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How — and Why — to Coach Your Employees to Replace You

Posted by Admin Posted on Nov 15 2019

Unfortunately, many leaders don’t coach anyone to replace them -- and in my view, not coaching their replacement is one of the biggest mistakes they can make.

Have you ever wondered why amazing CEOs, and leaders of all kinds, don’t leave behind amazing CEOs after they leave?

Most leaders want to be the smartest person in the room. They’re afraid to coach people to be better than them. It’s a scarcity mindset that keeps people from teaching their replacement. They think: I’m not going to teach someone how to take my job, that’ll make me replaceable. It’s easier to defend yourself and your position. It’s easier to get lost in the day-to-day operations of your company. It’s easier to address problems as they happen. It’s easy to be reactive.

Beyond that, the real hard truth is that you can’t teach someone to replace you if you don’t know what you do. And frankly, most people probably have no clue what they’re doing. But here’s what some people miss: You don’t grow a company around a single individual. You build it around a team of people, all of whom are smart, capable and well-coached. Otherwise, when that single individual is gone, everything could collapse. 

You always want a backup plan in place, and that backup plan is surrounding yourself with people who are capable of doing great things, and that you have coached to be better than you.

That’s the secret to leaving behind amazing leaders: Teach people to do their job and your job so well that they can operate without you. Then they’ll teach the next generation even more. And on it goes… without you.

Many people in corporate America don’t approach it like that. They view the situation from a scarcity mindset: Why would I coach someone to take my job? Here's my take: If you don't do that, your company will be built around you, and when you’re gone, it will crumble. Because if you don’t coach your replacement, your company will die with you. And your legacy will begin and end with you. If you surround yourself with people who are better than you and coach them to replace you, your company won’t crumble after you’re gone. It will only improve.

So how do you coach people to replace you?

I ask if they could do their boss’s job.

 

It’s not enough for me to coach my replacement. I essentially ask people in my company, Scribe, if they could replace their boss. I do this to coach people to think about their jobs the same way: What do they need to learn in order to do their boss’s job? In that way, everyone is constantly learning to be better and, simultaneously, teaching their replacements. That’s another secret: It’s not enough for you to coach your own replacement -- you also have to coach others to coach their own replacements. That’s how you create a learning machine in your company, and that’s how you leave behind an unforgettable legacy. It's why I scenario-test with our director of operations every month -- for the day when I ask her if she could be the COO and she says, "Yes." 

After that first scenario-test call, our director of operations and I met in the office. “Could you be COO?” I asked her frankly. “No,” she said. “I would have had no idea what to do in that scenario. How do we hire replacements for those three people?” Now, when I ask her what she’d do if she were COO and three people quit, she knows exactly how she’d handle it.

The best CEOs aren’t interested in being the smartest person in the room. They coach people to be better than they are. 

529 funds can be used for K-12 tuition, but Minnesotans should approach with caution

Posted by Admin Posted on Sept 10 2019

The Tax Cuts and Jobs Act of 2017 (TCJA) provided some help for families with Qualified Tuition Plans (529 plans). According to IRS guidance, the use of 529 plans was expanded under federal law to include K-12 school tuition up to $10,000 per student per tax year. That means a family member can make a tax-free distribution from their 529 plan to help cover kindergarten through post-secondary tuition expenses.

But, for Minnesota families, that allowance comes with a word of caution.

“Minnesota doesn’t recognize K-12 expenses as a qualified expense,” said Laura Bereiter, CPA, CFP ® , director of tax and financial planning at White Oaks Wealth in Minneapolis. “So, while you may use your 529 plan toward K-12 tuition and not see a penalty or additional income on the federal side, Minnesota requires those distributions be added back to your federal adjusted gross income.  Minnesota taxpayers may also find themselves paying back deductions or credits received in the past for 529 plan contributions if the funds are used for K-12 expenses.”

This is one of several items Minnesota did not conform to in its 2019 tax bill that was signed into law during this year’s special session. While this isn’t new compared to previous tax years, there’s potential for confusion as Minnesotans hear that the state tax code conformed to some parts of the TCJA.

“Not everything is in full agreeance between Minnesota and federal tax codes. So, it’s still quite complex,” added Bereiter. “That’s why it’s important to consult a tax professional, such as a certified public accountant, to determine what new tax changes were passed in Minnesota and how it’ll affect your family.”

