by The HLH Team
“Start with good rules, lay out the rules, communicate with your employees, motivate them and reward them. If you do all these things effectively, you can’t miss.”
-Lee Iacocca
As we learn to be brutal with wastes like over-inventory and sending half empty trucks on deliveries, we need to remember that some of the worst kinds of waste happen right in front of us, day after day. Unhealthy and stress filled workplaces inevitably waste countless hours in lost productivity, sick days, and low morale.
Here are a few ways that you can both reduce waste and make happier employees at the same time:
Encourage Exercise:
The modern world seems built to condone sedentary lifestyles. Diabetes, obesity, smoking, and stress cost governments and businesses billions of dollars a year and cost the people afflicted with them much more.
The best solutions are also the simplest, and even a minimum of effort can help combat these patterns. You don’t need to be punitive; the best results come from positive encouragement and gentle nudging. As a good leader, you can help your team break out of unhealthy lifestyles for everyone’s benefit.
It’s as simple as encouraging everyone on your team to exercise 30 minutes a day. Whether that’s allowing a walk at lunch or recognizing people who choose the stairs over the elevator, it can go a long way in decreasing stress and increasing overall focus and productivity.
Work/Life Balance:
In the frenzied pace of the past 30 years, employees have often left their home life behind as they struggled to climb the ladder. Now, the results of that relentless unbalance are becoming clear. Stress reigns as a key detriment to health and wellness.
Younger employees are increasingly wanting to keep a balance. People are searching for a way to balance goals and priorities in and out of the workplace, and parents are wanting to spend more time with their growing kids.
Savvy employers are actively on-board. A healthy work-life balance makes us more creative, productive, and keeps us physically healthier. The broad array of benefits stem from the right mindset in the workplace.
Here are a few easy ways to encourage this:
- Stop emailing them at night, and ask all employees to do the same. Leave that time for them, and encourage them to put their smart phone away during those hours
- Be flexible with work hours. Be the boss who makes exceptions for piano recitals and birthday parties.
- If someone isn’t taking their holiday time, encourage them to. They may not think they need to, but they need to rest. Workaholism doesn’t help anyone in the long run.
Smoking as Waste:
It’s a personal decision to smoke, but a 2013 Ohio State Study quantified its real cost to private US businesses. The 2013 study concluded that, on average, smokers cost employers $5,816 a year. Based on business and industry, it ranges dramatically from $2,800 to over $10,000 a year.
Time is the biggest, and most obvious, waste directly from smoking. While other employees take scheduled 15 or 30 minute breaks, smokers will often either “tack on” an additional 10 minutes to existing breaks or take extra breaks just to go outside.
While this isn’t all smokers, it’s a strong enough majority to be quantified in the study. The average was just over $3,000 of cost annually per smoker just in wasted time, with an average of 4 extra 10 minute breaks per day.
Talk to your smokers honestly, and encourage them to quit. Don’t threaten them, work with them. If you crunch some numbers and determine that a monetary reward is worth it, then do that. But often just knowing you’re on their side will give them the will to quit on their own.
Studies Cited:
http://tobaccocontrol.bmj.com/content/23/5/428
by The HLH Team
Talent is the most mysterious of the wastes of business. It’s impossible to measure because unlike the others, it’s not about having too much of something. It’s about not having enough ideas and enthusiasm because the wrong person was hired or the right person wasn’t listened to.
The root of talent waste happens during the hiring process. Hiring the right person opens up new ideas and opportunities, while the wrong hire can waste time and effort while squandering much needed potential.
At hiring time, you get a stack of resumes and they all blur together. Some stick out, for better or worse. But how to tell the others apart? And how to find what you actually need? Some interview questions reveal more than others. The right questions can cut down on wasted talent by finding the right person to hire in the first place:
“You work for this company. I’m a big Lead, and I give you 20 seconds to pitch me. Go.”
This not only puts the pressure on, but shows how much homework they’ve done. How keen are they? How well can they improvise? Pay attention to the details of their response; do they recite your slogans back to you or have they shown the initiative to learn the nuances of your brand?
“Tell me about the best relationship you’ve had with a co-worker. What about the worst?”
Team dynamics are as important as employee skill sets. You’re looking for people who will forge productive and meaningful professional relationships. A synergistic team builds each other up and brings out the best in each other, while talent waste can stem from feeling unsupported or unvalued at work, halting ideas in their tracks.
