Becoming an Effective Leader

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Team success often hinges on leadership. That leadership can come from a formal role or from within the team but having someone to facilitate a clear direction and provide structure and encouragement is key.

An effective leader is one who is not threatened by the competence or successes of his or her team, but rather inspired and enthusiastic. Such a leader involves his or her colleagues in discussions and plans, allowing them to bring their insight to the table. 

Let’s break down what an effective leader looks like.  

What is a Leader?

A leader can emerge in any situation without the need for a title, but for the sake of this article let’s look at this as someone who is in a formal leadership role.

A leadership role needs to be clearly defined so that everyone understands the expectations and responsibilities. Disappointment or dissatisfaction can sneak in when a team holds expectations of their leader which go unfulfilled or ignored.

A leader can offer leadership roles to teammates as well. Empowering your team can be a powerful motivational tool, just remember to do so strategically

Shared Vision

Shared vision is important in leadership. Communication is paramount in aligning goals and working toward them. Moreover, a clear vision is necessary.

Many businesses have Vision statements, Walmart’s for example is “Be the destination for customers to save money, no matter how they want to shop.” As a leader you need to be moving toward the vision of the company, but you can also have a vision for your department or team.

The main thing is that you point your activities toward the furtherance of that vision and reward actions that support that vision.

Developing Goals

“We want to increase sales this quarter by 10%” is a clear goal, while “We need to do better” is not. It is a leader’s job to build. Maybe not physically, but a leader should constantly be building something, whether that’s operational, sales, or morale. A stagnant leader is no leader at all.

Goals can help you build, but they need to be clear and understandable. I suggest you lay out goals for your team and work with them to make sure they understand how those goals contribute to the overall vision.

When people feel like they are contributing they often develop a sense of shared ownership. When the business’ success is your success, you tend to put your best effort forward.

Sharing a Mission

Another element of inspiring one’s colleagues is sharing a clearly specified mission. Even better is if the mission was created collaboratively by the team.  

A mission is similar to the vision, but also provides the “what”, “Why”, or “Who”, behind your company. For example, Tesla’s mission statement is  “To accelerate the world’s transition to sustainable energy.” So if you were to ask why Tesla exists, the answer is “To accelerate the world’s transition to sustainable energy.”

So, a leader needs to ask themselves and their team “why do we exist as a team?”, “who do we want to be?”, or “what is our purpose?” and align their team behind that mission.

Embracing Diversity

An effective leader looks to the strengths of their team for opportunity. There are often members within a team that are more capable or experienced in various aspects than the leader, yet a good leader does not find this intimidating. This is opportunity to let that member shine and utilize that strength to bring the whole team up, not a threat to be squashed.

A good leader isn’t threatened by the experience and the diversity of her team. The most effective leaders are comfortable leaning on the expertise of their team and those doing the work on the front line. Without that communication and trust, leaders are flying blind.

Success is found in having the right people in the right places. It is critical to utilize staff members in their areas where their strengths lie.

Furthermore, a diverse team provides a rich background of knowledge and experience from which to draw. Having a team perform the same work in the same way day after day limits opportunity for innovation and progress. Leaders who give their teams the freedom to offer input and suggestions create an environment of innovation, motivation, and excellence.

Pursuit of Excellence

Excellence is always the goal of a good leader. They do not ask their team to be average and fade into the crowd. A leader should always encourage his or her team to seek new heights and grow as an individual, as a team, and as a professional. Additionally, the leader and team should continually self-evaluate to find ways to operate more effectively.

Building Your Environment

Mistakes happen, that’s where some of the greatest learning takes place. Employees don’t need to be beat down every time they mess up. A good leader looks for “why” the problem happened, and how to make sure it doesn’t happen again rather than “who to blame”.

Its also important that team members feel security in their roles. They need to know that they can speak up, accept their mistakes, make suggestions, and have the freedoms necessary to do the best job they can.

Furthermore, an effective leader celebrates the successes of their team as a whole and individually.  Such a positive environment encourages employees, reduces turnover, and attracts strong candidates to your business.

Leadership in a Nutshell

Leadership can be difficult. Its not for the faint of heart, but it can also be extremely rewarding. There are many people who are under formal leadership who get beat down every day and dread going into work. As a leader you have the opportunity to encourage your employees and make their lives a little better while building something amazing together.

Financial Disaster is Looming, Here’s Why

As the nation faces The Great Resignation, $15 minimum wage for federal employees and an influx of money from stimulus and tax credits businesses are forced to up their game to compete for employees. Lets face it, money is readily available and as such $15 per hour is not as enticing as it used to be. In fact, no wage holds quite the same value any more. This may sound good, but it spells disaster for the middle and lower financial classes.

Employers are competing for employees, that’s usually a really good thing, but in this case it could be really bad, here’s how.

Frank’s Good Fortune

Lets imagine its 2019 and a man, we’ll call him Frank, is applying for a job as an underwriter for a bank and he is really good at what he does. Frank has applied at several banks and 3 of them wanted to hire him. The first offered him $50k, the second $52k, and the third $55k. He tells bank one and two of bank three’s offer and bank one offers to match while bank two offers $56k. The cycle continues and before its all over Frank lands a position with bank three at $60k per year. The average underwriter in his city earns $49k per year with a cost of living of about $44k per year. Frank is earning roughly $16k more than what is needed for the average person to live a life of moderate comfort in his city.

Now its 2022 and Frank has earned himself a nice raise, with it he is now earning $65k per year. Competition has increased across the board however, and now those same three banks are fighting for every candidate, not just the stars like Frank. So the fight we saw for Frank plays out over and over until the average pay for underwriters is now up to $55k. That’s great right? Well, comparatively Frank is now earning $10k more than average rather than $11k, so he’s actually lost ground for all his hard work. That’s not a big deal though, everyone works hard and their raises were long overdue right? I certainly think so.

