Chief Executive Boards Blog

Here's Why You'll Work for China, Israel, or Korea One Day

2016-02-05T13:35:00.001-05:00

If new technology is at the heart of getting ahead in business, the U.S. is about to hit a competitive bump in the road.

US jingoists and believers in general "exceptionalism" should take note that the country is setting itself up for global economic failure. Not that there's a "going out of business" sign hanging on entry ports. However, there's a trend that is going to be a serious problem in the future -- one that will put the U.S. behind a number of up-and-comers.

The issue is R&D. Businesses depend on innovation to anticipate the needs of old markets and to meet new markets. And while, of course, you can waste money in R&D and efficiencies can be had, there's a strong correlation between what you spend and what you get. (I remember years ago HP under then-CEO Mark Hurd, HP's R&D budget nose-dived. And yet, some PR person tried to convince me that it was all in eliminating waste. We all know what happened there.)

In this case the R&D spending trend is negative but on a national level, according to the Organisation for Economic Co-operation and Development. And it's not that businesses have given up on R&D, but that public budgets have pulled back. Here's one sample:

In constant dollars, many countries, including the US, have been on a downward trend:

Provisional data for 2015 indicates that public R&D budgets in the OECD area continued their downward trend since 2010 after briefly stabilising in 2014. Among countries for which 2015 data are available, two thirds have decreased their R&D budgets in real terms and the estimated area total has dropped by 1.3%. In a number of cases, this decline may have been mitigated through growing support through R&D tax incentives, which have been increasing in relative importance over time. On the basis of leading budget data, it is expected that R&D performed in government and higher education institutions in the OECD also declined in 2015.

Like many other countries, the US is putting less and less publicly into R&D, and public funds have been a traditional support of the basic science and development whose scope is beyond the capabilities of individual corporations. But notice that South Korea is rocketing ahead. According to the data, China continues to grow R&D, albeit at a slower rate given macroeconomic challenges, but still 9 percent in real terms. Israel's R&D is at 4.1 percent of the country's GDP, while Korea is at 4.3 percent.

Some countries understand the connection between today's R&D investment and tomorrow's economic success. Many more may say they do but act differently. And the US is in that group.

Maybe that's why so much research is being sent overseas these days -- and why kids might think about learning Chinese, Korean, or Hebrew rather than Spanish, French, or German.

BY ERIK SHERMAN

Contributor, Inc.com

Daily "Adrenaline" Meeting

2015-12-22T10:17:00.001-05:00

Author: Verne Harnish

There is one indispensable routine; one absolute essential habit more important than any other I can teach an executive team; one discipline that is non-negotiable – and that is an effective daily meeting rhythm.

Before dismissing the idea (I’ve heard every excuse over the years), consider that from the top teams at Goldman Sachs to the assembly floors of Dell Computer to the Oval Office of the White House, an effective daily meeting rhythm is at the heart of their management practices. And I’ve not encountered a single start-up to mid-size firm that didn’t benefit greatly from initiating a short daily huddle organized around a specific agenda which I’ll detail below.

“I lead a daily ‘Adrenaline’ meeting,” explains Tony Petrucciani, CEO of Single Source Systems, Inc., a computer services firm based in Indianapolis. Petrucciani gathers his management team (five including himself) and meets each day at 10:07am to discuss roadblocks. Their goal is to be out in 15 minutes. The name came from the substance which makes the heart beat faster. “In our case, we wanted the business to pulse faster,” adds Petrucciani.

“Our key customers really like that we do these meetings and it has become a sales tool, differentiating us from the speed that our competition pulses,” adds Petrucciani. “It used to take days for issues to work their way ‘to the top’ to get authority to allocate resources – it’s now like Fedex – it’s there by 10:30.” It wasn’t always like that at Single Source. The meetings were launched when they faced a large project in overrun status and their customer was getting angry. “We implemented a specific Project Adrenaline daily meeting. Within a week, we were making much better progress, and had gained back credibility from the customer (we told them about Adrenaline). This kept a 6 figure project from imploding,” describes Petrucciani.

Since then, his team has implemented other types of daily Adrenaline meetings (Channel Adrenaline, Sales Adrenaline) that pulse just before his management meeting. If a major issue comes up in those earlier meetings, they pulse thru to the Management Adrenaline meeting, keeping the company operating at an effective pace.

“The daily huddles are particularly key when you’re the busiest and spread the thinnest,” notes Chuck Hall, founder and CEO of Charles Hall Construction in Clarendon Hills, IL. With a focus on clients with multiple projects across multiple regions, Hall has teams working all over the country. And with the economy picking up, he’s facing an onslaught of business. “We have approximately $24M in contracts signed or under negotiations for work this year waiting to start,” explains Hall. “With the daily, we’re much better equipped at keeping our daily tasks aligned with our plan. And it has helped us keep moral high during the difficult slow months, and step by step prepare us for the tidal wave of work that will hit us in June/July of 2004,” says Hall.

The immediate pushback I get when recommending a daily huddle is “We’re too busy!” Executives can’t imagine finding the time to get everybody in the same place or on a conference call every day for one minute, let alone five or 15. And if the company is quite small and travel isn’t that big an issue, they’ll tell me, “We don’t need a meeting when we’re seeing each other all day long.”

Yet, routine actually sets you free. Teams that huddle daily find they interrupt each other considerably less the rest of the day. There’s a fixed time when everyone knows they’ll have everyone else’s attention. Meeting daily also clears up issues that otherwise linger to clog up the weekly meeting. This frees up time to focus on more strategic issues during the weekly gathering (focus of a future column).

I recommend that companies set the time at an odd time, like Petrucciani’s 10:07am. People do a better job of being on time when the time’s not on the half- or quarter-hour. Worried that you’ll forget the meeting while traveling? For a nominal monthly fee use www.iping.com, a reminder service which pages or phones you just prior to the daily meeting. And www.freeconference.com offers a free conference bridge you can use to host a daily conference call.

Make attendance mandatory and on time, with no excuses. I’ve been in intense meetings with clients. I’ve been in the midst of seeking funds from venture capitalists. It doesn’t matter; I tell them I need to take a break for my daily meeting. And it only gains one respect -- a disciplined firm exudes success.

Overall, start and end on time and don’t problem solve. This meeting is simply for problem identification. If the meeting is face-to-face, stand up to avoid going too long. And back the meeting up against other regular meetings or appointments to force an ending. If it starts to go longer than 15 minutes, people will drop the habit.

The Agenda: It should be the same structure every day, and it’s an agenda just three items long: what’s up, daily measures, and where are you stuck? In the first few minutes, each attendee shares “what’s up” the next 24 hours. This lets people immediately sense conflicts, crossed agendas, and missed opportunities. The key is to highlight specifics without simply reading one’s ‘to do’ list.

Next, review whatever daily measurements your company uses to track its progress, highlighting any unusual trends.

The third and most important agenda item is where people are stuck. You’re looking for bottlenecks. There’s something powerful in simply verbalizing, for the whole group to hear, your fear, your struggle, your concern. It’s the first step to solving the problem, because “until the mouth runs, the brain won’t engage.” And the only people who don’t get stuck are those who aren’t doing anything. So, scrutinize the person that reports “everything is fine!” or “no stucks today.”

Important as it is, the bottleneck conversation shouldn’t be allowed to drift on into problem-solving. It’s okay if somebody wants to reply to a bottleneck by saying “Call so-and-so,” but if two people start engaging over an issue, politely suggest they “take it off line.” Remember: The daily meeting needs to be kept short.

While reading Titan, in preparation for writing the chapter on meetings in my book, I was struck by the fact that John D. Rockefeller had lunch with his top team every day, starting with his co-founders in the early days and ending with Standard Oil’s nine directors at headquarters in New York. Rockefeller insisted that this routine was crucial in the success and global reach of his company – and it will for your firm as well.

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Kevin Minton

CEO

Chief Executive Boards International

http://www.chiefexecutiveboards.com/

KevinMinton@ChiefExecutiveBoards.com

Seven Commandments for Business Success

2015-11-01T14:00:00.001-05:00

Nobody likes rules. They tell us to do things that might not come naturally, or that are simply “hard” to do. But follow these simple rules and you’ll be moving closer to achieving business success.

Leon Owens: Enjoying your work can lead to success.

In business, what we want—what is essential for survival—is a level of success over the long haul. Yes, business is full of ups and downs, but if we can get the former to outnumber the latter, then we’re a success.

What follows are the fundamental rules for any successful enterprise. Maybe it’s an affront to Moses to call them “Commandments,” so let’s just call them “Really Good Suggestions” and I’ll cut them down to my lucky number: 7.

Anticipate failure. Not ultimate failure, hopefully, but failure along the way to success. If you can arrange it, fail early. Get it out of the way. Don’t be afraid of it. Business is risky, nothing is certain, and a large percentage of endeavors fall flat on their face. Make failure your friend. It will be the most valuable business lesson you’ll ever have. You learn things, it will make you stronger, and you’ll be that much closer to success.

