Top Tips to Lead and Empower Employees
Employees are an essential part of your business and brand. If they come across as unwelcoming or uninterested, you run the risk of rubbing your customers the wrong way. Unhappy employees can lead to assumptions about whether or not your business is a great place to work – and whether or not customers want to give you their business. There are countless studies highlighting the links between strong employee morale and satisfaction and customer satisfaction. So how do you make sure your employees are happy and satisfied?
“Happy” and “satisfied” are subjective terms, but typically, satisfied employees are those with a sense of well-being. This includes the presence of positive feelings like joy and interest, and the absence of negative feelings like apathy and sadness. In the same way that positive feelings can enhance an employee’s ability to find meaning in his or her work, those feelings can also play a role in that employee’s performance and growth.
Here are some tips to foster a positive work environment and empower your employees:
1. Start by being a good leader. You might be a good manager, but are you a good leader? It’s often said that while managers manage people, leaders lead people. In addition to managing projects and workload, make sure you’re also focused on inspiring your team to excel and succeed.
2. Give them quality time with strong leaders. As a leader, it’s important for you to listen and show that you care about your employees’ work, concerns, and aspirations. Whether you introduce a mentor/ protégé program or a few extra one-on-one meetings, your employees will be more engaged and productive when they feel seen and heard. If you have a larger business with a hierarchal reporting structure, it’s also important to give recognition to your management team. If they already get workplace face time with you due to their positions, consider a social outing like a lunch or a social event for the entire management team.
3. Encourage empowered behaviors. Employees who have a strong sense of well-being are also more likely to take on new challenges and to play a wider role in the success of your business. When possible and with parameters, let your employees make some decisions independently of you when they are closer to the action than you are and may be more likely to know the right call to make. Remind them that as they make decisions that they need to consider customers, the team, and your business profitability.
4. Encourage creativity. There are always new challenges to address and better ways to do things; let your employees get creative when it comes to dealing with common business issues. Whether it’s suggesting a process improvement for managing inventory or researching a new technology solution for your invoicing system, give your employees room to creatively address everyday challenges.
5. Hold “lunch and learn” sessions. These meetings give your employees the opportunity to learn and connect with one another during the lunch hour. Determine a clear topic ahead of time and tee the sessions up to be both informative and interactive. Whether you’re discussing team goals and performance, holding a “show and tell” with a partner or a particular team, or bringing in a guest speaker or outside resource, getting everyone together in one room can shed light on new ways of doing things and make the lunch hour energizing and engaging.
6. Don’t forget to say thank you. We all appreciate being thanked, but taking the extra step to use a hand-written note, a gift card, or other gestures to recognize achievement can make a big difference in making employees feel appreciated.
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10 Quick Tips on Business Plan Summaries
In this instant-update world we live in, life in 140-character bursts, it’s just a fact of modern life: you have to communicate faster. The whole world has attention deficit syndrome. So that’s as true for business planning as for most other things in business. Here are 10 lessons I’ve learned about business plan summaries.
- I’ve never forgotten what they told us decades ago in the resume clinic at business school: “Even the President of the United States can do a one-page resume.” Step back and appreciate the meaning of the word summary.
- There’s way too much vague and fuzzy vocabulary around summarizing business plans. A one-page business plan is a summary, not a plan. So too, an elevator speech, elevator pitch, business pitch, pitch deck, executive summary, and summary memo.
- As we use them these days, you can think of the lean canvas and lean business model as summaries. They focus on strategy and in some cases tactics. But they lack the milestones, tasks, performance measurements, budgets, and forecasts of a real business plan.
- Keep your summary short, cover the highlights, and assume key people will read this summary and nothing else. It’s a front door. Whether it’s an executive summary that comes first in a document, or a summary memo, make that reader want more information.
- A good summary is a collection of tips of icebergs. Each one has enough information to imply its entire iceberg, but it can’t go too deep, and it has to leave the iceberg somewhere. Don’t promise in the summary anything you can’t back up in the document or following discussions.
- Real business plans change often. It’s planning, not just a plan. And as your plan changes, rewrite and revise your summary to keep it fresh and keep it aligned with the plan.
- Different experts have different opinions on the ideal length of a summary. I’ve always recommended a summary of 2-5 pages, which can be used as a stand-alone summary memo where that’s appropriate. For example, in my angel investment group, we don’t read full business plans of all the startups that apply for investment. We eliminate some proposals just from reading the summaries. We read the full business plan only after deciding, from the summary, that we want to know more.
