Virtual Currency: Looking Forward

 Preface: If you don’t believe it or don’t get it, I don’t have the time to try to convince you, sorry. – Satoshi Nakamoto

Virtual Currency: Looking Forward

Credit: Donald J. Sauder, CPA | CVA

The virtual currency ideal began conceptually in the early 1980s when David Chaum, while studying at Berkley, wrote a research paper on online advancement possibilities for economic payments and transactions with a system called eCash. In the early 1990s, he developed a second system called DigiCash that used virtual processes to make economical transactions.

As the forerunner of the virtual currencies, DigiCash was unable to scale successfully as the company lacked cohesive direction, partnerships with large financial institutions, and the fact that the internet and smartphone technology had not yet fully integrated with e-commerce. The archetype DigiCash disappeared from the virtual currency space after a Y2K coding glitch, and the intellectual property was sold, with an interesting footnote, to the ubiquitous online virtual payment space PayPal.

One defining feature of a virtual currency is that it is not issued by a central authority and backed by a central bank or authoritative organization. The United States government assigns responsibility for counterfeit money and other currency-related regulation to the United States Secret Service. Therefore the faith to transact in US dollar currency is maintained confidently without substantial fear of counterfeits.

On the contrary, virtual currencies are consequently effectively immunized from authoritative regulations, have no governing group to prevent loss of confidence, and are the Chief Shehaka’s developing western frontier of speculative virtual contrarians. Financial regulators are increasingly opposed to virtual currencies since they facilitate cross-border transfers, money laundering, tax avoidance, and other fraudulent financial practices.

With the omission of an authoritative security framework with virtual currencies lacking such inherent and government umbrella protections, certain risks are inherent in any virtual currency transactions, as outlined as follows.

Hackers can drain virtual currency wallets, and users and investors are entirely reliant on computer security systems and third-party systems. This lack of substantial internal control can lead to stolen passwords or compromised passwords with the same or similar effect as being denied access to an impenetrable vault with valuables. If a virtual currency wallet key is lost from operational risks with cryptography or stolen perhaps, the original account owner’s virtual assets will be lost forever, devoid of remedial measures. There are no safety nets or reversible transactions in the virtual currency system.

Market risks are also present with virtual currencies, and a lack of transactional liquidity and market manipulation can result in speculative volatility to the virtual asset value. Tax risks with Foreign Bank Account Reporting with virtual currencies stored abroad are also applicable and necessitate compound tax compliance factors.

While the Federal Reserve doesn’t have the authority to supervise or regulate virtual currencies, such as Bitcoin, Ethereum, Ripple, Litecoin, Tether, and EOS, it has not stopped virtual currencies from progressing and creating wealth for miners and speculative currency investors. Interestingly, the true legend of Bitcoin is the person credited with developing it, Satoshi Nakamoto may not be a real person, as no one has every met them. The name is likely a pseudonym for the creator or creators of Bitcoin who wish to remain anonymous.

Virtual currencies are here to stay. Legendary investor Jim Rogers has stated that virtual currencies will likely meet government defense departments’ force one day in the future. At that time, economies will experience a currency transformation, unlike any in human history.

Instituting appropriate compliance with relevant tax laws on pertinent virtual currency transactions, and being wary of the risk(s) is therefore advised. Please contact your tax advisor if you own virtual currency.

This article is general in nature, and it does not contain legal advice. Please contact your accountant to see what applies in your specific situation.

Taxation of Bitcoins and other Virtual Currency

“Stay away from it. It’s a mirage, basically. In terms of cryptocurrencies, generally, I can say almost with certainty that they will come to a bad ending.”  –  Warren Buffett

Taxation of Bitcoins and other Virtual Currency

Credit: Donald J. Sauder, CPA | CVA

In recent years, The Internal Revenue Service has now issued a decree that all virtual currency transactions are henceforth taxable. This includes Bitcoin, Ethereum, Ripple, Litecoin, Tether, and EOS. Concerningly, to tax advisors in the age of information, many virtual currency users continue to be unaware of the increased non-compliance risks and continue to blissfully transact with any number of virtual currencies absent consideration of IRS tax implications.   

The IRS classifies virtual currency as a digital representation of value, other than a representation of the U.S. dollar or a foreign government authorized currency that functions as a unit of account, a store of value, and a medium of exchange. Some virtual currencies are convertible, which means that they have an equivalent value in real currency or act as a substitute for real currency; and are a digital medium of exchange, such as digital currency and cryptocurrency.

Cryptocurrencies are a type of virtual currency that utilizes cryptography to secure transactions digitally recorded on a ledger, such as a blockchain. Units of cryptocurrencies are generally called coins or tokens.

Fortuitously, the IRS has instituted property tax laws to virtual currencies instead of currency for federal tax purposes. Therefore, in exchanges of one virtual currency for another, while a taxable transaction is subject to propitious capital gains taxes instead of higher ordinary income tax rates.

However, mining activities for virtual currencies and payments received for services from virtual currency payments representing earnings income may be ordinary income tax rates. You join a group of virtual currency miners, and your share of electricity is $10,000, and you receive $17,000 of coin value. You will have $7,000 of ordinary taxable revenues for IRS purposes.

Payments for services as an independent contractor from virtual currency are subject to self-employment income and self-employment FICA taxes. Additionally, wages or salaries paid in virtual currency are per the IRS code remuneration for employment tax purposes and subject to federal income withholding and both FICA and FITA reporting. Since Federal taxes on the IRS form are subject to U.S. dollar currency values, the income you must be recognized is the fair market value of the virtual currency in U.S. dollars when received if you’re receiving payments for services in the virtual currency, you’re advised to keep costs tabulated and tax implication measures.

