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Entrepreneur

Who Are You Going to Turn the Keys Over to?

By Tom Irmen

More than half of America’s nearly 30 million small business owners are within a decade or so of retirement. So who’s going to succeed you when you retire? Or maybe it’s your plan to work right up to the end? Regardless of your plans, you might discover that future events could interfere with even your best intentions.


What if you were to die unexpectedly? What if you are incapacitated and unable to make those same decisions in the future that you make today? What if your children pursue their own dreams that don’t include operating the family business?

Less than one-quarter of today’s small businesses have succession plans. If tragedy were to strike, it would be like dying without a will. In other words, someone else will be making decisions in the future on your behalf… decisions that you might not agree with.


It can get even more complicated than that. What if your son or daughter that takes over your business decides to divorce their spouse? You know, the one you were never quite fond of. Will the divorce settlement include surrendering half of your business to their ex?


Life doesn’t always go exactly as we might have hoped. If you and your spouse are counting on retirement income from your business when you’ve turned over the keys to your small business to your successor(s), your only assurance of continuity will be a well-thought out and carefully implemented succession plan. Probably the best place to start in succession planning is to meet with your family to discuss your future plans and expectations. Next, schedule a meeting with an attorney experienced in small business succession planning. Finally, incorporate your intentions into a final document that describes your future plans in detail.

It’s also a good idea to meet with those family members involved and key employees to review your succession plans in order to eliminate any surprises that might be potentially disruptive in the future. Your objective should be to map out as smooth a transition as possible in order to protect not only the business that you’ve invested your life in, but also to protect the livelihoods and futures of all of your associates who have contributed to your small business success.

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Entrepreneur

The Case for a Living Will

By Tom Irmen

Every year at my annual physical, without fail, my healthcare provider asks me if I have prepared or amended my living will. Contemplating our own mortality often makes us feel uncomfortable, but as I get older, I have come to appreciate that a living will may become the greatest gift you or I can leave our loved ones. And no, a living will it’s not something that just the elderly should consider. Regardless of our age, each of us is only one unforeseen accident away from benefiting from this simple yet all important document.

A living will is a written directive to your family, personal physician, and other healthcare providers about just what type and level of care you would wish to receive in the event that you were unable to make important personal medical decisions on your own in the event of a medical emergency. Your living will can be of great comfort to your loved ones who might be called on to act on your behalf in the absence of this document. Let’s be honest, not everyone knows what decisions you might make on your own, and two or more individuals that might be asked about your treatment options might not be able to agree on what course of action might be best for you.

When these decisions are left to others, you potentially place family members in the very difficult position of having to guess as to what care you might have elected to receive. Disagreements among family members can occur, resulting in strained or even broken relationships that may last for years or longer. And consider as well that these decisions can have long-term financial consequences for your family members as well.

A living will removes this burden from your family members to act on your behalf and asks only that they respect the choices you have made. This simple but important document may be the greatest gift you can give to your loved ones who might one day be forced to struggle with making medical decisions on your behalf in the absence of a living will.

Everyone of every age can benefit from the creation of a living will. No one is immune from a health crisis. And if you are self-employed, a living will is just one of several important documents necessary to assure the future success of the small business that you have devoted your life to, protecting it for your heirs. Our families deserve the peace of mind that can come from the creation of a living will.

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Success in Small Business is Not a Game of Chance

By Tom Irmen

The odds for a successful new business launch are abysmal, but they don’t need to be.  Your odds increase significantly depending on whether you view your startup as a game of chance or a solid business opportunity.  If you believe that your potential for success will come down to a roll of the dice or your celestial sign, you might want to hold on to your day job.

The same is true of would-be entrepreneurs that want to transition their favorite hobby into a viable business.  You may discover that your passion for your once favorite hobby will fade once it moves beyond the fun activity you used to fill your leisure time.

But if you believe that you have the necessary drive and the requisite entrepreneurial spirit required for success, start by asking yourself these questions:

  1. Is my product or service unique?  If you discover that you can’t successfully differentiate your product or service from the competition, you will likely have to charge less.  And unless you possess some significant cost advantages, you will probably find that squeezing your margins may not result in the success you had hoped for.
  2. Do I have the necessary working capital to succeed?  The anticipation of future sales, reliance on credit cards, and leveraging your vendors is not a formula for success.  In fact, the eventual tsunami of high interest debt and resulting poor relationships with your favored vendors is a recipe for disaster that you may never escape from.
  3. Am I willing to create and follow a business plan?  If the answer is no, small business ownership may not be for you.  A well-thought out and carefully implemented business plan will significantly enhance your potential for success.  Add to that the accountability from a few trusted mentors and you may be well on your way to a rewarding future as a successful small business owner with the odds squarely in your corner.

