5 Unexpected Life Changes You Might Experience When Starting a Business

Source: https://tinyurl.com/35u9z3ze

BY IVAN POPOV • APR 17, 2023

Running a business sometimes has an unpredictable effect on our lives — but the more we are aware of all the possible takeaways, the easier it would be to overcome each obstacle along the way.

Opinions expressed by Entrepreneur contributors are their own.

Starting a business is a goal many people pursue at some point in their lives. Once we see the potential in us and grow to believe in our expertise, we begin considering what would it be for us to start fresh and become our own boss. As intriguing and exciting as it may sound, sometimes business ownership arrives with unexpected life changes we haven't seen coming.

Oftentimes I've spoken about what we need to be prepared for business-wise — things like saving up for initial investments, finding the perfect business niche and learning how to spot great employees are just the tip of the iceberg when it comes to fully submerging ourselves in the world of entrepreneurship. With time, we usually learn how to adapt and overcome obstacles along the way that are strictly work-related, but what about the certain amount of change we'd be witnessing during our outside-of-office hours?

Truth be told, it would be rather naïve on our part to believe that such a huge event like starting a business won't affect our personal and social life in any way. That's why I've decided to shed some light on five unexpected life changes you might witness once becoming a business owner. It's better to be prepared and informed instead of being taken off guard.

1. Your professional and personal lives will inevitably mix

Right at the beginning of my CEO journey, I assumed the biggest hardships I'm about to witness would revolve around the establishment of my company. Details like building a portfolio, finding the best employees and getting our work out there took a considerable amount of my time, and yet I knew quite well this is what the road ahead is supposed to look like. As busy as it got, I was somewhat prepared — after all, the majority of aspiring entrepreneurs have a good understanding of how their professional life is about to change once they step into the world of business ownership.

But here's the thing — our professional and personal lives are so intertwined that is almost impossible for one not to affect the other.

Feeling constantly overwhelmed, the long working hours, the overall work-related pressure and stress and monitoring how's your business going on weekends are simply a small part of all business-related consequences that might affect our outside-of-office hours. Naturally, we'd feel pressured by time and deadlines and this could cause disruptions in the way we choose/can to spend our free time. What's more, all those predispositions may lead to somewhat unexpected changes in our lives that we couldn't see coming and may bring discomfort and struggle in the area.

2. You may notice your social circle shrinking

As disturbing as it may sound, many entrepreneurs (especially right at the beginning of their career journey) share that their friends appear to be drifting away from them once they launched their gigs.

There could be numerous reasons for this: For instance, people from your social circle might feel neglected or as if you've chosen work over spending quality time with them. Another possible, yet bitter option, is that they might start witnessing their lack of development as now you're skyrocketing your own business.

Whatever the reason is, your social circle shrinking is a plausible outcome of your entrepreneurial goals — and it's better for you to be prepared, just in case. Honest and open conversations about how each person feels usually help get rid of the issues and misunderstandings and you can all salvage the relationship.

3. New people may come into your life and stay for good

Usually, when people opt for business establishments, they need to communicate with fellow entrepreneurs, clients, prospective investors, etc. The more you put yourself out there and attend networking events, the higher the chance is for you to widen your social circle and let newcomers appear. More often than not, relationships built on mutual business interests tend to last for long as people share experience and expertise, while also providing support and guidance.

4. You might find it extra hard to keep a balance between work and personal life

When we are employed, we usually treasure our time off from work and look forward to it, but things change when we lead our own business. You might find it hard to juggle between opening your laptop and checking that minor detail on a Sunday afternoon even though it could wait until Monday, especially at the beginning.

In the long-term, this lack of balance and fruitful relaxation time could have a tremendous effect on your mental health as you'd find yourself always being at work subconsciously. So it's important to set certain standards for yourself when it comes to taking some time off and enjoying life outside of the office.

5. You might experience a change of heart when it comes to your career

Some people find out business ownership is not as enjoyable as they thought it was and prefer getting back to being employed. Others might enjoy running an enterprise in general, but realize their desired niche is not the one they primarily chose. All those instances, even though troublesome at first, are a good thing — it's the ultimate path toward self-discovery and paving one's way to a successful career that aligns with who they are.


Of course, all those are assumptions — as often as they may appear, some entrepreneurs never face obstacles and difficulties of this sort. It doesn't hurt to be prepared though — owning a business isn't merely about running some numbers and never expecting anything to be different. At the end of the day, change helps us grow.

Ivan Popov

ENTREPRENEUR LEADERSHIP NETWORK CONTRIBUTOR

CEO and Tech Lead of Vipe Studio
Ivan Popov serves as the CEO of Vipe Studio, which establishes and maintains WordPress-based websites for enterprises and SMEs. He is always curious about technology, web and software development, WordPress, sports, journalism, leadership, entrepreneurship and all things mental health.

9 Time Management Tips That Will Boost Your Productivity

Source: https://tinyurl.com/2cp9re8c
By Athalia Monae

Here are nine tips for improving your productivity through effective time management.


Time is of the essence when starting and running a business. It doesn't matter what stage you're at. Making the most efficient use of your time would be very wise. Working smarter, not harder, should be the goal. That takes discipline, patience and planning. On my journey, there were times when I had the motivation but wasn't sure what my next move should be. I'm very organized and find that I function better when things are in place and when I know what I'm doing and where I'm going. The benefits of good time management include greater productivity, less stress and more opportunities to do the things that matter. Utilizing the following tips will help boost your productivity:

1. Set clear goals

When creating a plan for your business, setting a timeline and setting goals are two of the things you want to consider. Setting timelines keeps me on my toes. While setting a timeline gives you an idea of how long it'll take you, setting your goals allows you to focus your energy on the things you want to achieve. Also, think about your long-term and short-term goals.

2. Prioritize

One of the best ways to stay focused on accomplishing your goals is by prioritizing. Knowing how to prioritize work affects the time you spend on tasks and your overall success. Start by creating a to-do list of tasks that need to get done. Make sure to order tasks by effort and begin planning your time accordingly. Creating a list will help you visualize your goals and determine what is most relevant, as well as what is most urgent. You can't go wrong with a to-do list.
3. Create a routine

The more you stick to your routine, the easier it gets. Whether you work better in the morning or late at night, plan your tasks in a way that you know you will be most productive, and keep it the same. I work better at night. There have been many times I pulled an all-nighter and felt like I moved mountains in that time. Your body naturally responds to repetitive behavior.
4. Avoid distractions

Honor the time that you've dedicated to working on that project, and avoid distractions — no television, social media or text messaging during that time. If you're working in a public space, find a quiet area. Some people like to work in silence, while others might like soft music. Whatever the case may be, commit to that time.

