Tuesday, September 27, 2022

What is inflation?

Source: https://tinyurl.com/4pfrrzmv

Inflation is the gradual loss of purchasing power, reflected in a broad rise in prices for goods and services. This is just one entry in our McKinsey Explainer series.

Inflation refers to a broad rise in the prices of goods and services across the economy over time, eroding purchasing power for both consumers and businesses. In other words, your dollar (or whatever currency you use for purchases) will not go as far today as it did yesterday. To understand the effects of inflation, take a commonly consumed item and compare its price from one period with another. For example, in 1970, the average cup of coffee cost 25 cents; by 2019, it had climbed to $1.59. So for $5, you would have been able to buy about three cups of coffee in 2019, versus 20 cups in 1970. That’s inflation, and it isn’t limited to price spikes for any single item or service; it refers to increases in prices across a sector, such as retail or automotive—and, ultimately, a country’s economy.

In a healthy economy, annual inflation is typically in the range of two percentage points, which is what economists consider a signal of pricing stability. And there can be positive effects of inflation when it’s within range: for instance, it can stimulate spending, and thus spur demand and productivity, when the economy is slowing down and needs a boost. Conversely, when inflation begins to surpass wage growth, it can be a warning sign of a struggling economy.

Inflation affects consumers most directly, but businesses can also feel the impact. Here’s a quick explanation of the differences in how inflation affects consumers and companies:
  • Households, or consumers, lose purchasing power when the prices of items they buy, such as food, utilities, and gasoline, increase.
  • Companies lose purchasing power, and risk seeing their margins decline, when prices increase for inputs used in production, such as raw materials like coal and crude oil, intermediate products such as flour and steel, and finished machinery. In response, companies typically raise the prices of their products or services to offset inflation, meaning consumers absorb these price increases. For many companies, the trick is to strike a balance between raising prices to make up for input cost increases while simultaneously ensuring that they don’t rise so much that it suppresses demand, which is touched on later in this article.
How is inflation measured?

Statistical agencies measure inflation by first determining the current value of a “basket” of various goods and services consumed by households, referred to as a price index. To calculate the rate of inflation, or percentage change, over time, agencies compare the value of the index over one period to another, such as month to month, which gives a monthly rate of inflation, or year to year, which gives an annual rate of inflation.

For example, in the United States, that country’s Bureau of Labor Statistics publishes its Consumer Price Index (CPI), which measures the cost of items that urban consumers buy out of pocket. The CPI is broken down by regions and is reported for the country as a whole. The Personal Consumption Expenditures (PCE) price index—published by the US government’s Bureau of Economic Analysis—takes into account a broader range of consumers’ expenditures, including healthcare. It is also weighted by data acquired through business surveys.What are the main causes of inflation?

There are two primary types, or causes, of inflation:
  • Demand-pull inflation occurs when the demand for goods and services in the economy exceeds the economy’s ability to produce them. For example, when demand for new cars recovered more quickly than anticipated from its sharp dip at the beginning of the COVID-19 pandemic, an intervening shortage in the supply of semiconductors made it hard for the automotive industry to keep up with this renewed demand. The subsequent shortage of new vehicles resulted in a spike in prices for new and used cars.
  • Cost-push inflation occurs when the rising price of input goods and services increases the price of final goods and services. For example, commodity prices spiked sharply during the pandemic as a result of radical shifts in demand, buying patterns, cost to serve, and perceived value across sectors and value chains. To offset inflation and minimize impact on financial performance, industrial companies were forced to consider price increases that would be passed on to their end consumers.
How does inflation today differ from historical inflation?

In January 2022, inflation in the United States accelerated to 7.5 percent, its highest level since February 1982, as a result of soaring energy costs, labor mismatches, and supply disruptions. But inflation is not a new phenomenon; countries have weathered inflation throughout history.

A common comparison to the current inflationary period is with that of the post–World War II era, when price controls, supply problems, and extraordinary demand fueled double-digit inflation gains—peaking at 20 percent in 1947—before subsiding at the end of the decade, according to the US Bureau of Labor Statistics. Consumption patterns today have been similarly distorted, and supply chains have been disrupted by the pandemic.

The period from the mid-1960s through the early 1980s, deemed as “The Great Inflation,” saw some of the highest rates of inflation, with a peak of 14.8 percent in 1980. To combat this inflation, the Federal Reserve raised interest rates to nearly 20 percent. Some economists attribute this episode partially to monetary policy mistakes rather than to other purported causes, such as high oil prices. The Great Inflation signaled the need for public trust in the Federal Reserve’s ability to lessen inflationary pressures.

How does inflation affect pricing?

When inflation occurs, companies typically pay more for input materials. One way for companies to offset losses and maintain gross margins is by raising prices for consumers, but if price increases are not executed thoughtfully, companies can damage customer relationships, depress sales, and hurt margins. An exposure matrix that assesses which categories are exposed to market forces, and whether the market is inflating or deflating, can help companies make more informed decisions.

Done the right way, recovering the cost of inflation for a given product can strengthen relationships and overall margins. There are five steps companies can take to ADAPT (Adjust, Develop, Accelerate, Plan, and Track) to inflation:
  1. Adjust discounting and promotions and revisit other aspects of sales unrelated to the base price, such as lengthened production schedules or surcharges and delivery fees for rush or low-volume orders.
  2. Develop the art and science of price change. Don’t make across-the-board price changes; rather, tailor pricing actions to account for inflation exposure, customer willingness to pay, and product attributes.
  3. Accelerate decision making tenfold. Establish an “inflation council” that includes dedicated cross-functional, inflation-focused decision makers who can act nimbly and quickly on customer feedback.
  4. Plan options beyond pricing to reduce costs. Use “value engineering” to reimagine your portfolio and provide cost-reducing alternatives to price increases.
  5. Track execution relentlessly. Create a central supporting team to address revenue leakage and to manage performance rigorously.
Beyond pricing, a variety of commercial and technical levers can help companies deal with price increases in an inflationary market, but other sectors may require a more tailored response to pricing. In the chemicals industry, for instance, category managers contending with soaring prices of commodities can make the following five moves to save their companies money:
  1. Gain a full understanding of supply–market dynamics and outlook. Understand and track the elements that trigger price increases and rescind these increases once those drivers are no longer applicable.
  2. Ensure that suppliers can clearly articulate the impact that price increases in the market have on suppliers’ prices. In times of upward price pressure, sellers often overstate the share of raw materials in input costs, taking the opportunity to inflate their margins. Using cleansheet methodology to identify and challenge these situations is important.
  3. View unavoidable price increases as temporary surcharges, not the new future state. This mechanism, partly psychological in nature, is very effective in dealing with the stickiness of price increases because it shifts the burden of proof to the supplier.
  4. Prioritize cross-functional initiatives. When prices are high, the impact of yield improvements, waste reduction, or substitutions can be amplified. If any are available, now is the time to make them a priority.
  5. Work with sales to pass on price increases. Category managers work closely with finance and commercial teams to shed light on pure market effects and their impact on the prices of goods sold, while ensuring that the right arguments are advanced to pass market-price increases to customers.

What is the difference between inflation and deflation?

If inflation is one extreme of the pricing spectrum, deflation is the other. Deflation occurs when the overall level of prices in an economy declines and the purchasing power of currency increases. It can be driven by growth in productivity and the abundance of goods and services, by a decrease in aggregate demand, or by a decline in the supply of money and credit.

Generally, moderate deflation positively affects consumers’ pocketbooks, as they are able to purchase more with less money. However, deflation can be a sign of a weakening economy, leading to recessions and depressions. While inflation reduces purchasing power, it also reduces the value of debt. During a period of deflation, on the other hand, debt becomes more expensive. Additionally, consumers can protect themselves to an extent during periods of inflation. For instance, consumers who have allocated their money into investments can see their earnings grow faster than the rate of inflation. During episodes of deflation, however, investments, such as stocks, corporate bonds, and real-estate investments, become riskier.