The IRS continues to closely monitor the growing fields of virtual currency exchanges, and in 2017 they investigated Coinbase. Coinbase’s extensive crypto exchange has almost 6 million registered members and fewer than 1,000 of those filed a tax return for implicit gains on the virtual currency. Following a legal directive, Coinbase delivered a few thousand names to the IRS. A corresponding number of IRS letters were issued to virtual currency account holders issuing a warning. They would be advised to begin tax compliance before an audit as a good faith encouragement. Taxpayers incorporating virtual currency transactions are advised to regularly consult with their tax advisors on increasing tax compliance and regulations to keep apprised of tax law revisions regarding virtual currencies.

Also, paying for services with virtual currencies held as a capital asset, upon the exchange will incorporate a taxable transaction with either a reportable capital gain or loss. Virtual currency received as a gift will not be recognized as income until exchanged or sold. If you cannot substantiate the donor’s basis, your tax basis is zero in the virtual currency property. The capital gain on virtual currency gifts is either the day you receive the gift or the day from documentation substantiating the donors holding period of the virtual assets.

A charitable organization receiving virtual currency donations will attribute such gifts to non-cash contributions and advised to consult with a tax advisor before embarking on such contribution receipts.

Are Leading Entrepreneurs Considering the Ants? (Segment IV)

Preface: “Talent wins games, but teamwork and intelligence win championships.”  Quote from Michael Jordan

Are Leading Entrepreneurs Considering the Ants? (Segment IV)

Credit: Donald J. Sauder, CPA | CVA


Ants, like robots, have an innate talent to work admirably as a team. Ants carry upwards of an incredible fifty times their weight. Ants travel in large numbers when hunting or farming, and this gives them a significant probability of warding off risks that individually would be insurmountable. Again, together ants can accomplish what would impossible individually, from defending the colony to vast territory hunting and farming collection activities. Ants very infrequently can join a new colony. If an ant colony is destroyed or an ant is separated from their native colony, most new colonies will reject the foreigners. However, infrequently, if the captive orphan ant can contribute successfully towards the new colonies’ progress, they will be adopted. This gives ants fierce loyalty to their fellow members and teammates in their native settlement. Ants understand and appreciate their position and responsibilities in their colony and peacefully conduct their activities unless threats occur to the colony’s status quo.

Google is a ubiquitously known organization in both households and businesses, and one quest that they continually invest in is to understand teams better. Project Aristotle was one such specific initiative for this purpose. Many Google executives believed that building the best business team was to assemble the best people into a group. You combine the best engineers, MBA’s and Ph.D.’s, and you’ve automatically created the best team for a business.

The collaborative research resulted in struggling with the lenses in ideas and practices to determine a great team’s characteristics leading to a conclusive five key points that top teams exhibit. 1.) Dependability: A successful team member must be dependable and get things done on time and within expectation. 2.) Structure and Clarity: High-performing teams have clear goals and well-defined roles within the group. 3.) Meaning: The work has personal significance for each member. 4.) Impact: the group believes their work is purposeful and positively impact the greater good. 5) Psychological Safety: the Project discovered unnervingly that quantitative data alone, as may be hoped, was not the core platform of great teams, such as superior IQ, credentials, and education.

Google discovered with Project Aristotle that they began to make noticeable breakthrough progress when they started looking at specific intangibles of the teams, such as group norms. The researchers’ recurring progress was in part from analyzing the existing research theme from earlier psychologists and sociologists that reflected on “group norms” – the traditions, behavioral standards, and unwritten rules that govern how teams function when they gather.

Group norms can be unspoken or openly acknowledged, but their influence is often profound. Therefore, business teams assembled with safe zones for employees, where they feel secure from seeming incompetence, or other fears of risk in voicing their opinions, or asking judgment-free questions or other danger(s) and insecurities from a lack of shared group norms, was the underlying foundational component for a business to a building and excel with a dream team.

In entrepreneurship, shared “group norms” are one of the big secrets to great teamwork.

Ants also exemplify perfectly one of the greatest secrets of successful and champion teamwork aligned and similar to “group norms”– the right chemistry. The “Miracle on Ice” U.S Hockey team of 1980 was chosen based on chemistry and not talent alone. We can learn from Malcolm Merkin who wrote the following in his article How Teamwork Led Mike Eruzione to Olympic Victory 

(In the 1980 Winter Olympic Games), Twenty-five-year old captain Mike Eruzione played a prominent role in bringing home the gold for the USA (and from) Soviet professionals. Eruzione’s parents taught him to pursue and expect success, but not to take anything for granted. Sporting his older sister’s white hand-me-down figure skates, the future gold medallist learned to skate on the sand traps of a nearby golf course.

Since his mother would not allow young Michael out on the lake with the older kids, iced-over sand traps provided an excellent training ground for a small but determined, Eruzione. By the age of eight, he had demonstrated that he was committed to becoming a hockey player, so, with saved up S&H green stamps, his mother bought him a pair of bona fide hockey skates. “The only rule that we had around the house was that if you signed up for something, you had to commit yourself to work hard and stay with it.

You couldn’t quit the team or pout if you didn’t score any goals. It was a case of playing because you wanted to enjoy yourself.”…. I wouldn’t come home and say `I’m the best player on the team,’ or `I’m going to be a pro player because I’m better than the next guy.’ I always took things in stride and was part of a team. To me, the team was always more important than how well I was playing.”

Both Olympic teams in the famous US Olympic victory were chosen for their teamwork chemistry instead of individual sheer talent. Ants excel at shared group norms and importantly the chemistry feature of teamwork. The ants have no personal ego, pride, or other individual motives in their endeavors, because of supposed superior ability.

