Building a Culture of Servant Leadership

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By Michael Iverson

Imagine if this was your first experience with an airline:  Leaving town for vacation, a friend and his young family were among the last passengers to board their Southwest Airlines flight. As the family made its way to the plane, crew members warned there was no room in the overhead bins for their carry-ons.  The captain told my friend to leave the carry-ons at the end of the breezeway and he would find a place for them. When my friend got to his window seat, he saw the captain himself carrying the bags down the stairs to employees loading luggage onto the plane!  My friend thought: What other airline captain would do that?  This act of servant leadership had a profound impact on him and he became a loyal customer of Southwest.

Servant leadership is a leadership style that has been around for over 30 years.  It was first introduced in 1970 by former AT&T executive Robert Greenleaf.  It really came into its own in the 1980s and 1990s, when companies that adopted servant leadership (such as Southwest Airlines and Starbucks) first achieved success and admiration.

But what exactly is servant leadership?  Servant leaders selflessly put their employees’ needs ahead of their own. The employees, in turn, put the needs of customers first.  Customers, appreciative of the attention and care they receive, reward the business owner with their loyalty.  It is, by design, a cycle of virtuous behavior.

It must be noted, however, that servant leadership is a model that can conflict with the traditional management philosophy of a leader needing to exert authority over employees.

Behavior of a Servant Leader  
The servant leader’s natural inclination is to help others.  He or she helps his employees become proficient in their work. A servant leader shows them how they can pursue careers that achieve balance between work and family life.  And, he or she rewards their efforts with financial consideration that is truly representative of the value they add to the business.

Its leadership by example and with integrity, teaching employees how to put the needs of others first.  A servant leader purposely stays out of the limelight, allowing his team members to accept the accolades and not themselves.  He or she trusts his employees to do what’s right for customers and the business.

Management consultant and author Franklin Covey put trust as the hallmark of a servant leader.  He cited 13 behaviors a business owner must adopt, including:

  1. Talk straight:  Tell the truth. Let people know where you stand.
  2. Demonstrate respect:  Show you genuinely care.  Respect everyone, including those who can’t do anything for you. Show kindness in little ways.
  3. Create transparency: Be genuine, open and authentic. Don’t hide information or have hidden agendas.
  4. Right wrongs:  Apologize quickly. Make restitution where possible. Demonstrate humility.
  5. Show loyalty: Give credit to others.  Be loyal to those absent and represent those who aren’t there to speak for themselves.
  6. Deliver results:  Establish a track record of results.  Don’t make excuses for not delivering.
  7. Get better:  Continuously learn and improve.  Thank people for feedback and act on feedback received.
  8. Confront reality:  Meet issues head-on.  Address the “tough stuff” directly.
  9. Clarify expectations:  Disclose and reveal expectations.  Ensure expectations are clear.
  10. Practice accountability:  Hold yourself and others accountable.  Take responsibility for good or bad results.
  11. Listen first:  Listen before you speak.
  12. Keep commitments:  State your intentions and then act on them.
  13. Extend trust:  Extend trust abundantly to those who have earned it.

Business owners who have adopted the servant leadership philosophy say it promotes team-building, achievement, positive change and high employee morale.  So, what’s the catch?

This style of leadership does not come naturally for some people.  Our achievement oriented focus is taught in school and does not consistently encourage servant leadership traits.  It requires an intentional approach to live the principles outlined by Covey.

If you can incorporate the principles of servant leadership into your business, you can provide an environment for your employees that is much more than a place to work.  You are inviting them to a better way to work, and a better way to live.

To discuss whether your business is a good fit for the servant leadership model, contact Trillium Financial.

What is the One Best Yardstick to Measure your Business Success?

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Mike Iverson’s client had it all figured out. He knew exactly how well his business was doing every month, without researching complicated data or paying an expensive consultant. He just looked at his phone bill. If the number of outbound calls was up, he could bet that his revenues for that month would be up, too.

A reckless, haphazard guess? Just the opposite. Iverson’s client had found a simple metric that he could track every month and immediately gauge the health of his business.

The concept of a simple metric as a forecaster of financial health belongs to Norm Brodsky, a successful serial entrepreneur and writer for Inc. magazine. The idea is for every company to find that one magic metric – the connection between a routine business function and the positive growth of a company.

