On Organizational Silos and How to Surmount Them

It’s been 25 years since Jack Welch, the iconic former leader of General Electric, encouraged a different way of looking at how businesses are organized and managed.

He advocated for the “boundary-less” organization, marked by faster decisions, greater employee engagement and stronger collaboration. He brought it to life as the “GE Work-Out Process,” and the underlying philosophy – the need to remove the hierarchies and silos and fragmented processes and cultures – has been popular among management gurus ever since.

Still, 25 years later, everyone seems to have a recipe for making the Kool-Aid. But why aren’t more organizations drinking?

From my perspective, Jack Welch is an excellent role model and this particular flavor of Kool-Aid is one that should go down well. In growing a 200-plus employee organization that’s a leader in construction and construction management, my firm, MBM Consulting, couldn’t have earned its reputation for innovation and quality had we been mired in a rigid and controlled environment with a trickle-through communications style.

That isn’t to say that organizational silos don’t have their place. Especially in larger organizations, they offer structure. They provide a place for specific areas of expertise to flourish. And they allow some measure of control to be exerted over the flow of information up and down the organization.

But, when the walls are too high, there’s a price to be paid. Alignment of priorities goes off-kilter. Bottlenecks occur and stifle the information flow. And decision-making in a vacuum occurs, with long-term negative implications for the business.

So, how can organizations do a better job of, if not dismantling their silos, at least reducing the height of the dividers between them?

Here are three suggestions that I’ve adapted to my own organization’s purposes.

1.     Establish a top-down culture of communication and collaboration. It takes leadership commitment, people at the top who walk the talk. I try to personify the behaviors that I want to see in my teams. It takes time and commitment to grow a culture where opinions and input from across the aisle are solicited and valued. To a significant extent, that also takes articulating that commitment in meaningful vision and mission statements that everyone trusts.

2.     Borrow from Jack Welch’s “work-out” process. The bigger the organization, the more difficult it is, of course, to coordinate across a fragmented and geographically dispersed structure and functions. A fairly simple solution is to fashion your initiatives as regular forums designed to improve cross-functional and hierarchical communications and, ultimately, push for faster decision-making. Team leaders for a tech company, for example, successfully brought together its R&D and business areas, whose combined input led to a faster process for product commercialization.

3.     Share the successes. When you’ve surmounted the barriers and joined disparate teams and disciplines together to tackle the big challenges that can affect your productivity, growth and financial performance, give credit where it’s due. You’ll strengthen the bonds of your organizational fabric and also motivate others to want to play a role in this collaborative environment.

The fact is that whether you’re the chief executive or project manager or IT troubleshooter or marketing specialist, everyone has shared goals in pushing for the future success of your organization. The more effectively you can remove the barriers from collaboration and communication, the greater your measure of success will be.   

Four Guidance Points to Building Successful Family Business Governance

A 2014 survey by PricewaterhouseCoopers found that 71 percent of family-owned businesses didn’t have procedures in place to resolve conflict issues.

Statistics such as these make it all the more imperative that family members in business together set up a clear and agreed-upon structural plan, a constitution for business governance as it were.

Items in this structural plan can include mission and vision statements, an employment policy, strategies to develop the next generation of leadership for the business, a liquidity policy, a succession plan, and information regarding any shareholder meetings.

Understandably, the details of what is relevant when it comes to successful family governance can change from business to business.  With that said, the below guidance points can prove useful for a wide range of family-run organizations. 

Independent Board of Advisors

Many family businesses have boards of directors comprised mostly or entirely of family members. Although boards of directors with this kind of composition can be successful, independent, non-family-related directors do bring value. 

Some family businesses ensure more balanced boards of directors through policies that limit the number of family directors.  Some also compliment their family board members with non-equity holding directors. If the governance structure doesn’t allow for outsiders on the board, setting up an advisory committee to the CEO that is composed of individuals recruited from outside the family may bring fresh perspective and expertise.

Avoiding Conflict During Management Changes

Policies that encourage meritocracy are certainly beneficial to any family-run company, especially when it comes to setting boundaries and avoiding conflict during times of management change.

