Categories
Human Resource

Emotional Intelligence

Emotionally intelligent employees and managers bring tremendous value to companies.

  • Emotional intelligence is the ability to understand your emotions and recognize the emotions and motivations of those around you.
  • Emotional intelligence counts for twice as much as IQ and technical skills combined in determining who will be a top workplace performer.
  • When hiring for emotional intelligence, ask interview questions that prompt job candidates to describe their actions in past situations.
  • This article is for small business owners and managers interested in hiring emotionally intelligent employees.

There are many traits to look for when hiring exemplary employees. You’ll consider the candidate’s past job experience, aptitude and culture fit. However, you should focus on one trait above all else: emotional intelligence (EQ).

In today’s environment, where many employers put a premium on workplace collaboration, hiring employees who can understand and control their emotions – while also identifying what makes those around them tick – is of the utmost importance.

Bill Benjamin, a partner at the Institute for Health and Human Potential, says emotional intelligence is by far the most critical hiring factor to consider.

“Provided people have the threshold experience, IQ and technical skills needed for the job, EQ either makes or derails a candidate’s performance and career,” he said.

We’ll look at what emotional intelligence means, why it’s essential in the workplace, and how to hire emotionally intelligent people.

What is emotional intelligence?

The term “emotional intelligence” was first unveiled in a paper written by Peter Salovey and John D. Mayer. According to the Yale Center for Emotional Intelligence, Salovey and Mayer developed the theory while painting a house.

“Over fresh coats of paint, the two friends and collaborators lamented that theories of intelligence had no systematic place for emotions,” according to the website. “Using each of their expertise, they articulated a theory that described a new kind of intelligence: the ability to recognize, understand, utilize, and regulate emotions effectively in everyday life.”

Annie McKee, a senior fellow at the University of Pennsylvania Graduate School of Education and director of the PennCLO Executive Doctoral Program, defines emotional intelligence in the workplace as the ability to understand and manage your emotions while grasping other people’s emotions and motivations. With these skills, an emotionally intelligent employee can help a team work together on shared goals.

“Whenever you put two or more people together, they need to learn how to work together, and emotional intelligence is a huge part of that,” McKee said.

Why EQ skills are important in the workplace

When employers seek top performers, research shows that they should start by looking at emotional intelligence. Benjamin said research by Harvard University, the Institute for Health and Human Potential, and many others have determined that emotional intelligence counts for twice as much as IQ and technical skills combined in determining who will be a star performer.

Here’s a look at the factors that make a potential employee’s EQ so important.

EQ may outrank IQ.

“It’s not that IQ and technical skills aren’t important, but they are threshold competencies: You need a certain amount of them to do any job, and once you are over the threshold, getting more IQ and technical skills doesn’t significantly improve performance,” Benjamin said. “It’s often said, ‘IQ and technical skills get you the job, and EQ gets you the promotion,’ or the corollary: ‘IQ and technical skills will get you hired, and EQ will get you fired.'”

The World Economic Forum (WEF) 2020 Future of Jobs report says that emotional intelligence is one of the 10 most in-demand skills and that it will remain there through at least 2025.

“Overall, social skills – such as persuasion, emotional intelligence, and teaching others – will be in higher demand across industries than narrow technical skills, such as programming or equipment operation and control,” according to the WEF. “In essence, technical skills will need to be supplemented with strong social and collaboration skills.”

Jobs are evolving.

McKee believes that as more “dull and dangerous” jobs fall by the wayside in favor of artificial intelligence and machine learning, emotional intelligence will be even more critical, pointing out that the jobs that will remain will involve things that machines can’t do. These include jobs requiring complex thinking and envisioning the future – jobs that require understanding your values, emotions and thought processes.

McKee says that these jobs will also necessitate understanding how to work with people vastly different from ourselves and learning how to read people so we can guide them individually and collectively toward a common goal.

Leaders have more impact than ever.

While emotional intelligence is essential for all employees, McKee believes that it may be even more critical for those in charge. She said that managers and other leaders set the tone for the entire workplace; therefore, good managers must understand how their emotions can impact those around them.

“If they aren’t able to understand their own impact on people – for example, they don’t understand when they are having a bad day and when they are stressed out – [that] is contagious, literally,” McKee said. “And then other people will start to have a bad day, and before you know it, everyone is, and no one is thinking as clearly as they need to.”

Hiring for emotional intelligence

While many employers understand the importance of finding employees with high emotional intelligence, how do you make this search part of your hiring process? Here are some important steps to take.

1. Commit to focusing on emotional intelligence.

Employers must first commit to looking for emotionally intelligent employees, according to McKee. She said that employers will often say this is a quality they want, but when the hiring process actually starts, they become laser-focused on resumes and job skills.

“The first step is acknowledging openly that emotional intelligence is one of your top criteria for hiring,” McKee said. “It is one of the things you are going to recruit on and one of the things you are going to screen candidates on.”

Once you’ve made that commitment, you need to dig in during the interview process to get candidates to explain things they have done in their past that displayed emotional intelligence, such as leading a team through a rough patch.

2. Bring emotional intelligence into the interview.

One technique McKee suggests is conducting an advanced behavioral interview. She said that hiring managers could use this to identify a quality – emotional intelligence, in this case – they want in that employee’s skill set.

“Ask about experiences, last job, where they are going in the future, strengths and weaknesses,” McKee said. “They are all useful. You get a sense of their interpersonal style and comfort [with] having a conversation in a stressful situation and a sense of the fit for the culture.”

McKee said that you also have to dig deeper to see previous examples of their emotional intelligence. Hiring managers can ask job candidates to talk about a time when they were working on a team and felt they and the team were successful.

“I want to hear about what you did to make that happen,” McKee said. “Oftentimes, people will say something vague. Push them to really talk about what they do until you get to the point of them telling you things like, ‘Well, the team didn’t start very well. In fact, we had some conflict. I sat back and tried to understand what the conflict was about, and then one by one, I tried to reach them.'”

McKee said that when you get an answer that covers what people did, thought and felt about the situation and their actions, you can get a much better sense of the candidate’s emotional intelligence.

Benjamin agrees that the best way to determine someone’s level of emotional intelligence during the hiring process is to ask interview questions that put them in stressful situations, which can draw out emotional responses. “This way, you can understand how they have responded to pressure, conflict and difficult emotions in the past, as well as observe how a candidate reacts to emotionally based questions.”