Lets zoom out though. The same thing has taken place with the tellers. In fact, its happened with the mechanics, retail workers, accountants, store managers, truck drivers, and everyone else. Except now, those who were earing $7.50 per hour are now earning closer to $18/hr. The competition for those employees became more fierce because, with all the extra payments and large increase in minimum wage for some jobs devalued $7.50 significantly more for them than for those earning more.

Sarah’s Wages

Think of it this way. Sarah is single and earning $400 per week and you have a child. She does have government assistance to get by but she still has to fight every day to survive and provide for her child. $7.50 is a meal for her, its important. Suddenly she is getting $900 per month as a tax credit. That is more than a 50% increase in what is coming into her bank account. That is life changing while it lasts. And for that time $7.50 no longer represents survival and as such allows her to be more choosy in her employment. I.e. if business A is offering $7.50 to perform grueling labor and employment is a guarantee if she applies while business B is in a restaurant earning $8.00 but she may not get the job, she is no longer forced to choose the guaranteed option. In other words $7.50 is no longer as valuable as it once was and she can hold out for higher wages.

Lets Compare

Now imagine you’re Frank. At $65k per year your income is roughly $5,400 per month. That same credit represents only 16% of his monthly income. His ability to feed his family was never in question. He had disposable income and now this $900 per month is something he can invest or spend on whatever he chooses. If it disappeared he would miss it, but its not devastating. This did not devalue wages for Frank to the same extent that it did for Sarah.

Still, at this point it seems like an absolute win. However, now with those who were earning $7.50 per hour or about $15,600 per year are starting to earn as much as $35k or more. That means that comparatively Frank is now making $20k less.

That’s still okay. Sarah doesn’t deserve to live any less than Frank does. If I’m having a steak I’m not upset because Sarah has upgraded from ramen noodles to a happy meal. I’m excited for her!

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Now it Falls Apart

The problem is that these wages come with a cost. Make no mistake, the cost will not come from the pocket of the rich.

Who owns the business where Sara and Frank Shop? We will call her Lucy. Lucy sees that her profit margin was 35% but now she’s paying her employees 50% more. Her suppliers have also raised prices and her costs are up by 10%. She has to raise prices to break even, but she really wants that margin she once had. She looks around and sees that competitors are in the same boat and will raise prices soon as well. She also sees that those who were earning $15k now have thousands greater income and don’t value $7.50 nearly as much as they used to. In fact, its not a meal any more, now its something extra. So she raises her prices to the maximum level at which she believes customers will pay while maintaining optimal sales volume. Her margin is now 45%.

Break it out

Lucy’s sold her product for $10.80. Her cost was $8 and her markup was $2.80. Payroll and overhead ate up $1.50 of that leaving her with a profit of $1.30 for every unit sold.

As she adjusts pricing as discussed her new cost is now $8.80, her 45% margin makes her sales price $12.76. Payroll and overhead are now around $2 which means her total cost per unit is $10.80 and her profit is $1.96 which is almost 51% more.

That’s Good Right? Business Owners Need a Profit Too

Sarah’s happy to pay $12.76 for Lucy’s goods, after all she couldn’t buy them at all a year ago. But everyone is now doing this and Sarah is paying more for food now too. In fact, landlords realized more money means that occupants can now afford to pay more as well. So Sarah’s rent increases significantly. In fact, mortgage rates have dropped so housing prices skyrocketed, allowing landlords even greater opportunity. Sarah’s run of good fortune is quickly being ripped apart by everyone who wants a piece of her newfound income.

Remember Frank? He’s not immune to these price increases any more than Sarah. While Frank’s salary has grown its not done so proportionally. While Frank may not be renting his home his cost of food, fuel, vehicle/repair, home maintenance, and all other costs have increased dramatically. Now that $44k that it cost to live in moderate comfort is suddenly $50k. Now his wages are $15k above and beyond the base comfort where they were $16k. His peers are now $5k over the cost where they were $6k.

Make no mistake, the cost will not come from the pocket of the rich.

Sarah’s cost for moderate comfort is even higher because for her, it costs more to rent or buy a home and it will take years to save for a good down payment. Her ability to find a comfortable living is no more within her reach than it was before.

Where Does Everyone Stand Now?

Frank is comparatively earning $2k less comparted to his peers. Frank and his peers are earning $1k less income above living costs. The actual purchasing power of that excess income is lesser than it was in 2019 due to inflation. I.e. Franks excess is $15k but its only worth roughly $14k compared to 2019.

Sarah and her peers are earning significantly higher incomes; however, their cost of living has kept pace and coupled with inflation their situation is little improved.

Lucy is earning 51% more on all sales, meaning that with sales volume remaining comparable to prior years, her income has increased by 51%. While the purchasing power of that income has declined, the overall ability to make purchases has increased. With the increased income her ability go secure loans at lower interest has improved or remained unchanged. She is able to pour funds back into the business and grow and expand operations if she so desires. Essentially, she is making more money and has gained greater ability to increase her earnings as well.

The middle and poorer classes have at best remained unaffected, but in most cases have suffered a setback. The wealthier Americans have gained opportunity and unprecedented income growth.

What Can We Do?

Now is the time to develop multiple streams of income if ever there was a time. Investing in something that can generate revenue for you on its own is ideal, but develop streams however you can. Keep in mind that there are only so many hours in a day and inflation will almost always exist. Investing your time and energy in something that will earn passive income is the best way to protect your financial future. Especially if you can use that passive income can invest in more passive income. The power of compounding interest is remarkable and can make a world of difference.

Grow Your Wealth in 2022, Understand Money Moves

The past couple of years have been wild. Terrible for some, tolerable for others, great for no one. Now it seems like the economy is just getting worse. We have the great resignation, hyperinflation, and coming interest hikes that seem to be destroying the stock market. Financially we’re doomed right? Well, not exactly. It’s not that black and white.

The inflation from 2020 to 2022 the core inflation was about 3.57 percent per year. That is the fasted inflation growth in decades. The stock market continued to soar with 2021 seeing a  26.9% gain on the S&P 500, 18.7% on the Dow Jones Industrial Average (DJIA), and 21.4% on the Nasdaq Composite.

