92.35% of your net earnings from your business (your revenue minus your expenses then minus the new small business tax credit) comes to $127,200 or less (note that this number changes annually), your self-employment tax rate will be 15.3%. (Tax on net earnings over $127,200 is 2.9%.) This amount of tax will be due and payable, even if your taxable income is zero. Forgetting or overlooking this key point is what often results in the unpleasant surprise of owing when you didn’t think you would.

If you were paying close attention to the previous paragraph you might be wondering how your taxable income can be zero if your net earnings show a profit. Here’s a quick summary of how taxable income is calculated for a typical self-employed dog pro:

Net Earnings from your business (revenue minus expenses)
Minus: 20% small business tax credit (new for 2018)
½ self-employment tax
Health insurance premiums
Personal Exemptions
Standard or Itemized Deductions

= Taxable Income

Your personal income tax is calculated based upon your taxable income and then the self-employment tax (which is based solely on your net earnings from your business minus the new tax credit) is added to that tax to derive your total tax liability. If you’ve made any quarterly estimated tax payments, that amount is subtracted from your total tax liability to arrive at the amount you still owe.

What to do if you can’t pay
What if you didn’t make any estimated tax payments during the year, or that new vehicle wiped out your tax savings, or you’re new at this and didn’t realize how it was all going to go down? In short, what do you do if you don’t have enough money to pay your taxes? The answer is don’t panic. The IRS offers various solutions for taxpayers who can’t meet the April 15^th deadline.

Short Term Extension
If you find yourself temporarily short of cash on April 15^th, the IRS provides a 120-day extension to pay, giving you until August 15^th to pay your tax bill in full. You actually don’t need to file any paperwork with the IRS to receive this automatic extension, but it’s a good idea to give them a call to let them know your intentions. You can pay a lump sum at the end of the 120 days, or make as many payments as you like along the way.

Note that the IRS will add penalties and interest if you take this option, and be sure to still file your taxes on time even if you don’t include a check. The penalties for not filing on time are 10 times steeper than for not paying on time!

Medium Term Extension
If your current and expected cash flow over the 120 days after April 15^th is insufficient to pay your taxes, and you owe less than $50K, you can apply for an installment agreement with the IRS. Over the past few years, the IRS has simplified the process through the Fresh Start program and your application is automatically approved when you submit it. All you need to do is complete a brief online application process and pay a small fee. You’ll then have 72 months to pay off your tax debt.

A few important details: The application fee is reduced from $107 to $31 if you apply online and elect to have your payments direct debited from your bank account. Penalties and interest will again be tacked on to your bill, but the penalty is reduced by 50% (from .5% per month to .25% per month) if you request the agreement before the 120 days expire.

Long Term Extension
Long term extensions, called Offers in Compromise, are a way to settle a large tax debt for less than the amount owed. This is not an easy row to hoe, however, and will likely require the help of a tax professional and/or an attorney to navigate you through the process.

When the IRS contemplates a settlement they look at all the available equity in your assets, including your home, your 401K, and any other assets you own that could be liquidated. They could, for example, require you take out an equity loan to pay down the amount, or withdraw your 401K savings or sell what they term as non-essential assets before accepting your offer to pay less than the full amount you owe.

But if you’re suffering from more than short-term cash flow problems and the IRS determines your financial condition renders you unable to pay the full amount within a statutory period of time, this could be an option to help you hit the reset button. Do note that there are additional criteria to be met, including having paid all your other payroll and estimated taxes when due. You also cannot be in an active bankruptcy proceeding. As you can see, this is an extreme measure for an extreme situation.

Non-IRS solution option: Borrow elsewhere
If you owe the IRS and find yourself unable to cover your debt, another option is to look into borrowing money from a cheaper source than the IRS, such as from a low-rate or interest-free credit card. If you can find the right deal you’ll save yourself in interest payments.

How to make sure you have enough at tax time
Planning ahead and paying estimated taxes is the first line of defense against getting hit with an unexpected bill at the end of the year that you might not be able to pay.

Budget for your taxes throughout the year. Put money into a savings account each month for the purpose of paying your taxes. This can be hard to do, but if you discipline yourself to live on less than 100% of the income you take in, you’ll have an effective cash management strategy.

Last but not least, engage the services of a CPA or tax professional who can help you plan, estimate, and budget so you’re always on top of your tax liability. This is especially important for growing businesses, as your tax numbers will change as your business grows.

 

Marie Poliseno is the Managing Partner of Dollars & Scents Accounting Services. She is a Certified Public Accountant (CPA) who works exclusively with dog pros, as well as a professional dog trainer (CPDT-KA) and honors graduate of the SFSPCA Academy for Dog Trainers (CC). To work with Marie to create a plan to get out of a tax pickle or avoid a future one, e-mail [email protected] or visit www.dog-pro-cpa.com to learn more about her services.