Sauder & Stoltzfus Blog

Preface: “I don’t even like the term ownership. I like the term stewardship.”
— Ernie Hershberger

From the Chicken House to the Met: What Ernie Hershberger’s Journey Can Teach Us About Business and Life

There aren’t many obvious connections between a chicken house and the Metropolitan Museum of Art. One brings to mind work boots, dust, early mornings, and decidedly unglamorous work. The other sits along Fifth Avenue in New York City and houses some of the greatest treasures of human civilization.

Yet somehow, both became part of Ernie Hershberger’s remarkable journey.

Hershberger, an Ohio furniture maker and entrepreneur, got his start in a small furniture store housed in a former chicken house in Mount Hope, Ohio. What began there in 1990 grew into Homestead Furniture and, eventually, the luxury furniture brand Abner Henry. Decades later, that journey would lead to a collaboration with the Metropolitan Museum of Art, creating a collection inspired by works in the museum.

From a chicken house in rural Ohio to the Met in New York City is quite a distance—not simply in miles, but in circumstances.

And perhaps that unlikely journey tells us something important about business: we rarely know where today’s ordinary opportunity may eventually lead.

Hershberger’s story, told in his book Entrusted, is compelling because it isn’t simply a story about becoming successful. It raises a much bigger question:

What are we supposed to do with success once we achieve it?

That is a question worth considering whether you own a small construction company, manage a growing professional firm, operate a farm, or lead an organization with hundreds of employees.

Great Destinations Often Have Ordinary Beginnings

We love stories about entrepreneurs after they become successful. We see the beautiful office, thriving company, impressive customers, or financial success and assume there must have been some grand master plan behind it all.

Usually, there wasn’t.

There were opportunities. Problems that needed solving. Customers who needed serving. Relationships that needed developing. And countless decisions that probably seemed rather ordinary at the time.

No guidance counselor is likely to tell a young entrepreneur, “Start with a chicken house, work hard, remain faithful, and someday this may lead you to the Metropolitan Museum of Art.”

Careers simply don’t work that neatly. Entrepreneurs may love five-year plans; life occasionally seems amused by them. We often understand the significance of an opportunity only when looking backward.

That’s an encouraging thought for anyone building a business today. The customer who seems relatively unimportant might introduce you to your largest customer five years from now. The young employee you’re training might eventually become one of your company’s best leaders. The difficult project you’re struggling through might teach you the skill that creates your next competitive advantage.

Small opportunities have a peculiar habit of becoming important ones.

Excellence Has a Way of Compounding

One of the great lessons of entrepreneurial success is that reputation doesn’t appear overnight. It compounds.

Every time you return a phone call, meet a deadline, correct a mistake, deliver excellent work, or keep a promise when keeping it becomes inconvenient, you make a small deposit into something enormously valuable: trust.

There isn’t a line for trust on the balance sheet. Perhaps there should be.

A company’s equipment can be purchased. Buildings can be financed. Technology can be duplicated. Competitors can copy products and sometimes even recruit employees.

Trust is much harder to reproduce.

It accumulates slowly, through hundreds or thousands of interactions between ordinary people. And that is why some of the smallest decisions in business eventually become some of the most consequential.

Business Is Ultimately About People

Accounting statements make business look wonderfully mathematical.

Revenue minus expenses equals profit. Assets minus liabilities equals equity. Cash comes in. Cash goes out.

The equations are useful. But anyone who has spent much time in business knows there is another story behind the numbers:

People.

Behind revenue are customers who decided to trust you. Behind payroll are employees who chose to invest part of their careers in your organization. Behind accounts payable are vendors who supplied materials or services. Behind equity is capital someone worked to accumulate.

Business may be measured in dollars, but it operates through relationships.

That’s why successful entrepreneurship requires something beyond financial intelligence. It requires learning how to work with people, develop people, serve people, and earn their confidence.

A business owner can have an excellent strategy and still fail because people don’t trust him. Conversely, an entrepreneur with integrity, humility, persistence, and a willingness to learn can travel remarkably far from very ordinary beginnings.

Perhaps even from a chicken house to the Met.

From Ownership to Stewardship

This brings us to what may be the most interesting idea behind Entrusted.

Entrepreneurs naturally think like owners:

My business. My money. My customers. My property. My success.

There is nothing particularly strange about that. Legally and economically, those statements may be perfectly accurate.

But Hershberger’s story invites us to consider another perspective:

What if the things we own are also things we’ve been entrusted to manage?

That single change in perspective can profoundly affect how we approach business.

Consider an entrepreneur with 50 employees. He doesn’t merely have a payroll expense. Fifty people are investing an important portion of their lives in an organization under his leadership.

Consider a business owner who has accumulated substantial wealth. She doesn’t merely have a larger investment account. She now possesses resources capable of creating opportunities, helping people, supporting worthwhile causes, and strengthening future generations.

Success doesn’t decrease responsibility. It increases it.

And at some point, the question may begin to change from “How much can I accumulate?” to “What should I accomplish with what has been placed in my hands?”

Profit and Purpose Don’t Have to Be Enemies

Stewardship is sometimes misunderstood as an argument against ambition, wealth, or business growth. It doesn’t have to be.

A profitable company can accomplish things an unprofitable company simply cannot. Profit allows a business to hire people, increase wages, purchase equipment, develop employees, survive recessions, support communities, reward investors, serve customers, and give generously.

Financial strength creates capacity.

The real question isn’t whether a business should make money. Businesses need profit just as people need oxygen. The better question is what that profit makes possible.

That is where purpose enters the conversation.

Making money can be a worthwhile objective. Building something valuable can be enormously satisfying. But eventually, successful people often discover that accumulation alone is a surprisingly small destination.

There needs to be a why behind the more.

What Has Been Entrusted to You?

Perhaps the distance between a chicken house and the Metropolitan Museum of Art isn’t really measured in miles.

Maybe it’s measured in thousands of ordinary decisions:

Showing up. Keeping your word. Doing excellent work when nobody important seems to be watching. Learning from mistakes. Treating people well. Recognizing opportunities. Remaining humble enough to keep learning.

And being faithful with whatever happens to be in your hands today.

That is what makes Ernie Hershberger’s journey more than an interesting entrepreneurial success story. It leaves the rest of us with a question:

What has been entrusted to you?

Maybe it’s a business. Maybe it’s twenty employees. Maybe it’s a clean slate. Maybe it’s a particular talent, a reputation, a customer relationship, a piece of property, a million dollars, or simply an opportunity that doesn’t look particularly impressive today.

We can’t always know where those opportunities will lead. A chicken house certainly doesn’t look much like the beginning of a journey to the Metropolitan Museum of Art.

But that’s the interesting thing about beginnings: they rarely look like destinations.

Preface: “Success happens at the speed of a seed.” — Mark Batterson, Gradually, Then Suddenly

Book Report: Gradually, Then Suddenly by Mark Batterson

Mark Batterson’s Gradually, Then Suddenly is an encouraging book about faith, perseverance, patience, and the remarkable things that can happen when we remain faithful over time. The title itself captures one of the most important lessons of the book: many of life’s greatest accomplishments do not happen overnight. They develop little by little, often so slowly that we barely notice the progress. Then one day, what has been developing beneath the surface becomes visible. What appears to be a sudden breakthrough may actually be the result of years of preparation, prayer, learning, hard work, and faithfulness.

