Monday, April 22, 2024
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Profit Making Strategies for Sole Proprietors

How can sole proprietors, or one-person shops, maximize their earnings via smart investing and selling their goods and services to other companies? With a recession looming, it’s essential for every entrepreneur to think outside the box. In the 2020s, that means doing more than making money in the consumer markets. The B2B (business-to-business) realm is where the bulk of the best opportunities are for many kinds of micro-entities.

Of course, retail selling is a solid piece of the revenue puzzle. Unfortunately, too many owners overlook options like investing in real estate via REITs (real estate investment trusts), working directly for other merchants, servicing the wholesale and manufacturing marketplaces, and generating sales leads for other companies. In the 2020s, one-person firms have a lot to gain and nothing to lose by exploring all their options. Here are details about some of the most promising ones.

Selling Directly to the Public

The oldest and perhaps most reliable way for individuals to earn income from a one-person entity is to sell items or services to consumers directly. Some of the most profitable and well-known businesses operate this way, but many run hybrid organizations that sell to the public and take on B2B clients whenever they can. This may not completely ensure your enterprise survives a recession but it is a strategy that will definitely help. 

Investing in REITs (Real Estate Investment Trusts)

For so many one-person operations, working with other businesses is the single most effective way to turn a profit. However, setting up a company investment portfolio is one of the smartest ways to build long-term revenue streams for even the smallest of entities. By investing in REITs, a sole proprietorship can cut their tax bills by as much as 20 percent via the QBI (qualified business income) deduction. One reason REITs came into being was to offer non-wealthy investors a chance to take advantage of the tax benefits of real estate ownership. 

In 2017, the TCJA (Tax Cuts and Jobs Act) made REITs even more attractive for business owners by offering tax advantages via pass-through provisions that let owners retain more profits and plow them back into the economy or directly into the growth of their own companies. The qualified business income deduction on REIT investments can be a powerful financial tool for sole proprietors. Because one-person businesses can leverage the power of REIT investing, they can potentially only be required to pay tax on 80% of their total real estate income, not 100% of it. To get started, it’s important to review a comprehensive guide on how the deduction works, what qualified business income is, and more.

Working For Other Merchants

A large number of IT professionals, investment advisers, and customer service outsource firms are strictly B2B-oriented enterprises. They sell nothing to the public and earn their entire income by servicing other business sectors. The demand in this niche is incredibly large because new contracts and arrangements are constantly coming into existence. In fact, the entire concept of B2B is built on the financial model of companies that do nothing but work for retailers, wholesalers, and manufacturers. One of the fastest-growing branches of this segment is sales-lead generation as an outsourced function. Affiliate marketers represent a significant portion of the B2B industry.

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