Friday, June 28, 2019

International Focus Magazine Houston - June 2019 (G7 Soledad Tanner Consulting Award)

Interview Part # 1 Page 42 - 45

Interview Part # 2 Page 44 - 46

International Focus Magazine Houston - May 2019 (G7 Soledad Tanner Consulting Award)

How to Read and Analyze an Income Statement


By: Heather Liston MANAGING

Ever feel a little left ut when people start chatting about P&L’s? How about when the talk turns to income statements, or profit and loss reports, or even a “statement of activities”? The first bit of good news is that all of these refer to the same thing, so you may not have as much to learn as you thought. The second is that an income statement is based on a few very simple concepts, which you already understand.

The basic suite of financial statements a company produces, at least annually, consists of the statement of cash flows, the balance sheet (or statement of financial position), and the income statement.

The ones that people most often look at (and most often pretend to understand), are the latter two. The major difference between them is this: the balance sheet is essentially a snapshot, while the income statement is a movie. In other words, the balance sheet shows what you own (assets) and what you owe (liabilities) at a moment in time (most often as of December 31). The income statement shows what happens over a period of time (usually a year): what comes in, what goes out, and what’s left over at the end.

Here is an example of a basic income statement, covering the period of one month:

Revenue (or Gross Income):

Allowance $2.00


Candy ($1.50)

Net Income
: $ .50

See how that works? The top section lists money coming in during the period, the middle section lists money going out, and the bottom line is the difference between the two. All the math you need to produce or proofread this statement is a little basic subtraction.

Now flip open the annual report of any Fortune 500 company and find the income statement. What you see, in basic concept and structure, will be exactly like the one above. The only difference is that it has a lot more lines.

The annual (financial year ending Sept. 30) income statement for Apple Computers.

As companies get larger, they start making a few common variations on the structure. Many, for example, have a section at the top that starts with total revenue, then subtracts “cost of revenue” and shows the difference as “gross profit”. The “cost of revenue” line is the total of all expenses the company deems to be directly related to generating the revenue, such as the cost of purchasing inventory. From the gross profit, they then subtract normal operating expenses, like administration and research and development, which leads to another sub-total called, usually, “operating income,” or, more jargonistically, EBIT or EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization). From that, obviously, interest and taxes (and maybe depreciation and amortization) have to be subtracted before the statement shows the final net income line.

All the complexity sketched out in the previous paragraph, though, is nothing more than a little rearrangement of the basic elements—income and expenses—into some sub-categories. The same principles still apply, even when things start to look complicated. No matter what, the income statement includes just income, expenses, and differences between the two. And income is always listed before expense in any group; it’s just that some companies do more sub-grouping before they get to the bottom line.

No matter what twists and turns you take along the way, the last number on the income statement is crucial. It is labeled “Net Income” above, but it also goes by names like “surplus,” “the bottom line,” or maybe “contribution to savings.” If the bottom line is a negative number, it will most often be called the “deficit” or “loss.” The math and the meaning are exactly the same; these are purely terminology issues.

If you’re asked to review an income statement and you’re not sure where to start, here are a few things to do:

1. Check all the math.

Yes, errors occur even in printed, published statements; even in ones produced by major companies. If you find an error, you look smart—and you might also uncover something that changes the results completely. Also, as you run through the adding and subtracting, you will improve your own understanding of exactly how the numbers fit together.

2. Find the bottom line. (Should be easy—it’s at the bottom.)

On a very basic level, it’s good to see a positive number there. That means the company earned more than it spent during this period. That means it can pay its employees, keep the lights on, and not be forced to borrow money. But if that bottom line is preceded by a minus sign, or printed in red, or enclosed in parentheses, then expenses exceeded revenue. Find out why. And what the plan is for making the red turn to black.

A net loss once in a while does not necessarily imply disaster. Sometimes new companies have a lot of start-up costs and do not expect to turn a profit in the first year or three. Or maybe the business in question is a cyclical one, like agriculture: if your company grows corn and there was no rain this year you will likely show a loss. Perfectly normal; some years are up; some are down. On the other hand, if net losses become a trend, or if the company does not have enough cash to fund its expenses during the down times, there could be a problem.

3. Look at the sources of income.

Do they make sense for the business? For example, if you’re in the cotton candy business, then sales income from the county fair sounds right. But if one income line is “gifts from friends” that’s probably not sustainable. What about next year when those friends don’t come through again?

Or say you’re reviewing the statements for a museum. Ten percent of their income came from admission fees last year and 90 percent came from ticket sales for a special blockbuster exhibit that came through town. Fine, as long as there will be a new blockbuster exhibit every year. If that was a non-repeatable event, though, you will want to ask questions about whether the revenue model is sustainable.

4. Look at the expense categories.

Are they logical? For most businesses, you will see salaries and wages, insurance, rent, supplies, interest, and at least a few other things. Is anything missing that you would expect to see? For example, if the business has a hundred employees and you don’t see rent, or mortgage interest, find out why. Is there an office? If not, why not? If yes, how is it being paid for?

5. Now look at the amounts: What are the biggest expenses?

If this is a service business, expect to see a large number for salaries. If it’s a manufacturing business, materials and supplies may logically be a significant total. On the other hand, what if you know the company has only three employees but the salary line is extremely high? Is someone being overpaid? Are there more people working there than you realized? Or what if the president told you the company has been profitable for years but you see high interest expense? Find out why the company is borrowing money, and from whom, and whether they’re paying a reasonable rate.

6. Compare year-over-year numbers.

Usually, the income statement will have separate column showing the figures for the prior year. If the document doesn’t already show the percentage change in every category, calculate those numbers yourself. Question any significant changes. Like, why is sales income 50 percent lower this year than last? Why is insurance 20 percent lower? Did the entity rack up such a great safety record that the insurer lowered its rates? Maybe. But maybe the reduced insurance number has a negative cause—like one of the policies was canceled and the company is at risk in some way.

7. Think about logical relationships between numbers.

For example, at most companies these days employee benefits (like health insurance, retirement plan contributions, parking passes) are a significant cost. If the salary line doubled but the benefits number went up by only 10 percent, that should strike you as odd. Is there some reason the new employees do not qualify for benefits? Did the company drop one of its benefit plans?