Success as an entrepreneur depends largely on your perspective.  Do you view your new venture as a game of chance or a solid business opportunity?  If you find yourself saying that “you’ll give it a shot,” you may be rolling the dice.

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Hire for the Future

By Tom Irmen

It was just a few short years ago that small business owners seemed preoccupied with the state of the U.S. economy and the future likelihood of success for their individual businesses. What a difference a few years has made. Today, by contrast, entrepreneurs nationwide are preoccupied with filling open job positions.

In June of this year, the National Federation of Independent Business (NFIB) Research Center reported that 36% of small businesses were unsuccessful in filling open job positions – the highest level on record. In addition, the NFIB reported that 63% of business owners plan on hiring or are trying to hire new workers to fill existing or anticipated future openings. That’s up five points from last month and represents the highest level since September 1999.

The temptation today is to fill open positions rather than to hire for the future. Trying to fill an open position, while frustrating, can become even more frustrating if you have to refill the same position months later. Here are a couple of suggestions that you may wish to consider if your small business is currently trying to hire.

Discuss the open position opportunity with trusted associates within your company. They know first-hand about the job’s requirements, and they likely have a sphere of friendships unavailable to you. They know these people well and might be in a better position to help you to identify those individuals who are looking for a career rather than merely seeking a paycheck.

Another approach to consider is to seek potential candidates through your vendors. Representatives of your vendors actively market their products and services to other similar companies throughout your marketplace, including your competition. Oftentimes they know of talented individuals looking for new opportunities or hoping to make a move from an employer that might be struggling financially or perhaps one where the personal chemistry isn’t right.

With business optimism at record highs, filling future or currently open positions is critical. Be disciplined, and don’t make the common error of just trying to fill a position. Hire for the future!

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Small Business Pulse

By Tom Irmen

If you’re wondering about the state of today’s small business community, feast your eyes on the most recent small business optimism survey from the National Federation of Independent Business (NFIB).

“There is no question that small business is booming,” said Bill Dunkelberg, NFIB Chief Economist. “Consumer spending, the new tax law, and lower regulatory barriers are all supporting the surge in optimism across all small business industry sectors.”

The NFIB survey for the month ending April 2018 came in at 104.8, the highest in the survey’s 45-year history.

I’ve often spoken to other small business owners about the challenges resulting from the “sitting on the fence” trend that began to emerge during the most recent recession. Surprised by the depth and breadth of this nearly decade long recession, most entrepreneurs eliminated all but essential expenditures, reduced staff, eliminated or significantly curtailed capital expenditures, closed satellite locations, and shelved future expansion plans.

Despite all of the positive financial news of late, many small business owners remain cautious, fearing that the other shoe might drop. Perhaps current financial and political volatility playing out on our national and international stages are the cause of much of this apprehension, but it is important to recognize that the promise of real sustainable growth is being driven by sound financial fundamentals such as those cited in this NFIB survey.

This April survey is the 17th consecutive month of historically high readings. The survey points to gains in productivity, stronger sales, and increased spending on new equipment. And a host of other surveys and statistics support these survey results.

NFIB President and CEO, Juanita Duggan, said, “Never in the history of this survey have we seen such profit trends so high.”

The future for small business hasn’t looked this promising in a long time. Perhaps the biggest challenge confronting today’s small business owner is the reluctance to accept today’s positive financial trends as reality.

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Add Value to Your Small Business by Serving Others

By Tom Irmen

If you have ever wondered where small business owners derive their entrepreneurial drive, oftentimes you do not have to look any further than the parents that raised these individuals.

One of eight children, my father’s life was centered around his family, so it was not surprising that he left school at an early age to help support his family after his father lost his job during the Great Depression. In fact, until my father married, he endorsed his paycheck over to his parents every payday. He never regarded his choices as sacrifices but merely something that family members did for family. When the second world war broke out, he volunteered for service in the United States Navy. I remember to this day his first-hand account of sailing into Pearl Harbor and his description of the devastation that still remained from the December 7, 1941, Japanese attack.