A recent period of deflation in the United States occurred between 2007 and 2008, referred to by economists as the Great Recession. In December 2008, more than half of executives surveyed by McKinsey expected deflation in their countries, and 44 percent expected to decrease the size of their workforces.

When taken to their extremes, both inflation and deflation can significantly and negatively affect consumers, businesses, and investors.

For more in-depth exploration of these topics, see McKinsey’s Operations Insights collection. Learn more about Operations consulting, and check out operations-related job opportunities if you’re interested in working at McKinsey.

Articles referenced include:

Wednesday, September 21, 2022

What Is Compound Interest and How Is It Calculated?

 Compound interest can help savings grow faster or make borrowing more expensive. Understand what it is, how it’s calculated and how to use it to your advantage.

Source: https://tinyurl.com/4p4mfpm4

By My Finance Academy

When you deposit money into a savings, money market or other type of deposit account, you may earn interest — a percentage of the account balance paid to you periodically by the financial institution for allowing them to use your money. When you take out a loan or take on credit card debt, interest works the other way: You periodically pay the financial institution a percentage of your outstanding balance for the privilege of using their money.

Compound interest is interest calculated on an account’s principal plus any accumulated interest. If you were to deposit $1,000 into an account with a 2% annual interest rate, you would earn $20 ($1,000 x .02) in interest the first year. Assuming the bank compounds interest annually, you would earn $20.40 ($1,020 x .02) the second year. (Most banks compound interest much more frequently; we chose annual compounding to simplify this example.)

Simple interest, on the other hand, is calculated on principal only. If you were paid simple interest on the account above, you would earn the same $20 interest a year rather than reaping the rewards of compounding. When interest is based on your growing balance, your funds can snowball over time.

In the case of money you borrow, compounding can work against you. When interest is charged on credit card accounts or loans that use compounding, that interest is calculated based on your principal plus any interest previously accrued on your account. You may end up paying more or needing more time to pay off your balance.

To gain better insight into how much compounding interest can affect what you earn or pay, take a look at how it’s calculated.
How Compound Interest Is Calculated

Whether it is interest you will earn or interest you will pay, compound interest can be calculated using the following formula:

x = P (1+r/n)nt - P

… where

x = compound interest

P = principal (the initial deposit or loan amount)

r = annual interest rate

n = the number of compounding periods per unit of time

t = the number of time units the money is invested or borrowed for

Let’s use an example where you earn interest. Say you deposit $5,000 into a savings account at an annual interest rate of 5%, which is compounded monthly. That deposit would earn $3,235.05 in interest at the end of 10 years. Here’s a breakdown of the math:

x = P (1+r/n)nt - P

x = 5,000 (1+.05/12)12x10 - 5,000

x = 5,000 (1.00416667)120 - 5,000

x = 5,000 (1.64701015) - 5,000

x = 8,235.05 - 5,000

x = 3,235.05

Over that 10-year period, your deposit would grow from $5,000 to $8,235. The same account earning simple interest would grow to only $7,500.

Of course, if you don’t enjoy crunching numbers, you can use an online calculator. Calculators can be particularly helpful when you are regularly making deposits or payments to your accounts, since your balance will be changing as you go.

The frequency of compounding is particularly important to these calculations, because the higher the number of compounding periods, the greater the compound interest. And while interest can be compounded at any frequency determined by a financial institution, the compounding schedule for savings and money market accounts at banks are often daily. The interest on certificates of deposit (CDs) may be compounded daily, monthly or semiannually. For credit cards, compounding often takes place monthly or even daily. More frequent compounding is beneficial to you when you are the investor, but it’s a disadvantage when you are the borrower.
How Compound Interest Can Affect Your Financial Planning

Given that compound interest can be beneficial (when you’re the investor) or disadvantageous (when you’re the borrower), it’s important to consider its potential in your financial plans.

To fully reap the rewards of compound interest, save! Choose deposit and investment accounts that offer compounding interest, and do your best not to make withdrawals so that interest has a chance to really add up.

To avoid paying compound interest, shop for loans that charge simple interest. Many large loans — mortgages and car loans, for example — do use a simple interest formula. By contrast, credit cards and some other loans frequently use compound interest. So use credit cards wisely and be sure to pay off your statement balances every month.

As you become more familiar with compounding interest, you will be able to leverage it to your advantage as you build your wealth and minimize your debt

Tuesday, September 20, 2022

Making Something From Nothing: James R Langabeer Of Yellowstone Research On How To Go From Idea To Launch

Source: https://tinyurl.com/mrrpr6ap

Written by: Fotis Georgiadis

An Interview With Fotis Georgiadis

I wish somebody would have told me was that it just isn’t as fun as you think to be your own boss! You have nobody to blame, or go to for help. Try to find a mentor, or somebody that’s more experienced than you in a similar business or venture. Ask for their help — and take their advice!

As a part of our series called “Making Something From Nothing”, I had the pleasure of interviewing James Langabeer.

James R. Langabeer, PhD is a management strategist, entrepreneur, and professor. He has founded or led several successful companies, including a healthcare information technology company and a business intelligence software firm. He has also developed several large-scale community initiatives and programs as an endowed professor at UTHealth Houston. James is best known for his expertise on management decision-making and founded Yellowstone Research, LLC to provide strategy consulting for leaders in healthcare, supply chain, and consumer goods firms. He was named a finalist for the 2022 Success Magazine most influential leader award, and his writing has been published in Forbes, Psychology Today, and over 125 academic journals. His latest book is The Quest for Wealth: Six Steps for Making Mindful Money Choices (Routledge Press, 2022).

Thank you so much for doing this with us! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a bit about your “childhood backstory”?

Iwas very fortunate to have been born overseas in Tokyo Japan, the middle child of an Air Force officer/Certified Public Accountant, and a loving and energetic mother. They were both from the heart of the Midwest in Peoria, Illinois. We moved around quite a bit, which showed me that growth in life is fed by new opportunities and new scenery. We shouldn’t get complacent, or remain in one place, literally or figuratively, too long. With a military family, you learn a lot about discipline, and I was also taught the importance of money and how to make solid conservative financial choices. Our parents constantly tried to model how important it was to exercise leadership, whether in your work or personal life. I tried to lead, travel, and take advantage of as many opportunities as I could to keep moving forward.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

One thing my father used to always goes something like “a coward dies a thousand deaths, a hero only one.” He encouraged us to take chances, get out there, and do something despite potential consequences. He wasn’t afraid of much, and “action” was always preferable to inaction. I’ve been lucky because I believe that risk-taking is essential for innovation and entrepreneurship, so those early lessons have helped me immensely with my ability to get things done.

Is there a particular book, podcast, or film that significantly impacted you? Can you share a story or explain why it resonated with you so much?

I loved the short story “The Secret Life of Walter Mitty” by James Thurber. We read it in high school I believe, and then much later I saw the film version with Ben Stiller. The story made a lasting impression on me. At its core, I believe it is about the difference between dreamers and doers. There are some people who wish they had a better, more exciting, heroic life. And others who go out there and are brave and courageous. Most importantly, it shows that you can go out there and change your life, and make it all come true.

Also, I read in business school the book “Zen and the Art of Motorcycle Maintenance” by Robert Pirsig. I don’t remember much of it, but what stuck with me was the idea that you can be actually grounded in daily rational thinking (about consequences, the future, planning) yet still be present in the moment. That there can be a balance between being analytical and still be mindful. I think that’s really important for us, since we tend to think of things in extremes rather than harmony, and prefer one way over another. Since I focus on how people make big (strategic) choices, I like to know that you can be congruent between these perspectives.

