Category: Uncategorized

Trust-Based Selling – An Abbreviated Book Report for At-Work Entrepreneur’s

 Preface: Trust-based selling is far beyond common processes and laws of selling; it is in a fundamental fashion, the human spirit of selling. Trust-based selling is a people process; it’s about living and working [selling] with a set of core beliefs, values, and principles, gilding trusted behavior.

Trust-Based Selling – Segment II

Report Credit: Donald J. Sauder, CPA

Why should buyers easily trust sellers? Sellers objectives have one purpose often — to get a sale. Therefore, sellers most often do not have the buyers interest at heart. Trust-based selling is built on a foundation of true customer focus, collaboration, transparency, and a far sighted perspective. You cannot use trust as selling tactic, solely. Your customers are smart; they can see rather quickly whether sellers are wearing self-centered shades in the conversation, and they know intuitively, even if they can’t point to what’s wrong – that a seller usually cannot be trusted.

Trust is no easy matter because it based on beliefs and principles, not on techniques or processes. Trusted based selling is behavioral selling. Trust-based selling is matter of living your beliefs, values, and principles to behave in trustworthy manner. This requires consistent principled behavior, not a fabricated façade. [The behavioral selling principle rests well with certain groups of sellers, e.g. Amish business owners intuitively approach selling while living their personal beliefs, values and gilding principles – each day  {authors report note}.]

Collaborative approaches to selling are necessary to be successful with trusted based selling. Trusted seller need to pick-up the phone and ask what the buyer wants, and how you can help the buyer. Some sellers fear collaboration, they have too much ego, and can’t share the pie; or they fear lack of knowledge; fear collaboration will help competitors, or result in lower prices. These fears are only in the sellers mind, and not objective marketplace conditions.

A far-sighted perspective makes you willing to make certain investment in relationships, and obtain better data for a higher return on investment. Fear that there will not be an opportunity tomorrow or next year; or that they [the seller] could be taken advantage, i.e. how will I benefit; or fear of not getting the reward right here, right now, because it might not come up again; these are the results of a lack of trust. A lack of trust results in fear.

Transparency builds trust. Secrets breakdown trust. Being transparent and letting buyers into your business, and into your thinking — builds trust. Transparency removes doubt about motives, helps your clients know you’re telling the truth, builds your reputation; and since your flaws and strengths are evident in transparency, people can make sensible judgement about you. Clients reciprocate by being open and above board as you gain credibility.

It is not surprise that not everyone practices transparency. Yet, this is how you build a trusted-based selling relationship. After all, is it prudent to show all your selling cards to those on the other side of the table? Again, this transparency resistance is a result of fear. The courageous seller who doesn’t fear rejection, doesn’t fear losing control of a sale, or doesn’t fear helping competitors, will be perceived as an honest and trustworthy seller – and that my friend, is trust-based selling.

Buyers will trust you not solely on your ability to get things done; because trust-based selling it is not a business process or a business system. It business neutral. Trust-based selling is far beyond common laws of selling, it is essentially the human spirit of selling. Trust-based selling is a people process; it’s about living and working [and selling] with beliefs, values and principles gilding trusted behavior.

Trust-Based Selling – An Abbreviated Book Report for At-Work Entrepreneur’s

Using Customer Focus and Collaboration to Build Long-term Relationships, Charles H. Green, Copyright 2006

Preface: At last, a sales book based on how adult, intelligent people actually buy. An Important contribution that challenges the effectiveness of much of the current sales practice, and shows how to do it better. David Maister, Retired Harvard Business School Professor

Trust-Based Selling – Book Report Segment I

Book Report Credit: Donald J. Sauder, CPA

In order for successful customer relationships to work, sellers have to care – honestly and deeply – about customers. Successful, flourishing salespersons know the trick is easy – you have to care – honestly and deeply. The solution, simple to state, is hard to live.

Three pillar questions in great sales are 1. What do buyers really want? 2. Why don’t they say so? 3. Why, if selling expertise isn’t the best approach, is it the dominant one? Customers and clients make decisions based upon trust. The best businesses gain sales from the trust they develop with customers. What buyers really want is to buy from someone they trust. Trust is developed with understanding the customer needs, asking the right questions, and demonstrating expertise – rather than talking about it.