So what does that mean? Well, its tricky. Two things happened, first the value of a dollar decreased. Second, stocks themselves more or less held their actual value; however, now it takes more dollars to match the value of that stock.

Think of it this way, you’re locked in a room and starving there is a meal behind a plate of glass that you have to pay to unlock. You have $10 and you are willing to spend it on that meal.

Suddenly, money starts falling from the ceiling and now you have $100, but the price of that food is now reading $100. You are still willing to pay it.

Why? Is the food worth more now? No, it retained its value while the dollar lost value.

Protecting and Making Money

At its core, if you started out this most recent inflation run with $10,000 in the bank and left it alone you have significantly less purchasing power.

If you had invested it in stocks and that money seemingly skyrocketed. You likely didn’t make a killing. Your money just retained its value.

Now we have an interest rate hike and stocks are tanking. For me, it hasn’t yet come close to wiping out the “gain’s” I’ve seen through inflation and the actual value gains my portfolio has earned, but my equity is still falling.

Retaining the Value of a Dollar

This is a tricky balancing act that the federal reserve is trying to pull off. Interest rate hike announcements hit the value of stock almost immediately, but sometimes take over a year to have any meaningful economic impact.

If you don’t know much about the federal reserve rate, it is the interest rate that the reserve lends to depository institutions such as banks and credit unions. Those institutions then pass along that increased rate to their customers. This makes access money less readily available, in essence decreasing the supply while the demand remains the same.

What this is intended to do is combat inflation by essentially making your money worth more. So now that $10,000 sitting in the bank may not lose quite as much value as it did during the periods of high inflation.

Does This Mean Money Sitting in the Bank is Gaining Value?

Simply put, no. Even in a high yield savings account and periods of normal, healthy inflation your interest rate sitting in the bank will rarely ever outpace inflation. Sometimes it may, but it’s very rare.

I’m not against savings accounts by any means, but you need to know that with no risk comes little or no reward. I view a savings account as an insurance policy for money. If you get 1% return annually and inflation is 2% then your money has lost purchasing power. That loss is the fee for your security.

How About My Stock Portfolio?

Well, like I said before, for the most part your portfolio should reflect the general value of the businesses that comprise it. But what do I mean by value? I used the food example earlier but let me expand on that.

Now put yourself back in that room with the locked-up meal. Now there is a second case of food, and you really think that the second case may continue to accumulate food, but there’s no guarantee.

All else equal, most of us would choose the second box. That is because expectations create or diminish value.

In a period of high interest shares in financial institutions tend to be unaffected while the dollar value of others drops. Stock prices tend to fall in large due to the cost of financing projects and the fear of what impact that will have on operations, or the expectation that it will hinder growth.

What Does That Mean?

Different analysts may interpret this differently or have speculations contrary to my own, but I see this as a cyclical balancing act. In the short-term stock prices decline due to a value decline deriving from expectation. I.e., you do actually lose equity on your portfolio; however, long term fears settle, and inflation is slowed bringing the value of the company back to where it would have naturally otherwise been.

Your portfolio’s dollar value should appear to have increased but remember, higher interest rates are there to balance or slow inflation, not necessarily to trigger deflation. The dollars value will continue to decline; however, it should do so at a slower rate.

Bank or Stock, Any Other Options?

REITs (Real Estate Investment Trusts) are a lot like stocks in that there are shares, price increases or decreases, and you can buy them on most exchange platforms like Robinhood, Webull, and so on.

Where they differ is in their response to interest rate increases. For the most part REIT returns tend to follow the direction of interest. In other words, interest increases, REIT returns are likely to follow. They also tend to follow inflation increases.

That is because when inflation happens, real estate owners can increase rent prices to match because the value of having a place to live or run your business remains the same in spite of a weaker dollar. Conversely, one reason their value tends to increase with interest is that increased interest makes buying property less appealing or more difficult than renting.

Another benefit of REITs is that high dividend payments are extremely common.

Does That Mean I Should Liquidate Everything and Buy REITS?

No. I’m definitely not saying that. Historically REITs and traditional stocks have been neck and neck in terms of growth.

You’re not going to put $1,000 in one thing and become a millionaire over night (in most cases, some cryptos and GME have made me question that).

The point I’m trying to make is this. Don’t panic.

Learn your options, know your options, consider them and make well informed, thoughtful decisions. Maybe now is the time to pull out of one thing and put into another? Maybe its time to diversity or maybe just time to start investing altogether.

The answer isn’t mine to give. The right move will vary from individual to individual. The important thing is that you approach your finances well informed and not from a place of panic.

You’re Losing Passive Income and Big Money

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We’ve all seen those extreme coupon people. The ones who end up on tv or in the paper because they bought $1,000 in groceries for 67 cents. Impressive as that may be, who has the time to figure all of that out? It’s a full-time job clipping coupons, researching deals, mixing and matching, and calculating up the right mix. Not to mention, you’ve got $1,000 in groceries, but is it even food you like?

If you’re not into the minimalist lifestyle all the compulsive clipping, I just mentioned, I don’t blame you. I’m not here to tell you that you should be. But the truth is, you are probably missing out on a lot incredibly easy money. From cash back to receipt redemption, to digital coupons there are a lot of opportunities to keep more of your money, get some back, and even earn residual income.

According to Statista, the average American spends $2,912 annually on entertainment, $1,434 on apparel and services, $9,826 on transportation, and $7,316 on food every year. That’s $21,488 per year on things that could be earning you cash back.

Let’s say conservatively that you earned 2% cash back on all that. You would be getting about $432 per year. That may not sound like much, but if you’d been doing that for the past 10 years and investing that cash back you would have well over $6k earning you income right now.