“I think every business has it,” says Mike Iverson, Numbers Coach. “Every small business can put a finger on a certain key number that can tell you how you will end up that month.”

The trick, of course, is uncovering exactly which numbers have that relationship in your business. For example, if call volume goes up and sales go down, you’ve got the wrong metric. It is important to track as many numbers as possible in the beginning, because it may take two years (or more) to find the leading indicator. Also, recommends Iverson, track the numbers by hand. The process of writing the numbers down with a pencil and paper will help you realize the connections.

Here are seven important metrics for any business. Track them for 3 months and see which one gives the greatest transparency to the rest of your business:

  1. The Trailing 12-Month Sales Average: By monitoring – and graphing – sales from the 12 months prior, you’ll get a visual of the progress of sales, while taking seasonal issues out. If it’s July 2025, look at July 2024 through June 2025. Graph each month’s sales and see where the highs and lows were, and what the average was. If that 12 month average is trending up, it’s good. If the graph line is flat or declining something is causing sales not to perform.“If you look at just sales numbers month to month, you won’t see it,” says Iverson. “This is a visual metric: you want to see that 12-month trailing graph trending up.”
  2. Operating Profit Percentage: This shows the extent to which a company is making a profit on standard operations. When looking for indicating factors, ask, ‘Is this percent holding steady, increasing or decreasing?’  You can also examine this on a trailing 12-month average.
  3. Accounts Receivables Cash Conversion Cycle: If you extend credit to customers, track how long it takes to collect cash from the time the bill is sent. What is your cash conversion cycle (or DSO – Days Sales Outstanding)? Be careful about the terms extended to your customers; you have set them for a specific reason. If customers go beyond those time limits, you’ll feel the pinch.
  4. Days Inventory Outstanding (DIO): In theory, you should keep the least amount of inventory on hand as possible. In a perfect scenario, you would get the order in just in time to have it manufactured and sent out; the longer inventory sits unsold the more of a drain it is on your cash.
  5. Disbursement Cycle: These are the terms you get from your vendors. The longer you can hold on to your money and the faster you get it from your customers, the better.
  6. Working Capital as a Percent of Your Revenue: This is an important financial set of measures to look at because it is often overlooked by business owners, says Iverson. “They know to look at the income statement. But if all that operating profit is getting absorbed into working capital, then there won’t be enough cash flow to grow the business,” he says.Receivables and inventory are investments.  (And in the same way vendors have an investment in you.) You’ll want to invest as little as possible of your revenue in working capital. Turn your receivables to cash, your inventory into billing, and hold on as long as you can to your money. Look at the number of days net working capital is invested every month (or cents on the dollar of what’s invested). If you don’t have enough cash flow to cover what you’ve got invested, you’ve got a problem.
  7. Return on Capital Employed (ROCE ) Percent: According to FinanceScholar.com, ROCE measures the efficiency and profitability of a company’s capital investments. For example, capital assets such as trucks and computers should help make the business more efficient, cut down on costs and realize greater profits.  The ROCE percentage also indicates whether the company is earning sufficient revenues and profits in order to make the best use of its capital assets. The higher the percentage the better.

Tracking the numbers involved with these seven metrics over a period of time will give you an idea of which is the leading indicator for your business.

“It seems like the concept would be complex, something more to it. But really there’s not. If you break it down and keep it simple, the metric can give a business owner an easier way to digest information and act,” says Iverson.

Start measuring today so you can figure out what actions to take in order to achieve your financial goals.   The Numbers Coach can help; just contact us at (404) 353-2148 or mike@numberscoach.net.

Numbers Coach Crafts Financial Models for Brewing Company

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COMPANY
In 1993, Red Brick Brewing (RBB) started as one of the first craft brewers in Atlanta.  The Red Brick team is dedicated to providing the consumer with world class Southern beers and ales.  The consumer gets a consistently great-tasting beer from unique blends of hops and other ingredients.  The RBB team of dedicated people are passionate about brewing the best-tasting Southern beer.  (Red Brick Brewing rebranded back to their original name of Atlanta Brewing Company in 2018.)

