Empathy is defined as the action of understanding, being aware of, being sensitive to, and vicariously experiencing the feelings, thoughts, and experience of another of either the past or present without having the feelings, thoughts, and experience fully communicated in an objectively explicit manner. That’s a mouthful. For some, it connotes a purely emotional response. But in truth, empathy is an important skill for being a successful leader.
It should be noted that there are some who suggest empathy leads to poor decisions. For example, a Yale professor says empathy distorts judgment.
My view on empathy is that it is no less essential than any other leadership trait. Empathy can’t be used to the exclusion of rational thought. But excluding empathy from your leadership basket of skills would be a serious error.
Maya Angelou said: “I think we all have empathy. We may not have enough courage to display it.”
Last month’s blog concerned creativity and vision. Next month’s blog on developing leadership qualities addresses grit.
Not all monetary increases in your business are treated as income for tax purposes. Separating what you feel as more wealth from what is actually taxable income can help you make tax savvy decisions for your business.
Here’s a rundown of some items to note.
Gross receipts. The sales proceeds you receive for your merchandise is not entirely income. The proceeds (gross receipts) must be reduced by the cost of goods sold (what it cost you for inventory) to arrive at the amount of income that’s taxed.
Consignments. Consignments of merchandise to others to sell for you are not sales. This is because the title to the merchandise remains with you (the consignor), even after the other party (the consignee) possesses the merchandise. If you ship goods on consignment, you have no profit or loss until the consignee sells the merchandise. The merchandise you shipped out on consignment is included in your inventory until it is actually sold.
Sales taxes. While you may be required to collect sales tax from customers and remit it to the state, you’re just the state’s agent. The amount of this sales tax is not income to you.
Getting back your own money. It is not “income” for tax purposes when you get back your own money. This can occur when what you receive is a return of capital (i.e., your investment in property). This is your basis in property, which is subtracted from the sales proceeds to determine your gain (or loss). Similarly, when you receive proceeds from a loan you made to someone, you’re merely getting back the principal. It’s not income.
Paper profits. The value of your property may go up or down. When the value of your property appreciates, it is not income until there’s a sale. For example, your business owns a strip mall in a city that’s booming. The value of your property may increase substantially, giving you potential profit (income)…but your gain only becomes taxable if you sell.
The law makes it tax free. Some types of income are tax free because the law says so. Examples of tax-free income include:
Frequent flyer miles and other rewards programs (e.g., cash backs). But there are some things to watch out for. Although the receipt of frequent flyer miles isn’t taxed, a deduction for business travel financed with them needs to be reduced accordingly. And certain credit card reward bonuses are taxable.
Municipal bond interest
Rebates on product purchases
Deferred income. Even income that you may have had to report now can be deferred in certain situations:
Advance payments. If you are on an accrual basis for tax accounting purposes, you can elect to postpone including an advance payment in income until the next year. The IRS has guidance on this deferral election.
Installment sales. If you sell property (not inventory) and receive payment over more than one year, you can spread your gain over the period in which payments are received.
Like-kind exchanges. If you exchange realty solely for other realty that is “like kind,” no gain is recognized on the exchange. The unrecognized gain is effectively preserved in the tax basis of the replacement property so that the original gain, plus gain from any additional appreciation in the property, is recognized when it is ultimately sold.
“Not everything that can be counted counts, and not everything that counts can be counted.” -- Albert Einstein
Work with your CPA or other tax adviser to check on the tax status of your “income.”
It’s been 243 years since a group of men in Philadelphia signed the Declaration of Independence and started a revolution. Most of these 56 men were small business owners, lawyers, doctors and farmers; 14 were plantation owners. These men risked it all: “We mutually pledge to each other our Lives, our Fortunes, and our sacred Honor.” (This is an update of a blog I ran 5 years ago.)
Here’s a list from the National Archives of the signers and their occupations to remind us that our businesses, our jobs, and our lives can be on the line when freedom is at stake.
