Innovation Leadership-Go Team!

When you hear the word leadership, one tends to think of a person or a style of management. So innovation leadership would default the ingenious dreams of a visionary, who transfers those midnight downloads into a road map of success. But the big ideas do not take flight without the ground crew preparing the big air balloon for an endless sky of possibilities. Innovation Leadership is the story of a team of highly qualified individuals who are willing to plug into a vision (products/services), immediately receiving a burst of power that sparks the creative circuit within each member; emitting a light so strong that produces a must have, can’t live without item. In his article What is Innovative Leadership?, Jeffrey Baumgartner suggests, “Innovation is breed within the organization’s culture, therefore “Innovative leaders are not just CEOs. They can be team leaders, division managers and others who manage people and projects.” The synergy created from this union carries the vision. Synergy is defined as “the interaction of two or more agents or forces so that their combined effect is greater than the sum of their individual effects.” (thefreedictionary.com)This force is the foundation for innovation leadership.

In his article, 5 Ways Leaders Enable Innovation In Their Teams, Glenn Llopis references a Wall Street Journal article entitled, Together We Innovate, which spoke to the team concept in innovation.  The article state[d] that, “most companies continue to assume that innovation comes from that individual genius, or, at best, small, sequestered teams that vanish from sight and then return with big ideas.”  The article argue[d] that “most innovations are created through networks — groups of people working in concert.” (2014) What beautiful harmonies can be produced in this symphony of talent and creativity. Llopis says that, “Innovation is the creation of something new that represents a communal adaptation or application used and embraced by the masses.”(2014) Picture a symphony. Each instrument supplies a sound, a note though brilliant alone, together creates a sound that moves the masses to a standing ovation. Steve Jobs was the visionary, but it is a team that consistently creates a must have product. His legacy continues on.

“Innovators are those who can see, sow, grow and share opportunities.” (2014) The powerhouse team consists of the people who “know their customers and their specific needs; they take time to analyze their competitors and the evolution of industries, brands and the emerging role of technology;…they have a pulse on the marketplace and what it is telling them they must do.” (2014) The boardroom becomes a war room of strategy, logistics and execution. These key team members are not your average employee. They are game changers and innovators in their own right. “They are passionate explorers in pursuit of endless possibilities. These explorers are courageous enough to take that leap of faith and follow it through all the way to the end.” (2014)The energy produced from this type of team is high voltage that are a sign of DANGER to the competition.

To keep this high level of voltage, Llopis suggests 5 immediate things leaders can do with their teams to foster an environment of innovation and initiative:

  1. Trust Yourself Enough to Trust Others – each team member must become more transparent than ever before
  2. Collaborate and Discover – working closely together and taking leaps of faith together to discover new ways of thinking to create greater outcomes
  3. Communicate to Learn – a team should view themselves as an innovation lab – constantly challenging each other to learn from each other’s ideas and ideals and to plant the seeds for future innovations
  4. Be a Courageous Change Agent – embrace constructive disruption that ultimately makes things operate better and improves performance. Every leader must become a change agent or face extinction.  As such, their teams must equally be charged to do the same; accepting the role of a change agent means taking on an entrepreneurial attitude, embracing risk as the new normal, and beginning to see opportunity in everything. As you do, innovation becomes second nature.
  5. Course Correct to Perfect – course correction steers you closer to the promise of the culture you are attempting to create. Course correction also keeps people on their toes and teaches them to adapt to new environments, where they can showcase their abilities and skill-sets to new people and personalities in different situations and circumstances.

I truly believe that the synergy created in teams separates the true innovative leaders. They work together instead of silos and the outcomes are amazing products and services that change the world. What does your team look like? And how will it change your corner of the world or influence the masses?

Youtube link- https://youtu.be/qQ2l678XmFc

RESOURCES

Baumgartner , J. (n.d.). What is Innovative Leadership? Retrieved January 31, 2017, from http://www.innovationmanagement.se/imtool-articles/what-is-innovative-leadership/

Llopis, G. (2014, April 07). 5 Ways Leaders Enable Innovation In Their Teams. Retrieved February 01, 2017, from http://www.forbes.com/sites/glennllopis/2014/04/07/5-ways-leaders-enable-innovation-in-their-teams/#68a17f0310cb

Synergy. (n.d.). Retrieved February 02, 2017, from http://www.thefreedictionary.com/synergy

What Does Flawless Look Like?

Flawless should start with a question? How do I make it better? I dare not say perfect…I don’t think perfect was ever used at Apple. They continue to make the product better and better and better each year. So where are the customers; camping out for the latest version. In 2011, a garbage man waited 240 hours for the iPhone4. (The Atlantic, 2011) It’s ceremonial each year. Expectations have been created for that faithful customer and let’s not mention the price tag that comes with it; a price tag that gives one bragging rights is more of an investment to them. Why do they wait- higher demand for the “next generation” phone, preorders, redesign and “social proof.” “Adam Hanft, who works at a New York consulting firm for consumer brands, told Market Watch that shoppers feel validated by a crowd making the same decision as them.” (Herbert, 2014) Consumers anticipate better, not perfect. Better has a place to go, perfect is stuck.