With this in mind, Bereiter offers the following advice to families preparing for the school year:

  1. Consider saving the funds in the 529 plan for college expenses and using other resources to pay for K-12 tuition. Not only will this allow the account balance more time for tax-deferred growth, but it won’t negatively impact your Minnesota tax situation.
  2. If you find yourself needing to use your 529 plan for K-12 tuition, work with a CPA to project the impact the withdrawal would have on your 2019 Minnesota tax return. Do you need to increase your withholding or make an estimated tax payment to cover any additional tax liability and minimize underpayment penalties?
  3. Many families can take advantage of the Minnesota K-12 education subtraction or credit. This applies to qualified education expenses (not just tuition) related to a child in kindergarten through 12th grade. No 529 plan is necessary to receive this benefit on your Minnesota income tax return, but the credit is subject to limits and phases out. The subtraction doesn't have these same restrictions. A CPA can help you determine which one works best with your financial situation.

Taking a long-term approach to certain insurance documentation

Posted by Admin Posted on Aug 05 2019

After insurance policies expire, many businesses just throw away the paper copies and delete the digital files. But you may need to produce evidence of certain kinds of insurance even after the coverage period has expired. For this reason, it’s best to take a long-term approach to certain types of policies.

Occurrence-based insurance

Generally, the policy types in question are called “occurrence-based.” They include:

  • General liability,
  • Umbrella liability,
  • Commercial auto, and
  • Commercial crime and theft.

You should retain documentation of occurrence-based policies permanently (or as long as your business is operating). A good example of why is in cases of embezzlement. Employee fraud of this kind may be covered under a commercial crime and theft policy. However, embezzlement sometimes isn’t uncovered until years after the crime has taken place.

For instance, suppose that, during an audit, you learn an employee was embezzling funds three years ago. But the policy that covered this type of theft has since expired. To receive an insurance payout, you’d need to produce the policy documents to prove that coverage was in effect when the crime occurred.

Retaining insurance documentation long-term isn’t necessary for every type of policy. Under “claims-made” insurance, such as directors and officers liability and professional liability, claims can be made against the insured business only during the policy period and during a “tail period” following the policy’s expiration. A commonly used retention period for claims-made policies is about six years after the tail period expires.

Additional protection

Along with permanently retaining proof of occurrence-based policies, it’s a good idea to at least consider employment practices liability insurance (EPLI). These policies protect businesses from employee claims of legal rights violations at the hands of their employers. Sexual harassment is one type of violation that’s covered under most EPLI policies — and such claims can arise years after the alleged crime occurred.

As is the case with occurrence-based coverage, if an employee complaint of sexual harassment arises after an EPLI policy has expired — but the alleged incident occurred while coverage was in effect — you may have to produce proof of coverage to receive a payout. So, you should retain EPLI documentation permanently as well.

Better safe than sorry

You can’t necessarily rely on your insurer to retain expired policies or readily locate them. It’s better to be safe than sorry by keeping some insurance policies in either paper or digital format for the long term. This is the best way to ensure that you’ll receive insurance payouts for events that happened while coverage was still in effect. Our firm can help you assess the proper retention periods of your insurance policies, as well as whether they’re providing optimal value for your company.

 

Buy vs. lease: Business equipment edition

Posted by Admin Posted on May 28 2019

Life presents us with many choices: paper or plastic, chocolate or vanilla, regular or decaf. For businesses, a common conundrum is buy or lease. You’ve probably faced this decision when considering office space or a location for your company’s production facilities. But the buy vs. lease quandary also comes into play with equipment.

Pride of ownership

Some business owners approach buying equipment like purchasing a car: “It’s mine; I’m committed to it and I’m going to do everything I can to familiarize myself with this asset and keep it in tip-top shape.” Yes, pride of ownership is still a thing.

If this is your philosophy, work to pass along that pride to employees. When you get staff members to buy in to the idea that this is yourequipment and the success of the company depends on using and maintaining each asset properly, the business can obtain a great deal of long-term value from assets that are bought and paid for.