Like most veterans of that time, he returned from the war without fanfare and immediately returned to work. He married our mom soon after, and they went on to raise six children. But little had changed for Dad. His life remained one of hard work, with often more than one job, and a dedication to his friends and family. Regardless of what he was doing on his few days off, if any family member or friend was in need of his help, he would drop whatever he was doing to lend a hand.

When our mother unexpectedly passed away at an early age, Dad was left to care for my four brothers and sisters who remained at home. Balancing work and parenting proved to be difficult for him, and he often struggled, but he did the best he could.

His life’s journey, although marked with some disappointments, was nonetheless one of service to others. He had a true love for his family and friends that he seldom expressed in words but rather by his actions.

I appreciate my dad’s sense of duty and loyalty to others, and my hope is that I demonstrate these same qualities I learned from him, both in my everyday life and in my interaction with others. I am proud of my dad and know that he did his very best for his family, friends, and nation. He truly was part of this country’s greatest generation. Happy Father’s Day, Dad.

My dad passed away on October 4, 2016, at age 90, less than a month before his beloved Chicago Cubs won their first world series in 108 years.

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Become Your Own Marketplace Disrupter

By Tom Irmen

Many small business owners live in fear of the potential for “disruptive technology” to enter their marketplace, putting them out of business.  The fear of an Amazon-like disrupter displacing established marketplace leaders with innovative new ideas is enough to cause even the most ardent entrepreneur to lose sleep.

But take a step back for a moment.  Amazon, which was first launched as an online bookseller in 1994 by Jeff Bezos, generated only $511,000 in sales in 1995, posting a net operating loss of $303,000.  What you may not know is that Amazon was founded in the garage of Bezos’ home in Bellevue, Washington.

On April 1, 1976, Apple Computers, Inc. was founded by college dropouts Steve Jobs and Steve Wozniak.  Once again, launched from a garage, Jobs and Wozniak started building the Apple 1 and selling it without a monitor, keyboard, or casing, which weren’t added until 1977.

And childhood friends Paul Allen and Bill Gates set out to succeed in business utilizing their shared skills in computer programming, launching their first company, Traf-O-Data, in 1972 before establishing Microsoft in 1975.

Without question, the new technologies I have cited have had a profound impact on the world of business and our own personal lives, leaving many lamenting the fact that these disrupters have been the root cause of tens of thousands of companies closing their doors and millions of employees losing their jobs.  But the fact is that these innovators simply set out to satisfy existing or future perceived consumer needs or marketplace changes that they identified and responded to with their own unique marketplace innovations. And they accomplished their objectives with the meager resources they possessed at that time.

While few of us will rise to the level of Bezos, Gates, or Jobs, each of us has the potential of becoming a disrupter within our own marketplace by identifying changing consumer needs and then satisfying them with our own unique marketplace innovations.  Sound daunting?  Perhaps, but try to imagine the task ahead of you if your competition acts first.

Perhaps what is most remarkable about these early marketplace disrupters is just how unremarkable they likely appeared to others at the time. Marketplace disruption is the domain of risk taking, forward thinking, and innovative entrepreneurs and not just a handful of billionaires.

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Entrepreneur

Avoid New Tax Law Complacency

By Tom Irmen

The Tax Cuts and Job Acts of 2017 gripped headlines right up to its enactment, but much less is heard today of its far reaching impacts on individual and business taxpayers. Many of us are understandably focused on reporting our 2017 tax liabilities and the day-to-day management of our businesses. One word of caution, however: Don’t allow complacency to creep into your tax planning for 2018 and beyond. It could end up costing you plenty. In fact, I would encourage every small business owner to schedule time with their accountant to discuss all of the applicable provisions of this new tax law that will likely impact them.

I asked Yvonne Marsh, Certified Financial Planner™ and CPA of Marsh Wealth Management, to elaborate on several of the key provisions of the new tax. Here is her response:

The new tax laws generally benefit both individuals and small business owners in the form of higher standard deductions and lower marginal tax rates. The biggest change for small business owners is the introduction of the Qualified Business Income (“QBI”) deduction. QBI is generally the earnings from a trade or business. If the business is a pass-through entity (i.e. not a C corporation) and the total taxable income is less than $207,500 for an individual or $415,000 for a married couple, then the owners can take a deduction for 20% of their qualified business income. If those income limits are exceeded, there are additional rules relating to the type of business you own and the deduction begins to phase-out. Notably, this QBI deduction does not reduce your self-employment tax.