Investors think in terms of getting the product on the shelves. Market placement means profitability. Right? Not Quite. Blank shouts to not ignore the process of “Customer Discovery.” (Blank, 2013, pg.7) “Time after time, only after the first customer ship, do start-ups discover their early customers don’t scale into the mainstream market, the product doesn’t solve a high-value problem, or the cost of distribution is too high…losing scales strategy.” (Pg.7) In any ship-relationship, partnership (yes we are partners with our customers), or business venture, you have to get to know the other party – Listen, learn, relate and value to create repeat consumers.

Ask, Ask, Ask

What problems does your product solve? Do customers perceive these problems as important or “must-have”? How do you reach the customers? How many customers do we need to be profitable? These are just a few of several questions that Blank suggests for start-ups. If the product fails to work, who will stop and fix what’s broken? How well do you understand what problems customers have? How much will they pay to solve those problems? Do we understand the hierarchy of our customers’ needs? Who are your visionary customers (early buyers)? Do you truly understand what you need to be profitable? Are the sales and business plans realistic, scalable, and achievable? (Pg. 8-10)

What is the true reality for your business? Customers are not always right, but they should always be first. Unrealistic expectations are by far a poisonous spur ready to germinate and infest your start-up to the point of suffocating and choking the life out of something that was once alive and breathing. The Customer Development model is based upon, “Learning and discovering who a company’s initial customers will be, and what markets they are in….” I am not talking sales and marketing, rather proving a market exists, validate they will pay for your vision, then capturing that market. (pg. 21)

These are questions to ask for The Four Steps to Epiphany… “Do you have a process for discovering your market, locating your first customer, validating your assumptions and growing your business?” (pg. 24) Next, we will look closer at the four steps: Costumer Discovery, Customer Validation, Customer Creation and Company Building to create the flawless/better product or service.

Resources

Blank, Steven G. The Four Steps to the Epiphany: Successful Strategies for Products That Win. 2nd ed. California: Steve Blank, 2013.

Gherbert@syracuse.com, G. H. (2014, September 19). IPhone 6 Plus: Why do people wait in line all night for the latest Apple toy? Retrieved February 01, 2017, from http://www.syracuse.com/news/index.ssf/2014/09/iphone_6_plus_apple_why_line_up_wait_all_night_syracuse.html

How Long People Waited to Be First in Line to Buy Apple Products. (2011, October 5). Retrieved February 01, 2017, from https://www.theatlantic.com/technology/archive/2011/10/how-long-people-waited-be-first-line-buy-apple-products/337087/

Ships of Harmony

http://EzineArticles.com/expert/Michelle_W_Moore/2358063

Pending publishing from EzineArticles.com

As a communications major, I am also listening to what people do not say via their non-verbal cues. Body language, special proximity, facial expressions, simple gestures and even a touch can give a deeper meaning into real truths of a conversation. My thoughts are loud through my wrinkled forehead, clinched teeth or half curled top lip. For example, I do not have a default or poker face. Let us not forget the eyes like laser beams that burn every hidden agenda. I realized so often I am saying more than my mouth is talking and my silence is not as sweet as it should be without words. Relationships can be strained or even awkward at times with multilingual conversations. I stretched the word multilingual here because your mouth could be saying one thing and your body is speaking in an entirely different language.

I was recently introduced to another category of languages that I found to be universal and insightful. This category is called Love languages. The five love languages, as presented by Gary Chapman in The Five Love Languages: How to Express Heartfelt Commitment to Your Mate (1995) expounds upon five ways to give and receive emotional love. They are: receiving gifts, physical touch, acts of service, words of affirmation and quality time. Even though this book refers to couples, on a greater level it spoke to me about relationships. Ships as I call them, take the form of friendships, companionship as well as partnerships, which extend into business. Even though it speaks in terms of the word love, I heard how we want to be treated and how we treat others; how I am valued and how I value others. As leaders, founders and entrepreneurs, we have a responsibility to assure our team that they are valued and add value. Here is a snapshot of the languages from Focus on the Family:

Receiving gifts- value through a visual expression or token that says you are thinking of me

Physical touch-value through physical contact and proximity

Acts of service- value through doing things for me

Words of affirmation-value through words; compliments and showing appreciation

Quality time-value through showing interest and giving your undivided attention

My primary love language is acts of service. When someone takes a task off my list, I feel so appreciated. I don’t need to be touched, talked to or told I’m doing a great job. I recall my staff when I was a financial center manager. They were a remarkable group of loyal employees. I saw their primary love language and how it affected their performance and our ships. The head teller was acts of service. I recall one holiday season she had Gaither tickets and we were not able to get coverage. I ran the vault and a teller window so that she could attend. The ATM teller liked receiving gifts. A cupcake on a busy Friday, which was every Friday, made her day in the midst of long endless lines. The customer service representative was words of affirmation and physical touch. Words of praise made her face shine, not to mention that it got brighter if I touched her shoulder at the same time. The part-time teller was quality time. She liked my undivided attention at times because she was only there a few hours a day. Knowing how people feel valued or loved ranks with knowing their strengths and weaknesses. How this knowledge translates into leadership is quite rewarding for everyone involved.

Acts of kindness extend beyond bonuses and promotions. Sometimes the money dries up and people stay until they retire. Knowing love languages and applying that knowledge in the workplace can increase moral, production and harmony among your staff. I encourage you to take the test at www.5lovelanguages.com and experience uncharted waters of success on your ships.