An appreciation for what is best for the client or customer, and putting their needs first, always leads to more benefit to you and your business than putting your needs or your business needs first, e.g. Is your solution the ultimate for the need of the customer, or simply your month’s sales quota?

Studies show that to achieve duplicative sales successes you do not even have to deliver on all the wants and aspirations; after all, customers don’t expect you to perform miracles. Yet, you must understand and appreciate them for who they are. You need to connect, understand and care. Customer care is the key phrase. Care includes paying attention, showing interest, exhibiting curiosity about things important to the customers, e.g. seat warmers for car shoppers, complaining about cold winter temperature.

Trusted based selling is about doing business in such a way that you’re worthy of the customer’s trust. You must be personable, and genuine; and let the customer experience or sample what it’s like to buy your goods or services.

What buyers really want – even when they don’t say so – is a seller they can trust.

Trust based selling require solid competence, credibility, and reliability; and most important a sense that the seller cares about what is best for the buyer. Trust based selling is built on helping the buyer make the best decision or the purchase.

Buyers are people. They have fears of missing something, fears of being ignorant, fears of making a bad decision, fears of being taken advantage of. Trust based selling, eliminates fear, and replaces it with the confidence; the confidence of having made a good decision, long after the decision occurs.

Here the benefits of building trust:

1. Reduces challenges to competitor purchases
2. Minimized challenges on pricing
3. Minimized being second guessed, or double checking of facts
4. Increases customer willingness to listen
5. Helps customers share information that is useful to the seller
6. Improves chances your phone calls will be answered
7. More forgiving attitude when mistakes are made
8. Customers will seek you out take your advice when buying
9. Help with exceptions to the rule as appropriate
10. Give you preferential status

Trust is no longer a commodity in business. Trust is becoming an invaluable resource.

Pressures from a competitive, seller centric marketplace, with a greater gain attitude, and the risks incorporated when working to build trust, all hinder successful sales.

Good salespeople overcome these obstacles and the reap benefits for their customers, and ultimately themselves too.

Trusted salespeople have always been valuable, and will become more valuable in the future.

Preface: Optimal levels of equity in business, are the result of fiscal discipline. High debt to equity ratio enterprises are subject the to credit risks outlined in the following blog.

Looking Into 2018 — Credit Slopes

Credit: Donald J. Sauder, CPA

Business history data provides a clear cyclical history. That history yet differs in the timeframes of the effective expansion and contractions in the economic forces of supply and demand, fueled with credit driven consumption and credit driven business investments. Looking at the fundamental driver of business strategy, e.g. increased revenue, increased profitability, standard revenue increases are the result of greater assets investment, and greater asset output. While output can increase, e.g. manufacturers produce more skis, the demand for skis must be sufficient to sustain the increase in the levels of production. During business expansion cycles, demand outpaces supply, encouraging the growth of production, i.e. more skis sold, and more income.

The business cycle of skis is a small sub-segment of the greater business environment, but easily comprehensible. For ski manufacturers to succeed, several market catalysts must be in place, 1. Snow 2. Interest in recreational winter activities, 3. Consumer capacity to enjoy. If alpine ski businesses powered the stock market, the higher the lift, the more exciting the black run.

David Stockman, former Reagan White House Budget Director and former Congressman, thinks the current business cycle will experience a fiscal calamity of Biblical proportions, a financial reset in future years. To quote Stockman, “The Central Banks realize they cannot keep printing money at these crazy rates, and by that I mean bond buying. Now they are going to have to normalize and shrink their balance sheet….by the end of 2018 it will $600 billion a year.

In understandable terms the artificial snow creation on at the Federal Reserve’s economic resort cannot last all year. They skiing has been great, and sooner or later, the slopes will vacate for summer. This is to say that the again, a credit driven economy, resulting from Federal Reserve balance sheet expansion, same as artificial snow creation, is perpetually unsustainable in most US States. The Federal Reserve has been printed money and purchasing bonds on an overtime schedule since 2008, thereby financing investments and taking the bond markets up the lift. This market effect is an interest rate to decline upto the present time.