A Deeper Dive

Credit Cards

So, let’s take it a bit deeper here. Some say credit cards are the enemy, some swear by them. The truth is, if you use it responsibly and pay off the balance in full each month, they are generally an income tool. I’ve managed to get one with an incredible cash back of 5%, which is hard to find, but if you can even do 1-2% its well worth the trouble in my opinion.

Swagbucks

Many people know Swagbucks as a survey site and its still very heavy on surveys, but it has a lot more to offer. A LOT. But what I’m going to focus on here is the cash back. For almost every online venue you can think of, Swagbucks has a cash back program. You just install the Swagbutton on your computer or visit the retailer through Swagbucks website, buy what you want, and get cash back. Now this is in the form of swagbucks (SB), which are redeemable for giftcards or straight up cash. So, say you spend $50 at Walmart and get 1% back, then you get 50 swagbucks which are equal to $0.50-$0.65 depending on your choice of card.

Take it a step further with swagbucks, you can also scan your receipts and get at least 2 SB, but often much more. For example, I recently got 150 SB ($1.50) because there were bananas and bread on my receipt.

Ibotta

Ibotta isn’t a guaranteed deal every time you shop. It’s select products and if you’re not careful the cash back can tempt you to buy things you wouldn’t otherwise buy. That’s not saving money, that’s spending. However, if you find something you would buy anyway you can get cash back. One example for me is some supplements and deodorant last week earned me $4 back. My total purchase was only $15 so that was awesome.

Fluz

I’ve written about this one a few times and I can’t believe more people haven’t hopped on this. Fluz offers some crazy cash back from time to time. I’ve seen 35% cash back on everything from X-Box Live to Uber Eats in some cases – granted it doesn’t always last long. The general norm across the board is about 2% in my experience.

The cool thing is that you can invite others and if they join from your reference then you get a 10% bonus on their cash back for life. Now, don’t think that’s some kind of crazy windfall though. To put it into perspective, if your friend spent $1,000 and got 2% cash back that would mean you get a bonus that month of 10% of $20, which would be $2.  Still, its passive income and that’s a step closer to never having to work again.

Honey

This is probably my favorite plug-in for Chrome. I’ve not earned any cash back from it, but it sure has saved me a lot of money. At the checkout it can take its wealth of discount codes and run through them to find you the one that will benefit you the most. Some times its free shipping, sometimes its nothing, but on occasion I’ve had up to 50% off some of my purchases.

Receipt Redemptions

Finally, once you have squeezed the cash back and discounts as dry as you can with nearly no effort, you can get a little extra out of your receipts. As I mentioned, Swagbucks will give you at least 2 SB and often much more. Coinout will also pay you for your receipts. I’ve not pinpointed the rhyme or reason as to how its calculated. I’ve gotten $0.01 and I’ve got $0.20 off of a single receipt. Usually its $0.02-.03 though.

Fetch is another good receipt app. Generally, you’ll get what translates to about $0.02 per receipt, but sometimes it’s a lot more if something they are promoting is on your receipt.

Dabble is a fantastic app for some quick easy money. Granted, its not a lot, but its quick and easy, which is my second favorite way to make money. The first being passive income. Dabble has a feature much like the previously mentioned apps that allows you to upload receipts for roughly $0.02 each or more if you’ve purchased select products.

Stackable

The absolute best thing about all of this is that every bit is stackable. Its rare that a purchase falls into the best of every single category, but there is usually a really good overlap. For example:

Say you want to buy something from Amazon and you have a credit card that pays 2% cash back. Well, Fluz is offering 2.25% back, and Swagbucks is offering up to 4% back. So, you spend $100 (on something you were going to buy anyway).

You get $2 from your card, $2.25 from Fluz, and $4 from Swagbucks. You then upload your digital receipt everywhere and get $0.02 from Coinout, Fetch, and Dabble. You’ve got $8.31 back and now you can invest it and make that start earning you more income.

That’s just one purchase. Imagine how much money you would have if you did this every time you bought something?

Fuel

This one isn’t really stackable with anything other than your credit card cash back, but it can still save you a ton. The GetUpside app can save you up to 25 cents per gallon on fuel, 45% on snacks, and 22% cash back on some convenience stores. Its super easy to use

Its More than Extra Money

Everybody loves having some extra cash, but this is more than just that. Its extra life. If you follow my passive income articles, then you are probably someone who understands the value of freedom. The idea of not having to wake up early and go to work is great. Not because you’re lazy, but because there is so much more to life than stocking shelves, sitting in an office, or leading presentations. Its hard to even know who you are when you’re so busy filling a role in a job sometimes.

This isn’t your overnight ticket to early retirement. But I encourage you to consider this, to retire you need to determine your monthly need and make your monthly passive income match or exceed that need.

If you can lower your need by even one percent, then you are instantly closer to full financial freedom. Moreover, you can compound that. What if you took that same one percent and put it into something that would generate passive income? And what if that passive income continued to compound and grow?

The real question is, do you want financial freedom, or do you just like the idea of financial freedom? Its never going to fall into your lap, you have to make the first move.

Starting a Successful Business You Love- Structure

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You’ve found your idea, worked out the finances, discovered your competitive advantage, decided on a funding method, and now its time to get to work on actually making your vision a reality. The next step is to decide on a business structure. There are many routes you could go and no real one size fits all. Some are better on taxes, some limit your liability, others give you more control. So which one is right for you?

Sole Proprietorship

The most common business structure type is a sole proprietorship. Usually, sole proprietorships tend to be smaller in scale than other business structures, but there is no law limiting its size.

Sole proprietorships are owned by a single person. They don’t act as a separate entity, so all the business and tax liability are your own if you choose to go this route.

It can be a good option if you are looking for full control of your business and you are okay with that liability.

Partnerships

A partnership is a business that is owned by more than one person or business. The ownership doesn’t have two be 50-50 either. It can be any combination of percentage which is agreed upon by its members. Each member would get a K-1 for their taxes, splitting income and equity according to their contributions and operating agreement.

There are different forms of partnerships which are general, limited, and limited liability partnerships.