The worker ant’s dedicated teamwork focus is on the commitment to the successful furtherance of their colony. That teamwork approach has helped them successfully thrive for millenniums. This is team “chemistry” and “group norms” core component is genuinely most clearly evident among successful family entrepreneurial teams. Likewise, when (entrepreneurial) teams are procured with the right chemistry, amazing things happen that talent alone cannot achieve.


Are Leading Entrepreneurs Considering the Ants? (Segment III)

Preface: I believe that robots should only have faces if they truly need them. Quote from Donald A. Norman

Are Leading Entrepreneurs Considering the Ants? (Segment III)

Credit: Donald J. Sauder, CPA | CVA

Set Deadlines

Ants know what task(s) they are responsible for as members to further the colonies’ vitality. Because they are respectable, responsible “social entrepreneurs,” they approach each colony’s responsibility or task with fastidious and accountable action. There isn’t time to be lazy in a nation of ants or time to look for short-cuts of responsibility or shifting the burden. Ants exhibit the same 20-Mile March theory outlined in the business book Great by Choice. This is steady, consistent, and uniform progress towards the project destination or goal, day after day, and month after month.

Those readers who have had the privilege to enjoy a homework assignment in school will understand the pressure of deadlines. Classroom success requires preparing the essay before a particular class day or have today’s lessons designed before class tomorrow. Sometimes multiple mid-year exams were on the same day. The ultimate goal of these individual classroom deadlines is for responsible participants to understand thoroughly the concepts being taught to be prepared for the final class examination(s).

When an (entrepreneurial) project matters, and that is most of the time, assigning project deadlines and focusing those resources involved and responsible for prioritizing time to complete that task or project either individually or as a team effectively, whether preparing an ice-cream cone for sale or painting a vehicle. The planning and accountability on a project deadline can help keep workload appraisals realistic.

Project deadlines help manage scheduling with preventions extra projects or meetings that could interfere with a deadline. Unfortunately, some managers drive deadlines and project workload expectations that require 101% or 110% from the team to achieve. This compels long hours and stressful work expectations and can lead to eventual failures in diminished energy for a team’s long-term success. Although on the contrast periodically from time to time, extra demands are typical of many roles. Procrastinators often fail in environments with tight deadline expectations, and being responsible for nonessential projects or task specifics are more appropriate for team management.  

Keeping project completion deadlines and achieving them on schedule and budget are the fields of top-teams. When used effectively, setting realistic deadlines and completing them successfully can provide the satisfaction of a job well-done, and the sweet taste of achievement, as enjoyed by leading performers. The setting, keeping, and achievement of realistic deadlines satisfactorily reveals the true capabilities of any team.

Division of Work

Henri Fayol, who started his career as a mining engineer in France in the 1860s, and eventually became director of a company with more than 1,000 employees, developed Fayol’s 14 principles of Management. The first of those 14 principles is the division of work. During the Dark Ages, markedly concluding with the Bubonic Plague that brought a profound shift to the world from the effects of an array of social, economic, cultural, and religious changes in ways of life – blazed the trail towards a new ear, leading to the Renaissance. This was the beginning bud of the most significant epochs for art, architecture, literature in human history, and the early blossoms of the division of work. This concept of division of work was introduced early in Plato’s Republic “Well then, how will our state supply these needs? It will need a farmer, a builder, and a weaver, and, I think, a shoemaker and one or two others to provide for our bodily needs”.  Yet, until the years of the Renaissance, these concepts gained limited mileage towards more free markets, and therefore the division of work that is enjoyed in today’s economies. 

Friedrich A. Hayek, in the written work The Use of Knowledge in Society first published in September 1945, proposed that a centrally planned economy could never match the efficiency of the open market because what is known by an individual member of society is only a small fraction of the sum of knowledge held by all members of the community. 

A decentralized economy thus complements the dispersed nature of information spread throughout society. Quoting “The price system is just one of those formations which man has learned to use (though he is still very far from having learned to make the best use of it) after he had stumbled upon it without understanding it. Through it, not only a division of labor but also a coordinated utilisation of resources based on an equally divided knowledge has become possible. The people who like to deride any suggestion that this may so usually distort the argument by insinuating that it asserts that by some miracle, just that sort of system has spontaneously grown up, which is best suited to modern civilisation. It is the other way round: man has been able to develop that division of labour on which our civilisation is based because he happened to stumble upon a method which made it possible. Had he not done so, he might still have developed some other, altogether different, type of civilisation….”

One ant study performed with the observations of organizational researchers objectively proved that in one ant colony, a single ant transported 57% of all items moved in a colony emigration, suggesting that small colonies are incredibly dependent on a few key individuals. This free-market observation provides a landscape feature of when the ambition to work is given appropriate latitude. Secondly, on observation, each ant’s amount of work was more evenly distributed in larger colonies. From scout ants to carrier ants, these social entrepreneurs instinctively divide responsibilities effectively  to maintain, build and grow existing and new colonies successfully. With this clear and classified division of work, ants successfully continue to thrive as “social entrepreneurs” in their colony environments as they have since the ancient days of the Proverbs writer’s reflections.

As (business) knowledge continues to exponentially lead to innovations, from candlestick makers to electricians and shepherds to fence builders and doctors to surgeons, and laborers  to robots, the concept of division of labor continues to successfully segregate the production or manufacturing of the product(s), distribution warehouses, and retail sale storefronts into individual enterprises for entrepreneurship. Have ant colonies developed this economic model in colonized successes over period of time or have they been quietly and industriously implementing this economic model since the first days of their creation? 