Ok super. Let’s now shift to the main part of our discussion. There is no shortage of good ideas out there. Many people have good ideas all the time. But people seem to struggle in taking a good idea and translating it into an actual business. Can you share a few ideas from your experience about how to overcome this challenge?

I think this is completely correct. So many people think they have ‘killer ideas’, but don’t act on them. Some times, these are just re-do’s of what is already out there. But in other cases, people have really good ideas, but can’t figure out the first few steps. It’s really rare to find somebody with a good idea, that can actually pull it off. That’s why entrepreneurs who can get an idea to the commercialization phase are fairly rare. When I’m advising young entrepreneurs, the first thing I always ask them to do is to make a few notes, briefly detailing these points:
  • What’s the core concept?
  • Why does this inspire you?
  • Why is this unique?
  • What business problem or need does this solve, and for whom specifically?
  • Why are you the right person to tackle it?
  • How might this be monetized?
These just need to be a sentence or two for each point. I don’t recommend a detailed business plan at first. Details in a traditional business plan just bog people down in a writing exercise and make you think about the “practical” matters. Not having answers at first, is what you have to get comfortable with! So don’t worry about all details at first, try to remain conceptual. We tend to go right into the details, and gloss over the most important aspects. This creates too much focus on the wrong components of planning, which are virtually unknowable at this point. I see people worrying about their pricing strategy (how much to charge) when they really don’t even know who they are solving a problem for. These details will all come later, but first, start with the concept and the innovation.

Often when people think of a new idea, they dismiss it saying someone else must have thought of it before. How would you recommend that someone go about researching whether or not their idea has already been created?

People often dismiss their own abilities and their own originality. I think it’s because people are thinking about ideas for things in the wrong way. Even an incrementally better service, product, or even process enhancement can all be ideas that can be innovated. It’s not necessarily just one ‘big thing’. The best way to really know if this is a unique idea is to more carefully explore it. Write down the answers to the conceptual questions earlier. Try asking a few people what they think of this idea, especially those people who might have the need for the product or service you are thinking about. Then, as we all do, “Google it”. See what exists that is out on the public domains. I wouldn’t worry about a patent or trademark or legal matters at this stage — start by asking questions and doing some basic research.

For the benefit of our readers, can you outline the steps one has to go through, from when they think of the idea, until it finally lands in a customer’s hands? In particular, we’d love to hear about how to file a patent, how to source a good manufacturer, and how to find a retailer to distribute it.

Even before this, let’s talk about what’s most important — developing your ‘story’ about this big idea. You want to work on creating a compelling pitch that will seize people’s interest immediately, yet not too much where you lose them. Think of a 15 or 30 second pitch around your vision. Don’t try to confuse people. Simplify as much as possible, as if you’re talking to somebody who knows nothing about this! That is the most important thing — simplify your ideas, and what it could mean for them or others. Give people a reason to be excited and wanting to hear more.

Then, you’ll need to work through the mechanics. You have to have a solid grasp of competitive intelligence — who are the competitors in this area. Not only other companies but competing products that might fill the same need. What are the gaps today? You want to end up with an idea of the size of the market potential. What is the opportunity? What is the up-side?

Once you have this, people should get some validation on their ideas. You tossed the idea around to a few people earlier, but now you need to get serious with some research. A/B testing is a good way to try to see what potential customers might prefer, if you can narrow things down. Surveys, interviews, or small focus groups might help provide insight. Before investing a lot of your personal money, or that of an investor, validate that this makes sense to potential real customers.

Then think through what you need to make this happen from a value-chain perspective: Do you need to manufacture a product? Open a retail location? What suppliers would you need? What are the start-up to do this in the beginning, and and ongoing costs once fully scaled? What would a team or organization look like for this? This is the heart of the financial projections you’ll need to consider.

With all this information, you should be able to now create a revenue model. Think of a small pilot to deploy this, and always build in a lot more time than you think you need to get something out there. In my projections, I usually expect zero revenue for many months, and only expenses. You’ll need to make sure you have at least 6–12 months of expected expenses saved to get going. This is where you might need to consider financial alternatives: self-funded, angel investors, venture capital, or debt (loans).

See how easy it is to get mired down in details? There is a lot to plan. So take it one step at a time!

What are your “5 Things I Wish Someone Told Me When I First Started Leading My Company” and why?

The first thing I wish somebody would have told me was that it just isn’t as fun as you think to be your own boss! You have nobody to blame, or go to for help. Try to find a mentor, or somebody that’s more experienced than you in a similar business or venture. Ask for their help — and take their advice!

Second, I’d say to others don’t sweat all the details too early on. You just get too overwhelmed. At the same time, I wish I would have thought through financial alternatives earlier too. You might reach a point of financial ‘vulnerability’ or even desperation, where you think of don’t have any alternatives. I have found myself taking funding from companies that probably weren’t in the best interest, but I thought I had no other choices at the time. Strategic planning can help you prepare for these times!

I also think I under-estimated the value of a solid team at start-up. Whiel everything starts and stops with you, it’s not just about you anymore. It has to be about finding partners and employees that share your vision and can take it to the next level. When I started up a healthcare information organization, I brought in a few people immediately that could absorb the vision, and create passion and energy. This is essential to the first year of a new venture.

I sometimes wish I wasn’t always so frugal. For instance, now I know that spending money on outside consultants can be useful. I often find myself thinking through things by myself and probably didn’t reach the best option. If I would have spent a little money on an independent management consultant or market research firm, they could have played a more active role in helping me do the research, simulate alternatives, and come up with a better path forward. I strongly recommend the use of a consultant to help go through these steps from idea to implementation.

Lastly, I wish I had thought through this important question a little more closely: “what does success look like”. We get worked up with a few things, such as customer counts, or dollar volumes of sales. Yet, these aren’t the best indicators for most companies. Entrepreneurs often want to create a product and become rich, successful, or well-known — or just create a useful product or service. But articulating that a lot more clearly, with detailed performance indicators and specific goals, could help you gauge success better.

Let’s imagine that a reader reading this interview has an idea for a product that they would like to invent. What are the first few steps that you would recommend that they take?

The very first step is to be able to articulate the vision into a story. Work on refining the message so well that you can literally tell people what it is, what it does, and why they need it without seeing them yawn or turn away. This crafting of a compelling, yet concise, story is what successful entrepreneurs master. Think about your role this way:
  • Messaging. You own the story, the brand, and the vision.
  • Master Planning. The most important choices are yours to make. Develop and maintain a strategy blueprint.
  • Mobilizing. You have to think about your leadership team, resources, partners, and suppliers. These are all vital to early-stage success.
  • Momentum. Focus your energy on maintaining momentum and moving toward your 1, 3, and 5-year goals.
There are many invention development consultants. Would you recommend that a person with a new idea hire such a consultant, or should they try to strike out on their own?

No, not an invention development consultant. But, I would definitely consider using an independent consultant for helping do some of the initial research and providing advice on markets and competitors. You must own the vision the concept, but you can use a consultant to gather the intelligence and the research to create prototypes. Use a consultant to help you with revenue or cost projections. Or, use them to help work on validation and implementation. They can be worth their weight in gold, and allow you bandwidth to focus on what really matters — your message and momentum-building.

What are your thoughts about bootstrapping vs looking for venture capital? What is the best way to decide if you should do either one?

There are some advantages to both. Generally, for most people, I recommend using your own resources for as long as possible. You’ll hold on to more of your “sweat-equity” and future profits. But this can also limit growth considerably. For some types of companies, such as information systems or those requiring significant capital expenditures, it might be necessary to consider outside investors, such as venture capital firms (VC). VC funding can be great and can help the company sustain years of losses since they aren’t always focused on short-term profitability. I’ve gone through multiple rounds of funding, and each time, you lose a little bit more of your ownership. So make sure the growth of the firm outweighs this ownership devaluation. It’s a hard choice to make. In the end, do the one you feel most comfortable with and can sleep best with. If you go the VC route, make sure you do all the due diligence to find the right partner, future board member, and advisor. That relationship is key to your growth and success.