General Parthership (GP)

In a general partnership, all partners share in the profits, responsibilities, and liability for debts. They also have a responsibility to act in the best interests of the other partners.

Limited Partnership (LP)

A limited partnership is different from general partnerships in that partners can have limited liability. That means that they aren’t able to loose more than they put into the business. In other words, they are not liable for business debts that are greater than their contribution. These are sometimes known as silent partners or can be angel investors.

So, general partners manage the day to day business and are liable for company debt including litigations. Limited partners just contribute financially to the business as an investor.  

Limited Liability Partnership (LLP)

A limited liability partnership is a type of structure where all partners have a limited liability, unlike a general partnership or LP. All partners are may also be active in the business.

This structure is often found in professional services where partners may want to limit their responsibility from litigation arising from the conduct of other partners.

Corporation

A C corporation is a separate entity from its owners. For most purposes it is its own person, so these grant you the greatest protection in terms of individual liability.

The downside is that corporations are taxed as their own entities. So, as an owner you may pay taxes on your income from the business, and the business will have to pay taxes on its income.  

Corporate taxes can become extremely complicated very quickly so it may be more costly in its need for a dedicated accountant as well.

S Corporatoin

An S corporation is a type of structure where profits and losses are passed through directly to the owner’s personal income. This means that it isn’t subject to corporate tax rates. This is an election which can allow you much of the benefit of a C corporation without the double taxation.

There are restrictions regarding S Corps. For example, members must be US citizens and an S Corp can only have a maximum of 100 shareholders.

Limited Liability Company (LLC)

A limited liability company, or LLC is another very common structure for small businesses. An LLC gives you a good mix of the advantages of the sole proprietorship, corporation, and partnership business structures.

An LLC is its own entity and therefore provides you with liability protection like corporations but does so without double taxation. Your business can avoids double taxation since by can passing through taxes to your personal income.

LLCs are treated differently in for tax purposes in each state, so tax liabilities vary depending on where you are. Check with your state for specific LLC regulations.

Choosing your business structure

As you select a business structure, be sure to choose the one that provides the most benefits and is the best structure for your small business.

Some things to think about as you weigh your options:

  • Legal liability
  • Taxes
  • Members
  • Flexibility
  • Your long term plans

After you decide on your business structure, check out your state’s website or talk to an accountant about registering your business and moving on to next steps.

Starting a Successful Business You Love – Getting Funding

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A successful business takes a lot of time. As the old adage goes “time is money”, and you will likely need a lot of both if you want to see your business take off. Funding is an important aspect of any startup, but not all funding is created equal.

You have many options for how to finance your business operations and each comes with its own set of pros and cons. You can choose one or utilize multiple options. What is important is that you thoughtfully consider what is best for you and your business rather than taking whatever comes along first with the greatest ease.

So What Are my Options?

Investors

You can find investors to fund your business. There are multiple routes to this as well, from crowdfunding to partnerships. An investor is someone who puts money or resources into your business, but like the name suggests they often expect to get a return on their contribution.

Finding investors can be a good solution for you because it doesn’t typically require monthly payments. Investors may require a profit split, ownership percentage, a specific percentage return or any number of things in exchange for their investment.

You may have more free cash flow upfront not having to worry about monthly payments. You also may have the benefit of investors vested interest in your business. They will be quick to offer input, advice, and may even contribute more capital if the need arises.

In many cases you may not need collateral or any money of your own. Investors are aware of the risks going in, so another benefit is that if the business fails you aren’t on the hook to repay that money.

Keep in mind though, that the greater risk your investors are taking, the more they are going to want in return. Whether that’s control, money, or ownership they will want something for their contributions.

Unfortunately, if your goal is to work for yourself, you will also have to answer to investors. They may want some form of control or threaten to pull out if you don’t do things their way. You may be trading one manager for another.

Finding investors can be a great thing, just weigh your options first.

Loans

Small business loans are probably the most common method for funding startups. They are readily available and generally fairly easy to obtain as long as you’ve done your due diligence. Which, if you have been following my series on How to Start a Successful Business You love, at this point you should be well prepared.

The nice thing about these loans is that the interest and terms are usually manageable. The lenders want you to succeed so they aren’t normally going to try to kill you on the loan. The SBA has tools to help match you with lenders based on your business profile and needs.

The downside is that while your loan should be manageable, a payment is still a payment. A portion of your cash flow will be tied up for the duration of the loan and you’re paying interest.

Additionally, most business loans require you to contribute 10-20% of the total amount needed for the project. So if you needed $200 thousand to start the business, then you would be expected to come up with $20-40 thousand yourself.  Some may also require a certain level of collateral, but that can usually consist of business assets. So if you are buying equipment for your business with the loan, then that equipment would count toward the collateral.

Contrary to some investor agreements, the payments on a loan do eventually stop. There is no shared ownership and no ongoing dividends. Not only that, but you retain full control throughout the life of your loan and beyond.

Self Funded

Choosing to go the route of self-funded probably takes the longest but offers some great benefits. First, you don’t have any payments so your cash flow can be utilized quickly to invest back in your business. Next, there is no interest or investors for you to pay. That means that every dollar has a slightly bigger impact in your business, since a portion of it isn’t going toward paying interest.

Furthermore, you don’t have to answer to investors. Every decision is your own (within the confines of legality). That is a double-edged sword however, because the consequences of those decisions are yours also. Not only that, but you miss out on the benefit of guidance from the experienced business professionals who typically invest in startups.

Lastly, the biggest downside to being self-funded is the time it takes to raise enough money to start. You should have enough capital to cover about 6 months’ worth of expenses before you open the doors. Unless your business is something akin to a small lemonade stand then it may take years to save that kind of money.

Combination

You don’t have to settle for just one funding source. Its perfectly acceptable to mix and match your funding. For example, if you wanted to take out a loan but you only had half of the 20% you needed, then you could look for investors to cover the other 10 percent. The SBA is a great resource for finding investors as well as loans and other business resources. There are many more funding options than these, including grants and I highly encourage you to check them all out.