All these questions may have perfectly reasonable answers, but sorting through them will help you understand what’s going on, and give you confidence that you know what you’re talking about when it comes to income statements.

You do. Revenue minus expenses equals the bottom line. Everything else is details.

How to Make Sense of Your Small Business Financial Statements


By: Caron Beesley ACCOUNTING

How does your business assess its financial strength? No doubt you refer to your income statement (also called profit and loss statement or P&L) and your bank account for the basics.

But the truth is most businesses ignore the most powerful financial tools in the accounting arsenal: the balance sheet and the cash flow statement.

These three basic financial statements provide the most comprehensive view of any business. That’s why they’re considered essential components of a business plan.

But what role does each of these financial statements play, and how do you interpret the data they produce? Here’s an overview of how they can help you keep your finger on the pulse of your company’s financial position.
The income statement (profit and loss or P&L)

Think of the income statement as your business’s report card.

The business income statement, also referred to as a profit and loss (P&L) statement, is a useful tool for providing an overview of how your business is doing over time. It breaks down the revenue your business generated and the expenses incurred.

A well-maintained income statement will show how profitable your business isand highlight steps that can be taken to increase profitability (i.e., whether you should focus on more profitable product lines or curb unnecessary expenses).

When investors look at your business plan, they will use your income statement to assess the level of risk involved in extending credit or venture capital your way.

Here’s an example of an income statement from LivePlan:

What you can’t see in your income statement

What your income statement won’t tell you is whether your overall financial condition is weak or strong (refer to your balance sheet for this), how cash is actually moving in and out of your business (refer to your cash flow statement), or list any assets you own or liabilities you owe (again, see your balance sheet).

To learn more about reading and understanding your income statement, check out our guide to reading an income statement. If you’re putting together your P&L for the first time, download this free income statement template to help you get started.

The balance sheet

Think of the balance sheet as a window into your business’s financial strength.

Although investors will also pay attention to your income statement, the balance sheet is actually their preferred starting point for building a picture of your business’s fiscal health.

Why? Because the balance sheet summarizes key financial information on a given date, as opposed to the income statement, which shows profitability over a period of time. It’s a good indicator of company stability and liquidity, which are both important factors in determining your business’s ability to sustain itself without outside financing.

Here’s an example of a balance sheet from LivePlan:

Components of the balance sheet:

The balance sheet is usually put together at the end of a particular time period—usually a month or quarter—and lists the following:
Business assets: “What do we have?” Assets aren’t just what your business owns, but what it controls or what is in its possession, such as bank accounts or a financed vehicle.
Liabilities: “What do we owe?” Liabilities include your debts, including loans, outstanding credit card payments, etc.
Owner’s equity: “What is left over for the owner(s)?” How much of the business’s assets do you still own once you’ve paid off all your liabilities?
This information in your balance sheet can provide a view into the following:
The net value of your small business (should you ever want to incorporate or sell your business).
Current (otherwise known as “short term”) and long term debt.
Asset management (how effectively you’re managing your assets) and liquidity ratios (your ability to turn an asset into cash).
Comparative data so that you can see changes in cash, accounts payable/receivable, equity, inventory, and retained earnings.

A balance sheet can seem a little overwhelming and the format can differ wildly depending on your business type, so it’s a good idea to have an accountant help you set up and interpret your first one, or use a product like LivePlan to generate it for you. Even if creating a balance sheet is intimidating, don’t shy away from it—it’s an essential part of your business plan and an extremely helpful tool for running your business.

Learn more about balance sheets in our comprehensive balance sheet guide. And if you want to go the DIY route, download this free balance sheet template to get started.
The cash flow statement

Does your business have the cash to stay afloat?

More businesses fail because of cash flow issues than for any other reason. That’s because cash doesn’t always flow into your business at the same rate that it exits it! In fact, your business can be profitable yet still have cash flow problems. While your income statement can tell you whether you made a profit, it doesn’t take into account delinquent or missing payments, or help you determine whether you actually generated enough cash to stay afloat.

In order to understand and manage the flow of cash in and out of your business, you’ll need to maintain a cash flow statement. Updated on a daily, weekly, or monthly basis, the statement can be a simple one-page spreadsheet or a more dynamic report created with accounting software like QuickBooks or a planning and financial reporting tool like LivePlan.

Whichever template you use, you’ll rely on the following formula to calculate your end balance:

Operational Costs + Asset Investments + Financing = Cash Balance

Here’s an example of a cash flow statement from LivePlan:

Let’s dig a little deeper:

Operational costs: This includes your net income and losses, minus your regular expenses, and is the one number that you’ll want to see growth in because it provides an accurate picture of the cash you are generating before any costs associated with financing or investments are taken into consideration.
Asset investments: This section reports both inflows and outflows from purchases and sales of long-term business investments such as property, assets, equipment, and securities.
Financing: This is the cash you’ve received as a result of a business loan, line of credit, the sale of stock, or other capital infusions.

In addition to helping you gauge whether your business has enough money to cover its day-to-day activities, pay its bills on time, and maintain a positive cash flow, your cash flow statement also informs a number of other financial decisions, such as whether you need additional capital to fund seasonal fluctuations or purchase inventory to support a growth in sales.

For lending purposes, you’ll include the cash flow statement in your business plan to provide evidence to your bank that you can manage cash and have a plan for dealing with cash flow gaps when they arise. Learn more about cash flow by reading our cash flow 101 guide.
The bottom line

While the cash flow statement is often considered the most important financial statement for a small business, the three main financial statements are interrelated. Viewing them holistically can help you make smart financial, investment, and management decisions for your business.

Of course, that’s easier said than done, so be open to getting help—whether from an accountant, Expert Advisor, or from free resources such as the expert mentors at SCORE. Getting your arms around your financial data may be the most important thing you do this year.

The Five Stages of Small Business Growth

Neil C. Churchill
Virginia L. Lewis

Categorizing the problems and growth patterns of small businesses in a systematic way that is useful to entrepreneurs seems at first glance a hopeless task. Small businesses vary widely in size and capacity for growth. They are characterized by independence of action, differing organizational structures, and varied management styles.

