Wyoming Entrepreneur Blog

Why Family Businesses are Special Today

Family-owned businesses are stable and optimistic, even in times of economic uncertainty. A recent national study by Kennesaw State University, the American Family Business Survey of family-owned businesses, studied the strengths, challenges and changes since a previous study done in 2002. It found that family business owners:
1 | Are optimistic about future growth - Even during some generally depressed business conditions, family business owners express optimism. Figures confirm that family businesses are better able to weather economic hardship and stabilize the economy than their non-family counterparts.
2 | Lack a sense of urgency about retirement and succession planning - Family businesses face some significant succession challenges. Over forty percent of business owners expect to retire in the next ten years, but many are less certain about retirement. Almost one third have no plans to retire, ever. Nearly another third report that retirement is eleven or more years away. This means that many owners plan to die running their business, which is not beneficial to their family, the business, its employees or its customers. Furthermore, nearly one third have no estate plan beyond a simple will.
3 | Select women as leaders - There has been an almost five-fold increase in the number of women leaders in family businesses in the last decade, far more than the increases seen in non-family businesses. The trend indicates that increased female leadership of family businesses should continue.
4 | Hold themselves and their employees to a higher ethical standard - Since family businesses are family and relationship oriented, they operate more ethically. Family owners have a major influence on their business and their values are emphasized in the business. Family orientation seems to translate into more ethical behavior and the resulting actions contribute significantly to their family’s identity in their communities.
5 | Expand on traditional management - There is a misconception that due to the relational nature of family businesses they are less professional. In one way this may be true, with only a few businesses having a written strategic plan or formal planning process. This is only one higher level of professional behavior. Despite the lack of formal strategic planning, they use other types of planning tools. Buy-sell agreements, business valuations, boards of directors, formal recruiting, performance appraisals, and benefits administration indicate their professionalism.
6 | More unified family values - Family unity and cohesion are critical to family business success and an important goal. Family members that agree on values, attitudes, and beliefs exhibit that unity and cohesion. The practice of these values result in increased levels of employee loyalty, commitment, and organizational citizenship. Similarity of values between family members in business and their customers can also improve relationships and foster economic stability.
7 | Place their trust in family members as key advisors – Overwhelmingly the business owner’s spouse is seen as their most trusted advisor, followed by their accountant, a business peer, parent, lawyer, and financial advisor.

Social Media Meets Corporate Ethics and the Law - Part 1

John W. of Casper asks, “As my company increases our use of social media as a marketing strategy, I find myself encouraging my employees to participate on social media sites as a work activity.  How do I determine what is ethical in terms of how employee time is spent online and what is expressed?”

The Problem 

Every day, more and more people are actively participating in online social networks.  Statistics show that over 80% of Internet users participate in a social networking site.  These networks are about communities, collaboration, and user-generated content.  Not only is the size of the social networking audience of interest to businesses, but the facts that information moves instantaneously and across global boundaries are also significant.  In this new “online, social world,” business reputations may be defined by customer opinions and ratings.  Companies that formerly feared the idea of social networking are embracing these sites to utilize for lead generation, employee recruiting, branding, customer service, and other typical business marketing functions.  

The use of social networking in the workplace raises many new and unique legal and practical issues for businesses who want to harness the benefits of increased employee participation in social networks, while avoiding the pitfalls.  On one hand, unregulated employee use/misuse of social media can result in an employer having to deal with unprofessional, and possibly illegal, actions by employees.  On the other hand, employers that enact tough restrictions may violate federal or state electronic monitoring laws, or laws relating to legal, off-duty personal conduct.  To navigate this minefield, companies are adopting official policies for social media usage, while the courts are simultaneously making rulings about the legality of those policies.  

Let’s examine some of the issues that may arise.  Decreased work productivity due to time spent online is one obvious problem.  Legal pitfalls, such as the possibility of an employee revealing confidential or proprietary company information in a social media post, are also a concern.  Another possible issue is a supervisor or employee posting discriminatory remarks about the company, a co-worker, or a company product on his/her Facebook page. Online harassment is an undesirable possibility.  What about an employee who engages in criminal conduct using his/her employer’s computer?  As companies flock to use social media outlets for marketing purposes, they must consider how employees can put them at risk and how to protect themselves.  The best solution is probably for businesses to adopt a set of clear, written social media policies that are consistent with their organizational culture.  

See next week's blog for more information about social media policies.

Electronic Payment of Taxes - Probably Not an Option Anymore!