SITUATION
In 2012, the Red Brick team was transitioning its financial management and reporting with the goal of creating a financial model that would communicate the company’s key performance indicators (KPI) and drivers of its financial results to management and investors.  However, the team quickly found that it was challenging to accomplish this goal on their own.

SOLUTION: The Numbers Coach Financial Leadership Services
The Numbers Coach (“NC”) financial leadership services were an ideal fit for developing RBB’s customized financial model and metrics.  NC’s,Mike Iverson, created the model and also reviewed the company’s financial results each month to help the team identify areas of concern or improvement.

RESULTS
NC effectively pulled together the required financial and non-financial data to complete a customized financial model, providing insights for the team to do product and cash flow planning.  The model was developed with “what if” scenario planning capability.   This allows the team to see how changes to key metrics drive the financial results of the business.  The model also has the option to provide a rolling forecast for the team to get visibility on how they might finish the year given actual results to date.

According to RBB investor (and founder of North Highland Global Consulting) Dave Peterson:  “Mike at the Numbers Coach jumped in and set up a customized financial model that matched Red Brick’s business and key metrics.  His solid understanding of financial reporting and analysis provided our company with the right tools for financial planning.  We would highly recommend the Numbers Coach financial leadership services.”

For more information on Red Brick Brewing Company/Atlanta Brewing Company, visit https://atlantabrewing.com.

To learn more about the Numbers Coach financial leadership services, click here.

“Mike jumped in and set up a customized financial model that matched our business and key metrics.  His solid understanding of financial reporting and analysis provided our company with the right tool for financial planning.”  

Dave Peterson, Red Brick investor & founder of North Highland Global Consulting

The Sale of the Small Business

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by Glenn Lyon, MacGregor Lyon, LLC

Thousands of small businesses change hands every year, but often not enough money is left in the hands of the seller.  As such, MacGregor Lyon would like to share some advice about preparing your business for sale.

  • Have an exit plan. Most entrepreneurs have start-up plans and growth plans, but too many fail to prepare for the time when they want to sell the business or reduce their day-to-day involvement.
  • Know the market value of your business. Know the value in the world marketplace. Simple formulas are often misleading and inaccurate measures of the value of a private business.
  • Explore ways to increase value. A business could be made more attractive to prospective buyers if changes are made in the organization, key personnel, or marketing strategies.
  • Understand when the market is ready. Be ready when buyers are active, money is plentiful, and interest rates are low.
  • Don’t assume the best buyer is local.
  • Document the growth potential of your business.
  • Consider which perks you’ll miss after selling your business.  Usually the transaction can be structured to retain those executive perks which you enjoy while meeting the buyer’s needs.

In addition to implementing these tips, be sure to work with a competent business attorney and tax professional. This is not a time to skimp on professional help.

Which Business Structure is Right for you?

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by Glenn Lyon, MacGregor Lyon, LLC

General Partnership

One of the simplest and most common ways for small businesses to bring in additional capital or someone with sought-after complementary skills is in the form of general partnerships. In these types of partnerships, stakes are evenly divided among each partner unless otherwise specified in a partnership agreement. All gains and losses general partnership are routed directly through to the individual partners’ personal tax returns and the business is typically not taxed as a separate entity, although it must still file a return detailing the revenues and expense of its partners (Form 1065). And because payroll isn’t required for general partners, if a company consists entirely of partners and has no employees, the paperwork requirements can be much simpler than that of a corporation.

However, general partnerships have some distinct disadvantages. The most important of these involves the risk exposure to the partners, who are jointly and severally (individually) liable for any debts or judgments against the company, which means the partners’ personal assets (home, car, investments, etc.) could be vulnerable to creditors. Also, many state laws mandate that if any one of the partners leaves or dies, the partnership is immediately dissolved, which can make succession planning more and legally tenuous.

Limited Liability Company (LLC)

Started nearly 30 years ago as a hybrid between corporations and traditional partnerships, LLC’s have proven to be an increasingly popular strategy for small business owners. LLC’s allow multiple owners of a company to directly share in profits as they would in a sole proprietorship or general partnership while shielding their various personal assets from liabilities or debts incurred by the business, protections normally found only in fully incorporated companies. A simple Operating Agreement establishes the LLC and sets up the rules for governing the company as well as the rights and responsibilities of each partner, or member.” As part of an LLC, members have the flexibility to chose whether to pass-through company profits to their personal tax returns or to have the business taxed as a separate entity.