Ok. We are nearly done. Here are our final questions. How have you used your success to make the world a better place?

To me the most important societal areas we have to address with bold ideas are around mental health, homelessness, climate changes, substance use, and immigration. I have tried to create a few programs to address a few of these, but so much more is needed. One really successful project I have created is helping those who are struggling with substance use and mental health disorders, especially opioids. One of these programs, the Houston Emergency Opioid Engagement System (or HEROES) helps provide free integrated treatment and recovery services for people struggling with substance use disorders in Texas. We’ve helped re-build thousands of lives for individuals and their families. As with any initiative, I think it’s important to define a future state that is better than where you are, and do something rather than nothing. We need innovators in these areas, and I applaud the work of people like the Gates Foundation who are using their resources to combat important social issues.

You are an inspiration to a great many people. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger.

As somebody who is highly vested in the technology world, I’d have to controversially say that we need a better way to manage mobile technology has taken over our life. We need some kind of controls over how phones and technology are dominating our brains! We need better mental health interventions that can help reduce loneliness and suicide rates. I think mobile technology is one area which can be improved significantly.

We are very blessed that some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US, with whom you would love to have a private breakfast or lunch, and why? He or she might just see this if we tag them.

Being a big fan of great leaders and brand-builders, I would love to meet Oprah Winfrey. She’s so smart, always well prepared, and seems to know everything! Everything she touches turns to gold it seems, from her magazine, books, films, podcasts, and other business ventures. She is a terrific role model!

Thank you for these fantastic insights. We greatly appreciate the time you spent on this.

Addressing Disparities in Finance for Hispanics and Latinos

By: Vianessa Castaños |

One of the most significant social issues facing Latinos in America is the myriad obstacles preventing them from building a secure financial future. These financial disparities begin with high-interest lending services, insufficient credit history and higher than average student loan debt, among other factors.

The effects of these disparities appear in the demographics of rental and homeownership rates in many areas. While the homeownership rate among Hispanics increased by 47.5% since 2019, many younger Latinos find that their path to homeownership and financial security are hindered by monthly student loan repayments, which in turn prevents many of them from being able to build up their savings. Meanwhile, other more vulnerable members of the Latino community, such as immigrants and non-native English speakers, face challenges with predatory lending practices and unfavorable financing options.

5 Financial Barriers and Solutions

There are a number of obstacles that prevent the Hispanic and Latino community from being able to grow their savings and achieve their financial goals. Learning to save, predatory lending practices and poor or insufficient credit history are just some of the major barriers that prevent the community from reaching financial stability. And when each of these factors compound, many find themselves in a situation where they are unable to invest their money and create generational wealth.

1. Learning How to Save and Make Investments

Many Latino immigrants are unbanked, meaning that they don’t rely on financial institutions to deposit and save money. This practice stems from a lack of distrust in the financial institutions in their home countries, coupled with a lack of financial education in general. It’s also common for individuals to put their funds toward caring for family members or supporting their children through school rather than saving for their own retirement. And while many Latinos are responsible with their finances, they lack money mentors within their communities who can teach them how to properly plan for retirement or provide guidance on making financial investments.


If available, take advantage of your employer-sponsored 401(k) or brokerage account. Also, consider an additional savings vehicle, such as an individual retirement account (IRA), Roth IRA or certificate of deposit (CD), which is a type of low-risk federally insured savings account.

2. Predatory Lending Practices

The Hispanic and Latino community can often have limited access to financial literacy materials, which means the community can be left without the tools necessary to manage finances and build up savings. Limited access to resources coupled with the potential financial implications of maintaining a commercial bank account can push individuals to rely on predatory alternative financial services that may be mortgage scams, which can charge upwards of 400% APR. In 2017, people who relied on alternative financial services such as payday loans, check cashing services and rent-to-own stores ended up spending more than $173 billion in fees and interest charges.


Whenever possible, seek out a commercial banking institution and avoid or limit the use of products that do not actually help you build your credit, such as prepaid credit cards. While you may think that you are banking with an accredited institution, many alternative “banking” entities charge above-average interest rates. They may not carry insurance, thereby putting your investment at risk while at the same time doing nothing to help build your credit-worthiness.

Juntos Avanzamos works with a network of 108 credit unions in 26 states that serve to empower Hispanic and immigrant communities. These credit unions will work with you to open a checking or savings account and establish your credit, even if you don’t have a social security number.

3. Limited Access to Credit and Low Credit Scores

The median FICO credit score for Hispanics was 684 in 2018. Compare that to 742 for non-Hispanic whites and 722 for the overall population. You can get a picture of the discrepancy between each demographic. These lower credit scores can be attributed to limited access to credit-building opportunities as well as limited knowledge and access to information on how to build and maintain a healthy credit score. And because credit-worthiness is taken into account when qualifying for loans and mortgages, aspiring Hispanic homeowners can often find their options for financing a new home limited, or they are unable to secure a conventional home loan or down payment altogether.


The first step to improving your credit score is getting a copy of your credit reports from the three nationwide credit reporting companies — Equifax, Experian and TransUnion. You can easily do this by using an online credit report, like a credit report from Central Source LLC, which grants you access to all three credit reports for free once a year. By knowing your credit score isn’t enough, you’ll also want to understand what that score means, which is where the list of consumer reporting companies from the Consumer Financial Protection Bureau can help. The website offers a broad range of financial education materials in nine languages on topics ranging from how to rebuild your credit to how to get a home loan, all available for free.

4. High Cost of Buying a Home Relative to Income

Because Hispanic populations tend to be more concentrated in high-cost markets, the homes Hispanic and Latinos buy are valued at lower than median market rates. But they are more expensive overall relative to their income level. While the majority of Hispanics finance their homes through traditional methods, they disproportionately have to rely on FHA insured mortgage loans. These loans often end up being costlier and can negatively impact lifetime wealth-building potential. Another instance in which Hispanics and Latinos can find themselves in a high-cost market is due to gentrification. Real estate appreciation can often lead to displacement and sees many families priced out of their own communities. Gentrification drives up housing costs and demand for low wage workers, who then, in turn, cannot afford to buy homes in their very communities.


Down payment assistance programs exist to help homebuyers find loans and grants that can help drive down the cost of your potential down payment. These programs are typically meant for first-time homebuyers, but depending on the program, some exceptions can be made. You can also contact local community organizations in your state to inquire about homebuyer education programs that can teach you what to expect when buying a home — from how to select a mortgage to how to negotiate the selling price.

5. Student Loan Debt

Many Latinos are first-generation college students who are left to navigate higher education costs without much guidance. And while there are options for financial aid for Hispanic students available, 72% of Latino students take on student loan debt in order to attend university. In fact, 12 years after starting college, the median Latino student borrower still owes 83% of their initial loan. This debt affects their ability to save money well into adulthood, which is further compounded when they become delinquent or default on payments.


This financial literacy handbook is a great place to start learning about managing your money and navigating major expenses. Also, check out The Hispanic Center for Financial Excellence — it offers free financial education services and can teach you how to reduce your debt and develop a savings strategy.

Expert Insight on Navigating Financial Constraints

What are your own observations about the financial disparities within the Latino/Hispanic community? Why do you think these disparities exist?
Student loan debt is seen as a major barrier to financial security for many. Can you offer any advice on how to tackle (or avoid) student loans?
What are some tips to start saving and develop a strong relationship with money for Hispanics and Latino?
What are the best ways for Hispanics and Latino to get educated on finances? Are there any specific resources you recommend?