Yet on closer scrutiny, it becomes apparent that they experience common problems arising at similar stages in their development. These points of similarity can be organized into a framework that increases our understanding of the nature, characteristics, and problems of businesses ranging from a corner dry cleaning establishment with two or three minimum-wage employees to a $20-million-a-year computer software company experiencing a 40% annual rate of growth.

For owners and managers of small businesses, such an understanding can aid in assessing current challenges; for example, the need to upgrade an existing computer system or to hire and train second-level managers to maintain planned growth.

It can help in anticipating the key requirements at various points—e.g., the inordinate time commitment for owners during the start-up period and the need for delegation and changes in their managerial roles when companies become larger and more complex.

The framework also provides a basis for evaluating the impact of present and proposed governmental regulations and policies on one’s business. A case in point is the exclusion of dividends from double taxation, which could be of great help to a profitable, mature, and stable business like a funeral home but of no help at all to a new, rapidly growing, high-technology enterprise.

Finally, the framework aids accountants and consultants in diagnosing problems and matching solutions to smaller enterprises. The problems of a 6-month-old, 20-person business are rarely addressed by advice based on a 30-year-old, 100-person manufacturing company. For the former, cash-flow planning is paramount; for the latter, strategic planning and budgeting to achieve coordination and operating control are most important.

Developing a Small Business FrameworkVarious researchers over the years have developed models for examining businesses (see Exhibit 1). Each uses business size as one dimension and company maturity or the stage of growth as a second dimension. While useful in many respects, these frameworks are inappropriate for small businesses on at least three counts.

Exhibit 1 Growth Phases

First, they assume that a company must grow and pass through all stages of development or die in the attempt. Second, the models fail to capture the important early stages in a company’s origin and growth. Third, these frameworks characterize company size largely in terms of annual sales (although some mention number of employees) and ignore other factors such as value added, number of locations, complexity of product line, and rate of change in products or production technology.

To develop a framework relevant to small and growing businesses, we used a combination of experience, a search of the literature, and empirical research. (See the second insert.) The framework that evolved from this effort delineates the five stages of development shown in Exhibit 2. Each stage is characterized by an index of size, diversity, and complexity and described by five management factors: managerial style, organizational structure, extent of formal systems, major strategic goals, and the owner’s involvement in the business. We depict each stage in Exhibit 3 and describe each narratively in this article.

Exhibit 2 Growth Stages

Exhibit 3 Characteristics of Small Business at Each Stage of Development

Stage I: Existence

In this stage the main problems of the business are obtaining customers and delivering the product or service contracted for. Among the key questions are the following:

Can we get enough customers, deliver our products, and provide services well enough to become a viable business?

Can we expand from that one key customer or pilot production process to a much broader sales base?

Do we have enough money to cover the considerable cash demands of this start-up phase?

The organization is a simple one—the owner does everything and directly supervises subordinates, who should be of at least average competence. Systems and formal planning are minimal to nonexistent. The company’s strategy is simply to remain alive. The owner is the business, performs all the important tasks, and is the major supplier of energy, direction, and, with relatives and friends, capital.

Companies in the Existence Stage range from newly started restaurants and retail stores to high-technology manufacturers that have yet to stabilize either production or product quality. Many such companies never gain sufficient customer acceptance or product capability to become viable. In these cases, the owners close the business when the start-up capital runs out and, if they’re lucky, sell the business for its asset value. (See endpoint 1 on Exhibit 4). In some cases, the owners cannot accept the demands the business places on their time, finances, and energy, and they quit. Those companies that remain in business become Stage II enterprises.

Exhibit 4 Evolution of Small Companies

Stage II: Survival

In reaching this stage, the business has demonstrated that it is a workable business entity. It has enough customers and satisfies them sufficiently with its products or services to keep them. The key problem thus shifts from mere existence to the relationship between revenues and expenses. The main issues are as follows:
In the short run, can we generate enough cash to break even and to cover the repair or replacement of our capital assets as they wear out?
Can we, at a minimum, generate enough cash flow to stay in business and to finance growth to a size that is sufficiently large, given our industry and market niche, to earn an economic return on our assets and labor?

The organization is still simple. The company may have a limited number of employees supervised by a sales manager or a general foreman. Neither of them makes major decisions independently, but instead carries out the rather well-defined orders of the owner.

Systems development is minimal. Formal planning is, at best, cash forecasting. The major goal is still survival, and the owner is still synonymous with the business.

In the Survival Stage, the enterprise may grow in size and profitability and move on to Stage III. Or it may, as many companies do, remain at the Survival Stage for some time, earning marginal returns on invested time and capital (endpoint 2 on Exhibit 4), and eventually go out of business when the owner gives up or retires. The “mom and pop” stores are in this category, as are manufacturing businesses that cannot get their product or process sold as planned. Some of these marginal businesses have developed enough economic viability to ultimately be sold, usually at a slight loss. Or they may fail completely and drop from sight.

Stage III: Success

The decision facing owners at this stage is whether to exploit the company’s accomplishments and expand or keep the company stable and profitable, providing a base for alternative owner activities. Thus, a key issue is whether to use the company as a platform for growth—a substage III-G company—or as a means of support for the owners as they completely or partially disengage from the company—making it a substage III-D company. (See Exhibit 3.) Behind the disengagement might be a wish to start up new enterprises, run for political office, or simply to pursue hobbies and other outside interests while maintaining the business more or less in the status quo.

Substage III-D.

In the Success-Disengagement substage, the company has attained true economic health, has sufficient size and product-market penetration to ensure economic success, and earns average or above-average profits. The company can stay at this stage indefinitely, provided environmental change does not destroy its market niche or ineffective management reduce its competitive abilities.

Organizationally, the company has grown large enough to, in many cases, require functional managers to take over certain duties performed by the owner. The managers should be competent but need not be of the highest caliber, since their upward potential is limited by the corporate goals. Cash is plentiful and the main concern is to avoid a cash drain in prosperous periods to the detriment of the company’s ability to withstand the inevitable rough times.

In addition, the first professional staff members come on board, usually a controller in the office and perhaps a production scheduler in the plant. Basic financial, marketing, and production systems are in place. Planning in the form of operational budgets supports functional delegation. The owner and, to a lesser extent, the company’s managers, should be monitoring a strategy to, essentially, maintain the status quo.