Get rid of your pride. Here’s a fundamental reality: nobody’s waiting for you to succeed, and nobody really cares what your brilliant plans are. If you hang out in the hallways talking about your degree from Yale or Harvard and expect anyone to give you a purchase order or an investment because you “deserve it”…you’ll be in those hallways for a lonngg time. Waiting for the perfect moment to approach a client or to be “discovered” for that promotion? Not gonna happen. Don’t just knock on doors. Push them open and just walk right in. What’s the worst that can happen? You’ll be escorted to the back of the line…but you will have already been inside and you’ll know what to expect the next time you get in there. And while you’re at it, leave your pride outside.

Don’t count your money. A fundamental in poker and in business. Noodling over every dollar takes time away from what you should be doing: breaking down doors, creating opportunity, serving a need, and delivering on promises. Okay, so money’s short. You think you’re alone? Well, you will be alone if you don’t get out there and create value that earns a financial return. Stop counting money and start making some. Remember what J. Paul Getty said: If you know how much money you have…you don’t have enough.

Don’t look for money. You can be sure it’s not out there waiting for you to come along and just pick it up. You need to do something to make money, and if all you do is look for money that’s just “looking” and not doing. The trick, of course, is to do something you believe in, something that you would pay to do. Do that, and eventually someone will actually pay you for it.

Learn the value of…love. What? I know, you’re shocked. What does love have to do with business? Well…everything. Without it, what’s your real motivation? Have someone in your life to share your success (as you achieve it) and to share your disappointments when you fail (you’ll both be stronger, and so will your love). Love creates a unit, a team. Business is a team sport; you don’t want to go onto the field to face all those opponents all by your lonesome. Find love and a teammate; success follows.

This way to Success!

Know what success means. Your business thrives, you make serious profits, and everyone suddenly loves you. Not on this planet, folks. You’ll work hard, overcome obstacles, become a success…and find a world of naysayers and critics trying to bring you down. You’ll find it hard to trust anyone. Trust Success least of all, because it is never guaranteed, never eternal. When you achieve it, enjoy it…but it can be short lived, so get back to work and create the next success.

Be and feel lucky. We’ve all heard the cliché “It’s better to be lucky than good.” Well, there’s nothing wrong with being both. If you prepare for it, work for it, and are always open to the unexpected, success is waiting for you to show up. The real secret to success: work hard and never stop showing up.

Courtesy: Mr. Leon Owens - Cienega LLC

You don’t know what you don’t know

2015-10-19T12:30:00.001-04:00

Don’t assume you have to give away a piece of your business to attract a great employee

How can you recruit, retain and reward outstanding employees

without giving away stock? Many times a key executive you are recruiting or who has performed very well for you wants to be a partner. They want ownership, or at least they think they do. How many owners have thought to ask the question: Why? You may think the answer is obvious – but you are thinking with your brain, with your experiences and motivations. The obvious answer to you may be totally different for them. Some possibilities might include:

1: They want more money (the most commonly assumed answer)
2: They want recognition for all the blood, sweat and tears they put into the business.
3: They want respect from the other employees.
4: They want more involvement in decision-making.
5: Their spouse has been telling them for years they deserve more.
6: They want the title or a bigger office.

If you want to know what they want, ask them the question directly. Most owners don’t. The answer to that may be fear. So what are you, the business owner, afraid of?
1: Giving up control.
2: Giving up control.
3: Giving up control.
4: Not usually giving your person more money (if they really deserve it).

So what does the average entrepreneur owner do? Choose one of the following missed opportunities:
1: They don’t hire the dynamo who could triple the bottom line.
2: They tell the executive “you aren’t quite ready yet” but give them no clear, measurable performance targets for getting there.
3: They lose that key person to a competitor. Profits shrink, and it costs cash and your time to replace them for someone who turns out to be not as good (but for whom you paid more).
4: You give them a piece of the pie, but no authority to do anything. They get frustrated and leave. You don’t get it. You gave them what they wanted – or did you?

Does any of this sound familiar? Has this happened to you not once, twice, but several times? You are either so depressed by now you don’t want to read any more, you really don’t care or you have figured it out and have already solved the issue.

Here’s my three-step solution:
1: Have you determined if there’s a key person you need to recruit, retain or reward? Look at your motivation. Are they driving profits? Do they have skills that would be very difficult to replace? Are they a leader? Or have they just been there a long time? Are they a “good guy”?

2: Has the employee approached you? You need to determine their motivation. Ask questions. Why do they want a piece of the pie? Do they truly understand the risks of being an owner? Do they have the capital or credit to buy in? Do they deserve something more?

3: Determine the best course of action. Can you give them a new title or bigger office? Will a bonus or raise satisfy them? Would “phantom stock” accomplish the same goal? Are you truly willing to give up some control? Then perhaps a cash or installment buy-out is the solution. If it is, make sure you have a well-thought-out, funded buy-sell agreement in place ahead of time. It could save a lot of money, time and agony down the road.

Or what if there was a way to give a benefit to one or more people without ERISA discrimination rules? Make it like “golden hand-cuffs” so if they get approached by another company they would really have to think twice because the benefit might not be vested. Make it so the benefit is tax-deductible when paid out. Make it so that you could even recoup the cost of the benefit. Maybe there is a better way than giving up equity.

So how do you recruit, retain and reward key people? Ask questions. Consider options. And take action when called for.

Courtesy: Mr. Roger Brooks - CEBI Member

Focusing Cybersecurity on What is Critical to Your Business

2015-09-23T18:28:00.000-04:00

Nick Coleman, IBM’s global head of cybersecurity, discusses the keys to a strong cybersecurity program and what companies can do to keep pace with the evolving nature of security threats, in a Wall Street Journal blog post.

Having a clear governance and leadership model, translating that into a real risk management program and understanding what happened after a cyberattack are the three key strategies for eliminating or reducing your cybersecurity risk. “If you have no feedback loops, if you don’t understand what happened operationally, if you are not seeing attacks and the way you are handling them, are you really understanding what is happening in those systems in real time?” Coleman said in the Journal blog.

“The volume of security incidents increases every year, they’re getting more complex, and data breaches are more frequent and costly than ever. That’s why businesses are turning to cyber resilience – accept that security breaches are inevitable and develop the ability to efficiently handle them and move on, just like any other business challenge,” John Bruce, CEO of Resilient Systems, which sponsored the latest Ponemon Institute report on cyber threats, told SCMagazine.com recently.

Data breaches that get reported are just the tip of the iceberg, the Ponemon Institute says. Ponemon notes that as part of everyday business, there are exponentially more security incidents than data breaches. Under federal law, all security incidents need to be assessed to determine if they are data breaches that require reporting. The study’s findings indicate that organizations are not thoroughly assessing their security incidents. In fact, one-third of the respondents do not have an incident response process in place.

Coleman advises that cybersecurity teams use common language to keep the board and the C-suite up to date. “Generally, organizations that embrace it understand the conversation, they don’t just keep it in the technical area,” he said. “That is one thing that is still emerging, those reporting mechanisms and how to get the board to see the overall risk management in a way that translates the technical risk into showing how it relates to the business.

In a recent conversation Coleman had, a board director relayed to an IT person that his company had been talking about a digital transformation of the board for two years, but the conversation never involved the security team. It’s critical that companies close the loop on keeping everything informed and involved.

Courtesy: Chief Executive Magazine

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Kevin Minton
CEO
Chief Executive Boards International

http://www.chiefexecutiveboards.com/

KevinMinton@ChiefExecutiveBoards.com

Top 5 Leadership Issues

2015-07-14T18:56:00.001-04:00

Recently, a CEBI member suggested they would be interested to hear what's happening with the other members. So, as I traveled around to facilitate the latest local board meetings I took note of all the issues surfaced by the participants to see if there were any common themes. While there was significant variation in the items brought to the table for discussion, I noticed there were certain issues that seemed to be common among many of the participants. I'd never taken notice of this before but I'm glad that I've started the process as it seems to signify sort of a general feeling or experience in the business community. So what were these issues? Well, in no particular order, here are the top 5 that seemed to be on the minds of the CEBI community.

Lack of Sleep and Anxiety - this appeared to be related to a general lack of double digit growth during the first two quarters that was thoroughly enjoyed the previous year. Most indicated they were having a flat year so far even though they may have been experiencing single digit growth. Relatively speaking, the fear of the unknown seemed to be the root cause of this issue.

Lack of Sales Management Leadership - some had indicated a lack of leadership by their sales managers because they weren't experiencing the same growth pattern as last year and they didn't have the skill set to coach and drive expectations.

Family, Friends and Partners Causing Problems - many who have family, friends or business partners experienced frustrations regarding expectations and being on the same page. Apparently, people change and sometimes we grow in different directions and there's more emotion involved when dealing with these individuals.

Sales Training for Reps that Don't Know How to Sell - while there are various selling methodologies, it appears there could be some improvement in the skillset ranging from identifying an opportunity all the way through deal closure and getting paid.

Time Management and Being Productive - many felt as though they were walking uphill in sand throughout the day, dealing with problems, getting into the weeds and not being able to focus on being a leader. Whether the cause related to a lack of human resources or simply not knowing how to set priorities each day and sticking to them in order to move the needle, the tone of not feeling like a productive leader surfaced on several occasions.

It was interesting to hear how these were discussed and resolved during the meetings. Even though these were common general issues, the resolutions for each were quite different for each specific problem.

Well, that's a flavor for what's on the minds of many in the leadership community. I'm curious to see if some of these same issues continue to surface in future meetings or if there will be a change of tone.

