by The HLH Team
“In your career, even more than for a brand, being safe is risky. The path to lifetime job security is to be remarkable.”
-Seth Godin, The Purple Cow
The Purple Cow holds an honoured spot on many entrepreneurs’ bookshelves. In it, Seth Godin challenges us to make our businesses different using a brilliantly simple analogy.
Consumer choices are like cows along a country road. There so many that no none of them stand out. No one remarks on them because what would the point be?
But put a purple cow in the field and every looks; everyone comments. With word-of-mouth being the most effective form of marketing (by far), businesses that are worth being noticed and talked about are the most likely to thrive.
Listen:
Are you listening to what people are saying about your business? If you aren’t, you need to.
Sign up for a Google Alert for your business here: https://support.google.com/websearch/answer/4815696?hl=en
The word-of-mouth is the objective, sometimes ruthless measure of if your business if remarkable or not. On the other hand, it may reveal negative threads that you need to address.
If you hear a deafening silence, then you’re probably a brown cow. Your job is to make your business worth noticing, worth buzzing about.
Becoming Remarkable:
What aspect of your business, be it a product, a twist on your services, a new design, etc, makes you stand out in your sandbox?
Your Purple Cow needs to be remarkable. 5% lower prices or slightly better service is not enough. It needs to be a game changer.
Now here’s the rub. You have thought a lot about how your business is unique, but does your customer know? Have you build a strategy around how your customer is going to learn about it, or have you buried it on page 2 of your website hoping the customers find out on their own?
Purple Cows aren’t modest. Unless you tell the world you’re awesome, the world will assume you’re ordinary. According to Seth Godin, those are the only 2 options.
More than a Sales Pitch:
Being remarkable gets you noticed, being useful gets you paid and retained. Being a purple cow just for the sake of it isn’t enough. Your business needs to have the depth enough to close the deal and turn your customers into advocates.
How much trust is implied in your industry? If you’re selling shoes or software, you can typically take more chances than if you’re a lawyer or life insurance salesperson. Be careful not to sacrifice the trust necessary in your first impression with too much glitz.
Being remarkable isn’t about a facade. It needs to run through the entirety of the customer journey, from brand exposure to advocacy. The savviest companies craft their Purple cow to reflect the value-added usefulness that potential customers may not otherwise see.
by The HLH Team
“The only difference between death and taxes is that death doesn’t get worse every time Congress meets.”
– Will Rogers
Income Sprinkling 101:
It’s become common practice for high income Canadians. We get a private Corporation (easily done) and funnel a portion, or all, of our income into it. From there, we pay lower income family members (who may or may not be connected to the business operations) via dividends and it cuts down the tax bill. A lot.
Small businesses are subject to corporate income taxes, which can be considerably less than personal taxes, to the tune of about 35%. The advantage is obvious. But the government doesn’t want people who aren’t legitimately a part of a small business to be paid as if they were.
Say I make $250,000 a year. My spouse doesn’t work and I have a 19 year old in University. I set up a private corporation and bill my services through it rather than doing so personally. My spouse takes $100,000 and my son, who needs to pay rent and tuition, takes $50,000. We save thousands in taxes.
What’s Changing:
On July 18, 2017, Finance Minister Bill Morneau proposed a crackdown. He wants to make it harder for high income Canadians to sprinkle income among family members.
Right now, if you try to flow dividends from your Corporation to your under-18 child, they’ll be taxed at the highest rate. This “kiddie tax” keeps a high income earner from paying their toddler $50,000 via their Corporation.
The new rules would focus on your adult children. It’s been easy to funnel money to them in way of dividends for them to pay for tuition, rent, etc.
Starting soon, family members receiving dividends will be subject to a “reasonability test”, to determine if they’re a legitimate contributor to the small business or collecting money for tax reasons. This test will be stricter for 18-24 year olds, who seem to be the target of the crackdown.
The reasonability test will exist so that legitimate family members in the small business aren’t penalized. If a family member doesn’t pass the test, the “kiddie tax” will be extended to them and they’ll pay the highest tax rate (currently over 41%) on their dividends, effectively wiping out any possible tax advantages.