    Previously, once your business’s federal tax liability (including all taxes) during a calendar year exceeded $200,000 or your payroll tax deposits exceeded $50,000, you were required to use EFTPS or Electronic Federal Tax Payment System, in the second succeeding calendar year.  However, under a proposed rule from the U.S. Treasury (REG-153340-09), any business with a tax deposit requirement would have to make deposits electronically as of January 1, 2011.  The Financial Management Service (FMS), a Bureau of the Treasury Department, beginning in 2011, is eliminating the system that enables the processing of Federal Tax Deposit (FTD) coupons.  Accordingly, these proposed regulations require the use of EFTPS for all FTDs, effective January 1, 2011, which is not that far away.  Designated federal taxes include employment taxes, corporate income taxes, social security taxes, FUTA tax, excise taxes and various other types of non-payroll withholding.
    EFTPS, or Electronic Federal Tax Payment System, is provided FREE by the U.S. Treasury Department for payment of federal taxes via the Internet or by phone 24/7.  It is handled by a secure government website that uses the highest level of security.  The system can only be accessed through a secure Internet browser with 128-bit encryption.  When you enroll or to gain access to your account, you must provide three forms of unique information – a taxpayer identity (EIN or SSN), EFTPS Pin#, and a password.  They claim it is secure, fast, accurate, convenient, easy to use and reduces penalties.  Once enrolled, business taxpayers can use the system to make all their federal tax payments via the Internet or by phone.  Both methods are interchangeable.  Via the Internet you can initiate a tax payment 24 hours a day, 7 days a week.  Also, you can conveniently schedule tax payments up to 120 days in advance of a tax due date.   It takes about two weeks after you enroll to receive an enrollment confirmation, so plan ahead.  For more information about enrolling in EFTPS, visit www.eftps.gov to get started.
    So get ready to make the change and (maybe) get rid of those paper FTD coupons, you probably won’t be able to use them after the first of the year. 

I may be hiring some part-time help occasionally for my handyman business. Will I have to make these individuals employees, or can they be independent contractors? Steve L., Casper

Most new businesses tend to shy away from hiring employees, due to the complexities of doing payroll and submitting payroll taxes.  Before you write a check to someone as an independent contractor, be sure that you understand how the IRS defines “contractors” vs. “employees.” 

In defining the relationship between an employer and an employee or independent contractor, “degree of control” is important.  Questions to consider are:

1. Does the company control or have the right to control what the worker does and how the worker does his/her job?

2. Are the business aspects of the worker’s job controlled by the payer?  Are expenses reimbursed?  Who provides the tools/supplies used on the job?

3. Is the company providing any employee benefits to the individual?  Will the relationship continue?  Is the work performed a key aspect of the business’ operations? 

The general rule is that an individual is an Independent Contractor if the person/business for whom the

services are performed has the right to control or direct only the results of the work, not what will be done

and how it will be done.

According to the IRS, there is no “magic” collection of factors that automatically define a worker as an employee or independent contractor.  They look at the entire relationship and consider the degree of direction and control to make each individual determination. 

At the point that you determine that the individual you are paying can be classified as an independent contractor, you should have the contractor fill-out a FormW-9, Request for Taxpayer Identification Number and Certification.   On this form, you will collect the correct name and Taxpayer Identification Number (TIN) of the worker.  A TIN can be either a Social Security Number (SSN) or an Employer Identification Number (EIN).  The IRS advises that you keep the W-9 form in your files for four years. 

At year-end, businesses are required to file a Form 1099-MISC to report payments made in the course of a trade or business to others for services.  If you pay someone who is not your employee (subcontractor, attorney, accountant) $800 or more for services provided during the year, you are required to send a form 1099-MISC to the independent contractor by January 31^st of the year following payment.  You must also send a copy of this form to the IRS by February 28.   

One important thing to consider if you are hiring independent contractors is liability in the event of injury.  If you hire an independent contractor to do a job that could conceivably result in injury, you may want to check to see if the contractor carries his own Workers’ Compensation Insurance. 

Customer Service is Sooooo Important!

I am a consumer, you are a consumer, we are all consumers. I am writing this purely with my consumer hat placed firmly on my head. I am very passionate about small businesses and wish I had one myself. So, maybe, it is this passion that causes me to be a critical consumer. Don't get me wrong, I don't outwardly complain to the manager, but observe and share my experiences with friends or with you our readers. You probably too share poor customer service with friends. Word of mouth gets around pretty fast. So how is your customer service? Do your employees practice good customer service? Have you trained them? 

I will keep this to one example: I promise!

I live in a small town, with one very small grocery store (not in WY). The next closest grocery store is eight miles away, so for quick fixes, I won't travel that far. I believe in supporting local businesses, and have tolerated the poor customer service in this little grocery store for two plus years. The owner is great. Some of the employees are good too. But, there are a couple of employees that don't greet you with a hello, or say anything (to me anyway). On the occasion that I need to ring the bell for assistance, these employees act as if I interrupted something very important. This behavior reflects badly on the store and on the owner.

Don't think you need to train people how to greet customers, how to make them feel special (if they come in three or more times a week for two years, how hard is it?), how easy it is to smile, say Thank You for shopping here because I know you have other choices? Unfortunately, you don't have to go far to find a great example of poor customer service.

Am I being too critical? I would love to see your comments on customer service and especially if you provide employee training!

Change Strategy

When a new manager is hired, change will likely follow.  This isn’t a bad thing...unless the manager doesn’t implement the change thoughtfully.  If you find yourself in this position, don’t rush into change, be thoughtful, analytical, and make a plan!