It’s also illuminating to hear about their worst. Almost everyone has had a negative experience at one point, but the illuminating part is hearing how honest they are about it and how they speak of the other party.
“Let’s find something complex which you’re passionate about but I don’t know at all. In 2 minutes or less I need you to explain it to me so I understand.”
The topic is immaterial: the key here is that they can break it down quickly so that you understand it, and in an engaging way that draws you in. This is critical for evaluating communication and people skills. We all have passions, but those of us who can communicate and connect spread them to others.
If they’re working for you on complex problems you want them to be able to break it down quickly, but also communicate the value of it in a way that gets other people excited.
“I give you $50,000 to make your own business from scratch. What do you do with it?”
This question gives you the best insight if you give them some time. Let them think on it, perhaps even jot some notes. The best answers here are specific, so try not to cut them off.
You’re testing their creativity, their interests, and their entrepreneurial spirit. You’ll also get a taste of their business IQ by thinking about how successful their venture could be.
“I hire you, and a year from now you’re thinking that taking this job was the best thing you ever did. What happened in that year to make you think that?”
Ideally, you’re looking for someone who has already thought through what they want to contribute for the company. The more specific their answer is, the more ambitions they probably have.
This question will also inform you about their values and goals. A year from now, do they want to be focused on closing big commissions, or are they excited about developing an exciting new product? Consider if their answer team oriented or personal, and how it fits with your existing dynamic.
“Would you have asked any different questions, or done anything differently, in this interview?”
This may be uncomfortable, so be gentle. You’re trying to get at a number of things here. How assertive are they in speaking their mind to authority? Action-focused people with strong voices push achievement to the next level better than “yes men.”
You’re also giving them the chance to tell you the thing about themselves that they wished you asked about. It’s a bit like asking a cook his favourite recipe; you’re opening the conversation to a lot of things, but expect it to be a little rehearsed.
An anecdote as the last word. I interviewed someone years ago, and it was a good interview but she was up against very stiff competition. As we concluded I asked her if she had any questions for me, and she did: “Could you please tell me what I could have done better, so that if I don’t get it I can learn for next time?” I hired her on the spot.
by The HLH Team
It’s been a long three-plus month process since Federal Finance Minister Bill Morneau held his now-famous press conference touting the government’s plans for implementing major changes to how Canadians are taxed. On October 24th, he tabled the
2017 Fall Economic Statement on the heels of multiple announcements the week before which brought some more clarity to which measures the government intends to pursue and which have been currently tabled.
Here are some of the highlights of the most recent announcements:
•Small business tax rate reduction
The government has reversed its previous decision to halt the continued reduction of the small business tax rate applicable to the first $500,000 of active income in a qualifying corporation. Effective January 1, 2018, the federal tax rate on this income will drop from 10.5% to 10% with a further reduction to 9% effective January 1, 2019.
•Limitations on capital gains exemptions and conversion of income to capital gains
The government has lifted the proposed measures that would have limited taxpayers’ access to their lifetime capital gains exemptions on certain transactions or convert income to capital gains. This will help ease the burden on those business owners that wish to pass their business on to family members. “Pipeline planning” will also still be available for those who have passed away while still in ownership of these shares.
•Taxation of corporate investment income
There are no expected changes to the current income tax rates on investment or passive income earned within a corporation up to a limit of $50,000 of investment income earned per year. The mechanics of the additional tax on investment income in excess of $50,000 are yet to be released.
•Income sprinkling
Revised proposals are expected this fall, but the government has made no indication that they will be softening the proposed rules put forth in their July 18, 2017 announcements. This may result in much higher personal income taxes for dividends paid to family members who are also shareholders of private corporations.
What does this mean for you?
Everyone has a different set of circumstances and stands to be impacted by these proposals in varying degrees. It is clear that the response from taxpayers across the country has put pressure on the federal government to revisit these proposals and take the time to properly assess the impacts of any changes on our overall economy. As they sit right now, these proposals are not yet law and are still subject to alteration.