Resources:

http://www.focusonthefamily.com/marriage/communication-and-conflict/learn-to-speak-your-spouses-love-language/understanding-the-five-love-languages

Do You See What I See-Perception Management

How people think, feel and act are not always based upon truth, but instead upon what they perceive (observe, identify, or distinguish) as being their reality. This past election triggered emotional uproars from the American people. President elect Trump took a straight-with-no-chaser approach to politics as he does business. He was totally candid and raw; sometimes even vulgar. This is the person we have always known him to be and he did not change faces for the election. But once he actually won, it appeared that he toned down. He shouted from the mountain top that he was going to build a wall and send the bill to the other side. We watched emotions stir. Or he was pulling the plug on Obamacare. Think of the millions who would be without coverage again. Emotions stirred over and over again as the laundry list ran down the floor. But now he’s president elect and the wall is for illegal immigrants, illegal being the operative word here. Some components of Obamacare might be kept. Things have just toned down. So what is the perception now and what do you see?

The United States Department of Defense defines perception management as:

Actions to convey and/or deny selected information and indicators to foreign audiences to influence their emotions, motives, and objective reasoning as well as to intelligence systems and leaders at all to influence official estimates, ultimately resulting in foreign behaviors and official actions favorable to the originator’s objectives. In various ways, perception management combines truth projection, operations security, cover and deception, and psychological operations.

In his article, The Victory of ‘Perception Management’, Robert Parry states, “…what the insiders called “perception management” began in earnest with the Reagan administration in the 1980s but it would come to be the accepted practice of all subsequent administrations, including the present one of President Barack Obama.” Where propaganda trumps ideals, “The point would be not to honestly inform the American people about events around the world but to manage their perceptions by ramping up fear in some cases and defusing outrage in others depending on the U.S. government’s needs.” (Parry) Wow! Do we get caught up in the hype? Yes indeed!

Now let’s draw a line from government to corporations and from corporations to businesses. Billionaire, Donald Trump, is a case study for entrepreneurship. He has used perception management to now be the most influential man in America. How can you position yourself as an entrepreneur to be the most influential person in your business arena? In his book, It’s a Jungle in There, Steven Schussler believes, “Sometimes it is important to use perception management to create the appropriate image or belief you want a person or group of people to have about you and/or your creations.” (2010, pg. 173)

What do you want you’re the marketplace to perceive you to be? Schussler says, “Perception management is about getting people to see you and what you do in a positive light…negative impressions [create] unwanted consequences.” For Trump, did it really matter? There were protests but that too has passed. But for the maturing entrepreneur, Schussler is correct. It’s all about mind-sets. As the artist, you get to paint the picture you want them to see; you get to create the sculpture right before their eyes; and you get to write the script of your success story. You get them to see what you want them to see.

 

Parry, R. (n.d.). The Victory of ‘Perception Management’. Retrieved December 07, 2016, from https://consortiumnews.com/2016/04/13/the-victory-of-perception-management-2/

Perception management. (n.d.). Retrieved December 07, 2016, from http://psychology.wikia.com/wiki/Perception_management

Schussler, Steven. (2010) It’s A Jungle In There. New York: Sterling Publishing Co. Inc.

 

 

I Want to Make You Smile

I was recently introduced to another category of languages that I found to be universal and insightful. This category is called Love languages. The five love languages, as presented by Gary Chapman in The Five Love Languages: How to Express Heartfelt Commitment to Your Mate (1995) expounds upon five ways to give and receive emotional love. They are: receiving gifts, physical touch, acts of service, words of affirmation and quality time. Even though this book refers to couples, on a greater level it spoke to me about relationships. Relationships take the form of friendships, companionship as well as partnerships, which extend into business. While it speaks in terms of the word love, I heard “the golden rule”, how we want to be treated and how we treat others; how I am valued and how I value others. As leaders, founders and entrepreneurs, we have a responsibility to assure our team that they are valued and add value. As Steven Schussler says in his book It’s A Jungle In There, “Make People Feel Special.” He suggests that we think of a time when we were remembered, recognized, or celebrated; capture that emotion and say you didn’t like. Of course you did. Just thinking about an instance right now makes you smile.

Understanding love languages help make people smile. Here is a snapshot of the languages from Focus on the Family:

  • Receiving gifts- value through a visual expression or token that says you are thinking of me
  • Physical touch-value through physical contact and proximity
  • Acts of service- value through doing things for me
  • Words of affirmation-value through words; compliments and showing appreciation
  • Quality time-value through showing interest and giving your undivided attention

My primary love language is acts of service. When someone takes a task off my list, I feel so appreciated. I don’t need to be touched, to talk or for anyone tell me what a great job I am doing. I recall my staff when I was a financial center manager. I saw their primary love language and how it affected their performance and our ships. The head teller was acts of service. I recall one holiday season she had Gaither tickets and we were not able to get coverage. I ran the vault and a teller window so that she could attend. The ATM teller liked receiving gifts. A cupcake on a busy Friday, which was every Friday, made her day in the midst of longs endless lines. The customer service representative was words of affirmation and physical touch. Words of praise made her face shine, not to mention that it got brighter if I touched her shoulder at the same time. And the part-time teller was quality time. She liked my undivided attention at times because she was only there a few hours a day. All I knew is that I had a remarkable group of loyal employees. Knowing how people feel valued or loved ranks with knowing their strengths and weaknesses. How this knowledge translates into leadership is quite rewarding for everyone involved.