John Adams (MA)
Samuel Adams (MA)
Josiah Bartlett (NH)
Carter Braxton (VA)
Plantation owner, ship owner
Charles Carroll (MD)
Merchant, plantation owner
Samuel Chase (MD)
Abraham Clark (NJ)
George Clymer (PA)
William Ellery (RI)
William Floyd (NJ)
Benjamin Franklin (PA)
Elbridge Gerry (MA)
Button Gwinnett (GA)
Merchant, plantation owner
Lyman Hall (GA)
John Hancock (MA)
Benjamin Harrison (VA)
Plantation owner, farmer
John Hart (NJ)
Joseph Hewes (NC)
Thomas Heyward Jr. (SC)
Lawyer, plantation owner
William Hooper (NC)
Stephen Hopkins (RI)
Francis Hopkinson (NJ)
Samuel Huntington (CT)
Thomas Jefferson (VA)
Lawyer, plantation owner, scientist
Francis Lightfoot Lee (VA)
Richard Henry Lee (VA)
Plantation owner, merchant
Francis Lewis (NY)
Philip Livingston (NY)
Thomas Lynch Jr. (SC)
Thomas McKean (DE)
Arthur Middleton (SC)
Lewis Morris (NY)
Robert Morris (PA)
Merchant, land speculator
John Morton (PA)
Thomas Nelson Jr. (VA)
Merchant, plantation owner
William Paca (MD)
Lawyer, plantation owner
Robert Treat Paine (MA)
John Penn (NC)
George Read (DE)
Caesar Rodney (DE)
Plantation owner, military officer
George Ross (PA)
Dr. Benjamin Rush (PA)
Edward Rutledge (SC)
Lawyer, plantation owner
Roger Sherman (CT)
James Smith (PA)
Richard Stockton (NJ)
Thomas Stone (MD)
George Taylor (PA)
Matthew Thornton (NH)
George Walton (GA)
William Whipple (NH)
William Williams (CT)
James Wilson (PA)
John Witherspoon (NJ)
Oliver Wolcott (CT)
George Wythe (VA)
Some of the signers were very successful in their businesses, while others failed miserably. Many loaned money in support of the American Revolution and were not repaid. Others had their property destroyed by the British.
All in all, these men made it possible for the American experiment to continue.
"Reading is everything. Reading makes me feel like I've accomplished something, learned something, become a better person. Reading makes me smarter." Nora Ephron
Did you know that reading correlates with success? Tom Corley (Rich Habits: The Daily Success Habits of Wealthy Individuals) says that 85% of successful people read two or more self-improvement or educational books each month. Whether summertime gives you some extra time for reading or you’re busy but don’t want to miss good reads for your business, here are some ideas.
My favorites this summer
One book to consider is Grit: The Power of Passion and Perseverance by Angela Duckworth. It shows that you don’t have to be the smartest, strongest, or most creative to succeed; all you need is grit. The book shows how grit can be learned, regardless of I.Q. or circumstances.
A novel that I think is a good business book is The Last Days of Night by Graham Moore. It came out a few years ago and describes the contest between industrialists Thomas Edison and George Westinghouse on which type of electric power would run the world. Just a good read about these and other titans of the era, including Alexander Graham Bell and Stanford White.
My last suggestion is a new book: The Pioneers: The Heroic Story of the Settlers Who Brought the American Ideal West by David McCullough. As the New York Times book review says, “If every generation of Americans gets the visionary colonizer it deserves, we get Elon Musk, but people in the early republic got the Rev. Manasseh Cutler.” He set out to colonize the Ohio Territory. And what he and those who joined him went through is inspirational. Being an entrepreneur is being a visionary and having the will to pursue the dream. As a McCullough fan, if this one doesn’t do it for you, consider The Wright Brothers. Their patent saga will wow you.
Summer reading lists
My list is short; you may be hungry for more. Here are some good lists to check out for business books this summer:
Don’t overlook Hack The Entrepreneur’s 101 Best Business Books of All Time (2019). This list includes some very old favorites, including such must-reads as Dale Carnegie’s How to Win Friends & Influence People, Malcolm Gladwell’s Outliers: The Story of Success, Michael Gerber’s The E Myth Revisited (2004), Napolean Hill’s Think & Grow Rich. And if you are still thirsting for more, consider my book Smooth Failing.