5. Practice the four Ds

Do, Defer (Delay), Delegate and Delete

Placing a task or project into one of these categories helps you manage your limited time more effectively and stay focused on what matters most to you. For anyone who's never utilized this: After you do it for the first time, you might get hooked.
6. Don't multitask

I had a habit of multitasking, which was productive, but since I started multitasking much less, I see how much more productive I've been. Instead of dividing your attention into three different things, it's better to focus entirely on one thing at a time. To make it more effective, try timeboxing them. That means allocating a time frame for every task which, as a result, increases the likelihood of its successful completion.

7. Sleep

Studies have shown that when we have good sleeping habits, we are healthier, more productive and less stressed. Sleep is a detrimental factor that could affect many things both positively and negatively. When we get a good night's rest, not only do we feel fresh and rejuvenated, but it also contributes to a healthy lifestyle. On the contrary, when we don't get enough sleep, we may also be increasing health problems, such as diabetes, obstructive sleep apnea, obesity and more.

8. Don't feel bad about failing

A lot of people fear failure — it's human nature. But spending time stressing about failing is taking time from you being productive. Just try to jump in, and conquer those fears. In my personal experience, failing wasn't necessarily a bad thing. I learned from those failures. I built on those failures. I grew from those failures. Believe in what you're doing, and focus on why you're doing it.

9. Use an online calendar

I swear by online calendars. They are so useful and are a great fundamental tool to manage time. You can easily manage your schedule, mark important dates and events, set up reminders, create time blocks, etc. The best part is that online calendars can be integrated with third-party applications and can be accessed from multiple devices. There are plenty of options to choose from, such as Google Calendar, Outlook Calendar and Apple Calendar, but the project calendar in ProofHub simplifies the way you manage your schedule, plan your events and keep track of the important dates and deliverables in the project, so you always stay ahead of the deadlines.

In conclusion, if you try all or some of these time management tips, you will very likely start feeling more in control, with the confidence to choose how best to use your time. And by feeling happier, more relaxed and better able to think, you're in a great place to carry on with your business.

5 steps to performing a midyear financial plan review

Source: https://blog.massmutual.com/post/midyear-financial-check

Written by: By Shelly Gigante

Shelly Gigante specializes in personal finance issues. Her work has appeared in a variety of publications and news websites.

Summer is the perfect time for barbeques and beach parties, but it’s also a good opportunity to take the pulse of your saving and spending plan with a midyear financial checkup.

With the first half of the year in the rearview mirror, a quick look at your monthly budget can yield valuable insight into whether you are still on track to meet your 2021 savings goals. It can also help identify areas of waste and provide motivation to set new goals. (Learn more: Setting savings goals)

“It is always a good idea to evaluate your financial situation at certain intervals,” said Greg Hammer, a financial professional with Hammer Financial in Schererville, Indiana, in an interview. “If you haven’t met with your professional since January, it’s good to check in midyear and take a deeper dive so we can assess whether your investments are still in line with your objectives.”

The midyear checkup serves another important function, as well: “If you’re in tune with your investments and in touch with your professional, you are less likely to panic when the market starts to correct,” said Hammer. “You are less likely to make emotional decisions that can negatively impact your returns.”

1. Check your retirement contributions

Hammer suggests savers start by taking stock of their retirement plan contributions.

Savers should, at minimum, contribute enough to collect any employer match to which they are entitled, he said. Not doing so leaves free money on the table.

Ideally, you should aim to max out your tax-favored retirement plans, such as a 401(k) plan, 403(b), or IRA, said Hammer, which not only helps to build your future nest egg, but also potentially yields a valuable current-year tax deduction. Take note that Roth IRA contributions provide no tax break for contributions, but your earnings and withdrawals in retirement are generally tax-free. (Learn more: Setting retirement goals )

The annual contribution limit for 401(k) plans is $19,500 in 2021, and the total annual contribution limit for Traditional and Roth IRAs this year is $6,000.1 (That limit is $26,000 and $7,000 respectively for participants age 50 and older.)2

If you don’t have the resources to meet the max, financial professionals often suggest looking for ways to reduce your current expenses. You can also potentially allocate any bonuses or raises you get going forward to your retirement fund. Or, some financial professionals suggest, consider increasing your contributions gradually by 1 percent of your salary per year until you reach your desired goal. (Retirement planning calculator)

Even an extra $200 per month starting at age 30 can amount to roughly $454,000 more in retirement savings by the time you reach age 65, assuming a 7 percent annual return.

2. Tackle debt

Next, review your debt, said Hammer. “The best way to save is by getting rid of debt,” he said. “Is your debt level going up, declining, or unchanged from the start of the year? If it’s on the rise, you need to understand what’s happening with your financial situation and correct your spending pattern.”

Some debt, said Hammer, including student loans and home mortgages, are common and necessary, but credit card balances with double digit interest rates can cripple your budget, especially in a rising interest rate environment. Indeed, most credit cards have a variable rate, which means the percentage they charge consumers who carry a balance is tied directly to the Federal Reserve’s benchmark rate.

“Debt is the worst possible thing to carry in a rising interest rate environment,” said Hammer. (Learn more: Handling debt)

Like most professionals, he suggests consumers with multiple credit card balances tackle the one with the highest interest rate first, while continuing to make minimum monthly payments on any others to avoid late fees. Once that debt is paid, move on to the next highest rate card until you are debt-free. Just be sure you don’t pay for any new purchases with plastic while you’re paying down your debt, he said.

Your debt level is an important metric in determining your “creditworthiness.”

According to the Consumer Financial Protection Bureau, most lenders like to see a debt-to-income ratio of 43 percent or less to qualify borrowers for their most favorable interest rates.3

To calculate your ratio, add up your monthly debt payments and divide that figure by your gross monthly income.

3. How’s your emergency fund?

The mid-year check-up is also an opportune time to be sure your rainy day fund is up to snuff, said Willie Schuette, a financial professional with JL Smith Group in Avon, Ohio, in an interview.

