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CategoryBusiness Advice Archives — C. Lynn Northrup, CPA, CPIM
Managing Cannabis Inventories
February 3rd, 2021
Managing and valuing inventories in cannabusinesses is the key to increasing cash flow and lowering taxes. Cannabusinesses are restricted to reducing gross revenues by the cost of goods sold because of IRS Section 280E. Section 280E was enacted in 1982 and provides that no deduction or credit is allowed for any amount paid or incurred in carrying on a trade or business consisting of the trafficking in controlled substances within the meaning of schedule I or II of the Controlled Substances Act. The only way cannabusinesses can reduce their tax burden is by maximizing cost of goods sold (COGS).
The tax laws and regulation associated with cannabusiness are complex. Understanding these complex laws and regulations makes the job of valuing inventories and determining COGS of cannabis businesses a challenge. This is compounded by the cannabis industry being a collection of complex processes and types of businesses.
Cannabusinesses include cultivators or growers that grow plants and then harvest the flower from these plants. In addition to selling flower, it can also be processed into a variety of marijuana infused products (MIPs). Marijuana infused products are created by extracting distillate which is then infused into other cannabis products such as vape cartridges, edibles, topicals, wax, and shatter. These products are then packaged and sold through dispensaries. The tax laws and regulations for determining COGS and inventory valuation for growers and MIPs are different for dispensaries.
Cultivation or farming of cannabis needs to track the flower yield from indoor and outdoor grows measured in grams to develop a cost for the harvested flower. Marijuana infused products are the result of process manufacturing operations creating multiple varieties of products requiring different types of packaging. Costs are developed based on the recipes for these products, including packaging.
These products are then sold and distributed to dispensaries for ultimate resale to the consumer. Dispensaries, in many cases, are required to inspect, repackage, and check the quality of products before they can be sold to the consumer.
Most cannabis businesses are using Quick Books to accumulate costs supplemented by spreadsheets to calculate yield and the cost of distillate. The costs of cultivation and marijuana infused products include direct labor, material, and allocation of overhead. Allocation of overhead should be based on guidance from Section 471 and Section 263A of the Internal Revenue Code. It is critical to determine any allocation of overhead to be included in COGS in compliance with IRS codes and regulation, but also to maximize costs that offset gross revenue.
Accounting for cannabis products needs to be accurate. In some cases, ERP (Enterprise Resource Planning) systems are being utilized by larger operations. Dispensaries determine cost based on the actual cost of products purchased and associated freight. Inventory tracking is required, and many dispensaries utilize point of sale systems and inventory management systems to control and manage activity.
Based on my experience, managing and controlling inventory costs and the associated investment is one of the most challenging and critical areas of cannabusiness. First, inventory investment requires a significant cash investment. This makes effective purchasing and inventory management vital. Second, accurate and maximum determination of COGS reduces the tax burden created by IRS Section 280E. This means that inventory costing and management should be a top priority for all cannabusinesses and their accountants.
Utilization of professionals who understand cost accounting and the unique taxation requirements of the cannabis industry represents the key component to success or failure.
Cannabis Guidance and the IRS
January 19th, 2021
The IRS recently published guidance to provide cannabis businesses insight regarding compliance with IRS regulations. Major questions have been raised regarding Section 471 (c) which allows small business tax payers with revenue under $25 million to adopt the cash basis of accounting and prepare the books and records in accordance with the taxpayer’s accounting records. This seemed to open the door to modifying how cannabis businesses recorded cost of goods sold to minimize the impacted of Section 280E. Changes in Section 471 (c) resulted from the Tax Cuts and Jobs Act of 2018.
Section 280E disallows all deductions or credits for a business that sells or otherwise traffics marijuana. However, Section 280E does allow businesses to reduce its gross receipts by properly calculating cost of goods sold. This means that advertising or selling expenses are not deductible.
