by The HLH Team
“If you’re trying to create a company, it’s like baking a cake. You have to have all the ingredients in the right proportion.”
– Elon Musk
Incorporation 101:
A lot of professionals have their own businesses. If you have one, you’ve probably wondered about whether or not to incorporate. If your business is growing, it’s likely more a question of “when” rather than “if”.
There are no formal rules as to when to take the plunge. It really should be tailored to each individual situation and depends on factors such as:
* Personal Liability – Once incorporated, typically only your corporate assets can fall victim to creditors or lawsuits. These third parties will not have as much ability to threaten your personal finances.
* Income Splitting – Does your significant other fall in a lower personal income tax bracket? A corporation can become a way to even out your personal incomes to reduce the overall tax burden on your family.
* Deferring Income – If you don’t need all the money that your business is making in any given year, you can keep the extra in the company for as long as you would like before having to bear the burden of personal taxes. This often allows you to delay tax payments until you fall in a lower tax bracket which leads to overall tax savings.
Pros & Cons:
Let’s break this down:
Pros:
Reduces Personal Liability: If an unincorporated business hits rough financial waters and you can’t pay your bills, creditors can go after your personal assets (house, bank accounts, etc). Corporations are considered separate legal entities, so your creditors will typically go after your corporation and its assets, not you and your personal assets.
You have Options: With an unincorporated business you have one way to get paid, and the taxman knows it. In a corporation you have a choice between salary, dividends, bonus or a combination, whichever is the most tax efficient. You can also take advantage of income splitting (Income Splitting Article).
Defer Your Taxes: If you don’t need business earnings for personal use, you can leave them in the business and defer your personal tax.
Debt Repayment: If purchasing an existing business, incorporation of a holding company may allow you to make your debt repayments to the vendor on a tax-preferred basis.
Employee Benefits: You’ll have more tax-favourable options to offer tax-free benefits to your employees to increase retention and attract the best candidates.
Cons:
Fees: You’ll need a lawyer and an accountant to incorporate, so plan to incur some professional service and filing fees. However, it pays for itself quickly (often in just a year or two) in tax savings. Remember that you get what you pay for, and going for the cheapest consultants won’t maximize your advantages.
Can’t Claim Losses: The shield against your personal assets goes both ways. If your business fails, you’ll only be able to write off the amount you invested personally against your personal income, not the corporation’s accumulated losses.
There’s Paperwork: You’ll need to file a separate tax return, an annual return, etc. It’s standard stuff, but you’ll need to be another level of organized if you’re going to do it yourself. Finding the right professional advisors to help guide you through these additional challenges will definitely be a worthwhile exercise.
How to Get it Done:
This is one of the biggest steps of your professional life, so find a qualified professional who won’t rush you, but will take the time to discover the opportunities that your personal situation allows. Every individual (and their business) is unique, so the structure and ownership of every corporation will be different. Take the time up front to ensure your accountant gets to know where you’re coming from, and more importantly, where you’re going. The proper foundation will help your business ensure both its current and future success.
by The HLH Team
“You don’t ever want a crisis to go to waste; it’s an opportunity to do important things that you would otherwise avoid.”
Rahm Emanuel (White House Chief of Staff, 2008-2010)
The Definition of Crisis:
The Piper alpha oil-drilling platform exploded in July, 1988. 166 people lost their lives. One of the survivors, Andy Mochan, lived by leaping 15 stories into the frigid North Sea. In his words, “it was either fry or jump, so I jumped.” Andy found himself in an unthinkable position, one leading to imminent disaster if he didn’t take action, but with no clear path to success.
His ordeal has been adapted into the burning platform metaphor, (Burning Platform Article) which focuses on the agonizing decisions businesses need to make when confronted with an imminent crisis. The key feature of a crisis is that, when it happens, you can’t ignore it. You must change your behaviour and take action. That’s often the source of panic. The qualities of a burning-platform crisis are:
-There is a real and immediate danger that you can’t ignore.
-There are a limited number of difficult choices.
-The choices are irreversible.
-All choices have a high chance of failure.
Knowing when a Crisis is Coming:
Your business is going to have a crisis. Hopefully it’s not today, maybe not this year, but it will. If I were talking over beer I’d ask you to read my lips: “you are not immune.” To paraphrase Norman Vincent Peale, when God gives you an opportunity he wraps it in a problem. A savvy business person can turn impending doom into imminent profit if he knows how to roll with the punches.
If you look for the right signs, you’ll usually be able to tell when a crisis is closing in:
-Stay aware of the hard realities of your industry. Some business people think that their business has the ability to resist market turmoil. They’re usually wrong.