- A generalized summary will include the obvious information such as essential business details, what you sell, what locations, projected sales growth, profitability, and news you don’t want anybody to miss. It’s a good place to put a highlights chart, a bar chart that shows sales, gross margin, and profits before interest and taxes for the next three years. You should also cite and explain those numbers in the text.
- However, generalized summaries are as rare as generalized business plan events. Write a new summary for each time you need one. Tailor it to match the requirements of your specific business need. The summary you show angel investors is different than one you show a bank loan manager, and different again from the one you show a potential partner, employee, or attorney. How? How can you tell? Think what’s most important for each audience, in each context. That changes depending on the occasion.
- What you highlight depends on the context, as in point #8, but also on the specifics of your business. Highlight what serves your purpose best. For example, if you’re looking for investment and have a venture already backed by major brand-name backers, say so early in the summary. If you’ve got a founders team that includes several known entrepreneurs with good track records, then put it up front. If you have a good business track record, like impressive early sales or landmark deals with major channels, corporations or governments, put that first. If you have an amazing new invention or break-through technology, lead with that. Use good judgment. You’re an editor, at this point, looking at things through the audience’s eyes.
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Starting a Business in the Trucking Industry: Part Two
Earlier this week, we talked about the highly competitive trucking industry, and some guidelines that will hopefully save you time, money, and energy if you’re hoping to start a trucking business. Today, we’re picking up where we left off with some of the specific rules and regulations of this industry.
Starting a trucking business may require locating and purchasing specific equipment to get started. If you choose to operate a private fleet with your own drivers, you’ll need commercial vehicles. Different types of cargo require different equipment – if you’re transporting food, you may need a refrigerated truck. If your cargo is oversized, you might need flatbed trucks.
In addition to specific equipment needs, the trucking industry comes with its own set of tax, license, and permit regulations. Depending on the type of trucking business you’d like to start, important regulations could include:
- Federal DOT Number and Interstate Operating Authority: Understand your requirements and apply for these certifications online on the Federal Motor Carrier Safety Administration’s website
- Heavy Vehicle Highway Use Tax Form (2290)' Comply with tax regulations related to the heavy use of U.S roads with this IRS form, which the IRS updated in July 2015
- International Registration Plan (IRP) Tag: Most states require you to obtain IRP tags. You can learn more by visiting your state’s transportation website and its IRP portal
- International Fuel Tax Agreement (IFTA) Decal: You can obtain your IFTA deals by visiting your state’s transportation website
- BOC-3 Filing: You’ll need to file this form to secure and maintain active operating status – learn more on the Federal Motor Carrier Safety Administration’s website
Beyond operational requirements, if you choose to employ private drivers, those drivers will need to obtain special driver’s permits or endorsements such as a commercial driver’s license in order to legally operate your vehicles.
The good news is that each state has a portal dedicated to commercial transportation. For example, Idaho’s government site has a trucking portal with detailed information on commercial driver’s license requirements, rules and safety information, permits and licenses, taxes, and other related topics. Before you get started, be sure to visit your state’s transportation portal to ensure that you understand your state’s requirements and available assistance.
As always, the best step you can take to ensure you are meeting all requirements is to consult a compliance professional.
Time to Go Find Those Contracts
The trucking industry is competitive, and tracking down those first contracts can be difficult. As a new business, you won’t have the reputation you need to secure large accounts – but don’t be afraid to start small and utilize local contracts and small business trade shows to build up your client base. As you successfully complete your first jobs, you’ll be able to grow your business and contract larger jobs each year.
If you own a trucking business, what best practices would you share with someone who wants to get started in this industry?
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Starting a Business in the Trucking Industry: Part One
Commercial goods and products will always require transportation to new locations. In a growing marketplace, this need presents a great opportunity for new transportation businesses – but the transportation industry in the United States is also highly competitive – particularly in the trucking industry.
The American Trucking Associations reports that in 2012, trucks moved 9.4 billion tons of freight, or about 68.5 percent of all freight tonnage transported domestically. Motor carriers collected $642 billion in revenues, or about 81 percent of total revenue earned by all domestic transport modes.
If you’re looking to throw your hat into the highly competitive trucking business, are some guidelines that will hopefully save you time, money, and energy.