This idea is easy to understand when we think about how many things in nature develop. A seed planted in the ground does not become a tree the next morning. For a long time, almost nothing appears to be happening. Yet beneath the soil, roots are forming. Eventually a small plant emerges, but even then it takes years for that plant to become a mature tree. We see the same principle in our own lives. Character develops gradually. Wisdom develops gradually. Relationships develop gradually. Businesses develop gradually. Faith develops gradually. The visible results may eventually appear suddenly, but much of the important work happened when nobody was watching.

One of the most encouraging lessons from Batterson’s book is that we should not mistake slow progress for no progress. We live in a culture that loves immediate results. We want the promotion, the successful business, the answered prayer, the improved relationship, or the financial breakthrough as quickly as possible. When results take longer than expected, it is easy to become discouraged. Batterson challenges this way of thinking. A period of waiting does not necessarily mean that nothing is happening. Sometimes the waiting itself is part of the preparation.

The Bible contains many examples of this principle. Joseph dreamed about his future when he was young, but he did not immediately become a great leader. His journey included betrayal by his brothers, slavery, false accusations, and imprisonment. David was anointed to become king, yet years passed before he actually sat on the throne. Abraham received an extraordinary promise from God, but he and Sarah waited many years for Isaac. In each story, there was a considerable distance between the promise and its fulfillment. Looking backward, we can see that the waiting years were not wasted years. God was developing people who would need the character and faith necessary to handle what was coming.

This leads to an important question: What if God is more interested in preparing us for the answer than we are interested in being prepared? We naturally focus on what we want God to change around us, while God may also be working on something within us. We pray for greater opportunities, but greater opportunities require greater responsibility. We pray for influence, but influence requires character. We pray for success, but success without wisdom can become destructive. The gradual seasons of life may therefore have tremendous value because they develop the person who will eventually have to carry the responsibility of the breakthrough.

Another valuable idea in Gradually, Then Suddenly is the power of small actions repeated over long periods of time. We understand this principle financially as compounding, but compounding operates throughout life. Reading ten pages of a good book today will probably not transform someone’s life. Reading ten pages every day for twenty years almost certainly will. One conversation with an employee may not create a great leader, but years of coaching, encouragement, accountability, and opportunity can. One prayer may seem insignificant, but a lifetime of prayer can develop extraordinary faith and intimacy with God.

Our habits eventually become part of who we are. A person does not suddenly wake up one morning with great character. Character is built through hundreds of seemingly small decisions: telling the truth when dishonesty would be easier, keeping a commitment when it becomes inconvenient, treating people respectfully when frustrated, admitting a mistake, forgiving someone, remaining generous, and doing excellent work even when nobody is watching. These choices may seem insignificant individually, but together they create a life.

The same principle applies to leadership. Great leaders are rarely created by attending one seminar or reading one leadership book. Leadership develops gradually through experience. A person makes decisions, sometimes makes mistakes, accepts responsibility, learns from those mistakes, receives feedback, develops better judgment, and tries again. Over time, those experiences accumulate into wisdom. Eventually other people may look at that person and see an accomplished leader, but they do not necessarily see the thousands of experiences that produced the leader.

This is also how great organizational cultures are built. A business owner cannot give one inspiring speech about excellence, teamwork, integrity, or customer service and expect the organization to change immediately. Culture develops through repeated actions. Leaders communicate their values, model them, hire people who share them, recognize employees who demonstrate them, and address behavior that violates them. Eventually something fascinating begins to happen: employees start reinforcing those values even when senior leadership is not present. What began as the leader’s philosophy gradually becomes the organization’s culture.

Prayer is another area where the message of Gradually, Then Suddenly becomes especially meaningful. Prayer can sometimes be difficult because we cannot always see what is happening. We may pray today and wake up tomorrow to circumstances that look exactly the same. After weeks, months, or even years, we can begin wondering whether our prayers matter. Yet Scripture repeatedly encourages believers to persevere in prayer and not lose heart.

Persistent prayer does not mean that we can force God to give us whatever we want if we pray long enough. That would make prayer a formula rather than a relationship. Instead, prayer brings us into deeper dependence upon God. As we continue praying, God may change circumstances, but He also changes us. Our motives become clearer. Our faith grows stronger. Our dependence deepens. Sometimes our original request changes because we begin to understand God’s purposes differently.

This distinction is important because Gradually, Then Suddenly should not be understood as a promise that every dream will eventually come true if we simply refuse to quit. Christian faith is ultimately faith in God, not faith in a particular outcome. Sometimes God opens a door. Sometimes He closes one. Sometimes He asks us to persevere, and sometimes He redirects us. Wisdom involves learning the difference. True faith can say, “I do not know exactly what God is going to do, but I will remain faithful to what He has given me to do.”

Persistence, therefore, should not be confused with stubbornness. There are times when a strategy needs to change. A business may need a different approach. A leader may need to admit that an idea did not work. A relationship may require a different kind of conversation. Perseverance does not mean repeating the same mistake forever. We can remain committed to the mission while being willing to change the method. Some of life’s greatest breakthroughs may come because we were humble enough to learn and adjust while continuing forward.

The book’s message also provides an excellent way to think about success. Society tends to notice people after they become successful. We see the thriving company but not its difficult first years. We see the accomplished leader but not the early mistakes. We see the skilled musician but not the thousands of hours of practice. We see the mature Christian but not the years of prayer, Scripture reading, obedience, disappointment, repentance, and spiritual growth that developed that faith. What looks sudden from the outside may have been very gradual from the inside.

This principle should encourage us not to despise small beginnings. Small does not mean unimportant. An acorn is small, but it contains the potential for an enormous oak tree. A seemingly insignificant opportunity can become the beginning of something extraordinary. The better question is not always, “How big is this right now?” Sometimes we should ask, “What could this become if I faithfully cultivate it?”

There is also a valuable lesson here about reputation. Trust is built gradually. A person becomes respected because others observe consistency over time. They discover that his word can be trusted. They see how he treats people when circumstances become difficult. They watch whether his private actions match his public values. No single moment creates that kind of reputation. It compounds through hundreds of decisions. Eventually people say, “I trust this person,” but that conclusion was built gradually.

Perhaps one of the greatest dangers in life is quitting too soon. We cannot always know how close we are to an important opportunity or breakthrough. At the same time, we should avoid pretending that perseverance guarantees a specific result. Instead of constantly asking, “Why hasn’t this happened yet?” a more useful question may be, “What is God teaching and developing in me during this season?” That question changes our focus from simply escaping the process to learning from it.

My greatest takeaway from Gradually, Then Suddenly is that we should never underestimate what God can accomplish through ordinary faithfulness over a long period of time. We naturally admire extraordinary moments, but extraordinary lives are often constructed from ordinary days. The prayer nobody hears, the difficult conversation handled with grace, the employee patiently developed, the dollar wisely invested, the book carefully studied, the temptation resisted, the promise kept, and the responsibility handled well may not seem particularly impressive today. Yet repeated over many years, these actions can produce extraordinary results.