Are Leading Entrepreneurs Considering the Ants? (Segment II)

Preface: “Great things happen to those who don’t stop believing, trying, learning, and being grateful.” Roy T. Bennett

Are Leading Entrepreneurs Considering the Ants? (Segment II)

Credit: Donald J. Sauder, CPA | CVA

Develop a Routine

Ants appreciate the importance of daily and weekly routines, including rest. The worker ant manages their work schedule with one-minute naps at regular intervals. Napping with say 250 quick snoozes every day, with approximately a four-hour sleep cycle. The Queen ant rests more with approximately ninety 6 minute naps per day. In contrast, worker ants follow consistent routines per daily tasks and responsibilities on public works projects for the colony’s continued well-being.

An essential and often overlooked component of high-achievement in entrepreneurship is also a routine. A well-developed daily routine pillars good habits in several ways. One of the most important is that it reduces the time and opportunity for a wasted moment, minimizing the chance of drifting aimlessly into the problematic doldrums of idleness. Suppose you research the amount of data on the benefits of daily routines. In that case, you will discover the frequency of routines and time management techniques implemented by high achievers both inside and outside of the public eye.

“The heights by great men reached and kept were not attained by sudden flight, but they while their companions slept, were toiling upward in the night.” Henry Wadsworth Longfellow

Routines can enable entrepreneurs to make individual decisions quickly and without laboriously thinking about them and the alternatives, including the time to work on the business, team meetings, or reflections, all corporate characteristics of experienced and adept management.

These effective routines free up more necessary resources for any unforeseen challenges of a busy day, perhaps. But alas, routines may not be for everyone. Yet, many industrious students have often rigorously followed routines, and these habits follow them into their careers, leading to exceptional opportunities. So too, those entrepreneurs who work persistently to build a productive daily or weekly routine, the routines and habits will effectively lead towards the desired opportunity for advancement.

Stay Optimistic

Now we will consider the mindset of ants. Ants think and plan ahead. They live with a continual awareness winter is approaching amidst the warm and balmy summer climate months, and they are optimistic they can sustain their colony through those anticipated winter challenges with appropriate preparations. They therefore diligently gather food all summer long for the winter months’ reliant on the environment to provide, and they approach that task without a quota. In other words, there is no limit on when the gathering is “enough.”

It’s a mindset of working as arduously, as long, and persevering as much as you can in preparation because predicting winter challenges is never easy, and the stake of the colonies future relies on the ants individual and collective persistent efforts to store up for whatever winter may bring.

When winter arrives, the ants can then satisfactorily wait for spring to arrive, knowing they’ve prepared appropriately for the colonies successful survival, and patiently look forward to getting back to the fields when the warm weather comes, and do it all again.

There is a book The Ant and the Elephant about an ant stranded alone on an island. The ant asks a turtle for help. The turtle uncaringly refuses because he has already swum for the day; soon after that, he falls on his back and can’t right himself. So, he asks a hornbill for help; she selfishly refuses, and then her egg falls out of its nest. It’s too heavy for her to carry, so she asks a giraffe for help, but the giraffe is also too inconsiderate to assist. Then the giraffe’s legs get hopelessly snared in some large vines; he asks a lion for help, but the lion just laughs and saunters on. Then a boulder rolls onto the lion’s tail, ensnaring him. He asks a rhino for help, but when he can’t think of any way to return the favor, the rhino strolls on to gets his horn embedded in a stump. Then an elephant considers the collective predicaments and helps each of the animals in turn, starting with the ant, which is the only one who bothers to thank the Elephant.

Shortly after the Elephant has assisted everyone, he falls into a ravine. When he can’t get out, the Elephant resigns himself to his predicament. Then a horde of ants led by the one he assisted previously safely transported him out of the ravine. The Elephant, in turn, then gives the ants a ride home on his back. Vibrant and flourishing entrepreneurship is centered around vibrant communities. Consider the above story and the antithesis of all the island dwellers being selfish perhaps.

Even though the above story is about an Elephant and an Ant in the jungle, it again exemplifies the fact that the best blessings we can receive are usually in the joy and reward of helping others, when we have the opportunity, regardless of our aura, without great expectation, and with gratitude we can help give.

To be continued…..

Disciplined Marching

Preface: A fruitfly is ancient in 40 days, a mouse at 3 years, a horse at 30,
a man at 100, and some species of, tortoises not until 150 years.  Quote from Leonard Hayflick

Disciplined Marching

Credit: Jacob M. Dietz, CPA

Imagine that there are two hikers travelling on foot from California on the west coast to Maine on the east coast. The long trek involves desert, nearly endless plains, and many, many miles. Hiker 1 consistently treks 20 miles per day in good weather and bad weather. He does not exhaust himself when traveling is easy by pushing too hard, but he also does not relax too much when traveling is difficult but keeps marching. He marches with discipline.

The second hiker, however, travels with less discipline. When it is easy, he hikes many miles, risking exhaustion from too much exertion. When it is hard, he stays in his tent, delaying the reaching of the goal.

Is there anything we can learn from these hikers that helps in our vocations? This hiking example is adapted from the book Great by Choice authored by Jim Collins and Morten Hansen. The authors teach us about business discipline. In their research, they explain principles and benefits of 20-mile marching discipline for business.

Disciplined Widget Production Plan

How could 20-mile marching apply in a business? The specifics of a 20-mile march would vary from one company to another. Let us look at a hypothetical manufacturing company, ABC Manufacturing, LLC.