Most financial professionals recommend having three to six month's worth of living expenses set aside in a liquid, interest bearing account, such as a money market fund or savings account, for life’s little emergencies, but you may need up to a year’s worth of expenses socked away if you are self-employed, your job security is tenuous, or your family is dependent upon a single breadwinner, he said. (Learn more: Emergency fund basics)

If you don’t have a fund, or haven’t saved enough, no sweat. Set an attainable goal and start contributing monthly, while continuing to fund your retirement and pay down debt, until you reach your goal.

Depending on your circumstances, you might also consider using these sultry summer days to score a few income-earning gigs, such as housesitting, dog walking, helping people move, painting houses, having a garage sale, or selling bottled water (as permitted by local laws) at outdoor events. With a little creativity and hard work, you could potentially have a fully funded rainy day account before the cooler temperatures descend this fall.

4. Monitor your spending

If your debt level has been stagnant since January or you’re finding it tough to meet your savings goals, put the next lazy day to good use and get your budget under control.

The National Foundation for Credit Counseling suggests consumers, regardless of their financial position, track their spending for at least 30 days to get a better sense of where their money is going, highlight areas of waste, and establish better saving habits.4

“Write down every cent you spend, and then put your spending into categories,” the NFCC suggested in its guidelines on mid-year financial planning. “At this point you can make conscious decisions regarding how you want to spend moving forward.” (Related: Budget basics)

Look for opportunities to liberate cash flow by halting memberships in clubs you don’t use, slashing your cable bill, and swapping one trip per year for a staycation.

Remember, too, that your disposable income (or spending money) is what’s left over after you fund your long-term financial goals, such as saving for a down payment on a house and saving for retirement.

Most financial professionals recommend saving 10 to 15 percent of your annual salary for retirement. That’s easiest done by “paying yourself first” through automated deferrals at work.

If you are consistently unable to save what you need to secure your future, you may be living beyond your means, which means more drastic measures may be in order, including downsizing to less expensive housing.

5. Tackle your taxes

Most of us only pay attention to taxes in December, when it’s too late to implement many of the most effective tax-saving strategies. If you meet with your tax professional now, however, you can potentially still maximize deductions and prevent future penalties.

Specifically, financial experts and tax professionals routinely suggest taxpayers check their withholding to be sure they’re on track to pay what they owe and nothing more. Withhold too much and you’ll get a refund when you file your return next year, but you will also miss out on an opportunity to invest that money for compounded growth or use it to reduce your debt. By overpaying monthly, you effectively give the government an interest-free loan.

By contrast, if you owed money in prior years, financial professionals commonly advise that you should consider reducing your withholding allowances now, which will result in a lower monthly paycheck but may result in either a slight refund or zero tax liability next spring. Ask your human resources department for a new W-4 form to facilitate the change.

Online calculators and tax preparation firms offer basic guidance on how many withholding allowances you may want to take to maximize your tax refund, or your take-home pay, but a tax or financial professional can provide personalized expertise.

Look, too, for opportunities to maximize charitable deductions, begin harvesting investment losses to offset current year capital gains, and spend down your Flexible Spending Account (FSA). FSAs are funded with pre-tax dollars and can be used to help pay for qualified medical and dependent care expenses, but any money not used by year-end gets forfeited.

“It’s a use it or lose it account so if you’re not about halfway through your account at this point in the year start looking for ways to ramp up your eligible spending by scheduling doctor’s visits and making vision appointments,” said Schuette.

Similarly, to avoid a current year penalty, self-employed individuals should be sure they’re making their required estimated quarterly tax payments, and are on track to pay either 90 percent of what they will owe for this year or at least as much as they owed last year, whichever is less.5

The year is still young for retirement savers, borrowers, and taxpayers who are serious about getting their financial house in order. By examining your finances or working closely with a financial professional, you can potentially use the remaining months of the year to maximize your 2019 tax deductions, eliminate debt, and develop a saving and spending plan that will help you meet both your short- and long-term financial goals.

This article was originally published in June 2018. It has been updated.

15 Things Not to Do as an Entrepreneur in 2021

Source: https://tinyurl.com/ycj5ht9t

Written by: Ian Khan
ENTREPRENEUR LEADERSHIP NETWORK CONTRIBUTOR

Inventor of the Future Readiness Score™

Whether you're a small business owner or run a large enterprise, avoid these missteps in order to get ahead next (or any) year.

We all know the year 2020 presented the world with a number of challenges in the entrepreneurial space. The following are the 15 things to avoid as an entrepreneur in the year 2021. 

1. Lose your focus

When you forget why you got into business in the first place, you are well on the path to failure. Examples include not caring about your customers and not being able to address their concerns and needs from a product or service perspective. Always keep your customer's needs at the center of how your products and services are developed. Continuously make sure that you are reaching out to your customers and constantly evaluate if you are on the right track.

2. Lack of leadership

Organizational leadership encompasses numerous concepts and ideals, with sales, marketing, operations and personnel management just the tip of the iceberg. When organizations and leaders start making the wrong decisions, it's typically the start of a bad outcome. In 2021, take the time to focus on leadership and creating value.

3. Not caring about your employees

As an employer and as an organization, if your employees are not happy, motivated or engaged, it is impossible for them to serve your client base diligently on a daily basis. Successful organizations work on their inside game and internal structure before they start going out to generate revenue and tackling larger goals.

4. Not working with partners

Successful organizations always look for opportunities to work with others. Successful leaders understand that winning is about collaboration. Start out by seeking 10 partnership opportunities with potential partners and work on something small to start off with. Consistency is key to winning the game.

5. Build walls

Successful organizations tear down walls. Never build walls with your stakeholders. This includes competition, industry organizations, associations, the media and any other organization. Be the person who tears down the walls and helps others connect and build a better industry. Become the leader that others can look up to and ask for help because they trust that you can help tear down walls.

6. Ignore your clients

Never ignore your customers. Many times, organizations focus too much on internal happenings. One of the companies that I worked with in my career was focused on how good their products were and internal processes that were more complicated than needed. This led to them not paying attention to the voice of the customer and what the customer ultimately wanted. The result? Declining revenue and organizational degradation.

7. Not holding people accountable

Accountability is key to organizational success. Experts suggest that accountability is one of the top reasons why organizations succeed. The American Society of Training and Development (ASTD) says that we have a 65% chance of attaining a goal if we commit to it. There are many studies that prove that personal accountability, organizational accountability and using accountability coaches helps increase the possibility and chance of completing a goal. You can elevate your organization's accountability by driving a culture of being held accountable.
8. Not creating a culture of execution

Execution is probably the most important element in successfully reaching a goal. Many of us endlessly plan things, but fall short when it's time to execute. Use the pursuit of consistent execution as a tool to get ahead. Make sure you deliver on the promise that you have made to your customers, employees and other stakeholders by executing on your stated tasks and goals.