The message also causes me to think differently about success. Instead of constantly searching for the next breakthrough, perhaps we should pay more attention to becoming the kind of people who could wisely handle a breakthrough if God provided one. Greater opportunity without greater character is dangerous. Greater wealth without greater wisdom can become destructive. Greater influence without humility can lead to pride. Preparation is therefore not an inconvenience standing between us and success. Preparation may be one of God’s greatest gifts before success.

In conclusion, Mark Batterson’s Gradually, Then Suddenly offers a hopeful and practical message about faith, patience, perseverance, and personal growth. It reminds us that progress is not always visible and that waiting does not necessarily mean nothing is happening. Some of God’s most important work may occur beneath the surface, just as roots develop underground before a tree produces visible fruit. Our responsibility is to remain faithful, continue learning, keep praying, make wise adjustments, and trust God with the results.

The title ultimately provides a memorable way to think about much of life. Relationships are built gradually. Wisdom is gained gradually. Character is formed gradually. Leaders are developed gradually. Businesses are built gradually. Faith deepens gradually. And sometimes, after years of seemingly ordinary faithfulness, something extraordinary happens suddenly.

Perhaps the great lesson of the book is therefore not simply to believe in the “suddenly.” It is to learn to appreciate the “gradually.” Instead of wishing away the season we are presently experiencing, we can ask what God wants us to learn from it. The quiet years, difficult seasons, small beginnings, unanswered questions, and daily acts of faithfulness may not be interruptions to our story. They may be the very chapters God is using to prepare us for what comes next.

Preface: “The more things change, the more they stay the same.” — Jean-Baptiste Alphonse Karr, Les Guêpes (1849)

Act 21 of 2026: What Pennsylvania’s New Local Sales Tax Sourcing Rule Means for Your Business

If you do business in or around Philadelphia or Allegheny County, a provision buried inside Pennsylvania’s new budget-implementation law — Act 21 of 2026 (formerly Senate Bill 146), signed July 12, 2026 — is worth your attention. It changes how local sales tax is “sourced,” meaning which transactions owe Philadelphia’s or Allegheny County’s local sales tax and which don’t. The change applies to tax years beginning after December 31, 2025, and the Department of Revenue has indicated it will begin enforcing the new rule for sales made on or after October 1, 2026 — so businesses have a short window to get their systems ready.

A quick refresher: Pennsylvania’s state sales tax rate is 6%. On top of that, Philadelphia adds 2% (combined 8%) and Allegheny County adds 1% (combined 7%). No other city or county in the state imposes a local sales tax.

The rate hasn’t changed. Act 21 does not raise or lower any tax rate — Philadelphia is still 2%, Allegheny County is still 1%. What changed is the rule for deciding which sales those local rates apply to, not how much tax is owed once a sale is subject to them.

Before Act 21: tax followed the seller

Philadelphia and Allegheny County each had their own local sales tax rule, written separately from the state’s rule. In practice, both worked the same way: the tax followed the seller, not the customer. A business located in Philadelphia charged the 2% local tax on its sales no matter where the goods ended up, even if they were shipped out of the city. A business located outside Philadelphia generally didn’t have to charge that 2%, even if it shipped directly to a customer in Philadelphia. Allegheny County’s 1% tax worked the same way. This was different from how Pennsylvania’s regular 6% state sales tax already worked, which is based on where the customer receives the goods, not where the seller is located.

After Act 21: tax follows the customer

Act 21 fixes that mismatch. Now, Philadelphia’s and Allegheny County’s local sales tax follows the same rule as the state’s 6% tax: it’s based on where the customer receives the goods, not where the seller is located.

So the question is no longer “where is the seller located?” It’s “where does the customer receive the item, or where will it be used?” If that’s an address in Philadelphia, the 2% local tax applies. If it’s in Allegheny County, the 1% local tax applies. If it’s anywhere else in Pennsylvania, only the 6% state rate applies — no local add-on. That’s true even if the seller itself is based in Philadelphia or Allegheny County.

Practical steps to take now

• • • Verify customer addresses. The tax now turns on the delivery/use location, so your invoicing or e-commerce system needs an accurate ship-to or place-of-use address for every sale — not just a billing address. A stale address field is now a tax-rate risk.
    • Update your tax engine or POS settings. If you use a sales tax automation tool (Avalara, Vertex, TaxJar, or similar), or hard-code rates in your accounting platform, confirm the jurisdiction logic reflects the new rule for Philadelphia and Allegheny County.
    • Refresh exemption certificate files. Collect current, properly completed exemption certificates (Form REV-1220) from wholesale, resale, and exempt-organization customers, and confirm certificates on file haven’t expired.
    • Check your marketplace and platform settings. If you sell through a marketplace facilitator or a hosted e-commerce platform, confirm the platform’s tax settings have been updated to source Philadelphia and Allegheny County sales correctly — don’t assume the platform handled it automatically.
    • Spot-check recent transactions. Since the change applies to tax years beginning after December 31, 2025, it’s worth reviewing earlier-2026 transactions to confirm they were taxed correctly, especially anything invoiced before systems were updated.
    • Train the team. Make sure whoever handles invoicing, order entry, or customer service understands that the local tax now depends on the customer’s delivery address, not the business’s location — a common source of manual errors during the transition.

If you’re located in Philadelphia or Allegheny County

Don’t assume every sale you make still carries the local tax. Under the new rule, a sale you ship to a customer outside the city or county generally won’t carry the Philadelphia or Allegheny County add-on, even though your business sits inside that jurisdiction. You still charge the local rate on sales delivered within the jurisdiction, exactly as before — but the obligation now runs sale-by-sale, based on the delivery address, not on your storefront’s address as a blanket rule.

If you’re located outside those jurisdictions (including out-of-state sellers)

If you ship goods to customers in Philadelphia or Allegheny County and already collect Pennsylvania’s 6% state sales tax (because you have nexus in PA, physical or economic), you now need to evaluate whether each delivery address falls inside Philadelphia (add 2%) or Allegheny County (add 1%). Sourcing follows the customer’s location, not yours — being headquartered elsewhere doesn’t exempt you from the local add-on when that’s where the goods land.

Bottom line

This new law doesn’t change what you owe in tax dollars-and-cents terms — Philadelphia is still 2%, Allegheny County is still 1%. What it changes is the test for deciding when those local rates apply, shifting from the seller’s location to the customer’s delivery address, in line with the same destination-based rule already used for the state’s 6% tax.

Preface: “A teacher affects eternity; [they] can never tell where [their] influence stops.” —Henry Adams, The Education of Henry Adams (1907)

Back to School, Back to Tax Planning: A Teacher’s Guide to Financial Decisions

The pencils are sharpened, classroom decorations are going up, lesson plans are taking shape, and somewhere a teacher is wondering how several hundred dollars of classroom supplies somehow disappeared into one shopping cart. It must be back-to-school season.

Teachers understand preparation better than almost anyone. A successful school year rarely begins when students walk through the classroom door on the first morning. It begins weeks earlier with planning, organizing, purchasing supplies, preparing lessons, establishing goals, and thinking about what students will need to succeed. Yet when it comes to personal finances and taxes, many of us take exactly the opposite approach. We wait until tax season, gather whatever documents we can find, hand everything to the accountant, and hope for good news.