Put simply, trucking companies operate by bidding on, winning, and fulfilling transportation accounts and contracts. Most trucking businesses operate in one of two forms, depending on how they acquire drivers to fulfill contracts:
Sub-contracted drivers: With this option, business owners use sub-contractors as drivers. While the business owner runs the business and receives the contracts, the drivers are not actually employed by the company. The up side? This option can cut down on start-up costs, insurance costs, and required equipment. The down side is that it also gives you less control over your drivers and can cut into your profits.
Privately-owned drivers: With this option, the business owner privately runs his or her business and all operations, using their own equipment, paying higher insurance prices, and hiring a fleet of private drivers who are employed by the company. This option gives you total control over your business and its employees, and promises the most return on profits. The down side for this option is more obvious, as it requires significantly more start-up capital and has higher operating costs.
As with any other business, it’s important to understand the basics of starting a business before researching the additional steps specific to your field of interest. Once you’ve determined which type of trucking business you’d like to start, you can follow these 10 Steps to Starting a Business for great tips on how to finance your business, hire employees, and ensure that you are complying with tax obligations.
You’ll also need to consider insurance requirements. The very nature of the trucking industry creates strict insurance requirements on businesses because you own and oversee the operation of commercial vehicles.
In addition to your insurance responsibilities, your employer responsibilities require you to comply with health and safety standards and regulations. The U.S. Department of Labor's Occupational Safety and Health Administration provides compliance assistance for the trucking industry to meet these expectations.
That’s all for today – tune in later this week for part two of this blog post, where we’ll outline the specific rules and regulations of the trucking industry.
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Sales Tax and Small Businesses – Part Two
Questions about sales tax are among the most frequent inquiries from small business owners across the country. In part one of our “Sales Tax and Small Businesses” post earlier this week, we defined sales tax, explored state-specific permit and sales tax requirements, and reviewed common situations in which sales tax does not apply. In today’s post, we’ll pick up where we left off with four additional lessons when it comes to small businesses and sales tax.
Lesson 5: When your business sells online
If your business sells goods and services online, you will likely still pay sales tax, but not necessarily on all transactions. E-Commerce tax laws can be confusing, but typically, you charge sales tax for customers located in states where your business has a presence. For example, if you only operate out of Virginia but sell your product to customers across the country, you would only collect and pay sales tax for customers located in Virginia. However, if you have your headquarters in Virginia, a warehouse in Ohio, and a distribution center in Arizona, then you would pay sales tax on any transactions that originate from those three states. Check out this article for more helpful tips on when to collect sales tax for online transactions.
Lesson 6: Time to pay your sales taxes
Depending on your state’s requirements, your business probably has an option to pay monthly or quarterly. Monthly payments may help you track your expenses more regularly and avoid a bigger tax bill to pay three times a year. Some states and localities may require businesses with larger tax liability to make electronic payment, while others do not have the infrastructure in place to support electronic payment. Regardless of which schedule and process you follow, make sure you know your state’s sales tax deadline to avoid costly fines.
In addition to paying the state sales taxes your business owes, you will likely need to file periodic sales tax reports to your state department of revenue. Most states now allow businesses to pay and report sales tax online – a great, time-saving feature – and some states also give a discount for prepayment of sales taxes. If you can swing it, it will save you money in the long-run to pay in advance.
Lesson 7: Relying on accounting software may not be enough
Your business may use accounting software, but it’s critical to also keep track of your accounting personally. An incorrect entry could mean not collecting enough tax from customers, yet still having to pay state taxes. While technology can be an incredibly helpful tool, make sure you also keep track of your numbers to give yourself a backup method for avoiding mistakes when technology is being less than cooperative. This planning guide outlines more helpful tips to keep your business on top of its numbers.
Lesson 8: Document in case of an audit
The word “audit” can strike terror into the heart of a small business owner, but if you have a reliable process for keeping track of sales taxes, it will serve you well in case of an audit. The current economic client has increased the chances of small businesses being audited as many states work to balance their budgets and locate unpaid taxes through audits. If your business takes the time now to review its process for keeping sales records, it could go a long way in minimizing your costs and time wasted in the event of an audit.
That wraps up our list of top lessons when it comes to small businesses and sales tax. Sound overwhelming? It can be – there are thousands of sales tax jurisdictions in the United States, which makes this topic a challenging one. Just remember that there are also dozens of resources available to help you with this process from start to finish.