What is ideal will depend on your situation and preferences, so I encourage you to play around with the numbers. Continue to research and find what works best for you.

Start Your Passive Income Life – Free Money to Start

Passive income life, fun relaxing
Photo by Helena Lopes on Pexels.com Passive Income Life

2021 showed us the start of the Great Resignation, a mass move to work from home jobs, and a general unrest in traditional employment. Most of us would love to live off passive income and just escape from the shackles of work altogether.

 Everyone wants to be totally financially free, but there is a difficult truth to why most of us are not.

You want money but ignore it when it comes your way

If you pass up opportunity because it won’t get you rich quickly then you will likely never actually get rich. Opportunity knocks constantly, but since it’s not Publishers Clearinghouse, most people don’t open the door.

My point is, that the journey of a thousand miles starts with a single step. The first steps are usually the slowest and hardest, but I’m wanting to get you started today with a free $30+ and a diversified portfolio.

I’ll wrap up with a few ideas to supplement your income and grow your investments & passive income even faster.

Real Estate Investing

By far one of the most common and easy ways of becoming wealthy and creating income is through real estate investing. The catch is that its usually only easy if you are already very well off, and at that point you don’t really need it anyway.

Thankfully, it has become easier and easier over the years to invest in real estate. I’m sure if you’re reading this then by now you have at least heard about crowdfunded investing. Well, I’ve been using Fundrise and I do really like it, but another platform has joined the scene.

HappyNest if you sign up using my link then you get $10 added to your account when you deposit $10. Now this may seem like a shameless plug to get my own referral bonus, and to some extent it is. BUT I really have found this to be a good app, otherwise I risk losing all my credibility for a couple of bucks.

The thing is, Fundrise is good too, I get a little bit on referrals if you use my link there, but you don’t and last I checked you needed $1,000 to get started.

My goal here is to help you build a small foundation with money you got for free. So, about HappyNest:

Pros

  • You can start with just $10
  • You can link a card and do roundup investing on all your purchases
  • Dividends are calculated daily and distributed or reinvested quarterly
  • Compound interest

Cons

  • It can be time consuming and difficult to cash out your principle (as with all real estate)
  • Automatic round up program $1 per month after trial (program itself is totally optional)

Lending your money

Everyone knows about P2P lending by now, but not everyone is privy to the world of crypto lending. The technical aspects are a bit complicated, but here is a thousand foot view. You deposit USD in your savings account and someone else deposits Bitcoin, or some other crypto. Their crypto serves as collateral and they can borrow USD for short term loans (30, 90, 180 days). They pay interest and the holding company distributes that interest to you. It works in reverse as well, i.e. you can deposit or borrow crypto.

The platform I use is MyConstant. The rate of interest is 4% compounded constantly. If you choose to commit your cash for up to 180, meaning you wont be able to withdraw for that period of time, you can earn up to 7%. 

If you sign up using my link you can get $5,000 as a trial balance to earn interest for 15 days. Note, that doesn’t mean you get $5,000. That means that you account will grow as if you are earning interest on $5,000.

That means that if you sign up with my link and deposit at least $10 then you get roughly $8.33 in 15 days plus the interest on your $10.

Dividend Investing

I absolutely love dividend investing. I think it’s because it’s a little more of a wild card. I try to choose mostly stocks that I have a great confidence will continue to pay a stable dividend and grow, but sometimes they surprise you. One example is ARCC which is a REIT (Real Estate Investment Trust). When I found them and bought in just under 2 years ago the price was sitting at $17.10 per share with an incredible dividend of $0.39 per share per quarter, or $1.56 per year. At the time of this writing the share price is $21.01 and the dividend is $0.41 per quarter or $1.64 per year. So not only did the value of my holdings increase, but so did my passive income!

I can’t promise that will happen to you, do your research and invest wisely. But if you do sign up using my link, or anyone else’s (they’re everywhere), you will get a free share of a random company. 98% of the time is value is between $2.50 and $10, but you could get something as high as $225.

Where does that leave you?

If you do all that you should be better off than you were yesterday. You won’t be rich. Not even close. But you should have close to $30 you didn’t have do work for, a diversified portfolio, and about $0.19 per month extra in the form of passive income.

What am I going to do with that?

Nothing. You can do basically nothing with a 19-cent monthly income. But if you never take that first step you are going to find yourself 10 years down the road browsing the internet trying to find a way to get rich overnight, so you don’t have to go back into work. And you will be no closer to making that a reality.

You can however, make that future self’s wish come true today. Interest compounds quickly. There is a reason for the saying “the rich get richer”. The more passive income you have the more you can build.

Make your money start working for you so you can stop working for your money

Once you get started earning passively you will see how addicting it is. Putting money back every week, even as little as $5 can make a huge difference in your future income.

Every time you add to your investments you give yourself a raise.

Bonus

I’ll save the in depth analysis for another day, but there are many ways to increase your free cash that you can invest to boost your passive earnings. (links included).

Swagbucks – Est about $20 per month for casual users

Usertesting – up to $40 per hour but qualifying tests are sparse

Premise– Est $12 per month, but $50+ is very doable

Slicethepie – About $0.2 per review, basically unlimited earnings if you have time

Reklaim – App in app store, $4 per month

Current – Est $10 per month

Ibotta – Est $20-50 per month, but higher earning is possible. This one is a spend to earn situation so more of a discount app

Fluz – Est $10-50 per month, potential is unlimited however

ATM- Available in app store, Est $5-10 per month

What Now?

Get to investing, earning and repeating. If you use all of these you could make an extra $100 or more in your spare time. Investing that could quickly grow your passive income and get you to financial freedom fast!

Running a Business You Love – SWOT and PEST

red and blue football jerseys
Photo by Pixabay on Pexels.com

What’s your favorite sports team?

How’s their offence? What about defense? Who’s their star player? What do they need to work on for the upcoming season?