The guidance under Section 471 (c) according to the IRS is that it is just a timing provision and would not permit a taxpayer to recover a cost that it would not otherwise be permitted to recover or deduct for Federal income tax purposes solely by reason of it being an inventory cost. We’re not sure if this works and there could a conflict with Section 471 (c). This is a new regulation and is the IRS opinion on the application of Section 471 (c). They are adding Internal Revenue Code “flush language” via a regulation which is the opinion of the Internal Revenue Service.
I work with multiple cannabis businesses and have spent a considerable amount of time dealing with Section 471 (c) and how to apply it. The regulations say that qualifying businesses may choose to treat its inventory as reflected in the taxpayer’s books and records prepared in accordance with the taxpayer’s accounting procedures. If a change in accounting was made to adopt the new regulations, a Form 3115 is required to be filed outlining the changes.
A taxpayer taking the Section 471 (c) approach contrary to the regulations should consider disclosing any position that could be inconsistent with the new regulations. A disclosure should be made by filing a Form 8275R with the tax return. Determining cost of goods sold for cannabis businesses can be complicated and should be based on cost accounting logic. Cannabis businesses and their tax advisors should consult with someone experienced in these areas when applying these regulations.
IRS guidance has indicated that the growth of the marijuana industry will warrant increased tax compliance efforts. Accordingly, extreme care should be taken when developing and preparing cannabis tax returns based on the recent IRS guidance.
What is Strategic Planning?
January 12th, 2021
Everyone talks about doing strategic planning, but how many really understand it. I think it is simple and can be in three steps:
- Where are we?
- Where do we want to be?
- How do we get there?
How many businesses really take the time to stop and address these questions? Many organizations just go from day to day and never dig into the real issues raised by these three questions.
Strategic planning isn’t easy, but the payoff can be huge. It can alert organizations to opportunities in addition to challenges that lie ahead. We operate in a complex and rapidly changing world and gaining insight into the future can make the difference between success or failure. It can help avoid trouble or help to maintain control during a period of rapid change.
Assessing where we are involves looking at financial history, marketing, competition, problems, and opportunities. Pulling all this information together is hard work to create a foundation for planning.
Where do we want to be provides the results for visioning, innovation, and looking beyond right now. I think visons are the result of dreams of where we want to be. We then need to convert them into measurable goals and objectives. This can include profit and sales targets, market share, and ideas for new products and businesses.
We create strategies into how we get where we want to go. This is the nitty gritty of how we accomplish goals and setting new directions to take us into the future. Strategies can include some old established ideas in addition to new concepts that are completely out of the box. The planning process will detail the costs, resources, projected results, and a timeline for meeting our objectives.
The result of our planning boils down to what we need to do today to make the future be what we want it to be.
Take this Time to Work on Your Business
April 6th, 2020
We’re facing the biggest challenge we’ve ever faced in our country and the world. Millions of people are without jobs and many businesses have been forced to shut down. We’re dealing with the Corona Virus crisis, the silent killer sweeping the country and the world. People are asking what we should do and how can we survive. I don’t the answers to the future. My advice is rather than panicking, take this time to work on your business and prepare for a future after the crisis.
Working on our business, what does that mean? Here’s what I think it means and some ideas on what we should be doing:
- Brainstorming for new ideas
- Assess your strategies and adjust for the future as best you can
- Evaluate and assess all the new risks
- Figure out how much money you will need to survive and ways to access it
- It’s essential to orient your business to the reality of new economic and market conditions
- Consider how to maximize assets to get the most bang for the buck
- How can the stimulus package be used to maximize your cash flow?
- Think about managing the scale of your business to fit and adjust to the future reality
This list could continue, but this gives you some thoughts and ideas on where to start working and focusing.
In addition to these ideas and thoughts, it’s essential to realize that there are only 4 ways to grow your business:
- Increase the number of customers of the type you want
- Increase the frequency of the transactions
- Increase the average value of each sale
- Increase the effectiveness of each business process
It all really boils down to these 4 ways and they need to be quantified in order to create focus on the right steps. Remember that what you can measure, you can manage, and produce the result as a result creating effective processes.