9. Not taking any risk

Many industries today are suffering because they refuse to take any risks. Service industries such as legal and accounting, for example, are battling technology and the decline of traditional business models because they refuse to adapt to a new way of conducting business. Business risk is not only a financial risk, but it's also about exploring new areas of opportunity, creating new revenue streams and exploring avenues that have not been explored in the past.

10. Not having standards

Have you ever heard of an automobile company that had zero safety standards? What about an airline that has no operational standards? It's impossible for some industries to not follow standards because a lack of standards can lead to dire consequences. Make sure that you operate with high standards. This means doing the best, expecting the best and creating a mindset of quality and a minimum level of acceptable standards within your organization, across the board.

11. Letting people get their way

Organizational bullies are people who get their way. These could be people at a strong position within your organization who have developed a habit of getting away with actions that undermine organizational standards. Keeping your organization's culture free from organizational bullies is a tough task for leaders. However, it is important that everyone who is part of your organization knows the value you create, the culture you have and respect everyone they come across within the organization. This also goes into respecting organizational policies, the vision of the leadership and what you stand for.

12. Focus too much on competition

Some industries are very focused on what the competition is doing. In a small market with many companies offering the same products and essentially targeting a very small number of customers, competition and getting ahead can be a "do or die" situation. If all your focus is on competition, you start lagging in being an innovative and out-of-the-box thinker. Do not focus strictly on the competition, but work on your inner game, making your product and solutions more valuable for your customers and raising your standards
13. Ignoring your critics

Have you ever had critics who are always on your case? If not, then you have not really made an impact on your industry. This way of thinking is a bit non-traditional. You should always have critics and those who point you in the right direction, helping you identify both areas where you face challenges and areas where opportunities exist. Pay attention to those who point a finger at you and help guide you in the right direction.

14. Being socially awkward

In 2021, you must become a socially engaged organization. This means supporting social causes, meeting other people with similar interests, helping your employees be part of social change, involving your organization in initiatives and ideas that are beyond just what you do professionally as an organization. At a local level, you may find a school basketball team that needs support or a conservation project seeking volunteers. These projects and opportunities are a means to get your employees engaged and work closely with the communities that support you as an organization. Get involved and do not be a socially awkward organization.

15. Stop learning

If you have stopped learning as an individual and as an organization, then there is nothing much that can be done. Look at some of the industries that are dying a slow death today, including the accounting industry. Traditional accounting firms are facing an uphill task in surviving as technology is crushing firms that refuse to change and adapt to a new way of doing business. Always stay hungry as an organization and ensure that everyone within your company is learning something new.

Success as an organization, as a leader or as an individual contributor, is a blend of many different things, but there are plenty of opportunities to you can make headway and succeed in 2021 as an entrepreneur and as a business.

7 Resources for 1099 Contractors During the Coronavirus Pandemic

Source: https://tinyurl.com/y87efb45
Written by: Matthew D'Angelo, Contributor

These resources, from SBA loans to industry-specific grants, are available to freelancers, self-employed workers or independent contractors who are struggling financially.

From expanded unemployment benefits to industry-specific relief funds, there are options available for 1099 workers looking for financial relief during the COVID-19 pandemic. — Getty Images/hobo_018

COVID-19 is having an impact on all areas of the economy. From large businesses to smaller restaurants, everyone is having to adjust to a new normal in business activity. Freelancers and other 1099 contractors are no different. With several foundations, corporate relief funds and other financial programs emerging from a variety of industries, it’s not clear how freelance workers are being supported during this time.

Here is a list of seven resources for freelancers struggling through the COVID-19 pandemic, including a list of industry-specific grants and funds worth applying for as a freelancer, self-employed worker or independent contractor.

Expanded unemployment benefits

Due to COVID-19, independent contractors can qualify for unemployment payments from the government. In the past, this service was not available to freelancers and 1099 contractors. By following the steps specific to your state, you can qualify for relief and potentially a $600 weekly increase during this time. While this may be a long process to apply, it can help greatly once you’re approved. Be sure to stay up to date with your application and have an understanding of how your state’s unemployment relief is changing due to the virus.

The Small Business Administration

The SBA has announced extensive programs to help struggling small businesses during the coronavirus pandemic. While freelancers and other 1099 workers work on a contract basis, if you’ve established a business entity in your name, you may be able to qualify for a loan. In New York City alone, for example, loans with no interest are being offered to all businesses with less than 100 employees. Look into disaster relief loans and other financial assistance available in your state.

SBA debt relief

If you already have a loan through the SBA 7(a), Community Advantage, 504, and microloan programs, you can qualify for payment relief for up to six months. Again, while this isn’t a program specifically designed for freelancers, it can benefit those that have created business entities and are in debt with SBA.

Paycheck Protection Program

While initially only available for small businesses with 500 or more employees, the PPP program is being extended to independent contractors and other self-employed individuals. As of April 10, independent contractors and self-employed individuals can apply for a loan up to $100,000. Your actual loan will likely vary based on your specific situation. You can read more about the program here.

Industry-specific grants and relief funds

Depending on the industry you work within, there may be a grant or relief fund you can apply for. Below is a list of options you want to consider based on your industry. The industries include comedy, writing, contemporary arts and other creative freelance industries.

• Comedy Gives Back
• American Society of Journalists and Authors’ Writers Emergency Assistance Fund
• PEN America Writers Emergency Fund
• National Academy of Recording Arts and Sciences’ MusiCares Coronavirus Relief Fund
• Freelancer’s Union Relief Fund
• Foundation for Contemporary Arts
• NYC Freelance Isn’t Free Act
• Northeast Minneapolis Arts Association

GrantSpace

This is a curation website that gathers different grants and relief opportunities for small businesses and freelancers. GrantSpace is updated as new opportunities emerge. This service does not provide grants and relief funds for businesses, but instead curates them for easy access.

FreshBooks

FreshBooks collects resources for small businesses and freelancers alike. It provides a comprehensive list specifically for freelancers that includes things like job opportunities, job board websites and other work options. This can be a good resource for freelance writers who’ve lost contracts due to coronavirus.