We’re here to help
Our partners and staff are staying on top of these changes and have already talked to many of our clients about these proposed changes. If you have questions about how these changes could affect your business and what actions may be required of you, please let us know. We’re more than happy to walk you through this ever-changing landscape so that we can stay ahead of the curve together.
by The HLH Team
“The road to success is always under construction.”
-Arnold Palmer
In the construction industry, it sometimes feels like the only way to be more profitable is to work more and more hours. But driving up revenue is only one way to make more money.
Reducing waste is the best way to cut costs. Dollars you cut from your net costs are more profitable than revenue because other factors (labour, goods) are already factored in.
Let’s talk about some ways for your business to make more and still have you home in time for dinner:
Strategic Bidding:
Are you bidding on every job that graces your desk? You shouldn’t be.
Every company has a target job and/or client, one that fits your company better than the others. Not only will you do your best work with this client, these jobs will likely be the most profitable as well.
Bidding on everything is tempting, especially with soft sales when you want to keep your guys employed. But not only will it eat your time, it also has the potential to win you jobs that lose you money because they’re a poor fit.
Figure out who your target client/job is. Define the parameters to qualify it.
Don’t bid on jobs outside your target. Monitor how close your bids come to actual costs.
Take the time to learn why a job was unprofitable in the past. Looking at your processes in past jobs will help you reduce waste and become more efficient.
Reduce Waste:
An average of 3 tons of materials is wasted building the average house. That’s about 4 pounds of waste per square foot.
Waste costs twice. You pay to buy the materials, and the insult to injury is when you pay to dispose of it. So be brutal with waste:
- Double and triple check your measurements. Challenge yourself to stay close to the rocks with your materials
- Cut back on your bulk purchases. Buying a season worth of materials isn’t worth the % you save.
- Spend the extra time to store, stack, and secure materials properly at day’s end. This becomes a training issue.
Inventory waste will devour your profit faster than almost anything. Dig deeper into inventory waste here: https://hlhcpa.com/pi-blog/inventory-8-8-deadly-wastes/
Avoid Defects:
Defects are the most frustrating of the 8 wastes. Having to rework a project is a guaranteed profit-killer via overextended schedules, increased chance of injury and long-term damage to reputation.
You can protect your bottom line and reputation with a little pre-planning:
- Do you homework with the contractors you hire to make sure they won’t be a monkey wrench in the job
- Track reworks from past jobs and why they had to happen. Identify the weak spots and focus on them for improvement.
- Look into Lean construction techniques. It’s a whole methodology designed to identify and eliminate waste.
by The HLH Team
“The more inventory a company has, the less likely they will have what they need.”
-Taiichi Ohno
The Temptation of Over-inventory:
As dangerous a waste that over-inventory is, most business owners have fallen victim to it. Saving 15% when buying in bulk is a siren song that puts visions of high markups in our heads. But as we’ve learned, that’s not reality.
Usually, the extra good sit, and sit, and sit. We pay to store them, saturate our market with them, and then put them on sale to clear them out. 15% in savings is gobbled up by 50% markdowns and waste.
In business, buying or producing small amounts, frequently, tends to be the most profitable. We pay more on the front-end, but keep control and save more in the long run.
Over-Inventory at Home:
Shop at Costco? The lure of buying groceries in bulk brings as much waste as producing widgets in bulk. A new study from the University of Arizona confirms that shopping frequently costs consumers less by resulting in far less waste than buying bulk.
Our retail economy is built on people buying more than they need. If you’re in retail, you probably rely on that behaviour for revenue even as you’re cautious with it in your own business.
Saving Money:
Buying 6 litres of milk reassures us that we won’t have to buy anymore for a while. It also means we’ll be pouring 3 litres down the drain in a week.
Over-inventory is as expensive as it is comfortable. Lean methodology teaches us that staying close to the rocks, and only carrying as much inventory as is necessary, is the path to profitability.
At home, staying close to the rocks means buying 2 litres of milk at a time, running out sometimes, and never pouring spoiled milk down the sink.
Staying Close to the Rocks:
The next time you’re in Costco or anywhere else, remember that their business model is based upon consumers falling prey to over inventory. Interrogate yourself about what you really need to buy.
You spend your days at work eliminating waste from your company. Spend your evenings and weekend eliminating it from your personal life, and you’ll save money in both.
Cites:
https://uanews.arizona.edu/story/ua-food-study-shop-more-waste-less
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/)