So, in the mist of all the fear and chaos, take the time to contemplate and consider different scenarios. Both the good and the bad. Plan for the worst and plan for the best. This will put you a better position to act and do what needs to be done.
Understanding Business Entity Structures
January 9th, 2020
It is important to understand that there are different entity (organizational) structures for conducting business. The form or type of organization will depend on the business purpose, a structure to provide legal protection, the size of the business, and the ease and cost to create the business organization.
Here are the common types of business organizations:
- Sole proprietorship
- Limited Liability Partnership
- S Corporation
- C Corporation
Each of these business organizations are described to provide background and understanding.
The Sole Proprietorship is the most common and easiest from of business organization to create. Typically, it is created by a person wanting to start a business out of their house or garage. The sole proprietor invests in their business, usually from their own savings, and begins operations. The type of business might be a service business, a small craft, or a distribution business. It also might involve an internet based business selling products, conducting affiliate marketing, and utilizing social media techniques.
A simple accounting system is used with these businesses which might include Quick Books, Xero, or other compatible bookkeeping/accounting system. The disadvantage of sole proprietorships is that it is exposed to legal liability with no limitation. The business of a sole proprietor itself does not pay income taxes. Profits and losses from the sole proprietor business flow through directly to the individual’s 1040 tax return on Schedule C and then taxed at the individual’s tax rate. However, it should be noted that profit reported on Schedule C is also subject to Self-Employment tax.
Sole proprietorships are the easiest business to form and operate. If a person does business under any name other than their true name, most states will require the filing of a fictitious business name which is known as a “Doing Business As” or a DBA Statement. These forms are available at the county recorder’s office as well as through some newspapers. There is no tax effect if a sole proprietor takes money out of their business, or transfers money to or from their business. However, it is a good idea to set up a draw account to help identify amounts that are not business but are for personal use.
Advantages of a Sole Proprietorship:
- All business tax advantages flow to the owner.
- Organizational costs are low.
- Legal & Accounting fees can be lower.
- State & Federal taxes may be lower.
- Administration is less complicated.
- Can be easily converted to another entity.
Disadvantages of a Sole Proprietorship:
- Personal liability.
- Inability to income split.
- Limited fringe benefits.
- Subject to Self-employment tax.
This covers the basic elements of sole proprietorships.
Partnerships can be defined as a relationship between two or more people (an individual, a corporation, a trust, an estate, or another partnership) who carry on a trade or business with each person in the relationship contributing money, property, labor or skill and with each expecting to share in the profits and losses of the business.
The partnership will be based on a partnership agreement together with any modifications and agreed to by each partner. The partnership agreement and any modifications can be either oral or written.
A partner’s share of income, gains, losses, deduction, or credits will typically be spelled out in the partnership agreement. The partnership agreement and any modification will be disregarded if the allocations to a partner under the agreement fail to have a substantial economic effect. An allocation will have a substantial economic if there is a reasonable possibility that the allocation will affect the dollar amount of a partners’ shares of partnership income or loss independently of tax consequences and the partner actually receives the economic benefit or bears the economic burden corresponding to the allocation.
Partnerships can have both general and limited partners. Limited partners are partners whose personal liability for the partnership is limited to the amount of money or other property they contributed to the partnership. Limited partners are not generally considered to materially participate in trade or business activities conducted through partnerships.
Limited partnerships can allow a sole proprietor to have part of his/her income from the business to be taxed in lower rather than the sole proprietor’s higher brackets. Family partnerships are a popular income-splitting concept by utilizing §704(e). One thing to note is that when the partnership is not recognized for tax purposes, the tax liability stays with the sole proprietor. Family members can contribute a capital interest in a partnership that can be withdrawn from the partnership or upon the liquidation of the partnership. The right to share in the earnings and profits is not a capital interest in the partnership. Family members in such partnerships can only include husband and wife, ancestors, lineal descendants, and any trust created for the benefit of such persons.