Subchapter S Corporation (S-Corp)

Similar to traditional C-Corporations in every way except for a different tax structure, S- Corps have become quite popular among many small business owners. This is because S-Corporations offer the same tax advantages of sole proprietorships or partnerships—where all income is passed through to the shareholders’ individual tax returns—as well as offering the liability protections inherent to a corporation. The downside of S-Corporations includes increased administrative costs, a much more extensive set of rules and by-laws to follow regarding corporate governance, and closer scrutiny by the IRS. Also, federal regulations require that all S-Corporation shareholder- employees are paid prevailing wages (subject to Medicare, FICA, and any applicable state income taxes), before any profit distributions can be made.

Business Planning: Having a Business Plan Helps Ensure Sweet Success

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by Tim Fulton

Quick. Name a product or service that you or your business will gain more satisfaction from while it’s being developed or produced than when it’s finished.

Your answer?

“My tax return?” (Wrong answer)

“Chocolate chip cookies?”  (You’re getting much closer)

‘OK, I give up.”

Your strategic business plan!  (“I never would have said that.”)

Well, don’t feel embarrassed. Most business owners and managers do not consider developing a Strategic Business Plan for their organization. In fact, less than 20% of all small businesses have any type of plan in place including operating plans, marketing plans, succession plans, etc.

They deny themselves such pleasure for a number of reasons:

  • “It’s far too difficult to do.”
  • It’s far too costly to do.”
  • “I don’t have the time.”

Imagine that you have hired a builder to construct your dream home. You have this rather vague picture of this house in your mind and you communicate this image to the builder.

Now imagine that your builder plunges into the construction of your home without any architectural plans. No drawings.

In a panic, you stop construction and ask the builder why he isn’t using any plans or drawings?

He responds, “It’s far too difficult to do.” Or “It’s far too costly to have done”.  Or “I don’t have the time.”

It would be crazy to build a home without plans. How long would that “dream house” of yours last if it was not built to any type of specifications? How long do you think your business will last without any direction or strategy?

Now back to my original question.

What is fascinating about developing a business plan is that the greatest satisfaction is derived from the development of the plan itself. Just like baking chocolate chip cookies. I get more enjoyment from eating the delicious cookie dough while I’m baking than I do from the baked goods upon completion. Sometimes I get halfway done baking and stop completely. On rare occasion, the dough never makes it to the oven.

The business plan development process includes the following three steps:

  • Analyze the business as it exists at this moment in time
  • Determine your 3-5 year vision for the business
  • Decide what you need to do to move towards that vision

As you go through this process you will be forced to examine your business, as you have probably never done before. You will uncover your strengths and weaknesses. You will identify market opportunities and threats. You will set goals and objectives and then establish an action plan geared to achieving them.

You will take that image of your “dream house” out of your head and onto paper where it belongs.

When you finish, you will feel exhilarated and motivated like never before. You will find new confidence in your business. If this is not the case, it’s time to bail out. Sell the farm.

Once your business plan is completed, it than becomes your road map for leading your business. You will use it to make sure that the “construction” of your business is just as you have planned for. You may even want to share it with others such as your employees, your banker, or even your family.

Just like chocolate chip cookies.

Health Check: Is Your Overhead Growing Faster than Your Revenue?

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As a Numbers Coach, we consult with many growing companies.  One unhealthy trend we often encounter is a company whose revenue growth is not keeping pace with the growth of its fixed overhead. This situation is manageable in the short term, but problematic in the long run.

In today’s economic climate, many businesses find it difficult to increase prices or find new sources of revenue. For those businesses, revenues are stagnant or perhaps even declining. At the same time, employee salaries and benefits, rent and utilities are all trending higher. So, what do do if you find your business facing this predicament?

Let’s take a look at two possible solutions for this challenge.

Possible solution #1: Lowering prices

Given stagnant or declining revenues, lowering prices to grab market share is one possible strategy. To increase revenues under this strategy, you need to increase the volume of products/services sold. This may be feasible, especially in mature industries where a fairly uniform set of product/service features makes differentiation difficult to achieve. In these circumstances, price can be an important differentiator.