Did you learn something new through part one or part two of this series? Do you have a great lesson to add to the list? Share your small business sales tax takeaways in the comments below.
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SBA is Empowering Communities across America to Become Business Smart!
President Obama once said that entrepreneurship is the most powerful force the world has ever known for creating opportunity and lifting people out of poverty. The benefits of entrepreneurship include increased personal income, social mobility and the ability to create jobs for others. At SBA, we know that business ownership has long been a pathway toward wealth creation and economic empowerment; having a profound bottom-line impact on improving people’s lives. Making this pathway more inclusive and accessible is especially important for women and people of color, where barriers to accessing credit, influential networks and relevant information have made starting and growing businesses extremely challenging.
SBA has partnered with the National Association of Government Guarantee Lenders (NAGGL) to create the Business Smart Toolkit. This Toolkit is a business education series and resource designed to equip community organizations, civic leaders, faith and non-faith based organizations, and individuals alike with the tools needed to host a business education workshop that informs individuals about business basics, becoming credit-ready and connecting to local resources to start and grow businesses. Through Business Smart, SBA is increasing access to sound business information to those that are often underrepresented in America’s entrepreneurial economy.
To watch an introductory video and to download the Business Smart Toolkit, visit: www.sba.gov/businesssmart.
While an increasing number of women and people of color are starting businesses, they continue to face hurdles that impact their ability to successfully start, survive and grow. It is no secret that access to capital is one key hurdle. Although SBA works hard to increase access to capital—in fact SBA is three to five times more likely to guarantee a loan to a minority or woman owned small business than a conventional lender—many existing and would be entrepreneurs are not informed on how to position themselves to access this credit. Additionally, another hurdle is access to sound business advice and information to move forward successfully. SBA is attempting to address these two hurdles through a new effort called the Business Smart Toolkit.
The Toolkit is free and accessible online for anyone who wants to host a Business Smart workshop. Included in the Toolkit is a Welcome Packet that guides organizations and individuals through the key steps of hosting the workshop; an Instructor’s Guide that walks an individual through delivering the workshop; and PowerPoint Slides divided into three separate 60-90 minute modules (Ready; Set; Go). The Toolkit also provides guidance on how to partner with SBA District Offices and local Lenders to deliver a Business Smart Workshop that educates and connects attendees to local small business assistance resources. By taking this approach and leveraging existing community assets such as the faith community, volunteer organizations, trade associations and civic groups, SBA hopes to reach more individuals.
Each year, SBA reaches millions of individuals through existing programs and services; however with the introduction of the Business Smart Toolkit, tens of thousands more will have an opportunity to be reached.
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Why Your Business Needs a “Content First” Social Media Marketing Strategy
Social media marketing takes more than signing up for a free account and waiting for followers and fans to materialize.
But where do you start creating content that resonates with your audience on social media?
You need a content-first business. But while content-first usually refers to brands that develop content to build an audience before launching products or services, you can also think of the concept more widely to guide the development of your social marketing efforts.
Joe Pulizzi, founder of Content Marketing Institute, explained the steps of creating a content-first strategy in a recent SCORE online workshop.
Great social marketing starts with expertise and passion
Pulizzi’s first step in developing shareable, engaging content comes down to you as an entrepreneur. Think about your knowledge base and expert-level skills. In what topic areas do you have authority to speak as an expert? What aspects of your industry are you most passionate about?
Match your passion and expertise with what you know about your customers. What are they passionate about? What pain points can you help them solve? Together, these elements of your expertise and your customers’ needs create what Pulizzi calls the sweet spot – the basis for your content marketing.
Once you find the sweet spot, go beyond it to narrow your efforts. Go an extra step to determine your content tilt: the thing that makes you not just an expert, but a leading expert in some aspect of your line of work. “Everyone stops at the sweet spot,” Pulizza explained. “You have to tilt it to find your leading area of expertise, and differentiate.”
Once you’ve solidified your sweet spot and content tilt, it’s time to develop a brand content mission to guide the content you create and share. This mission can be brief, but it should outline your target market, what you’ll offer (ex: blog posts, a podcast, three YouTube tutorials per month), and the outcome for the audience – the value they’ll take away from the experience.
By narrowing your focus with the content-first method, you can spend less time wondering what to post on social media, and spend more time connecting with your audience in a meaningful way.