What happens if that trend is sustained? Inflation occurs, and a decline of the currency value from the dilution of the aggregate Federal Reserve notes, causing imported purchase to increase in cost in a global marketplace.

Stockman’s concern is how the US will balance its budget, with a decrease in revenues, e.g. The Tax Cuts and Jobs Act, recently approved by Congress. “Were talking 2019…..You’re facing not in the distance future, and not in the by and by way down the road…in 2019 the next fiscal year….a 1.2 trillion dollar deficit”. Stockman says in the next recession, the US budget deficit will really increase. “The stock market operation on the illusion of permanently low, ultra-low interest rates,” Stockman continues.

When interest rates rise, will the business environment be sustainable, or will stock market and bond markets will collapse with a massive debt reset. Maybe not in 2018, but ski slopes will eventually vacate again with the typical seasonality of the business cycle. Start preparing for a return to business as usual if you’re skiing on credit at the Feds resort. That’s the gist of Stockman’s advice. It will require a longer time than anticipated for most businesses to get to bottom of slopes.

This blog is not to be construed as investment, legal or accounting advice. It is for informational purposes only. Please talk with your trusted advisors before making any decisions.

Dear Clients:

Each year, the IRS requires businesses to file Form 1099 on various vendor payments made during the year, to verify the business expense for tax purposes. If you made certain qualifying vendor payments during the calendar year as a business or self-employed taxpayers, you may be required to file an information return Form 1099 with the IRS.

We are happy to provide you with assistance with your tax services, or filings of your Form 1099s.

You should approach 1099 filing compliance seriously. In fact, two questions are asked on every tax return for every business regarding the 1099 filings. 1) Are 1099 filings required? [see following subject payments] 2) Did you file the 1099s? Your response is required for an accurate tax filing each year. Penalties for non-filing are expensive. The filing deadline for 1099-MISC is January 31.

In preparation for preparing 1099s, here are the filing requirements for businesses and self-employed taxpayers:

 Payments subject to 1099 Filing:

If you made any of the following types of payments, then you may be required to file an informational 1099 return.

1. Form 1099-MISC is required for each person to whom you have paid during the year:

• at least $10 in royalties
• at least $600 in rents, services, prizes and awards, other income payments, medical and health care payments, crop insurance proceeds; or, generally, the cash paid from a notional principal contract to an individual, partnership, or estate;
• gross proceeds of $600 or more paid to an attorney during the year.

1. Interest on a business debt paid; filed on Form 1099-INT for interest payments of $10 or more.
2. Dividends or other distributions to a company shareholder; filed on Form 1099-DIV for dividend payments of $10 or more.

__________________________________________

You are not required to file information return(s) if any of the following situations apply:

1. You are not engaged in a trade or business.

1. You are engaged in a trade or business and

• the payment was made to another business that is incorporated, or
• the sum of all payments made to the person or unincorporated business is less than $600 in one tax year.

3. Wages paid on Form W-2
4. Employee expense reimbursements

_________________________________________

Thank you for complying with IRS required 1099 filings.

To simplify the preparation of your Form 1099 filings or associated tax questions, please contact our office and speak with Anthony Martin: 717-701-5368, extension 1.

Happy New Year!

A Sum-Up of the Tax Cuts and Jobs Act Applicable to Individuals and Businesses

 Donald J. Sauder, CPA

With President Trump’s signature, the week before Christmas, the Tax Cuts and Jobs Act has legislated major changes to US tax laws. Most notably, lower tax rates for both individual taxpayers and businesses. The new tax rates for individuals remain effective until 2025, when they revert again to the 2017 rates.

The Tax Cuts and Jobs Act Individual Taxes

The new individual tax rates are as follows:

Rate	Married Filing Jointly	Individual Filing
10%	$0 -$19,050	$0 – $9,525
12%	$19,050 – $77,440	$9,525 – $38,700
22%	$77,400 – $165,000	$38,700 – $82,500
24%	$165,000 – $315,000	$82,500 – $157,500
32%	$315,000 – $400,000	$157,500 – $200,000
35%	$400,000 – $600,000	$200,000 – $500,000
37%	Over $600,000	Over $500,000

 

Personal exemptions have been omitted from the calculation of individual taxes until 2025; along with this reduction in deductions to taxable income, the standard deduction has been increased from $12,000 to $24,000 for joint filers, and from $6,000 to $12,000 for individual filers. This increase has reduced the benefit of itemized deduction for 2018 to an increasing number of taxpayers. Filing requirements will now be subject to applicable new deduction thresholds.