There is a fundamental difference between tax preparation and tax planning that is worth understanding. Tax preparation looks backward. Tax planning looks forward. Preparing a tax return tells us what happened last year. Planning gives us an opportunity to influence what happens next. A teacher would never wait until the last day of school to develop the year’s lesson plan, and taxpayers should not wait until April to begin thinking about financial decisions that may have needed to occur before December 31.

Back-to-school season therefore provides a surprisingly good opportunity for teachers to conduct a financial checkup. There are still several months remaining in the calendar year, which means there may still be time to adjust tax withholding, increase retirement savings, organize classroom expenses, address income from a side business, and consider other financial decisions before year-end.

Let’s begin with something nearly every teacher understands: classroom expenses. Imagine Sarah, an elementary school teacher who begins preparing her classroom in August. She purchases books, organizational materials, educational supplies, and other items she believes will help her students succeed. Before long, she has spent several hundred dollars of her own money. Like many teachers, Sarah thinks, “I’ll save the receipts and deduct everything on my tax return.”

Unfortunately, tax law is not always as generous as Sarah’s classroom.

Eligible educators can receive a federal above-the-line deduction for certain unreimbursed educator expenses, subject to an annual limitation and other requirements. Qualifying expenses can include certain books, supplies, equipment, and professional-development costs. However, teachers should understand the applicable limitations rather than assuming every dollar personally spent on their classrooms will produce an equivalent tax deduction.

There is also an important lesson here about reimbursements. If your school or employer offers an appropriate reimbursement arrangement for qualifying business expenses, don’t automatically assume that paying the expense personally and taking a tax deduction is the better option. A tax deduction generally saves only a percentage of the amount spent. An eligible tax-free reimbursement may put substantially more money back in your pocket.

In other words, never spend a dollar simply to save a fraction of a dollar in taxes.

And please keep your receipts. Telling your accountant, “I’m pretty sure I spent about $800,” is not quite the same thing as documentation. Teachers know that “I definitely turned in that assignment” does not always mean the assignment can actually be located. Tax records sometimes suffer from the same problem. A shoebox full of receipts may technically resemble a recordkeeping system, but your accountant would probably appreciate something a little more organized.

Classroom expenses, however, may be one of the smaller opportunities available to teachers. Retirement planning can potentially have a much greater impact on long-term financial success.

Depending on their employer and individual circumstances, educators may have access to pensions, 403(b) plans, 457(b) plans, IRAs, or other retirement savings opportunities. The rules surrounding these accounts can be complex, but the underlying principle is simple: small financial decisions made consistently over long periods can become very large financial decisions.

Consider a 40-year-old teacher who decides to increase retirement savings by $200 per month. Assuming a hypothetical 7% annual return, those additional contributions could grow to approximately $162,000 by age 65. Investment returns are never guaranteed, but the illustration demonstrates the power of time and compounding. Finding another small tax deduction may feel satisfying today, but building a disciplined retirement strategy can influence financial security for decades.

This is an important distinction because tax planning should not become a treasure hunt for deductions. The goal is not simply to pay the least possible tax this year. The goal is to make wise financial decisions that improve your long-term position while appropriately considering the tax consequences.

Withholding is another area teachers should review before year-end. Perhaps you got married. Maybe your spouse changed jobs or received a significant raise. Perhaps you welcomed a child, began receiving investment income, or started earning money outside the classroom. These changes can affect your overall tax situation even when your regular teaching paycheck looks almost exactly the same.

August or September is a much better time to discover a withholding problem than the following April. There may still be time to make adjustments during the remaining pay periods of the year. April is a wonderful month for warmer weather, baseball, and spring flowers. It is considerably less enjoyable when it includes discovering an unexpected tax bill that could have been anticipated months earlier.

Side income deserves particular attention because many teachers are also entrepreneurs without necessarily thinking of themselves that way. A teacher might tutor students after school, coach, teach summer programs, provide consulting services, sell educational materials online, or operate an entirely separate business. Once someone begins earning income independently, the tax picture can change considerably.

Unlike regular wages, independent business income may not have taxes withheld automatically. Self-employment taxes, estimated income tax payments, business expenses, recordkeeping requirements, and potentially even additional retirement planning opportunities can enter the conversation. A teacher earning $10,000 from tutoring does not necessarily have $10,000 available to spend. Some of that money may eventually belong to the government.

The good news is that a legitimate business may also have legitimate deductible expenses. The important word is legitimate. Good tax planning means understanding which costs are truly business-related, maintaining appropriate records, and discussing the activity with your tax advisor before tax season rather than attempting to reconstruct an entire year of business activity afterward.

Continuing education is another area worth considering. Teachers frequently pursue graduate degrees, certifications, conferences, continuing education, and professional-development programs. Depending on the circumstances, various tax rules, employer reimbursements, or education-related provisions may apply. Rather than assuming an expense is deductible—or assuming it isn’t—keep the documentation. Save tuition statements, reimbursement records, receipts, and information describing the program. Your tax professional can then evaluate the facts under the applicable rules.

Charitable giving and classroom generosity can create similar questions. Teachers are generous people. Many purchase items for students, contribute to school-related programs, participate in fundraisers, or support charitable organizations within their communities. But generosity alone does not automatically make an expenditure tax deductible. A personal expenditure for a student, an eligible educator expense, an employer-reimbursed expense, and a charitable contribution can receive very different tax treatment. Documentation and understanding the nature of the payment matter.

Teachers should also consider whether anything significant has changed in their lives during the year. Did you purchase or sell a home? Welcome a child? Get married or divorced? Receive an inheritance? Begin graduate school? Start a business? Make a significant charitable gift? Experience a substantial change in household income? These events can have tax and financial consequences, and waiting until tax-return preparation season may eliminate planning opportunities that were available earlier.

This leads to perhaps the most useful tax-planning question of all. Instead of asking, “What can I deduct?” consider asking, “What financial decisions should I make before December 31?”

That question changes the conversation. Maybe the answer is increasing retirement contributions. Perhaps it is correcting withholding. Maybe it involves making estimated tax payments on side income, improving your recordkeeping, evaluating charitable giving, or simply organizing documents so that tax season becomes easier. In some situations, the best tax-planning decision may have little to do with obtaining another deduction and everything to do with building a stronger financial future.

So, as students return to school, perhaps teachers deserve a little homework of their own. Pull out last year’s tax return and look at it before next April. Review your most recent pay stub and determine whether your withholding still makes sense. Organize receipts for classroom expenses. Review how much you are contributing toward retirement. Make a list of any income you earn outside your teaching position. Gather documentation for continuing education. Think about major changes that have occurred in your family or finances. If something significant has changed, consider talking with your tax advisor while there is still time to do something about it.

And unlike some homework assignments, waiting until the night before this one is due really can cost you money. Perhaps the greatest financial lesson teachers can borrow from their own classrooms is the value of preparation. Great teachers establish goals, develop a plan, monitor progress, make adjustments, and occasionally rewrite the lesson when circumstances change. Successful financial planning works much the same way. We cannot predict everything that will happen during the year, but we can prepare thoughtfully and adjust when life changes.