As the business matures, it and the owner increasingly move apart, to some extent because of the owner’s activities elsewhere and to some extent because of the presence of other managers. Many companies continue for long periods in the Success-Disengagement substage. The product-market niche of some does not permit growth; this is the case for many service businesses in small or medium-sized, slowly growing communities and for franchise holders with limited territories.

Other owners actually choose this route; if the company can continue to adapt to environmental changes, it can continue as is, be sold or merged at a profit, or subsequently be stimulated into growth (endpoint 3 on Exhibit 4). For franchise holders, this last option would necessitate the purchase of other franchises.

If the company cannot adapt to changing circumstances, as was the case with many automobile dealers in the late 1970s and early 1980s, it will either fold or drop back to a marginally surviving company (endpoint 4 on Exhibit 4).

Substage III-G.

In the Success-Growth substage, the owner consolidates the company and marshals resources for growth. The owner takes the cash and the established borrowing power of the company and risks it all in financing growth.

Among the important tasks are to make sure the basic business stays profitable so that it will not outrun its source of cash and to develop managers to meet the needs of the growing business. This second task requires hiring managers with an eye to the company’s future rather than its current condition.

Systems should also be installed with attention to forthcoming needs. Operational planning is, as in substage III-D, in the form of budgets, but strategic planning is extensive and deeply involves the owner. The owner is thus far more active in all phases of the company’s affairs than in the disengagement aspect of this phase.

If it is successful, the III-G company proceeds into Stage IV. Indeed, III-G is often the first attempt at growing before commitment to a growth strategy. If the III-G company is unsuccessful, the causes may be detected in time for the company to shift to III-D. If not, retrenchment to the Survival Stage may be possible prior to bankruptcy or a distress sale.

Stage IV: Take-off

In this stage the key problems are how to grow rapidly and how to finance that growth. The most important questions, then, are in the following areas:

Can the owner delegate responsibility to others to improve the managerial effectiveness of a fast growing and increasingly complex enterprise? Further, will the action be true delegation with controls on performance and a willingness to see mistakes made, or will it be abdication, as is so often the case?

Will there be enough to satisfy the great demands growth brings (often requiring a willingness on the owner’s part to tolerate a high debt-equity ratio) and a cash flow that is not eroded by inadequate expense controls or ill-advised investments brought about by owner impatience?

The organization is decentralized and, at least in part, divisionalized—usually in either sales or production. The key managers must be very competent to handle a growing and complex business environment. The systems, strained by growth, are becoming more refined and extensive. Both operational and strategic planning are being done and involve specific managers. The owner and the business have become reasonably separate, yet the company is still dominated by both the owner’s presence and stock control.

This is a pivotal period in a company’s life. If the owner rises to the challenges of a growing company, both financially and managerially, it can become a big business. If not, it can usually be sold—at a profit—provided the owner recognizes his or her limitations soon enough. Too often, those who bring the business to the Success Stage are unsuccessful in Stage IV, either because they try to grow too fast and run out of cash (the owner falls victim to the omnipotence syndrome), or are unable to delegate effectively enough to make the company work (the omniscience syndrome).

It is, of course, possible for the company to traverse this high-growth stage without the original management. Often the entrepreneur who founded the company and brought it to the Success Stage is replaced either voluntarily or involuntarily by the company’s investors or creditors.

If the company fails to make the big time, it may be able to retrench and continue as a successful and substantial company at a state of equilibrium (endpoint 7 on Exhibit 4). Or it may drop back to Stage III (endpoint 6) or, if the problems are too extensive, it may drop all the way back to the Survival Stage (endpoint 5) or even fail. (High interest rates and uneven economic conditions have made the latter two possibilities all too real in the early 1980s.)

Stage V: Resource Maturity
The greatest concerns of a company entering this stage are, first, to consolidate and control the financial gains brought on by rapid growth and, second, to retain the advantages of small size, including flexibility of response and the entrepreneurial spirit. The corporation must expand the management force fast enough to eliminate the inefficiencies that growth can produce and professionalize the company by use of such tools as budgets, strategic planning, management by objectives, and standard cost systems—and do this without stifling its entrepreneurial qualities.

A company in Stage V has the staff and financial resources to engage in detailed operational and strategic planning. The management is decentralized, adequately staffed, and experienced. And systems are extensive and well developed. The owner and the business are quite separate, both financially and operationally.

The company has now arrived. It has the advantages of size, financial resources, and managerial talent. If it can preserve its entrepreneurial spirit, it will be a formidable force in the market. If not, it may enter a sixth stage of sorts: ossification.

Ossification is characterized by a lack of innovative decision making and the avoidance of risks. It seems most common in large corporations whose sizable market share, buying power, and financial resources keep them viable until there is a major change in the environment. Unfortunately for these businesses, it is usually their rapidly growing competitors that notice the environmental change first.

Key Management Factors

Several factors, which change in importance as the business grows and develops, are prominent in determining ultimate success or failure.

We identified eight such factors in our research, of which four relate to the enterprise and four to the owner. The four that relate to the company are as follows:

1. Financial resources, including cash and borrowing power.

2. Personnel resources, relating to numbers, depth, and quality of people, particularly at the management and staff levels.

3. Systems resources, in terms of the degree of sophistication of both information and planning and control systems.

4. Business resources, including customer relations, market share, supplier relations, manufacturing and distribution processes, technology and reputation, all of which give the company a position in its industry and market.

The four factors that relate to the owner are as follows:

1. Owner’s goals for himself or herself and for the business.

2. Owner’s operational abilities in doing important jobs such as marketing, inventing, producing, and managing distribution.

3. Owner’s managerial ability and willingness to delegate responsibility and to manage the activities of others.

4. Owner’s strategic abilities for looking beyond the present and matching the strengths and weaknesses of the company with his or her goals.

As a business moves from one stage to another, the importance of the factors changes. We might view the factors as alternating among three levels of importance: first, key variables that are absolutely essential for success and must receive high priority; second, factors that are clearly necessary for the enterprise’s success and must receive some attention; and third, factors of little immediate concern to top management. If we categorize each of the eight factors listed previously, based on its importance at each stage of the company’s development, we get a clear picture of changing management demands. (See Exhibit 5.)