The bill also prevents prepayment of state and local income taxes in 2017, and allows only $10,000 of property taxes to be deducted on Schedule A. The new law repeals all miscellaneous itemized deductions subject to the two percent floor, e.g. portfolio deductions, unreimbursed employee expenses, etc. Medical expenses have a lower threshold to deduction of 7.5% of adjusted gross income.

Although the increased standard deduction will trim the balance of taxpayers itemizing on Schedule A, charitable contributions deduction threshold will increase from 50% to 60% of income. Therefore, more charitably favoring taxpayers will obtain greater opportunity to reduce taxes. If you maximize the 50% rule every year, this is in the new bill just for you.

The child tax credit increases from $1,000 to $2,000 with a $1,400 refundable feature per child. Families who will forfeit tax dollars on the standard exemption, will now be rewarded from the family friendly higher child tax credits.

The federal estate and gift tax threshold increases from the $5.49m 2017 exemption to $10m; the new exclusion will permit married couples to exempt up to $22m for 2018. Heirs will continue to receive a “stepped up, date of death” basis for inherited assets on costs basis for following transactions. This exclusion will help families retain more of what they’ve accumulated, and pass it to the next generation. The generation skipping transfer exemption has also doubled.

The student loan interest deduction is retained in the bill, and the American Opportunity Tax Credit is not overhauled, supporting students and the incentive to higher levels of education.

 The Tax Cuts and Jobs Act Business Taxes

The new tax bill features a 21% corporate tax rate in 2018, and a 20% deduction on taxes for small business, e.g. pass-through ownership of say a partnership or S-Corporation. Therefore, partnership income tax rates will be 80% of the calculation from the prior table, after applicable thresholds. This pro-business tax atmosphere is designed to stimulate business activity, and support entrepreneurial ventures.

Businesses also benefit from a 100% bonus depreciation allowance for new assets placed in service after September 27, 2017, and before January 1, 2023. All new equipment placed in service before December 31, 2017 qualifies for the 100% bonus addends. The new law places a $10,000 cap on first year vehicles for business. Section 179 expensing, a well-regarded business tax planning feature, has been increased to $1,000,000 for 2018, from prior year $500,000.

The “free expense” know as Section 199 domestic production activities deductions is eliminated in 2018; the research and development credit stays in place.

Net operating losses are limited to 80% of taxable income from losses after December 31, 2017, and carrbacks are denied in most cases, with indefinite carryforwards, subject to certain limits. The new law keeps the “Johnson Amendment” in place, generally restricting 501(c)(3) organizations from political activities.

The law repeals the Affordable Care Act (ACA) individual shared responsibility requirement, making the payment $0, a change effective for penalties after 2018. The IRS has cautioned that full-year coverage compliance is required for 2017, or applicable exemption. If absent, a shared responsibility payment will be assessed.

The historic tax legislation is the largest in the US in at least 30 years, and to quote:

According to the Tax Foundation’s Taxes and Growth Model, the plan …….. would lead to a 1.7 percent increase in GDP over the long term, 1.5 percent higher wages, and an additional 339,000 full-time equivalent jobs.

The enormity and speed of the tax legislation is no less surprising than the pro-business environment that it supports.

If you have questions regarding the newly passed tax laws from the Tax Cuts and Jobs Act, please contact our office.

This blog is not to be construed as advice for tax or accounting, or any other purposes; it is for informational purposes only. Please consult with your advisors before making any decision applicable to this information.

As the Holiday Season is here again, we find ourselves reflecting on the past year and on those who have helped to shape our business in a most significant way.

Thank you!

We value our relationship with you and look forward to working with you in the year to come.

We wish you a very Merry Christmas and Happy New Year, filled with peace and prosperity for you and yours!

Merry Christmas and Happy New Year!

