Your favorite number on the balance sheet might just be Cash. It’s easy to understand and something every business has. But there is a more meaningful number, at least in the long-term sense, and that’s equity. Below, we’ll dive deeper into this part of the balance sheet.
The Equity Section
As a reminder, the balance sheet has three major sections: assets, liabilities, and equity. When it comes to equity, the accounts displayed depend on the type of entity of your business. Your business could be a sole proprietorship, a partnership, a corporation, or something else. In this article, we’ll focus on the example of equity in a corporation.
Every corporation should have at least three equity accounts:
This account should reflect the amount of stock issued by the corporation. The amount and price of each share are usually detailed in the Articles of Incorporation, which is the initial legal document of the corporation. For example, if the amount of shares the corporation can issue is 100,000, and they have a par value of $.01, then your stock account balance should be $1,000, which was paid in by cash by the corporation’s owner(s).
This account might also be named Capital Stock, Common Stock, or something similar. This account’s balance typically doesn’t change much over time for a small business. It’s only when new stock is purchased (issued), sold, retired or repurchased by the corporation that the account will see changes.
2. Additional Paid in Capital (APIC)
Additional Paid in Capital occurs when investors and business owners pay in more than the par value price of the stock. The balance represents the difference between what owners/investors paid into the company and the par value of the company stock.
3. Retained Earnings
Retained Earnings is where the action is and it is an important number to understand. It’s the accumulated earnings of the company less any dividends paid to shareholders over all time that the business has been in existence.
For a small business, retained earnings will change once a year at the end of the fiscal year when net profit (or loss) from the current year is rolled into the retained earnings account. At this time, all of the income and expense accounts are zeroed out to start over for the new year, and the balance (which is profit or loss) is added (or subtracted, in the case of loss) to retained earnings. Your accounting system automatically does this for you, and you can check it out by running a balance sheet as of the last day of your fiscal year, then running a balance sheet on the following day – the first day on the next fiscal year and comparing what changed.
You can reconcile retained earnings by adding up all of your profits and losses for each year you are in business. Then subtract any dividends paid throughout the years, and you should come out with your retained earnings balance. You can have a negative retained earnings balance.
The retained earnings number is a measure of the long-term value of the business. It also plays a large role in determining your basis, or investment, so to speak, in the company, which is used for tax purposes.
An S Corporation will have an additional fourth account in its Equity section.
Distributions represent the money that the S Corporation owner has taken out of the business. This money is over and above the salary that is paid to the owner. It must be tracked for tax purposes, which is why it has a separate account on the balance sheet. In simple terms, distributions are generally not taxable as long as the owner has enough basis to cover them. In this way, distributions are different from dividends that are issued in C Corporations, since they are taxable.
Last, if you run a balance sheet report in your accounting system on any date during the year, you may see an additional account:
5. Current Year Earnings
This is the sum of all of your income and expense accounts. It should be the same number as net profit or loss on your income statement from the beginning of the year to your balance sheet date. On a formal balance sheet for external purposes, this number is rolled into the retained earnings account.
The equity section can be the most difficult section to understand on the balance sheet. Hopefully, the explanation above will provide a bit more clarity as well as shine a light on the significance of the retained earnings balance.
Every business has competitors of some kind, and in most industries, it’s crucial to know what your competition is up to in order to ensure your own products sell. A great deal of information can be gleaned from researching your competition’s online presence, but there’s another tool you might consider adding to your marketing toolbox: a mystery shopper.
A mystery shopper is a trained observer with significant customer service experience who is hired to shop your competitors. Their sole purpose is to share information with you about their shopping experience. While most of this article will focus on the example of mystery shopping at brick-and-mortar retailers, the tactic can be useful beyond this specific industry from professional services to health care, real estate, restaurants, and beyond. You can also adapt the idea to industries such as construction and manufacturing.