The reality is that leadership change happens in most businesses.  Intelligently-run organizations understand this reality and plan ahead to make leadership transitions as smooth as possible.

To build on the previous point, outside directors and advisers can help make management changes smooth, after all non-family related advisors or directors can provide both the perception and the reality of objectivity during leadership selection decisions.

Regardless if a business is hiring new management from within the family or outside of it, new management should be in line with the organization’s culture and should be evaluated based on core leadership qualities like respect, integrity, quality, humility, passion, modesty, and ambition.

Transparency

To prosper, businesses need to raise financing from time to time and if a company is still private, that usually means depending on a bank to provide a loan. Family-run firms that insist on maintaining a veil of secrecy over their affairs will find it difficult to raise the financing needed to grow.

The so-called “family premium” — the idea that family-owned and -led businesses are stricter when it comes to standards, capital distribution and governance — is typically only applicable to entities with high levels of transparency. Conversely, opaque firms trade at a discount because investors simply don’t know enough about that business, especially those firms with governance practices that may be questionable in other respects.

A Well-Organized CEO Succession

When examining large family-run corporations that have failed in the past, CEO successions, or rather failed CEO successions, have played an unfortunate pivotal role.  When considering the integrity of their own CEO succession process, businesses should ask three questions: one, how vigorous is their candidate selection process and does it allow for the inclusion of multiple candidates?  Two, will all family members who are significantly part of the business be involved in the selection of the new CEO?  Three, what is involved when it comes to integrating and developing the successor in his or her new role as CEO? 

The latter point should be particularly emphasized if a new CEO is being introduced into the business who is not part of the family.  After all, this will be a leader who will not only have to efficiently and successfully integrate into the company, it will also be someone who will need to integrate into the family business dynamic and navigate the occasionally choppy waters of inter-family relationships.

Sole Proprietor Vs. LLC From A Money Management Perspective

A growing number of Americans today run their own business. Between 1980 and 2010, the number of sole proprietorship businesses in the US grew from around 10 million to more than 23 million. For perspective, the corresponding number of C corporations, partnerships and S Corporations put together account for not more than 8-9 million.

It is easy to start a sole proprietorship business. In fact, there is no formal action required from a business owner to be a sole proprietor. Limited Liability Corporations (LLC) on the other hand, need to be registered as a legal business entity. However, this incorporation lets them add members to the organization. This may be essential if you have more than one founder. Members of an LLC shall continue to file profits and losses in their individual capacities, much like a sole proprietor.

So if you are the sole founder of a business, does it still make sense to register yourself as an LLC? Here are a few things to consider.

Business Expenses

There is little to no difference when it comes to accounting for business expenses. Buying a phone to handle customer calls counts as a business regardless of whether you buy it in a personal capacity or as an LLC. Similarly, buying gifts for your clients can be written off as a business expense no matter how your business is registered. That being said, it should be pointed out that the IRS does tend to look closer into sole proprietors writing off regular visits to a restaurant or a coffee shop as business expense. You may need to have proper documents for your business lunches and gifts to avoid tax liabilities in future.

Losses

Businesses tend to allocate a healthy chunk of their profits into marketing their business. All of this is classified as business expense and is tax deductible. A good accountant may advise you on the best way to optimize your tax liabilities while ensuring a healthy profit for your business. This is true with both sole proprietorship businesses as well as LLC. Where they differ however is in loss liability. When your business truly suffers a loss and you are unable to pay back your loans, a business registered as an LLC would limit personal liability of its founders. This means that banks and other lenders may not seek to recover their money from the sale of your personal assets like house or car. This is not the case however with a sole proprietorship business. Lenders, in this case, are legally permitted to seek recovery through the sale of your personal assets.

Tax Filing

Filing for taxes can be a painful process no matter what type of business you hold. It is always a good idea to hire a CA to help you with the process. You may write off their fee as a business expense in any case. Both LLC and sole proprietor businesses are required to file for taxes in a personal capacity. This should not have a bearing on the type of business you form. LLC business owners must still pay the self-employment tax.

These are just a few of the many factors to take into account while launching your own business. The rule of thumb is to always limit your personal liability. So unless you have a strong case against LLC, it is always preferable to form an LLC over running your business as a sole proprietor. That being said, none of this should be considered professional advice. Consult a professional before you move ahead with your decision.