I’m not well traveled I’ll admit, so I don’t know about the rest of the world, but in the US about 90% of people can answer all those questions. In fact, if you ask someone those questions they can usually go into great detail and run through hypothetical scenarios. They get fired up and you can see excitement and passion bubbling out. Not only that, but hey have ideas and feel vested. Also, they want everyone around them to be as excited as they are.

So why aren’t business owners like that when it comes to their businesses?

The first reason is that people often monetize what they do well, not what they are passionate about. And they became good at what they do by working a job they hate.

The second reason is that business can be complicated. You learn sports from childhood. But we don’t grow up learning the ins and outs of business. We don’t buy tickets to watch businesses compete and have accountants sign our jerseys.

Running a business is a long game and the “rules” change often.

Look back 20 years ago and very little business was done online. If you look back 15 years, cell phones weren’t that big of aspect of business. And just 10 years ago giving customers Wi-fi access was a competitive advantage.

What I’m saying is, you need to constantly take stock of where you are. You should examine your business like you would break down your NFL team. The technical way to do this is with a SWOT and PEST analysis. They can help you to break down your business and dig deep into where you stand.

What are SWOT and PEST?

SWOT stands for Strengths Weaknesses Opportunities and Threats. PEST is similar and sometimes the two overlaps in some areas. PEST stands for Political, Economic, Social, and Technological and it examines external factors that can impact your business.

You can get pretty deep into these if you want, and you really should, but for now I will run though a simpler look to give you a feel for how to do your own.

So, lets make up a crazy business to exaggerate things and drive each concept home.

Scenario: We’ll say you exclusively sell swim wear for house cats. Your supplies come from China and you primarily advertise via flyers, word of mouth, and local newspapers.  

SWOT Analysis

StrengthsWeaknesses
– Your business is unique
– Low sales volume allows for greater focus on customer service  
– Little demand
-Cats generally do not like water/swimming
-Limited customer reach
-Major debt from purchase of inventory
-Holding far too much inventory  
OpportunitiesThreats
-Low competition allows for a large percentage of the market share
– Expansion to online sales
– Inclusion of online marketing  
-If popularity grows it could lead to competition entering the market
-Supply chain issues may limit ability to purchase inventory  

For strengths you’ll need to ask yourself what your business does well, or “What does it have going for it?”

Weaknesses is the other side of that coin. This is what is holding you back or needs improvement.

Opportunities and threats are usually externally focused. In its simplest form, it’s what you can do to improve, vs what you may have to face.

Sometimes weaknesses compound or create threats. Sometimes your strengths can do that as well. Its a balancing act which is why you need to lay it out. Teams have players on the sidelines waiting to jump in if they are needed. That’s because not everything goes to plan all the time. Weaknesses, and setbacks arise, but you cant ignore them. You have to plan for what to do when they come up. Knowing where they may arise is half the battle.

PEST

PEST is primarily external and a bit more obscure in some ways. Each category may have positives and negatives as well, unlike SWOT.

PoliticalEconomic
– Relationship with China is becoming strained
– Imports/Export regulations may harm ability to obtain inventory
– Minimum wage increase may allow greater disposable income
-Inflation may counteract the wage increases  
SocialTechnological
-Some may consider cat swimsuits unethical due to cats aversion to water
-Select social media communities may offer support and growth opportunities  
-Your business is not currently utilizing technology to its fullest
-Consumers may be able to find overseas direct ship suppliers online as well  

The Takeaway

This is a hypothetical business I made up in about 2 minutes, but when you examine your own business, you will be amazed at what you find. You know your business better than anyone, but when you start to really break everything down you start to see beyond the day to day. You’ll start to get an idea of the competition’s playbook and what your offense and defense are up against.

Starting a Business You Love- Competitive Advantage

battle black blur board game
Photo by Pixabay on Pexels.com

Why Are They Doing So Much Better Than I am?

You may find yourself asking this question if you approach business with a “build it and they will come” attitude. You can set up a business with the same products, same prices, on the same street as your competitor and have vastly different results.

This is largely due to something behind the scenes, often intangible – the competitive advantage.

Now competitive advantage can come from a variety of things, and some are more obvious than others. For example, Walmart’s low prices are one of their advantages. They are a large enough corporation that they can vertically integrate, buy massive quantities for low prices, and maintain low margins in order to offer the lowest prices possible. It is practically impossible to compete with Walmart’s prices in any meaningful way.

You can also have more than one competitive advantage. Think about Amazon, how they have such a vast network of products and suppliers. This allows them to offer an incredible variety of products at a wide range of prices. There lies an advantage over big box stores, if they don’t have it you can bet Amazon does. Their next advantage is their quick ship times. Amazon offers same day delivery in some instances, and that can be a powerful driver for consumer purchases.

So, What Do YOU Do Better?

If you look at your business, or business idea and have no idea what you do better than anyone else it may be time to review your business.

It’s time to think through every aspect of your business from first interaction to collecting on sales. What can be improved? Where are your weaknesses? You will be able to find your specific answers better than anyone, but I’ll give you some hints.

You Are Your Advantage

If you have been following my series on How to Start a Successful Business You Love, then you likely already have one advantage. You built your business around your passion.  You know your products inside and out and are able to effectively engage with potential customers. You are also likely to build trust easily and upsell when the opportunity arises.

Your Employees

If you have employees or have ever worked with another human, you know the importance of hiring the right people. Your employees can make or break your small business, especially in the early stages. If you start off right, you can set yourself up to have your team be your competitive advantage.

Imagine walking into a local coffee shop and all the staff are enthusiastic, have a deep knowledge of the products, and are extremely personable.

As you look around in your minds eye, are there customers in the shop? Does it seem like a place you would enjoy being in? My guess is that the answer to both of those questions is yes.

Of course, the quality of product plays a large factor, but passionate employees with a sense of shared ownership look for ways to improve your business. If you’re thinking that’s a ridiculous statement, then you have likely only ever had managers, not leaders. It’s your job to recruit the right people and turn them into passionate employees.