Acts of kindness extend beyond bonuses and promotions. Sometimes the money dries up and people stay until they retire. Knowing love languages and applying that knowledge in the workplace can increase moral, production and harmony among your staff. I encourage you to take the test at www.5lovelanguages.com and experience uncharted waters of success in your ships.

Resources:

http://www.focusonthefamily.com/marriage/communication-and-conflict/learn-to-speak-your-spouses-love-language/understanding-the-five-love-languages

http://www.5lovelanguages.com/

You only fail if you quit

There is something about time that makes you wiser and stronger if you will allow it to transform you. I don’t mean change, but truly transform. I know there are some mornings I go through two suits, three blouses and four pairs of shoes until I get the fit and feel for that day, which happens to be the first suit, second blouse and third pair of shoes. So change is interchangeable depending on your mood, perspective or your preference. But transformation comes with a type of metamorphosis where you’ll never be the same; that caterpillar to butterfly kind of thing; a total unrecognizable chain reaction that literally causes you to take flight. And the beauty of it all is that you are equipped with everything necessary to make it happen. That which stands in between the transformation is time and season. If the caterpillar’s life-changing process is interrupted, it dies. Failure is interruption that could cause your life-changing process (dreams) to die. Getting knocked off your twig by nature (failed attempts) can cripple and crush you transformation. But you have to set your eyes on Mexico; you must take flight or death is inevitable. The transformation is necessary for the journey to a warmer climate. If you do not transform, you die from the cold (giving up). You only fail if you quit.

In his book It’s A Jungle In There, Steven Schussler gives three things to learn from failure to graduate to success. One, failure isn’t permanent. You are working with an EXPO marker and not a SHARPIE. “Failure should act as a stimulus, not paralysis.” (2010, pg. 141) An entrepreneur should have the capacity to get back up again. Two, failure should bring humility. “You need to be humbled by your mistakes, not crippled by them.” (pg. 142) Check your ego and how highly you think of yourself. Humility gives you a window seat to the truth. Your idea wasn’t as great as you thought it was or you aren’t as invincible as you thought you were. Thirdly, failure translates into appreciating success-“…how precious it is to achieve and how difficult it is to maintain.” (pg. 142) Each success is a milestone to be celebrated and treasured. Failures transform you, successes transforms others. Your failures forerun a path for others to learn from and avoid.

We are far greater than the butterfly dangling from that twig with hopes of continued life. Life continues when you recover and keep it moving. Time has shown me those things that I counted as failures like my marriage ending in divorce, loss of that significant job where I had influence and power, or not spending enough quality time with my daughter because I am tired and she thinks I work too much were merely reminders that the life-changing process is just that, a process. And as I move towards becoming an entrepreneur, I’ll keep my eyes on Mexico and never quit …

Resources:

Schussler, Steven. (2010) It’s A Jungle In There. New York: Sterling Publishing Co. Inc.

Charts of Accounts, Income Statement and Balance Sheet ENT630

The Accounting for Profitability website for Alicia Sisk-Morris, CPA was very helpful for understanding and developing core information for Charts of Accounts, Income Statements and Balance Sheets. A summary of information is listed below.

Charts of Accounts

A general ledger is the portion of the accounting system that contains the balance sheet and income statement and where transactions are recorded. A chart of accounts is a master list of all of the account names that a company has identified for recording their financial transactions in their general ledger. Line items categories are industry specific. The categories can have sub-categories to organize departments.

  • NetMBA suggests the following numbering system for your chart of accounts:
    • 1000-1999: Asset accounts
    • 2000-2999: Liability accounts
    • 3000-3999: Equity accounts
    • 4000-4999: Revenue accounts
    • 5000-5999: Cost accounts for goods sold
    • 6000-6999: Expense accounts
    • 7000-7999: Misc. Revenue (interest income, etc.)
    • 8000-8999: Misc. Expenses (taxes, etc.)

Brighthub.com notes that account numbers should be spaced out to allow new accounts to be added. Also, the types of accounts will be different according to type of business, years in business, and the organization structure. Below you will find addition charts that could be included.

  • Asset Accounts
    • 1000 Petty Cash
    • 1010 Cash on Hand
    • 1020 Business Regular Checking Account
    • 1050 Savings Account
    • 1100 Accounts Receivable
    • 1400 Prepayments
    • 1500 Equipment
    • 1550 Vehicles
    • 1600 Land
    • 1700 Depreciation, Equipment
    • 1800 Deposits

Liabilities

    • 2000 Accounts Payable
    • 2300 Wages Payable
    • 2600 Notes Payable

Equity Accounts

    • 3000 Market Shares
    • 3500 Retained Earnings

Revenue Accounts

    • 4000 Service Earnings
    • 4500 Product Earnings
    • 4600 Interest Income

Cost of Goods Sold

    • 5500 Product Cost
    • 5600 Labor Costs

Expenses

    • 6000 Marketing and Advertising
    • 6100 Bad Debts
    • 6500 Employee Benefits