Mystery shoppers provide value by helping you collect intel you can’t determine from an internet query, like the shopping experience, quality of products offered, or accessibility. This data will help you perform a Competitive Analysis – a report on who your competitors are and what they are doing, informing your business of where it can (or already does) stand out. A competitive analysis report should be part of your marketing plan, as it can help you optimally spend your marketing dollars.
Let’s say you own a fabric store and want to know what other stores in your area are doing. You can make a list of a few fabric retailers in the three zip codes around you, providing that list to your mystery shopper, who would visit each of the stores. You could also provide your mystery shopper with a list of questions or a checklist of what to observe and/or purchase. The mystery shopper will take detailed notes about their experiences at each retailer and report their findings back to you.
From your mystery shopper’s notes, you can determine a variety of things, like:
- how their storefront looks and what their curb appeal is.
- if it was easy or not to find parking.
- what their opening hours are and do they open on time? Is there a queue of shoppers waiting to get into the store? Are you required to schedule an appointment to use their services?
- Did employees provide a greeting when entering the business? How friendly or approachable are the employees?
- How does the store look? Is it crammed full of items or sparse?
- What kind of displays do they have and how attractive are they?
- Is their inventory broad, deep, or both? What type of items and brands do they carry compared to your store? Are there brands, items, or product lines your company should be carrying?
- Were there a lot of customers in the store? How long were the checkout lines?
- How clean is the store? Do you feel comfortable with the level of cleanliness?
- Taking a sample of items and comparing pricing, how does your company’s selection stack up?
- What was the purchase experience like? Were you offered an upsell or a coupon? What does the checkout area look like? Were customers offered a bag for their items?
- What was it like to return an item? How strict is the return policy, and was the service friendly or hesitant?
- For service providers, does their waiting area look inviting and professional? What do their service areas look like?
- Was there any follow-up, such as an email promotion or thank-you note?
Once you have compiled the information on your competitors, you can look for ideas to improve your business that align with your brand and culture. These improvements are often in the area of customer service, but can also include adding inventory, updating hours and availability, adding store features or sales events, and more. You may even be able to find ideas to implement at a lower cost than your competitors, giving you an edge on profits.
Now, where can you find a mystery shopper? You can hire individuals or a company that specializes in providing this service. While many business owners might consider asking a friend to mystery shop in an effort to save money, a friend might not be able to articulate their experience with the detail you need, or they could fail to observe important aspects of the shopping experience.
So, consider recruiting a professional for the job. You’ll need a budget to pay the shopper(s) for their time, plus funds to make any purchases on your behalf. But hiring a mystery shopper can be well worth the investment, as it provides valuable access to your competition.
Whether we’re headed for a recession or not, it’s always a good time to squeak out more profits from your business books. We’re not talking about drastically slashing expenses or spending a lot to raise revenue; the tips in this article are long-term ideas to lift up your profits gently.
Timing on Capital Purchases
The timing of asset purchases, such as equipment, a truck, or even a PC, can be tricky. Understanding the best timing for asset purchases and replacements can make a difference in your profits.
When purchasing a new asset, gain a good understanding of the return on investment so that you’re prepared from a cash flow standpoint. With more complex businesses, it’s a good idea to hire an accountant who knows your industry and has capital expenditure experience.
When replacing an asset, it should be timed so that the asset is replaced before you have to begin spending a lot on repairs, but not so soon that you maximize your use of the current asset.
Rent and Utility Contracts
When rent and utility contracts come up for renewal, it’s time to negotiate. If your landlord hasn’t fixed something, you can at least use this as an opportunity to have the discussion and hopefully accelerate the repairs.
For certain utility contracts, like internet and phone, the price will often increase when your contract runs out. However, it can also be the best time to ask for a better deal, or even a new customer deal. The adage “it’s always easier to keep a customer than find a new one,” can apply to new carriers, too. Communications companies are constantly creating new deals and packages, so try to jump into one of those to keep your costs from going up.
Profit in Leftovers
What assets do you have that aren’t working for you? Put them to work!
Here are some examples:
- Cash – make sure your excess cash is safely invested or at least in an interest-bearing checking or savings account.