A new manager may feel resistance to the change simply because the employees don’t know what is in store for them; it’s human nature and the new manager is a change in itself.  The employees may fear the unknown and just need a little time to adjust to the new style of leadership.  A new manager should be prepared to answer questions and to provide guidance and feedback to the employees. But, before additional change is implemented, a new manager may want to take time to become familiar with the current culture of the business.  A new manager also needs to build trust and get to know their team (as well as the business owner), and examine the history of the business and how things were done prior to he or she taking the position.  Employees should be engaged in conversations to find out what they feel is, or is not working in the business.  This will allow them to take ownership and might provide a foundation for the changes being considered. 

A new manager should make it clear what types of changes are being considered and for what reasons. Is it to keep up with technology, is it for efficiency or environmental reasons, is there a change in the market, are the changes due to financial matters, or is it competition that is driving change?  It will be very important for a new manager to understand the nature of the changes and the impact they will have, positive or negative so they can be clearly conveyed to the employees; good communication is key.  The greater the buy in from the team, the greater the chances are for positive change and success.  

 

Have you been in a position to impose change in a business?  What strategies worked for you?  More importantly, what strategies didn’t work and why?

Interns Rock!

Want to find a way to get that project completed…you know the one you really want done, but which you never seem to find time for?

How about working on updating your website?  Conducting a customer service survey?

No time? No money? No problem!

Try hiring an intern.  I have had interns for the past 6 years and they are a great way to stretch your resources and to bring enthusiasm, dedication and hard work to your business.

The first step in hiring an intern is to think carefully about what you want and need an intern to do.  One thing I would advise is to ensure that your intern is not simply shuffled off to do filing and copying.  Look for interesting projects that the intern can “own” and which are desirable from your company’s standpoint.  I have used interns to do statistical analysis of customer feedback, to create interactive data CD’s and to do research projects for clients. 

I believe that the key to a successful intern program is to come up with a varied and interesting set of tasks for the interns that keep them engaged and which further their real-world education.

Given my location in Laramie, I have tended to hire interns from the College of Business.  However, depending on your company, you could find interns in any of the other Colleges at UW, or from your area community college.  If you are interested in a business student, the contact information to begin the process is below.

College of Business Internships Office, Dept 3275
1000 E. University Ave.
Laramie, Wy 82071
Phone: (307) 766-2363
Joan Downham, Coordinator, College of Business Internships
downhamj@uwyo.edu

The WMRC has had interns from overseas and from Wyoming.  Every one of them has brought something unique and has helped make our organization better.  Hiring an intern can be an inexpensive, interesting and invigorating way to bring new blood to your organization and to finish that project that always seems to be pushed aside by day-to-day life.

What has been your experience with interns?

Tough Market Conditions Present Opportunities to Build Infrastructure

As a former [read as: reformed] banker, I find that a majority of my friends are either bankers, portfolio managers, or business service providers.  Perhaps that is because of the propensity to see these same individuals at the golf courses and other "social networking" venues I still frequent.  Whatever the case, my current responsibilities as a business counselor and legal specialist with WyomingEntrepreneur.Biz makes for a synergistic partnership with these colleagues.

So on the frequent occasions I have to visit with these "finger-on-the-pulse-of-the-economy" friends of mine, I always ask them, "What should I be telling my business clients to do in this economy"?  The resounding response is: "Grow!"

Now, "Grow!" can mean a lot of different things to different people.  Perhaps my commercial lending compadres are suggesting the time is ripe for a huge expansion loan...but I doubt it.  Maybe my investment friends are suggesting I tell you to go diversify your portfolio...but they always say that, so I doubt these tough economic times warrant any special treatment.  No, I think what "those in the know" are suggesting is that this is a good time to invest in your business.

Investing in your business can also mean many things, but to me that means working on your infrastructure.  We all know that infrastructure is just a big word that means "the nuts and bolts" of your company.  That new record keeping software, that piece of equipment that needs refurbished/replaced, the certification you have put off, even resurfacing the parking lot or a new coat of paint on the office walls...they are all infrastructure.

When business is good you are too dang busy to worry about those small details.  How many times during "peak sales" did you say to yourself, "Ah, I need to take care of {insert problem area here}."  But you never did because you were too busy making money to find time to spend it...I mean, reinvest it in your company.  With the economic slowdown, the slow sales, and the fear of just covering the bills comes a temptation to withdraw and save every penny.  Problem with that is, we KNOW [emphasis added] that things will rebound.  Already $1.5 trillion has been earmarked for something called "economic stimulus" nationwide.  Whatever that really means, it means there will be a lot of money that needs to be spent.  When the "good" times come back, will your business be poised to capitalize?  Or will you be woefully unprepared?

One final thought...if you think that you have your business as prepared for the rebound as it can possibly be - and you have employees - then consider investing in your greatest asset: your staff.  Employee training [training = training, certifications, continuing education, licensing, skills assessment, skills improvement, etc., etc., etc.] is a fairly low-cost, high-return, and easy investment in the people who make your business run.  If you are unsure what training your people need, or how to find the training you know they need, contact your local WyomingEntrepreneur.Biz office for a no-cost consultation to point you in the right direction.

Whether it be in the equipment, the real estate, the business plan, or the people...an investment in your business today [when things are slow and manageable] will lead to rewards when the inevitable bounce-back arrives.