Pulizzi warns that monetization of the content-first marketing plan takes 15-17 months. But once your audience builds in support of your consistent, compelling content, you’ll see an increase in social media followers, customer engagement, and, of course, revenue. If your business is already selling products, you may see results quicker, but more gradually.
Put your content-first strategy to work
Once you’ve mastered your content strategy, it’s time to communicate! On Twitter, search for and follow other leaders in your industry or region. Accounts with overlapping audiences can offer content to share and respond to. On Facebook, you’re not tied to a character count, so feel free to ask questions, respond to customer queries, and solicit ideas for additional content. Create photo or video posts, or keep tabs on shareable content your colleagues and industry partners are making. Sharing relevant content from others bolsters your own content-creation efforts by offering new items to click and comment on during lulls in your marketing calendar. Sharing also strengthens your reputation as someone who pays attention to their industry – and appreciates their colleagues.
With a steady stream of great content, you’ll not only continue to excite your followers, you’ll also be prepared when social media channels change. Twitter and Facebook have evolved, and Instagram, Snapchat, and Periscope have joined them. Other tools, like Google Plus, have begun to fade out of daily use.
Who’s to say what social channel will be next? By focusing on your sweet spot and content tilt, you’ll have content that transcends specific social media tools, enabling you to adapt it to whatever social channel is all the rage on any given day.
Not sure how to turn your passion and expertise into a marketing strategy? A SCORE mentor can talk through your ideas and help identify a niche audience.
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7 Secrets to Making PR Work for You
Do you do public relations for your business? Many small business owners neglect PR because they think it takes too much time or requires hiring a PR person or agency. Others think their businesses just aren’t newsworthy or that they can’t write a good press release – so why bother?
The truth: PR is a great way for any business to get noticed – for free. “Earned” publicity – publicity that comes from a blog, newspaper, or magazine writing about your business – is far more valuable than “paid” publicity (that is, advertising). Prospective customers trust earned publicity more, and it has long-lasting results in terms of building your brand and your credibility.
The nuts and bolts of PR have changed a bit in recent years, with the advent of social media and the rise of the Internet, but the basic rules of PR still hold true. Here’s what you need to know:
1. Get to know your target. Just as in any type of marketing, understanding what your target market wants and needs is key to success. In this case, your target market is the media – journalists, bloggers, TV and radio reporters, etc. To find out what they need, pay attention to what they already write about. A local reporter who covers the retail industry is the perfect person to pitch your new store to, while the reporter who reviews restaurants won’t care.
2. Craft your pitch and press release. There are many websites that provide templates for pitches and press releases. PRLog.org is one my company uses, but PRNewswire and PRWeb.com offer useful tools, too. Following a template helps by suggesting how and when to use hyperlinks, photos, and other elements to add interest to your pitch or press release. Of course, format isn’t the only thing that matters when writing a pitch or press release. You need to find a “hook” – something timely, interesting, or newsworthy to the media person you’re pitching. If your retail store sells children’s toys, for example, a pitch about the “10 Hottest Holiday Toys for 2015” will get parenting magazines or mom bloggers intrigued.
3. Hit the target. Send your pitch and press release to your target media members. Email is the generally accepted method today; you can find most media members’ emails on their publications’ websites. Use an attention-getting subject line that clearly states what you’re offering without being boring.
4. Follow up. Develop a spreadsheet of media contacts with contact information to help you manage your PR efforts. After your first pitch, follow up if you don’t hear back – but don’t be a pest. I’ve noticed a disturbing tendency of PR people emailing me the day after (or even later the same day) I get their pitches to follow up. Give people some time to get through their emails before you hit them with a second attempt – but do follow up; emails often fall through the cracks.
5. Make an offer. Spell out what’s in it for the media if they take you up on your press release. Provide some useful data (such as statistics from a survey you’ve done), an interesting or compelling quote, an offer to serve as an interview source, or an invitation to your grand opening or other event.
6. Be active. If your business targets local customers, getting out into your community is a great way to get PR. Become an active member of local networking groups, Chambers of Commerce, and other business organizations in your area. Local media often reach out to these groups when they need quotes or interview subjects, so being involved gives you a better chance of getting press.
7. Make the most of it. Once you do get publicity, make the most of the attention by posting the article on your website, framing it in your store, and generally spreading the news about your 15 minutes of fame. Also be sure to thank the journalist or blogger for the attention – that helps build relationships and leads to more publicity.
