Tag Archive for 'small business ownership'

Do you know which brain hemisphere is your nigh ox?

Watching a television program about how American pioneers trained and employed oxen in the 19th century reminded me of how our brains work.

Like a yoke of oxen, our bilateral brain hemispheres are hitched side-by-side, meeting the world head-on. But also like the bovine, they don’t always pull together.

In addition to their names, oxen are also identified by their position in the yoke: the animal most favored by the driver is the nigh ox, always on the left, while the off ox is always on the right. The nigh ox is usually the senior animal and takes the lead in pulling the load.

Brain hemispheres also have names - left and right. For most of us, one or the other is our nigh hemisphere as it seems to be the most dominant in our behavior, but we favor it more because of who we are than its location. So for effect and for fun, I’ll be referring to our brain hemispheres as our nigh ox, and our off ox.

According to experts, when we think more logically, rationally, and analytically, like an engineer, the left hemisphere is the dominant, nigh ox. For someone who’s more creative, intuitive, subjective, and emotive, the right hemisphere is pulling the hardest as our nigh ox. Gender also seems to play a role in our nigh/off predisposition. But I’m leaving that angle alone today as a tangent potentially fraught with peril - for me.

All of this brain stuff might be unremarkable to small business owners if it weren’t for two things: 1) As leaders, we’re called upon to perform and respond to issues that are closer to our off ox than our nigh ox; 2) regardless of our nigh ox, we have to work with those whose behavior favors the other side of the brain yoke. Let’s take a look at examples of how these two realities manifest in the marketplace and in our small businesses.

As a small business owner, you likely won’t have the luxury of favoring one ox over the other for very long. Regardless of which brain hemisphere is your nigh ox, any given day is filled with demands on both, and often simultaneously. For example, developing a marketing campaign causes the right brain to take the lead with creativity. But your left brain will be pressed into service by the cold, hard analysis of media buys, demographic strategy, and ultimately, operational fulfillment of the business your plan generated.

The good news is that as your business grows, you can look forward to delegating your off ox work to an employee whose oxen are opposite yours. But as the leader, the small business reality is that you must be able to successfully work and do business with people whose nigh ox is your off ox. For example:

If your nigh ox is right-brain creativity, you still have to employ, manage, and work with left-brain accountants and engineers.

If your nigh ox is the by-the-numbers, detailed analysis-loving left brain, you’ll have to suffer gladly the seemingly non-linear expressions of those whose nigh ox pulls from the right side of the yoke. Indeed, a critical counter-balancing trait your nigh ox desperately requires.

But all of that is inside the organization. Outside your four walls, you have to be able to quickly assess which ox any particular prospect or customer favors. For example you no doubt sell stuff desired by customers of both ox yoke configuration. Even though the two groups buy the same product or service, they likely lead their purchasing process with the side of the brain that’s nigh to them. Consequently, regardless of which ox is nigh to you, you’ll need selling skills to help you lead with the other.

Although in the minority, there are whole-brain individuals whose brain hemispheres pull together, like having two nigh oxen. Members of this group are naturally well-suited for small business. But whether by protoplasm or by practice, more than any corporate CEO, a small business CEO has to perform like a whole-brainer to deal with the bi-polar demands of the workplace and the marketplace.

Write this on a rock … Small business owners are required to behave as if they have two nigh oxen.

Business ownership — everything is not always as it seems

Whether you’re dreaming of being a business owner, or are actually working that dream right now, one thing is the same: You don’t want your dream to become a nightmare. And one of the best ways to accomplish this is to learn as much as you can about how this dream will play out.

Of the many motivations that would cause someone to have a business-owner dream, allow me to introduce four that are common to all of us. And just below each one, I’m including a counter-balancing reality following a quote from a popular movie. In “The Karate Kid,” reluctant sensei, Mr. Miyagi, imparted the following broken-English wisdom to his protégé, “Daniel-san,” when he said: “Evry’ting not always as seem.”

Reason 1: Achieve financial independence, if not wealth
Good for you! Who could have a problem with this business-ownership motivation? The pursuit of financial independence is a primordial motivator, and business ownership is an excellent and high percentage way to achieve it.

“Evry’ting not always as seem”
Do you know how much most small business owners take home in a year? Most make less than they could earn as an employee. And even though you could hit that financial homerun, there’s a much greater chance you’ll just make a living. But if you truly love being a business owner, that’ll be OK.

Reason 2: To have more control of your life
This is an absolute possibility. As a business owner you can focus your energy and time in the direction you want your life to go, rather than hitching your wagon to someone else’s star. Plus, you should be able to get away to attend your children’s school events. That was a big deal for me.

“Evry’ting not always as seem”
Even though business owners don’t punch a clock, most work harder than they ever did as an employee. A thousand things - including customers and even employees - will combine to demand more of you than any former boss. But here’s the good news: You can work half days whenever you want, and you get to choose which 12 hours. Being responsible for everything your business does, or fails to do, will fight you for control.