5 Ways To Find Money For Your New Business

When it comes to trying to start a new business, the toughest part, without fail, is going to be trying to get the necessary money in order. Typically you won’t be making any money before you start, which mean you need to get an initial sunk investment into the venture, and that means pulling cash out of thin air in most cases.

But, there is a method for this procurement of thin air when you begin to look more closely at the possibilities. Common ways include working to get a credit line, asking friends and family for an investment, minimizing and selling belongings you don’t need, looking into getting grants (if you’re a non-profit), or looking for sponsorships from established companies or brands.

Getting a Credit Line

If you don’t automatically have all of the cash you’re going to require to run and maintain your business, your next best bet is to start getting a business credit line. This is going to involve a few steps, and it’s important that you have things in order in advance like having a separate bank account for business transactions, and all of your licenses in order as well.

Asking Friends and Family

Especially if you don’t have a lot of collateral, or maybe you don’t have a lot of experience in the business field, your friends and family can potentially be you best early financial collaborators. Now, there are definitely best practices for asking for money from family and friends, because you don’t want to get in legal or familial issues because of details that weren’t discussed when the initial lone happened. Families can either succeed together in business deals, or get torn apart.

Minimizing and Selling

Sometimes the problem with trying to find new money is that you haven’t totally exhausted your available resources. And by this I mean, before starting a new business venture, you should minimize your personal stuff, selling anything valuable you have that you don’t need or use anymore. You’d be amazed at how much upfront cash you can get for things like unused electronics, video games, music, or exercise equipment.

Grants For Nonprofits

If you’re starting a business that can be considered non-profit, there are a ton of options that you have in terms of trying to get grants from state or federal governments. Especially if your company has anything to do with children or with education, see what your options are for requesting money or reduced interest rate loans.

Sponsorships

And finally, if your idea is good enough, you might be able to get some sponsorship money from individual donors or possibly even companies that are willing to invest in your concept. Sometimes you’ll have to give up some of your management independence, but having early financial support might be worth that consideration.

More than a boss: 9 qualities that make a great leader

more-than-a-boss-2

Being a boss, even a reasonably good boss doesn’t necessarily mean you are a good leader. The two aren’t mutually exclusive. As a good boss you may be able to get great results and accomplish company objectives. But that doesn’t automatically qualify you as a great leader. In fact, in most cases it doesn’t.

Most bosses are great at managing operations, but they don’t think strategically. They are capable of resolving short-term challenges, but don’t plan for the long-term. They can achieve end results, but they’re not fully connected to the people who help achieve them.

Far from the stereotype of a boss in his office barking out orders to a disincentivized staff, a good boss can appear engaging and supportive, as well as get results. But there’s more to a leader than just achieving results. A leader understands strategy. A great leader sees the bigger picture and knows how to engage and include others in a common vision.

So what qualities make a boss more than just a boss? What skills determine a good leader as opposed to merely a good boss? I’ve put together a list of 9 qualities and skills essential for great leadership, as part of an ongoing research project using sources from across the web, printed literature and a case study using Planday.com – a staff management software specialist.

  1. Vision

A leader doesn’t just look at the end result. A leader wants the whole team to embody a shared vision by empowering them and coaching them. He or she understands the complex relationships in a team and wants everyone to succeed and excel. A great leader sees beyond the self. It’s not about a bonus or promotion. It’s something bigger. They link the means to the end and beyond. They enable staff to see how and why their input matters.

  1. Trust

You can’t be a great leader without trust. That works on both sides of the coin. People who work for you need to feel you can trust them. Equally they need to feel they can trust in you. Trust also extends to customers.

Commitment from staff emerges from trust and openness, as does customer loyalty. Being accountable and not making promises that can’t be kept are essential for building trust. A good leader shows they are good at what they do, and they are passionate about it. They care about people and they operate with integrity.

  1. Respect

Too many bosses take their title and authority for granted. A good leader understands the need to earn respect and will take responsibility for their actions. A leader understands the effect their influence has on employees and on the company as a whole. Delegating tasks and trusting staff plays a big part in building respect.