3. Ask relevant questions.

In addition to common interview questions, these are some of the interview questions Benjamin suggests that hiring managers ask:

  • Can you describe a time when you were given critical feedback?
  • Can you describe a time when you had to have a difficult conversation?
  • Can you describe a time when there was tension or conflict on a team?
  • Can you describe a time when a change was instituted that you didn’t agree with?
  • Can you describe a time when you had to come up with a creative solution under pressure?
  • Can you describe a time when you made a mistake?

For each question, Benjamin said, hiring managers should ask the candidate follow-up questions about the thoughts and feelings they had and the actions they took.

If someone can’t answer a question, Benjamin said, it may be a sign that they shy away from tough conversations or have trouble admitting mistakes. He said hiring managers should use the answers to gauge how much self-awareness the candidate has of their thoughts and emotions. If they have trouble describing situations, they may lack emotional awareness.

For those who can describe specific situations, Benjamin encourages hiring managers to consider whether their actions demonstrate the ability to take ownership, show personal accountability and step into pressure situations.

“While you need to ensure that people meet the minimum requirements of IQ, experience and technical skills, the bottom line is, if you aren’t hiring and developing people for emotional intelligence skills, you are not going to be competitive in the future,” Benjamin said.

Types of jobs that require high emotional intelligence

While it’s the professional opinion of Dr. Shané P. Teran that all jobs should require high emotional intelligence, at a minimum, jobs with emotional labor as a part of their work culture and duties should require their employees to have a high EQ.

“These would-be jobs [are] found within the healthcare industry, mental health, customer service, hospitality, law enforcement, emergency response roles and transportation, to name a few,” Teran said. “In jobs such as these, there is a great need to be in control of your own feelings, understand the emotions of others, and use this information to make decisions that yield a favorable end result.”

Teran admits that some of the jobs listed are pretty obvious, but she noted that individuals working in transportation industries come across many in-transit people from varying lifestyles, events, situations and attitudes. If someone can’t gauge the emotional state of an individual who might be in a very bad space or have ill intentions, people could get hurt.

Improving current employees’ emotional intelligence

Sometimes, employers must work with what they have, which means improving their current employees’ emotional intelligence. Here are a few ways to accomplish this:

  • Train for each EQ domain. Teran suggested offering interactive training programs and more long-term coaching support to help build, enhance and maintain the four domains of EQ (self-awareness, self-management, social awareness and relationship management). While an employee may not have a customer-facing or interactive role, any employee expected to communicate with team members should use EQ to manage professional relationships better and tend to their own emotional regulation needs.
  • Practice meditation. Tina Hawk, senior vice president of human resources at GoodHire, said that a significant aspect of developing emotional intelligence is our ability to self-regulate emotions. Meditation is one of the most effective and popular methods for achieving this. It’s also important for organizations to understand workplace stress and offer stress-reduction opportunities and employee wellness plans. Highly stressed individuals usually struggle to regulate their emotions.
  • Set an example. Employees look to leaders to set an example for many things in the workplace, and regulating and properly displaying emotions is one of them. If managers or higher-ups take steps to improve their emotional intelligence, it sends a message to employees that this is something the company values, which may encourage employees to improve their emotional intelligence.
  • Get HR involved. Your HR department, or whoever has an HR role in the company, should be directly involved in creating formal processes for improving emotional intelligence. These processes can be part of successful onboarding or retraining programs for current employees. Making it a formal program will make employees feel like it’s vital to their job, hopefully spurring them to take it seriously and practice emotional intelligence in their work life and personal life.

Emotional Intelligence Skills: How to Spot Them in Hiring [Business News Daily]

About Our GE Network Expert - Min Tang

Categories
Branding

Creating a Great Corporate Logo

A company’s branding is an important part of its consumer-facing identity. No aspect of branding is more visible or immediately recognizable than a company logo.

  • A corporate logo is an image or visually appealing set of words that reflects your brand’s values and distinguishes you from competitors.
  • To create a logo, you’ll need to reflect on the meanings of certain fonts, shapes, lines, and colors and how they dovetail with your brand. Obtaining audience feedback through a focus group is helpful.
  • You should change your logo if your offerings shift, your brand has recently received negative press, or your logo is outdated. But be careful: Altering a popular logo could hurt customer loyalty.
  • This article is for small business owners who want to develop the perfect logo for their company.

Given how prominent logos are, rebranding can have an enormous impact on a company. It’s critical for businesses to go about rebranding the right way and avoid confusing or upsetting their audiences.

In a recent study, C+R Research examined some major brands and how their logos have changed in relation to their revenue over time. The results shed light on corporate logo design and the benefits and risks rebranding poses to businesses.

Major companies like Starbucks, Apple, Amazon and Levi’s have each taken different approaches to logo redesigns and rebranding throughout their histories. These industry giants’ rebranding experiences hold valuable lessons for small businesses considering changing their corporate logos.

We’ll explore the importance of a corporate logo and how to design an effective logo that will represent you well to consumers.

What is a corporate logo, and why do you need one?

A corporate logo is a symbol that represents and identifies your business. It distinguishes your business from others and hints at your identity and values. It also invites people to learn about your brand and helps build customer loyalty.

Perhaps most importantly, your logo goes everywhere: on your business website, social media pages, business cards, marketing materials and more. If you run a storefront, it goes there too. Think about all the Target logos you see when you shop there.

According to C+R, the most effective logos are wordless and minimalist. Dan Ferguson, CMO at Adore Beauty, advises businesses to keep logos consistent, simple and memorable.

“Whether you’re starting from scratch or just want to give your logo a facelift, think carefully about the colors, shapes, patterns, and fonts you use and the emotions they create around your brand,” he said. “If there is a mismatch between your identity, values, and logo, it can lead you down the difficult path of trying to market a disengaging or downright confusing brand.”

Ferguson offered the following insights on different logo elements and what each can convey to consumers.

Color

Color psychology plays a massive part in the messages your logo sends and how consumers interpret those messages, said Ferguson. What do your logo colors say about your brand? What emotions do your colors elicit?