  • Possible pitfalls:The tricky part is assuring that a price decrease results in more volume and, therefore, increased revenues. By offering lower prices, you bet that a reduced profit margin per sale will be more than offset by a volume increase. If you can’t accomplish that with certainty, you may cause a potential disaster – by lowering your gross profit to the point where it still doesn’t cover your overhead!

  • Our advice: Carefully analyze the financial ramifications of a proposed price change before implementing it.

Possible solution #2: Lowering Salaries and Benefits as a Fixed Expense

For many businesses, particularly those in service-oriented industries, employee-related expenses are the biggest part of overhead.   There are instances where cuts to employee expenses make a great deal of sense.

For example, consider a local plumbing contractor who has significantly less work than he had three years ago. Prospects for next year aren’t good, because construction starts here in the Atlanta area are still suffering. The contractor has to consider how to reduce his overhead, since revenue growth will be marginal at best.

  • Possible pitfalls: In theory, employee-related expenses are a logical place to look when overhead needs to be reduced. However, most business owners are very reluctant to make cutbacks in this area – with good reason. Cutting salaries produces immediate financial benefits, but those benefits may be offset by a loss of employee trust and loyalty. By following the advice below, it is possible to reduce overhead while retaining loyal employees.

  • Our advice: When there isn’t enough work to keep existing staff busy on a full-time basis, an employer has several options. First, he may choose to cut back the hours of all employees. Our plumbing contractor put his non-administrative staff on 30-hour work weeks. All the employees share the pain equally, but they still have jobs and they seem grateful for that. Another option is to identify employees who are under-performing and make necessary cuts. Every business has high achievers that need to be retained and rewarded. That is difficult to do in a poor economic environment, especially when other employees aren’t achieving nearly as much. For our contractor, eliminating a single position meant keeping five high achievers happy and motivated. From a long-term perspective, it was the right business move.

So when your fixed overhead expense growth outpaces your revenue growth, look to alternative pricing strategies or reducing selected overhead expenses to set you back on track. But remember: rational analysis trumps emotion when it comes to financial decision-making.

If you need an objective opinion about your options, just give us a call at (404) 370-6147 or send us an email, and we are happy to advise.

One Crazy Idea Can Revolutionize Your Business

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by David Shavzin

“We are too busy mopping the floor to turn off the faucet.”
Anonymous

Trying new things is always a good idea. We get stuck in ruts as individuals and as companies. “We have always done it this way, so why change?”   It can be hard to get out from under the day-to-day fires and step back to THINK.

Even in the best of times, we need to keep reinventing how we do things. But certainly during these challenging times! Even if the years since 2009 have been an economic anomaly, they have clearly changed the business environment, including every industry and every aspect of the economy.

You’ve likely heard the definition of insanity (attributed to various people, including Albert Einstein): “Insanity is doing the same thing over and over, expecting different results.” If you have not been hitting the sales targets you had set, are you going to keep doing what you have been doing? What are you going to do to ensure a successful year? What are your customers doing differently? How can that impact you? How can you adjust to take their new habits into account?

You cannot – and do not want to – change everything. But, how about one thing? Just one “crazy” idea.

Here is an example: Sales at The Home Depot were down due to housing market problems and lower consumer spending. Sound familiar? So, they decided to sell off parcels of their parking lots. They are taking pieces of those giant parking lots and selling them to retail outlets such as fast-food, pet stores and auto parts. Imagine being in the boardroom when that idea was suggested!!

Here is my advice: Get together with your partners, your management team, your employees or a couple of friends or colleagues. Brainstorm and come up with your “parking lot” idea.

Get in a room with a white board, a flipchart or paper and pen. Ask everyone to help you brainstorm new ideas…laughing is allowed, criticizing is not, everything gets Written Down, as reasonable or wacky as they sound. If you can, have someone facilitate to keep you on track – they should not participate but keep you focused. Alignment and agreement among the owners or the management team is critical.

The ideas may be slight twists on something you are doing today, or they may be the most ridiculous-sounding ideas you have ever heard – at first! They may have something to do with operations, finance, human resources, production, marketing, sales, customer service or any other part of your business. New markets, new products, new staff member, an improvement to your production or sales process.

How can you make at least one of these ideas fit your business this year? It may or may not work. If not, go back to that list and try something else!