Teachers dedicate an extraordinary amount of their time and energy to preparing students for the future. This back-to-school season, consider spending a little time preparing your own financial future as well. You don’t need to become a tax expert, memorize the Internal Revenue Code, or understand every retirement-plan rule. You simply need to ask good questions while there is still time to act.

Because whether we’re talking about the classroom, retirement, or next year’s tax return, a little preparation today can prevent a lot of homework tomorrow.

Preface: “Whenever you see a successful business, someone once made a courageous decision.” — Peter Drucker

Beyond the Interest Rate: Making Capital Investment Decisions

Every business owner eventually arrives at a “major” financing decision. It may be the opportunity to purchase a larger facility, invest in new equipment, hire additional employees, expand into a new market, or acquire another business. These moments are exciting because they represent growth, but they are also intimidating because they require committing significant financial resources without knowing exactly what the future holds. The question that naturally follows is one every entrepreneur has asked at some point: “Is now the right time to invest?”

For many business owners, the first place they look is the interest rate. If borrowing costs seem high, they delay the decision. If rates fall, they become more optimistic. While financing costs certainly deserve careful consideration, I have learned over the years as a CPA that the businesses that consistently succeed are rarely those that simply borrowed money at the lowest rates. Instead, they are the businesses led by owners who understood how to make wise capital allocation decisions with a proper assessment of the marketplace opportunity. The interest rate is important, but it is only one variable in a much larger equation.

Imagine two manufacturers located just a few miles apart. Each has the opportunity to purchase a new automated production line for $750,000. Both qualify for the same financing at 6.5% interest rate. One owner decides to move forward because the equipment will double production capacity, reduce scrap, improve product quality, and allow the company to pursue larger customers. The second owner decides the interest rate is simply too high and postpones the purchase for another year.

Fast forward five years. The first company has expanded into new markets, increased profitability, hired additional employees, and strengthened its reputation for quality and reliability. The second company continues operating with aging equipment, higher labor costs, slower production, and shrinking market share. What made the difference? It certainly wasn’t the interest rate. The difference was understanding the opportunity returns generated by the investment rather than focusing exclusively on the cost of financing it.

Peter Drucker once observed, “The best way to predict the future is to create it.” That statement captures the essence of wise business investing. Great business owners recognize that capital expenditures are not merely expenses—they are opportunities to build a stronger, more competitive organization. They understand that every investment should create value that exceeds its total cost over time.

One of the biggest mistakes I see business owners make is asking the wrong first question. Instead of asking, “Can I afford the monthly payment?” they should ask, “With the market environment, will this investment create more value and a higher rate of return than it costs?” Those are fundamentally different questions. A business can comfortably afford the payments on a poor investment while still damaging its future. Conversely, an exceptional investment often generates returns so significant that the financing costs become almost secondary.

This brings us to an important concept that is often misunderstood: the cost of capital. Many people assume the cost of capital is simply the interest rate charged by the bank. In reality, it is much broader than that. Every dollar invested in one opportunity is a dollar that cannot be invested somewhere else. Purchasing a building may delay investing in technology. Buying new equipment may postpone hiring another salesperson. Expanding into a new market could require giving up another attractive opportunity. Every investment carries an opportunity cost because every dollar has competing uses.

As Warren Buffett wisely said, “Risk comes from not knowing what you’re doing.” The greatest financial risk is often not the loan itself but making an investment without fully understanding its long-term impact on the business. Successful entrepreneurs think beyond today’s interest rate and evaluate how the investment will influence cash flow, productivity, customer satisfaction, and long-term competitiveness.

When thinking about a major financial decision, consider and look beyond the financial statements and ask several important questions. Will this investment generate more cash than it consumes? Profitability is important, but profits do not make loan payments—cash flow does. Will this investment improve productivity by allowing employees to produce more, make fewer mistakes, or serve customers more efficiently? Does it reduce operational risk by improving our customer experience, replacing aging equipment, or strengthening compliance? Will it create a competitive advantage that competitors will struggle to match? Does it align with the company’s long-term mission and vision? Finally, what happens if things don’t go according to plan? Wise entrepreneurs stress-test every investment by asking what happens if sales decline, interest rates increase, or operating costs rise unexpectedly. Strong investments continue to make sense even under less-than-ideal circumstances.

Perhaps the most overlooked consideration in business investing involves non-financial returns. Some of the highest-return investments never appear directly on an income statement or balance sheet. What is the financial value of developing exceptional teams? How much is a culture worth that attracts talented employees and retains them for years? What is the value of earning a reputation for outstanding customer service that allows a business to command premium prices? How much is a loyal customer worth over the next twenty years? These questions cannot always be answered with precise calculations, yet they frequently determine whether a company flourishes or merely survives. Will the investment help or hinder key attributes of your businesses success? Jim Collins, author of Good to Great, reminds us that “Greatness is not a function of circumstance. Greatness is largely a matter of conscious choice.” Investing in leadership development, employee training, technology, innovation, and customer relationships often produces returns that exceed those of physical assets alone. These investments may not immediately increase profits, but they create stronger organizations capable of sustained growth for decades.

Business owners also tend to place too much emphasis on relatively small changes in interest rates. Consider two different investment opportunities. One project generates a 20% annual return while being financed at 7%. Another produces only a 5% return but carries financing at 5%. Which investment would you rather own? The answer is obvious. The quality of the investment matters far more than a modest difference in borrowing costs. Outstanding opportunities remain outstanding even when interest rates rise.

One of my favorite examples comes from agriculture. Imagine a farmer deciding whether to purchase a neighboring farm that perfectly complements his operation. The interest rate may be higher than he would prefer, but the land provides additional acreage, operational efficiencies, economies of scale, and opportunities for future generations. If the purchase strengthens the farm for decades, was the interest rate really the deciding factor? Probably not. The wiser question was whether the land helped build the future the farmer envisioned.

The same principle applies to virtually every business decision. The goal is not to make investments because financing is available. Neither should businesses avoid investing simply because interest rates are higher than they were several years ago. The objective is to invest intentionally, thoughtfully, and strategically in market opportunities that create long-term value.

Before making your next capital expenditure, resist the temptation to ask only one question: “Can we afford it?” Instead, ask yourself a series of better questions. Will this investment make our company stronger? Will it improve the experience of our customers? Will it make our employees more productive and engaged? Will help us create a better wake for those who will follow after? Will it create a meaningful competitive advantage? Will it position us for success five or ten years from now? Most importantly, if we choose not to invest today, where will our competitors—and our business—be five years from now?

As the years roll, interest rates will continue to rise and fall. Market opportunities will expand and contract. Economic conditions will inevitably change. Yet history consistently demonstrates that enduring businesses are not built by entrepreneurs who merely looked at the interest rates. They are built by leaders who allocated capital wisely based on assessing market opportunity, balanced financial discipline with strategic vision, and possessed the courage to invest in the future even when certainty was impossible.

In the end, capital is far more than money. It is marketplace opportunity. Every dollar entrusted to a business owner carries the responsibility of creating something better—better products, better service, better careers for employees, better experiences for customers, and ultimately a stronger organization. The question is not simply whether you can afford the investment. The question is whether the investment helps build the future you are trying to create with the marketplace opportunity. And in business, your proper analysis of the marketplace opportunity and its alignment with your business dreams may be the most important financial decision you will ever make.