Chart I- Charts of Accounts

SMALL BUSINESS
CHART OF ACCOUNTS
10000 – ASSETS
11000 – Cash
11100 – Primary Checking Account
11200 – Primary Savings Account
11300 – Money Market Account
12000 – Accounts Receivable
15000 – Fixed Assets
15100 – Furniture
15200 – Computer Equipment
15500 – Building
15600 – Tenant Improvements
20000 – LIABILITES
21000 – Accounts Payable
22000 – Credit Card Account
25000 – Mortgage / Long-term Debt
30000 – EQUITY
31000 – Beginning Capital
31100 – Beg. Capital – Mary Smith
31200 – Beg. Capital – John Smith
32000 – Contributions
32100 – Contributions – Mary Smith
32200 – Contributions – John Smith
33000 – Distributions
33100 – Distributions – Mary Smith
33200 – Distributions – John Smith
39000 – Ending Capital
39100 – End. Capital – Mary Smith
39100 – End. Capital – John Smith
39900 – Retained Earnings
40000 – REVENUE
41000 – Sales
41100 – Sales – Customer 1
41200 – Sales – Customer 2
50000 – EXPENSES
51000 – Salaries & Wages
52000 – Supplies
53000 – Utilities
53100 – Electric
53200 – Gas
53300 – Water
54000 –
55000 –
70000 – OTHER INCOME
71000 – Interest Income
80000 – OTHER EXPENSE
81000 – Interest Expense

Income Statement

The income statement is one of four primary financial statements. It is also referred to as the profit and loss statement, statement of operations or the P & L statement. It tracks profitability for a specific time period such as monthly, quarterly or annually. Income statements come in a single-step format using only one subtraction to calculate a net income or a multiple-step format using multiple subtractions in calculating the net income. Either step results in a net income calculation. The format will be determined by the business activities. AccountingCoach.com gives these basic elements which include:

  • Expenses and Losses
  • Expenses involved in primary activities
  • Expenses from secondary activities
  • Losses (e.g., loss on the sale of long-term assets, loss on lawsuits)

 

See Chart II-Income Statement

ENT Company Income Statement
ENT Company
Month ending October 31, 2016
Financial Statements in U.S. Dollars
Revenue
Gross Sales/ Earned 10000
    Net Sales 10000
Cost of Goods Sold
Beginning Inventory 2000
Add: Purchases 1000
Direct Labor 300
Inventory Available 3300
Less: Ending Inventory
    Cost of Goods Sold 3300
   Net Income   Gross Profit (Loss) 6700
Expenses
Advertising 200
Commissions 500
Insurance 150
Equipment 600
Rent 1500
Utilities 350
    Total Expenses 3300
    Net Operating Income 3400
Other Income
Gain (Loss) on Sale of Assets
Interest Income
    Total Other Income 0
    Net Income (Loss) 3400

Balance Sheet

The balance sheet, also known as the statement of financial position, shows the financial condition of the company at the end of a specific date in time. It is a “snapshot” or “moment in time” that shows the company’s assets (items of financial value), liabilities (items of debt owed), and stockholder’s or owner’s equity (book value of the company). Reports are usually reviewed monthly, quarterly and yearly depending on board meetings.

John Tracy explains in the article Connecting the Income Statement and the Balance Sheet that the income statement and the balance sheet are connected. A sale increases an asset or decreases a liability, and an expense decreases an asset or increases a liability. Therefore, one side of every sales and expense entry is in the income statement, and the other side is in the balance sheet. You can’t record a sale or an expense without affecting the balance sheet.

See Chart III- Balance Sheet

ENT Company
Balance Sheet
  Year end Dec 31, 2015
Sales revenue                                                                               110,000
(Less sales returns and allowances)
Service revenue                                                                                 70,000
Interest revenue
Other revenue
                                                          180,000
   
Advertising                                                                                   1,000
Bad debt
Commissions
Cost of goods sold                                                                                 65,000
Depreciation
Employee benefits
Furniture and equipment
Insurance
Interest expense                                                                                   4,200
Maintenance and repairs
Office supplies
Payroll taxes
Rent
Research and development
Salaries and wages                                                                                 55,000
Software
Travel
Utilities
Web hosting and domains
Other                                                                                 17,460
                                                          142,660
Net Income Before Taxes                                                                                 37,340
Income tax expense                                                                                 14,936
                                                            22,404
{42}
   
Income from discontinued operations
Effect of accounting changes
Extraordinary items
                                                            22,404

Resources

10 Free Sample Income Statement Templates. (n.d.). Retrieved November 27, 2016, from https://www.sampletemplates.com/business-templates/income-statement-template.html

Chart of Accounts. (n.d.). Retrieved November 26, 2016, from http://www.netmba.com/accounting/fin/accounts/chart/

Chart of Accounts, Income Statement, and Balance Sheet. (n.d.). Retrieved November 29, 2016, from http://www.siskmorriscpa.com/chart-of-accounts-income-statement-and-balance-sheet/

Connecting the Income Statement and Balance Sheet – dummies. (n.d.). Retrieved November 26, 2016, from http://www.dummies.com/business/accounting/connecting-the-income-statement-and-balance-sheet/

Income Statement (Profit and Loss Statement) | Explanation | AccountingCoach. (n.d.). Retrieved November 25, 2016, from http://www.accountingcoach.com/income-statement/explanation/1