Careers advice: stop telling women to talk like men – ask men to talk more like women

Written by: Kayleigh Dray

Source: https://tinyurl.com/y7dq9tpg

A viral Twitter thread has explored an “unpopular opinion” about women in the workplace, and it makes a lot of sense.

The year is 2020, we’re all in lockdown due to the ongoing coronavirus pandemic, and we’re using social media more than ever . As such, the internet is absolutely full of so-called “unpopular opinions” – perhaps more so than ever before.

One such “unpopular opinion” growing in popularity, however, is Dr. Charlotte Lydia Riley’s commentary on women in the workplace. And it’s one which we here at Stylist can 100% get behind, too.

“Apparently an unpopular opinion, but I don’t hate that I say ‘does that make sense?’ all the time in a professional context,” she writes, in a Twitter post which has been shared almost 20,000 times in under 24 hours.

“It lets other people into the conversation and gives them the chance to ask questions. Maybe sometimes feminised speech patterns are… good? Helpful?”

Continuing her train of thought, Riley adds: “I’m not keen on the way that all these things relate to language in a way to tell women to be more declarative, more dominant, more loud and assertive. Maybe it would be better for men to, I don’t know, listen more? Ask more questions? Leave room for doubt?”

It’s an opinion which is shared by author Ruth Whippman, who recently penned a careers advice piece for The New York Times entitled: ‘Enough leaning in. Let’s tell women to lean out.’

In the piece, Whippman further explores the idea that the assumption that assertiveness is a more valuable trait than, say, deference is itself the product of a “ubiquitous and corrosive gender hierarchy.”

“Until female norms and standards are seen as every bit as valuable and aspirational as those of men, we will never achieve equality,” she notes.

“So perhaps instead of nagging women to scramble to meet the male standard, we should instead be training men and boys to aspire to women’s cultural norms, and selling those norms to men as both default and desirable. To be more deferential. To reflect and listen and apologise where an apology is due (and if unsure, to err on the side of a superfluous sorry than an absent one). [And] to aim for modesty and humility and cooperation rather than blowhard arrogance.”

Of course, gender shouldn’t be a factor in whether or not a person can be a great leader – a person’s leadership abilities should depend on their individual strengths and personality traits.

However, there’s no denying that women have been repeatedly told to embrace those traits which are still traditionally viewed as being more “masculine”: strength, courage, independence, and assertiveness. However, research has repeatedly shown us that those traditionally “feminine” traits (empathy, sensitivity, caring, and compassion) should be nurtured by all genders, as they lay the groundwork for better leaders.

Indeed, a 2017 study looking into personality and leadership identified the key characteristics of effective leaders (emotional stability, openness, sociability, methodicalness, and good communication skills) and found that women score higher than men in four of the five traits – thus concluding that women “are better suited for leadership than their male colleagues when it comes to clarity, innovation, support and targeted meticulousness.

The research, led by professors Øyvind L. Martinsen and Lars Glasø from the BI Norwegian Business School, assessed nearly 3,000 managers in the private and public sectors and pinned down the following personality traits of effective leadership.

• Ability to withstand job-related pressure and stress (leaders have a high degree of emotional stability)
• Ability to take initiative, be clear and communicative (leaders are outgoing, with a high degree of extraversion)
• Ability to innovate, be curious and have an ambitious vision (effective leaders have a high degree of openness to new experiences)
• Ability to support, accommodate and include employees (effective leaders display a high degree of sociability)
• Ability to set goals, be thorough and follow up (effective leaders are generally very methodical)

Women ranked higher in initiative and clear communication, openness and ability to innovate, sociability and supportiveness, methodical management and goal-setting. The one area the study showed men to be stronger in was dealing with work-related stress; Glasø said the findings suggested that “female leaders may falter through their stronger tendency to worry – or lower emotional stability.”

However, he pointed out that the trait did not invalidate the other areas in which women excelled, saying: “This does not negate the fact that they [women] are decidedly more suited to management positions than their male counterparts.

“If decision-makers ignore this truth, they could effectively be employing less qualified leaders and impairing productivity.”

Martinsen said: “These findings pose a legitimate question about the construction of management hierarchy and the current dispensation of women in these roles.”

This evidence seems to prove that promoting “feminine” qualities such as deference, humility, cooperation, and listening skills will be beneficial to pretty much everyone – particularly businesses.

In the words of Beyoncé Knowles-Carter: “We need to reshape our own perception of how we view ourselves. We have to step up as women and take the lead.”

Of, to put it plainly, if we can disregard outdated stereotypes, learn from ourselves and from those around us, then we’ve got this.

Images: Getty

SBA Relief Loans - Covid19

Source: https://tinyurl.com/wmdqkyc

Four common tax errors that can be costly for small businesses

Source: https://tinyurl.com/vosuhkx

A small business owner often wears many different hats. They might have to wear their boss hat one day, and the employee hat the next. When tax season comes around, it might be their tax hat.

They may think of doing their taxes as just another item to quickly cross off their to-do list. However, this approach could leave taxpayers open to mistakes when filing and paying taxes.

Accidentally failing to comply with tax laws, violating tax codes, or filling out forms incorrectly can leave taxpayers and their businesses open to possible penalties. Using IRS Free File or a certified public accountant is the easiest ways to avoid these kinds of errors.

Being aware of common mistakes can also help tame the stress of tax time. Here are a few mistakes small business owners should avoid:

Underpaying estimated taxes
Business owners should generally make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed. If they don’t pay enough tax through withholding and estimated tax payments, they may be charged a penalty.

Depositing employment taxes
Business owners with employees are expected to deposit taxes they withhold, plus the employer’s share of those taxes, through electronic fund transfers. If those taxes are not deposited correctly and on time, the business owner may be charged a penalty.

Filing late
Just like individual returns, business tax returns must be filed in a timely manner. To avoid late filing penalties, taxpayers should be aware of all tax requirements for their type of business the filing deadlines.

Not separating business and personal expenses
It can be tempting to use one credit card for all expenses especially if the business is a sole proprietorship. Doing so can make it very hard to tell legitimate business expenses from personal ones. This could cause errors when claiming deductions and become a problem if the taxpayer or their business is ever audited.

What is the Leadership Style of the Future CFO?

Source: https://tinyurl.com/y2zgwkaj

Driving innovation and improving business outcomes

As the role CFO evolves to strategic business partner their leadership style has to adjust to accommodate the quick pace of innovation, unsettled global markets, heightened competition and other disruptive factors.