Advantages of partnerships include:
- Income is taxed to the partners rather than to the partnership.
- Distributed income is not subject to double taxation.
- Losses and credits will generally pass through to partners.
- The liability of limited partners is normally limited as in a corporation.
- There can be more than one class of partners.
- Partners can obtain basis for partnership liabilities.
- Special allocations are permitted.
- A partnership can be used to transfer value and income within a family group by making family members partners.
Disadvantages of a partnership include:
- The liability of general partners is not limited.
- Partners are taxed on earnings even if the earnings are not distributed.
- Partners cannot exclude certain tax favored fringe benefits from their taxable income.
- Partners may be required to file numerous state individual tax returns for multistate partnership businesses.
- In the absence of a business purpose, a partnership must use either a calendar year or the same year as the partners who own a majority of the interests in the partnership.
Limited Liability Companies
LLC’s are non-corporate businesses that provide its members with limited liability, a single tax, and the option to actively participate in the entity’s management. The IRS does not recognize an LLC as a distinct entity so for tax purposes the LLC may be treated as:
- A partnership,
- An association taxable as a corporation, or
- A trust.
While LLC’s have the corporate characteristics of limited liability, they are usually treated as a partnership for federal tax purposes since they can be organized without continuity of life, centralized management, or free transfer ability of interests.
When a limited liability company (LLC) is a partnership they include benefits such as the following:
- It provides the pass-through attributes provided under partnership tax rules;
- Limited liability to all members;
- It offers control membership control over the business without the risk that management participation will cost members their limited liability; and
- Provides freedom from S corporation eligibility requirements.
In addition, when an LLC holds assets with fair value in excess of basis, the availability of such an adjustment can be helpful by helping the transferring member to obtain a higher price for their interest. These situations are not available to shareholders of C corporations.
There are some non-tax benefits of LLCs which include:
- They can provide members with unique economic, voting, and other rights without creating a second class of stock.
- Rights of members can be modified by amending the LLC operating agreement which is not a publicly filed document.
- LLC members can be elected according to procedures set forth in the operating agreement.
- LLC members are not susceptible to piercing the corporate veil attacks solely as a consequence of the member’s failure to satisfy certain administrative formalities.
There are some disadvantages of LLCs which include:
- Uncertainty over self-employment taxes.
- They can be restricted to certain businesses and professions.
- In some instances, there can be additional taxes and filing fees.
- They are required to use the calendar method for accounting and taxes.
- A cancellation of indebtedness might stick to a member.
- There are issues with recourse and non-recourse debt.
- LLCs have no at-risk amounts because of the limited liability afforded to each member.
To sum up, LLCs are non-corporate businesses that provide members with limited liability, a single tax, and the option to participate actively in the entity’s management.
There are two types of corporations, S corporations and C corporations. We’ll discuss both together with their advantages and disadvantages. First, it is important to point out the characteristics of a corporation which include:
- Associates (shareholders).
- An objective to carry on a business or profession and to divide the profits from the business.
- Continuity of life.
- Centralized management.
- Limited liability to the associates.
- Free transfer ability of interests.
C corporations have a number of tax advantages over S corporations and unincorporated businesses. First, C corporations can be used to split income between itself and its owners with potentially lower overall tax rates.
C corporations can deduct fringe benefits paid for its employees in contrast to S corporations who are not able to deduct these expenses for employees who are 2% or larger shareholder. Unincorporated businesses cannot deduct these payments for its owners. C corporations can elect a fiscal tax year whereas S corporations and partnerships must be on a fiscal year for the most part with some limited exceptions. Corporations are able to deduct up to 80% of the dividends they receive from investments in other domestic Corporations.
C corporations can have an unlimited number of owners and multiple classes of stock ownership. The owners of the shares are not restricted to being United States citizens or to the numbers of shareholders. Forming a corporation involves a transfer of money, property or both by prospective shareholders in exchange for capital stock in the corporation. When money is exchanged for stock, the shareholder or corporation realizes no gain or loss. The stock received by the shareholder has a basis equal to the money transferred to the corporation by the shareholder.