Sample Chart of Accounts – Free Template for Download. (2010). Retrieved November 26, 2016, from http://www.brighthub.com/office/finance/articles/72875.aspx

Personal and Business Credit Issues that may impact funding

Since a start-up has not established a credit score, lenders rely on the credit history of the owner. Your personal credit score directly affects your ability to secure capital. “Studies show that many small business owners borrow personally to finance their business operations, further intertwining small business borrowing and owner personal credit.” (Brown) Management of personal credit is a mirror of how one will handle business credit. Brown also quotes, “According to Small Business Trends, the power of personal credit scores to predict small business loan repayment, the legal structure of many small businesses, and small business owners’ use of personal guarantees and personal borrowing to finance business operations, all link small business owners’ personal credit to their companies’ access to capital.” Capital, which is essential for starting, building, sustaining and expanding the business, often diminishes within the stages of growth and development consequently, causing major set-backs or even shut-downs. “Bootstrap” or self-funding, coupled with borrowing money from close sources like family and friends is often the entrepreneur’s first line of finances. (Wasserman, 2012, pg. 26) Angel investors are often sought because they seek no return on the investment. It is a gift, but this line of financing can only go so far without a strategic plan. Credit is imperative in business growth and development.

The financial crisis that occurred when the housing bubble burst in 2008, changed the face of liberal lending. This financial “perfect storm” created market instability – “a dramatic change in the ability to create new lines of credit, which dried up the flow of money and slowed new economic growth and the buying and selling of assets.” (Guina, 2016) Who was left in the struggling to gain footing in the aftermath of the storm- banks, businesses, you and me. “Millions of small businesses had their lines of credit reduced or revoked, with many loans being called in before their due dates. In the first six months of 2009, 38 percent of small businesses reported a decrease in their lines of credit or credit card limits, according to the National Small Business Association.” (Fay) It shook the core of our economy and drove the US into a recession. What that meant for the business owners was strict credit scrutiny. “Startup businesses face credit problems as lender closely examine both personal and business finances prior to approving loans. Startup business owners must provide a financially sound business plan and have a clean credit history prior to applying for business loans. Lenders will look at the owner’s debt to credit ratio, credit score and past credit history before a loan approval.” (Zoldak)

Experian reports that credit scores range from 300-850, where 300-549 is considered as very poor, anything above 800 is excellent. An average good score is in the high 600-750 range. Everyone should check their credit report annually from https://www.annualcreditreport.com/index.action . This free annual report compiles data from the three main credit reporting agencies-Equifax, Experian, and Transunion. This report not only shows your credit standing, but it allows you to follow your progress and gives you early detection of information reported incorrectly.

A decline in credit worthiness morphs from many life events. The average person’s goal in life is not to have bad credit. Something happens that changes the one’s ability to maintain their lifestyle. Canadian financial consultants, Ginsberg Gingras suggests these causes of financial problems:

  • Loss of a job
  • Decreased income
  • Separation or divorce
  • Illness
  • Work-related accident
  • Student debts
  • Lack of familiarity with the consequences of using credit
  • Victim of fraud
  • Gambling problems
  • Alcoholism
  • Drug Addiction

Any one or combination of these factors will cause a personal credit score to plummet. All create the inability to pay personal debt. Personal debt management speaks to how a person will manage business debt. You are the same person. A bankruptcy, unpaid taxes or a felony can also contribute to the downward spiral of a life event. Your ability to recover will give an advantage in starting to rebuild personal credit and establishing business credit.

One may think that a life event like job loss is a great time to start a business, but is it? JD Roth asks, “Can your emergency fund last until your business is profitable?” Your financial responsibilities are not suspended. Your credit must stay worthy through the transitions. Launching your new business should be planned not forced. Roth also suggests, “While you are searching for your next job, I think it would be a great idea to devote some of your free time to further developing your ideas for a business. Then once you’ve obtained your next job, re-established yourself financially, built-up excess savings, and determined the proper time to enter the market, you can begin to implement the idea with confidence and a much faster road to success.” The road to incredible success is obtainable after termination. Steve Jobs, Oprah Winfrey, Walt Disney, Mark Cuban and Thomas Edison just to name a few are testaments to this truth.

David Balovich, in his article What Causes Businesses To Fail?shows that industry consultants give five reasons why businesses fail: loss of revenue, management/operational issues, lack of capital, economic conditions and credit/debt issues. For credit issues he states, “Many businesses for too long have relied on access to easy credit in the forms of lines of credit, loans and home equity lines of credit to finance their businesses. Small to mid-size businesses are now struggling as a result of tighter lending, high-rate credit cards, reduced lines of credit and maturing loans.” All of these issues flow back to housing crisis. He further explained, “…from the credit professionals’ perspective the two primary reasons a business fails are poor management and economic conditions. Poor managerial experience: including not following the business plan, weak internal controls, poor execution, hiring the wrong people, poor delegation skills, poor communication skills, ineffective time management.” Economic conditions are usually something that is beyond managements’ control. Good management practices, however, can permit management to respond to those opportunities and challenges that the economy, good or bad, is constantly presenting.”

He concludes with, “The good news about managerial shortcomings is that management has control over them and they can be corrected. The bad news is that management will sometime overlook these shortcomings and find fault elsewhere never admitting that they were to blame for the failure of the business.”