David Shavzin is President of Shavzin & Associates, Inc., a Certified Management Consultant, and a master of crazy ideas. He can be reached at (678) 795-1750 or dshavzin@shavzinassociates.com 

Does Your Business Have a Succession Plan in Place?

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by Michael Iverson

Have you met a business owner who is close to retirement age and wants to sell the business? His or her life’s work is tied up in it, and the owner is unsure whether a buyer can be found. Unfortunately, he or she never developed a plan to transfer ownership of the business.

According to a recent survey conducted by PNC Bank, only about one-third of small businesses in the U.S. have a succession plan in place. Without one, a business owner probably won’t attract what he or she considers to be a fair selling price. In all likelihood, the owner will sell the business at terms stacked in favor of the buyer. Should the business owner die without a succession plan in place, it might have disastrous consequences for his or her family, such as a forced sale of the business to pay estate taxes.

The business case for a succession plan is to make sure the owner can gradually withdraw from the business on his or her terms – at a fair price and on a preferred timetable. In this article we are going to focus on three key areas that need to be considered in your succession planning process: 

  1. Identifying a suitable buyer for the business.
  2. Allowing a long enough training period that assures a smooth transfer of ownership to the new owner.
  3. Preparing a financial plan for “cashing out” the owner without draining all of the business’s operating capital.

How to Identify the New Owner

Finding the right person to purchase your business need not be difficult, but it does require time and forethought. Trying to identify a buyer under time constraints is difficult, especially during an economic downturn. As part of your planning, write down periodically a list of possible buyers – even if you are not considering a sale just yet. The exercise is a good way to understand your options.

People familiar with your business are often the most likely buyers. Many business owners ultimately transfer ownership to existing business partners, a family member or a long-time employee. In any of these circumstances, there are benefits to the seller and the buyer(s), including:

  • The seller is likely to achieve a better price by selling to a party that knows the business.
  • The buyer(s) can negotiate a timetable that assures the seller will pass along valuable knowledge about running the business.
  • The resulting continuity of business will benefit employees and customers.

Do you know potential buyers of your business?  Go ahead and start making a list.

How to Plan a Smooth Transition

No matter who the prospective buyer may be, there are significant benefits to allowing a period of several years for a successful transfer of ownership, including:

  • The current owner can provide training to the prospective buyer.
  • The owner can also assess the strengths and weaknesses of the buyer, and spend the time necessary to address areas of weakness.
  • The prospective buyer can be introduced to customers and interact with them for an extended period – to minimize the risk of customer attrition.
  • A long transition period usually improves the financial stability of the business. And, the business’s tax accountants have a chance to plan for future tax liabilities.

A long time frame might not be warranted if the business is being sold to another company. In that case, a shorter period would be better to integrate. However, planning for the transition is still very important because the real work begins after the close of the sale.

How to Cash Out

As an owner transfers ownership of the business, he or she needs a plan for both a) funding retirement and b) leaving the business with the cash resources necessary to continue operations. In other words, writing him or herself a large check from the business’s bank account is not a solution.

Many partnerships put buy-sell agreements in place, which provide for the orderly exit of one partner. Deferred compensation plans can be established, which allow the owner to begin the transition to retirement while still collecting a salary. And, life insurance policies can be used to provide liquidity in case an owner dies before a transition is completed.

These are just a few of the considerations for any succession plan. The important thing to understand is this: not having a succession plan is a huge risk – not only to the business owner, but to his family and to the employees.

If your business doesn’t have a succession plan in place, get started today.  Let us know if we can help you by calling (404) 370-6147 or sending us an email.

Next time we will talk about what can create Transferrable Value. Without it, you don’t have a business to sell.

Are You Insuring Your Life and the Life of Your Business?

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by Duffy G. Elliott, CPA, CFP

As a business owner, you may not consider life insurance an integral part of your financial planning. However, life insurance is critical to an owner’s family, as well as the business, in the event of an unexpected death. In order to make sure both your family and your business are adequately protected, it’s important to purchase the
proper amount of life insurance coverage.

The amount of life insurance you need depends on your current net worth, the lifestyle you want to provide for your family, and ultimately, your personal desires. (see more detailed guidelines below).