-Crises do damage by initiating a downward spiral of knee-jerk decisions. The more contingencies you plan for ahead of time, the better chance you’ll break the spiral.
-Get out of your office and don’t just rely on official updates to know what’s happening. Start conversations in the lunchroom and make your employees comfortable telling you things
If you’re evaluating your businesses’ success by revenue or even gross margin, you need other metrics. Keep your finger on 3 pulses at all times:
- 1. Your profit margin trend. The number at the bottom is the one that counts. Create a trends chart for this period compared to a few previous periods. If the trend slopes down, find out why.
- 2. Listen to industry experts. Consume podcasts, blogs, and whitepapers on the state of your industry. Ask the right questions over the Friday afternoon pint. Don’t be blindsided.
- 3. Listen to your customers. Are they happy with your products and, more importantly, your business trajectory? Do you conduct a Net Promoter Score survey at least annually? If you don’t or if you haven’t heard of it, start this year. Find your customers’ normal level of satisfaction so you know if it changes.
A Crisis is just an Opportunity that has to happen Now:
Kung-Fu is the art of turning an opponent’s fierce momentum against him. A burning platform crisis will hit your business like a roundhouse kick. If you lock your knees and absorb the momentum, it will crush you. If you anticipate and maneuver, you can land back on your feet ready to hit back.
If you don’t see it coming, you’re probably in trouble. If you do see it coming, what you do is about perspective. You can be afraid of the kick, hide and start updating your resume, or you can see it as a golden opportunity to take the risks you might otherwise never take.
Comfort makes us complacent. Let an impending crisis make you hungry to innovate. Change more than products. Use the momentum of the crisis to drive a sustained, cultural change. Be the first one out of the trenches leading this charge.
Pressure makes us creative. Explore avenues of innovation that you were nervous of before. Do your homework and be prepared to take a risk.
Make changes that are going to matter to your customer.
Set fire to the platform before anyone else can. Control the direction of the flames and stay ahead of the crisis.
Keep your finger on the 3 pulses. Plan contingencies. Anticipate the kick and what your next move will be. Turn the crisis into an opportunity, and you’ll be the one left standing.
(original sources: https://hbr.org/2012/12/how-to-anticipate-a-burning-platform
http://innovateonpurpose.blogspot.ca/2013/09/innovations-burning-platform.html)
by The HLH Team
“I decided that my job was to listen aggressively.”
-Michael Abrashoff
Lessons from the US Navy’s Best Ship:
When he took command of the Navy’s worst ship, Captain Michael Abrashoff knew he had a monumental challenge. But by the end of his command he’d turned the USS Benfold into the best run ship in the navy. He did it with aggressive listening.
Your business relationships hinge upon listening. We communicate in 3 ways. Our words, the literal meaning, make up 7% of our message. Our tone of voice accounts for 38%, and our body language makes up 55%. Most of the message isn’t verbal.
You can listen 2 ways. Passive listening, when you’re hearing the words but thinking about something else, tunes you out to everything but the verbal 7%. It’s doesn’t engage you, and you don’t learn anything from it.
Aggressive listening is treating every exchange like the most important one you’ll ever have. It’s focusing on all the ways that person is communicating with you and learning the most you can. It has the opportunity to turn hum-drum encounters into empowering lessons that you can build on.
Top 5 Ways to be an Aggressive Listener:
We’re not born good listeners. It’s a skill that we need to work at and refine. But if we make the effort to listen aggressively, we’ll have the opportunity to make every interactions we make more meaningful. Here are some tips:
- Talk less, listen more. You already know what your opinions are; you’re not going to learn anything from repeating them. Listen closely to what is said, and you’ll be more likely to hear what isn’t said (and that’s the good stuff).
- Don’t interrupt. Instead of waiting for the other person to take a breath so you can jump in, wait out the silences. They’ll eventually keep speaking and go into more detail, and you’ll learn more than you otherwise would have.
- Block out distractions. Put your phone away, minimize your screen, and listen. Think more about what they’re saying than what you want to say, and you’ll better understand his or her position.
- Talk face-to-face. If your email is longer than a paragraph, walk to their desk or, if you’re not close to them, call or video conference them. Emails omit tone, which makes them fairly useless to communicate anything other than simple facts.
Choose your Conversations. It’s hard to listen aggressively when conversations catch you off-guard or in the middle of another task. Try to plan the conversation so you can think of key questions you need answered before-hand and make the most of your time.
by The HLH Team
“Bet on the people who think for themselves. “
― D. Michael Abrashoff, It’s Your Ship: Management Techniques from the Best Damn Ship in the Navy
Captain of a Sinking Ship:
What’s your nightmare business situation? How about being put in charge of a company with terrible productivity, a grumbling team, and the worst performance records in your industry. What would you do?