Preface: “Since 1984, the proportion of beneficiary families whose benefits are taxed has risen over time from less than one in 10 to more than half” – Income Taxes on Social Security Benefits from Social Security Administration: Research, Statistics & Policy Analysis

Social Security – How Your Social Security Benefits Are Taxed

The following is the fourth in a series of blog posts on the subject of Social Security. The first three installments, which can be found here, here, and here:

• • • Reviewed the history of the Social Security program
    • Explained how to claim Social Security retirement benefits
    • Explained how to claim Social Security survivor and family member benefits

This fourth installment will discuss:

• • • How Social Security benefits are taxed

Future posts in this series will address:

• • • How earned income is taxed to fund Social Security
    • Estimating Social Security’s returns on investment

Tax on Social Security Benefits

For almost the first 50 years of Social Security, Social Security retirement benefits were not subject to income tax. It was only with the Social Security Amendments of 1983 that they became partially taxable for some recipients. This taxation of benefits went into effect in 1984 and has been with us ever since. In fact, it has expanded apace.

The 1983 law set up dollar thresholds above which 50% of Social Security benefits become taxable. These thresholds are $32,000 for married taxpayers filing jointly and $25,000 for all other filers with one exception: for married taxpayers filing separately who lived together at any time during the year, the threshold is zero.

For purposes of applying this threshold, only half of the Social Security benefits themselves are considered. Also, tax-exempt interest income is added back.

Note that 50% of benefits being taxable does not mean that your benefits are subject to a 50% tax rate. It means that half of those benefits are taxed at your ordinary rate. The other half remains tax-free.

Amazingly, the dollar amounts of these thresholds have not been adjusted for inflation since they were first introduced in 1983. It is interesting to speculate whether this legislation would have received the support it did at the time if people had realized it would eventually apply to a majority of benefit recipients.

While most of this expansion was accomplished through inflation, a change was made a decade later that subjected some portions of benefits to an even higher degree of taxability. The Omnibus Budget Reconciliation Act (OBRA) of 1993 defined a second set of thresholds above which 85% of Social Security benefits are subject to income tax. This higher threshold is $44,000 for married filing jointly and $34,000 for other filers. These thresholds have likewise never been adjusted for inflation.

If income as computed for Social Security purposes falls above the upper threshold, then 85% of that amount of Social Security benefits is subject to tax. Any amount of benefits that falls between the thresholds is 50% taxable, but not if that would make the total taxable portion more than 85% of the benefit received.

If you would like SSA to figure the taxable amount for you, they provide their own calculator here. Many other websites provide unauthorized versions of a similar calculator.

“No Tax on Social Security”

While there was talk in the presidential campaign of 2024 about eliminating tax on Social Security benefits, what the One Big Beautiful Bill Act of 2025 (OBBBA) ended up doing was introducing an entirely new tax deduction for taxpayers over 65.

Beginning in tax year 2025, this new deduction is worth $6,000 per individual. It begins to phase out for married filers with adjusted gross income over $150,000 and fully phases out at $250,000. For single filers, these phaseout thresholds are $75,000 and $125,000. The deduction is available to anyone within these income thresholds who is of age without regard to the amount of Social Security benefits being received. In fact, you don’t have to be receiving any Social Security benefits at all to take this deduction.

The deduction will expire after tax year 2028 if it is not renewed by an act of Congress.

There has still been no change in the law governing taxation of Social Security benefits since OBRA of 1993.

Treatment of Lump Sum Benefits

If a Social Security benefit is for any reason delayed beyond the year it originated and is paid instead in a later year, it is treated for tax purposes as received in the year it was actually paid. Prior year tax returns cannot be amended to include benefits that were not received until a later year. This can result in an unusually large payment in the current year know as a “lump sum” benefit.

The only relief available to recipients of lump sum benefits is an election to figure the taxable amount of the lump sum based on the year the payment originated. The taxable amount of payments that originated in a prior year can be calculated as if they had been received in the prior year. The amount that would have been taxable in the prior year can then be considered the amount taxable in the current year, if this is more beneficial to the taxpayer.

Claim of Right

Occasionally, Social Security benefits must be repaid. For tax purposes, any amount repaid in the current year can be deducted from the amount received in the current year. However, if for any reason a benefit received in one year is not repaid until a later year, tax relief is only available as “claim of right” under Internal Revenue Code Section 1341.

Claim of right is a doctrine that applies to cases where income that was taxed in a prior year is repaid by the taxpayer in a later year. This same doctrine applies to wages or bonus repaid to an employer and also to repayment of unemployment benefits.

If the amount is less than $3,000, no relief is available.

Any claim of right amount greater than $3,000 can either be deducted as an itemized deduction on Schedule A or figured as a refundable credit on Schedule 3, whichever is more beneficial to the taxpayer. The credit is figured in the following way:

• • • Tax is refigured for the year in which the amount was originally reported in income, but as if that amount had never been received.
    • The difference between the refigured tax on the prior year and the actual tax in that prior year is then the credit that may be claimed in the current year.

Preface: “The will to win is not worth much unless you have the will to prepare to win.” – Fielding H. Yost, University of Michigan football coach

Why Great Businesses Are Built During Slow Seasons

Every successful athlete understands a truth that business owners would be wise to embrace: the most important work rarely happens when everyone is watching. When spectators watch the World Cup, Olympics, the Super Bowl, or the World Series, they witness incredible performances. They see athletes competing at the highest level, often making extraordinary accomplishments appear effortless.

What they don’t see are the thousands of hours spent preparing long before the competition began. They don’t see the early mornings in the weight room, the countless practice sessions, the film study, the conditioning, or the recovery that made those performances possible. Championships are won long before game day. The same principle applies to successful businesses.

Many business owners become uneasy when activity slows. Orders decrease, the phones become quieter, and calendars suddenly have a little more white space than usual. The natural tendency is to hope business picks up quickly and simply wait for the busy season to return. However, the most successful companies think differently. Rather than viewing slower periods as lost opportunities, they recognize them as some of the most valuable opportunities they will have all year. They understand that while revenue may temporarily slow, progress doesn’t have to.

In fact, many champion businesses are quietly built during their slowest seasons. Just as athletes use the offseason to improve their skills, business owners should use slower periods to strengthen the foundation of their companies. This is the ideal time to improve internal processes, document procedures, train employees, evaluate technology, review profitability, strengthen customer relationships, and develop future leaders. These activities may not immediately increase revenue, but they often determine how successful the business becomes over the next several years.

One of the greatest mistakes business owners can make is believing that productivity only occurs when serving customers. In reality, some of the highest-return work happens behind the scenes.

A slower season provides an opportunity to ask important questions that are often overlooked during the rush of daily operations. Are our systems efficient? Are we pricing our services appropriately? Is our team receiving the training they need? Are we preparing future leaders? Could technology improve our workflow? What processes create unnecessary frustration for our employees and customers?

These are the questions that move a business from simply operating to continuously improving.

Professional athletes also understand another important principle that applies directly to business: recovery is part of peak performance. No athlete expects to compete at the highest level every day without allowing time for rest, reflection, and rebuilding. Muscles grow stronger during recovery. Minds become sharper after stepping back. Performance improves because intentional time was invested in preparation rather than constant activity. Business owners are no different.