Passive Income:
The government doesn’t want people to hold excessive wealth to themselves. The economy benefits when we invest and get it circulating.
It’s common for Canadians to invest in stocks, real estate, or other holdings via their private corporation. There’s a significant tax advantage for an owner to invest in his/her company as opposed to in a personal account.
The Feds are cracking down on your corporate investments. They want excess profits to be re-invested actively and not accumulate in your business. While the exact changes are unclear, at this point, it’s apparent that high-income Canadians will likely soon face yet another increase in their overall annual tax bill.
Cited:
(http://business.financialpost.com/personal-finance/taxes/ottawa-cracking-down-on-loopholes-that-create-major-tax-breaks-favoured-by-wealthy-families/wcm/481ba137-ac18-46da-893d-21dce841c176)
(http://www.cbc.ca/news/politics/morneau-tax-changes-wealthy-consultations-tuesday-1.4210201)
(http://www.macleans.ca/politics/ottawa/will-bill-morneaus-crackdown-on-tax-avoidance-work/)
(https://www.theglobeandmail.com/news/politics/morneaus-proposal-affecting-passive-investment-income-draws-backlash/article35745510/)
by The HLH Team
“Deep summer is when laziness finds respectability.”
-Sam Keen
Is the Summer Slump a Thing?:
Feeling sluggish lately? As the temperature rises and employees turn to thoughts of margaritas and campground, down goes the productivity. This can amp up not only your waste of talent, but could also spiral to create more defects, decrease safety, and ultimately erode your bottom line. Here’s how the dog-days affect your productivity:
- It takes 13% longer to finish tasks
- 45% of your workers feel distracted
- Your workplace attendance drops 18%
And that’s not even the bad news. Employee behaviour shifts dramatically as the temperature rises. You can expect to see:
- 63% more socializing
- Longer lunch breaks 51% of the time
- 49% of people ducking out a little early
Heat Matters:
Temperature plays a big role. We’re at our productive best around 20 degrees C or even cooler. David Letterman notoriously kept his studio at around 14 degrees C. He claimed that the cool air made the jokes crisper.
As the heat mercury rises, attention spans plunge. Productivity drops significantly after 25 degrees. If you don’t have A/C in your office, or even if you do, you may want to bring in a couple fans and close the blinds on south and/or west facing windows.
What Tactics Don’t Work:
Companies have tried and failed and tried again over the decades to perk up the summer slump. You’re fighting against nature, but there are ways to do it.
First, here’s what history has shown doesn’t work all that well:
- “Summer Fridays” (ie. making people work longer Mon-Thurs so they can take Friday off). This tends to results in increased stress levels and a productivity dip.
- Early arrival/ early departure: this is a “siesta-lite”, and involves making people start earlier so they can leave in the heat of the afternoon. But they’re tired from lack of sleep and the apathy rises quickly.
What Works:
You can’t mandate productivity from the corner office. Talk to your staff individually. Engage them frankly; they’ll appreciate that more than pretending there’s not an issue.
Tailor the solution to their needs. Do they have kids who are home from school? Then perhaps a day working remote a week is the best option.
In the office, try giving more frequent, shorter breaks during the day. Set up a comfortable spot where people can unwind for 10 minutes. Your staff will be thirsty, so have some cold water on hand. Giant companies like Google provide free catering to their staff and always have snacks and drinks available. Google isn’t doing that for charity; they’re doing it because it decreases waste.
Be flexible. Every employee has a different situation and is going to have different needs. Engage them instead of dictating to them. This is another way to eliminate waste, and like all waste management, the more proactive buy-in you have from your team, the more efficient you’ll be.
by The HLH Team
“If failure is not an option, then neither is success.”
-Seth Godin
“I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.”
-Michael Jordan
Everybody Fails:
What was the last thing you failed at? Was it a small failure, like forgetting to buy milk last night so you had to have toast instead of cereal? Or was it monumental, like a business venture you poured years and countless dollars into falling apart?
The business world is like the racetrack. We’re constantly looking over our shoulders to see how our competitors are doing. We think of a fail as a stumble, a chance for others to take the lead. Failure is not a stumble; it is a teacher. And those who fail the most, tend to succeed the most.