That happened to Michael Abrashoff. At 36, he became the youngest commander in the U.S. Pacific fleet. The bad news was that his ship, the USS Benfold, was as abysmal as the hypothetical company mentioned above. But in 12 months, he turned it into the #1 ship in the navy. So, what did he do?
How Abrashoff turned his ship around has lessons for all leaders, whether in the navy or business. His philosophy: Everyone wants to excel at his or her job. The leader’s job is to give them the opportunity to do so.
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“What would you do? It’s your ship!”:
Abrashoff began his 2 year command with the assumption that every one of the crew wanted to succeed. If they didn’t it was on him.
He sat with the 310 strong crew and asked 3 questions:
“What do you like most about the USS Benfold?”
“What do you like least?”
“What’s one thing you would change?”
These three questions are immensely powerful. They have the power to draw out hidden inefficiencies that only the team members can see. If you ask them, and (far more importantly) take ownership of the answers, you’ll start your team working towards a unified purpose.
Abrashoff believed that, as Captain, he served the crew. During lunches on the deck, he and the officers went to the back of the line. They ate with the crew. They shared stories and jokes, and the crew began to know them as people and not ranks.
When your staff members come to you with a problem, what do you say? Do you dismiss their concerns and anxieties or, wanting to be a good boss, solve problems for them? Abrashoff challenged them with, “What would you do? It’s your ship!” By not allowing himself to become a crutch, he empowered them to think for themselves. In doing that, he gained the gift of their perspective.
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Don’t Keep Painting the Ship:
We know what salt water does to metal. Every couple of months, the Benfold has to be repainted to cover the rust. It took a month. Imagine if you had to close your business every 2 months, for a month, and to spend money in that time on maintenance that you had to do again and again. How profitable would you be?
Does leadership matter? Consider this. A sailor, who had painted the Benfold countless times, felt able to approach Abrashoff with a question. It was the bolts that rusted, so what about replacing them with stainless steel bolts? The mark of a good leader is the fact that his staff feel able to speak up about what bugs them.
By replacing the bolts, time between re-paintings went from 2 months to 10. The navy quickly adopted the practice, saving millions.
If that sailor hadn’t heard, “it’s your ship,” over and over, he wouldn’t have asked. If an employee doesn’t feel valued, he or she will not say what’s bugging him or her. If team members don’t speak up, your business will not improve. It’s up to you, as leader, to ask those 3 crucial, empowering questions and own the answers.
original photos from: https://investingcaffeine.com/2009/11/06/too-big-to-sink/
by The HLH Team
We know that icebergs are dangerous. They aren’t dangerous because they scratch or bite us, but because of their unknowable mass under the waves. Made of freshwater, icebergs’ relative low density makes them float high in the ocean. With about 90% of their mass under the surface, they’re very hard to map and even harder to predict.
Our company cultures are icebergs. We choose to spend our day-to-day dabbling in the visible aspects we can see and control. We create a vision and post it on the bulletin board. We use that to outline a strategy and define our shared values. We establish procedures to achieve our strategy and create the structure to support them.
While we focus on the visible, the real drivers are happening under the surface. 90% of the bulk of our company culture is beneath the surface, their details unseen their force always felt.
Just under the waves, where we only have to stick our head under to see, are our company beliefs, our shared assumptions and our traditions. We don’t often define these things, but we typically know what they are. Going deeper, we’ll find the unwritten rules that guide our daily behaviour. We never talk about them, but those affected by them always feel them. They can constrain behaviour and stifle innovation, and because they’re often tacitly allowed by management, they’re very hard to define and remove.
At the darkest depths you’ll find the inner feelings of your staff. These are forces that we keep buried within us but guide our most fundamental judgements. Paradoxically, while we spend most of our time crafting process and strategy, it’s the inner lives of our team that really steer the iceberg.
How to Manage Change:
So what does this have to do with change? For change to be successful, it needs to go deep. It needs to impact the bottom depths of the ice, and we need to approach the bottom differently than the top. We know how to affect change on the top of the iceberg. Brainstorming new strategies and putting the structure in place to support them is our managerial default.
Changing the visible elements will give you all the appearances of making real change, but you won’t see any sustained results. The iceberg will continue to be pulled in the direction it always has been, pulled by the weight beneath the surface. If you want deep change, you’ve got to go deep. As you dive beneath the surface, you’re going to need different tactics to change the levels of culture.
Next week, we’ll look at how to tackle each stage of the ‘berg, from the cerebral top to the dark bottom. To implement effective change, you have to go deep.