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Kevin Minton
CEO
Chief Executive Boards International

http://www.chiefexecutiveboards.com/

KevinMinton@ChiefExecutiveBoards.com

U.S. trade, jobs data encouraging; services sector disappoints

2015-06-04T09:38:00.001-04:00

The U.S. trade deficit narrowed in April on a drop in imports, which surged in March following the end of a West Coast ports labor dispute, while companies picked up their hiring in May after a pullback the previous month.

The data supported the notion the U.S. economy has recovered somewhat from a first-quarter contraction and bolstered expectations the Federal Reserve may consider raising interest rates later this year.

Not all the news on Wednesday was as encouraging.

Two private reports signaled slower growth in the U.S. services sector, which has propped up the economy as it faced drags from a strong dollar, a recent rise in oil costs and sluggish demand abroad.

"This is consistent with modest growth. It's enough for the Fed to consider tightening. September is very much on the table," said Christopher Low, chief economist at FTN Financial in New York.

U.S. central bank, which will hold a policy meeting June 16-17, concurred with that view in its latest Beige Book released on Wednesday.

This collection of anecdotes on the economy from early April to late May showed U.S. growth will continue at a "modest" to "moderate" pace, despite weakness in metal and energy industries and a strong dollar crimping exports.

U.S. stock indexes gained 0.4-0.5 percent after the data. The dollar and prices of U.S. Treasuries fell, which traders said was due more to the selling of German Bunds and gains in the euro after the European Central Bank upgraded its inflation outlook. [.N] [US/] [FRX/]

The U.S. Commerce Department on Wednesday said the trade gap narrowed to $40.9 billion from March's revised deficit of $50.6 billion. The 19.2 percent drop in the April trade deficit was the largest decrease since early 2009, and the deficit was about $3 billion less than forecast.

Imports fell 3.3 percent to $230.8 billion as West Coast

ports, a key gateway for goods to and from Asia, cleared a

backlog created by a labor dispute that was settled earlier this year.

Exports increased 1.0 percent to $189.9 billion in April with foreign sales of U.S. services edging up to a record high of $60.9 billion. In recent months, the strength of the dollar has made U.S. goods and services more expensive abroad.

The April petroleum deficit stood at $6.8 billion, the Fed won't raise rates until Q2 2016 - Mizuho's Ricchiuto, lowest since March 2002.

The latest trade data led Morgan Stanley to raise its forecast of U.S. economic growth in the second quarter to 2.7 percent from 2.2 percent.

EYES ON PAYROLLS

Meanwhile, private employers added 201,000 jobs in May, the most since January, payrolls processor ADP said on Wednesday.

That was in line with analyst forecasts and higher than a revised 165,000 jobs in April, which were the fewest since January 2014.

The ADP data came ahead of the U.S. Labor Department's more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment.

Economists polled by Reuters are looking for total U.S. employment to have grown by 225,000 jobs in May, similar to April's 223,000 increase. The unemployment rate is seen holding at a near seven-year low of 5.4 percent.

Flying in the face of the better trade and jobs outlook, other data showed services industries booked fewer new orders last month.

Financial firm Markit said its final May reading of its Purchasing Managers Index for the services industry slipped to 56.2, its lowest since January.

The Institute for Supply Management's own services sector gauge fell to 55.7 last month, its weakest since April 2014.

Courtesy: Richard Leong - Reuters (June 3, 2015)

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Kevin Minton
CEO
Chief Executive Boards International

http://www.chiefexecutiveboards.com/

KevinMinton@ChiefExecutiveBoards.com

How to Protect Your Company From Your Business Partner's Divorce

2015-05-07T18:24:00.002-04:00

Before you formed your business partnership, did you vet your partners’ marriages along with their bank statements? You may not consider it until divorce proceedings are underway, but your partners’ spouses likely own a part of your company, whether you want them to or not.

In my day job as a financial strategist specializing in complicated (and often highly contentious) divorces, I rarely see a case where the day-to-day operations, valuation and ownership structure of a business is not affected in some way by a breakup. If your partner’s soon-to-be ex receives a part of the business in the divorce settlement, you’ll gain a new, unwelcome partner who now has a voice in how your business operates and, by extension, can impact your own net worth.

Michael Lees, a business attorney and partner at Solomon Ward Seidenwurm & Smith in San Diego, recommends including a contingency for divorce in your company’s setup. “Start with a well-drafted partnership, ownership or shareholder agreement that requires a partner’s spouse to sell his or her awarded interest back to the company (or to its co-owners) in the event of divorce,” he says. “This buy-sell provision should contain a comprehensive list of terms and conditions, including the method by which shares will be valued, the transaction timeline and the source of funds to be used for the purchase, such as cash on hand, an existing line of credit and/or a loan.”

To ensure that the “right to purchase” can be upheld in family court, it is worthwhile—and often essential—to have all non-partner spouses consent in writing to all aspects of the agreement long before any marital dispute arises, according to Lees. In the event a buy-back is not possible, this agreement can limit an ex’s voting rights and/or management participation.

Even with such arrangements in place, John Ovrom, CEO of Coronado, Calif.-based Exit Consulting Group, regularly sees divorces play havoc on operations. “If one partner has to step away from the day-to-day operations to tend to his or her divorce, the balance is thrown off,” he says. “Resources are spread thin, resentment increases very quickly, and the partnership begins to look more like a sole proprietorship. The impact on cash flow can be dramatic and devastating.”

Ovrom’s advice is to plan for the worst. Divorce, illness, disability or the death of a loved one will affect your partner’s ability to contribute to the business. “You need to set up a legally binding plan that addresses how to handle these challenges,” he says. “One that answers some basic questions, such as how long one partner can step away from the company before his or her compensation drops. Who will assume his or her daily duties? If a loan or pay advance is needed to cover skyrocketing legal bills, what are reasonable terms?”

These are tough queries, but it’s better to ask them now than in the middle of a messy divorce. Handled correctly, every partner, including you, should come away with a greater sense of trust in one another to do the right thing to preserve the company—even when someone’s personal life is going down the drain.

Courtesy: Steph Wagner - Entrepreneur Magazine

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Kevin Minton
CEO
Chief Executive Boards International

http://www.chiefexecutiveboards.com/

KevinMinton@ChiefExecutiveBoards.com

Understanding DPOs: Should Your Small Business Go Public?

2015-03-23T12:18:00.000-04:00

“Going public” doesn’t have to mean heading to Wall Street. Small-business owners of any size can now use direct public offerings (DPOs) to sell ownership stakes in their company to raise capital, without the tight securities rules of an initial public offering (IPO). But is it a legitimate move for your small business? We spoke to Brenda Hamilton, a lawyer specializing in securities and going public with Hamilton & Associates Law Group, to get answers.

Small Business Center: What is the difference between an IPO and a DPO?
Hamilton: Both an IPO and a DPO involve the sale of an issuing company’s securities to investors as a way to raise capital. An IPO always involves a public offering registered with the Securities and Exchange Commission (SEC), and an underwriter sells those securities and receives a commission. In addition, the issuing company typically enters into an agreement with the underwriter that significantly impairs its ability to change its offering, offer other securities, and/or engage in certain transactions.

On the other hand, a business owner can register a DPO with the SEC, or can conduct an unregistered offering in some circumstances. The issuing company will market and sell its shares on its own behalf without an underwriter. As such, the success of the DPO is dependent upon the issuing company’s own efforts. Since the enactment of the JOBS Act, many companies conduct unregistered DPOs with accredited crowdfunding. This allows the issuing company to engage in advertising and solicitation as long as it verifies the purchasers are accredited investors.

Can any size business conduct a DPO?
Yes, that’s one of the benefits of this type of offering. Because you can structure DPOs in a variety of ways, you have flexibility. A DPO can be used by a startup company or an established company with a proven track record.

What other benefits can small-business owners realize from DPOs?
There are numerous benefits to DPOs. For instance, a DPO allows business owners to raise capital at their own pace, and the SEC doesn’t limit the amount of capital a company can raise in either registered or unregistered offerings. Both private and public companies can offer a DPO, and the issuing company can offer securities to investors without an IPO’s limitations. Finally, DPOs are less expensive than IPOs because there are no underwriter fees.

Are there any disadvantages to conducting a DPO?
The principal disadvantage of a DPO is that the issuing company is responsible for raising its own capital, and that could take time away from running the company.

How much does it cost to conduct a DPO?
The price will vary depending upon how the small-business owner wants to conduct the DPO. The minimum cost of a registered DPO is $40,000, and the minimum cost for an unregistered DPO is $15,000, and that includes fees to an accountant, attorney, transfer agent, EDGAR filing agent, and for a registered DPO, an auditor. However, a DPO costs hundreds of thousands of dollars less than an IPO.

How should small-business owners decide if a DPO is right for them?
To raise capital from investors, any company must be prepared to provide transparency. This means opening up the company’s books and records and disclosing all information that would be important to a reasonable investor. If a company cannot do this, it should not conduct a DPO or any other offering.

Another factor to consider is whether management has the ability to market its own offering. And even a DPO involves costs. In a registered DPO, these costs include legal, accounting, auditing, transfer agent, costs of electronic trading, and EDGAR filing fees, which is the SEC’s system for collecting, validating and publishing submissions by companies. For an unregistered DPO, the costs will vary depending upon the particular issuer, but will generally include legal, accounting, EDGAR filing fees and other costs.