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Choosing a Business Name: 5 Interesting Things to Know
There’s plenty of advice out there about choosing a business name, such as the need to do a name search in your state, a trademark search, register the name, and other key legal issues. Those are all important factors to consider as you choose a business name.
But I’d like to focus today on five considerations you should also be thinking about. These five things may be overlooked when choosing a business name (or thinking about a re-branding of your business):
Dot Com Domain Names Still Rule
Today’s small businesses depend on Web presence to generate leads. Prospective customers are researching businesses online before they buy, so being findable online is crucial.
Before you settle on a choice for a business name, go to your favorite domain registrar, and search to see whether the .com URL is available. The “dot com” version of a name is still the go-to address that most of the public thinks of automatically. So whenever possible, try to get the dot com version of your chosen name.
Otherwise, you may end up like me – buying that dot com extension at auction on the secondary market later –for thousands of dollars. After years of vainly trying to encourage people to use our chosen domain name (which was close but not exact), I finally caved in and purchased the one that matched my company name and that people tended to automatically think of, and redirected it to our company website. So now we no longer “leak” that misguided Web traffic, but it did cost us.
Newer Domain Extensions Can Be Catchy
Absent that – or perhaps in addition to a dot com – consider the catchiness of some other top level domain extensions. Today we have many more choices for domain extensions, to the point that they can become a clever part of your name.
Consider a name like Lesson.ly. The “.ly” extension is used as an integral part of the name.
Some of the new domain extensions suggest the type of business you may be in. For instance, a consultant might opt for a .guru domain extension, as in JohnQSmith.guru. A photographer might opt for a .photography domain, as in SuperSnazzy.photography or something similar.
There’s no rule that says you are limited to just one domain name. You can always have two or more using some for specific marketing purposes – just make sure they are directed properly to your website.
Will Trendy Names Stand the Test of Time?
Names, like fashion, go through trends. A number of years back, names with “crunch” in them were trendy. Think Techcrunch. Names with dropped vowels were also trendy for a long time - such as Unbxd. Or adding in extra letters was cool, such as the three b’s in Dribbble.
Consider, though, whether that trendiness will be difficult to spell or remember. Will the public remember to drop the right combination of vowels, or to add in that extra letter?
Catchy vs. Descriptive
There’s a trade-off when choosing a name. Go for marketing memorability? Or go for findability online or in yellow pages? Have you ever wondered why there are so many service providers named “AAAA Best Plumber of Skokie, Iowa” or “AAA Pest Control of Hunstville, Arkansas”? In the days when yellow pages ruled, businesses wanted to be first on alphabetical lists.
When the Web showed up, names shifted toward the descriptive terms that the public looked for in search engines (“Lima Oklahoma Used Car Dealer”).
But consider whether you’re letting the tail wag the dog. For many businesses, you want the public – buyers – to remember your name. A catchy, memorable name often trumps one that is designed to get people to find it when searching.
Of course, the best names manage to do both: make it easy to find when searching, yet are memorable. Or the business owner gets two domain names – one that matches the brand name and one that pairs up with searches.
The International Dilemma
The world is becoming a small place when it comes to commerce. The majority of companies that export are small businesses. Business owners who are thinking ahead have to consider not only how that name sounds or what it means in the United States, but how it plays in other countries and languages. Years ago, Chevrolet allegedly named a new car model the Nova – only to have it pointed out later that in Spanish, Nova meant “it doesn’t go.” That turned out to be an urban legend about Chevrolet that has now been debunked according to Snopes.com – but the lesson it represents is still valid. If nothing else, it’s wise to consider whether your business name will be pronounceable and spellable in countries you may plan to sell into. And consider whether there’s already a famous competitor in those countries with the same name.
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The Difference Between Benefit Corps and Certified B Corps (And Deciding What’s Right for Your Business)
Most people start a business with one key objective in mind – making a profit. Yet some companies seek out not only to profit but also to provide a tangible benefit to society and the environment. These companies, depending upon a few specific criteria, are classified as Benefit Corporations or Certified B Corporations.
Confused by the difference between the two? Didn’t even realize there was a difference? You’re not alone – it’s one of the most confusing aspects of a recent movement for companies focused on giving back. Benefit Corporations and Certified B Corporations have a lot in common, but there are a few key differences.
To date, 31 states as well as Washington, D.C. have passed laws creating a new type of corporation – the Benefit Corporation (often referred to as “Benefit Corp”). Benefit Corporation status involves a separate process available to companies in every state. These companies pledge to think about people and the planet in addition to profit (most are committed to a specific social mission), but Benefit Corporations voluntarily work against standards of corporate purpose, accountability, and transparency.