Respect is something built over time, just as trust and loyalty are. Respect doesn’t mean a leader has to be friends with everyone. Not all leaders are well-liked, but you will usually find a good leader to be well respected. Leaders get respect for how they lead and how they make those around them better.

  1. Communication with an open-door policy

more-than-a-boss-3Creating authentic conversations is key to great leadership skills. A good leader is able to listen, and speak directly and succinctly. They manage direction and work, not people. They say thank you, and acknowledge staff often. And when things go wrong they don’t yell. They have the ability to retain perspective. They know when to admit they’ve made a mistake too.

  1. Engaged

A good leader will pitch in and help. They aren’t afraid to roll their sleeves up and get their hands dirty.

  1. Openness

Good leaders are open to input and different perspectives.

  1. Inspiring

A really great leader wants the best for those around him or her. They understand the importance of bringing the best out in people, even if that invites competition. They provide challenges and opportunities. They lead and they inspire.

  1. Caring

It may seem obvious, but good leaders care about people. They don’t assume anything about anyone. They see people as individuals without gender, generational or stereotypical differences. A good leader operates with compassion and always wants the best for people.

  1. Learning

more-than-a-boss-1A good leader never stops learning. They reach out to mentors to get feedback on strengths and weaknesses.  They know that understanding flaws and imperfections helps to overcome leadership blind spots.

There’s no such thing as a perfect leader, but a good leader will always be looking outside of the box. They want staff to develop and they know how to get the best out of people. They know their weaknesses and they aren’t afraid to delegate tasks they aren’t good at. Most of all, good leaders never stop learning – they are the product of a never-ending process of skill, character and relationship development.

A boss without leadership qualities gets lost in operational details. Great leaders embody a vision and they want those around them to embody that too.

 

Which Processes Should Small Business Owners Consider Outsourcing?

For a startup or small business, a reduction in overheads allows you to allocate more revenue to operational growth, whilst at the same time, freeing up some of your time. For small business or startup owners, outsourcing operations can be a considerably good move, providing more continuity, managing risks and keeping operational expenses to a minimum. Along with this, busy entrepreneurs also tend to find that outsourcing allows them to enjoy a better work/life balance. We’ve listed some tasks that you can easily outsource in order to free up your time and help your business to grow.

Customer Support

When it comes to customer services, everybody in your business should be on the same page. But, a customer support department can be expensive to run, and many small businesses simply don’t have the funds available to instantly meet the ever growing demands of their customers with features such as a 24-hour contact center, web chat services and a constant presence on social media. Because the reputation of your startup is something that you are going to need to nurture and build, offering a good level of customer service from the get-go is important.

One great company to consider outsourcing this to is SandStorm Holdings. Sandstorm offers 24/7 email, telephone and chat support, and is available in multiple languages.  If you have found that your customer support levels are lacking and that you are struggling to retain customers, they can help you with that too.  Any forms of support that they provide are evaluated for conversions, so that things can be tweaked as necessary to get better results.  Many in the iGaming industry find them invaluable. It’s a must have service for large businesses, but even small business can benefit.

Content Marketing

Marketing your business through web content is something that’s still highly important for most small businesses and startups, but the whole process of content marketing can be time-consuming and tricky. Unless you’re a small business owner who knows a lot about content marketing and are happy running your own campaigns, outsourcing your content marketing can not only free up some more time for you, but also help you to get better results overall.

Payroll

Even if you only employ a few workers, outsourcing your business’ payroll can help to minimize the amount of stress that you are under as a business owner and also make sure that everything is compliant and in line with regulations. Payroll duties tend to go well beyond simply calculating the hours and salary pay-outs for each of your employees, and one mistake with the payroll can lead to serious financial complications. Because of this, it’s a wise idea for business owners to outsource payroll processes to organizations or professionals who can ensure everything runs smoothly.

Administrative Tasks

Smaller tasks such as scheduling and admin might seem like something that you can easily do yourself, but these can often add up, leaving you with no choice but to dedicate a huge chunk of your day to carrying out dozens of small tasks such as replying to emails, taking calls and scheduling appointments. Outsourcing these tasks to a virtual assistant can be a very cost-effective way of managing things, as a remote worker usually does not cost as much as an on-site assistant and you may also be able to find somebody who can work the hours that you can’t.