How important is it to hire a securities lawyer for the process?
It is critical to hire a securities lawyer for the DPO process. There are expansive regulations that apply to both registered and unregistered securities offerings. Although the regulations are manageable with proper guidance, deviations can disqualify an offering and subject the issuing company to civil penalties and fines as well as investor rescission obligations.

What advice would you give to small-business owners who are considering a DPO?
If I had to choose one piece of advice, it would be to avoid professionals associated with multiple reverse-merger transactions, including lawyers, accountants, auditors, and transfer agents. Small companies and investors are often inexperienced in the financial markets and are easy prey to unsavory market participants in the micro-cap markets. Over the course of my career, I have seen numerous companies and investors devastated by reverse-merger transactions, some of which were actually recommended by securities lawyers. I would also encourage small-business owners to learn as much as possible about the process before they begin.

Courtesy: Suzanne Kearns - Freelance

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Kevin Minton
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Setting Goals: 3 Steps to Igniting Workplace Engagement

2015-03-15T21:39:00.001-04:00

The most important power a CEO has is the power to motivate the company’s employees. However, few CEOs realize just how critical it that job is. Often, the ability to motivate is chalked up to a natural flair or charisma -- but in fact some simple practices can help any leader inspire an entire company.

To begin the process, follow these three steps:

1. Begin with company goals.

It’s the job of the CEO to select the company’s top goals. Maybe they include new product development or a way to help the local community. They’re not random, of course; you’ll listen to the market, analyze past results and brainstorm with key advisors. But the real secret here is listening to the customer. The smartest businesses today practice agile strategies, and in this case that means aligning your goals with what your customers are trying to achieve.

Pro tip: When you draft your official goals, don’t just stick to the operational. Include two or three big ambitious goals -- the kind that move the needle. They’ll be too remote to feature in your immediate plans, but you want to promote them anyhow. Why? Because these are the goals that will get your employees excited about coming to work every day.

2. Focus on the 'why.'

Let’s face it, most businesses don’t have Apple’s hipness factor or a clear and relatable purpose like an environmental company. That means it’s your job as CEO to draw the connection between the employee’s duties and the customer’s benefit. Employees need to know that what they do during the day impacts big-scale results. By putting the employee’s purpose in the context of helping others, you can help everyone understand their role in achieving the company goals. It’s a critical ingredient in making sure the goals get executed. If you fail to provide a “why,” your busy employees simply won’t make their goals a priority.

Pro tip: Link the “why” of goals back to your company’s core values and mission. That provides wind at your back and makes it easy to prioritize plans.

3. Get your employees involved

This is where most leaders derail the whole goal-setting enterprise, as they tend to get overly detailed in their planning and try to set everyone else’s goals. Because the CEO doesn’t know how to actually do everyone’s job, those plans wind up being implausible and disconnected from the staff’s day-to-day reality. Instead, trust your people to write their own goals. Allowing employees to select the “how” of their contributions will boost morale and help them connect their work to results. Provide guidance and motivation, but let them chart their course.

Pro tip: Encourage employees to align their goals with their manager’s to ensure all goals line up with the company end game. Tools like scorecards and dashboards will help keep everyone on track, while metrics for measuring progress will keep your workforce enthusiastic.
When you get down to it, the heart of goal setting is communication. Employees feel motivated when they understand how their work impacts the company’s mission. Communicate a sense of purpose and give your team autonomy in their contributions, and you’ll have a workforce committed to driving the company forward.

Courtesy: Entrepreneur, Author: Alex Raymond

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26 Unsettling Truths About Social Security

2015-03-03T15:14:00.000-05:00

Courtesy Daily Finance - By Lucy Mueller

The Social Security program is turning 80 this year, and though most Americans won't commemorate this milestone, 57 million will benefit from it for more than $1,200 a month.

The future of the Social Security program has been much debated, especially this month, as a new Congress looks to approve or deny a budget that would decide the immediate future of disability payments. We can expect full saturation of headlines, a fair amount of politicking and, ultimately, a sneak peek into what this program will look like in the coming decades.

It could be drastically different. Social Security was created in the wake of one financial crisis; nearly a century later, as the country limps to recovery from another, policymakers are making decisions about the program's future that have real-dollar effects on just about everyone.

That makes it a scary time for the millions of Americans approaching retirement -- and the millions who are just starting to fund the Social Security system. We've put together a list of everything you need to know -- the good, the bad, the awful, the silver lining -- so you can start building a realistic retirement plan.

1. At Its Current Pace, Social Security Will Run Out by 2033

2. Social Security's Disability Program Will Run Out Much Sooner

3. People Rely On Social Security Than Ever

4. The Ratio of Taxes to Payout Is Shrinking

5. All the Boomers Are Retiring at Once

6. People Are Living Longer

7. People Are Having Fewer Children

8. Benefits Are Growing Faster Than the Economy

9. First Beneficiaries Put Less In, Got More Out

10. Income Inequality Is Eroding Social Security

11. Social Security Benefits Could Get Cut

12. Social Security Taxes Could Be Raised

13. The Retirement Age Could Be Moved

14. Trust Funds Are Invested in Low-Yield Securities

15. Investing a Portion in Corporate Securities Could Be Risky

16. It's Not a Politically Convenient Time for a Fix

17. The Social Security Administration Is Understaffed

18. It's Losing Field Offices All Over
19. Wait Times Are Increasing at the SSA's 800 Number

20. The SSA Spent $288 Million in a Failed Attempt to Update

21. Most People Don't Know How Social Security Works

22. People Aren't Working in Early Retirement -- and They Should Be

23. People Lose Lots by Collecting Too Early

24. People Get Lower Benefits by Not Working for 35 Years

25. The SSA Won't Tell You About All Your Benefits

26. More Beneficiaries Will Owe Taxes on Benefits

For more details regarding each of these facts, click here.

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11 Things Remarkable Leaders Think Every Day

2015-01-29T09:34:00.000-05:00

By getting to the heart of what makes some leaders truly great, you can become pretty remarkable yourself.

Remarkable leaders are admired--and followed. Learning how a great leader thinks is essential to learning how to become a great leader.

1. What's happening in the world today?

The best leaders begin their day with the news because they know that what's happening in the world today can have an effect on their business. They stay ahead of technological and industry advances so that they--and their companies--can evolve along with the rapid pace of change.

2. What are my goals for the day?

Remarkable leaders set goals for themselves daily--some easily achievable, and others a reach, because they thrive on challenges.

3. Which tasks should I begin first and which should I delegate?

Once they have a set of goals in mind for the day, great leaders prioritize, and then decide what tasks they need to personally accomplish, and what things should be delegated to others.

4. How are our products/services doing and are we making money?

Every highly effective leader thinks about the products or services that his or her company or department produces, and how much revenue and profit is being realized from them. Without these facts--examined on a regular basis--leaders can't readily see the need for change, or which direction to take.

5. Which contacts should I reach out to today?

Remarkable leaders are great at networking and staying in contact with others, first and foremost, because they enjoy the camaraderie and friendship. They also understand that these same connections may one day be a valuable resource for advice and information. And, these leaders are always there for their contacts when they're the ones who are in need--whether it's to pass on their expertise, give advice, or make a recommendation.

6. I am going to listen closely

Remarkable leaders ask questions and listen closely to what others have to say and share. They consider and listen to the views of others in an effort to learn and grow and enrich their business, others, and themselves.

7. How can I help you have a successful day?

Great leaders want their employees, customers, and vendors to be successful. They take the time to notice when someone is struggling, and they ask what they can do to help.

8. Can we find a better way?

Remarkable leaders are constantly thinking, asking, listening, and observing in an effort to learn new ways to be faster, more efficient, and more successful at what they do.

9. I really appreciate the hard work of my team

A great leader is the first to say, "They get all the credit because they deserve it." When employees do something exceptional, great leaders are the first to shine the spotlight on their people.

10. Were we successful today?

At the end of each day, remarkable leaders ask themselves and the members of their team whether or not they were successful. If the answer is yes, then these leaders know they should do more of that. If the answer is no, then they know that it's time to try a different approach.

11. I am grateful for...

Finally, remarkable leaders never forget to be grateful for what they have and make it a point each and every day to find something positive to reflect upon and be grateful for.

Courtesy: Inc. Magazine, Author: Peter Economy

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The 7 Emails You Need to Know How to Write

2015-01-20T21:18:00.000-05:00

Why Give a Damn:

Emails are how we communicate with each other in this day and age. Writing them well can be the difference between successfully building a relationship and not. This post includes example emails for how to get meetings, ask for introductions to investors, say no gracefully, and more!

Emails are strangely awkward. They give us the ability to start a conversation with anyone in the world, without the social cues of an in-person interaction. So we do things that we’d never do in real life via email. Can you imagine walking up to someone at a dinner party, handing them a large document and saying, “Hey Steve, it’s great to meet you! I’ve heard a lot about you and was wondering if you’d give me feedback on my business plan?” And yet, I get emails like this. A lot of people get emails like this.
So this post is dedicated to effectively writing what I believe are seven of the most important relationship-building emails. I’ve assembled articles and examples for each of the emails below and hope this helps you to start the critical relationships you need to produce extraordinary results!