Other changes for small business owners include the elimination of the 50% entertainment expense deduction (the 50% meals deduction remains), increased deprecation for business cars, an employer tax credit for paid leave provided under the Family and Medical Leave Act, increased deductions for bonus depreciation, and the limit to expense purchases under Section 179 was raised from $520,000 to $1 million annually.

Entering into this new tax year without a thorough understanding of the potential impact of the new tax law on our businesses could cost you thousands of dollars and missed opportunities that perhaps your competition may take full advantage of. If you’ve already prepared your taxes for 2017, schedule a follow-up appointment with your accountant. If you haven’t already completed your 2017 taxes, schedule an appointment with your accountant to discuss the new tax law. If your accountant doesn’t understand the new tax law changes, schedule an appointment with your new accountant.

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Entrepreneur

Make Some Waves

By Tom Irmen

You’ll discover that the theme of this month’s entrepreneur article is very much the same as last month’s. It is because I feel so strongly about this subject that I felt it deserved repeating.


As a youth growing up in the ’50s, I was surrounded by a group of loving, encouraging, and supporting parents, grandparents, aunts, and uncles who all felt invested in the future success of not only their own children, but the success of their nieces and nephews as well. However, they all shared one common experience that shaped the advice they afforded to each of us, and that was that they had all lived through one of the most devastating economic catastrophes in U.S. history: The Great Depression.

The Great Depression saw my mother’s father, my grandfather, after the death of his wife, placing his five children with relatives on family farms while he traveled to Alaska to seek work as a tree cutter. My late father once shared with me that he and his brother used to go into the family basement to turn on the gas, which had been shut off for non-payment, so that their mother could warm a meal for her eight children. And my wife Judy’s grandmother, and my friend, once saved all of the aluminum foil that our restaurant served baked potatoes in, rather than see it disposed of – a lesson she had learned 50 years earlier. Waste not, want not.

Each of us is comprised of lifetime experiences – ours and those who were responsible for raising us. And despite the economic boom and the prosperity that occurred after World War II, a great many people avoided taking risks, fearing the future as seen through the prism of their past.

Almost to a person, the advice I received was to get a good education, go to work for a Fortune 500 company, and not to make waves. Basically, choose security over the uncertainty of making waves.

I won’t risk predicting what the future holds for you. And it’s ok to learn from the past unless it defines your future. Many people sense a resurgence of the American dream. I guess I share their optimism. Maybe it’s time for you to make some waves and to reignite your hope for the future.

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Missed Opportunities

By Tom Irmen

In the fall of 1930, during the Great Depression, which started in mid 1929, the first bank panics occurred, starting first in Nashville and then spreading throughout the Southeast. Referred to as a “bank run,” hundreds and sometimes thousands of depositors who lost confidence in the security of their financial institutions would converge of their local bank, withdrawing all of their hard earned money. As a consequence, more than 1,300 banks failed in 1930, and it continued on through 1931 and 1932.

As a child born in 1950, I often recall the conversations of adults reliving their experiences of both the Great Depression and that period of bank failures that followed, which saw American depositors lose an estimated $140 billion in deposits. Because these bank failures occurred prior to the creation of the Federal Deposit Insurance Corporation (FDIC), which today insures your deposits held in participating banks, this money was lost for good. It was no wonder that many Americans continued to mistrust financial institutions for decades after, electing to keep their money elsewhere, just not in a bank despite the protection offered by the FDIC. People often referred to their mattress as their bank.

The experiences of the Great Depression, while far more dire than our most recent Great Recession, have nonetheless upended the economic confidence many of us hold for the future. And while our lack of optimism may be driving our desire to keep our heads down and our powder dry, the renewed confidence in our economy experienced during the last year is undeniable. So just what should you do?

Our history is filled with multiple examples of both economic hardship and periods of economic boom. I encourage you to closely examine today’s economic indicators, including the small business confidence index, which is at a new all-time high. Be careful not to allow previous economic challenges to limit your future for economic growth. Don’t throw caution to the wind, but don’t put yourself in a position where you will have missed what might become one of the biggest economic opportunities in recent times. The best place for your money may not be the mattress.

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