There are a number of complex restrictions associated with corporations which are beyond the scope of this post. The most significant issue is that C corporations are not allowed to use the cash basis of accounting and are required to use the accrual method. The accrual method requires that income needs to be reported when it is earned in contrast to the cash method of accounting used by sole proprietors, S corporations, qualifying partnerships, qualified personal service corporations, and small businesses with less than $5 million in gross receipts.
Because of the restrictions and complexity of C corporations, most small businesses and service companies will not use this method of business formation. These reasons when combined with the double taxation of earnings of C corporations will cause smaller entities to form as an S corporation, partnership, LLC, or as a sole proprietor.
Domestic corporations can avoid double taxation by electing to be treated as an S corporation allowing small business corporations to elect special rules under Subchapter S. The treatment allows S corporations to be treated similar to partnerships whereby income, deductions, credits, and gains and losses are passed through to shareholders on a pro rata basis. S corporations are taxed like a partnership in that it pays no taxes, and its income and deductions pass through to the shareholder.
Here are some of the advantages of S corporations:
- S corporations can distribute its profits to shareholders with only a single tax in sharp contrast to C corporations where a double tax is incurred because dividends are not deductible.
- Losses of S corporations are deductible by shareholders in contrast to C corporations where losses are not deductible by shareholders.
- A new corporation may elect S corporation status in its initial year of operation in order to utilize losses even though they may ultimately want to be taxed as a C corporation.
- An S corporation is exempted from the accrual method of accounting rules and can use the cash method of accounting.
- An S corporation provides a corporate shield for liability purposes for those who want the income and losses taxed to them, but do not want the potential liability problems of a partnership.
- S corporations can adopt tax deductible and non-deductible fringe benefit plans subject to special rules and limitation applicable to these plans.
- An interest deduction is allowed for funds borrowed by a shareholder to purchase stock in the S corporation and such interest constitutes business interest when the shareholder materially participates in the business.
- Many problems of C corporations such as alternative minimum taxes and personal holding taxes do not apply to S corporations.
There are some disadvantages associated with S corporations:
- Because there is no corporate tax rate it makes deferred compensation programs impractical.
- There is no opportunity to accumulate corporate earnings at a lower tax bracket which makes it difficult for S corporations to reinvest profits in the business.
- Split-dollar and other non-deductible fringe benefits for shareholders can’t be paid for by lower taxed corporate funds.
- The 80% dividend received deduction is lost.
- In some states, the S corporation election will not avoid the double tax.
- A new or dissident shareholder can cause termination of the Subchapter S election through a disqualified transfer of stock.
- S corporations lack the flexibility that partners, and partnerships have to equalize the outside basis of owner’s interest with the inside basis of the entity’s assets.
- All income, except long term capital gains, received by the corporation are taxable to shareholders.
- More record keeping may be required to maintain accurate records for basis in shareholders stock to maintain the accumulated adjustments account, and to determine the tax ability of distributions.
Becoming an S Corporation
In order to become an S corporation, it must be formed in accordance with both state and federal laws. The corporate capitalization involves the transfer of money and/or property to the corporation in return for stock. The corporation must meet the requirements of S corporation status and all shareholders must consent to the S corporation status. The corporation will utilize a tax year status unless it meets special requirement to select another tax year and it will have to file Form 2553, Election by a Small Business Corporation, to indicate that it chooses S corporation status.
S corporation status is only permitted to “small business corporations.” S corporations are limited to a maximum of 100 shareholders who are U.S. citizens and non-resident aliens are prohibited from being shareholders. While this is the primary rule, resident aliens who possess a green card could be a shareholder, but this puts the corporation in jeopardy should this status change after achieving S corporation status. The requirement is to have only individuals as shareholders who are advised to establish a buy-sell agreement that restricts transfers to ineligible persons.