As we have seen, personal and business issues emerge in many forms from life events to lack of business planning. But credit worthiness can be restored. There are alternative funding strategies when your personal credit is damaged. Maggie McCormick offers several ways in her article, Starting a Business With Bad Personal Credit.

  • Set up your business as a separate legal entity. Register with your local government, sign up for a Federal Employer Identification Number and register for a Duns & Bradstreet number [provides business credit history]. This allows you to start creating business credit.

 

  • Bootstrap your business using your own funds. Do what you can to reduce your start-up costs. Learn to do things on your own so that you don’t have to pay someone else to do it. Use your own money to pay for the things that you need.
  • Purchase equipment and supplies on store credit from a company that reports your credit activity to the bureaus. Since the goods that you buy secure the loan, this is easier to get then other types of small business funding.
  • Apply for a credit card. At this point, you may have a bit of positive credit history that allows you to get a business credit card with a small limit. If you cannot, then put down a deposit on a secured business credit card so that you can start to build credit.
  • Use PayPal as a payment processor. A traditional merchant account will look at your credit score when making a decision of whether to approve you or not. PayPal allows you to accept credit cards from anywhere you have an Internet connection without a credit check.
  • Build a client base to start generating income. When you have income coming in, lenders will view you favorably.

 

In his article What Causes Businesses To Fail?, CM Brown believes that there are other factors that contribute to credit worthiness for a business such as bank deposits, credit card sales and credit partners.

  • Bank deposits – A business with regular bank deposits can put its cash flow to work with revenue-based loans. This program is based on the deposits going into the business bank account on a monthly basis. Typically, a business can obtain a business loan equal to 10% of its annual gross deposits regardless of having bad credit. Another benefit of this program is the time it takes to get funded, which is approximately seven business days. Keep in mind the loan term can be as long as 18 months with this program, with rates slightly higher than a traditional bank rate. It requires no collateral, financials or tax returns. Repayments are made in small increments every day via ACH from the business bank account.
  • Credit card sales – This type of funding program, known as a merchant cash advance, provides businesses with upfront cash in exchange for a portion of future credit card sales. For businesses that have regular monthly credit card sales but struggle with bad personal credit, a merchant cash advance may be a viable option. However, be very selective on what merchant cash advance provider you select. Some providers can cost as high as 38% while others can be as low as 12%. In addition, when it comes to repayment, the majority of merchant cash providers take a fixed percentage of your daily credit card receipt volume until the advance you took is paid back. Other business cash advance providers may offer a fixed monthly installment payment for its repayment method.
  • Credit Partner – Using a business partner(s) as a credit partner for obtaining lines of credit in the form of business credit cards can be a viable solution to overcome a personal credit challenge. A business partner who has strong credit scores is the best place to look. You may also want to consider someone who may be interested in participating in your business as a potential credit partner. This method does bring risk to the credit partner because they are cosigning with the business to obtain funding. However, these types of unsecured business credit cards will not appear on the personal credit reports of the cosigner unless they go into default.

 

The credit score is just as important as the source of funding when it comes to starting a business. Unforeseen circumstances, live events, or economic factors can all contribute to a fallen credit score. But your credit score is not the only factor in achieving credit worthiness. Your business plan, partnerships and other credit relationships can help your achieve your goals and dreams as an entrepreneur.

Resources:

Balovich, D. (210, December 7). What Causes Businesses To Fail? Retrieved November 25, 2016, from http://www.creditworthy.com/3jm/articles/cw12710.html

Brown, C. M. (n.d.). How Your Personal Credit Score Affects Small Business Lending. Retrieved November 21, 2016, from http://www.blackenterprise.com/small-business/how-your-personal-credit-score-affects-small-business-lending/

Causes of financial problems. (n.d.). Retrieved November 21, 2016, from http://ginsberg-gingras.com/en/understand/causes-of-financial-problems

Fay, Bill (n.d.). Obtaining Credit for a Small Business – Manage Debt & Build Credit. Retrieved November 20, 2016, from https://www.debt.org/small-business/obtaining-credit/

Guina, R. (2016, October 11). The 2008-2009 Financial Crisis – Causes and Effects. Retrieved November 25, 2016, from http://cashmoneylife.com/economic-financial-crisis-2008-causes/

McCormick, M. (n.d.). Starting a Business With Bad Personal Credit. Retrieved November 21, 2016, from http://smallbusiness.chron.com/starting-business-bad-personal-credit-4694.html

Roth, J. D. (2016, May 25). Starting a Business After a Job Loss. Retrieved November 25, 2016, from http://www.getrichslowly.org/blog/2009/05/17/starting-a-business-after-a-job-loss/

Wasserman, Noam. (2012) The Founder’s Dilemmas. Princeton, NJ: Princeton University Press.