For business owners, life insurance for the business is often referred to as “key man” or “key person” insurance. In this case the beneficiary of the policy is the business and not the owner’s family. The insurance is used to provide funds to help the business navigate through the change as a result of the loss of the owner. The funds may be used to buy out the owner’s family interest, find a replacement to lead the business, provide working capital to cushion any financial impact from the loss, or a combination of these options.

Key man life insurance is an important part of a business’ planning. Without it, all of the hard work by the owner and the sacrifices of the owner’s family could vanish.

A common rule of thumb is that you should purchase 5-7 times your annual income. Unfortunately, like most rules of thumb, this does not take into account individual circumstances and may leave you with an inadequate amount of insurance.

  1. First, you should consider how much your family will need every year, being sure to take into account the effects of inflation.
  2. Next, total your assets and other sources of family income. Be sure to include any benefits your family may be entitled to under any pension plans. If your spouse doesn’t work now, you need to consider if he/she would work if you died and how much he/she could earn. Don’t overlook social security survivors’ benefits available to your children under age 18 and to your spouse if he/she does not earn significant wages.
  3. Finally, determine how much life insurance you require. This will depend on how long your family will need this income, what rate of return can be earned on the insurance proceeds, and other factors.

Unfortunately, this is not a calculation that can be made only once. Since your needs will change over time, you should assess your insurance coverage periodically, especially if a major life event occurs.

To learn more about how life insurance plays an integral part of your business and personal financial planning, contact Duffy G. Elliott at Elliott & Associates Wealth Advisors at (770) 451-2446 or visit http://www.elliottandassoc.net/.

Could Your Business Benefit from an Advisory Board?

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by Michael Iverson

Self-reliance is a characteristic of most successful small business owners. When an important business objective needs to be accomplished, an owner often takes a hands-on approach. In my experience, the owner’s personal involvement usually assures that the objective is met.

There is a possible downside to self-reliance, however; an excess of self-reliance can stunt business growth. It’s possible for an owner to give too much weight to his own ideas, when listening to the ideas of others would yield better results. To guard against this possibility, many business owners establish advisory boards.

What Is an Advisory Board?

An advisory board is a group of peers that a business owner consults periodically and informally. Members of the advisory board provide perspectives and experience that help fill gaps in the business owner’s knowledge base. In other words, a humble business owner realizes that he doesn’t have all of the answers. Advisors usually make their most significant contributions by helping to shape strategic direction for the business, although some are capable of suggesting operational improvements.

Members of the advisory board are invited to serve because they are respected and trusted by the business owner. The business owner has a personal relationship with each member of the advisory board, so everyone has an interest in seeing the business succeed. Advisory board members serve on a voluntary basis; they have no fiduciary responsibilities to the business. They must not be afraid to offer honest opinions, because opinions and ideas are their principal contributions to the organization’s success.

Getting Started

Many business owners see how useful it would be to have an advisory board, but there’s an obstacle to putting such a board in place. The owners are so involved in the details of day-to-day business that they haven’t cultivated many professional relationships. Don’t let that become your excuse for not establishing an advisory board.

Good candidates can be found through a local business organization (Rotary Club, for example). Or, an owner can identify and approach retired executives with knowledge of the industry. Current business contacts are another source of excellent candidates. A supplier or vendor certainly has knowledge of your operations and an interest in your business success.

Recruit advisors whose skills and knowledge bases complement your own. Think about the biggest challenges you face in building your business and add advisors whose strengths speak to these challenges. No matter what business challenges you face, others have successfully addressed many of the same issues. Your task is to find them.

An advisory board should be a small, manageable group. Typically, the right size is three to six advisors. Knowledge of your industry is helpful, but it shouldn’t be a pre-requisite. At least one or two advisors should be from other industries. They will lend fresh perspectives. A good mix of advisors includes people from varied disciplines: sales, marketing, engineering, finance, human resources and legal, for example.

Compensating advisory board members is discretionary, but most business owners feel strongly that advisors should be compensated to reflect their contributions to an organization’s success. There are many ways to show your appreciation for a person’s valuable input. Gifts, dinners and cash bonuses are a few ways to express that appreciation.

If you would like to discuss how your business can establish an advisory board,contact us.  We’re glad to share our ideas!