- Extra space – rent out space that you are not using or only using some days. This solution can have many different looks to it beyond the monthly renter. As an example, virtual workers looking for a conference room for a day could be a money-maker for you.
- Manufacturing firms can sell the scrap from their assembly lines as well as their obsolete inventory.
- Excess construction materials can be sold, donated, stored for the next job, used on a new small project, or used as firewood.
- If the inventory on your shelf needs to be dusted, you’ve had it too long. Find a way to move it now, and replace it with something that sells faster.
If employees are wasting time, they are wasting money–yours, to be exact. There are three good solutions:
- Offer training – perhaps they haven’t been shown what to do correctly or how to do it efficiently. Or maybe they need to break bad habits.
- Re-energize employees with incentives, new benefits, or motivational training and events.
- Redesign your processes and automation, then retrain – it could be your workflow needs revamping to make it more efficient. For accounting processes, New Business Directions can help with this!
If these options don’t work, it may be time to face the reality that your employee could be a bad fit. You know what you have to do in that case.
Stop the Subscriptions
Those recurring monthly charges just keep adding up. The average small business uses dozens of apps, meaning they also likely have dozens of $20 to $50 automatic monthly charges going on a credit card somewhere in your business. This includes magazines, memberships, dues, conferences, newsletters, gadgets, and software.
If you’re making a lot of money, you may have trouble finding the time to research what subscriptions you really need versus what you don’t. But in the long run, you will retain more revenue sooner if you sit down and examine this area of spending. Stop the $20 to $50 madness by reassessing what subscriptions you really need and then either opting for the annual subscription discount or canceling the apps that aren’t essential.
ClickUp™ is a versatile new web application that functions primarily as a project management tool, and serves multiple other functions for small businesses and is adaptable across several industries.
ClickUp’s goal for its users is to save time and reduce redundancy by tying everything together in one app. Its integrations, which are called ClickApps, are truly its strength. The 1,000+ integrations set ClickUp apart from other offerings, and for this reason, ClickUp excels at automating processes that use multiple apps, including hard-to-automate processes like customer onboarding.
Some of the functions people use ClickUp for include reminders, goals, whiteboards, templates, calendars, document flow, task management, dashboards, marketing processes, and team collaboration and communication.
One feature frequently mentioned is the ability to create custom views exactly the way you want them. Views provide a summary of your work and come in many flavors. You can create task views, list views, boards, calendars, Gantt views, workload views, and box views.
If ClickUp has any weakness, it could be the fact that it’s a blank slate. Because the platform is so versatile, it can be used across many different industries. However, users should really spend some time considering their hierarchy of workspaces, folders, and list. You may need to be somewhat tech-savvy to get everything set up. The learning curve can be intimidating, but once you get through it, there is so much power in having everything customized and on one platform.
ClickUp does have a following of power users, and a certification of sorts is offered. Becoming ClickUp Verified means that you’ve earned expertise in the product. If the learning curve is too much for you or your team members, you can hire one of these ClickUp consultants to do the setup for you, or head to YouTube for comprehensive tutorials.
As of this writing, ClickUp hosts 4,000,000 users, including those using the free version available for personal use. Monthly pricing for business users ranges from $5 to $19 per user, depending on the features you need. Enterprise options are also available.
ClickUp was founded in 2017, is headquartered in San Diego, CA, and has raised three rounds of funding as of this writing. New Business Directions recently implemented ClickUp within our own company, so if you’d like to learn more about why we chose this software, send us an email or learn more at clickup.com.
Entrepreneurs often excel at running their day-to-day businesses and swiftly meeting their customers’ needs. But often, those same business owners who are great at meeting their clients’ needs have a hard time meeting internal deadlines and achieving long-term goals, despite their best intentions. Enter: self-accountability, or the act of maintaining commitments you make to yourself and accepting responsibility for the outcomes of your actions. It’s the difference between getting something done and a wistful, “I’ll get to that next week” mindset.
This article will outline a few ways you can stretch your self-accountability muscle.