To effectively lead, the future CFO need to balance their finance duties with a need for innovation and agility, as they are actively involved in ensuring better business outcomes and developing new revenue streams. “Today’s CFOs are partnering with other members of the C-suite in driving business strategy, so a CFO with a strong accounting or controlling background is no longer enough, you need strong business acumen with greater focus on people” said Anthony Coletta, CFO of SAP North America.

John Gimpert, National Programming Chair & Chicago Regional Director at The CFO Leadership Council, concurred, noting that “high intellect and strong functional skills are no longer sufficient.” The organization’s CFO leadership framework includes enhancing their ability to lead themselves and others, knowing the organization and delivering performance. Attributes essential to delivering performance encompass being diligent about driving results, setting priorities effectively, possessing an open, problem-solving mindset, and adopting an innovative and adaptive approach to change.
The Skills Modern Finance Leaders Need

The future CFO needs to be a thought leader who fosters an open and collaborative culture to build next-generation practices. “That means empowering the team and giving them more control over the day-to-day finance operations,” Coletta said.

To succeed in their new leadership roles, senior finance executives need to be adept at interacting with people inside and outside of their organization. “There is a huge shift in how the CFO spends their time,” Coletta said. The new brand of finance leader must position themselves as an ambassador of innovation by having an open dialog with sales, marketing, IT and other stakeholders.

The future CFO will be an architect of growth and value creation, according to Coletta. “Finance has an impact at every step of the value chain which requires building bridges across the organization and across various finance functions.”

One area where modern CFOs are leading is talent acquisition to foster the next generation of leaders. “I spend a good portion of my time mentoring and encouraging members of the finance team and ensuring that we hire or promote the right people,” Coletta noted. A successful finance team will include people with different backgrounds and demographics, but also a diversity of viewpoints.

Going forward, CFOs will also interact more frequently with those outside of the organization to understand and improve their connection to the finance function and the business overall. “I spend way more time with partners and customers in order to improve those relationships and understand their business imperatives and how finance can better serve their needs with innovative solutions,” Coletta said.

Coletta offers this advice as CFOs shift leadership styles:

• Focus on the culture, not solely on optimizing processes
• Understand the broader technology trends and how to translate into core business
• Continuously invest in learning / people’s development
• Be an agent of the change you want to see

Click here for more information about the future leadership style of the CFO.

Author: Anthony Coletta

As chief financial officer (CFO) for SAP North America, Anthony Coletta is steering the business in a territory that spans the United States and Canada, fostering operational excellence and overall financial health of the region. His role extends to driving the cloud business in SAP’s largest market and leading strategic initiatives as part of Global Finance leadership team

On Women's Equality Day, Work Equity Is Still Elusive

Source: https://tinyurl.com/y26b7xgr

Aug. 26 is Women's Equality Day, the anniversary of the day in 1920 that the 19th Amendment to the U.S. Constitution was adopted, giving women the right to vote. The anniversary has been observed since 1971, following the nationwide Women's Strike for Equality in New York City the previous year that involved 50,000 women gathering on Fifth Avenue.

Other days throughout the year recognize women's achievements, such as International Women's Day on March 8, or draw attention to income discrepancies between men and women, like Equal Pay Day on April 2.

Despite making up about half of the labor force and the majority of the college-educated workforce, women have not achieved complete equality when measured in pay equity, representation in leadership roles and seats on boards of directors.

"Women's Equality Day is a reminder of how far we've come, but we are far from true gender equality worldwide," said Georgene Huang, cofounder and CEO of Fairygodboss, a career site for women.

"Women want to see more women in leadership positions and in positions of power to effect change. We want to be paid equally for equal work, and, most importantly, we want to be treated the same and awarded the same opportunities as our male peers," she said.

Change is slow, despite the many mentoring and sponsorship programs in U.S. businesses, noted Subha V. Barry, president of Working Mother Media, in research the organization released on women in corporate America.

SHRM Online has collected the following articles about the workplace gender gap from its archives and other trusted news sources.

True Gender Equity at Work Is Still a Distant Reality

Women these days can be CEOs, entrepreneurs, board directors, doctors, engineers and truck drivers, yet true gender equity at work—in terms of leadership, pay and promotion—is still a maybe-someday ideal. Nearly 80 percent of global organizations do not formally prioritize the advancement of women, despite research showing that doing so is good for a company's bottom line. That's according to a new survey of 2,300 executives worldwide by IBM's Institute for Business Value and Oxford Economics.
(CNN)

Click photo

Study: Idaho, Utah and Texas Among Worst States for Women's Equality

Maine, Hawaii and Nevada, in respective order, took the top three slots in a new WalletHub study on women's equality. Idaho, Utah and Texas came in at the bottom of the rankings. The financial site came up with its list by comparing states on 17 key metrics ranging from the percentage of female business execs to the educational attainment gap between men and women.
(San Antonio Current)

Women Did Everything Right. Then Work Got 'Greedy.'

American women of working age are the most educated ever, yet it's the most educated women who face the biggest gender gaps in seniority and pay. At the top of their fields, they represent just 5 percent of big company chief executives and a quarter of the top 10 percent of earners in the U.S. There are many causes of the gap, like discrimination and a lack of family-friendly policies. But recently, mounting evidence has led economists and sociologists to converge on a major driver—one that ostensibly has nothing to do with gender.
(The New York Times)

U.S. Companies Are Working to Fix Pay-Equity Issues

Sixty percent of U.S. organizations are working to resolve pay inequities based on gender, race or other demographic factors, and most organizations that are not yet taking action are considering doing so. Larger companies are more likely to be taking action than smaller businesses, according to a new survey, which found that among employers engaged in managing pay equity issues, most are focusing on pay equity analysis, remediation strategies and pay equity adjustments and identifying and resolving root causes of pay inequities.
(SHRM Online)

All S&P 500 Companies Now Have Women on Boards

There are no longer male-only boards of directors among Standard & Poor's 500 companies. Dallas-based Copart Inc. became the last of those companies to add a woman to the fold with the appointment of Diane Morefield, chief financial officer at CyrusOne Inc. There has been a push for board diversity in recent years. Last year, California became the first state to pass a law requiring publicly traded companies headquartered there to have at least one woman on their boards by the end of 2019. By the end of July 2021, boards with five members would need to add at least two women to their boards and boards with six or more members must add at least three women.
(SHRM Online)

As Gender Diversity on Boards Improves, There's Still a Gap at the Top

While the uptick in the number of women holding board seats between 2012 and 2019 is an improvement, it is nowhere near to reaching gender parity, especially when it comes to multicultural women.
(Diversity Best Practices)