There are some special situations that allow estates and certain trusts to be a shareholder. In these instances, it is essential that the laws and regulations be carefully followed so as to not jeopardize the sub-chapter S status of the organization. Non-resident aliens may not be S corporation shareholders. In addition, a C corporation is not allowed to be a shareholder in an S corporation.
There you have the basics of business entities.
Urgency Creates Change
January 2nd, 2020
Change starts with a sense of true urgency and in most cases needs to be created to make things happen. The enemy of urgency is complacency. Complacent people don’t look for new opportunities and they pay more attention to their internal feelings than external feelings. They tend to move slow when they need to move fast. What ever worked in the past is what guides them.
While anxiety and fear can drive behavior that might be mistaken for urgency, the resulting actions tend to be non-productive. This is called false urgency resulting from failure. The thought process from a sense of false urgency usually is not productive and proactive. It typically is mindless wheel spinning that creates no positive results.
A true sense of urgency is created and recreated by communicating the existence of great opportunities together with the existing hazards and roadblocks. People engaged in a true sense of urgency exhibit a strong need to move and win, now. The biggest challenge about creating a sense of urgency is taking the first step in initiating the action needed to succeed in a changing world. Real urgency isn’t a natural state of affairs because it needs to continually be created to get change initiatives moving and in the right direction. In a constantly changing world, the good news is that there are an over abundant number of opportunities that can be utilized to create true urgencies.
A true sense of urgency evolves from a set of feelings that creates a compulsive determination to move right now. True urgency is a process of winning the hearts and minds of the people needed to make change happen. Mindless emotion doesn’t get the job done. Winning change strategies utilize sound, ambitious, but logical goals using methods allowing people to experience the feelings that embrace the determination needed to make things happen.
The strategy for producing a true sense of urgency focuses on creating very alert, visibly oriented action, aimed at winning with daily progress toward achieving the vision and goals targeted at core emotional feelings. Here are the four tactics needed to make this strategy successful:
- Reconnect internal reality with external opportunities and obstacles using data, people, video, and other media.
- Avoid acting anxious or angry and always effectively demonstrate your own sense of urgency in meetings, one-on-one interactions and other communication with the people engaged in the change process.
- Take the opportunity to determine if crises can be used to your advantage and always proceed with caution.
- Remove the negative and urgency skeptics and keep the group complacent to avoid destructive negative urgency.
In addition to these four tactics is the necessity of keeping up the pressure to maintain a sense of continued urgency. The trap that can occur is achieving success and then losing your momentum of continuous improvement. Short-term success does not always translate to long-term results.
Here are some thoughts on maintaining urgency after making a successful change. Always be on the alert for potential declines in the sense of urgency. Realize that complacency can set in so be ready with backup solutions to maintain momentum. Take advantage of new developments to apply to change initiatives and improvements. Essentially, building a culture acting with a high sense of urgency will focus on the strategy for producing a true sense of urgency and application of the four tactics that are needed to make a positive change become a constant.
Strategies for Success
December 14th, 2017
Success isn’t always easy. Here’s a strategic program that helps businesses get to the next level and beyond. Imagine accomplishing and achieving more, in a shorter period. The Boot Camp for Small Business teaches you these techniques. In addition, you learn how to fine-tune your business vision and create a foolproof strategy for success. Furthermore, you apply and grow your knowledge of financial operations, learn what needs to change, and how to change it.
The Boot Camp will help you transform your business and give you the skills needed for continued growth. The program provides the building blocks small business owners need to separate themselves from the competition. Here’s a summary of what you get in the Boot Camp:
- Learn the 4 ways to grow your business
- Learn how to create a vision and business mission
- Learn the basics of accounting measurement
- Learn the basics of sales, marketing, and customer service
- Learn how to address change and how to manage it
The program provides self-paced video presentations that allow you to learn based on your schedule. Copies of the slides are provided for documentation and taking notes.