Setting Goals and Deadlines
We all have projects we’d like to work on but haven’t gotten around to for various reasons. The issue could be that your goal isn’t SMART (Specific, Measurable, Achievable, Relevant, and Time-bound) enough, causing uncertainty about how to start. Eliminating ambiguity around your goals can often unveil the path to achieving them.
Once your goal is SMART, start by making a timeline of tasks and milestones that you would like to be held accountable for, marking your calendar for each milestone and the project’s end date. By displaying your list of milestone dates prominently, you might find that carving out time to work toward them becomes a more practical and intentional process.
Connect with Your Purpose
Take some time to analyze why completing a project is important to you. How would completing it connect with your business purpose, mission, vision, and values? Document your “why” and display it prominently next to your milestone list to help you stay focused.
State Your Goals Publicly
Communicate your goals publicly with peers, friends, or co-workers. For many entrepreneurs, this is when their commitment to achieving their goals feels real. “There’s no turning back now,” you might find yourself thinking.
It’s a big step to put yourself out there, and as we’ve mentioned, many entrepreneurs find it easier to be accountable to others than to themselves. If this is something you experience, announcing your commitment can be a great way to establish self-accountability. By making your intentions public, you’re taking responsibility for the results of your actions (or inactions). It may feel scary to do so, but it works!
Consider an Accountability Partner
Some people do very well by partnering with a peer or trusted business person. This could be a mentor, a paid coach, an advisory board, a mastermind group of people, a nonprofit group, a co-working group, a peer, a vendor, an incubator, or an investor. While a friend might seem like the best place to start, consider going further outside your comfort zone.
Tell your accountability partner to push you and to be candid. They may need your explicit permission if it’s an informal arrangement. Set regular meetings to help you maintain your progress and report on your milestones. Allow your partner to point out mistakes or opportunities for improvement, and acknowledge them yourself. Make course corrections as soon as they’re necessary and use your partner as a sounding board.
Remember, this process won’t work if you aren’t honest with both yourself and your partner. Notice when you’re procrastinating and dig deep to discover why. Often, it can be a lack of resources or time, but this cause is usually coupled with a mindset issue, like uncertainty about where to start or a fear of failure that needs to be illuminated.
Celebrate every milestone you achieve, big and small. Reward yourself appropriately! Even if a project seems small, if it’s one you’ve put off for months or even years, completing it is worth celebrating, and you shouldn’t feel ashamed of the time it took you to reach completion. A celebratory mindset reinforces positive behavior and creates enthusiasm and momentum.
Self-accountability makes the functions of your business run better, plain simple. You can apply these ideas to projects, entire departments, and even your personal life goals.
Accountability can make a tremendous difference in achieving the success you want, so try out one of the approaches we outlined above, and know that we’re cheering you on every step of the way.
Securing a business loan can be an exciting step in the growth of your business. But did you know that loans typically require a specific process to be properly recorded in your accounting system? Not to worry; your loan statement will provide the information needed by your accountant to get the loan booked properly.
To start, you’ll need to locate the following pieces of information about your loan:
- Total amount borrowed
- Date of loan
- Date of the first payment
- Payment amount
- Term of loan
- Number of payments
- Interest rate
The full amount of your loan should be recorded as a liability on your business’s balance sheet. The offset is either an increase to cash or the recording of new assets like a car, truck, or building.
Each payment you make contains two components: interest and principal. Interest is an expense and is recorded in the Other Expenses section of your profit and loss statement. It will reduce your profit. Principal is the amount you pay toward paying off the loan. It reduces the liability account where the loan is recorded. While Principal does not affect your profit, it does improve your liquidity with each payment you make.
The interest and principal amounts won’t be the same for each payment. Earlier loan payments consist of higher interest and lower principal amounts. As you reach the end of paying off your loan, the interest portion becomes smaller and the principal larger. An amortization schedule shows you the exact amount of interest and principal for each payment. You or your accountant can create a loan amortization schedule in Excel.