Men play a pivotal role in creating workplaces where male and female employees can succeed, according to Catalyst. The New York City-based global nonprofit helps organizations advance women in the workplace, and it encourages employers to engage men as champions and build inclusive cultures. Many men would take more action to make their workplace inclusive if they knew what to do, according to the National Center for Women & Information Technology.
(SHRM Online)

To Improve Gender Equality, Help Men Take Parental Leave

Employers serious about building gender equality in their organizations may offer paternity leave to new fathers in addition to maternity leave for new mothers. Further, they should help men take paternity leave as often as women take maternity leave, new research indicates. The 2018 Global Parental Leave report, released in September by HR consultancy Mercer, shows that in Britain, Canada, France, Germany, Italy, Japan and the United States, at least 23 percent of men could be taking paid paternal leave but are not. The report draws on responses from almost 1,000 employers.
(SHRM Online)

How CFOs Can Unlock innovation

Source: https://tinyurl.com/y3umvcxn

Author: Ken Gabriel, Draper Labs

The most important thing CFOs and other leaders can do is give people the right resources and remove the obstacles that allow them to innovate.

A company’s success — or indeed its very survival — increasingly depends on its ability to drive change and innovate at pace. Yet most organizations aren’t equipped to do this. At one extreme, organizations micro-manage innovation with rigid processes and metrics. At the other extreme, companies treat innovation as an art, operating with the philosophy that creativity shouldn’t be constrained.

Either approach ultimately yields the same result: diminished or non-existent returns on R&D – an intolerable result for any finance director. But CFOs and finance directors have among the most powerful roles in breaking this cycle of no return by applying and advocating for an approach I call “disciplined innovation.”

Disciplined innovation increases the likelihood of achieving breakthroughs because it creates the right conditions for innovation to flourish. It has three key components, starting with a determination to achieve a bold new capability — think engineering the lightbulb instead of designing a better candle. Many innovations are a 2.0, and while there are a time and place for incremental innovations, new breakthrough capabilities are today’s game-changers.

Second, innovation requires fixed timeframes and budgets. Smart financial constraints and deadlines don’t impede creativity, they impel creativity by creating a sense of urgency and focus. The third element is where the CFO plays a vital role: operating with independence. This means creating measured freedom from business-as-usual rules, especially when it comes to reporting, hiring, and contracting. This is key to making breakthroughs happen.

Before I sound too sacrilegious, I’m not saying all rules need to be relaxed. Standard operating procedures like procurement have well-intentioned safeguards against risk. But when you consider all the elements that must align to bring a new invention to life — from talent to market opportunity to capital — it’s imperative for businesses to move fast and be able to strike at the right time. Waiting several months for a competitive bidding process to award a contract just isn’t an option.

CFOs have an immense lever to empower and encourage innovation by understanding which rules to relax and how to relax them. Some of the best finance directors I’ve worked with have taken some of the following key steps that paved the way for big breakthroughs. And in the process went from people who said “no,” to saying “this is what we can do.”

Streamline financial control and reporting. Innovation isn’t a linear process and new discoveries often mean that money allocated for one workstream needs to shift to another. I’ve seen so much time wasted in multiple meetings justifying this shift to multiple stakeholders. As long as the project stays within scope, additional reporting or controls on expenditures detracts from the mission at hand. Relaxing some of those reporting constraints is a relatively simple step a CFO can take that can empower an organization to be far more agile while still guarding against risk.

CFOs have an immense lever to empower and encourage innovation by understanding which rules to relax and how to relax them.

Take a new approach to talent. Convention has us think about hiring people for the long-term. But innovators often want to come in to effect change on an exciting project and move on, either to another organization or another project. So, instead of thinking about a long-term salary and benefits, finance and HR can work together to attract top technical talent with a sign-on bonus and incentivize them via a performance or exit bonus when they achieve the project’s goal. It’s also critical to be open to subcontracting to be able to move at pace. Waiting several weeks for a search to hire a specific expertise in-house can kill innovation when a subcontractor can get a job done within a week.

Take a fresh look at contracts. Acting at speed requires a greater degree of outside partnering, bounded by shorter, simpler, and mutually fair contracts that can be executed quickly. For example, at Draper, lengthier contracts needed for defense work just aren’t practical for private-sector projects. So, we created a shorter development services agreement, which has a more flexible approach to intellectual propertyownership and indemnification while still protecting against risk. This is vital because if a project has a two-year deadline, waiting nine months to lock in a contract is going to doom the project to failure.

Incubate and insulate. Freedom from business-as-usual rules sometimes requires creating specific innovation activities within a company. One way we do this at Draper is through our internal research and development program, which is where teams compete to get funding for game-changing innovation projects. Each project lasts for a discrete timeframe and has a fixed budget. They operate with independence. The finance team and I check in with the group every six months to review progress and offer guidance.

The most important thing leaders can do is give people the right resources and remove the obstacles that allow them to innovate. As you assess business-as-usual rules within your organization, perhaps one guiding question can help: Is this a governance issue, or simply the way we’ve always done things? If it’s the latter, you’re likely looking at an area you can unlock to increase the pace of innovation for your business and further differentiate your products, services, and company.

Ken Gabriel is President and CEO of Draper Labs, an MIT spin-off engineering solutions company, famed for developing the Apollo guidance computer and continuing its tradition of cutting-edge innovations in numerous fields, including precision medicine. Before joining Draper, Gabriel co-founded the Advanced Technology and Projects (ATAP) group at Google; prior to this, he was Deputy and Acting Director of the Defense Advanced Research Projects Agency (DARPA) in the U.S. Department of Defense.


contributor, Draper Labs, innovation, R&D

8 Ways Marketers Can Show Their Work’s Financial Results

Source: https://tinyurl.com/yyg5bgfp

Paul Magill
Christine Moorman
Nikita Avdiushko
JULY 31, 2019

When we asked over 300 marketing leaders in the U.S. to identify the activities they find most challenging, the number one thing they reported, by a wide margin, was “demonstrating the impact of marketing actions on financial outcomes.”

This is a longstanding challenge for marketers. They want to demonstrate financial impact so that they can show accountability for business results, gain the respect of other business leaders, and secure future investment — but the measurements of marketing are often less precise than the measurements of other business activities.