Many entrepreneurs spend months operating at an exhausting pace. Tax season, construction season, harvest season, or holiday demand often requires extraordinary effort. Slower periods provide an opportunity not only to strengthen the business but also to strengthen the leader. Reading a leadership book, attending a business peer group, meeting with trusted advisors, improving strategic planning, or simply spending uninterrupted time thinking about the future of the company can produce tremendous long-term returns. Another lesson athletes teach us is that success yesterday does not guarantee success tomorrow.

Every season begins with learning anew. Businesses face the same reality. Markets change. Customer expectations age. Technology advances. Competitors improve. Businesses that stop learning eventually stop growing. The organizations that consistently outperform their competition are often those that view every slower season as an investment rather than an inconvenience.

As CPAs and business advisors, we have the unique opportunity to work alongside companies across many industries. One observation consistently stands out. The businesses that experience sustained long-term growth are rarely the ones that simply work harder than everyone else. More often, they are the businesses that intentionally improve, they build seasons, sharpen skills, and practice and prepare while others are waiting for business to get busy again.

Financial statements tell the story of yesterday’s decisions. The investments you make today—in your employees, your systems, your leadership, your technology, and your customer experience—will eventually appear as tomorrow’s revenue growth, improved profitability, stronger cash flow, and increased business value. Perhaps that is why the slow season should not be viewed as an interruption to success.

It should be viewed as preparation for it.

The next time your business enters a quieter period, resist the temptation to raise concerns. And wait for activity to return. Instead, ask yourself:

• • • How can we stay focused on our mission?
    • What skills can our team develop to fulfill our vision more aptly?
    • What systems can we strengthen?
    • When we get where we are going where will we be?
    • What decisions today will position us for greater success next year?

The answers to great questions may become the foundation for your company’s next season of growth. Just as athletes prepare long before the competition begins, great businesses prepare long before opportunity arrives. Because when the next busy season comes—and it will—you won’t simply want to be busy. You’ll want to be ready.

Great businesses are not built only during seasons of abundance. They are built during seasons of preparation. Use your slower seasons wisely. Improve your people. Strengthen your systems. Refine your strategy. Invest in your culture. Build your leadership. Listen to you coach. The work you do when few people are watching often becomes the reason everyone notices your success later. Preparation – it’s the champions edge to a great business.

Preface: “What is a farm but a mute gospel?”– Ralph Waldo Emerson

The Best Business Lessons Are Still Found on the Farm: What Every Business Owner Can Learn from Seedtime and Harvest

What do successful businesses and successful farms have in common?

At first glance, not much. One is filled with tractors, fields, and grain bins. The other has conference rooms, computers, financial statements, and customer meetings. Yet beneath the surface, they operate according to the same timeless principle: you cannot harvest what you have not first planted.

Thousands of years ago, long before MBA programs, strategic planning retreats, or business consultants, God established one of the greatest business principles ever recorded. In Genesis 8:22, He declared, “While the earth remains, seedtime and harvest… shall not cease.” Although spoken in the context of agriculture, the principle has remarkable application to every business owner, entrepreneur, and leader. Every thriving business is simply the result of good seeds planted consistently over time.

Perhaps that’s why farming has always fascinated me. Farmers never wake up in October surprised by what grows in their fields. They understand that the harvest is determined months earlier, when they decide what seeds to plant, how well to prepare the soil, and how faithfully they care for the crop. Business works exactly the same way.

Unfortunately, many business owners spend far more time dreaming about the harvest than thinking about the seeds. We want growing revenue, loyal employees, delighted customers, stronger cash flow, and higher profits. Those are wonderful goals—but harvests never appear simply because we wish for them. They are the natural result of decisions made months and often years before.

Every decision you make is planting something.

When you invest in training your employees, you’re planting a future leadership team. When you consistently provide exceptional customer service, you’re planting referrals and long-term relationships. When you improve your systems and technology, you’re planting efficiency. When you communicate honestly with your clients, you’re planting trust. Even your company culture didn’t happen by accident—it grew from seeds that leadership intentionally, or unintentionally, planted over many years.

The opposite is also true. Poor decisions produce harvests as well.

Ignoring employee development eventually produces high turnover. Neglecting customer relationships often results in declining referrals. Delaying necessary investments in technology creates inefficiencies that slowly erode profitability. Cutting ethical corners may create a short-term gain, but almost always produces a painful long-term harvest.

Nature never plays favorites. It simply multiplies whatever is planted.

One of my favorite observations about farmers is that they never become impatient with the growing season. Imagine a farmer planting corn on Monday and digging it up on Friday to see whether it’s growing. We would question his judgment. Farmers understand that healthy growth takes time. They faithfully prepare the soil, plant quality seed, remove weeds, and trust the process.

Business owners, however, often struggle with this principle. We attend one leadership conference and expect our culture to change overnight. We install new software and wonder why efficiency hasn’t immediately improved. We hire a talented employee and become discouraged when they aren’t fully productive after a few weeks. We expect harvests before the growing season has had time to do its work.

The waiting season isn’t wasted time. It’s where the roots are growing.

Every successful company has experienced seasons where progress wasn’t immediately visible. Systems were being developed. Employees were learning. Customer trust was being earned. Brand reputation was slowly taking shape. From the outside, it may have appeared that very little was happening. Underneath the surface, however, something important was taking place. The roots were growing strong enough to support a future harvest.

Another lesson farmers understand exceptionally well is that they never eat all of their seed.

They know that consuming today’s seed means sacrificing tomorrow’s harvest. That’s a lesson many businesses would do well to remember.

Every profitable year brings temptation. Do we distribute every dollar? Do we postpone investments because they reduce this year’s earnings? Or do we intentionally reinvest part of today’s success into tomorrow’s opportunities?

Sometimes your “seed” looks like upgrading technology before it’s absolutely necessary. Sometimes it means investing in leadership development, improving manufacturing space, refining processes, hiring ahead of growth, or strengthening your marketing efforts. None of these investments produce immediate results, but they often become the very reason a business thrives five years later.

Great leaders think like farmers because they understand that today’s decisions shape tomorrow’s opportunities.

As CPAs, we have a unique perspective. Every year we review financial statements that tell the story of a business. Revenue either increased or declined. Gross margins improved or slipped. Cash flow strengthened or weakened. But financial statements don’t just report numbers—they reveal the harvest of thousands of decisions made over many years.

Healthy businesses rarely become healthy by unintentional effort. Behind every balance sheet is a story of seeds planted faithfully—or neglected.

Perhaps that’s why some of the most successful business owners I’ve met possess remarkable patience. They understand that sustainable growth cannot be rushed. They know there are no shortcuts to trust, leadership, culture, or reputation. They are willing to plant today for a harvest they may not fully enjoy until years into the future.

Imagine how different our businesses might look if we evaluated every major decision through a farmer’s perspective.

Instead of asking, “What will this cost me today?” we might ask, “What harvest could this produce five years from now?”

Instead of asking, “How quickly will I see a return?” we might ask, “Is this the right seed to plant?”

Instead of focusing exclusively on quarterly results, we might spend more time cultivating the conditions that create long-term success.