ABC Manufacturing, LLC manufactures widgets that it sells to homeowners. ABC’s 20-mile march is to increase annual production of widgets by at least 10% every year, but not more than 15%. Their 20-mile march goal, in this hypothetical example, was set by the company after careful consideration.

The company wants to grow, but not too fast. They realize that at least 10% growth in the production of widgets is necessary to keep the business growing fast enough for the business to reach its goals. If the company does not consistently reach 10% growth, then the goals of the company are not accomplished.

Although the goals of a company will vary from one company to another company, the goals of ABC Manufacturing involve funding a certain percentage of an orphanage in another country. Another goal is for the founding owner, Abel, to be able to phase out of the business by a set age and turn it over to 5 of his children. The company must be profitable enough to support them and their families while continuing to fund part of the orphanage. After doing the math on how to reach these goals, and some other goals, Abel clearly sees that the company should strive for no less than 10% production increases each year.

Furthermore, Abel realizes that too much growth would be counterproductive. Abel abhors excessive debt loads. He calculates that he could not sustain more than 15% production increases without pulling his equity-to-asset ratio too low. The lower the equity to asset ratio, the higher the liability load.

Abel also strives to slowly teach his children how to lead the business. He realizes that if the business consistently grows production by more than 15%, then he will thrust his children into too much responsibility too soon. Although Abel deeply desires to see his children eventually reach those heights of responsibility, he wants to prepare them thoroughly for it.

Discipline to Make Difficult Decisions

ABC Manufacturing, LLC did not realize how challenging their march would be when they set out to annually increase widget production by 10%-15%.

In year 2, reaching 10% seemed very difficult. In April, the flu kept 2 of the most productive workers off the shop floor for 1 week each. Furthermore, one of the machines caught fire. Fortunately, the local fire department put the fire out with minimal damage to the shop, but the machine was nonfunctional for two weeks.

Abel’s stress level was high at the end of April. He was not only missing the 10% production growth goal; he was slightly behind the previous year’s production. So, what did Abel do?

He took a pen and a notebook and went to a park. Abel did not want to languish in mediocrity. He knew if his competitors saw him, they would probably laugh and think he was wasting his time at the park. But Able took this clarity break because he knew he needed new ideas if he wanted to reach his 10% production growth goal. He thought and prayed and doodled all morning.

Fortunately, one of his doodles was a new way to organize one of the machine workstations. When he went back to the shop and tried the new layout, the employees were delighted. The new layout allowed them to produce widgets faster.

Later in the year, Abel hired a new employee to assist with manufacturing widgets. The new employee and the new design helped ABC hit 11% growth that year. Abel could not control the flu or the fire. Abel worked on what he could control, hiring a new employee and redesigning the layout.

The next year, no one got sick and no fires damaged the shop. Furthermore, a dealer from a nearby state called and told Abel that he found a new customer for ABC. The new customer, however, would only switch to ABC’s widgets if ABC were able to supply all their widget needs. Abel realized that he could not supply enough widgets unless he doubled production.

Abel groaned inwardly at the decision. He did want to eventually grow the business. If he doubled production, he might even be able to fund the orphanage completely, instead of just a portion of it.

Abel declined to double production. Although no external economic force prevented him from growing, Abel resolutely stuck to his goals because he knew they were good goals established for good reasons. He knew that if he would double production that year, then he would need to reach a debt level at which he was uncomfortable. He also knew that he would need to place his son Seth in a management position before Abel felt Seth had enough experience to manage.

The Fruit of Discipline

Eventually, ABC’s disciplined growth strategy, not too slow and not too fast, paid off for the hypothetical Abel. He was able to turn the business over to his children, who were all capable leaders with years of experience leading in the company. The company had grown sufficiently to be able to easily support them, as well as fund a greater portion of the orphanage.

Lacking Discipline

We looked at a hypothetical company that exercised discipline in their business. Now, let us look at a hypothetical company that failed to march properly.

XYZ Manufacturing, LLC builds homes. XYZ’s 20-mile march is to increase annual home sales by at least 20% every year, but not more than 25%.

In year 2, sales were difficult to close. Although on paper the goal was to increase sales by at least 20%, the founder, Cain, did not bother comparing sales until after the year was over. After the year was over, he realized that he only increased sales by 5%. Cain was very frustrated at the lack of growth.

The next year, the economic winds changed, and home sales soared. Still stinging from not reaching his goal the year before, Cain pushed hard to close sales. He realized that his employees were working as hard as they could, so he hired two new crews. He did not have the working capital to outfit the new crews with equipment, so he went to the bank for a loan. After securing the loan with his personal home, he outfitted the crews with new equipment.

Later, some empty lots came up for sale in an area near where he had built some homes. Although Cain had never purchased lots before, he decided to purchase 5 lots to increase his profits as he tried to catch in his sails the economic winds that were soaring sales in his region.

At the end of the year, when Cain asked his accountant how sales compared to last year, Cain was stunned to learn he had increased sales by 95%. At first, he felt a little bad about zooming past his 25% maximum goal. Then he remembered that he had failed to reach his minimum goal the year before. He decided more of a good thing must be a good thing, so he disregarded the 25% maximum and pushed for rapid growth again the next year. He purchased 5 more empty lots for development, and he started yet another crew.

Halfway through the year, through no fault of Cain’s, the economic winds changed. He could not find enough work for his crews. He started subcontracting two of his crews to a general contractor at a rate that was not enough to cover all the overhead. He decided to sell the empty lots to generate cash flow. Unfortunately, the lots only sold for about 70% of the price for which he had purchased them. The amount earned from selling them barely covered the loans he had on them.

What happened? Cain lacked discipline. When things were difficult, he failed to measure his progress and take steps to increase sales. He had a poor year.