1. How to get busy people to respond to your emails.
2. How to ask for an introduction.
3. How to make an introduction between two people.
4. How to ask for feedback.
5. How to ask for a meeting.
6. How to be politely persistent in getting someone to write you back.
7. How to say no gracefully.

Click here to discover "How To" construct these e-mails.

The author of this post, Teju Ravilochan, is co-founder and CEO of the Unreasonable Institute.

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Hiring Solutions and Hiring Trends for 2015: How to Hire Better

2015-01-08T13:46:00.000-05:00

2015 will be a challenging year for finding the talent you need to grow your business. This is not a prediction. It is the current reality and it is not likely to change in the next 12 months.

New realities require new strategies and tactics. They require smart hiring solutions. Want to know how to be prepared?

Click here to read the full article. Courtesy of NewHire.

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4 Things Every Business Owner Should do to Have a Financially Happy New Year

2015-01-04T19:32:00.001-05:00

Will 2015 be your year? The economy is slowly gaining speed, and according to the National Federation of Independent Business’ small business optimism index, owners are also becoming slightly more optimistic about the future. But optimism without planning and strategy is just a pipe dream. If you really want to achieve a banner year in 2015, you’ll need to attend to some basic financial aspects of your business. Here are four resolutions you can make to improve your chances of having a financially happy new year.

1. Get Slow Paying Customers to Pay Up

Regardless of how great your sales are in the new year, you need to collect on those sales or you won’t have the cash flow you need to run your business. One of the first things you should do is dust off your past due accounts receivable files and make a serious effort to collect what’s due. You’ve probably already tried the usual tactics — sending out reminder notices, calling and emailing the customers repeatedly, and offering them a discount to pay now. If you’ve tried all of this and you still have money sitting on the books, it’s time to get serious. Here are a few more options:

Pay them a personal visit. It’s easy to ignore phone calls, emails, and letters, but when a creditor comes calling, it gets people’s attention. Remind them in a friendly way they owe you money and you expect to get paid.
Ask for a payment schedule. Sometimes people want to pay but simply don’t have the means. Call your clients and ask them if they can pay their balance in smaller installments. If they agree, put it in writing and make it clear that if they don’t follow through, you’ll be forced to turn them over to a collection agency.
Have your attorney write a letter. People tend to take letters from lawyers seriously. Have your attorney send a letter to all of your non-paying clients and demand what’s due.
Sell them. If you simply can’t collect the debt, sell the invoices to a factor. You’ll only get a portion of their value, but if you don’t expect the customer to pay, a small portion of the invoice value is better than not getting paid anything at all.

In addition to cleaning up all of your old accounts receivables, you should create a new credit policy that drastically reduces past due invoices in the future. For example, you should run a credit check on new customers and do the same once a year on existing ones. If you notice a customer is paying late consistently, insist on cash-on-delivery payments until they have financially recovered.

2. Get Serious About Cash Flow

A business can’t run without sufficient cashflow — period. And if you’re like most small-business owners, you’ve already tightened your belt and increased your sales efforts. But if you want to start the new year off right, you’ll have to find a way to keep the cash flowing. Here are a few ideas:

Ask for payment upfront. If your business provides products or services, create a new billing system that offers clients a discount if they pay in advance. For instance, if you run a pest control business, ask your quarterly clients to pay a year in advance to receive a discount. It will be an incentive to them and put immediate (and risk-free) cash in your till.
Adjust your billing and payment cycles. Contact all your suppliers and negotiate additional discounts for shorter payment cycles. An additional 5 to 10 percent off your purchases can make a big difference in your cash flow. Another tactic is to ask suppliers to extend their payment terms, while shortening the payment cycle of your customers. This allows you to use the incoming customers’ money to pay your suppliers.
Have frequent sales to move your inventory, and reduce the amount of stock you keep for items that sell infrequently. Whatever you can’t sell, place online at sites like eBay and Amazon, or, if possible, return it to the supplier.

3. Set Your Sales Goal for the Year

Zig Ziglar famously said, “A goal properly set is halfway reached.” Your 2015 sales goal should be more than a number that you pull out of the sky. It should be a number you can realistically achieve, and it should be based on real numbers and trends. To reach your goal, you can forecast your revenue and work toward that figure all year. Or, you can work toward your goal backwards. Here’s how to do it:

Arrive at your sales figure using last year’s sales with adjustments or projections.
Determine the primary thing that needs to happen before you can reach the sales target. For instance, based on your average salesperson’s yearly numbers, you may find that you need to hire new salespeople to reach your goal.
Now figure out what needs to happen before that. You might determine that you need to transition your salespeople to work-from-home arrangements because you don’t have enough room to add more people.
Continue to work backwards until you identify the first milestone that you have to take in order to reach your goal. Now, set a time frame for each milestone.

4. Turn Your Marketing Plan on Its Head

If phone book and newspaper ads are still a major part of your marketing plan, it’s probably time to throw it out and start over. Much of today’s successful marketing is centered around the internet, even if you run a brick-and-mortar business. Successful business owners reach out to their customers in a variety of ways. Before you rewrite your plan, make sure that you can answer the following questions:

What do you offer your customers? In other words, what need do you fill in your customers’ lives? Hint: it’s the reason they buy from you.
Who are your ideal customers? Most businesses have a core group of repeat customers. Who make up your core? What are their characteristics and traits?
Who are your competitors? You need to understand your competitors — what do they do better or worse than you. What is their pricing strategy? Where do they advertise?

Once you have a clear understanding of these things, it’s time to decide where you will try to reach potential customers. Your new marketing plan may involve all or some of these avenues:

Internet marketing. This includes your own website, social media activity, running a blog, content marketing, pay-per-click advertising, links and backlinks to and from complementary businesses, and online press releases.
Local marketing. To appeal to your local community, you can sponsor local events, form partnerships with non-competing local businesses, use a street team, signage, and other traditional forms of advertising such as billboards, flyers, and coupons in the local paper.
Mobile marketing. More and more people are relying on their mobile phones for almost everything. Savvy business owners are finding ways to reach them there. You can optimize your homepage for mobile devices, create an app and then reward customers for using it with discounts and freebies, and use permission-based marketing with text messages.

So go ahead — pop the champagne cork and start celebrating. With a sound strategy in place, you’re sure to have a financially happy new year.

Courtesy National Federation of Independent Business.

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How To Lead Your Team Like An Alpha Wolf

2014-12-02T20:33:00.000-05:00

Want to dominate your market? Then cancel your next change management seminar and read this on the alpha wolf.

Great leaders recognize that, like it or not, humans are animals. And like the wolf, we organize into tight-knit, family-like units that must be run in an optimal way to thrive. The best, smartest CEOs, like Zuckerberg, know intuitively how to tap into their animal instincts to lead.

Here’s what you can learn from the alpha wolf to make your leadership more legendary.

Be A Master Communicator. Alpha wolves are social animals known for using their howl like a sophisticated instrument to keep their pack synced. But don’t start barking orders at your team. Instead as an alpha leader, keep your pack aligned with focused, emotionally-charged communication. Research published in Harvard Business Review found that the best leaders circulate actively and have short, high-energy conversations with team members. They communicate equally with individuals in the “pack” and make sure each one has a chance to contribute.

Build The Pack To Mass. Once a wolf pack hits five or more members, even lone wolves within it start to share a collective calling. The same is true in your company. Attract enough talented people who embrace a big vision you set, are mission-oriented, align with the values you design–and your leadership will make everyone want to contribute even more.

Go predator on them. In a wolf pack, you hunt for food. You work as one to find it and survive—or die. In your firm, you face a wolf-like, zero-sum game: There might be X number of clients you can get, but not if your competitors bag them first. Your version of prey may be the things that kill customers’ bliss or a sense of uncertainty that keeps them from buying. A great leader shows the team that by working together to kill off and nail your prey, you survive another day—and win.

Track Down Your Beta. In a wolf pack, the beta wolf enforces the rules and reminds all the alpha is king. To free yourself to lead your company to the next level, you, too, need a great number two. Invest in hiring a great chief operating officer if you want your company to run more efficiently, be predictable and rise.

Value Your Omegas. In a wolf pack, the lowest-ranking members can rise to the top—fast. But when they’re on the bottom rung, they give the group an important safety valve, by absorbing the stress of the pack. Your front-line employees play the same role. They make the first impression on your customers, collect important information, and show your company’s values. Trust them, with the right guidelines, to make on-the-fly, real-time choices to serve your guests. Make sure you support them. If you screw up in your alpha role, you’ll be working for them someday. Run hard.

Click here to read the full article. Courtesy Fortune Magazine.

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McKinsey's Dom Barton on Four Things That Worry Business

2014-11-24T16:06:00.001-05:00

As global managing director of McKinsey, Dominic Barton talks regularly with the CEOs of the world’s largest companies and leaders of nations worldwide—they’re clients of the elite management consulting firm, which serves some 90% of the

Fortune 100 as well as nonprofits and governments. Barton thus gets an unparalleled inside view of what global leaders are doing—and how the world’s business climate is changing. Barton, 52, talked recently about the trends of most concern to leaders now, how infotech is forever changing their jobs, and much else.