Exhibit 5 Management Factors and the Stages

Varying Demands

The changing nature of managerial challenges becomes apparent when one examines Exhibit 5. In the early stages, the owner’s ability to do the job gives life to the business. Small businesses are built on the owner’s talents: the ability to sell, produce, invent, or whatever. This factor is thus of the highest importance. The owner’s ability to delegate, however, is on the bottom of the scale, since there are few if any employees to delegate to.

As the company grows, other people enter sales, production, or engineering and they first support, and then even supplant, the owner’s skills—thus reducing the importance of this factor. At the same time, the owner must spend less time doing and more time managing. He or she must increase the amount of work done through other people, which means delegating. The inability of many founders to let go of doing and to begin managing and delegating explains the demise of many businesses in substage III-G and Stage IV.

The owner contemplating a growth strategy must understand the change in personal activities such a decision entails and examine the managerial needs depicted in Exhibit 5. Similarly, an entrepreneur contemplating starting a business should recognize the need to do all the selling, manufacturing, or engineering from the beginning, along with managing cash and planning the business’s course—requirements that take much energy and commitment.

The importance of cash changes as the business changes. It is an extremely important resource at the start, becomes easily manageable at the Success Stage, and is a main concern again if the organization begins to grow. As growth slows at the end of Stage IV or in Stage V, cash becomes a manageable factor again. The companies in Stage III need to recognize the financial needs and risk entailed in a move to Stage IV.

The issues of people, planning, and systems gradually increase in importance as the company progresses from slow initial growth (substage III-G) to rapid growth (Stage IV). These resources must be acquired somewhat in advance of the growth stage so that they are in place when needed. Matching business and personal goals is crucial in the Existence Stage because the owner must recognize and be reconciled to the heavy financial and time-energy demands of the new business. Some find these demands more than they can handle. In the Survival Stage, however, the owner has achieved the necessary reconciliation and survival is paramount; matching of goals is thus irrelevant in Stage II.

A second serious period for goal matching occurs in the Success Stage. Does the owner wish to commit his or her time and risk the accumulated equity of the business in order to grow or instead prefer to savor some of the benefits of success? All too often the owner wants both, but to expand the business rapidly while planning a new house on Maui for long vacations involves considerable risk. To make a realistic decision on which direction to take, the owner needs to consider the personal and business demands of different strategies and to evaluate his or her managerial ability to meet these challenges.

Finally, business resources are the stuff of which success is made; they involve building market share, customer relations, solid vendor sources, and a technological base, and are very important in the early stages. In later stages the loss of a major customer, supplier, or technical source is more easily compensated for. Thus, the relative importance of this factor is shown to be declining.

The changing role of the factors clearly illustrates the need for owner flexibility. An overwhelming preoccupation with cash is quite important at some stages and less important at others. Delaying tax payments at almost all costs is paramount in Stages I and II but may seriously distort accounting data and use up management time during periods of success and growth. “Doing” versus “delegating” also requires a flexible management. Holding onto old strategies and old ways ill serves a company that is entering the growth stages and can even be fatal.

Avoiding Future Problems

Even a casual look at Exhibit 5 reveals the demands the Take-off Stage makes on the enterprise. Nearly every factor except the owner’s “ability to do” is crucial. This is the stage of action and potentially large rewards. Looking at this exhibit, owners who want such growth must ask themselves:

Do I have the quality and diversity of people needed to manage a growing company?

Do I have now, or will I have shortly, the systems in place to handle the needs of a larger, more diversified company?

Do I have the inclination and ability to delegate decision making to my managers?

Do I have enough cash and borrowing power along with the inclination to risk everything to pursue rapid growth?

Similarly, the potential entrepreneur can see that starting a business requires an ability to do something very well (or a good marketable idea), high energy, and a favorable cash flow forecast (or a large sum of cash on hand). These are less important in Stage V, when well-developed people-management skills, good information systems, and budget controls take priority. Perhaps this is why some experienced people from large companies fail to make good as entrepreneurs or managers in small companies. They are used to delegating and are not good enough at doing.

Applying the Model

This scheme can be used to evaluate all sorts of small business situations, even those that at first glance appear to be exceptions. Take the case of franchises. These enterprises begin the Existence Stage with a number of differences from most start-up situations. They often have the following advantages:

A marketing plan developed from extensive research.

Sophisticated information and control systems in place.

Operating procedures that are standardized and very well developed.

Promotion and other start-up support such as brand identification.

They also require relatively high start-up capital.

If the franchisor has done sound market analysis and has a solid, differentiated product, the new venture can move rapidly through the Existence and Survival Stages—where many new ventures founder—and into the early stages of Success. The costs to the franchisee for these beginning advantages are usually as follows:

Limited growth due to territory restrictions.

Heavy dependence on the franchisor for continued economic health.

Potential for later failure as the entity enters Stage III without the maturing experiences of Stages I and II.

One way to grow with franchising is to acquire multiple units or territories. Managing several of these, of course, takes a different set of skills than managing one and it is here that the lack of survival experience can become damaging.

Another seeming exception is high-technology start-ups. These are highly visible companies—such as computer software businesses, genetic-engineering enterprises, or laser-development companies—that attract much interest from the investment community. Entrepreneurs and investors who start them often intend that they grow quite rapidly and then go public or be sold to other corporations. This strategy requires them to acquire a permanent source of outside capital almost from the beginning. The providers of this cash, usually venture capitalists, may bring planning and operating systems of a Stage III or a Stage IV company to the organization along with an outside board of directors to oversee the investment.

The resources provided enable this entity to jump through Stage I, last out Stage II until the product comes to market, and attain Stage III. At this point, the planned strategy for growth is often beyond the managerial capabilities of the founding owner and the outside capital interests may dictate a management change. In such cases, the company moves rapidly into Stage IV and, depending on the competence of the development, marketing, and production people, the company becomes a big success or an expensive failure. The problems that beset both franchises and high-technology companies stem from a mismatch of the founders’ problem-solving skills and the demands that “forced evolution” brings to the company.