Sauder & Stoltzfus

Preface: Optimizing the tax code is in a few instances effortlessly simple. The domestic production activity, remaining for the 2017 tax year, is one tax attribute that can save some clients thousands + in tax dollars. The Tax Cuts and Job Act did not continue this “free” tax deduction, but for this years tax filing– here’s how it works. 

The Free Expense for Domestic Production Activities

Credit: Jacob Dietz, CPA

The domestic production activities deduction (DPAD) is a taxpayer-friendly part of the tax law that allows taxpayers to deduct an expense that cost them zero additional cash. It is a “free” expense! The DPAD is going away with the passage of tax reform, but it is still available for open years before the tax reform takes effect. The American Jobs Creation Act of 2004 created this deduction, which allows certain taxpayers to deduct up to 9% of qualifying income as a DPAD, subject to certain limitations.

What types of activities and industries qualify for the DPAD? Generally, agriculture, real property construction, and manufacturing qualify, as well as some other industries. Qualifying activities can include dairy farming, crop farming, metal fabrication, furniture making, general construction contracting, construction subcontracting, and the list could go on.

Since the DPAD is 9% of qualifying income, it only applies if a taxpayer earns a profit. If the taxpayer shows a loss, then the DPAD is zero. Guaranteed payments paid to the owners are subtracted from income. The taxpayer cannot include them as income when calculating the DPAD, even though it is money earned from the company.

Another qualification for the DPAD is that it cannot exceed 50% of W-2 wages. If a company only reports guaranteed payments to partners on a K-1, and files no W-2s, then their W-2 wages are zero, and therefore the DPAD is zero as well. The DPAD is also zero for a company that subcontracts everything, or has all the work done by a sole proprietor who does not receive a W-2.

Let’s give an example of how the DPAD could save money for an entrepreneur. Suppose ABCDEF Construction, LLC is a single-member LLC owned by Abner C. Deffler. It earned a profit of $100,000 and paid W-2 wages to its construction employees of $90,000. The company constructs real property, such as barns, so the activities qualify for the DPAD. Secondly, the company earned a $100,000 profit, so there is income available to take the DPAD. The DPAD should be $9,000, which is 9% of the $100,000 profit. Thirdly, $9,000 is less than 50% of W-2 wages, so the 50% W-2 wage limitation does not reduce the DPAD. Abner will deduct the full $9,000 DPAD based on the activity of ABCDEF Construction, LLC. If Abner’s top federal tax rate is 25%, then that DPAD could save him $2,250 in federal income taxes. If Abner had the same numbers three years in a row, then the DPAD could potentially save him $6,750 over those three years.

If you own a profitable business that pays W-2 wages in the construction, agriculture, or manufacturing industry, check if your tax return includes the DPAD. If it doesn’t, ask an accountant who is familiar with the DPAD why it is not there. Did your business income fail to qualify, or was it perhaps missed on your tax return? If it was missed, and your company has been profitable in recent years, it is possible that amending previous returns to include the DPAD could save you thousands of dollars. The DPAD gives certain entrepreneurs the opportunity to be good stewards of their money by saving on taxes using a “free” expense.

 

Preface: The Tax Cuts and Job Acts passage in Congress this week results in a triumphant step for President Trump towards Making American Great Again. Entrepreneur’s should appreciate the tax bill as pro-business.

Trump is Making American Great Again

Credit: Donald Sauder, CPA

The US Congress passing the Tax Cuts and Jobs Act this week, and President Trump’s subsequent signature is the economic equivalent of Trump’s Washington singing to America taxpayers “We wish you a Merry Christmas and a Happy New Year, good tidings we bring to your and kin, good tidings for Christmas, and a Happy New Year.”

Legendary financial and geopolitical analyst Martin Armstrong, says the Tax Cuts and Job Act passage is very, very positive for the US economy. The pro-business bill, will grow jobs, and help small businesses succeed. “Canadian companies are already saying they will have to relocate to US if this keeps up” to quote Armstrong. This bill could make the US look like the place to be for business. “It’s monumental” Armstrong adds. “We could hire ten more people (just with this bill passage.)” Armstrong continues that he was called to London and Brussels this week as the result of Trumps tax bill being game changing and pro-business with global implication.