Three years ago, I blogged on this topic. Since that time, things have changed. The opioid crisis is still raging (every day more than 130 people die in the U.S. from overdosing on opioids). More states have legalized marijuana for recreation and/or medical use. The job market continues to be tight (the U.S. unemployment rate in May 2019 was 3.6%). All of these factors may impact your company’s drug policy.
What you must do
If your business is subject to federal regulations, such as a transportation business subject to DOT drug-testing rules, you must implement a drug testing policy to be compliant with the law. Find details about the types of businesses required to have drug testing at the Substance Abuse and Mental Health Services Administration (SAMHSA). Ideas on creating a drug policy follows.
What you can do
Most employers can set their own drug policy, as long as it’s fair (i.e., nondiscriminatory). For example, employers can set a drug-free workplace policy, which bans employees from marijuana use (even if such use is legal in the state) in the same manner as alcohol use.
When implementing a policy to test employees, including those who’ve been offered positions pending the outcome of a drug test, the Council on Alcohol and Drugs recommends:
A written policy
Access to assistance
In crafting a drug policy, be very careful to avoid problems that could trigger lawsuits against you for invasion of privacy, wrongful discharge, or discrimination. For example, if your state has legalized marijuana, it may be unlawful to discharge an employee solely on the basis of a positive test for marijuana. In fact, permitting the use of medical marijuana (in states where this is legal) may be a reasonable accommodation under the Americans with Disabilities Act. Be sure to have your drug policy reviewed by an employment law attorney.
What you can’t do
Be sure your drug policy aligns with the law in your state (e.g., accommodating medical use). Check the map to see the law in your state. Increasingly, states that permit the use of marijuana for recreational use are prohibiting employers from using positive marijuana tests to be used against an employee or job applicant; in effect, employers there cannot prohibit off-duty marijuana use.
However, look for exceptions (allowing or requiring you to test for drugs and use positive results against an employee) if the job:
Requires an employee to operate a motor vehicle
Could adversely affect the safety of others
Has federal or state law mandates (e.g., employees working for federal contractors explained earlier)
Untreated substance abuse disorder costs employers an average of $7,000 per year in higher health care costs, absenteeism, and turnover costs. Think about your drug policy. Does it promote the health and safety of your employees? Do you provide assistance (e.g., referral services) for substance abuse? Are you up on the latest drug and employment laws in your state? There’s a lot to think about.
The Atlantic hurricane season began on June 1; it runs through November 30. While the prediction for storms this season are modest (slightly less than last year), all it takes is one big storm in your area to wreak havoc with your business. Consider the devastating flooding that occurred early June in many parts of the U.S. Here are some suggestions to help you be prepared for any disaster that may come your way.
1. Review your disaster preparedness plan
If you have a plan in place, look it over to make sure you’ve done what the plan directs you to do (e.g., have emergency supplies on the premises). If you don’t yet have a plan, make one. Resources to help:
A flood can wash away all of your office papers. But if your information is stored in the cloud, you can easily recover everything. Take the time to scan your documents and store them in the cloud.
Keep all of your passwords accessible. Consider using a password manager stored on your smartphone for this purpose. PC Magazine has a list of the 10 best password managers for 2019.
3. Prep your smartphone
Make sure you have all key numbers in your contact list. These include your insurance agent, repair people you use (e.g., electrician), and all of your employees. Also be sure to have numbers for vendors and other business associates.
Add apps to your device to help you through disasters. For example, you want to have an app that will inform of weather conditions. You may also want an app to stay in contact with others. For example, Zello Walkie Talkie is a free app that lets you communicate faster than texting.
4. Check your insurance
If you wait until the weather report tells you a storm is coming, it may be too late to have the insurance you need to cover potential losses. Discuss now with your insurance agent what you have and what you should have. Then decide what you can afford. Insurance to review:
Business owners policy (BOP). Check the limits of coverage under your basic insurance policy.
Business interruption insurance. This coverage will pay the bills that don’t stop despite a disaster, such as rent. Depending on the policy, it may even cover profits lost during an interruption.
Flood insurance. Depending on where your business is located, your BOP may not cover property damage caused by flooding. Check with your insurance agent and FEMA.