Of course, no “buy vs. lease” discussion is complete without mentioning taxes. The Tax Cuts and Jobs Act dramatically enhanced Section 179 expensing and first-year bonus depreciation for asset purchases. In fact, many businesses may be able to write off the full cost of most equipment in the year it’s purchased. On the downside, you’ll take a cash flow hit when buying an asset, and the tax benefits may be mitigated somewhat if you finance.

Fine things about flexibility

Many businesses lease their equipment for one simple reason: flexibility. From a cash flow perspective, you’re not laying down a major purchase amount or even a substantial down payment in most cases. And you’re not committed to an asset for an indefinite period — if you don’t like it, at least there’s an end date in sight.

Leasing also may be the better option if your company uses technologically advanced equipment that will get outdated relatively quickly. Think about the future of your business, too. If you’re planning to explore an expansion, merger or business transformation, you may be better off leasing equipment so you’ll have the flexibility to adapt it to your changing circumstances.

Last, leasing does have some tax breaks. Lease payments generally are tax deductible as “ordinary and necessary” business expenses, though annual deduction limits may apply.

Pros and cons

On a parting note, if you do lease assets this year and your company follows Generally Accepted Accounting Principles (GAAP), new accounting rules for leases take effect in 2020 for calendar-year private companies. Contact us for further information, as well as for any assistance you might need in weighing the pros and cons of buying vs. leasing business equipment.

Year-end tax and financial to-do list for individuals

Posted by Admin Posted on Dec 18 2018

With the dawn of 2019 on the near horizon, here’s a quick list of tax and financial to-dos you should address before 2018 ends:

Check your FSA balance. If you have a Flexible Spending Account (FSA) for health care expenses, you need to incur qualifying expenses by December 31 to use up these funds or you’ll potentially lose them. (Some plans allow you to carry over up to $500 to the following year or give you a 2-1/2-month grace period to incur qualifying expenses.) Use expiring FSA funds to pay for eyeglasses, dental work or eligible drugs or health products.

Max out tax-advantaged savings. Reduce your 2018 income by contributing to traditional IRAs, employer-sponsored retirement plans or Health Savings Accounts to the extent you’re eligible. (Certain vehicles, including traditional and SEP IRAs, allow you to deduct contributions on your 2018 return if they’re made by April 15, 2019.)

Take RMDs. If you’ve reached age 70-1/2, you generally must take required minimum distributions (RMDs) from IRAs or qualified employer-sponsored retirement plans before the end of the year to avoid a 50% penalty. If you turned 70½ this year, you have until April 1, 2019, to take your first RMD. But keep in mind that, if you defer your first distribution, you’ll have to take two next year.

Consider a QCD. If you’re 70-1/2 or older and charitably inclined, a qualified charitable distribution (QCD) allows you to transfer up to $100,000 tax-free directly from your IRA to a qualified charity and to apply the amount toward your RMD. This is a big advantage if you wouldn’t otherwise qualify for a charitable deduction (because you don’t itemize, for example).

Use it or lose it. Make the most of annual limits that don’t carry over from year to year, even if doing so won’t provide an income tax deduction. For example, if gift and estate taxes are a concern, make annual exclusion gifts up to $15,000 per recipient. If you have a Coverdell Education Savings Account, contribute the maximum amount you’re allowed.

Contribute to a Sec. 529 plan. Sec. 529 prepaid tuition or college savings plans aren’t subject to federal annual contribution limits and don’t provide a federal income tax deduction. But contributions may entitle you to a state income tax deduction (depending on your state and plan).

Review withholding. The IRS cautions that people with more complex tax situations face the possibility of having their income taxes underwithheld due to changes under the Tax Cuts and Jobs Act. Use its withholding calculator (available at irs.gov) to review your situation. If it looks like you could face underpayment penalties, increase withholdings from your or your spouse’s wages for the remainder of the year. (Withholdings, unlike estimated tax payments, are treated as if they were paid evenly over the year.)

For assistance with these and other year-end planning ideas, please contact us.

Marketing success

Posted by Admin Posted on Nov 19 2018

A strong economy leads some company owners to cut back on marketing. Why spend the money if business is so good? Others see it differently — a robust economy means more sales opportunities, so pouring dollars into marketing is the way to go.