He also lacked the discipline to hold back when things were going well. Again, he failed to measure his progress during the year to see how things were going. At the end of the year, when he finally realized he had overstepped the maximum goal, he just continued to overstep it instead of pulling back. The extreme growth left him highly leveraged and exposed to economic risks.

Exercise Discipline in Business

Although your company is probably not literally marching, it may benefit from setting a figurative 20-mile march and sticking to it. The march that your company goes on may look very different from the marches of these imaginary companies.

Are you on a march? If you are not, considering grabbing a pen and a notebook and going to a park. What should you measure, and what should the minimum and maximum be? If you pick a great march, then it may motivate you to focus on what you can control and change that. It may leave you less exposed to economic changes. It may move you steadily towards your long-term goals instead of languishing in mediocrity. Happy marching!

This article is general in nature, and it does not contain legal advice. Contact your advisors to discuss your specific situation.

Are Leading Entrepreneurs Considering the Ants?

Preface: The lazy should learn a lesson from the way ants live. They have no leader, chief, or ruler, but they store up their food during the summer, getting ready for winter.  Paraphrase of Proverb 6:6-8

Are Leading Entrepreneurs Considering the Ants?

Credit: Donald J. Sauder, CPA | CVA

Ants colonies are a great case study for entrepreneurial and organizational success. The nation of the Ants really can teach great lessons mostly applicable to business and entrepreneurship. In this blog, we intend to gain simple insights and profound, systematic principles from these quiet “social entrepreneurs” to help the entrepreneurial communities to flourish with a greater appreciation for the vibrancy of the freedoms of our culture and thee privileged opportunities to pass the time with holidays.  


One of the most significant challenges in entrepreneurship is keeping focused on the right business opportunities, highest value tasks, and keystone priorities. Ants are exceptional at this. They can seemingly focus effectively on a task or project and see it through successfully to completion. They don’t procrastinate, complain, or wince at the perceived work or effort that may be required. Instead, they diligently and quietly get to work.

Likewise, star baseball players keep their “eye on the ball” and connect successfully. That’s how they win the game. That’s how they hit home runs right, focusing on the right opportunity to connect. Entrepreneurs likewise must also value continual focus day after day.  

Entrepreneurial success is obtained with a single-minded focus on serving customers, delighting customers, and satisfying customers. While this may seem to be conventional advice, it is easy to get distracted, in many moments, not only from business priorities, and not only individually but as a team or organization.

Ants seemingly don’t expect to be applauded at an awards ceremony or receive graduate honors, or other honorary recognition. Yet our expectation as we consider these social entrepreneurs is that they will give the responsibility of each task an award level commitment and focus. What do ants do for leisure?

A business can be only as successful as its systems of service, satisfaction, and delight of customers. Would you trust an ant to do what it says it will do regarding an order? A business that has a thriving and vibrant focus will have an outperforming team that is trusted, keeps its word, and delivers on consistently on time and budget. Do this, and the rest will take of its self.

Every incredible journey started with the first metric length. Goal setting with a plan will help you more easily measure and keep focus. Achieve your vision in incremental segments that are concise, understood, and realistic. Then accurately measure the success of your focus as you complete each step of the plan. This provides clear goal-posts to measure the yardage gained and progress with chronological steps.

A business with a focus will listen to its customers and provide staff training to develop the expertise to deliver an exceptional experience with every sale. While this is not easy to achieve and easier to talk about, it pays big dividends. Imaging what customer service would be like from an ant may seem similar to a robot – quiet, ambitious, and with a dedicated effort to complete the task to the best of expectations and highest standards. Giving 100% and knowing that is all that is required. Ants focus most effectively, and effectual entrepreneurs focus too. If focusing on entrepreneurship with the high-standards exhibited from the ants, it is likely good to great things will most certainly happen. 

To be continued….

Webinar On “Great by Choice!”

Webinar On “Great by Choice!”

This webinar is intended to provide valuable business insights to successfully navigate the challenges of any business climate for both clients and others from the entrepreneurial business community.

“Great by Choice!” arrived from the quill of Morten Hansen and renowned author Jim Collins.

One of our CPAs, Jacob Dietz, presents this webinar on “Great by Choice!”  Jake brings years of CPA experience to our clients. This expertise includes but is not limited to tax return preparation, tax advising, and CPA advising and financial analysis.

Diligently applying the principals from this book will pay you back in multiples. Our firm is committed to continually helping the entrepreneurial community to learn, grow, and ultimately flourish. We have benefited from the insights in this book, and we want to give you an opportunity to benefit from the knowledge and business wisdom in the content of this book.

The grade of learning from experience is more challenging than college. Although we can all learn valuable lessons from this book, we believe the preparation of preparing for business challenges; just like the prudent see danger ahead of time and avoid it, is prudent. Other companies have gone before us, some have thrived, while on the contrast some have not. This book looks at some of these companies and gleans insights from them.

We live in uncertain times, and this book also exemplifies how some companies have thrived in uncertainty. Stay tuned to this presentation to learn from these great companies to minimize barren fields of wasted resources. After this webinar, you should have specific business tips on adequate preparation, fanatic discipline, the 20-mile march, firing the right bullets, and more.

Productive Foresight

Preface:  “A prudent man foreseeth the evil, and hideth himself: but the simple pass on, and are punished.” Proverbs 22:3

Productive Foresight

Credit: Jacob M. Dietz, CPA

Have you ever heard someone say “I wish I had seen that coming” after a bad experience? If we knew the future, then we could act accordingly. If we knew that the bull in the pasture would charge us ferociously next Monday but not the rest of the week, then we could avoid the pasture next Monday. Every other day we could walk carefree through the pasture.