Reason 3: Status
It’s true, owning your own business provides, as Frasier Crane would say, a certain je ne sais quoi - a difficult-to-describe feeling that you’ve arrived. You’re at the top of the heap. It may be a small heap, but it’s your heap.

“Evry’ting not always as seem”
Congratulations on the first thing you’ll be in your own company - the president. But before you get too full of yourself, you’ll also be the first salesperson, receptionist, accountant, janitor - you get the picture. Status is mercurial. If you ever achieve it, remember this: The status god giveth and the status god taketh away.

Reason 4: Ego
In the chemistry of entrepreneurship, one of the active ingredients is ego. It’s like ambition, except more about you than your goals. In its positive form, ego manifests as perseverance and determination, two things you definitely need to succeed in business. Indeed, many of the great innovations from which we benefit today were born of ego.

“Evry’ting not always as seem”
As a small business owner, you’ll snatch crumbs of ego food where you can find it. On the same day your beautiful new website is launched, your best customer will change vendors. When sales are down, expenses are up, and your banker’s on the phone about an overdraft, your ego will feel more like a beagle than a lion. I have it on good authority that Mr. Murphy (as in Murphy’s Law) was a small business owner. Out here on Main Street, ego is a mercurial emotion.

As you consider starting a business, or taking the next step in the one you have, remember Mr. Miyagi’s wisdom and seek out the “Evry’ting not always as seem” factors. You may need help from those who’ve been there/done that. And if someone does help you, listen closely - they’re likely giving you advice they learned from a lesson they’re still be making payments on.

Write this on a rock … Dream about your business with eyes wide open so it won’t turn into a nightmare.

Claim the stealth benefits of small business ownership

The classic financial benefits derived from small business ownership typically fall under two categories:

1.  Earned income: salary and bonuses reported on a W2 each year.

2.  Unearned (investment) income: distribution of profits from the operation and/or sale of the business.

But there are other small business ownership advantages that I call “stealth benefits,” because they’re not as evident as operating opportunities. Arguably the most dramatic stealth benefit, which often has the most wealth creation potential, is for the business owner to also personally own the real estate in which that business operates.

Here’s the classic scenario: Every business is a tenant of some landlord, likely under the terms of a commercial lease. There are many financial and strategic reasons for a small business to lease property from an unrelated landlord. But that arrangement offers the business tenant only tax deductions of the lease payment and associated disbursements, and essentially no financial benefits for the owner of the tenant business.

Now let’s consider the stealth benefit mentioned earlier. As long as the business you own is legally structured as a tax reporting entity, like an S Corp or LLC, you can accrue stealth benefits by personally owning the real estate your business operates in and leases from you. For example: Smith Enterprises, Inc. (SEI), a small manufacturer, has one shareholder, Tom Smith. SEI enters into a long-term, formal lease of the improved real estate it operates in, and the landlord, the individual who owns that property, is the same Tom Smith. Several of the stealth benefits these two entities accrue from this legal arrangement include, but are not limited to:

  • SEI doesn’t have to worry about prohibitive rent increases, or getting kicked out because its landlord, Smith, won’t renew the lease.
  • As with any lease, SEI deducts lease payments and associated disbursements as operating expenses.
  • As owner and landlord, Smith personally deducts expenses necessary to deliver on the lease agreement, including mortgage interest, depreciation, maintenance, etc.
  • Profits arising from this venture are taxed as unearned (investment) income for Smith, calculated at his personal income tax rate, but – and this is important – not subject to payroll tax.
  • It’s possible that Smith could receive cash distributions from the property, even if the investment delivered a loss.
  • Over time, as inflation causes rents to rise against mortgage payments that may be fixed for that period, cash distribution will likely increase each year.
  • When the mortgage is paid off, the income-producing property becomes a cash-producing annuity for Smith.
  • Upon the ultimate sale of the property, basis-adjusted profit is taxed at the current capital gains rate, which is typically lower than Smith’s personal income tax rate.

In my long career, I’ve seen many family businesses that Mom and Pop founded and operated for decades. But at the end of their business careers, it turns out that the business itself had little or no value to a prospective buyer, and the founders just locked up the business one last time.

However, concurrent with operating their business, Mom and Pop also went about acquiring the property their business operated in, and leased it back to the company. Over those same decades, that corner of an intersection, in a once-sleepy section of town, became a valuable piece of commercial property.

In the end, Mom and Pop made a good living from operating their business, which ultimately was worth essentially nothing. But they retired well by selling the real estate they’d bought for thousands, for millions. Oh, and they actually have one other option that might be preferable: Just continue to lease the property to the next business.

And almost all of this, including years of rent distributions, was taking place under the marketplace radar, as a stealth benefit.

Write this on a rock … Take advantage of the stealth benefit of owning the real estate your business operates in.

What entrepreneurial desire do you possess?

In a passage from Upanishads, the ancient and sacred texts of Hinduism, the writer proposes this thought about desire:

“A man whose mind wanders and longs for objects of desire, goes again to life and death according to his desires. But he who possesses the End of all longing, and has found fulfillment, even in this life his desires will fade away.”