5. Talk to your employees
Your company needs a business preparedness plan, but your employees need their own personal plans for their families. Consider advising them of this and providing resources they can use to craft their personal preparedness plan:
In early June it was reported that a 13-year old sold 3,500 cupcakes over the course of a year to raise the $5,000 he needed to take his family on a trip to Disney World. This story illustrates that the entrepreneurial spirit can strike even children.
So, too, does the Girl Scout Cookie Program foster entrepreneurship. As the Girl Scouts says: “Whether girls go door to door, set up booths at libraries and shopping centers, or sell cookies online with Digital Cookie®, they’re also preparing for a bright future. The Girl Scout Cookie Program lets girls show the world their entrepreneurial spirit as key members of the world’s largest girl-led business.”
A lemonade stand can teach valuable lessons about running a business. But these entries into entrepreneurship should not ignore certain realities for business owners, regardless of their age.
Lessons from a lemonade stand
If you look on Amazon, you’ll find dozens of books with “lemonade stand” in the title. After culling out children’s story books, you’ll see that authors use the lemonade stand to illustrate how this basic business affords important lessons that can translate into running any type of business.
Children who want to run a business venture…even a lemonade stand…need to comply with the law. This may include vendors permits, health code compliance, and other legal requirements to operate.
But don’t feel overwhelmed because there may be exemptions for child-run businesses. For example, in Utah, cities and counties cannot require a license or permit for any occasional business created by a minor. New York is considering a similar exemption entitled Lemon-Aid Law.
When it comes to federal taxes, there are no blanket exemptions from reporting and paying taxes for minors. But again, if the income is modest, no reporting and no taxes are required.
For example, in 2019, a dependent child with earned income must file a return only if such income exceeds $12,200. So the typical lemonade stand earnings would not trigger any federal income tax compliance issues.
But check on state income tax rules as well as sales tax obligations. Things can get complicated.
Whether your child works for you in your business or ventures out on his or her own, there are important life lessons that your child can learn. He or she can learn about money, business operations, hard work, and more. Not bad for a summer break from school.
Being in a tight labor market as now exists requires employers to find ways to keep employees satisfied and loyal.
Unfortunately, this isn’t an easy thing for small businesses.
Typically, their budgets don’t permit generous fringe benefits offered by large companies, such as on-site gyms and eating facilities.
But is this what employees really want? The answer may depend on who you ask. Here is a sampling from some recent surveys to give you some ideas about your policies and offerings:Basic things employees want
ServiceNow’s survey found that what employees want most is meaningful work. In fact, 61% would ask for meaningful work rather than 34% who would ask for a raise.
Help in figuring out HR benefits. 45% would rather clean their bathroom than figure out HR benefits.
Office equipment that works. 37% would rather be stuck in traffic than troubleshoot a broken printer by themselves.
IT assistance. 36% would rather stand in line at the DMV than troubleshoot an IT issue.
Wish list depends on generation
This is what was reported by Daily Pay. Here’s a sampling of desired benefits by generation:
Baby boomers want flexible schedules and family care programs.
Gen Xs also want flexible schedules and family leave but desire the ability to make a difference in the organization, recognition for their work, and development opportunities.
Millennials want health and wellness programs, support and feedback, coaching (but not micromanaging), social consciousness, and a strong workplace culture with collaboration.
Generation Z want money, job security, and the opportunity to advance.
According to LinkedIn’s Workforce Learning Report, 94% of employees said they’d stay at a company longer if there were learning opportunities. About one quarter of Gen Z and Millennials said learning is the main thing that makes them happy at work.
From this sampling of surveys, you can see that what employees want is not all about money (of course competitive compensation is important). Your benefits offering is about many other things that are within your power and pocketbook to provide.
An IBM survey some years ago found that the most important leadership quality in today’s world was creativity. It was even more important than integrity and fairness. So how can you work on expressing your creativity and developing your vision?
Continue to grow personally
As a leader, you can’t remain stagnant. The world is changing too fast, and you have to keep up. These clichés say it all: stay ahead of the curve, think outside the box, and don’t drop the ball.