What are your clients’ worries right now?
They’re pretty consistent around the world. The big one now is:

Geopolitics: Whether you’re in Russia, China, anywhere, the assumed stability that was there for the past 20 or so years—it’s not there.
Technology: Which is moving two to three times faster than management. Most CEOs I talk to are excited and paranoid at the same time.
Cybersecurity: The amount of time and effort to protect systems and look at vulnerabilities is big.
The shift in economic power: With 2.2 billion new middle-class consumers in the next 15 years, and it’s moving to Asia and Africa. Do you have the right type of people in your top 100? Are you in those markets? Those are the four big ones we see everywhere.

Click here to read the full article. Courtesy Fortune Magazine.

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16 Tax Issues Facing Small Business Owners in 2014

2014-11-15T10:38:00.000-05:00

2014 will be a challenging tax year for businesses and higher-income taxpayers. The following issues are concerns that may impact you and your company’s tax liability in the new year.

Small Business Health Insurance Credit – The tax credit to small employers (25 or fewer equivalent full-time employees) that provide an affordable health insurance plan for their employees and supplement at least half the premiums, will increase to 50% of the employer’s contribution in 2014, up from 35% in 2013. For non-profit employers, the credit will be 35% in 2014.
Net Investment Income Tax – As part of the Patient Protection & Affordable Care Act (the new health care legislation sometimes referred to as “Obamacare”), a new tax kicked in for 2013 and will continue in 2014 and beyond. It is a surtax levied on the net investment income of taxpayers in the higher-income brackets. And although it is perceived as an additional tax on higher-income taxpayers, it can affect even those who normally don’t have higher income if they have a large income from the sale of real estate, certain business assets, stocks, or other investments. This is on top of the 20% long-term capital gain tax rate now in effect for higher-income taxpayers.
Higher Tax Rates – Prior to the increase in 2013, there were six tax brackets: 10, 15, 25, 28, 33, and 35%. Beginning in 2013 and continuing for future years, a new top rate of 39.6% has been added for higher-income taxpayers.
Higher Capital Gains Rates – Beginning in 2013 and continuing for future years, the tax rate for long-term capital gains and qualified dividends has been increased to 20% (up from 15%) for taxpayers with incomes exceeding the threshold for their filing status.
Medical AGI Phase-out – Beginning in 2013 and continuing for future years, a taxpayer’s medical deductions will be reduced by 10% of their adjusted gross income, up from the previous 7.5% (but the 7.5% continues to apply to seniors through 2016).
Possibility of Lower Expensing Deductions – The Sec 179 business expensing allowance for business equipment drops from $500,000 per year to $25,000 in 2014 unless Congress extends the more liberal amount.(1)
Bonus Depreciation Expires – Beginning in 2014, the 50% bonus depreciation for tangible business assets will expire unless Congress extends it.(1) This also reduces the first-year maximum depreciation deduction for business autos and small trucks.
Individual Insurance Mandate – Beginning in 2014, the Patient Protection & Affordable Care Act will impose the new requirement that U.S. persons, with certain exceptions, have minimum essential health care insurance, or face a penalty.
Large Employer Mandatory Insurance Requirement – Originally scheduled to begin in 2014 but delayed until 2015 because the government did not have the reporting mechanisms in place, large employers, generally those with 50 or more full-time equivalent employees in the prior calendar year, that:
o Do not offer health coverage for all its full-time employees,

o Offer minimum essential coverage that is unaffordable (employee contribution being more than 9.5% of the employee’s household income), or

o Offer minimum essential coverage where the plan’s share of the total allowed cost of benefits is less than 60% (i.e., less than the bronze plan coverage),

will be required to pay a penalty if any of its full-time employees were certified to the employer as having purchased health insurance through a state or federal exchange and qualified for either tax credits or a cost-sharing subsidy.
Simplified Home Office Deduction – Effective for tax years beginning in 2013 and continuing for 2014 and beyond, taxpayers can elect a simplified deduction for the business use of the taxpayer’s home. The deduction is $5 per square foot with a maximum square footage of 300. Thus, the maximum deduction is $1,500 per year. Eligibility qualifications are the same whether the simplified or regular deduction is claimed.
Increased Payroll and Self-Employment Tax – As part of the new health care legislation, higher-income taxpayers are faced with an additional 0.9% health insurance (HI) tax. Starting in 2013, and continuing for future years, this surtax is imposed upon wage earners and self-employed taxpayers whose wage and self-employment income exceeds $250,000 for married taxpayers filing jointly ($125,000 if filing separately) and $200,000 for all other.
Pease Limitations – The Pease limitation on itemized deductions that was reinstated in 2013 will continue for 2014. The Pease limitation phases out certain itemized deductions for higher-income taxpayers.
Phase-out of Exemptions – The phase-out of exemptions for higher-income taxpayers that was reinstated in 2013 continues for 2014.
Longer Depreciation Life for Leasehold and Restaurant Property – The current 15-year depreciable life will increase to 39 years in 2014.(1)
Qualified Small Business Stock Gain Exclusion – Beginning for qualified small business stock issued in 2014, the gain exclusion drops from 100% to 50%.
Qualified Real Property Expensing – Congress temporarily permitted the use of the Sec 179 expensing deduction to write off certain leasehold improvements, and restaurant and retail property improvements. Without Congressional intervention, this provision will no longer be available in 2014.

(1) Congress, a few years back, engaged in brinkmanship with last-minute tax changes. Normally, they have managed to finalize tax law by year’s end. However, for 2013, they adjourned without addressing the issue of extending many tax breaks that were set to expire at the end of 2013. It is not known if these tax provisions will be extended or not.

Source: YudichakCPA.com.

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How to Make Your Office an Employee Comfort Zone

2014-11-06T22:00:00.001-05:00

A well-designed office space can have a huge impact on employees’ morale. Here’s how to create one.

Employee retention strategies typically focus on benefits packages and company culture, but small business owners shouldn’t overlook the importance of an office’s physical space, reports a recent Bloomberg BNA article.
Because employees typically spend about 25 percent of their time at work, factors like comfortable seating (or standing desk options) and office layout can make a significant impact on morale, productivity and recruitment.

To make your own business an environment where employees are comfortable and happy, consider these tips.

Zero in on Individual Comfort
Offer Flexibility
Create Fun or Relaxation Zones

Click here to read the full article.

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Business Plan Innovations (10 Best Practices)

2014-10-02T17:15:00.001-04:00

Business planning is changing in tandem with the massive shifts in the

economy, in innovation, and even in politics. Conventional business

planning previously relied on industry structure and provided best case

scenarios in economic forecasts and financial analysis. But when

whole industries are getting disrupted, and tech advances are coming faster

than we can embrace them, the optimal business plan needs to reflect the

speed of innovation and the flexibility to prepare for change by envisioning

alternative scenarios.

Here are ten suggestions about how to keep your business plan flexible,

dynamic, and effective.

1. Review the competition

Business plans that don’t include the competition are naive. You may

think there’s nothing on the market that competes with your idea, but that

shows a lack of research or imagination. Even if you have a great idea for

a new product that didn’t exist before (think iPhone), you need to anticipate

that success will spawn competition (think Android). Your business plan

should not only look at current competitors, but who might be drawn into

the market by your success. Information on the competition should explain

each company’s place in the market and unique selling proposition. Ideally,

the business plan describes not just the working of your business, but how

it fits into the constellation of competing firms in the field.

2. Highlight innovation

It is not enough to show that you have a product or service that’s in

demand. Investors want to see that you have a plan for staying in demand

through innovation.

Detail your process for upgrading your products or services
Include a schedule for product revisions or upgrades
Outline investments in research and development
Mention any connections with research institutes or facilities

3. Prepare for success

Success can kill a business just as quickly as failure. Rapid growth

requires capital that must be advanced to generate the cash flows

needed to repay lenders and investors. Many business owners outrun

themselves, putting their businesses at risk from even slight shifts in the

direction of the market. If you are anticipating rapid growth, your business

plan should attempt to outline how you plan to cope with it.

Your plan should include:

Pro Forma Cash Flow Statements, illustrating the needs for cash as

the operation grows, and how those needs will be financed.

Facilities Inventory, showing how much space the operation currently

needs, how much more space will be needed to accommodate

anticipated growth, and when existing facilities will have to be

upgraded to remain sufficient.

Scenario Planning, showing how your business will handle a “worst

case scenario” of events not going your way.

4. Show how you will get buy-in

This might sounds obvious, but the whole company and all of your

employees should be committed to following the points included in your

business plan. How can you get everyone on the same page? How can

you prove it?

Share the Business Plan. Make the business plan widely available to

employees as a printed document, an electronic document, and on the

company intranet. If part of the plan must be kept confidential, share

the portions that you can, such as the company mission statement,

goals, and vision.

Include the Plan in Orientation. New hires should be introduced to

the company’s business plan during the new hire process.

Require Employees to Sign the Plan. If not all employees,

certainly the leadership team should be willing to sign off that they

have read the company’s business plan and are committed to

putting it into effect.

Track Compliance with the Plan. The business plan should

include information on how you intend to measure actual progress

against the plan. Will this be done quarterly, annually, or at another

prescribed interval?