Research by 99designs shows that consumers associate warm colors like red and orange with passion, vigor, and energy, while cool colors like blue and green are associated with tranquility, refreshment, and nature.

Shapes and lines

Logo shapes mean more than you may think. They can enhance your overall brand meaning and provide further insight into your identity and emotional messaging, Ferguson noted.

  • Circular: Circular designs can convey ideas of positivity, endurance, community and even femininity (e.g., World Wildlife Fund, Chanel).
  • Square: Square designs or those that use sharp, hard edges connote balance, symmetry, strength, professionalism and efficiency (e.g., Adobe, National Geographic).
  • Triangles: Triangles communicate messages intended to be masculine, powerful, scientific, legal or even religious (e.g., Adidas, Google Play).
  • Horizontal: Horizontal lines impart emotions associated with tranquility and community.
  • Vertical: Vertical lines are more related to strength, aggression and masculinity.

Font

Just like colors, fonts become identifiers for your brand and behave in a similar way to shapes. What messages do your fonts carry or reveal about your brand?

  • Angular: Angular fonts can reveal your brand identity as dynamic and assertive, while gentler, rounded typefaces come off as youthful and soft.
  • Bold: Bold fonts are more masculine, while cursive fonts are more feminine.

Ferguson notes that one font in a logo is ideal, but don’t mix more than two fonts. Whatever you choose should be clear and easy to read.

Words vs. no words

You should use a consistent font in your marketing emails, graphics and other visual materials. In fact, email marketing services like Mailchimp often prioritize logo use. (Read our Mailchimp review to learn more.)

However, you don’t need words in your logo, though they’re generally recommended for smaller, newer businesses.

Think about it: Can your company really convey its message with just an image before becoming a household name? The answer lies in how a handful of corporate logos have changed over time.

Once upon a time, Adidas, Shell, and NBC all had symbols and words in their logos – a “combination mark.” Each logo included the company’s name under the image. Over time, as these companies became trusted household names, they became identifiable on image alone. They dropped the name and left behind a visual-only logo known as a “brandmark.” The result is a crisper, more compact – but no less identifiable – logo.

Target audience feedback

Your logo is among the key ways you’ll reach your target audience. It only makes sense, then, to get your audience’s feedback on your logo. Focus groups consisting of your target customers can help here. What about your colors, shapes, lines and fonts has a meaningful impact on them? What misses the mark?

Once you have the answers to these questions, you can incorporate this feedback into a revised logo. You might also want to present more than one logo option to make the most of the occasion.

Different logo options

If you invest all your time and energy into developing only one logo, you might get tunnel vision and fail to consider some glaring flaws. That becomes a nonissue when you draft several logo options. You can bring all these options to a focus group to determine the most impactful. Then, with the group’s feedback, you can adjust the logo to further strengthen its impact.

What you can learn from household-name corporate logos

While the C+R study found that each company’s revenue sometimes fluctuated around the time of logo change, there was no consistent correlation. The conditions surrounding a redesign and the actual product or service are likely more important, said Matt Zajechowski, outreach team lead for Digital Third Coast.

“One thing this analysis confirms is that a lot of marketers who are fretting about the relation of brand aesthetic to revenue should probably be turning their attention to other things first,” Zajechowski said. “There was no consistent, noticeable correlation that showed different logos lead to more or fewer sales. … The most interesting pattern we noted is that many major brands, particularly tech brands, fuss with their logo a lot in the early years. Then, as soon as they take off and experience explosive growth, they back off the logo and leave it alone. Amazon, Microsoft and Twitter are great examples of this behavior.”

So what else can we learn from C+R’s findings? Below are some key takeaways from four corporate giants included in the study.

Starbucks

Starbucks, the ubiquitous coffee shop, was established in 1971 with a retro, brown version of its now well-known circular logo. It first added the green-and-white color scheme in 1987, then updated it with a sleeker style in 1992.

In 2011, Starbucks dropped the text “Starbucks Coffee” from its logo entirely, leaving just the central image. Each rebrand was a new iteration of the same logo, with minor changes, often in the direction of a sleeker, more minimalist style.

Apple

Founded in 1976, Apple launched with a drastically different logo than the well-known apple it boasts today. The following year, Apple underwent a redesign that introduced the first apple logo with a rainbow color scheme.

In 1998, Apple rolled out two new logos based on the same image: one in black and the other in a light blue. In 2001, Apple’s chrome logo debuted. Then the company started to increase sales and, in 2007, debuted another chrome apple logo with a shimmery new finish.

Finally, the company introduced a new iteration of the simple black apple logo, which it still uses today.

Apple’s logo redesigns almost always seem to be moving toward a futuristic or advanced feeling. These efforts would naturally be helpful to a big technology company’s brand.

Amazon

After incorporating in 1994, Amazon rebranded in 1997 with two new logos, one of which would go on to serve as the basis for its modern “Amazon.com” imagery. One year later, the company developed two more logos. In 2000, Amazon rebranded yet again, this time sticking with the logo for the long haul.

Amazon has cultivated a brand around one image after iterating six different logo designs in its first six years of existence. Importantly, Amazon began as a bookseller, then expanded to “books, movies, and more,” and now has a hand in seemingly everything. It’s common for a company to rebrand when the business model changes or expands.

Levi’s

Levi’s is known for one major product: jeans. This famous denim company was established in 1853 and only once changed its logo – in 1936, to today’s red-and-white Levi’s imagery. The brand has used the same logo ever since.

With such an iconic name – Levi Strauss – attached to an easily identifiable product, it’s worth asking if Levi’s ever really needed much of a logo redesign beyond the simple, recognizable logo designed in the ’30s.

Here are some instances when you should consider a logo change:

  • Your logo’s style is outdated.
  • Your company is expanding its product line.
  • You are merging with another company.
  • You want to reduce negative associations with the brand.
  • The brand has globalized, making language less relevant.

What are the risks of logo redesign?

These are some potential downsides of a logo redesign:

  • If consumers are attached to the existing logo, a redesign could backfire and hurt sales.
  • Seeking feedback prior to release from focus groups, for example, can expose weaknesses in the redesign.
  • Change doesn’t always mean progress.

How to Create a Great Corporate Logo [BusinessNewsDaily]

About Our GE Network Expert - Min Tang

Categories
Operations

Virtual Phone Line

Considering a virtual phone number for your business? Here’s everything you need to know about using a virtual phone line.