How Failure Makes You Successful:
Seth Godin, our modern bard of failure, spells out the link between failure and success.
- People who fear failure don’t take chances. When opportunities arise they stay a part of the chorus while others seize the spotlight.
- You usually fail because you’ve engaged with a project and taken on specific, measurable goals.
- The definition of the goal is what drives us to success. If we keep the goals vague, we will neither fail nor can we ever really succeed.
- If you fail, you know how to change your actions for next time. If you succeed, your success is measurable and real.
Instead of thinking of failure as a stumble, think of it as the opportunity to be able to look at your mistakes in the eye and learn from them. People who don’t invite failure never get that opportunity.
At the Bill & Melinda Gates Foundation, employees assemble for “Failure Fests”. Instead of ostracizing those who fail, they’re recognized as taking a chance and the team discusses what lessons they can learn for next time.
Do You Invite Failure:
All the business theory aside, failure still sucks when it happens. You feel like a deflated balloon, and it seems like a long road to inflate yourself again. So what kind of person invites it to happen?
You probably won’t fail a lot if you:
- Never take risks or tackle ambitious projects
- Stay safely and anonymously in the background
- Blame others for when things go wrong
- Worry about everyone else’s project but your own
- Not establish measurable, accountable goals for yourself
The person who fails is the person who takes risks, differentiates themselves from the crowd, and who is confident enough to look their own mistakes in the eye. If things don’t work out, they resist the urge to blame others and take responsibility.
Learning how to, in Seth Godin’s words, succeed at failing builds the attitude that will propel you to success. Accepting our failures conditions us to achieve success.
by The HLH Team
“A person who never made a mistake never tried anything new.”
– Albert Einstein
So you wanna sell your practice?
There are 2 important questions to ask. The first is whether or not the value of your practice is at its peak. This is gut feel, and largely determined by your energy levels as the key driver.
The second question (speaking of energy levels) is if you feel ready to move on. That’s not necessarily retirement. It may be that you’ve built up enough value to finance the next big step in your professional life.
How to Minimize Taxes:
Avoid the kneejerk “I should sell next year.” Starting 2-5 years out will have the best tax benefits. Here’s how:
- – You’ll have the time to consider whether to transfer the practice that you own personally into a professional corporation (your accountant can set one up)
- – You’ll have ample time to organize the assets and liabilities of your business to better present to a future buyer
- – You can consider whether you sell the assets of the practice/business (including goodwill) or the shares of the corporation. Selling your shares will ultimately help you tap into your lifetime capital gains exemption.
You’ll need to own the shares for at least 2 years before selling to get the exemption, plus time to set up the corporation and get the ball rolling. Not being in a hurry is your best bet tax-wise. The wait can help lead to great results from a tax perspective.
Consider that any gain on your personal income tax return (in the highest tax bracket in Alberta) will cost you 24% in taxes where a gain using your capital gains exemption will, in most cases, be tax-free.
Purifying your Practice:
No, it doesn’t involve any ancient rituals. To claim the capital gains exemption, and save a boat-load of tax, your shares must meet these criteria:
- – Must meet the 24 month holding period test (above)
- – Must be in a small business corporation (SBC – it’s how your accountant will structure your professional corporation)
- – Must meet 90% fair value test.
“Fair value” is the purity part. If more than 10% of your cash/ investments aren’t being actively used in the company operations (ie. excess investment capital), you’ll need to purify the corporation.
Sometimes purifying is straightforward (ie. using investments to pay down business debts), but other aspects, like extracting non-business assets, will require professional advice.
What’s it Worth?:
Now that we’re proactive about taxes, let’s ask the big question: what’s it worth? Selling your practice is like selling your home, in that its worth is ultimately determined by the amount someone is willing to pay, and you run the risk of losing your shirt without professional assistance.
Valuation is both complicated and surprisingly subjective. The key factors are:
- – Ongoing financial performance of the practice/business
- – Number of patients/ clients, and overall presence in your geographical marketplace
- – Economic climate
- – Number of potential bidders (hopefully more than 1)
Don’t rely on a canned formula to derive valuation. There’s too much at stake. This is where you need a professional the most, one who will take your business seriously and treat you like a unique entity with its own unique opportunities.