So what’s in the new tax bill? The historic bill legislated lower tax rates for both individuals and business, enhanced child tax credit and repealing of the individual shared responsibility payment in 2018; the foreign deferred overseas held earnings repatriation rates and territorial tax system internationally are the major drivers to Armstrong’s opinions.

Highlights:

The standard deduction increased 100% from $12,000 to $24,000 for married individuals, and from $6,000 to $12,000 for individuals. Tax bill incentivizes families with a $2,000 credit per qualifying child.

Education provision provide 529 plan contributions for elementary and secondary schools.

Corporate tax rates are set at 21% and bonus depreciation increases to 100% until 2023. In addition, Section 179 expensing increases to $1,000,000 from the prior $500,000.

Small business owners will receive a deduction of 20% on threshold tax amounts.

The estate and gift tax exclusion increases to $10,000,000 for tax years 2018 – 2025.

The Tax Cuts and Jobs Act is giant step towards Trump’s plan to make American Great Again.

Armstrong continues that he expects interest rates to increase rapidly until 2021, within expectations with Janet Yellen’s Federal Reserve guidance earlier this month. This would result in bond market turbulence, so there is so reason for cautious optimism, but the tax savings for businesses both inside and outside American borders, are very pro-business and will put more money in individual wallets at the end of day.

We will have a more comprehensive report on the tax implication of the bill after the holiday.

Merry Christmas!

This blog is not to be construed as tax, investment, accounting legal advice. It is for informational and entertainment purposes only. Please consult with your trusted advisors with regards to information reported in this blog before making any decisions.

Preface: Sell-side due diligence prepares your business for the potential bidders  before your business reaches the marketplace. Exit planning can never begin to early. History supports the data that every business owner will eventually exit or transfer ownership. Plan ahead. Be prepared. Performing sell-side due diligence with your accountants and/or third part advisors  will reduce risks and build buyers confidence; ultimately adding substantial value. Within reach, the best investment bank tombstones are the result of applied logical business algorithms. 

Sell-Side Due Diligence

Credit: Donald J. Sauder, CPA

If you are thinking of selling your business, be proactive and not near-sighted in planning that sale. Sell-side due diligence is a reverse due diligence where you ask accountants or third-party advisors to perform proactive due diligence on your business, gearing it up for sale. These due diligence experts scrutinize your business for deal breakers and increase value. Investing in sell-side due diligence most often pays off for every seller.

First, sell-side due diligence helps identify problems and provide an opportunity to resolve those problems well in advance of presenting your business to a buyer. For instance, you have multi-state tax nexus, requiring your business to file tax returns in various states from activities in those tax jurisdictions.

If you have not filed taxes in various states that your business has nexus in, this potential liability could reduce value. Sales tax liabilities could another risk. Or, let’s say you have a warranty liability on a new product, sell-side due diligence will help you identify and resolve these potential problems well in advance of gearing your business up for sale. If you don’t correct these value reducers before taking your business to market, you could potentially break a deal or lose value at the negotiation table. Your sell-side due diligence team will create options to resolve these value reducers before they are brought to your attention from the buy-side due diligence team.

Secondly, what surprises do you need to avoid? How accurate are your internal financial statements for the years that will be scrutinized? How meticulous is your accounting software? What operations risk does your business have, or personnel resource concentrations ? Will your business’s greatest intangible–your experienced employees–stay if you sell the business? Do you need an accountant to fine tune your internal financial statements, to provide solutions to tax risks or to resolve book to tax differences? What about independent appraisals of fixed assets such as equipment or real estate?

Thirdly, a sell-side due diligence team will help you add value to the sale of your business asset. The objective analysis of your business’s financial performance, credibility of revenue forecasts, and specific niche buyer values, will help prepare you to contact buyers that could benefit from a strategic purchase of your business. Thinking through the questions that a buyer will raise and preparing responses will assist in making negotiations more smooth. Financiers will have questions about options on tax structures of the sale such as an asset sale or stock sale.

Is your business worth more as an entire unit, or could you sell divisions of your business in a “carve out” for more value? Where is the value in your business? Is it in real estate, intangibles (like goodwill or patents), equipment and machinery, or inventory?