Your Differentiation

What do you have that the other guy doesn’t? If you don’t know the answer to that question, then you likely haven’t created any differentiations. A competitive advantage doesn’t have to be what you do better than your competitors. Sometimes its just what you do differently.

For example, Hooters is an extremely successful sports bar. There are hundreds upon hundreds of sports bars across the US, but few are better known than Hooters. Its obvious what they do differently and its crazy simple.

Netflix is another good example. While competition has adopted their approach, what made them successful was their unique model. While Blockbuster was the giant of the day, Netflix beat them by offering a different way of renting movies.

How do I Develop my Competitive Advantage?

  • Think about what resources you have that access to that are more difficult for your competitors to access if any.
  • Take recruitment seriously. Consider personality and competency tests. Don’t hire just to fill a spot, no matter how insignificant or “unskilled” you may think it is. Every job has value and the right people bring more than you could hope for.
  • Can you leverage your location somehow?
  • Can you get ahead on the technology to build efficiencies or make a more enjoyable client experience?
  • Can you offer lower prices than your competitors? You don’t need to make $1million on your first sale if you can make $1 two million times.
  • Build trust and recognition at any and every given opportunity. In fact, make opportunities. Go to events, host events, get your name out there and fix customer issues before they arise.
  • Be a leader, not a boss. Don’t ask anyone to do something you wouldn’t do yourself. Lift up your team and encourage them. Celebrate their successes and build a sense of shared ownership.

Survive or Thrive?

Identifying and properly leveraging your competitive advantage can mean thriving instead of just surviving. Most small businesses fail, of those that don’t, the majority plateau quickly. Don’t be one that stops short.

If you enjoyed this article, don’t forget to like and follow. Next in this series on How to Start a Successful Business You Love we’ll be taking a look at how to develop a SWOT analysis for your business.

Run a Business You Love – Understanding Cash Flow

hard cash on a briefcase
Photo by Pixabay on Pexels.com Net Income and Cash Flow Analysis

Its common sense to think that if you made a net income that you would have a positive cash flow as well. Unfortunately, that’s not always the case in business. You have accounts payable, accounts receivable, depreciation, WIP accounts and so on.

Your finances can get really complicated pretty quickly, so if you don’t have an accountant keeping track for you, I hope this article can help you shed some light on things.

In business very rarely are all things done on a cash basis. Service work is sometimes an exception to that if you’re a sole proprietor doing a short-term job, but for the most part you can expect to wait on your money. If you aren’t careful, you can get yourself into a cycle of high income, low cash flow and struggle to make ends meet.

What is Business Income?

Business finances typically work best on the accrual method rather than the cash method. With the accrual method you recognize income and expenses as they are earned rather than when money changes hands. The accrual method helps you to match expenses with income.

For example, imagine you pay someone $1,000 today to repair a car, then sold the car for $10,000 in 12 payments the minute the following month. For simplicity sake, lets pretend you have $0 in the car aside from the repairs. Based on the accrual method you would have an income of $9,000 from the transactions. You would also have a loan receivable of $9,167.

Using the cash method you would have a net loss of $1,000 in the month of the repair. In the 12 months following you would have an income of $833 per month.

If you have a business with multiple transactions every month, cash method can get really difficult to tell whether or not your business is successful very quickly.

Cash Method

Here is a quick glance at what cash method may look like in running a car lot. ( G & A removed for simplicity). Assume each vehicle costs $10,000 to purchase and the initial vehicle cost only the repairs and parts. Purchases are made on account and paid at $500 per month. Each vehicle is sold for $15,000 on payments of $1,000 per month.

Cash Flow Net Income

Does this look like a profitable business? After three months your net income is negative and you’ve yet to see a good month.

Accrual Method

Accrual method is different in many ways from the cash method. Sales are recognized as income when they are made and a receivables item is created if the cash isn’t delivered at the point of sale. Inventory comes into play on a more detailed scale as well but that’s a topic for another day.

So what would this exact scenario look like in the accrual method? Well, below are the entries that would have occurred.

This is a vastly different picture. In truth this business is very profitable. In the first quarter it earned a net income of $23,600. Who wouldn’t want to earn that in their first three months of business?

So you know I’m not just throwing numbers out there, here are the entries that make up these financial statements.

If you’re not an accountant these may seem like gibberish, but what you see here is the flow of your business. Equity, liabilities, inventory, sales, and cash are all lining up here to paint a picture of your business’s health.

So I Can Forget About Cash Flow Right?

Please don’t misunderstand. Cash flow is a vital part of your business success. Without knowing where your cash is going you can end up getting into trouble.

If you are only looking at your income statements then you see a hefty profit and it may be tempting to spend that income.

As nice as it would be to take out that money and go on a well earned vacation, the truth is you have $2,900 less cash than when you started.

I can’t tell you how many times I’ve worked with confused business owners who see that their making a killing, but have no idea why their bank balance is overdrawn EVERY SINGLE WEEK.

Other times a business owner may see a large balance in their account and go spend it while their income is in the gutter. They think they are doing great, then get hit with reality.

So How do I Handle My Business Finances?

Keep a close eye on your financials. Make sure you understand that cash flow and net income are two entirely different things in business. High net income is generally good. Low cash flow isn’t necessarily bad and high cash flow isn’t necessarily good. You just need to know what your cash flow is and optimize it for your business.

High cash free cash can mean you aren’t investing back in your business, or it can mean you’re being cautious.

Low free cash can mean you’ve put a lot into inventory, advertising or something else that will come back and then some. It can also mean that you are struggling.

Not knowing your cash flows absolutely means that you are in a vulnerable position. If you know your books, that is fantastic. If you don’t, then you would be well served to find someone to help you who does.

Let me know if you would like me to go more in depth on financials. Drop a comment if there is another topic you would like me to cover!

Next we will be looking at how you can develop your competitive advantage.