Economic Growth Trends for MSP Business Owners
Bill Moore
We partner with MSPs to scale in a tax efficient, ca$h rich, profitable manner◆ CFO Services & Tax Strategist ◆ / Managed Service Providers /↑ cash ROI & ↓ taxes by $20k-50k+ / yr
The cyber security industry is growing, and so too will be the demand for those MSP businesses who capitalize on this growing sector. Small businesses are the victims of more than 50 percent of all cyberattacks. Of these attacks half of these businesses will not survive. That stat from Cybersecurity Ventures should alarm every small business owner.
Capitalizing on the demand can be tricky for an MSP if not done strategically. As the industry grows, so too does the niche specific services that allow MSP owners to outsource select areas of their business and enable them to focus on scaling strategically. Outsourced services catering to MSPs can be found for marketing, sales, operations, and finance.
Selecting the right services for your growing MSP can be daunting. Make sure you have ways to measure the effectiveness of the offer. Any overlap in services can be evaluated for a term to determine the most efficient service during a trial period. It is important to have a metric to measure the value for comparison. Value can be measured in many ways- in monetary terms or stress levels. How much money would you pay to not be thinking about this problem at night?
January Barometer
The traditional proverb "as January goes, so goes the year" means that if the market closes up in January, the year will be good; if the market closes down in January, the year will be bad. Historically, it is among the most dependable stock market guides, being correct about nine out of ten times since 1950. Whereas the new year usually starts with enthusiasm & new money entering the market, helping to boost stock values, 2022 starts with a headache due to the epidemic & inflation. Let’s see where this month ends. Regardless of Wall Street numbers, the MSP industry market outlook is UP!
January Forecast
Inflation
Prices have risen so high that this will take a bit of time to return to normal. In other words, the unsettling inflation figures of 2021 are likely to linger for a while in January. Make sure as a business owner, you can pass these cost increases on to your customers to maintain your profit margin. Contract renewals should be updated and account for future cost increases.
The most current price information we have so far is through November, when the consumer price index and personal consumption expenditure index raised to a 39 year high. However, increasing inflation, combined with additional restrictions relating to the Covid-19 variant Omicron, could terrify some customers and drive them to reduce spending drastically.
There is reason to be optimistic: the reserve bank, responsible for maintaining price stability, is reducing its economic stimulus, and is anticipated to hike borrowing costs this year to control inflation & prevent the economic system from overheating.
The Federal Reserve's Plans
Policymakers revealed intentions to stop the month-to-month bond-buying program by March and hinted at the potential of raising the federal funds rate in 2022 during the December Federal Open Market Committee (FOMC) meeting. They will meet again on January 25th & 26th. However, traders are not expecting a rise in interest rates in the upcoming meeting. The upcoming meeting is significant because it will provide the FOMC with another chance to express its policy goals to market players.
Build Back Better
President Biden’s Build Back Better Agenda is likely to be resurrected this year. It comprises $1.75 trillion in spending for climate and social agenda items. Any changes to this legislation could have a market-moving effect in January.
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Deadlines in 2022
The COVID-19 outbreak messed up the federal tax calendars for 2020 and 2021. The IRS delayed different tax payment and filing deadlines to offer taxpayers additional time in both years. Although the IRS has stuck to the "regular" tax deadlines for 2022, it is still feasible that the latest COVID-19 variant could cause chaos on the calendar for the upcoming filing season. Even if the 2022 tax calendar is rearranged, one thing remains constant: No one wants to miss a tax deadline. If one misses a filing or payment deadline, then the IRS may levy significant interest and penalties. For example, the usual fine for not filing annual tax returns is 5% for each month. If you pay your tax late, you will be charged a monthly penalty of 0.5 percent of the due balance, up to the maximum of 25% of the outstanding balance, interest payments on the unpaid taxes. There may also be additional repercussions of becoming late, such as losing a lucrative tax credit.
However, avoiding these hassles is simple: ?file and pay on time. Keeping track of all IRS deadlines isn't always straightforward. Here’s a list to help you stay on track this month.
January Deadlines:
California MSP Owners Deadline: CalSavers requires that employers either offer a qualified company sponsored retirement plan to their employees (401k, SIMPLE, etc.) or enroll in the CalSavers program by the following dates based on employee count.
Simply put, California MSP business owners must have a retirement plan if you have more than 5 employees or you must offer this state-mandated plan (CalSavers) to your employees. This plan does not offer optimal benefits to most business owners and owners should speak to their CPA for the best tax savings strategy options. Adding a 401K benefit to an MSP business in this tight labor market has many benefits.
Final Take
The future of the managed service provider industry is bright, with huge growth opportunities ahead in 2022! Thrive CFO has the pleasure of serving our clients and help our MSP owners focus on what they do best. We are so grateful to be serving the financial needs of this exciting industry. We hope you subscribe to our LinkedIn Newsletter for our Monthly updates.
In 2022 we are launching Thrive CFO’s MSP Financial Community. We will be offering important timely assistance in M&A news for those who are looking to buy and sell or just prepare for market. This network will also highlight important tax and wealth planning tips and any legislative changes that may impact an MSP owners bottom-line and personal wealth. You can join on our website HERE!
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