How can marketers overcome this challenge? We have consulted on both sides of this issue: with CMOs seeking to demonstrate their financial impact and with CFOs, COOs, and CEOs seeking to make effective decisions about marketing investments. Based on that dual perspective, we think these eight steps can help.

1. Start with business value. The task of demonstrating how marketing affects the bottom line often prompts visions of precise measurement, elaborate metrics dashboards, and irrefutable attribution of financial outcomes. But focusing only on what is most measurable underrepresents marketing’s full impact. We think CMOs should take a more comprehensive view of the business value they create.

CMOs often play multiple roles in creating business value within their function — as growth enablers, innovation catalysts, champions of customer centricity, builders of new capabilities, and stewards of the corporate brand that serves as a magnet for talent. They also create business value beyond their function by collaborating with others in the C-suite to advance the enterprise’s strategy and the CEO’s agenda. Marketing leaders should frame their impact broadly, to include all the ways marketing benefits the organization. Judging its impact through metrics can then follow.

2. Understand what business value means to each function. Marketing leaders should translate the definitions of their value creation for the different functions they interact with. Sales might define business value as revenue growth; finance might think of it as volume, price, margin, and cost management; supply chain might call it the predictability of demand. Marketing leaders should tailor their demonstration of impact to the most relevant metrics for each function, and include other evidence that resonates, such as customer testimonials for sales, positive trends and variances for finance, and better forecasting and reduced stockouts for supply chain. Of course, in some companies there may be measures of business value that are shared across all functions (such as NPS/customer satisfaction), and marketing leaders can show impact on those, too.

3. Know your own metrics. There’s more to demonstrating the impact of marketing activities on financial outcomes than metrics. However, at some point, you need metrics. Most marketing leaders have a set of KPIs they use to demonstrate impact on financial outcomes, and it’s critical to be thoroughly knowledgeable about them. That means having not just a spreadsheet to review at the senior management team meeting but also a deep understanding of how the metrics are constructed. For MROI, for example, what costs have been included as the investment — program costs, or staff costs as well? What has been counted in the return on that investment — profit increase, or just revenue lift? What baseline of financial outcomes (absent marketing activities) is being used? What time frame is being used to assess the impact? Why do those choices make sense?

4. Explain the inherent uncertainties of marketing measurements. Deep knowledge of the metrics can build your credibility when you’re discussing them with other executives, but it helps to explain marketing’s inherent uncertainties. Marketing’s environment is typically much “noisier” than the factory floor in terms of unknown, unpredictable, and uncontrollable factors confounding precise measurement. Marketing activities can also be subject to systems effects where the portfolio of marketing tactics work together to create an outcome — say, a digital campaign that works only because of a complementary TV presence.

Marketing actions may also work over multiple time frames. For example, while demand generation takes place in the current quarter, brand-building actions could take years to cumulate. Finally, it is often difficult to attribute financial outcomes solely to marketing, because businesses frequently take actions across functions that can drive results. For example, perhaps a change in the sales force enabled the success of a marketing intervention last quarter. These uncertainties should be explained to the top management team as being inherent to the task of marketing, not the result of a sloppy measurement system.

5. Emphasize validity over precision. To executives used to managing their businesses through the scrutiny of numbers, marketing’s uncertainties can be frustrating. As the saying goes, “What gets measured gets managed.” If marketing is hard to measure precisely, how can we manage it? The answer: Marketing does have valid metrics through which its activities can be assessed and managed. A/B testing and test markets can confirm or refute hypotheses to reasonable levels of confidence. Brand-building tactics can be assessed through surveys and focus groups. Many modern marketing tactics (especially digital) are very trackable.

CMOs should emphasize that their metrics are valid when evaluating whether marketing activities are working as expected, and that the inherent imprecision in measuring marketing’s financial outcomes does not undermine their validity. Marketing leaders also need to protect against overindexing the marketing mix toward the most trackable tactics merely because they offer more precision.

6. Have a budget story. One factor that sometimes undermines executives’ faith in marketing’s impact is the sense that the marketing budget is not administered rigorously. Other functions often think that marketers drive unnecessary costs. It therefore helps to demystify the marketing budget and demonstrate rigor in managing it. Provide visibility on total spend, show how spend is aligned with business strategies and key priorities, and demonstrate how working spend has been optimized and non-working spend streamlined. These elements can be woven into a budget story that explains the logic behind the spending and establishes the credibility of marketing as a responsible steward of the organization’s resources.


7. Have a marketing transformation story. Further credibility can come from demonstrating ongoing improvements in marketing effectiveness and efficiency. There are major cost levers that can be operated in areas such as consolidating the brand architecture to focus more spend on fewer brands; rationalizing the agency roster and proliferation of websites; and creating shared services across the enterprise with automation and technology-enabled processes. Executives in other functions want to be assured that marketing is minimizing waste and staying at the frontier of effectiveness, efficiency, and agility.

8. Meet one-on-one. Marketing leaders usually attend monthly meetings of the senior management team or equivalent forums. Our observations suggest these are often poor environments for demonstrating the impact of marketing on the bottom line. The tone is typically set by the CFO and/or division presidents who are reviewing numbers. Precision is expected. Discrepancies or disappointments in the numbers are fiercely questioned. Credit and blame are sought and dodged, even if in unspoken terms. It can be difficult for a marketing leader to follow the advice above without risking the perception of making excuses. There is too little time given to marketing on the monthly agenda to give a comprehensive and nuanced view of marketing’s financial impact.

That work should happen one-on-one, with the CMO investing considerable time in educating their functional counterparts about these points above. Over time, the one-on-one efforts can make senior management meetings a more hospitable forum for marketing.

CMOs who master the steps above will be positioned to thrive in their role. And if they teach these steps to their teams, the stage will be set for a much deeper understanding of marketing to take hold across the enterprise. Over time, marketing can come to be seen as a strategic investment, one that is rigorously managed, adapts to market uncertainties, and demonstrably moves the needle on financial outcomes.


Paul Magill is a Managing Director with Deloitte Consulting LLP and former CMO for Abbott.


Christine Moorman is the T. Austin Finch, Sr. Professor of Business Administration at Duke University’s Fuqua School of Business and the Editor-in-Chief of the Journal of Marketing and Director of The CMO Survey.


Nikita Avdiushko is a recent MBA graduate from Duke University’s Fuqua School of Business with concentrations in Marketing and Strategy.

How to Read and Analyze an Income Statement

Source: http://tinyurl.com/y522ykyq

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

Expenses:

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.