5. Retaining top employees

Keeping your employees engaged and rewarded is essential to

employee retention and achieving business plan goals. Your plan

should outline systems or methods you will use to identify and retain top

performers, such as:

performance review process
employee training and development programs
employee recognition program
compensation policies, including profit sharing
advancement program

6. Exploring an exit strategy

A corporation has an unlimited lifespan, but the owners or managers

don’t. Just as many people put off estate planning because they don’t

want to face mortality, so business plans often fail to address the end

game for the entity. Are you grooming the business for sale? What

steps will you take to get it ready for market? Do you have a succession

plan? Who is going to run the business when the current management

is no longer able or willing to continue. Business plans should contain

guidance on how the company plans to sell itself, go public, or reach

other desired outcomes.

7. Include buyer personas

It’s not enough for your business plan to talk about your customers without

including detailed information about who, exactly, they are. Business plans

traditionally include buyer demographics, such as age, gender, income,

education, and other basics. The trend in business plans is to include

detailed buyer personas that provide a 360-degree look at who your

customers are. Beyond basic demographic information, buyer personas

often include the lifestyle, habits, interests, and aspirations of your ideal

customers or existing customers.

8. Include online media and content creation in the marketing strategy

More and more, businesses rely on the Internet and social networks to

attract prospects and distribute information about products and services.

More often, buyers are turning to the Internet and social networks for

business reviews, ratings and recommendations. The marketing portion

of your business plan should include information about how the company

intends to use Internet marketing, including:

Social Networks. What is your strategy for marketing on Facebook,

Twitter, Google+, and LinkedIn? How do you plan to attract followers

and maintain these accounts?

Multimedia Networks. It’s often more effective to market with

multimedia than text. How will your marketing operation use Pinterest,

YouTube, SlideShare, podcasting and webcasting to bring your

message to the target audience?

Content Marketing. Businesses need an array of quality content to

attract prospects and boost search engine position. Your business plan

should address how you plan to use direct email, newsletters, blogging,

infographics and other content packages to your advantage online.

Search Marketing. Your business plan should include a strategy for

achieving and maintaining high search engine rankings for target

keywords and phrases. It could take the form of a pay-per-click

advertising program, a guest blogging program, or some other content

marketing initiative.

9. Incorporate economic forecasting into your business plan

Customer needs evolve, new technology and competition emerge, and

markets change. Making “economic assumptions” when you develop

your business plan helps deal with those changes. Bill Conerly, Forbes

contributing writer and consultant, suggests that businesses incorporate

economic forecasts into their business plans. He offers these guidelines

along with some numbers:

Don’t bet your company on one economic forecast. Use multiple

forecasts for a rounded view.

Expect moderate economic growth. In 2013, the overall economy is

expected to grow by 2.6 percent inflation adjusted, according to the

Survey of Professional Forecasters (a free resource from the Federal

Reserve Bank of Philadelphia, and a good source for business forecasts).

Inflation will likely remain mild. The Survey of Professional Forecasters

puts the Consumer Price Index increase at 2.1 percent in the coming

year. With the unemployment rate expected to be 7.1 percent in 2014,

it’s unlikely wages will rise much. In 2012-2013, wage and benefits costs

combined grew by only 1.9 percent

Expect interest rates to rise. The increase in short-term interest rates

won’t begin until 2015, but long-term rates will rise slowly, according to

the consensus reported in both the Journal’s survey and the Survey of

Professional Forecasters.

10. Experts agree: Business plans need to see the downside

Why do some business strategies work and other fail? If yours fail, says

strategy consultant Steve Tobak, don’t feel bad, as few business owners

are business experts. Business owners start their businesses, Tobak

notes, because they’re passionate about their product or services, and

because they see opportunity, but don’t necessarily know how to sustain

growth. To achieve sustainable growth, Tobak says, business owners

should reevaluate their existing business plans often and include an

economic contingency. Meaning: Know when to walk away.

Conerly also advises incorporating economic contingency into your

business plan. “The Wall Street Journal’s economic forecast panel

estimates a 15 percent risk of recession in the coming 12 months,” he

writes. “That deserves some thought.”

Alejandro Crawford, senior consultant at Acceleration Group, also gives

great advice in his U.S. News & World Report article:

Dispense with the conventional business plan with its long range

predictions, its reliance on static assumptions about the market, and its

tendency to rationalize and defend a model and strategy built around

those assumptions. Instead, systematically embrace the potential shifts

that would challenge that model and that strategy. Focus on what it

would mean if these shifts occurred. And build a dynamic strategy by

developing a bold vision for what could happen, testing the market to see

what is happening, and positioning yourself to make the most of changes

as they occur.”

Source: Business.com - October 2, 2014

Other CEBI Blog Articles...

Kevin Minton
CEO
Chief Executive Boards International

http://www.chiefexecutiveboards.com/

KevinMinton@ChiefExecutiveBoards.com

Small Business Owners Lending Money to Employees - Good Business Sense?

2014-08-18T11:14:00.004-04:00

Every year, business owner Jim Fab lends his 25 employees as much as $4,000 interest-free for personal expenses they can't afford up front, ranging from down payments on homes and cars to funeral and legal fees. Most pay him back – eventually.

"I had a guy send me $300 a month for three years after he quit," says Mr. Fab, whose electrical-contracting company, Fab Electric Inc., has been in operation in Gaithersburg, Md., since 1978.

At small, closely knit companies, business owners like Mr. Fab sometimes take on an extra role: that of the parent who opens up the wallet when the kids need cash. After all, they typically can't steer their penny-pinched workers toward the kind of resources that many big companies have, such as credit unions and debt-counseling programs. Instead, the only option they usually have is to dig into their own pockets – and many say they do with little hesitation.

"It's normal," says Laura J. Wellington, co-owner of Giddy Gander Company LLC, a Ridgewood, N.J., provider of educational media content for children. Entrepreneurs often develop close ties with their staff members given they have so few, she explains, adding that's why she's felt comfortable loaning her 12 employees around $10,000 over the past two years. "I know my employees exceedingly well," she says, down to their spending habits. "If the person is credible and there's good reason to give out the loan, then I will do it."

These days, more workers may be prone to asking for financial support, as they're more likely to be the only members of their households earning an income. A report released earlier this week from the Labor Department shows that the share of families with an unemployed member rose to 12% last year from 7.8% in 2008 – the highest level since the government agency began collecting such data in 1994.

There's no firm statistics on how many small-business owners lend money to staff. But those who frequently engage in the practice say it makes good business sense. One reason, they say, is that it can help prevent a slowdown in productivity because workers who are stressed out about money may have difficulty focusing on their jobs.

Another rationale for helping employees overcome financial hardships is that it can boost loyalty, morale and unity within a work force, says Elie D. Ashery, co-founder of Gold Lasso Inc., a software company also in Gaithersburg that's given out loans to its 10 employees of up to $3,000 each. "Sometimes they're living paycheck to paycheck so we regularly go out of our way to help our employees keep their family obligations," he says. "It really helps to create better cohesiveness."

Offering financial aid to employees also can enhance a company's reputation, adds Shaun Burwell, chief financial officer of 2HB Software Designs Inc. in Columbia, Md. The systems-engineering firm has loaned its 17 employees more than $50,000 over the past five years, he says, and many recipients have shared that fact with family and friends. "It has been a positive discussion point," he says.

Certainly, there are potential downsides to lending workers money, such as the possibility of never getting paid back. For this reason, some owners say they only give out amounts they could live with losing for good. Others require workers to provide some form of collateral, such as the title to a car they own, or arrange to withdraw payments directly from their paychecks.

But John A. Snyder, a partner with law firm Jackson Lewis LLP in New York, says arranging for employees to pay back loans through salary deductions can have legal consequences. "You have to be careful about violating wage laws, especially if any deductions could potentially bring the employee below minimum wage," he says.

Mr. Snyder also warns that owners could be sued should they opt to give out loans to some workers but not others. "Whatever policy they have should be implemented in a uniform and nondiscriminatory way," he says, adding that it should also be put in writing and signed off on by an attorney.

Employee loans don't need to reported as income to the Internal Revenue Service since they're designed to be paid back, unlike monetary gifts, which are considered compensation, says John McQuaig, founder of McQuaig & Welk PLLC, a public-accounting firm in Wenatchee, Wash. But for safe measure, he urges business owners to record every loan they give out to employees on paper, including details on how it should be paid back and by when, and have them sign it, he advises.

Meanwhile, owners should consider the possibly that lending money to employees will create an awkward work environment, warns Christopher Carey, a small-business adviser in Brooklyn, N.Y. He says some might find it uncomfortable to inquire about late payments as well as embarrassing for the recipient, particularly in a small firm where other staffers might be within earshot. "It can cause undue stress," he says.

It's also possible that some workers will make a habit of asking for handouts, adds Mike Faith, founder of Headsets.com Inc., a retailer in San Francisco with 55 employees. "It could become a norm or expectation," he says. "It's got to be for a one-off event rather than just giving them money to feed bad spending habits."

But the bottom line, says Mr. Fab, the electrical-contracting company owner, is that there needs to be a high level of trust and respect between everyone involved to ensure a positive outcome. "It's not a good practice to get into unless you have a personal relationship with your employees," he says.

As long as that's the case, Mr. Fab doesn't see much of a need to worry. "You're the guy who signs their paycheck," he says. "They're going to pay you back before anybody else."