The beauty of the principle of seedtime and harvest is that it offers both encouragement and responsibility. If today’s harvest is disappointing, tomorrow’s harvest can be different because today’s seeds can be different. Every sunrise offers another opportunity to plant wisely — experienced farmers also know that only God knows what will be gathered in at harvesttime.

The next time you walk past a farm, remember that you’re looking at more than fields of corn or soybeans. You’re seeing one of God’s greatest illustrations of how success works—not only in agriculture, but in business and in life. “Do not be deceived: God is not mocked, for whatever one sows, that will he also reap.” — Galatians 6:7

The harvest never comes first. It never has. It never will. Great businesses, like great farms, are built one faithful harvest season at a time.

Preface: “Customers pay only for what is of use to them and gives them value. Nothing else constitutes quality.” —Peter F. Drucker

The Price Is More Than a Number: Why Smart Pricing Determines the Long-Term Success of a Retail Business

Walk into two retail stores selling nearly identical products, and you’ll often notice something intriguing: their prices can be remarkably different. One retailer competes aggressively to offer the lowest price, while the other confidently charges 10%, 20%, or even 30% more for what appears to be the same item. At first glance, the lower-priced retailer seems destined to win. Yet over time, the opposite is often true. The retailer with higher prices frequently enjoys stronger profits, better employees, superior customer service, healthier cash flow, and greater opportunities to invest in growth. The difference isn’t simply the product on the shelf—it’s the pricing strategy behind it.

Many business owners think of pricing as a simple math equation: determine the cost of a product, add a markup, and arrive at the selling price. While that approach is straightforward, it overlooks one of the most important principles of business. Pricing is not merely a financial calculation; it is a strategic decision that influences profitability, customer perception, employee opportunities, and the long-term health of the business. Legendary investor Warren Buffett captured this idea perfectly when he said, “Price is what you pay. Value is what you get.” Successful retailers understand that customers are purchasing far more than a product. They are buying convenience, trust, expertise, reliability, and an overall experience.

Peter Drucker, often referred to as the father of modern management, famously wrote, “The purpose of business is to create and keep a customer.” Pricing plays a central role in accomplishing both objectives. It communicates the value of a product and sends a message about the business itself. A price tag is more than a number—it reflects the confidence a company has in its products, services, and ability to meet customer expectations. Instead of asking, “What does this product cost me?” successful retailers ask a much more powerful question: “What value does this product create for my customer?” That subtle shift in thinking can transform an entire business.

There are several pricing models that retailers commonly use, and each has its strengths and weaknesses. The most familiar is cost-plus pricing, where a retailer calculates the cost of an item and adds a desired profit margin. It is simple, consistent, and easy to manage. However, cost-plus pricing has one significant limitation—it ignores the customer’s perception of value. Two businesses may have identical costs, yet one can command significantly higher prices because of its reputation, exceptional service, product expertise, or customer experience. Cost should influence pricing, but it should not be the only factor.

Many of the world’s most successful companies rely on value-based pricing rather than cost-based pricing. Apple provides one of the best examples. Consumers rarely purchase Apple products because they are the least expensive option. They willingly pay premium prices because they value innovation, design, reliability, customer support, and the seamless integration of Apple’s ecosystem. The lesson for retailers is clear: customers do not always buy the lowest price—they often buy the greatest confidence. Businesses that consistently create exceptional value often discover that customers are willing to reward that value with greater loyalty and higher prices.

Competitive pricing is another common strategy, particularly in industries where customers can easily compare prices. While it is important to understand what competitors are charging, competing solely on price often becomes a race to the bottom. Every discount reduces the resources available to hire talented employees, improve customer service, invest in technology, or renovate a store. Jeff Bezos once observed, “Your margin is my opportunity.” When businesses sacrifice their margins in pursuit of volume, they frequently sacrifice their ability to build a stronger company.

Technology has also introduced dynamic pricing, where prices fluctuate based on demand, inventory levels, seasonality, and customer behavior. Airlines, hotels, online retailers, and even entertainment venues adjust prices regularly to maximize profitability. While not every retailer requires sophisticated pricing software, business owners should recognize that pricing does not always have to remain static. Thoughtful adjustments based on market conditions can improve both sales and profitability.

Another effective strategy is premium pricing. Luxury brands intentionally charge more because price itself communicates quality, exclusivity, and prestige. Consumers often associate higher prices with better craftsmanship, superior service, or greater reliability. Of course, premium pricing requires businesses to consistently deliver an experience that justifies the higher price. Customers will gladly pay more when they believe they are receiving more.

Pricing is also deeply rooted in psychology. Retailers have long understood that consumers do not always make purchasing decisions based purely on logic. A price of $19.99 often feels significantly different than $20.00, despite the one-cent difference. Businesses use techniques such as bundling products, offering limited-time promotions, creating loyalty programs, and strategically positioning premium products alongside standard offerings to influence purchasing decisions. These strategies are not about deceiving customers; they are about helping customers recognize value in different ways.

One of the most common mistakes I observe as a CPA working with business owners is chronic underpricing. Many entrepreneurs believe that lowering prices will automatically generate more sales and greater success. Sometimes it does increase sales volume, but it often produces unintended consequences. Lower margins reduce cash flow, limit investments in technology, delay facility improvements, restrict employee development, and create unnecessary financial stress. Businesses simply cannot discount themselves into long-term prosperity. Jim Collins, author of Good to Great, reminds us that “Greatness is not a function of circumstance. Greatness is largely a matter of conscious choice.” Pricing is one of those choices.

Over the years, I have also noticed several recurring pricing mistakes. Some businesses compete almost exclusively on price instead of communicating their unique value. Others fail to analyze profitability by product line, allowing high sales to mask poor margins. Many underestimate the lifetime value of loyal customers and focus too heavily on attracting new ones through discounts. Others reduce prices before exploring ways to enhance the customer experience through better service, stronger warranties, or greater convenience. Finally, many business owners pursue higher sales volume without considering whether those additional sales actually improve profitability. Growth without healthy margins is difficult to sustain.

Every retailer should periodically step back and ask several important questions. Why do customers choose our business? What unique value do we provide that competitors cannot easily replicate? Are we pricing for today’s survival or tomorrow’s growth? Which products truly generate profit, and which simply drive traffic? Are we measuring sales, or are we measuring profitability? These questions often uncover opportunities that no spreadsheet alone can reveal.

Ultimately, pricing is far more than an accounting exercise. It reflects how business owners value their products, their employees, their customers, and their future. Healthy profit margins provide the resources necessary to hire exceptional people, invest in technology, improve customer experiences, and withstand economic uncertainty. Peter Drucker wisely observed, “Efficiency is doing things right; effectiveness is doing the right things.” Pricing is one of those “right things.” It deserves the same thoughtful attention as leadership, strategic planning, and customer service.

The next time you review your pricing strategy, resist the temptation to ask only, “What should we charge?” Instead, ask the more meaningful question: “How can we create greater value for our customers?” Businesses that focus on delivering exceptional value, rather than simply offering the lowest price, position themselves for sustainable growth and long-term success. In the end, the price attached to your products communicates much more than their cost—it tells customers what kind of business you are and what kind of future you intend to build.