  • You can get a virtual number alone or as part of a virtual phone system package.
  • Many virtual phone providers allow you to port your traditional phone number to a virtual one.
  • Having a virtual phone number can make you accessible by phone anywhere, anytime, while maintaining your personal number’s privacy.
  • This article is for small business owners considering using a virtual phone line as part of their business phone system.

A reliable telephone communication system is one tool every business should have. Traditionally, though, a good business phone system was expensive and difficult to implement in small businesses.

Today, a virtual phone number is a simple, affordable solution that can help expand your business beyond the confines of a traditional phone line. Here is everything you need to know about virtual phone lines.

What is a virtual phone line?

A virtual phone number, or direct inward dialing (DID), is a telephone number that is not tied to a specific phone device or line and allows the user to redirect and route calls from one number to another number, IP address, or device. Virtual phone lines are also known as “online numbers.”

Traditionally, phone numbers were designed to work over a single phone line that was physically connected from the phone company to your home or business, and any calls made to that number could only be sent to that specific physical location. Cell phones, while more mobile than landlines, are still dependent on cell towers to provide coverage. A virtual number gives a business greater control and flexibility in how it receives calls by removing these physical limitations.

How do virtual phone numbers work?

Virtual phone numbers rely on the internet instead of a phone company or cell tower to provide coverage, which allows users to be reached by phone or computer. It also allows you to change the device you use in real time. For example, if you only want to be available on your mobile phone at certain times, you can route all calls you receive during work hours to a virtual phone line.

How to get a virtual phone number

Virtual phone numbers can be purchased several ways. If your business already has a Voice over Internet Protocol (VoIP) system, you can add virtual numbers to your current package through your VoIP provider. This generally costs $5 to $10 a month per number.

If you want to purchase a virtual phone system, you can get a package that includes one virtual number and a certain number of extensions and minutes. Minutes are incurred depending on how long you talk on the “business line.” A virtual phone system plan’s costs start at $10 to $12 a month for one or two virtual numbers with 300 to 500 minutes, going up to $25 to $50 for two virtual numbers with 2,000 to 3,000 minutes.

If you don’t already have a virtual phone system, you can go through a provider that only sells virtual numbers. These are some of the most popular virtual phone line providers:

  • Google Voice provides individual users with a free virtual phone number that can be used for calls, text messages and voicemail. It has an easy-to-use app for smartphones or computers, and you can link the virtual number to a mobile or landline number. Business plans start at $10 a month per user for up to 10 users in 10 domestic locations.
  • MightyCall is a cloud-based virtual phone system that offers phone calls, text messaging, and voicemail as well as smart call forwarding and call recording. Multiple subscription plans are available, starting at $219.99 a month with an available seven-day free trial.
  • Grasshopper supports calls, texts and voicemail. It offers three service plans, starting at $26 per month, allowing you to choose the one that works best for your business.
  • 8×8 is a cloud-based VoIP unified communications system that boasts highly reliable service, three-way calling, online voicemail, call forwarding and ring groups among its many features. It also integrates with office programs like Salesforce and Slack. Plans start at $12 a month per user. Read our review of 8×8 for more details about its VoIP solutions.

What are the benefits of a virtual phone number?

Virtual phone numbers offer a strong list of benefits and features to help small businesses compete with larger organizations. They provide flexibility in hardware, endless options for localization and tons of cost-saving potential. Compared to traditional business landlines, virtual phone numbers make a lot of sense for businesses of all sizes.

1. Ability to receive calls anywhere

Without being tied to a physical location, you can receive calls anywhere, anytime and on your preferred device. For example, if someone in your company is going to be away and needs to be reachable by phone but doesn’t want to give out their cell phone number, you could assign a virtual number to their cell phone.

2. Incoming call distribution

Virtual phone numbers are also beneficial for companies with multiple office locations. Instead of a phone ringing in one office, incoming calls can be sent to phones in each office. You can do this by making your virtual phone line’s destination a call queue or ring group, which will ring the phones of any employee who is designated as part of the queue or group either simultaneously or sequentially, depending on your preferences.

3. Localized phone numbers

If your office is located in a different area than your customer base, you can assign a local area code to your phone line. This helps you establish a presence in a key area and lowers costs on incoming calls. Customers are more likely to call and answer calls from a local number than one with an area code they don’t recognize.

4. Integrations with marketing campaigns

You can also track key customer metrics through your virtual phone line. Many CRM systems let you assign a unique number to a specific campaign, for example, so you’ll know if someone is calling for that campaign based on the number alone. This data can be helpful in evaluating the effectiveness of a campaign.

5. Fewer equipment charges

Virtual phone lines can save your business thousands of dollars in telephony and equipment charges. Because they are 100% digital, virtual phone lines require no hardware, equipment, installation or maintenance.

6. Advanced features

When searching for a virtual phone provider, see if the company you’re considering offers text and voicemail features in addition to phone service. More expensive and complex plans typically offer features like three-way calling, ring groups, caller ID, call waiting and forwarding, call recording, and call transfers. You should also see how reliable the service is in terms of uptime and whether customer support is included in your plan.

What are the drawbacks?

The benefits of virtual phone lines vastly outweigh the cons for most business users, but there are a few potential drawbacks compared with traditional landlines.

1. You’re always “available.”

The foremost concern is the effect on work-life balance, said Matt Schmidt, CEO of Diabetes365. “The downside, in my opinion, is that you are accessible almost anytime you are awake. Most people are workaholics to begin with, and having the ability to make another call from your home or wherever may lead to burnout.”

2. The call quality depends on the internet.

Another drawback is the inconsistent call reliability. Because a virtual phone number is purely internet-based, the call quality will only be as strong as your internet connection.

3. Data limits can be costly.

If you are on a plan that uses minutes, you must be conscious of how you are using those minutes, ensuring you don’t waste them on spam or non-business calls. Otherwise, you run the risk of driving your costs up above your budget.

Frequently asked questions about virtual phone numbers

How can I get a virtual phone number for free?

Several free virtual phone number providers are available online, such as Google Voice for personal use. Simply choose your preferred provider and open an account, choose your desired area code, and begin using your virtual phone number. Many virtual phone providers offer a free phone number for individuals but have paid options for businesses.