Besides the extreme examples of franchises and high-technology companies, we found that while a number of other companies appeared to be at a given stage of development, they were, on closer examination, actually at one stage with regard to a particular factor and at another stage with regard to the others. For example, one company had an abundance of cash from a period of controlled growth (substage III-G) and was ready to accelerate its expansion, while at the same time the owner was trying to supervise everybody (Stages I or II). In another, the owner was planning to run for mayor of a city (substage III-D) but was impatient with the company’s slow growth (substage III-G).

Although rarely is a factor more than one stage ahead of or behind the company as a whole, an imbalance of factors can create serious problems for the entrepreneur. Indeed, one of the major challenges in a small company is the fact that both the problems faced and the skills necessary to deal with them change as the company grows. Thus, owners must anticipate and manage the factors as they become important to the company.

A company’s development stage determines the managerial factors that must be dealt with. Its plans help determine which factors will eventually have to be faced. Knowing its development stage and future plans enables managers, consultants, and investors to make more informed choices and to prepare themselves and their companies for later challenges. While each enterprise is unique in many ways, all face similar problems and all are subject to great changes. That may well be why being an owner is so much fun and such a challenge.
A version of this article appeared in the May 1983 issue of Harvard Business Review.

Neil C. Churchill is a visiting professor at the Anderson School at UCLA and a professor emeritus of entrepreneurship at INSEAD in Fontainebleau, France.

Virginia L. Lewis is a senior research associate of the Caruth Institute at SMU.

Monday, June 24, 2019

State of Latino Entrepreneurship - Profile of U.S.- (2018)

State of Latino Entrepreneurship - Houston - (2018)

State of Latino Entrepreneurship (2018)

Research Report. Latino - Owned businesses (2018)

The Rise of Latino owned Businesses in the U.S.

The U.S Latino Entrepreneurship Gap (2018)

Shining a light on National Trends - Latino owned businesses (2018)

State of latino entrepreneurship (2018)


Tuesday, June 18, 2019

Event: "Latinas in Finance" (POWER On Heels Fund, Inc)

Latinas are starting businesses in record numbers. Latinas are making our way to positions of leadership and influence in the corporate space too. Yet Latinas are struggling to survive in the business environment given the challenges they face when it comes to handling their money.

Demands from personal and professional commitments can place pressure on Latinas and can get in the way of being financially prepared. Especially when it comes to creating budgets, tracking expenses and long-term planning.

Friday, June 14, 2019

Universidad Catolica de Santiago de Guayaquil (UCSG) facebook post

My alma mater Universidad Catolica de Santiago de Guayaquil (UCSG) posted this today. So happy! Thank you!!!

đŸ”´Our GraduatesđŸ”´ Ing. MarĂ­a Soledad Tanner Cedeño, a graduate of the Business Administration degree, who received an award as "Outstanding International Consultant" granted by the Houston International Trade Development Council (HITDC) in Houston, TX USA. (May 2019). Congratulations from your alma mater UCSG! Soledad Tanner Consulting LLC.

Tuesday, June 11, 2019

Social Share - Living with Purpose

Social Share - Living with Purpose

Have you ever thought about your purpose in life?

Perhaps you're feeling empty like there is more for you to do but you don't know where to start. Maybe you've found yourself spinning in circles, accepting projects and jobs that leave you unfulfilled.  Or, you may have a friend that needs to be lifted, prayed for, or guided in her purpose in life. If so, we need you both here!
In this Social Share, we are going to discuss LIVING WITH PURPOSE. Join us to hear the purpose stories of 3 amazing resourceful leaders in the Houston community as they share their difficult journey which has led them to where they are today. You will also have an opportunity to discuss this topic in a safe space while connecting with our women of purpose community.


Saturday, June 15, 2019  |  9:30 AM – 11:30 AM CDT

Location: Rice Village  |  2455 Dunstan Rd. Houston, TX 


CONNIE LEON, better known as Momma of Dos. Born and raised Texan. Grew up in a small Texas town near the Mexican border. Moved to Houston in 1999 to attend the University of Houston where she received her Bachelor of Science in Psychology with a minor in Health. Has worked in the non-profit and governmental sectors most of her career. These days she works around the clock to provide for her little Mexican-American family both in and outside the home. She has "Dos" amazing, children; Camila, 7 years old and Santiago, 9. In 2014 she helped found Houston Latina Bloggers which serves as a collaborative group to help raise awareness of Houston-based Latina writers, bloggers and content creators within many industries such as; social media, marketing, and public relations among others. Their vision is to help empower Latinas in Houston to share their voice.
SOLEDAD TANNER, MIB is a global senior financial executive with 27 years of experience in finance & controlling, strategy & consulting, performance & metrics in the global logistics and banking industry. Currently, she owns her own consulting business, Soledad Tanner Consulting, LLC. They are a Business & Financial Management Consulting firm that support businesses, professionals, and Corporations with solutions, knowledge, and expertise to grow efficiently and stay competitive in the market, optimizing businesses and achieving goals.
IVETTE MAYO, is an award-winning entrepreneur, international speaker, and author. Ivette is the President and CEO of Yo Soy I AM, LLC, professional development and consulting firm. She is known as a POWER ADVOCATE by her clients for creating POWERFUL and IMPACTFUL results. Her 27-year global career was spent working in business development, sales, marketing, and training. She is the Founder of POWER On Heels Network, a digital platform empowering and supporting women to achieve their vision of success with members from throughout the country.
Can't attend? Consider making a donation to support our mission!

Thanks to our Event Sponsor

Soledad Tanner Consulting, LLC is a Business & Financial Management Consulting firm. They support businesses, professionals, and Corporations with solutions, knowledge, and expertise to grow efficiently and stay competitive in the market, optimizing businesses and achieving goals.  |
Sponsorship or Door Prize Opportunities Available!
For I know the plans I have for you,” declares the LORD, “plans to prosper you and not to harm you, plans to give you hope and a future.- Jeremiah 29:11”

Beautiful Purpose is a  faith-based, 501c3 non-profit organization empowering women through Christian principles, to live a purpose-filled life by creating a safe space for sharing, providing personal development workshops and leadership training, and by creating a woman of purpose community.