Financial Resources for the Hispanic and Latino Community

There are many resources available to help in your journey to financial success. From debt management programs to scholarships and mortgage financing assistance, these organizations and programs can help you get ahead.

Financial Services and Programs

Latino Educational Fund: LEF’s financial literacy courses provide Latinos with the knowledge they need to make informed decisions about their futures and their families’ futures related to banking, credit, bankruptcy and mortgage lending.
Fuente Credito: Fuente Credito, a small-dollar credit pilot program coordinated by UnidosUS, facilitates access to affordable loans. It offers an online credit application designed to provide fast and personalized options for immigrants who need assistance in financing immigration fees related to Deferred Action for Childhood Arrivals (DACA), citizenship or other legal services.
FDIC Money Smart: Money Smart offers a Spanish-language financial education program to help individuals improve their financial health.
Free Financial Literacy Course: This six- to 10-hour course from Alison concentrates on the basics of personal finance. From budgeting and saving to debt management and retirement planning, this class aims to improve your overall financial literacy to ensure you can manage your today and plan for tomorrow.

Technical Tools, Apps and Assistance

Mortgage Calculator: MoneyGeek’s simple and free mortgage calculator helps you estimate your monthly mortgage payment with the principal and interest components, property taxes, homeowner’s insurance and HOA fees. Once you input the numbers, you’ll see a detailed mortgage payment schedule.
Mission Asset Fund: MAF offers loans to help individuals cover their immigration expenses; part of the process includes a financial education course. You can download their app to track your progress, review your loan and track your payment history and credit score.
Mint: Mint is a budget tracker and planner that helps you easily manage your finances. One feature that makes this app so appealing is that it allows you to track your credit score for free.

Professional Organizations

Association of Latino Professionals in Finance and Accounting (ALPFA): The ALPFA provides professional development and career-building opportunities for Latinos. They partner with several educational institutions to help educate Latino leaders in finance.
Hispanic Heritage Foundation: The White House founded the Hispanic Heritage Foundation in 1987. It offers a series of free podcasts and videos focused on money management, debt management and wealth mindset, along with programs to promote leadership and education within the Hispanic community.
Congressional Hispanic Caucus Institute (CHCI): CHCI provides leadership, public service and policy experiences to Latino students and young professionals.
American Society of Hispanic Economists: This professional association of economists is focused on addressing the under-representation of Hispanic Americans in the economics profession. Its work centers on researching policy and economic issues affecting Hispanics in the U.S.
National Organization for Hispanic Real Estate Professionals (NAHREP): The NAHREP work to champion homeownership in the Hispanic community. They are advisers and advocates who are available to help Hispanic families create generational wealth.
United States Hispanic Chamber of Commerce (USHCC): The USHCC promotes the economic growth and development of Hispanic businesses. It provides support to small and minority-owned businesses.
The Hispanic Institute: The Hispanic Institute manages several ongoing projects, including the study of Hispanic economic contributions, media monitoring, consumer fraud protection, citizenship education and technology and telecommunication research.
New America Alliance: This organization of American Latino business leaders promotes the Latino community's economic advancement, focusing on economic and political empowerment and public advocacy to improve the quality of life in the United States.

Advocacy Organizations

UnidosUS: Formerly known as NCLR, Unidos serves the Latino community through nearly 300 affiliates throughout the country. It provides advocacy in civic engagement, civil rights and immigration, education, workforce and the economy, health and housing.
Mission of the League of United Latin American Citizens (LULAC): LULAC is to advance the economic condition, educational attainment, political influence, housing, health and civil rights of the Hispanic population of the United States.
Hispanic Federation (HF): Established in 1990, HF is a nonprofit organization to support the Hispanic community, families and institutions. Its work includes education, health, immigration, civic engagement, finances and the environment. HF offers advocacy services, community assistance programs and capacity-building opportunities.

Community Support Groups

Healthy Hispanic Living (HHL): HHL fosters wellness and quality of life for Hispanics by focusing on all aspects of health — physical, mental, financial and societal. It works to include issues and concerns the community faces from a cultural perspective.
Arte Sana (Art Heals): Arte Sana is a nonprofit organization dedicated to eliminating sexual and gender-based violence. It offers cyber advocacy and survivor activism, prevention and survivor empowerment through art, and training courses on sexual assault in Spanish and English.
National Compadres Network: The National Compadres Network is an organization that works to decrease issues such as domestic violence and child abuse, substance use, gang violence, racial inequity, teen pregnancy and issues around heterosexism. Its goal is to enhance and re-root individuals, families and communities by honoring, rebalancing and redeveloping their traditions, values, practices and identities.

Housing Resources

U.S. Dept. of Housing and Urban Development (HUD): HUD offers housing counseling to help consumers make informed housing decisions. HUD works with organizations, such as UnidosUS, in developing and supporting Latino homeownership programs in various states across the country.
Homeownership Assistance Programs: MoneyGeek’s very own guide to help you better understand the homeownership process. Here, you can find information on grants, loans and home purchasing programs.
Federal Housing Administration (FHA) Loan Requirements: This MoneyGeek guide provides educational resources to educate home buyers about FHA, VA and USDA government-insured mortgage loans.

Scholarships and Financial Aid

Scholarships for Hispanic Students: MoneyGeek offers a full, comprehensive guide to finding scholarships and resources for Hispanic students.
Hispanic Association of Colleges and Universities (HACU): HACU is an advocate for Hispanics in higher education and offers a number of resources, including a scholarship resource list.
TheDream.US: This is the largest college access program for DACA recipients and undocumented students. They offer scholarships to those who do not qualify for federal financial aid or in-state tuition due to their residency status.
FAFSA: The Free Application for Student Financial Aid (FAFSA) is a U.S. Department of Education service for applying for federal financial aid for students.

Health Resources

Medicare Advantage’s Latino Health Resource Guide: Medicare Advantage compiled this resource guide for Latinos and Hispanics to find health care providers by state and categories, such as dental, senior care and caregiving, substance abuse and mental health. This guide is available in Spanish and English.

About the Author

Vianessa Castanos formerly worked as a scriptwriter and producer for personal finance adviser Ramit Sethi of I Will Teach You to be Rich. She is also a culture & lifestyle writer who specializes in issues pertaining to the Latinx community in the U.S. and abroad.

Monday, September 5, 2022

How can CFOs rebrand themselves as innovation allies?

Written by: By Ankur Agrawal, Matt Banholzer, Eric Kutcher, and Scott Schwaitzberg

They can take five actions to improve objective-setting, performance measurement, and cultural factors associated with successful innovation projects.

CFOs continue to have an innovation problem—or, rather, teams in their organizations think they do. Research shows that many business unit leaders view the CFO and the finance team as obstacles, not allies, to the innovation process.

That perception isn’t the reality, of course—but it’s easy to see why it exists.

Boards, CEOs, and others on the senior-management team rely on the CFO to be an independent arbiter and guardian against overoptimism—or conservatism—in annual planning and budgeting discussions and in performance management meetings. During these conversations, CFOs must help the rest of the senior-management team assess proposals from business unit leaders. CFOs must also quantify the potential value from those proposals while accounting for the inevitable financial and strategic uncertainties associated with new products or services or with process or systems changes.

To become true collaborators and allies for innovation—not just seen as authority figures holding the purse strings—CFOs need to change their colleagues’ (and in some cases their own) perceptions of their role in innovation. In our experience, a CFO can take five actions to flip the script: formally build innovation goals into the company’s plans for growth, discover and validate untested assumptions about an innovation project, speed up the standard budgeting process, establish metrics specific to innovation projects, and upskill finance teams and empower them to help lead changes in the company’s culture.