Can a traditional phone number become your virtual phone number?

Yes, you can convert your existing traditional phone number to a virtual one. This process is called “porting” and is available through most virtual phone number providers.

What countries can you get a virtual phone number in?

You can get a virtual phone number in most parts of the world, though the specific countries may vary by provider. Most providers’ services are available in 50 or more countries, with some boasting availability in over 100 countries.

How long are phone numbers?

Virtual phone numbers follow the same 10-digit format as a standard U.S. landline with a three-digit area code followed by the phone number. Unlike traditional landlines, virtual phone numbers can be purchased without a physical address that’s tied to the corresponding area code. This allows businesses to create the appearance of a local presence in a geographic region from anywhere in the world. However, instead of utilizing a local area code, many national companies opt for a toll-free prefix such as 800, 888, 877, 866, 855, 844 or 833 for their virtual phone numbers.

What Is a Virtual Phone Line? [Business News Daily]

About Our GE Network Expert - Min Tang

Categories
Legal

Legal Structure For Business

How to Choose the Best Legal Structure for Your Business

Choosing the right legal structure is a necessary part of running a business. Whether you’re just starting out, or your business is growing, it’s important to understand the options.

  • Partnerships carry a dual status as a sole proprietorship or limited liability partnership, depending on the entity’s funding and liability structure.
  • Under an LLC, members are protected from personal liability for the debts of the business if it cannot be proven that they acted in an illegal, unethical or irresponsible manner in carrying out the activities of the business.
  • Corporations can sell shares of stock to secure additional funding for growth, while sole proprietors can only obtain funds through their personal accounts, using their personal credit or taking on partners.
  • This article is for business owners looking to learn more about the different small business legal structures.

Choosing the right legal structure for your business starts with analyzing your company’s goals and considering local, state and federal laws. By defining your goals, you can pick the legal structure that best fits your company’s culture. As your business grows, you can change your legal structure to meet your business’s new needs.

We’ve compiled the most common types of business entities and their notable features to help you decide on the best legal structure for your business.

Types of business structures

The most common types of business entities include sole proprietorships, partnerships, limited liability companies, corporations and cooperatives. Here’s more about each type of legal structure.

1. Sole proprietorship

This is the simplest form of business entity. With a sole proprietorship, one person is responsible for all a company’s profits and debts.

“If you want to be your own boss and run a business from home without a physical storefront, a sole proprietorship allows you to be in complete control,” said Deborah Sweeney, CEO of MyCorporation. “This entity does not offer the separation or protection of personal and professional assets, which could prove to become an issue later on as your business grows and more aspects hold you liable.”

Proprietorship costs vary, depending on which market your business is part of. Generally, your early expenses will consist of state and federal fees, taxes, equipment needs, office space, banking fees, and any professional services your business decides to contract. Some examples of these businesses are freelance writers, tutors, bookkeepers, cleaning service providers and babysitters.

Here are some of the advantages of this business structure:

  • Easy setup. A sole proprietorship is the simplest legal structure to set up. If your business is owned by you and only you, this might be the best structure for your business. There is very little paperwork since you have no partners or executive boards to answer to.
  • Low cost. Costs vary depending on which state you live in, but, generally, the only fees associated with a proprietorship are license fees and business taxes.
  • Tax deduction. Since you and your business are a single entity, you may be eligible for certain business tax deductions, such as a health insurance deduction.
  • Easy exit. Forming the proprietorship is easy and so is exiting one. As a single owner, you can dissolve your business at any time with no formal paperwork required. For example, if you start a daycare center and wish to fold the business, you can simply refrain from operating the daycare and advertising your services.

Examples of sole proprietorships:

The sole proprietorship is one of the most common small business legal structures. Many popular companies started as sole proprietorships and eventually grew into multi-million dollar businesses. A few examples include:

  • eBay
  • JC Penny
  • Walmart
  • Marriott Hotels

2. Partnership

This entity is owned by two or more individuals. There are two types: a general partnership, where all is shared equally; and a limited partnership, where only one partner has control of its operation while the other person (or persons) contributes to and receives part of the profits. Partnerships carry a dual status as a sole proprietorship or limited liability partnership (LLP), depending on the entity’s funding and liability structure.

“This entity is ideal for anyone who wants to go into business with a family member, friend or business partner, like running a restaurant or agency together,” said Sweeney. “A partnership allows the partners to share profits and losses, and make decisions together within the business structure. Remember that you will be held liable for the decisions made, as well as those actions made by your business partner.”

The cost of a general partnership varies, but it is more expensive than a sole proprietorship, because you want an attorney to review your partnership agreement. The experience and location of the attorney can affect the price range. A general partnership must be a win-win for both sides for it to be successful.

An example of this type of business is Google. In 1995, co-founders Larry Page and Sergey Brin created a small search engine and turned it into the leading search engine globally. The co-founders first met at Stanford University while pursuing their doctorates and later left to develop a beta version of their search engine. Soon after, they raised $1 million in funding from investors, and Google began receiving thousands of visitors a day. Having a combined ownership of 16% of Google provides them with a total net worth of nearly $46 billion.

Here are some of the advantages of a business partnership:

  • Easy to form. Like a sole proprietorship, there is little paperwork to file. If your state requires you to operate under a fictitious name (“doing business as” or DBA), you’ll need to file a Certificate of Conducting Business as Partners and draft an Articles of Partnership agreement, both of which have additional fees. A business license is usually needed as well.
  • Growth potential. You’re more likely to obtain a business loan when there’s more than one owner. Bankers can consider two credit lines rather than one, which can be useful if you have a less-than-stellar credit score.
  • Special taxation. General partnerships must file federal tax Form 1065 and state returns, but, usually, they do not pay income tax. Both partners report their shared income or loss on their individual income tax returns. For example, if you opened a bakery with a friend and structured the business as a general partnership, you and your friend are co-owners. Each owner brings a certain level of experience and working capital to the business, which can affect each partner’s share of the business and their contribution. Let’s say you brought the most seed capital for the business; it could be decided that you retain a higher share percentage, making you the majority owner.