Friday, June 7, 2019

Preparing for a Disaster (Taxpayers and Businesses)


Planning what to do in case of a disaster is an important part of being prepared. The Internal Revenue Service encourages taxpayers to safeguard their records. Some simple steps can help taxpayers and businesses protect financial and tax records in case of disasters.

Listed below are tips for individuals and businesses on preparing for a disaster.

Preparing for Disasters (Video)

Take Advantage of Paperless Recordkeeping for Financial and Tax Records

Many people receive bank statements and documents by e-mail. This method is an outstanding way to secure financial records. Important tax records such as W-2s, tax returns and other paper documents can be scanned onto an electronic format.

Be sure you back up your electronic files and store them in a safe place. Making duplicates and keeping them in a separate location is a good business practice. Other options include copying files onto a CD or DVD. Also, many retail stores sell computer software packages that you can use for recordkeeping.

When choosing a place to keep your important records, convenience to your home should not be your primary concern. Remember, a disaster that strikes your home is also likely to affect other facilities nearby, making quick retrieval of your records difficult and maybe even impossible.

Document Valuables and Business Equipment

The IRS has disaster loss workbooks for individuals ( Publication 584, Casualty, Disaster, and Theft Loss Workbook) and businesses ( Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook) that can help you compile a room-by-room list of your belongings or business equipment. This will help you recall and prove the market value of items for insurance and casualty loss claims.

One option is to photograph or videotape the contents of your home and/or business, especially items of greater value. You should store the photos with a friend or family member who lives away from the geographic area at risk.

Check on Fiduciary Bonds

Employers who use payroll service providers should ask the provider if they have a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider.

Continuity of Operations Planning for Businesses

How quickly your company can get back to business after a disaster often depends on emergency planning done today. Start planning now to improve the likelihood that your company will survive and recover. Review your emergency plans annually. Just as your business changes over time, so do your preparedness needs. When you hire new employees or when there are changes in how your company functions, you should update your plans and inform your people.

There are real benefits to being prepared for disasters. The following preparedness strategies are common to all disasters. You plan only once, and are able to apply your plan to all types of hazards.
Get informed about hazards and emergencies and learn what to do for specific hazards.
Develop an emergency plan.
Learn where to seek shelter from all types of hazards.
Back up your computer data systems regularly.
Decide how you will communicate with employees, customers and others.
Use cell phones, walkie-talkies, or other devices that do not rely on electricity as a backup to your telecommunications system.
Collect and assemble a disaster supplies kit. Include a portable generator.
Identify the community warning systems and evacuation routes.
Include required information from community and school plans.
Practice and maintain your plan.

Update Emergency Plans

Emergency plans should be reviewed annually. Personal and business situations change over time and so do preparedness needs. Individual taxpayers should make sure they are saving documents everybody should keep including such things as W-2s, home closing statements and insurance records. When employers hire new employees or when a company or organization changes functions, plans should be updated accordingly and employees should be informed of the changes.

Make sure you have a means of receiving severe weather information; if you have a NOAA Weather Radio, put fresh batteries in it. Make sure you know what you should do if threatening weather approaches.

Count on the IRS
Immediately after a casualty, you can request a copy of a return and all attachments (including Form W-2) by using Form 4506, Request for Copy of Tax Return (PDF).

If you just need information from your return, you can order a free transcript by calling (800) 829-1040 or using Form 4506-T, Request for Transcript of Tax Return (PDF). Requests for Transcripts are also available using the online and mail options found on the Get Transcript page. Transcripts are available for the current year and returns processed in the three prior years. is an indispensable resource as you prepare for and recover from disaster.

Tuesday, June 4, 2019

5 Strategies to Deal With Financial Stress


Feelings of financial stress often stem from common issues such as carrying too much debt, not earning enough money, the expense of raising kids, marriage to a spouse that has different ideas about how to manage finances, and the list can go on.

There is a virtually endless list of reasons you may be feeling some financial stress. It can take its toll on your closest relationships, and when you are stressed it can start affecting other aspects of your life.

If you can reduce your financial worry, it will free your mind so that you can focus on other important areas of your life and relax, knowing you have a plan to handle your financial situation. Following are a few things you can do now to relieve your financial stress and make it easier to function each day.

01 Create a Budget

You may feel overwhelmed and think that a budget is only going to add to your financial stress, but it is the best tool you have to get control of your finances and stop worrying about money. A budget allows you to decide when and how you are going to spend your hard-earned dollars. This spending plan makes sure you cover your immediate expenses, while still working towards your retirement and savings goals. It can also help you find extra money to put towards debt.

The first few months of planning and sticking to a budget are the most challenging, but once you understand what to do you can often reduce the amount of time you spend on it, and in turn, reduce the amount of time you spend worrying about money. Your budget will give you the feeling of control that you need to have over your finances. Start with just one months' worth of expenses and then go from there, tracking spending and cutting back in different areas each month until you find the perfect balance.

02 Get an Emergency Fund

An emergency fund is an amount of money you have set aside to cover unexpected expenses and financial emergencies. Although a car repair can be expensive and stressful, if you know you can tap into your emergency fund to cover it, a lot of the stress will go away. It is also easier to use the money in your budget the way you planned if you know you have the extra money in the bank ready to cover the unexpected emergencies that may crop up. You should have at least $1,000 in the bank until you are out of debt and after that, work up to an amount that covers about six months' worth of your expenses.

Building an emergency fund may seem tough at first, especially if you are struggling to make ends meet each month. Start by putting a small amount, whether it's $10 or $100, in the bank from each paycheck, and any leftover money you have in your other spending categories at the end of the month so that you can build up your emergency fund. You may also consider selling any unused items around the house to build up that cash as quickly as you can. You may be surprised at how quickly the stress fades away when you know you have that money in the bank to protect you and your family.

03 Get Outside Help

If you are really struggling with getting a handle on your budget and spending issues, do not be afraid to get outside help. You can take classes on basic money management and investing, that will help you plan out a budget and do the things you need to succeed financially. A financial planner can help you create a long-term saving and investing strategy that will help you take care of your current needs and plan for retirement. It is important to realize that you do not have to face the problems alone. If you are feeling overwhelmed by debt you can work with a credit counseling service to help you restructure your debt and in some cases, negotiate with creditors. You can also take financial classes that coach you through budgeting and other aspects of your personal finances.

