Changes in taxes have both positive and negative impacts on businesses, so it is natural for business owners to react to such changes…even if those changes are positive. The Tax Cuts and Jobs Act under the Trump administration has had both positive and negative impacts on small businesses. The plan brings on board many items that a small business owner should take advantage of, and it’s also supposed to reduce the tax burden on many business owners. At the same time, though, the Act removes some tax tools and benefits that small business owners in all sectors had previously been enjoying. To stay on top of their game, they’ll have to make their own changes to their businesses.
Some of the changes that small businesses may need to look at making due to the tax changes are as follows:
Change Prices of Products and Services
This change depends entirely on the level of competition in their industry. In a business where customers are price-sensitive, commodity prices are low, and competition is high, business owners may be forced to reduce the costs of their products or services. This is done to as a means of retaining customers. Success in such businesses is determined by the volume they sell at these lower prices, which allows them to maintain and hopefully increase their sales.
Add More Value to Products and Services
In businesses where quality and exclusivity is the order of the day, business owners may need to add value to their commodities rather than lowering their prices. If they feel the need to raise prices in order to cover increased taxes, they can add something extra to their product or service that makes the customer feel like they are getting more value for the price they agree to pay.
Take No Action
Another business approach regarding the tax change is to take no action. Sometimes the best choice is to wait to see what will happen and just ride the wave of change. It would be helpful for these business owners keep an eye on the changes happening to other businesses around them and decide if changes might eventually need to be made.
How does attitude in business affect employees? An article by Toby Scammell on Forbes.com helps to answer that question. Under the new tax code, small business owners are advised to invest more in their workers as a way to reduce their tax burden. Studies show that optimists are 3.5 times more likely to invest in their company by hiring and giving raises to employees more than pessimists are. This could imply that pessimists are likely to pay more taxes compared to an optimist. Apart from the fact that optimists will earn the loyalty of their workers, they may have the opportunity to reduce their tax burdens.
Changes in taxes can positively and negatively impact small businesses. Most likely, the business owners will have to make changes themselves or wait out these current tax code changes. The tax code under the Trump administration does provide a way for small business owners to get a reduction to their taxes to offset some of the effects of the changes; therefore, it is ultimately up to the business owner to decide how to take advantage of the situation they find themselves in.