In the world of entrepreneurs, desire is the common denominator and truly a powerful force. But what is not common among entrepreneurs is what is desired.

Perhaps there are two kinds of entrepreneurial desire: to accomplish something entrepreneurial and to be an entrepreneur. It’s important to understand the distinction because while both may lead to success, the latter is more likely to provide fulfillment.

Here are examples of desiring to do something entrepreneurial.

  • You’re tired of taking orders so you start a business.
  • You start a business as a way to make a living.
  • You want to do something specific on your own.

The desire to do something entrepreneurial is akin to longing to be a champion, standing in the victory circle with the trophy and a check. It’s focusing on a result at the finish line.

Clearly there’s nothing wrong with finding yourself in the winner’s circle. But it’s important to understand that all of the above examples are what the Upanishads would call longing for objects of desire. Desiring to do something entrepreneurial is a means to an end.

Those who desire to be an entrepreneur are like Olympic athletes: always knowing that while winning the gold medal is a worthy goal, preparing for and running the race can also provide fulfilment. The Upanishads might say one who desires to be an entrepreneur possesses the end of all longing and will likely find fulfillment.

Doing something entrepreneurial isn’t as risky as it might seem; if you fail you can always go back to being an employee. But being an entrepreneur is not a means to an end; it’s a way of life. Failures are merely setbacks, not the end of an entrepreneurial race. One who desires to be an entrepreneur longs to create as much as to have what is created.

In Sanskrit upanishad means knowledge by which ignorance is destroyed. It’s not for me to say if desiring to be an entrepreneur is better than desiring to do something entrepreneurial. But before you begin your journey make sure you’re not ignorant of the reason for your entrepreneurial desire.

Write this on a rock….Is your entrepreneurial desire a means to an end or a way of life?

Jim Blasingame is author of the award-winning book, The Age of the Customer: Prepare for the Moment of Relevance.

RESULTS: How do you feel today about your decision to be a small business owner?

The Question:
How do you feel today about your decision to be a small business owner?

66% - I’ve never regretted my decision to be a small business owner.
13% - Things started off rocky, but I’m now happy with my decision.
21% - It seems my best days as a small business owner are behind me.
0% -  I wish I had never done this. What was I thinking?

Jim’s Comments:
As you know, in the intervening years since the financial meltdown of 2008, we’ve gone from where survival was seen as success to weathering a long and laborious recovery to maybe, just maybe, starting to get some expansion traction.  Any small business owner who’s come through all of that and still in business is the marketplace equivalent of a combat veteran.

As I’ve said many times, small business owners are pathological optimists, operating all in, against all odds, often feeling very much alone, and all for the possibility of just making a living. So after all we’ve been through, and with assorted headwinds still in our face, it’s great to see almost eight of ten of you are happy to be running a small business.

Goodonya, my friends.  Keep up the good work because the world depends on you.

Small business can’t fund an economic expansion alone

How’s the economy going?

In my long career, it’s hard to imagine a time when you could get as many different answers to this question.

We know the answer if we’re talking to any of the millions of chronically unemployed or under-employed; they’re not represented in the misleading U3 unemployment index used by politicians and the media. And the same goes for the millions who were forced to transition from unemployment to early retirement, disability or welfare.

Photo courtesy of morgueFile

Photo courtesy of morgueFile

How about small business owners? Recently we asked them this question: How is the economy looking for you over the last third of 2014? Almost two-thirds of our respondents allowed they like what they see. That’s an improvement from polls we’ve conducted over the past couple of years when barely half expressed optimism.

Are small businesses finally feeling more confident about the economy? For generations Wall Street was accepted as a leading indicator of the economy; today it’s merely an indicator of itself.  I consider Main Street to be the more relevant economic indicator so this increased optimism is good news — at least until Wall Street and Washington do something to derail all of our hard work, like the last financial crisis they created together.

In a follow-up poll we asked small business owners how they would fund their next growth opportunity. Almost half reported they would grow organically with retained earnings (profits) and current cash flow. And consistent with previous polls by myself and others, only three percent chose the historical small business funding source: a bank loan.

Ironically, this growth-by-bootstrapping response is a silver lining of the financial crisis cloud. As I predicted in 2009, in order for small businesses to survive the Great Recession they had to operate more efficiently while reducing debt, which produced two very important financial conditions: 1) a better cash position and 2) more profit. Consequently, it’s not surprising when almost 50% of respondents to this poll reported the ability to capitalize future growth with in-house resources.

Unfortunately, small business retained earnings alone won’t take the economy from moribund recovery to robust expansion. That will require Corporate America to stop hoarding cash and start investing in the economy. The question is, when will Wall Street let them?

Write this on a rock … Small business alone can’t fund an economic expansion.

Jim Blasingame is author of the award-winning book The Age of the Customer: Prepare for the Moment of Relevance.




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