For better or for worse, we do not know the future. We encounter risk every day. Thus, we can know that there is the possibility of catastrophe, but we may not know when it will hit. Not all risks, however, are equal.   In Great by Choice, Authors Jim Collins and Morten Hansen explain 3 types of dangerous risk. Minimize and avoid death line risk, asymmetric risk, and uncontrollable risk.

Death Line Risk

In business and in life, know the risks that face you. Some risks are mild, some are deadly. If the snorting bull kills us on Monday, then we cannot learn our lesson and stay out of the bullpen on Tuesday. It is too late.

In business, death line risks could literally kill you or an employee. Although death may ultimately be unavoidable on this earth, there are steps businesses can take to avoid various kinds of unnecessary death. First, practice safety to avoid physical death. If an employee falls a very small distance, they might hurt their back. A hurt back is no fun, but at least they have a chance to learn a lesson. If they fall 30 feet, they may not recover to learn a lesson. When analyzing safety, consider how close you are to the death line. If you employ workers, consider their lives a top priority in your operation. An employer will not know when the accident will happen, but with foresight the employer may be able to prevent an accident.

Secondly, watch out for financial death. When doing a business transaction, ask yourself if it would take you out of business if the transaction went south. For example, what would happen if you cannot pay back a large loan? Would the lender pursue some type of peaceful arbitration and resolution, or would the lender sue you to recover every possible penny?

Suppose that you are taking a new product to market. What happens if the product fails to perform? Know your customers and the uses of your product. If it is a very important product that would be costly if it broke, then ask yourself if you can remain in business if the product fails.

Thirdly, avoid risks that cause spiritual death. Mark says it well. “For what shall it profit a man, if he shall gain the whole world, and lose his own soul?”

Asymmetric Risk

If the potential downside is significantly greater than the upside of a decision, then you have an asymmetric, or unequal, risk.

Be careful when you see asymmetric risks. If an entrepreneur sees a large opportunity, perhaps they will risk a lot for that opportunity. If they see a small opportunity, perhaps they will risk a little for that opportunity. Taking an asymmetric risk, unfortunately, involves risking a lot to get a little.

When making decisions, ask what the upside and downside is. If only the upside is focused on, then the business may take on an asymmetric risk unwittingly. On the other hand, if only the downside is considered, then a business may miss a good opportunity.

Imagine a business owner that wants to acquire another company and consolidate it with his company. He calculates that adding the new company could give him an additional $40,000 of net income per year. While doing due diligence before purchasing, the owner realizes that there is a $1,000,000 lawsuit pending against the company he wants to purchase. His attorney looks at the circumstances, and indicates that the lawsuit, if successful, could hurt him if he purchases the company. In this situation, the upside of an additional $40,000 of net income per year pales in comparison to a $1,000,000 legal judgment.

Think back to the last contract you signed. What was the upside, and what was the downside? If you are thinking of acquiring some new equipment, consider what is the upside and what is the downside.

Uncontrollable Risk

There are many things which a business owner cannot control. Entrepreneurs may not be able to control the weather, other people, public health, civil elections, gravity, inspectors, and the list could go on.

Be aware of these risks and focus on what can be controlled. For example, a construction crew cannot control the wind. They can control, to a certain extent, which day to set trusses. If the wind will cause a huge risk, it may be better to wait. On the other hand, if the entrepreneur is running a restaurant, then it may be safe to operate the restaurant in the wind. The food inspectors may be what worries the restaurant owner. Again, the restaurant cannot control the food inspectors. The restaurant can, however, take steps to implement safe food policies to minimize the risk that the food inspectors will cause problems.

Use caution when the risk is out of your control. Is there a way to bring the risk into your control, or take steps to alleviate it? For example, dairy cows may not do well in certain weather. The weather cannot be changed. The environment of the cows, however, can be changed by building a barn. For another example, consider the squirrel. The squirrel cannot control when the nuts will be ready on the tree, and when they will not be ready. When they are ready, however, the squirrel can minimize the risk of starving by storing up some walnuts for the winter.

For your business, what are the risks that you cannot control? What can you control to alleviate or lessen these risks?

Productive Foresight or Worry?

Proverbs explains that not only does the prudent man see the evil, but he does something about it. Entrepreneurs could put themselves to sleep reading about all the risks in business that are stalking through the land, or else they could keep themselves up at night worrying. Worrying does not help. A reason business owners should be considering the risks is to take action to hide themselves from the risk.

First, how can a business owner have foresight? Does that mean they can see into the future? No, business leaders do not need prophetic insight into the future. Careful study, however, can give them clues about the future. Reading good material, asking good questions, and associating with good people may give business owners insight into what might be coming, although they do not know exactly what the future holds. For example, a business owner may be able to learn from other owners that certain problems tend to arise, such as with the weather or taxes or some other area. If the business owner feels the risk is substantial enough, then they might take steps to mitigate the risk.

After identifying the risk, what can be done to mitigate and lessen the risk? The simple pass on and suffer, but the prudent take steps to avoid unnecessary suffering. The reason to identify and discuss risks is not to be a doomsayer but to find solutions. In meetings were risks are identified and talked about, do not forget to come up with an action plan to mitigate the risk.

Although a farmer does not know that the bull will charge next Monday, a farmer can realize that the bull might charge someday. Therefore, the farmer might avoid being in the pen, or make sure the bull has a ring in the nose, or he might implement some other feature to protect himself from the bull.

Do Your Part and then Trust

Even the prudent will not always avoid catastrophe. Surprise events, such as unexpected weather events, changes in a bull’s temperament, etc. can harm the prudent. For these unpredictable events, let them go and trust God.