Making changes in these areas will take time and a commitment to developing an innovation mindset. But CFOs who make the effort may end up working more effectively with project teams and advancing corporate innovation in a way that dovetails with the company’s overall strategic aspirations and promotes growth and resilience.

How the CFO can better support innovation

At base, the innovation process is about allocating resources toward initiatives that create value for a company and, ideally, change an industry. To innovate successfully, companies must identify the most promising projects and set clear goals for realizing them, regularly measure progress in reaching those goals, and change hearts and minds—internally and externally. The CFO can promote success by focusing on the following five steps associated with objective-setting, metrics, and culture change.

The innovation process is about allocating resources toward initiatives that create value for a company and, ideally, change an industry.

1. Build innovation goals into the company’s plans for growth

The first step for a CFO looking to serve as an innovation ally is to formally build innovation goals into the company’s plans for growth. Where and how does the company expect to find growth, and what role should innovation play in securing it? With input from the CEO and other members of the senior-management team, the CFO can help answer those questions and devise objectives that compel teams to move beyond the status quo and explore new ideas, not just incremental process improvements. At one global insurance company, for instance, business unit leaders felt that they could hit their performance targets by tweaking existing operations rather than exploring larger initiatives. In effect, they felt they didn’t need to innovate to meet the company’s growth goals. Despite interventions from the top team, innovation languished for years.

To counter that thinking, the CFO could have established a “green box”—an effort to quantify how much growth in revenue or earnings a company’s innovations must provide in a given time frame. With this information in hand, the CFO and other senior leaders could have established new innovation-centered objectives for the business units—objectives focused on closing the gap between their current performance and capabilities and the company’s overarching growth aspirations. In this way, the CFO and the rest of the top team would also have communicated the fact that innovation was a priority for the finance function and the company as a whole.

2. Discover and validate untested assumptions about an innovation project

The CFO must acknowledge that standard planning and budgeting processes may not be suited to innovation. In most companies, business unit leaders present preapproved business cases to the CFO, and the two sides engage in back-and-forth about whether the proposal merits investment. In all likelihood, many of the assumptions underpinning the idea have already been tested—indeed, they are implicitly embedded in the company’s current business models. The decision to set a certain price for a product, for instance, often results from tested assumptions about, say, the customers’ willingness to pay for other products the company has launched or the perceived value from those products.

Innovation ideas, by contrast, are often built atop what may be untested assumptions. For instance, it’s very possible that the targeted customers won’t be willing to spend a significant amount of money on an unfamiliar product or a product with a different level of functionality. What, then, is the right approach to pricing?

The CFO and other leaders will need to discover and validate the untested assumptions associated with innovative ideas. The finance leader could start by asking business unit leaders how big an opportunity must be to justify moving forward. What are the most important assumptions we need to test? How can the finance function help business unit leaders get the data they need to prove the case and turn a good idea into a better one? To gain greater clarity about straightforward assumptions, CFOs may ask business unit leaders for literature scans, surveys, or other forms of research to bolster confidence in an investment decision. To gain greater clarity about trickier assumptions, they may ask for real-world information, such as data on experiments with minimally viable products, mock products, beta launches, or early partnerships.

For the CFO and finance team, the focus here should not be on costs but rather on creating a mechanism to explore the most promising ideas. They should, for instance, avoid using a hurdle rate that might
encourage teams to engineer their numbers. Instead, they should surface and challenge the business unit leaders’ assumptions and use them as the basis for important finance discussions.

3. Speed up the standard budget process

There is often a lag between budget and innovation cycles. A business unit might get approval for funding a project only to find, nine months into the annual budget cycle, that changes in technology or the market mean that more or different resources are needed. Innovation happens day to day and month to month—not once a year.

To be an innovation ally, the CFO must work with the rest of the senior-management team and the business units to change the pace and intensity of (and the dialogue around) resource decisions. For instance, the top leaders can institute monthly and quarterly reviews—or even more frequent discussions—as a catalyst for adjusting resources. Some businesses have even instituted stage-gate discussions for investments in new products, services, and other innovations. A business unit may receive a minimum spending base that covers costs associated with a product’s first iteration. Additional funding would be contingent on increases in, say, demand or delivery rates. The business unit would have to meet predetermined thresholds set jointly by it and the finance team.

This stage-gate approach can help clarify expectations, enable the business unit to change course if needed, and ensure that resources are allocated continually rather than cyclically. It can also help strengthen a company’s innovation pipeline: many innovations fail, so it is important for CFOs to take stock of projects frequently—and to help shift resources to the most promising initiatives and end unsuccessful ones.

4. Establish metrics specific to innovation projects

A big source of tension between CFOs and business unit leaders is how to report and measure the performance of new initiatives. In proposing them, business unit leaders often build multiyear revenue projections too precise for the context. In other words, they don’t account for the inevitable changes, in business drivers and assumptions, that occur when new products are launched. In the first year, customers may flock to a shiny new product—which would imply success—but what happens when demand drops off or attention shifts to a fast-following product?

To get past this disconnect, CFOs and business units can jointly establish metrics specific to innovation projects. These would include traditional business metrics, like the internal rate of return (IRR), net present value (NPV), and ROI. But they could also incorporate nontraditional metrics, such as customer loyalty or environmental, social, and governance (ESG) scores and the ranges of performance appropriate for certain types of projects or portfolios of projects. In addition, the CFO and the finance team can identify and use metrics that quantify the biggest sources of uncertainty from an innovation, the pace and efficiency of the innovation team’s learning process, and the opportunity timeline, among other factors.

Equally important, CFOs and business unit leaders must engage in an ongoing dialogue about how innovation projects are faring rather than conduct only periodic reviews or focus only on struggling projects. As noted earlier, it’s important to understand when and how to cut the cord on underperforming innovation projects—but it’s just as critical to understand when and how to scale up the successes.

5. Upskill and empower the finance team

In our experience, members of the finance team who have spent time in business units tend to understand the uncertainties of and become better advocates for innovation. For this reason, the CFO may want to facilitate employee rotations that can give members of the finance team greater exposure to the business units and the day-to-day decisions facing their leaders and innovation teams. In this way, members of the finance team can build important relationships and better understand the assumptions underpinning innovation projects. The rotation program can also be an important professional-development tool for the company. At a large consumer company, such a rotation was the stepping-stone for a financial-planning and analysis (FP&A) analyst who participated in and then led an innovation project that eventually turned into a new product line with a multimillion-dollar P&L.

Most important, the CFO should empower members of the finance team so that they receive ideas in the early stages. The CFO can have only a limited impact with a set of already polished financial plans. The potential for successful innovation is far greater if the CFO receives draft plans with the assumptions clearly articulated—and that won’t happen by accident.

CFOs need to make it safe to innovate. The CFO can help to maintain a nonjudgmental tone in innovation-related conversations. Rather than flatly asking business unit leaders, “How did you come up with this number?,” the CFO can reframe the question as a point of appreciative inquiry: “I see this assumes we can convert 10 percent of customers. I wonder how we might be able to validate the take rate?”

CFOs need to make innovation fun. One company used a competition-style format to source new ideas. The CFO asked teams to come to the leadership with product, service, or process ideas and make the case for funding. The company gave bonuses and recognition to teams that made submissions. That created excitement, which encouraged people who may have hesitated to push ideas through the application process to do so in hopes of getting selected to present them to the C-suite.

CFOs need to make innovation easy. Another company has built lots of reversible decisions—or “two-way doors”—into the innovation process, so that it is easier for teams to test and learn from new initiatives. These two-way doors can mean fewer sunk costs for innovation teams, faster go or no-go decisions, and, ideally, faster times to market.