Each time you make a payment, cash is reduced for the entire payment amount. The offset is split between interest expense and your loan liability, using the amounts in the amortization schedule. When you code your loan payment, you can use the amortization schedule to get the correct amounts for both of those accounts.
In a simple service business with no assets except cash, your cash balance can mimic your profit level. However, when you introduce loans and new, non-cash assets with depreciation expenses, that won’t be the case. You might wonder why you have no cash and more profits, or vice versa. This is why it’s a good idea to understand how these transactions affect your Balance Sheet and Income Statement as well as your business’s overall financial health.
At year-end, your accountant can make correcting entries if needed between the loan balance and interest expense.
If you failed to make payments or made them late, your accountant can make those allocations as well using manual journal entries.
Often, when you get a loan, you’re also acquiring some type of asset, such as a car or land and building. This asset should be recorded on your books correctly as well. You should have some type of closing statement or purchase contract that has the details for your accountant. Your Accountant will also compute and record the correct amount of depreciation for the asset type.
Your accountant can speak with you in more detail about your specific situation and better explain the interplay between cash and profits. We use the Statement of Cash Flows to reconcile profits to cash. Want to learn more about that financial report? Reach out to New Business Directions.
Incidents of cybercrime have been problematic for a long time, but since the onset of the pandemic, we’ve seen these incidents increase not only in frequency but in elaboration, too. Unfortunately, phishers and hackers have become more adept at successfully targeting small and midsize businesses with their efforts.
Previously, we’ve addressed how you can improve the security of your online accounts. However, if your organization’s reputation depends on maintaining the security and privacy of customer records, then this insurance is a must. In today’s climate, it’s no longer a matter of “if” but “when” your private business information could be breached, and to what extent. However, with the right precautions in place, you could reduce–and possibly even eliminate–such risk.
Finding the Right Insurance
The best place to start is your current insurance agent or a general insurance broker that you trust. Cybercrime policies are separate policies that cover specific acts, and you will need to read the policy carefully to determine exactly what you are protected from. You should also distinguish between personal and business policies; you may want both.
In a business policy, some of the items you’ll want to consider protection against include:
- Data breach
- Ransomware attack
- Spoofing and identity theft
- Wire fraud
- Civil fines
- Costs of notification, reputation repair, forensics and data restoration, credit monitoring, and other potential damages
A good policy will cover some or all of these costs:
- Business interruption costs
- Data breach costs
- Extortion costs
- Crisis management and public relations costs
- Data recovery costs
- Computer replacement costs
- The cost of reputational harm
Like any other insurance, you will need to complete an application to obtain a quote. Some of the standard questions you’ll be required to answer include:
- Type of products and services sold in the business
- Type of electronic data stored on your computer systems
- Whether laptops are password-protected
- Whether you have written network security and privacy policies in place
- Whether you have physical security procedures in place
- Whether you have the most current software and processes to keep it upgraded
- Whether you have backups
- Whether you monitor unauthorized attempts to access systems
- Whether you are in compliance with PCI DSS (Payment Card Industry Data Security Standard), HIPAA (Health Insurance Portability & Accountability Act), and GLBA (Gramm-Leach-Bliley Act)
- Whether you have a written document retention and destruction plan in place
- Whether you have encryption enabled
- Whether third parties are involved in data handling
- Whether you have a process to check copyrights of materials you use
- Whether you have a risk management education program for employees
- Your current insurance policies
- Whether you’ve had a breach in recent years
- Whether you’ve had any lawsuits or claims in this area
- Whether you use a firewall
- Whether you use anti-virus protection
- Whether you have an employee/third party off-boarding process that terminates access to computers and data
As you can see, the application process itself is an excellent way to “cross your Ts and dot your Is” when it comes to putting safeguards in place for your business. And, of course, your premium will likely be less expensive when you have these precautions and systems in place. It goes without saying that your premium will be less expensive if you get insurance before you are attacked so that you have a clean application.
A key aspect of owning a business is managing enterprise risk effectively. A cybercrime policy will go a long way toward protecting your hard-earned investment and offer you peace of mind, knowing that your business is protected.