Which business processes and tasks do you outsource to others? We’d love to hear from you in the comments.

HR, Law, and Big Data

Corporate America is embracing big data in a big way. Your company is probably already using it, especially for HR. But there’s a risk that if used improperly it can be construed as bias in contradiction of state and federal hiring and employment laws. So be cautious.

Big data means the collation and analysis of all digital history created when someone shops, surfs the internet, places an online order, and so on. According to David Moorhead of The Moorhead Law Group, “In today’s high tech world fraud schemes are more sophisticated than ever before. Successful capture requires law enforcement to stay one step ahead of the criminals. The use of big data along with tools, such as, such as the ability to better track fiscal anomalies, puts financial crime fighters in a much stronger position when it comes to the ongoing war with white collar crime.”

The selection, promotion, compensation, and layoff of employees can be done quickly and efficiently through Big data analysis. However, if HR decides poorly based on Big data input it opens the company to lawsuits; which in turn can become very costly and tarnish the company’s reputation. Here as some prudent ways to make those risks smaller:

Choose your software wisely. There are many Big data services out there, from startups still wet behind the ears to companies that have been mining Big data, in one form or another, for the past dozen years. You need to choose your vendor carefully. The more established companies may seem to offer the best deal, but sometimes they can be behind the times when it comes to the latest technology. Also, startups are really hungry for your business, so they’re more likely to cut you a deal financially, and may have more up to date tech smarts than older companies. The bottom line here is that you want a partner that looks out for your back, especially your HR back, at all times.

Even taking out the human element, the risks are still there. But if your HR is using an algorithm program, how can there possibly be any bias? Everyone is treated according to data input and nothing else. It’s still possible to held liable and sued for bias. Most anti-discrimination rules ban decisions that treat everyone the same way but that result in decisions that excessively leave out or disqualify protected groups from benefits or employment. This is known as “Disparate Impact in Employment Discrimination”.

If, for example, HR decides it needs to hire only people who drive stick shifts for a particular position, and it turns out that the algorithm then chooses mostly male applicants for the job, a female applicant can make a case to a judge and jury that there is gender bias at work in her company’s HR department. These complex variations must be taken into account by those responsible for your Big data and algorithm programs.

Constantly monitor the outcome of your Big data HR program among applicants and employees. Some algorithms do not function neutrally under all conditions, and may unintentionally show bias against certain protected groups; the only way to make sure your HR department is not left wide open to any bias charges is to keep monitoring results from HR. If they seem skewed — if, for example, any certain ethnic or gender class is suddenly becoming the main contender for a promotion or position — you’ve got to be able to pounce on that anomaly immediately and analyze why it’s happening, and then get the solution in place asap.

Following these basic steps should help keep your HR department completely compliant with all state and Federal employment and hiring laws. And save you the trouble, expense, and grief of a lawsuit.

Managing Company Income

“You must pay taxes. But there’s no law that says you gotta leave a tip.”

–Morgan Stanley advertisement

 

Written by Steve Nyvik, BBA, MBA, CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.

Understanding how different types of income are taxed is the starting point to learning how to manage tax on your income and reduce overall family taxes.  In this article we’re going to look at personal and corporate income tax rates and then make some observations which you might discuss with your tax accountant to see if there are opportunities to improve your tax planning.

Income Earned Personally

Generally speaking, as an individual, your income and dividends from a private corporation are taxed in one of the four categories below:

  • Dividends from public corporations (such income is considered as Eligible Income for the preferred dividend gross-up and tax credit),
  • Dividends from a Canadian private corporation (such income is considered as Non-Eligible Income subject to a different gross-up and dividend tax credit resulting in a higher amount of taxes),
  • Ordinary income (this includes wages net of CPP and EI, interest income and foreign dividends although any tax withheld may be partially offset by a foreign tax credit), and
  • Capital Gains (where only one-half the gain is included in your income which is taxed as Ordinary Income; the other half is a tax-free gain)

exhibit-1

 

 

Income Earned through a Canadian Private Corporation (a “CCPC”)

Income earned in a private corporate is typically classified as being either: (i) Active Income, or (ii) Passive Income – this generally being your portfolio income.