The long-standing perception of CFOs as obstacles to innovation is stale—and mostly incorrect. CFOs who perpetuate the old mindsets and processes associated with innovation initiatives may put their organizations’ long-term health and viability at risk. But those who work to become innovation allies stand to boost value creation substantially and to improve both the company culture and the bottom line.

5 Things to Consider Before Becoming a Business Application Freelancer/Independent Consultant

According to a study by McKinsey & Company, 36% of the American workforce participates in the freelance market. This can include the Uber drivers, tutors, and other side hustle. A big portion of the percentage are full-timers. I know from my experience, in the business application space there is a good number of independent/freelancers working implementation projects. If you are thinking about becoming one of these individuals, I have put together a list of 5 things to consider:

1. Your Subject Matter Expertise
- I've connected with a lot of freelance and independents over the last couple of years. I think every business application has its share of independent consultants. For the area you consult or implement in (SCM, HR, Finance, Manufacturing, CRM, BI, etc.) are you experienced or seasoned enough to know the difficult portions? Would you be able to get through a challenging scenario without connecting with a teammate? Make sure you understand your knowledge area, so you can present yourself and your skills appropriately. Stretch assignments are good to take… heck, you know if you were working for a consulting company, they would put you into that position. Think about your industry knowledge as well. If you go into a new industry, would you be able to perform at a high-quality level?

2. The Finances – Do you have savings to get you through the initial phase and the non-project phases? You should have at least 6 months of living expenses ready to go. If you have more than 6 months, you are in good shape. Keep in mind, you might need to fund yourself for the first month while on an engagement. Since this is a contract, you will be sending your invoices to another company. Their payment policy might be a factor. You may need to wait 30 to 45 days after you send the invoice before you see actual income. If you need to travel, you will need to have a credit card with a large available balance as well. This will be another aspect of sending your specific client an invoice to be reimbursed for travel expenses. Plan for your financial situation.

3. Organizational Discipline – You are your boss working for your client. You will need to be very organized with your work and your administrative tasks. You'll need to keep good notes and time tracking. Your time will convert to your invoicing, and it will need to be done in a timely manner (as well as your travel expenses). Additionally, you will be wearing many hats. You will need to be good at sales, contracts, marketing, finance, and of course your delivery activities. You'll need to have good organizational skills.

4. Your Mindset – If you have been an employee your entire career then you are going to need to change your mindset from being an employee to a business owner. Business owners have an ability to have a vision of what they are working towards so when times get tough, they can make something happen to keep the business and themselves going. Do not take this mind shift lightly. Being a business owner is completely different than being an employee. Prepare your mental game for a tough and unknown battle.

5. A Support Community – As an independent consultant, you are on your own team. There will be many days that you feel like you are by yourself, and you'll need to get through these times. This goes along the lines of having a good mindset. A support community can help you work through different situations, can allow you to vent when you need vent, and can encourage you to keep going when you need that too. Your support community can include other freelancers or independents, trusted friends, a spouse, or a mentor/coach.

There are other areas to consider when making the jump. For example, what rate do you charge, do you start as a subcontractor, or can you go straight to the end-user. Do you need official contracts, an attorney, do you need a CPA, and business insurance? These are a few topics to consider. Before you make the leap, do some deep thinking, check with others, and develop a solid action plan.
Next level!

Do you know your next level? Did you know most businesses run on a 3-to-5-year business plan? In some cases, longer strategy plans are put together. What I find interesting is that when I was interviewing to bring new team members on my team, I would ask what their short-term and long-term goals were. Many would struggle with these questions. The short-term goals were usually to get the next new job. I always thought that was a shallow answer. Rare did I come across someone who could articulate where they wanted to be in 3 to 5 years. I wondered why this person would take this job, if they did not know if it would add value to their long-term plan. Do you know where you want to go with your career or are you letting the winds of life and the demands of your job bounce you around?

Friday, September 2, 2022

Testimonial Martha Lopez, Pairfect Guide


10 Licencias y permisos para abrir un negocio en USA

Si quieres emprender en uno de los países más desarrollados del mundo necesitas conocer las licencias y permisos para abrir un negocio en Estados Unidos.

Los extranjeros tienen la posibilidad y oportunidad de registrar empresas en este país norteamericano, y de hecho, este es un trámite que pueden hacer desde su propio país de origen.

Básicamente, puedes registrar una compañía en suelo estadounidense desde Colombia, México, España, Argentina, o cualquier rincón del mundo, sin enfrentarte a grandes trabas burocráticas.

Define la estructura del negocio con antelación

Muchos empresarios consideran que el secreto para impulsar negocios rentables radica en desarrollar productos o servicios novedosos.

Pero lo cierto es que para triunfar deben tener en mente otros factores de peso. Y allí es donde entra en juego la estructura del negocio.

Uno de los primeros pasos que debes dar es identificar el tipo de empresa o negocio que deseas emprender en suelo estadounidense.

En la actualidad, las dos estructuras corporativas más populares en Estados Unidos son las Sociedades de Responsabilidad Limitada (LLC), por sus siglas en inglés, y las Corporaciones C.

Por si no lo sabes, el tipo de estructura que escojas tendrá una incidencia directa en la gestión de tu negocio y en el pago de los impuestos.

Aunque las LLC tienen muchas ventajas, la gran mayoría de los empresarios extranjeros prefiere registrar una Corporación C.

Esto se debe a que este tipo de corporaciones son más flexibles y seguras para los inversionistas externos, puesto que les permite captar capital con mayor facilidad.

Aunque las LLC también son muy amigables con los extranjeros, ya que a través de ellas pueden evitar la doble imposición tributaria.
¿Cuál es el tipo de empresa ideal en USA?

Si te preguntas cuál te conviene más, ponle atención a esta información: si eres extranjero y quieres iniciar un negocio en Estados Unidos que te permita atraer capital con rapidez, entonces una Corporación C sería idónea.

Pero si ya tienes una empresa exitosa en tu mercado local, y tu siguiente paso consiste en escalarla en Estados Unidos, es probable que una LLC te caiga como anillo al dedo.

Las licencias y permisos para abrir un negocio en Estados Unidos, bajo la estructura de una LLC, son más sencillos y flexibles, lo cual le aporta un gran atractivo.
Licencias y permisos para abrir un negocio en Estados Unidos

Ahora bien, todo emprendedor o empresario que desee abrirse paso en el mercado norteamericano necesita conocer las licencias y permisos para abrir un negocio en Estados Unidos.

De lo contrario, podría poner en riesgo su inversión de dineroy destinar su empresa o emprendimiento al fracaso.

En Estados Unidos todas las empresas necesitan tramitar al menos una licencia. Y lo cierto es que este tema es un poco complejo, ya que los permisos varían entre un estado y otro.

En efecto, los empresarios están obligados, legalmente, a tramitar licencias y permisos para abrir un negocio en Estados Unidos en función de:

  • Tipo de industria
  • Sector económico
  • Estado o lugar de residenci
Estas son las principales licencias y permisos para abrir un negocio en Estados Unidos que deberás tramitar para mantener todo en orden (a escala tributaria y legal):
1. Licencia comercial general

Esta licencia demuestra que una empresa, marca, o negocio, posee el permiso necesario para dedicarse a una determinada actividad en una zona geográfica específica.

De ella derivan muchas licencias particulares, como sería el caso de la licencia operativa. Esta certifica que el negocio cumple con las normas de seguridad y prevención contra incendios y accidentes.

Para saber cuál es la licencia que debes tramitar necesitas investigar las regulaciones nacionales, estatales y locales.

Además, si existe una comisión, asociación o junta encargada de regular tu industria en el área donde decidas operar tu negocio, también deberás tramitar una certificación a través de ellas.

En caso de que quieras dedicarte a algunas actividades comerciales puntuales, deberás tramitar una licencia federal a través de la Small Business Administration (SBA).