Source: Wall Street Journal - June 4, 2010

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Kevin Minton
CEO
Chief Executive Boards International

http://www.chiefexecutiveboards.com/

KevinMinton@ChiefExecutiveBoards.com

High Achievement Companies Focus on the Invisible - Part 2

2014-07-17T14:49:00.001-04:00

Having worked with approximately 100 leadership teams over a 30 year period, one of the most significant items I have concluded is that high achievement leadership teams and cultures do not follow the tide or trends often spoken about, or that are present in the majority of companies. While most companies focus on what can be seen physically, High Achievement Companies focus on building what can NOT be seen. It sounds strange but the real power that drives high achievement is what is invisible but so clearly felt. So what are these invisible factors that drive high achievement? To date I have discerned five factors. In last month’s version of “The Strategic Minute,” I shared with you that the Leadership Team was the first of the five invisible factors. Today, I will share the second invisible factor of High Achievement Companies.

Invisible Factor Number 2: High Achievement Companies have a strong company spirit that is clearly felt. This spirit resonates throughout the organization with everyone reinforcing it. On the occasion when this invisible code is violated, team members take it upon themselves to speak with their peers in a big brother like manner to guide and mentor their colleague. This strong company spirit is grounded in the company’s Core Values and Trust.

Core Values are principles of conduct that are organization specific. They set the bar for what is right in that particular organization and are the foundation for making the hard decisions. High Achievement Companies consistently live to and apply Core Values to all decisions including who is hired, performance reviews, policies, compensation plans, etc. By purposefully living Core Values, High Achievement Companies reduce and in some cases eliminate:

Internal Company Conflict
Inconsistency in Leadership
Unclear or Inconsistent Company Reputation
Second Guessing Decisions

Working hand in hand with Core Values is an underlying sense of Trust. In High Achievement Companies, trust is evident and specifically lived in three ways:

1. Competence: The team members of High Achievement Companies trust that their colleagues are competent to perform their duties.

2. Integrity: The team members of High Achievement Companies trust that their colleagues will do what they say, including living to the Core Values.

3. Fairness: The team members of High Achievement Companies trust that their colleagues will balance their interest with the Company’s interest and/or the interests of follow colleagues, departments, customers, vendors, etc.

What spirit is being projected by your company? Do your team members know and live to a set of Core Values? Is there a sense of trust among team members or do you experience infighting? The Good News is High Achievement Companies can be created.

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Kathie McBroom
Synergy Business Group LLC

www.thinking-organization.com/

Kathie.Mcbroom@thinking-organization.com

Small-Business Owners Remain Cautious

2014-07-09T11:05:00.001-04:00

The National Federation of Independent Business’ Small Business Optimism index fell 1.6 points in June, marking its first drop since February, Wells Fargo Securities’ senior economist Mark Vitner said in a recent report.

The bulk of the decline was due to a 10-percentage point slide in expectations for business conditions, signaling that more business owners see conditions worsening over the next six months than see them improving.

Business owners were also slightly less upbeat on sales, with the expectations index falling 4 percentage points to 11% in June.

Frustrations with burdensome regulations remain a bone of contention with small business owners. Concerns about the cost and availability of insurance continue to edge back following the rollout of the Affordable Care Act, according to the report.

Despite their worries, businesses appear to be hiring, the report said.

Firms planning to increase payrolls rose 2 percentage points to 12%. Job openings increased, as did concerns about the quality of labor, perhaps signaling a tighter job market, the report said.

For more on this article visit: http://www.nfib.com/article/nfib-sbet-small-business-optimism-cant-be-sustained-66050/

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Kevin Minton
CEO
Chief Executive Boards International

http://www.chiefexecutiveboards.com/

KevinMinton@ChiefExecutiveBoards.com

All In The Family

2014-06-02T17:04:00.000-04:00

Instilling your children with the right financial values and a sense of responsibility is an important part of parenting—and the affluent have additional challenges. Many parents want to make sure that growing up in a wealthy household doesn’t leave their children with a sense of entitlement and a lax work ethic.
As it turns out, these parents are right to focus on values. A full nine out of 10 affluent families will lose their wealth by the end of the third generation thanks to faulty money management, according to Rodney Zeeb, coauthor of Beating the Midas Curse. But a growing number of affluent elders have found some measure of security in their children’s futures by working with financial advisors to craft family mission statements.
These are basically formal documents outlining what is important to a family from a wealth perspective. The goal is to try to ensure that future generations inherit appropriate financial values along with the family fortune. And with the baby boomers set to transfer an estimated $41 trillion to the next generation over the next 40 years, the stakes have never been higher.*
Identifying family values
A family mission statement is actually the end result of a series of conversations among family members. Important topics of discussion include the family’s values and guiding principles, the meaning of relationships inside the family unit, and how the clan’s financial decisions—from annual income streams to charitable giving—should reflect that framework. Typically, such conversations start with parents discussing their wealth-related values and goals with each other and with their advisor. Later on, other family members are brought into this dialogue to share their own thoughts about family and money.
Some families have taboos about “money chats.” To break this, it’s vital to include multiple family members in the process so that the entire family can craft a shared mission statement, achieve consensus on it and honor that document for years to come. Everyone needs to be part of the process if values are to be adopted, internalized and passed on. And the more you discuss money and values with your children while you’re alive, the more likely they are to share those values with their own kids.
Making the right statement
Family mission statements need not be long—they are often about three pages—but should answer some key questions that shape a values-based approach to wealth. They should answer such questions as:

What are the sources of our wealth?

What values do we hold?

What goals do we want to achieve?

What are our attitudes toward work and sacrifice?

What are our motivations for investment and estate planning?

How do we want to be remembered as a family (what type of legacy do we want to leave)?

Addressing issues like these can be especially beneficial in preparing younger generations to handle inheritances properly. For example, when children see in writing that the wealth and comforts they currently enjoy resulted from the family’s hard work and effort, they may develop a greater appreciation of what it takes to create and maintain wealth. In the best-case scenario, this realization may inspire them to spend and save with more prudence and forethought.
Likewise, by spelling out any philanthropic causes and charities the family might wish to support over time, the children can see that the money they’ll receive has a larger purpose—and therefore needs to be managed responsibly. That, in turn, can encourage them to learn about the various components of smart financial decision-making and become good lifelong stewards of their capital.
The kids typically “get it” when it’s explained to them in this way. They start to see the importance of earning wealth, and they come to understand that the money is about more than just them—that they have a responsibility for it.
Values for a lifetime
Once a family mission statement is drafted and agreed on by the family, it should be reviewed regularly—at annual family meetings, for example—to ensure that the document remains relevant to everyone’s goals and views. It makes sense to revisit the document after any major family event (marriage, birth, death and so on). Such meetings can be combined with a retreat or vacation. It’s a great way to reconnect and visit with family members. In the process, you can build stronger bonds and values to pass down to future generations in the years and decades to come.
Talk to your financial planner about:

Techniques for broaching the subject of wealth and values with your children

Setting up time for a family discussion about the need for a family mission statement

Crafting a family mission statement to reflect your family’s values and traditions

* The Center on Wealth and Philanthropy.

Courtesy of Lincoln Financial Corp.

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Kevin Minton
CEO
Chief Executive Boards International

http://www.chiefexecutiveboards.com/

KevinMinton@ChiefExecutiveBoards.com

CEBI Spring National Summit Recap

2014-05-13T11:11:00.001-04:00

In case you missed it, the CEBI National Summit recently held in Atlanta was a success. There were a lot of comments made about how well the National Boards were facilitated and how they gelled. New members to CEBI, as well as some not so new members who attended their first National Summit were able to make tremendous new contacts and start building upon their national reach within the CEBI organization. The first day began by welcoming everyone to Atlanta and Kevin's update on CEBI’s new direction and remaining events. While CEBI has a tremendous peer advisory platform a number of new initiatives were announced to include:

A new CEBI website under development
New and exciting Workshop
A Recommended Reading List with discounted pricing
Helpful Webinars on Topics of Interest
Business Coaching for individuals or groups
And more….

CEBI Calendar Events:

An Executive Retreat hosted at The Cloister, Sea Is., GA., September 7-9
A New Workshop called "Build A Wealth Creation Machine", October 1-3, Cleveland, OH
The CEBI Fall Summit at The Wyndham Virginia Crossings, Richmond, VA, October 23-24
The CEBI 2015 Spring Summit at The Renaissance Hotel, Orlando, FL, April 23-24, 2015

Later on, some great member presentations were shared with the group by Bob Kaynes of Columbus, Kevin Day of Charlotte, Jim Henderson of Boston, and Adam Anderson of Greenville. You can relive all of their presentations and experiences by visiting the CEBI Summit Presentation Library.

There were a few late nights at the bar rekindling old friendships and making new acquaintances. It was a tremendous experience catching up with everyone around the bar in between the hockey playoffs and the pool games.

Once the National Board meetings wrapped up, the Summit finished up on a high note with a workshop on Lean & Six Sigma Processes led by quality expert, Marco Luzzatti.

Thanks to all of our Summit participants, presenters, facilitators and dinner hosts for all of your contributions. It was great seeing everyone in Atlanta and on behalf of Kevin, Angel, and Robin, best wishes and we’ll look forward to seeing you again soon at your local board meetings.

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Kevin Minton
CEO
Chief Executive Boards International

http://www.chiefexecutiveboards.com/

KevinMinton@ChiefExecutiveBoards.com

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* The Center on Wealth and Philanthropy.

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