Examples of partnerships

Next to a sole proprietorship, partnerships are one of the most common types of business structures. Examples of successful partnerships include:

  • Warner Brothers
  • Hewlett Packard
  • Microsoft
  • Apple
  • Ben & Jerry’s
  • Twitter

3. Limited liability company

A limited liability company (LLC) is a hybrid structure that allows owners, partners or shareholders to limit their personal liabilities while enjoying the tax and flexibility benefits of a partnership. Under an LLC, members are shielded from personal liability for the debts of the business if it cannot be proven that they acted in an illegal, unethical or irresponsible manner in carrying out the activities of the business.

“Limited liability companies were created to provide business owners with the liability protection that corporations enjoy while allowing earnings and losses to pass through to the owners as income on their personal tax returns,” said Brian Cairns, CEO of ProStrategix Consulting. “LLCs can have one or more members, and profits and losses do not have to be divided equally among members.”

The cost of forming an LLC comprises the state filing fee and can range from $40 to $500, depending on the state you filed in. For example, if you file an LLC in the state of New York, there’s a $200 filing fee and $9 biennial fee. Further, you must file a biennial statement with the NY Department of State. [Check out our step-by-step guide on how to start an LLC].

Although small businesses can be LLCs, some large businesses choose this legal structure. One example of an LLC is Anheuser-Busch Companies, one of the leaders in the U.S. beer industry. Headquartered in St. Louis, Missouri, Anheuser-Busch is a wholly owned subsidiary of Anheuser-Busch InBev, a multinational brewing company based in Leuven, Belgium.

Examples of LLCs

The LLC is typical among accounting, tax and law firms, but other types of companies also file as LLCs. Well-known examples include:

  • Pepsi-Cola
  • Sony
  • Nike
  • Hertz Rent-a-Car
  • eBay
  • IBM

4. Corporation

The law regards a corporation as an entity separate from its owners. It has its own legal rights, independent of its owners – it can sue, be sued, own and sell property, and sell the rights of ownership in the form of stocks. Corporation filing fees vary by state and fee category. For example, in New York, the S corporation and C corporation fees are $130, while the nonprofit fee is $75.

There are several types of corporations, including C corporations, S corporations, B corporations, closed corporations and nonprofit corporations.

  • C corporations, owned by shareholders, are taxed as separate entities. Morgan Chase & Co. is a multinational investment bank and financial services holding company that’s listed as a C corporation. Since C corporations allow an unlimited number of investors, many larger companies, including Apple Inc., Bank of America, and Amazon, file for this tax status.
  • S corporations were designed for small businesses and avoid double taxation, much like partnerships or LLCs. Owners also have limited liability protection. Widgets Inc. is an example of an S corporation that operates very simply: Employee salaries are subject to FICA tax, while the distribution of additional profits from the S corporation does not incur further FICA tax liability.
  • B corporations, otherwise known as benefit corporations, are for-profit entities structured to make a positive impact on society. The Body Shop has proven its long-term commitment to supporting environmental and social movements, resulting in an awarded B corporation status. The Body Shop uses its presence to advocate for permanent change on issues like human trafficking, domestic violence, climate change, deforestation and animal testing in the cosmetic industry.
  • Closed corporations, typically run by a few shareholders, are not publicly traded and benefit from limited liability protection. Closed corporations, sometimes referred to as privately held companies, have more flexibility compared to publicly traded companies. Hobby Lobby is a closed corporation; it’s a privately held, family-owned business. Stocks associated with Hobby Lobby are not publicly traded; rather, the stocks have been allocated to family members.
  • Open corporations are available for trade on a public market. Many well-known companies, including Microsoft and Ford Motors, are open corporations. Each corporation has taken ownership of the company and allows anyone to invest.
  • Nonprofit corporations exist to help others in some way and are rewarded by tax exemption. Some examples of nonprofits are the Salvation Army, American Heart Association and American Red Cross. These types of business structures have one sole purpose: focusing on something other than turning a profit.

Advantages of this business structure include: :

  • Limited liability. Stockholders are not personally liable for claims against your corporation; they are only liable for their personal investments.
  • Continuity. Corporations are not affected by death or the transferring of shares by its owners. Your business continues to operate indefinitely, which is preferred by investors, creditors and consumers.
  • Capital. It’s much easier to raise large amounts of capital from multiple investors when your business is incorporated.

This type of business is ideal for businesses that are further along in their growth, rather than a startup based in a living room. For example, if you’ve started a shoe company and have already named your business, appointed directors, and raised capital through shareholders, the next step is to become incorporated. You’re essentially conducting business at a riskier, yet more lucrative rate. Additionally, your business could file as an S corporation for the tax benefits associated with it.

Examples of corporations

Once your business grows to a certain level, it’s likely in your best interest to incorporate it. There are many popular examples of corporations, including:

  • General Motors
  • Amazon
  • Exxon Mobil
  • Domino’s Pizza
  • P. Morgan Chase

5. Cooperative

A cooperative (co-op) is owned by the same people it serves. Its offerings benefit the company’s members, also called user-owners, who vote on the organization’s mission and direction and share profits. Advantages that cooperatives offer include:

  • Lower taxes. Like an LLC, a cooperative doesn’t tax its members on their income.
  • Increased funding. Cooperatives may be eligible for federal grants that help them get started.
  • Discounts and better service. Cooperatives can leverage their business size, thus obtaining discounts on products and services for their members.

Forming a cooperative is complex and requires you to choose a business name that indicates whether the co-op is a corporation, such as incorporated (Inc.) or limited. The filing fee associated with a co-op agreement varies by state. In New York, for example, the filing fee for an incorporated business $125.

An example of a co-op is CHS Inc., a Fortune 100 business owned by U.S. agricultural cooperatives. As the nation’s leading agribusiness cooperative, CHS recently reported a net income of $829.9 million for the fiscal year ending Aug. 31, 2019.

Examples of cooperatives

Unlike the other types of businesses, co-ops are owned by the people they serve. Notable examples of co-ops include:

  • Land O’Lakes
  • Navy Federal Credit Union
  • Welch’s
  • REI
  • Ace Hardware

Factors to consider before choosing a business structure

For new businesses that could fall into two or more of these categories, it’s not always easy to decide which structure to choose. You need to consider your startup’s financial needs, risk and ability to grow. It can be difficult to switch your legal structure after you’ve registered your business, so give it careful analysis in the early stages of forming your business.