There’s more to being financially resilient than simply saving enough money for a rainy day. One aspect of being financially responsible is maintaining good financial records – and making sure the people who will need access to your records, like family members or key business partners, know where to find them if something happens to you. Here are some ideas for your consideration.
Systems and lists
You’re probably managing your accounting through a digital platform like QuickBooks, but what about other tools that supplement your needs? Do you have a chart of your accounting tech stack and ecosystem? What about Excel worksheets that supplement your use of QuickBooks? Is it clear where these can all be accessed? Do your loved ones know how to find these items if something happens to you?
Now that so many things are digitized, it’s not as easy for others to access the intel required to run your business in your absence. Digitization is a critical advancement in business management, but it does make things a bit trickier for your representatives to step in. For example, your financial records might be in a dozen different places on your computer or the cloud. Being organized and planning for a smooth financial future for your loved ones means making a list of instructions on how to access all of your financially-related digital assets. Keep in mind, this information is highly sensitive and should not be shared until it’s absolutely necessary.
Your list might include:
- Contact information for your accountant, who will likely have access to your cloud-based accounting software.
- A list of banks you do business with.
- A list of credit cards that need to be paid monthly.
- List of government-related accounts, such as social security and IRS.gov.
- List of regular monthly bills, such as utility, credit cards, and rent, plus their associated email accounts.
- Details of regular monthly income received.
- Where to find financial files on your computer or cloud, such as tax returns, bank statements, and real estate closing documents.
A password management system like LastPass can help you share sensitive and critical data securely and even at a moment’s notice. We can’t stress enough how important it is to keep this information private and secure, and under no circumstance do we recommend sharing this information before it’s necessary.
If your computer crashes, will you be able to recover your financial files? Taking periodic backups will prevent a loss of records. In the IT world, there’s a common saying that “two is one and one is none.” This means that if you only have one backup file and it fails, you’re left with nothing. Having two backup systems ensures that the data is still preserved even in the event of one failure.
What to keep in case of an audit
You hope it will never happen, but if it does, are you prepared for an audit with the IRS or a state agency? Do you know what records to keep and for how many years?
Having good documentation, sharing financial knowledge and goals with the right people, and making a backup plan will boost your financial confidence. You will be more prepared than most households when it comes to financial safety.
How financially resilient do you feel? Take into consideration the above ideas to help you stay one step ahead.
The past few years have seen significant kinks in the supply chain due to several reasons: inconsistent buyer behavior, source material scarcity, government shutdowns, and worker shortages, to name a few. What can a business owner do to protect their businesses from shortages that result in revenue loss? Let’s take a look at a few ideas.
Source New Suppliers
Being dependent upon only one supplier for a critical item is risky. Increase your options by finding new suppliers to use as backups or alternates whenever you can. While it’s admirable to buy local, it’s not always possible. Expanding your network will provide you with a lot more flexibility, even if you have to pay a bit extra at times.
Understand Your Timeline
How accurate is your prediction of lead time? Are you providing enough time for ordering and delivery before you need the part in-house? Timelines have changed a lot in the last year. Spend some time reviewing and recalculating lead time if you need to.
Get skilled at forecasting so that you can anticipate and prevent inventory shortages before they occur. We can help you set up spreadsheets and generate dashboard reports so you’ll have better information for decision-making in this area of your business.
The more dependent your business is on a particular supplier, the more you want to develop that relationship. Adding that personal touch might not help you get your orders faster, but when troubleshooting is needed, you’ll enjoy the extra help that a personal relationship can provide.
Increase Communication and Collaboration
Increase communication with your suppliers so they can manage their own timelines and supply chains. Provide them with accurate forecasts and let them know how they can better meet your present and future needs. Remember, it’s within their best interests to serve you as best they can, too.
Audit Inventory Records Frequently
If your inventory balances are only adjusted once a year, inaccurate inventory numbers will likely cause problems. Instead, find ways to take inventory more often or, at the very least, increase the accuracy of inventory balances. The savings will be worth it; you’ll have fewer unexpected out-of-stock or back-order situations that could cost not only a loss in sales but customer loyalty.