What is a Good Credit Score? (2016). Retrieved November 26, 2016, from http://www.experian.com/blogs/ask-experian/credit-education/score-basics/what-is-a-good-credit-score/

Zoldak, A. (n.d.). Startup Business Problems. Retrieved November 21, 2016, from http://smallbusiness.chron.com/startup-business-problems-2391.html

Run with the Pack

Your service or product should always be your conversation. You are your biggest fan. Who knows the everything about it? Who knows how it can solve a problem they don’t even know they have yet? Who is the face of it? That person would be the creator. You gave birth to the creation, therefore you are not only marketing it, but you are marketing yourself as well. Investors are not just banking on the product; they are also banking on you. In his book, It’s a Jungle in There, Steven Schussler suggests that when you approach someone about partnering with you as an investor, they are considering several factors “You [the investor] would access the commercial value of the what the entrepreneur was proposing…; …be interested in that person’s commitment to her idea, her sense of dedication to what she was proposing, and the ‘sweat equity’ she was willing to invest in making her dream a reality.” (2010, pg. 110) The product or service is not on line, you are. Everything about you should sing and your passion should be oozing all over the place. Schussler believes, “By immersing yourself in your concept or idea certainly tells a potential investor you’re committed to achieving your objective.” (pg. 110) What is your presentation and is it a lasting one to compliment your next big thing.

Part of being a successful leader is the ability to move people to act. Peter Economy chose “inspire action” as his top choice in 7 Traits of Highly Effective Leaders. “Try to paint a vision of the future that inspires your people to do whatever it takes to get there. The best leaders also clear away the organizational roadblocks that constrain employees’ natural creativity and initiative, unleashing a tremendous amount of energy in the process.” Even though he is talking about leading a team, potential investors will become part of the team. You are an artist painting a detailed not abstract picture that inspires them to write a check or share some of their air. Also offering truths about your roadblocks could prove to be beneficial. The potential investors may offer solutions so that you do not have to reinvent any wheels. Building strategic partnerships allow you to “join forces” with a business or person that has already created value in a particular market. (Schussler, 2010, pg.103) Joining forces looks like “…strategic partnerships to facilitate the creation of a product or service, enhance its quality, and improve your profit margin at the same time.” (pg. 105)

You may have the lone wolf mentality when you step out in the venture, but running with a pack (successful business owners, executives or investors) can advance your dream into a bigger reality with a bigger payoff in the end.

Sources:

Economy, P. (2013). 7 Traits of Highly Effective Leaders. Retrieved November 20, 2016, from http://www.inc.com/peter-economy/7-traits-highly-effective-leaders.html

Schussler, Steven. (2010) It’s A Jungle In There. New York: Sterling Publishing Co. Inc.

See a Need, Fill a Need

The title quote from Robots’, the “…2005 American computer-animated science fiction dystopian comedy film,” chief inventor named Bigweld, anchored in my heart. (Wikipedia) Not just because my daughter had me watch it with her for what seems like once a month for the past 4 years, but it spoke to the incubating entrepreneur inside of me. I believe we all were created with purpose and to solve problems. Each of us in our own unique way has the abilities which contribute to functioning and flow of our space (community, state, or country). It lies dormant until stimulated by desire or need. Steven Schussler calls it “enhancement gaps-the difference between what you are seeing and what you could create to make what you are seeing better by providing some product or service.” (2010, pg. 65) These enhancement gaps are fuel to an entrepreneur’s soul. I see it as a catalyst for change and the awakening of a new venture. In other words, “…observing your surroundings to see what you can do to make things better is a surefire formula for turning a profit.” (Schussler, 2010, pg. 69)

This fuel feeds my desire to start an afterschool and summer program for kids in grades 3-5. I am not satisfied with the service I pay for each year. I have also found that at each grade level my daughter needs something different. But what will make the program I start different? I needed to discover a difference that will compel parents to invest in their children with my program call KIDZ KINGDOM. Discovery comes in the form of Research and Development. Schussler believes, “Research and development is the most direct route to that destination called excellence, the place every entrepreneur should want to call home.” (2010, p. 76) Each year I try different programs or I hope that last year’s program has improved, but I have found the results to be basically the same. I fill out surveys, but without tangible results. I know what I want as a parent, so I sought to find what other parents want besides a safe environment to play and learn; mostly play of course. They want something difference that has a foundation in learning, scholastically and with personal growth.

I am grateful for the journey into entrepreneurship with this degree. It is allowing me the opportunity to “incubate creative concepts before implementing them…” (2010, pg.81) I will be able to put all my ducks in a row and allow for new streams of interest to flow into this new venture. My need offering will be the summer school portion of the program. In my county, kids only attend summer school if they fail a subject. KIDZ KINGDOM summer school program will be for those who were promoted to the next grade. It will give them an opportunity to continue to learn during the summer with an added bonus of specialized play. It will offer science, math, arts, reading, technology, and sports and recreation. My daughter is in musical theater during the school year and she wants to be a fashion designer. So her summer bonus tracks will consist of design, dance, voice, and acting plus swimming. The need I desire to fill will provide for an awesome summer!

Schussler suggests that we, “…find new and impactful ways to attract attention to [the] product, and make it fun.” (2010, pg. 90) I believe this a la carte summer program will not only impact their beginning and end of grade test scores, but it will substantively impact the development of their dreams, gifting and heart desires. I truly believe that research and development, focused marketing and feedback will support annual robust cohorts to the program. Evaluation and assessment in conjunction with progressive improvement will bring incremental added value for the program, the kids and the community.

Sources:

Robots (2005 film). (n.d.). Retrieved November 20, 2016, from https://en.wikipedia.org/wiki/Robots_(2005_film)

Schussler, Steven. (2010) It’s A Jungle In There. New York: Sterling Publishing Co. Inc.