Benefit Corporations have a corporate purpose to create a positive impact on society and the environment, and are required to consider the impact of decisions on workers, the greater community, shareholders, and the environment. And while Benefit Corporations are required to provide an annual benefit report that is available to the public, benefit corporations do not have to be audited or certified.
In addition to 31 states and Washington D.C., five additional states are currently working on laws for benefit corporation status. You can explore your state’s Benefit Corporation law status here, but as always, it’s best to consult your tax advisor or attorney if you’re considering transitioning to Benefit Corp or Certified B Corp status.
Certified B Corps
Certified B Corporations are similar to Benefit Corporations but not identical. Certified B Corporations (also referred to as “B Corps” or “B Corporations”) are for-profit companies that pledge to achieve social goals as well as business ones and are certified by the nonprofit B Lab to have met rigorous standards of social and environmental performance, accountability, and transparency. It’s similar to USDA’s certification for organic milk or a LEED certification for a green building, with one key difference – a B Corp certification evaluates the entire company (environmental footprint, community involvement, governance structure, worker engagement, etc.) rather than just a single aspect like a building or a product in the examples above.
The broad evaluation is key because it helps to distinguish the companies that are focused on doing good from companies that just happen to do good marketing. There are now more than 1,000 Certified B Corps in the United States, including well-known companies like Ben & Jerry’s and Patagonia. All of these companies share a similar goal in that they are working to redefine what business success is – they are hopeful that companies will continue to compete and do what is best for the world around them.
B Corps are for-profit companies and are taxed the same as any other corporation - but to become certified, your business may need to amend its governing documents or adopt benefit corporation status (see above) to meet the legal requirements for certification for your state of incorporation and corporate structure. And as with any restructuring, your business should engage key stakeholders, legal counsel, and investors about the usefulness and implications of adopting these legal changes for raising money, selling your business, and directors’ liability. If your business is a corporation, you’ll need to file your amended articles with your Secretary of State within one year.
The belief that businesses exist solely to make a profit can have an impact on how companies operate. Focusing on your business’s positive impact on society and the environment comes with benefits. Here are a few to consider:
- Benefit/B Corp status can help companies attract and retain top talent and customers
- Millennials, which represent half of the global workforce, want work with meaning – a recent study by Intelligence Group found that 64 percent of millennials would rather make $40,000 annually at a job they love and care about than $100,000 at a job they find boring or less meaningful
- According to BBMG, 73 percent of consumers consider the company, not just the product, when making a buying decision
- Consumers often align purchases with their values – 86 percent of consumers are more likely to trust a company that shows the impact of its cause efforts, according to Cone Communications
There are also some drawbacks to consider if you’re exploring the pros and cons of Certified B Corp/Benefit Corp status:
- If you have shareholders, you will also have expanded reporting requirements in order to provide shareholders with enough information to determine if your business is achieving its stated purpose
- If you have shareholders, they can bring charges against the company for not carrying out its social mission (just as they could sue directors of traditional companies for violations of fiduciary duty)
- These designations are fairly new as far as legal entities go, so it’s not entirely clear how courts will interpret mandates to not only seek profits, but to consider potential benefits to society. As such, the impact on raising capital and on how angel investors and venture capitalists could react is still unknown
There are a few legal requirements to consider when thinking about Benefit Corporation or Certified B Corp status. When it comes to your company name, Benefit Corps and Certified B Corps do not need to make any reference to benefit status within the corporate name. You won’t need to alter the name you’ve chosen for your business, nor would you need to tailor your name brainstorming any differently than if you were considering a standard C Corporation. You will be required, however, to state your Benefit Corp/B Corp status in your articles of incorporation, and you may want your articles to highlight a specific purpose (like benefitting the arts, improving public health, etc.)
Finally, the share certificates of a Benefit Corporation must specifically state the benefit nature of the corporation. Certified B Corp and Benefit Corporation legal requirements may vary between states, especially when it comes to provisions relating to shares and their transfer, so be sure to research your local laws.
For entrepreneurs, business owners, workers, and consumers, the introduction of Certified B Corps and Benefit Corporations is an exciting development, because it enables community- and environmentally-minded business owners to preserve their social goals without sacrificing the ability to make a profit.
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