The right approach for your company depends on many factors, but one thing is for sure: Few businesses can afford to cut back drastically on marketing or stop altogether, no matter how well the economy is doing. Yet spending recklessly may be dangerous as well. Here are three ways to creatively get more from your marketing dollars so you can cut back or ramp up as prudent:

1. Do more digitally. There are good reasons to remind yourself of digital marketing’s potential value: the affordable cost, the ability to communicate with customers directly, faster results and better tracking capabilities. Consider or re-evaluate strategies such as:

• Regularly updating your search engine optimization approaches so your website ranks higher in online searches and more prospective customers can find you,
• Refining your use of email, text message and social media to communicate with customers (for instance, using more dynamic messages to introduce new products or announce special offers), and
• Offering “flash sales” and Internet-only deals to test and tweak offers before making them via more expansive (and expensive) media.

2. Search for media deals. During boom times, you may feel at the mercy of high advertising rates. The good news is that there are many more marketing/advertising channels than there used to be and, therefore, much more competition among them. Finding a better deal is often a matter of knowing where to look.

Track your marketing efforts carefully and dedicate time to exploring new options. For example, podcasts remain enormously popular. Could a marketing initiative that exploits their reach pay dividends? Another possibility is shifting to smaller, less expensive ads posted in a wider variety of outlets over one massive campaign.

3. Don’t forget public relations (PR). These days, business owners tend to fear the news. When a company makes headlines, it’s all too often because of an accident, scandal or oversight. But you can turn this scenario on its head by using PR to your advantage.

Specifically, ask your marketing department to craft clear, concise but exciting press releases regarding your newest products or services. Then distribute these press releases via both traditional and online channels to complement your marketing efforts. In this manner, you can make the news, get information out to more people and even improve your search engine rankings — all typically at only the cost of your marketing team’s time.

These are just a few ideas to help ensure your marketing dollars play a winning role in your company’s investment in itself. We can provide further assistance in evaluating your spending in this area, as well as in developing a feasible budget for next year.

529 plans offer two tax-advantaged education funding options

Posted by Admin Posted on Oct 30 2018

Section 529 plans are a popular education-funding tool because of tax and other benefits. Two types are available: 1) prepaid tuition plans, and 2) savings plans. And one of these plans got even better under the Tax Cuts and Jobs Act (TCJA).

Enjoy valuable benefits

529 plans provide a tax-advantaged way to help pay for qualifying education expenses. First and foremost, although contributions aren’t deductible for federal purposes, plan assets can grow tax-deferred. In addition, some states offer tax incentives for contributing in the form of deductions or credits.

But that’s not all. 529 plans also usually offer high contribution limits. And there are no income limits for contributing.

Lock in current tuition rates

With a 529 prepaid tuition plan, if your contract is for four years of tuition, tuition is guaranteed regardless of its cost at the time the beneficiary actually attends the school. This can provide substantial savings if you invest when the child is still very young.

One downside is that there’s uncertainty in how benefits will be applied if the beneficiary attends a different school. Another is that the plan doesn’t cover costs other than tuition, such as room and board.

Fund more than just college tuition

A 529 savings plan can be used to pay a student’s expenses at most postsecondary educational institutions. Distributions used to pay qualified expenses (such as tuition, mandatory fees, books, supplies, computer equipment, software, Internet service and, generally, room and board) are income-tax-free for federal purposes and typically for state purposes as well, thus making the tax deferral a permanent savings.

In addition, the Tax Cuts and Jobs Act expands the definition of qualified expenses to generally include elementary and secondary school tuition. However, tax-free distributions used for such tuition are limited to $10,000 per year.

The biggest downside may be that you don’t have direct control over investment decisions; you’re limited to the options the plan offers. Additionally, for funds already in the plan, you can make changes to your investment options only twice during the year or when you change beneficiaries.

But each time you make a contribution to a 529 savings plan, you can select a different option for that contribution, regardless of how many times you contribute throughout the year. And every 12 months you can make a tax-free rollover to a different 529 plan for the same child.

Picking your plan

Both prepaid tuition plans and savings plans offer attractive benefits. We can help you determine which one is a better fit for you or explore other tax-advantaged education-funding options.

Welcome to Our Blog!

Posted by Admin Posted on May 15 2014
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