Active Income is then characterized based on whether it qualifies for the Small Business Deduction (the first $500,000 of taxable income) or not.

Passive income is divided into:

  • dividends from Canadian corporations,
  • interest income, and
  • capital gains (where only one-half the gain is included in your income; the other half is added to your Capital Dividend Account where an election can be made to pay out to your personally a non-taxed capital dividend)

exhibit-2

 

 

Observations

Number 1:          For all passive income, the corporate tax rates are higher than the highest personal tax rate for each type of income.

This higher tax on passive income is punitive, so we need to either:

  • find a deduction against such income and avoid that high tax, or
  • pay out a dividend of the after-tax income assuming that the company tax less any dividend tax refund plus personal tax becomes competitive to the personal tax rates.

Number 2:          Active Business Income that qualifies for the Small Business Deduction is taxed at a lower rate than all personal marginal rates of income if earned personally (see Exhibit 3 below as to the Ordinary Income compared to the 13% corporate tax rate on Active Income).

The difference in tax ranges from 7.06% to 34.7% (see Exhibit 2 as to the 13% tax rate on active income qualifying for the Small Business Deduction and Exhibit 3 as to the tax rate on Ordinary Income – which includes business income earned personally).  This is a tax deferral as we have to pay tax when we take that after-tax income out of the company.

Company Active Income is taxed preferentially to incentivize people to create and grow small businesses which are responsible for most of our country’s jobs.

Once we take out this income, the tax deferral ends.  If we pay a dividend out equal to the after-tax income, our total income tax burden (personal tax plus corporate tax) is slightly more than if we had earned the income personally (see Exhibit 4 and compare to Exhibit 3).

 

exhibit-3

 

exhibit-4

 

 

Offsetting Income

If a company earns both passive income and active income, any bonuses or employment income taken goes first to offset active income.  Once our active income is used up, then the remaining salary is offset against our passive income.  This is exactly the opposite of what we desire.  So, if we have both active and passive income in the same company, a bonus doesn’t achieve our goal to minimize tax.

But what if we dividended out the after-tax passive income?  Exhibit 5 shows that the result is a marginal tax rate ranging from 12.70% to 47.79%.  In effect, the marginal tax rate difference varies with taxable income.  In the lower tax rates, dividending out passive income results in lower tax (eg. 12.70% versus 20.06% for taxable income to $38210) and at the high tax rate results in slightly higher tax (48.33% versus 47.70% for income over $200,000).  So one corporation can serve your needs.

exhibit-5

 

Having two corporations – one for active income and one for passive

An alternative way of doing things is where all after-tax passive income is dividended out to an investment holding company.

The key reasons for this include:

  • To segregate your investment assets and any insurance from potential creditors of your business;
  • To maintain your corporation as a Qualifying Small Business Corporation. The principal advantage of this is access to the Small Business Capital Gains Exemption through time.
  • It makes it easier for a banker or investor to gauge the performance of the active business through time (and you then have financial statements and tax returns to back this up). And if you take on a partner in your active business, they don’t inadvertently become partners in your other assets.

 

Summary

This article has explored the tax rates of various types of income to help give you some insight to how you might manage income and whether to incorporate an investment holding company.  Your next step might be to talk with your tax accountant to see if you are managing your company income tax efficiently.  It also makes sense to review with your financial planner and portfolio manager so that they understand the tax planning in place, tax carryforward info (unusued contribution room, capital losses carryforward), and taxation of your income (like your marginal tax rates) so they can help you create a tax efficient portfolio.

If you are interested in having an investment adviser knowledgeable about taxes, then please call Steve Nyvik at (604) 288-2083 Extension 2 or email him at: Steve@lycosasset.com.

Why Knowing When and What to Outsource is a Vital Skill for Small Business Owners

If you are looking into starting your own small business, it may seem like there are hundreds of skills you will need to pick up to be able to run your new venture competently. From people management and accounting to IT and marketing, there may be a lot of things outside of the scope of what your business actually does for its clients or customers which need to be managed.