The fundamentals provided by these programs are based on my life long experiences of helping businesses achieve their goals and objectives. I have taken the best of my training and coaching tools to create the Boot Camp for Small Business concept. The basics of this program give small businesses the tools they need to succeed and grow.
Experience has taught us that small business owners usually want and need additional support. We filled this need by creating the Journey to Results and offering personalized training and coaching. The Journey to Results offers hourly support or for a determined block of time on a retainer basis.
Personalized coaching and mentoring is support small businesses want and need. Small businesses need a sounding board and the Journey to Results helps fill this gap. My coaching advice is based on a life time of business, consulting, and teaching experience and knowledge base combined with my financial expertise as a CPA.
Why Business Owners Get in Trouble?
July 7th, 2017
Why business owners get in trouble is a question I’ve had on my mind for some time. Here are the prime reasons based on my experience over the years.
Firefighting takes top priority. Running a business is challenging and involves a lot of detail work. Business owners get too deep in the forest making it tough from them to see the trees.
People do what they like, it’s human nature. Some business owners love the finance part of their job while others gravitate towards the marketing aspects and still others favor sales or manufacturing. At the end of the day, the business owner’s interests will determine what gets the most attention.
They’re making money. Many companies don’t know where they make their true profits but are still profitable. They make money despite themselves. When people are making enough money to supporting their lifestyles and pay their employees, things tend not to change. This is a situation where if they’re making enough money to support a lifestyle, being the most profitable company possible isn’t necessarily a top priority.
Some of the value is hidden. Inventory and materials need to be tracked. Costs need to be correctly allocated to product lines. When a business owner visits their warehouse, they shouldn’t just see goods and materials… they should see cash.
Finally, another reason is the lack of training and knowledge. Business owners might not want to invest in training and coaching, but it could make a huge difference on the bottom line and value of their business.
I can help improve your bottom line and increase the value of your business. Contact me at email@example.com.
Coaching Case Study – Tim
June 23rd, 2017
Tim had a one-man wood working shop. His son, Arnie was his only helper. Tim asked me to help with a problem. The debt and bills were piled high. Tim didn’t know what to do or where to turn. To make things worse, Tim’s health was failing. We needed a plan.
First, we tightened up on receivables to get some cash flow. This bought time and some much-needed relief. Then we looked at expenses and started cutting back. It didn’t seem like much, but it put the business into the black.
Then I got Tim to secure a life insurance policy naming Arnie as the beneficiary. This was a key step in creating some peace of mind. Tim knew Arnie would be OK.
I think of Tim as I work at the desk he made for me. I look at the mantle over the fire place and the front door Tim crafted. They are constant reminders of our journey together.
Not long after our work together, Tim passed away. Arnie moved to Florida and got his college degree. Arnie is now pursuing his dream of being a football coach. Tim is looking down from heaven with a smile knowing that a coach made a difference.
Coaching Case Study – Jerry
June 23rd, 2017
Jerry built a printing business that always had lots of sales but no profits. I was introduced to Jerry by his CPA who thought maybe I could get Jerry to listen. I came in, wandered around and asked questions. That’s what I always do. It’s amazing how much you learn when people get comfortable and share concerns, questions and ideas.
People tend to get too close to the action and never take time to step back. We began analyzing the numbers to find out the little details that can lead to big results. These steps started having Jerry’s team building trust in my suggestions. By paying attention to the little details that matter, the company achieved record sales and profits. Jerry started to believe. Having the discipline and patience to focus on the right details can produce big results. That’s what coaching gives to business owners. Once they start seeing the results, coaches become part of the team.
Once I became accepted as a member of the team greater achievement became possible. We identified that a purchasing agent was taking kickbacks. Family members got new job assignments and a succession plan was put in place. The company went from almost going out of business to becoming the most respected printer in the region.
Overcoming the initial resistance can be an obstacle but the proof is in the results and on the bottom line. I went on to implement a team building effort and a management succession plan. I’ll tell you about this effort in another post.