For other events, the prudent can take steps to protect themselves even though they do not know all the danger that is out there. Read good literature related to your industry and talk with the wise people in your industry. Through diligent study the prudent can foresee possible problems and take steps to alleviate them.


This article is general in nature, and it does not contain legal advice. Contact your advisors to discuss your specific situation.

Update on PPP Relief Loan Forgiveness and COVID-19 Business Planning

Preface: Sometimes the best business counsel is right in front of us, and we are so very unaware. So that “they may indeed see but not perceive, and may indeed hear but not understand, lest they should turn and be forgiven.” Mark 4:12

Update on PPP Relief Loan Forgiveness and COVID-19 Business Planning

Credit: Donald J. Sauder, CPA | CVA

The small business relief measures with the Payroll Protection Program (PPP) loans are scheduled for the long-anticipated forgiveness approvals within the week. These outstanding loans for an extraordinary era as part of the 2020 CARES Act were designed to help with workers paycheck assurance, from a $669.0 Billion business loan program.

For businesses that participated in these stimulus measures, none have received forgiveness as of October 1st. With 96,000+ applications submitted for forgiveness since the initial filing seats opened on August 10th, borrowers began to look for guidance on the forgiveness process’s complexity. Some financial institutions are suggesting that PPP loan borrowers await further pending legislative changes to this forgiveness process. The possible revisions are automatic forgiveness on loans below certain thresholds of say $50,000 or $150,000 and simplified paperwork and documentation. Of note is Treasury Secretary Steven Mnuchin’s support for this automatic forgiveness feature, although final approvals are subject to further committee discussions.

Under the current laws, the Payroll Protection Loans principal will be either partially or fully forgiven if the borrower meets the forgiveness application’s stipulations. This includes expenditures of the loan proceeds, the extent of employees kept on payroll or rehired, and employee paychecks’ stability. Certain exemptions features are also applicable.

The application process, subject to future legislative revisions, provides two options on PPP loan forgiveness applications that can be submitted to lenders. The lender then has 60 days to obtain a decision on request payment from the SBA. The SBA then has 90 days to make the payment with interest after reviewing the loan terms and conditions on what ought was owed.

Each business participating in the PPP loan relief measures must keep documentation on the PPP loan for a minimum of six years after the forgiveness date or payment date of forgiveness, whichever is later, for purposes of future SBA and inspector general review.

A business may also not deduct expenses paid with the PPP loan proceeds from loan forgiveness for tax purposes, increasing taxable income with a quasi-reimbursement feature. Furthermore, current legislation does not permit double-dipping with PPP loans and other CARES Act tax provisions such as the employee retention credit. Therefore, businesses that participated in the PPP loan relief are limited to PPP loan benefits solely for Covid-19 relief measures.

All terms and conditions of current PPP loan forgiveness are subject to legislative changes. Revisions and businesses seeking forgiveness should consult with their tax advisor and banker before making any forgiveness decisions.

COVID-19 Business Planning

Resilience amid crisis and preparing for new uncertainties of the future will help bolster expectations for the journey ahead. Appropriate insights for short-term business decisions will lead towards the right longer-term successes of your endeavors, i.e., we should work to successfully navigate Q4 2020 before we plan to arrive at any destination in Q1 2021 or say Q4 2021. Is this a foothill, and there, more monumental economic surprises ahead?

Sometimes the best business counsel is right in front of us, and we are looking at it naively and unaware.

Sharing from experience on how this relevant, I was invited to a Sight and Sound performance at Lancaster Bible College, in January of this year.

It was a fantastic presentation on the Biblical Book of “Ruth,” and a production exemplifying God’s redemption of the lost and a testament of a Biblical account of God’s tremendous power. The point of mentioning this it characterized Elimelech’s pursuit of regaining “lifestyle” in Moab vs. a dedicated trust and faith in God’s ethical power and provision to meet his family’s needs “In the Fold” right where they were, in the Land of Promise.  

For those unfamiliar with the historical record, it is about a family living in Judah’s area. Elimelech, the father, with his wife, Naomi, and his two sons, Mahlon and Chilion, left the country in time of famine and moved to the foreign land of Moab . There Elimelech died, and his two sons married. Mahlon taking Ruth as his wife, and Chilion taking Orpah. Both women were Moabites. Then, both Mahlon and Chilion, likewise eventually died. Naomi received news that the famine in Judah had lifted, and decided prudently to travel back to the Promised Land. Ruth did not heed the words of dissuasion from Naomi, accompanied her mother-in-law to Bethlehem. The two women arrived in Bethlehem in early harvest season in a state of desperate poverty…and the story continues with nothing less than God’s miraculous redemption of the families lost estate. 

This story exemplifies a worst-case scenario of the COVID-19 ear, a financial famine, resulting in its significant decisions for sake of lifestyle, work, and family. Boaz, the successful redeeming kinsman, supposedly staying in Judah, didn’t perish during the famine, nor lose his estate.

Perhaps, Elimelech didn’t need to immerse his family in the Moabite culture to prevent his families complete devastation? Or maybe Elimelech was of the persuasion his perfect insight foresaw accurately the foothills leading towards more enormous mountains on the journey with famine in Judah and that his community was about to perish forsaken from living history, requiring immediate, necessary, and substantial departure actions on behalf of saving his families estate?

Keep in the Fold

We’ll conclude concisely with this summary. Whatsoever you envision as a “Keep in the Fold” business strategy will likely help you more successfully navigate the COVID-19 business climate with the short-term decisions leading to your endeavors’ desired longer-term successes.