Often, just talking to someone outside of the situation can help. Talking through your financial challenges and seeing an outside perspective can help you. Also, it can help to be accountable to someone about your progress. Just knowing that you have to report to someone else on your spending or your savings progress may be all you need to curb your impulse shopping habit or any other issues. A friend can help with this but a support group or class can also help, and sometimes be even more effective because a support group won't let you off the hook.

04 Determine What You Can Change

If you are having financial issues, you may have an income issue, a spending issue, or a combination of the two. If you know that you do not make enough money to keep up with your current bills, decide what you can do to change the situation. It may include options such as going back to school to qualify for a higher paying job. If you feel you have a spending problem and it's an addiction, you may want to attend a group like Shopaholics Anonymous to get help dealing with the issues you are facing. Once you have a plan that will help you change your situation permanently, you should be able to reduce your stress. One way that you can prioritize the things to cut back on is to determine the hourly cost of your wants. This may make choosing which items to cut much easier. Mastering these twenty financial skills can help reduce your financial stress too.

Change is not always easy. Start with small steps and work up to bigger changes. Additionally, if you make a mistake one week, go easy on yourself, and get right back on track so you can continue to stick to your budget and keep working on making those changes in your financial habits. It helps to realize that it's a journey and even if you take a short detour or a small break, you can keep moving forward and make the necessary changes.

05 Find Positive Aspects of Your Life Each Day

While this may sound like it's not a solution to your financial problem, it can make a big difference in the amount of stress you feel each day. Find positive aspects of your financial situation by tracking your progress towards your financial goals. Looking at the positive aspects of your life each day can also help you reduce your stress.

If possible, try to find some healthy outlets that do not cost a lot of money. Regular exercise and taking care of yourself can reduce your overall feelings of stress, which allows you to better focus on the problems and make headway. You can change your financial situation, and you will find it easier to accomplish if you are not worried and living in an anxious state all of the time.

You Don’t Find Your Purpose — You Build It

By: John Coleman

“How do I find my purpose?”

Ever since Daniel Gulati, Oliver Segovia, and I published Passion & Purpose six years ago, I’ve received hundreds of questions — from younger and older people alike — about purpose. We’re all looking for purpose. Most of us feel that we’ve never found it, we’ve lost it, or in some way we’re falling short.

But in the midst of all this angst, I think we’re also suffering from what I see as fundamental misconceptions about purpose — neatly encapsulated by the question I receive most frequently: “How do I find my purpose?” Challenging these misconceptions could help us all develop a more rounded vision of purpose.

Misconception #1: Purpose is only a thing you find.

On social media, I often see an inspiring quotation attributed to Mark Twain: “The two most important days in your life are the day you are born and the day you find out why.” It neatly articulates what I’ll call the “Hollywood version” of purpose. Like Neo in The Matrix or Rey in Star Wars, we’re all just moving through life waiting until fate delivers a higher calling to us.

Make no mistake: That can happen, at least in some form. I recently saw Scott Harrison of Charity Water speak, and in many ways his story was about how he found a higher purpose after a period of wandering. But I think it’s rarer than most people think. For the average 20-year-old in college or 40-year-old in an unfulfilling job, searching for the silver bullet to give life meaning is more likely to end in frustration than fulfillment.

In achieving professional purpose, most of us have to focus as much on making our work meaningful as in taking meaning from it. Put differently, purpose is a thing you build, not a thing you find. Almost any work can possess remarkable purpose. School bus drivers bear enormous responsibility — caring for and keeping safe dozens of children — and are an essential part of assuring our children receive the education they need and deserve. Nurses play an essential role not simply in treating people’s medical conditions but also in guiding them through some of life’s most difficult times. Cashiers can be a friendly, uplifting interaction in someone’s day — often desperately needed — or a forgettable or regrettable one. But in each of these instances, purpose is often primarily derived from focusing on what’s so meaningful and purposeful about the job and on doing it in such a way that that meaning is enhanced and takes center stage. Sure, some jobs more naturally lend themselves to senses of meaning, but many require at least some deliberate effort to invest them with the purpose we seek.

Misconception #2: Purpose is a single thing.

The second misconception I often hear is that purpose can be articulated as a single thing. Some people genuinely do seem to have an overwhelming purpose in their lives. Mother Teresa lived her life to serve the poor. Samuel Johnson poured every part of himself into his writing. Marie Curie devoted her energy to her work.

And yet even these luminaries had other sources of purpose in their lives. Mother Teresa served the poor as part of what she believed was a higher calling. Curie, the Nobel prize–winning scientist, was also a devoted wife and mother (she wrote a biography of her husband Pierre, and one of her daughters, Irene, won her own Nobel prize). And Johnson, beyond his writing, was known to be a great humanitarian in his community, often caring personally for the poor.

Most of us will have multiple sources of purpose in our lives. For me, I find purpose in my children, my marriage, my faith, my writing, my work, and my community. For almost everyone, there’s no one thing we can find. It’s not purpose but purposes we are looking for — the multiple sources of meaning that help us find value in our work and lives. Professional commitments are only one component of this meaning, and often our work isn’t central to our purpose but a means to helping others, including our families and communities. Acknowledging these multiple sources of purpose takes the pressure off of finding a single thing to give our lives meaning.

Misconception #3: Purpose is stable over time.

It’s common now for people to have multiple careers in their lifetimes. I know one individual, for example, who recently left a successful private equity career to found a startup. I know two more who recently left business careers to run for elective office. And whether or not we switch professional commitments, most of us will experience personal phases in which our sources of meaning change — childhood, young adulthood, parenthood, and empty-nesting, to name a few.

This evolution in our sources of purpose isn’t flaky or demonstrative of a lack of commitment, but natural and good. Just as we all find meaning in multiple places, the sources of that meaning can and do change over time. My focus and sense of purpose at 20 was dramatically different in many ways than it is now, and the same could be said of almost anyone you meet.

How do you find your purpose? That’s the wrong question to ask. We should be looking to endow everything we do with purpose, to allow for the multiple sources of meaning that will naturally develop in our lives, and to be comfortable with those changing over time. Unpacking what we mean by “purpose” can allow us to better understand its presence and role in our lives.