You Don’t Need to Do It All

However, in reality, you don’t actually need to become proficient in all areas of your business to make it a success. In fact, it is often better if you don’t try and do everything yourself and instead focus on what you are good at, and on the overall vision and drive of your enterprise. This is why knowing when and what you should outsource to other businesses is one of the most important skills you can have as you start out in business.

The Benefits of Having Far More Staff at Your Disposal Than You Can Actually Hire

If you have time to do everything yourself, or even to learn how to do everything needed to run a business, either your business is suffering for it or you are personally, from overworking. Neither of these are good things. Of course, you could hire people, however many of the tasks don’t need someone on them full time, and other things, like if you need a customer service helpdesk, require an investment in infrastructure as well as staffing. Outsourcing to third party companies like Pro Back Office gives you access to as many fully trained, expert staff as you need – but you only have to pay for the time they spend working for you and they are already equipped with the tools and software, as well as office space, that they need.

Small Businesses Are Usually Part of an Ecosystem

Whether you plan to run a business that serves other businesses or one which markets to the general public, you still need to appreciate that small businesses tend to operate within an ecosystem, rather than in isolation. A small business that does web design will have other small businesses as its clients, but it in turn will use small businesses for things like accounting. Being part of this web of businesses benefits everyone, as you make contacts and it can often be the case that your suppliers can also become customers, or can recommend you to the other businesses they work with. This is hugely advantageous, however can only be achieved if you take a step back from trying to do everything yourself.

For some things, you may outsource to large businesses who can provide you with lots of staff, whereas for others you might choose small businesses you can partner with. Either way, being open to outsourcing will make your business better, a

Norma Walton, Toronto Needs a New Home Lender

The big five banks control the majority of Canadians’ money.  Those banks love residential mortgages at no more than 80% loan to value.  Anything above that ratio will require Canada Mortgage and Housing insurance to protect the banks against any possible losses, with that insurance paid for by the borrowers.  Those bankers want to lend to Canadians with good credit ratings and regular employment income.

big five banks

The Canadian banks sailed through the 2008 credit crisis relatively unscathed and became the envy of the world for their strength and conservative balance sheets where other banks failed.  Although their loan loss provisions have recently been taxed somewhat due to the plummeting price of oil and their lending to that sector of the economy, they are still immensely solid and strong without exception.  Each earns billions of dollars of profits each and every year.  They succeed because they are a protected sector of the Canadian economy and they are immensely conservative.

approved

This is all well and good if you are a Canadian with good credit and a good job.  You will be offered a variety of 2.3% to 3% five year mortgage options and can sometimes even create a bidding war amongst a couple of different bank lenders if you fit into that perfect borrower profile.  So if you do, you don’t need any new home lender as you will be immensely well served by the big five banks.

self employed

For the rest of us, Canada is a somewhat hostile place for securing a mortgage.  There are few attractive options for self employed individuals.  Scotiabank tries to understand those who run their own businesses as does Street Capital and Home Trust.  Their lending standards, though, are still arduous to qualify for and their interest rates are generally higher than the 2.3 to 3% offered to their employed peers.

bad credit

For those who are self employed with less than stellar credit, the options are very poor.  Even those who already own their own homes have trouble renewing mortgages and find it near impossible to increase their mortgage principal.  For this reason Northwood Mortgage advertises on 680 News focusing on their approval of any borrower who already owns their own home.  That is an underserved market.

northwood mortgage

There are countless places, many located in the Allen Road and Sheppard area of Toronto, offering 100% approval for car loans regardless of credit.  There are no home lenders offering the same.

Toronto could benefit from a few new lenders offering the following lending services:

  • Those that permit equity only lending
  • Those that permit lending without personal guarantees and price in the risk of the lack of guarantee
  • Those that price in the risk of lending to employed individuals who have bad credit
  • Those that lend to self employed individuals with good credit
  • Those who lend to employees who are paid in cash so don’t have qualifying income but have a sufficient down payment to buy a house
  • Anyone else who doesn’t fit the bank’s very restrictive lending criteria

The services described above would benefit Toronto residents who don’t now qualify for mortgages or who have to approach private lenders now if they wish to buy real estate.

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