Este sería el caso de la aviación, pesca, energía nuclear, vida silvestre, bebidas alcohólicas, armas de fuego, transporte marítimo y muchas más.

Por ejemplo, el costo de una licencia para vender licores en el estado de Nueva York es de $960 dólares aproximadamente.

Sin embargo, si deseas operar un restaurante y vender tus propias cervezas, el costo de la licencia ascendería a $5.580 dólares.

Costo de una licencia comercial:

El precio de una licencia comercial no es genérico, puesto que existen distintos tipos. Pero en líneas generales el monto mínimo a pagar son $50 dólares.

Dicho precio se divide en la tarifa de procesamiento y en el costo de la licencia en sí mismo, (y dependiendo del estado podría costarte cientos de dólares).

Por ejemplo, en New Jersey la licencia para una guardería infantil cuesta entre $110 y $250 dólares (en función de sus dimensiones o tamaño).

Mientras que en Alaska una licencia comercial con vigencia de dos años puede costarte $50 dólares.
2. Licencia de hacer negocios

Con este trámite realizas el registro del nombre comercial de tu negocio.
Debes solicitarla si tienes pensado realizar negocios con un identificativo distinto al nombre legal de tu compañía.

El fin de esto suele ser eminentemente publicitario, y en el mercado existen muchos ejemplos de éxito, como sería el caso de McDonald’s y muchas otras franquicias en Estados Unidos.

El costo de presentación de esta licencia en Nueva York es de $33 dólares para una propiedad y de $34 dólares para una sociedad.
3. Licencias estatales especiales

Estas dependerán del tipo de actividad que realizará tu negocio.
En términos generales sirven para demostrarle a las autoridades competentes, y también a los consumidores, que tu empresa respeta los estándares legales y de seguridad establecidos en la norma.

4. Licencia profesional

Es una certificación que avala a los profesionales a desarrollar actividades vinculadas a su actividad o campo de estudio.

Si eres contador, abogado, o agente inmobiliario, y deseas gestionar una empresa en Estados Unidos, deberás tramitar una licencia ocupacional en el estado donde residas.

Por ejemplo, si eres un agente de bienes raíces deberás invertir entre $600 y $1.500 dólares para solicitar tu licencia profesional en el estado de Texas.

Pero si resides en California, esta misma licencia profesional podría costarte entre $515 y $880 dólares. Por su parte, los costos en Florida oscilan entre $400 y $600 dólares.

5. Permiso del Departamento de Bomberos

La mayoría de los negocios deben solicitar el permiso del Departamento de Bomberos. Este avala que un local está acondicionado correctamente para un determinado aforo.

A su vez, certifica que existen suficientes salidas de emergencia y que cuenta con equipos de prevención de incendios.
6. Permiso de negocios domésticos

Si quieres ganar dinero desde casa a través de tu propio negocio deberás tramitar un permiso de negocios domésticos.

Lo ideal es que te asesores con un experto, porque tu empresa podría necesitar otros permisos especiales, dependiendo de la actividad del negocio, o del sector y condado en el que cumplirá operaciones.

7. Permiso de edificación

Si tu plan consiste en comprar un local, para luego remodelarlo, deberás pedir un permiso de edificación o construcción ante las autoridades locales.

Estos organismos verificarán si la obra que planeas llevar a cabo se apega a las regulaciones vigentes o no.

Si todo está en orden, es decir, si los trabajos no ponen en riesgo su estructura, recibirás tu respectivo permiso.

El costo de este permiso estará supeditado al tipo de proyecto que deseas ejecutar. En promedio oscila entre $400 y $2.000 dólares (dependiendo del estado).

Aunque en los condados de menor afluencia el costo puede ser más bajo (a diferencia de las grandes ciudades).

En efecto, en ciudades como Nueva York, o Chicago, puedes pagar hasta $10.000 dólares por un permiso de edificación.

8. Permiso de impuestos sobre las ventas

Deberás pedir este permiso si has decidido vender productos en una tienda en línea, o en un local físico.

En ambos casos deberás recaudar el Impuesto Sobre las Ventas, y por ende, deberás contar con el permiso pertinente.

No obstante, debes tener presente que este impuesto no es aplicable en todos los estados del país. (De modo que deberás averiguar si es obligatorio en tu lugar de residencia o no).

En Florida este permiso es gratuito (si lo pides en línea). Pero si decides solicitarlo por correo postal tendrías que pagar $5 dólares.

Los únicos estados que no tienen Impuesto Sobre las Ventas en el territorio estadounidense son:

9. Permisos sanitarios

Las licencias y permisos para abrir un negocio en Estados Unidos relacionadas con sanidad son muy importantes.

Por ejemplo, si se trata de un restaurante, de un food truck, de un salón de belleza, o un spa, es necesario que tramites un permiso sanitario local con anticipación.

Y no solo eso, también debes asegurarte de que los organismos competentes realicen una inspección anual para corroborar si sigue siendo higiénico.

En el estado de Florida el costo mínimo de un permiso para vender comida en un food truck es de $50 dólares.

Mientras que en Texas el costo de un permiso sanitario está supeditado a las ventas brutas anuales.

Por ejemplo, si las ventas brutas de tu pequeña empresa en Estados Unidos son iguales a $50.000 dólares, el permiso sanitario te costaría $258 dólares.

No obstante, si gestionas un restaurante en este estado, el costo podría ser mayor a $700 dólares (considerando que la mayoría de los que ofrecen un servicio completo generan más de $150.000 dólares en ventas brutas anuales).

10. Requisitos para pedir una licencia comercial en USA

Según un reporte de Forbes, estos son los requisitos básicos para solicitar una licencia comercial en los Estados Unidos:

Establece la estructura comercial de tu negocio:

¿Se tratará de una LLC?, ¿de una Corporación C?, ¿de un Propietario Único?, ¿o de una Sociedad Limitada?

El primer paso que debes dar antes de solicitar licencias y permisos para abrir un negocio en Estados Unidos es establecer su estructura comercial.

Solicita un Número de Identificación Fiscal de Empleador:

Cada estado tiene sus propias políticas, normativas y regulaciones respecto al procesamiento de las licencias comerciales.

Por lo tanto, dependiendo de tu estado es posible que debas incluir este número de identificación fiscal y federal en tu solicitud.
Identifica el tipo de licencia que necesitas:

Al principio te dijimos que existen distintos tipos de licencias comerciales, ya que cada entidad es independiente.

Por ende, para saber cuál deberás tramitar en tu estado deberás consultar los requisitos estatales, federales y locales del tipo de negocio que tienes pensado administrar.

Te recomendamos visitar la Oficina del Secretario de Estado, de tu estado, o el Departamento de Ingresos, para consultar información actualizada y confiable.

Asimismo, es muy aconsejables que contactes a un abogado de negocios con experiencia para que te ayude a realizar todo el papeleo con éxito.
Solicita y renueva tu licencia:

Una vez que sepas cuáles son las licencias y permisos para abrir un negocio en Estados Unidos que le compiten a tu propia empresa, procede a formalizar sus solicitudes.

Finalmente, asegúrate de pagar las renovaciones que correspondan para evitar problemas legales, fiscales o tributarios.

Por lo general, las renovaciones deben pagarse cada año, o cada cinco años. En todo caso deberías asesorarte con tu abogado de confianza.
Opera tu propio negocio en USA:

Acabamos de compartirte las licencias y permisos para abrir un negocio en Estados Unidos que deberás tramitar si quieres dar este paso tan importante.

Pero debes recordar que estos varían entre un estado y otro. Por ende, deberás consultar información local y estatal para que no cometas errores o pierdas dinero.

Emprender, o gestionar tu propia empresa en suelo estadounidense, podría mejorar tu calidad de vida dramáticamente, a la par de acercarte a tu independencia financiera.