Understanding what will interest a buyer, how they will pay for the purchase, and how it benefits them, will make closing the deal easier. Proper sell-side due diligence puts you in control during the sale, minimizes surprises, and adds value for you and the buyer .

Summary

Sell-side due diligence is about preparing for the potential buyer of your business before your business reaches the marketplace. Most businesses will be sold at some point due to family transitions, retirement, or other reasons. When yours does, plan ahead. Perform sell-side due diligence with your accountants and/or third part advisors. They will help you build trust and ultimately add value in the marketplace.

 

 

Preface: The incorporation of extraordinary customer service values, superior client satisfaction values, and a value of team excellence developed in your business,  you will ultimately reward you as an entrepreneur. Every aspect of your business culture develops from values. Extraordinary value is the result of extraordinarily developed teamwork values.  

The Values in Value

Credit: Donald J.  Sauder, CPA

Your business values determine your business’s value in the long term. Values are the desired culture of your business–-the behaviors of your company. Why should your business develop and adhere to values? It gives your business a philosophical heartbeat; it’s what you do for your customers. Simply, that’s how you develop value in business–with the value of your business’s services and/or products.

Bright Horizon Family Solutions employs 25,000 people in the US and UK. When Roger Brown and Linda Mason started the business in 1986 to provide high quality child care at workplace centers, little did they imagine what was in store. Less than 30 years later the company has $1.2 billion in revenues with 16,000 employees in the US. With early education and preschool services, Bright Horizon Family Solutions has a simple core value statement with the acronym HEART–-Honesty, Excellence, Accountability, Respect, and Teamwork. This is the culture of the business. Employees of Bright Horizons demonstrate these cultural values every day. And it works, because employees are committed to continuing a cultural value of honesty, excellence, accountability, respect, and teamwork, every day in the workplace. It’s the guiding compass to the service they provide to their clients-–the parents who entrust their children’s care to Bright Horizons.

Today’s business environment often has debased values. But that’s not to say your business should debase values, too. Bright Horizons wouldn’t be at $1.2 billion in revenue in their industry without adhering to extraordinary core values.

What can adhering to core values do your for business? Four categories of values can exist, according to Patrick Lencioni. They include core values, aspirational values, permission-to-play values, and progress values.

Core values are those deeply engrained in management and the board’s actions and behaviors. Core values are the cultural cornerstones of a business. Core values should be adhered to at all costs. Core values provide a solid foundation for setting the cultural tone as new opportunities and markets develop.

Aspirational values are those values that a business strives to obtain in the future. The aspirational value of better balance between work and home life may develop, with the desire to work around the schedules of employees who need flex time , or the flexibility to work a certain number of hours within a set time frame. Maybe today your business cannot provide flex hours, but it can strive towards that value in the future.

Permission-to-play values are the minimum standards required to get hired. You can create a set of permission-to-play values for new employees. But permission-to-play values should not be core values.

Progress values arise from marketplace trends. For instance, the value of autonomous employees can develop as your culture grows and your workforce learns what’s required to succeed, a culture that’s more than just a paycheck.

Why should you set values in your business? You need to develop a culture built on a set of principles that are fundamental and strategically sound for building your business. To relook at Bright Horizons values, it is the belief in the work environment of Honesty, Excellence, Accountability, Respect, and Teamwork that earned them the trust of millions of customers–and billions in revenues.

You need to weave core values into every area of your business, from marketing, to hiring, to research and development, to installation. If your employees come to work every day understanding that they work for a business with extraordinary values, where they are held to high standards or extraordinary standards, you will differentiate your business from the competition. You will achieve more from everyone on the team.

Don’t for a moment think that incorporating values is easy. It’s not. But if a little work on exceptional core values seems daunting, think about fixing the problems resulting from the absence of values. You probably already have values that govern your business, but maybe they are unwritten and not communicated or not understood. Document what your business values and what you envision those business values too be.

If you incorporate extraordinary values, or develop them in your business, when every aspect of your business culture grows from those values, you will ultimately reward yourself and your employees with extraordinary value (tangible and intangible).