Here are some important factors to consider as you choose the legal structure for your business. You should also plan to consult with your CPA for his or her advice.

Flexibility

Where is your company headed, and which type of legal structure allows for the growth you envision? Turn to your business plan to review your goals, and see which structure best aligns with those objectives. Your entity should support the possibility for growth and change, not hold it back from its potential.

Complexity

When it comes to startup and operational complexity, nothing is more simple than a sole proprietorship. You simply register your name, start doing business, report the profits, and pay taxes on it as personal income. However, it can be difficult to procure outside funding. Partnerships, on the other hand, require a signed agreement to define the roles and percentages of profits. Corporations and LLCs have various reporting requirements with state governments and the federal government.

Liability

A corporation carries the least amount of personal liability since the law holds that it is its own entity. This means that creditors and customers can sue the corporation, but they cannot gain access to any personal assets of the officers or shareholders. An LLC offers the same protection, but with the tax benefits of a sole proprietorship. Partnerships share the liability between the partners as defined by their partnership agreement.

Taxes

An owner of an LLC pays taxes just as a sole proprietor does: All profit is considered personal income and taxed accordingly at the end of the year.

“As a small business owner, you want to avoid double taxation in the early stages,” said Jennifer Friedman, chief marketing expert at Expertly.com. “The LLC structure prevents that and makes sure you’re not taxed as a company but as an individual.”

Individuals in a partnership also claim their share of the profits as personal income. Your accountant may suggest quarterly or biannual advance payments to minimize the end effect on your return.

A corporation files its own tax returns each year, paying taxes on profits after expenses, including payroll. If you pay yourself from the corporation, you will pay personal taxes, such as for Social Security and Medicare, on your personal return. [Check out our reviews of the best payroll services.]

Control

If you want sole or primary control of the business and its activities, a sole proprietorship or an LLC might be the best choice for you. You can negotiate such control in a partnership agreement as well.

A corporation is constructed to have a board of directors that makes the major decisions that guide the company. A single person can control a corporation, especially at its inception, but as it grows, so, too, does the need to operate it as a board-directed entity. Even for a small corporation, the rules intended for larger organizations – such as keeping notes of every major decision that affects the company – still apply.

Capital investment

If you need to obtain outside funding, such as from an investor, venture capitalist, or bank, you may be better off establishing a corporation. Corporations have an easier time obtaining outside funding than sole proprietorships.

Corporations can sell shares of stock and secure additional funding for growth, while sole proprietors can only obtain funds through their personal accounts, using their personal credit or taking on partners. An LLC can face similar struggles, although, as its own entity, it is not always necessary for the owner to use their personal credit or assets.

Licenses, permits and regulations

In addition to legally registering your business entity, you may need specific licenses and permits to operate. Depending on the type of business and its activities, it may need to be licensed at the local, state and federal levels.

“States have different requirements for different business structures,” Friedman said. “Depending on where you set up, there could be different requirements at the municipal level as well. As you choose your structure, understand the state and industry you’re in. It’s not a ‘one size fits all,’ and businesses may not be aware of what’s applicable to them.”

The structures discussed here only apply to for-profit businesses. If you’ve done your research and you’re still unsure which business structure is right for you, Friedman advises speaking with a specialist in business law.

How to Choose the Best Legal Structure for Your Business [Business News Daily]

About Our GE Network Expert - Min Tang

Categories
Franchise

Today’s Opportunities In Franchising

Want to own a business with an established brand and business model? If so, franchising might be the right option for you.

  • Franchising is when a company sells the rights to its existing business model and products.
  • Opening a franchise is a business venture with relatively low risk and high support, but you must be aware of the regulations and factors that make a franchise successful.
  • While costs vary widely, in general, you can expect to spend $50,000 to $200,000 in franchising startup costs.
  • This article is for entrepreneurs and business owners interested in buying and operating a franchise.

When entrepreneurs dream about their future, franchising is rarely part of the fantasy. While it may not be your first choice, buying a business franchise comes with many benefits. When you open a franchise, you get a chance to run your own business while buying an established brand and business model.

“A franchise is a business with training wheels,” said Tom Scarda, founder of The Franchise Academy, a podcast dedicated to franchising. “For a majority of franchisees, franchising has proven to be a viable way to become a business owner.”

Franchises offer a unique mix of low risk and high reward. “For the most part, [franchising] offers the lowest risks and the highest level of support,” Scarda said. “Because a franchiser doesn’t succeed until the franchisees do, you’ll find a team of dedicated professionals willing and able to help you every step of the way, from site selection to employee hiring to grand opening.”

We’ll explore the basics of franchising, factors to consider when choosing a franchise, startup costs and more.

What is franchising?

A company that sells the rights to its existing business model and products to another businessperson or company is creating a franchise. However, the exact definition varies because of the numerous statutes passed by the Federal Trade Commission (FTC) and individual states.

The bottom line is when you buy a franchise, you’re purchasing an established business and a ready-made product or service. Franchises usually come with a recognizable brand name, a proven business model and a repeatable marketing strategy.

Franchise costs

The costs of buying a franchise can vary greatly depending on the type of business you’re considering. But in general, you can expect to spend between $50,000 and $200,000 in startup costs.

Here are some of the startup costs involved in buying a franchise:

  • Initial franchise fee
  • Corporate fees
  • Financing application fee
  • Attorneys’ fees (for having a lawyer review the contract)
  • Accounting fees
  • Insurance
  • Permits and taxes

You’ll also have to consider the ongoing costs of running the franchise. This includes marketing and advertising, running payroll, inventory, and equipment.

Franchise regulations

Federal regulations exist to protect the rights of both the franchisee and the franchiser. The FTC helps oversee and enforce franchise laws to ensure that entrepreneurs receive full disclosure on the state of the business they’re joining and that the franchiser’s brand is protected.

Early in the franchise purchasing process, franchisers must provide a franchise disclosure document (FDD) to the potential franchisee. Sometimes called an offering circular, the FDD outlines the franchiser company’s fees, investments, and bankruptcy and litigation history.

There are also registration and relationship laws that govern the franchise’s registration, salespeople and advertising. More laws cover terminating a franchise, notice and cure periods, grounds for nonrenewal, and equal treatment. These laws and regulations vary by state.