Proactively Manage Shipping
There may be times when paying rush charges on shipping is justified. Actively managing shipping and in-transit items will help you keep a handle on this. When possible, line up alternate shipping methods in the event that one method becomes unreliable. Alternate shipping methods are especially advised with overseas shipments where more can go wrong.
Create a Supply Chain Task Force
If supply chain issues are critical in your business and have cost you profits in the past, it might be time to create a dedicated team to manage and prevent crises. Consider putting together a group of employees who can be responsible for strengthening your supply chain.
Try these ideas to smooth out supply chain woes in your business.
Most large businesses have developed mission, vision, and values statements to help guide them and inform stakeholders about the company’s strategic direction. Going through this strategic exercise is a wonderful idea for even the smallest business as well.
A company’s mission statement lists its core purpose and desired impact for employees, customers, owners, and other stakeholders. A vision statement defines what the company wants to be. A values statement describes what the company stands for.
It’s a perfect activity for business owners to answer and remember why they built the business in the first place. It also serves to correct and re-align the trajectory of the business.
Start by asking what impact you want your business to have on the outside world. Here are some mission statement examples that are frequently quoted:
- Harley-Davidson: More than building machines, we stand for the timeless pursuit of adventure. Freedom for the soul.
- Disney: The mission of The Walt Disney Company is to entertain, inform and inspire people around the globe through the power of unparalleled storytelling, reflecting the iconic brands, creative minds and innovative technologies that make ours the world’s premier entertainment company.
- Nike: Nike exists to bring inspiration and innovation to every athlete* in the world. Our purpose is to move the world forward through the power of sport – breaking barriers and building community to change the game for all. *If you have a body, you are an athlete.
Notice how each one is short and simple to understand. They focus more on the big-picture benefits they bring to customers and less on how they will get there.
To write your own mission statement, ask yourself what your business’s purpose is and how you will impact your customers’ lives with your products and services.
A vision statement is big, bold, and futuristic. What do you want your company to be?
Here are a few examples:
- Harley-Davidson: Building our legend and leading our industry through innovation, evolution, and emotion
- Deloitte: We aspire to be the Standard of Excellence, the first choice of the most sought-after clients and talent.
- Amazon: Amazon strives to be Earth’s most customer-centric company, Earth’s best employer, and Earth’s safest place to work.
What do you want your company to become? That’s your vision statement.
Values statements are typically a set of adjectives or statements that answer what the company stands for. They can be in the form of leadership principles, core values, or a similar format. These days, they often include values on environmental, social, climate, global, human rights, diversity and inclusion, sustainability, and many other current issues. They can take the form of additional strategic statements on each one of these issues.
Sample values statements can be found in the company’s annual report as well as the About or Company section of their website.
Here are some examples:
- Harley-Davidson Principles:
- Communication – Communicate with purpose, structure, facts and inspiration
- Agility – Accelerate, innovate and thrive in a rapidly changing environment
- Impact – Focus on impact, not process, and be outcome driven
- Simplicity – Pursue the simplest path to achieve each outcome
- Speed – Don’t let perfection get in the way of process and pace
- Culture – Be fair, honest, positive and creative. Strive to win and have fun.
- Courage -Take risks and go against the norm
- Judgment -Think strategically and make informed decisions
- Focus – Focus on a short list of meaningful opportunities that build desirability
- Lean – Maximize impact with limited resources
- Coca-Cola Behaviors We Focus on:
- Merck Values:
- Patients first
- Respect for people
- Ethics and integrity
- Innovation and scientific excellence
Your mission, vision, and values statements will help you communicate the qualities of your business. It can help in hiring to see if a candidate’s individual values align with the core corporate values, and with customer acquisition when prospects see what your company is about. It can also help you remember your roots and why you work so hard every day.
We’d love to hear from you when you write up your mission, vision, and values statements.