Some ideas to help you continue to grow:
Read and listen. There is a never-ending stream of business books to challenge you and help with creativity and vision. For example, David Kelley has two great books: The Art of Innovation and Creative Confidence. His message is that creativity is not limited to “creative types.” Similarly, there are numerous podcasts, such as TED talks, you can listen to as a way to “stir your curiosity.”
Attend webinars and industry events. Listen to what others are saying. They just might inspire you to expand your thinking and widen your vision.
Devote time for thinking
You’ve probably heard the saying “work on your business, not in it.” In order to be creative and have vision for your company, you need to spend time on working on your business. Schedule the time and choose the location for this activity. Decide what works for you (a quiet office, time away from the business in nature) so you can think clearly.
Encourage creativity and vision in your staff
You don’t have to come up with all the ideas yourself. You may gain insight from your employees. Forbes Coaches Council lists 15 ways leaders can promote creativity in the workplace.
As Walt Disney said, “if you can dream it, you can do it.”
So it’s up to you to have the creativity and vision for your business.
This is the sixth blog in a 12-part series on Developing Leadership Qualities. Last month’s blog concerned decision making. Next month’s blog on developing leadership qualities addresses empathy.
According to Intuit’s The State of Small Business Cash Flow, “69% of small business owners say they have been kept up at night by ongoing concerns about their cash flow status.” Nearly one-third (32%) can’t pay vendors, pending loans, employees, or themselves because of cash flow issues. Even worse, “[o]n average, U.S. small business owners are losing $43,394 annually by foregoing a project or sales due to issues created by insufficient cash flow.”
Know your numbers
Cash flow essentially means money in and money out. Having enough coming in to pay what’s going out is key. And the only way to be sure is to stay on top of your numbers. This means monitoring your cash flow on a regular basis. This can be done using your accounting solution or add-ons to them. Some offer push notifications on your mobile device when payments are coming up and/or cash flow is low.
Change your billing policies
One of the findings from the Intuit survey was that “more than half of small businesses globally (53%) bill customers for goods/services on a specific date, compared to 47% that utilize advanced payment – charging customers for goods/services before or at the time of receiving them.” With today’s payment options, there’s no reason for most small businesses to delay billing. Generating a bill or invoice and receiving payment instantly. It can be done with QuickBooks and most other small business accounting solutions, with Square and other devices facilitating mobile payments on the spot.
If you must send an invoice and wait for payment, don’t wait too long before you begin collection activities. It’s been my view that invoices aren’t like fine wine; they don’t get better with age. What to do:
Set your in-house policy on what constitutes “past due.” For example, if your invoices say “net 10 days,” you may decide that one week after this means the invoice is past due.
Become proactive. Follow up immediately with any past due invoices. This can range from sending a second invoice as a gentle reminder or a phone call asking what’s going on. Depending on the amount that’s owed or the principle involved, you may even want to go to small claims court to collect what you’re owed without having to incur legal fees and other large costs.
Turn things over to the pros. If you’ve exhausted your own collections efforts, consider bringing in professionals. Again, depending on the amount outstanding, you may want an attorney to work on your behalf. Or you may want to use a collections agency. Recognize that once you use outside help, it’s going to cost you and you never get full payment (even if full payment is collected by your pro).
Build a cash cushion
Companies may be doing a box-office business and have lots of receivables on hand, but that doesn’t help cash flow. According to the Intuit study referenced earlier, “nearly a third of small businesses (31%) estimate it takes more than 30 days to get paid, by customers, clients, vendors or banks.” What’s needed here (in addition to following the ideas discussed earlier) is to have sufficient cash on hand to pay bills while waiting to get paid from tardy customers. Some ideas:
Create a savings account for this purpose. This can be very challenging for small businesses on tight margins.
Obtain a line of credit. If your business is financially sound now, you can set up a line a credit with a bank, credit union, or online lender. This can then be tapped as needed to cover expenses while waiting to get paid.
Cash advance. Get cash now at a discount to the face amount of your receivables. Another option is getting a cash advance from FINSYNC based on your invoices.
It’s been reported that 82% of small business failures are the result of cash flow problems. Don’t become a sad statistic.