What to look for when choosing a franchise

When it comes to choosing a franchise, thousands of options are available. So if you don’t know the type of franchise you’re looking for, this can be a daunting task. Let’s look at a few factors you should consider when choosing a franchise.

Startup costs

Franchising provides many benefits to aspiring entrepreneurs, but it also comes with significant startup costs. You’ll have to pay an initial franchising fee before you can begin setting up your business and selling products under the franchise’s brand name.

Before launching the business, you’ll be expected to propose a store location, business model, business opportunities and royalties. Once franchise contract terms are agreed upon, you can begin setting up the storefront. All those activities require an additional investment of money and time.

Your level of business autonomy

While franchising’s appeal is getting an established name and branding, running a franchise may limit your business autonomy. You may not have the autonomy to move and grow your business in different directions to take advantage of local business factors. You should think carefully about how much control you want to have over the business before investing.

A sustainable business model

It’s important to find a business with a sustainable business model and a track record of success. Make sure to research where the company stands before joining as a franchisee.

Rob Holt, founder of Two Maids & A Mop, said his franchise underwent growing pains when initially transitioning from a traditional corporation to a franchise.

“In 2013, we only opened one franchise,” he said. “In 2014, we opened one as well. We didn’t really start growing until 2015, but during those first two years of franchising, even though we only had two, we really tried to perfect what we were doing.”

How established the business is

It’s essential to understand the parent company’s current state, including its business valuation. The first franchisees for Two Maids & A Mop were willing to remain patient as the company experienced growing pains, while today’s Two Maids & A Mop franchisees are joining a more established business.

Neither option is right or wrong, but it’s important to know which situation you’re getting yourself into before spending the time and money to open a franchise.

Competition

You should also consider how competitive the franchise’s market is. Competition isn’t necessarily a bad thing, because it means there’s a demand for that product or service. But a lot of competition means you’re going to have to work even harder to differentiate your business and help it stand out.

Company culture

It’s important to consider the prospective franchise’s company culture. The parent company’s management will have a major impact on how you run your business – and your income. In many ways, they’ll be your business partners for the duration of your franchise ownership.

Pay attention to your interactions with company management and the level of support they provide. Do they answer any questions you have and provide resources to help you get up and running?

You should be very wary of buying into a franchise if you don’t like the company management. Look for a company you believe in and can get behind, or move on to a different franchise opportunity.

Your level of interest

Finally, you should consider your level of personal interest in the business model. Look for a business model you find interesting and a product line that excites you.

It’s all right if it’s a new industry or a product you’re unfamiliar with, as long as you’re interested in learning more about the company. Don’t just buy into a business model because you think it will make a lot of money. The energy and effort you put into the business will determine its success or failure.

Benefits of franchising

One of the biggest benefits of franchising is drawing off the experience and expertise of the entire organization. By joining an established brand, you bypass many of the hardships in building a company from the ground up.

“Franchising takes the guesswork out of starting a business,” said Jonathan Barnett, founder and CEO of Oxi Fresh Carpet Cleaning. “They have established systems designed to give new franchisees a massive head start over competitors.”

Being part of a respected brand is invaluable, Barnett said. “It’s hard to overstate the advantage of starting a business and having people know and trust your brand from day one.”

These are some other reasons to consider franchising:

  • Perks of the particular brand (e.g., training and discounts)
  • Business model with a track record of success
  • Easier access to money and small business loans
  • Low risk for banking institutions

Opportunities to watch

Nearly every industry has a successful business practice being sold as a franchise, from retail stores to employment services. Finding the right opportunity for you depends mainly on your previous expertise and passion.

Based on our research of top franchising opportunity lists from around the web, we’ve identified 10 industries where franchise business is booming.

  1. Children’s enrichment: Parents want the best for their children, and educational franchises such as Kumon, The Goddard School and The Little Gym are helping the next generation learn and grow. Primrose Schools is another great option because it offers year-round educational programs and educational child care.
  2. Hair salons: Hair care for men, women and children is a consistently in-demand service. Companies such as Supercuts, Sport Clips and Great Clips allow franchisees to stand out with a recognized brand name, while kids-only concepts like Snip-its allow owners to narrow their target market.
  3. Fitness: For a while, it looked like COVID-19 and the explosion of home workout options might be the nail in the coffin for gyms. That doesn’t appear to be the case. Many Americans are returning to gyms for both fitness and social interaction. If you’re looking for fitness franchises to invest in, Anytime Fitness, Planet Fitness and Orangetheory Fitness are great options. Each of these gyms comes with strong brand recognition, and Anytime Fitness has low monthly operating costs.
  4. Paint-and-sip studios: This entertaining concept, which allows participants to have a glass of wine while taking a group painting class, is growing fast for both new and established companies, such as Painting with a Twist, Pinot’s Palette, Paint Nite, and Wine & Design.
  5. Pizza: This is a staple of the franchise world, with competitors still finding new and innovative ways to put together a pie or slice. Domino’s, Pizza Hut and Papa John’s still rule the market, but concept franchises like Kono Pizza offer a fresh take on this classic food.
  6. Commercial cleaning services: Buying a commercial cleaning service is an excellent option for first-time business owners. Commercial cleaning services work with schools, businesses, churches, medical facilities and more. Jan-Pro is an excellent option to consider if you want to go in this direction, while Merry Maids is a good option if you’re more interested in home cleaning services.
  7. Property management: Since 2008, the number of rental properties – and companies needed to manage them, like Real Property Management and Property Management Pros – has increased, prompting growth and opportunity for those looking to fill that need.
  8. Senior care: As more aging baby boomers require in-home or facility care, this field is evolving by offering services such as advocacy and placement. Franchise options include Caring Senior Service and BrightStar Care.
  9. Spa and beauty services: Franchises such as Massage Envy, Hand & Stone, and European Wax Center are a part of the burgeoning self-care market. You can offer specialized treatments like waxing or massages, or go for a full-service establishment with add-on services such as facials and threading.
  10. Vending machines: Vending machines have been popular for decades, but the success of these models – and the variety of potential product offerings – has made franchising a viable option within the past few years, through companies such as Fresh Healthy Vending and Healthier 4U Vending.

The Basics of Franchising and Today’s Top Opportunities [Business Daily News]

About Our GE Network Expert - Min Tang