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10 Warning Signs of Workers' Compensation Fraud

Posted: 31 May 2019 12:19 PM PDT

Workers' compensation insurance is a vital (and, for 49 states, mandatory) part of any business and, like any requirement, has individuals frequently trying to find ways around the conditions to cheat the system.

Workers' comp fraud costs American employers, workers, consumers and shareholders around $7.2 billion each year, according to the National Insurance Crime Bureau. Almost anyone involved in the system can commit fraud; thus, employees and businesses alike are liable to fall victim to workers' compensation fraud. [Related: What your small business should know about workers' comp]

There are, however, many ways to prevent it. Read on to find out what red flags insurance experts look out for, how to prevent workers' compensation fraud and what to do if it happens to you.

Editor's note: Need a workers' comp insurance policy for your business? Fill out the below questionnaire to have our vendor partners contact you with free information.

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Types of workers' compensation fraud

There are two types of workers' compensation fraud: premium fraud, which is when a business attempts to misrepresent its workers' comp coverage to lower its insurance costs; and claimant, or employee, fraud, when an employee falsely claims to have suffered a work-related injury to gain workers' comp benefits.

The Leavitt Group identified four main categories of employee fraud:

  • False claims: The injury did not occur or was staged to allow the worker to collect benefits.
  • Exaggerated claims: The injury did occur, but the employee overstated the severity to get more benefits.
  • Off-the-job injuries: The employee was injured elsewhere, but claims the injury occurred at the job site to collect benefits.
  • Collecting benefits while working: The employee "double dips" by working another job while collecting benefits for a job-related injury. This is one of the most common types of employee fraud.

It is important to note that any employees who encourage or cover up for another employee committing fraudulent activities are complicit and also committing fraud.

Fraud can hurt your business from top to bottom. "Not only is workers' compensation fraud illegal, it can strain operations as well as lead to higher insurance-related costs for honest businesses," said Ranney Pageler, vice president of the fraud investigations department for business insurance carrier Employers. "It ultimately hurts honest workers by undermining the perceived validity of all claims."

What to look out for

Workers' compensation fraud can often be difficult to identify due to its nature of covering injury and illness. The network of fraudulent participants can also be dishearteningly wide: Dr. Carole Lieberman, a forensic psychiatrist and expert witness, said there are "workers' comp doctor mills" where doctors are paid to find things wrong with employees, as well as "cappers" that target low-paid workers and persuade them to make fraudulent workers' comp claims on behalf of medical or legal service providers.

Pageler listed the following 10 red flags for claimant fraud. If an employee's workers' compensation claim fits one or more of these scenarios, it may be time to launch an investigation.

  1. Monday morning injury reports: The alleged injury occurs first thing on Monday morning, or it occurs late on Friday afternoon but is not reported until Monday.  
  2. Employment change: The reported accident occurs immediately before or after a strike, job termination, layoff, end of a big project or the conclusion of seasonal work.  
  3. Suspicious providers: An employee's medical providers or legal consultants have a history of handling suspicious claims, or the same doctors and lawyers are used by groups of claimants.  
  4. No witnesses: There are no witnesses to the accident and the employee's own description does not logically support the cause of the injury.  
  5. Conflicting descriptions: The employee's description of the accident conflicts with the medical history or injury report.  
  6. History of claims: The claimant has a history of suspicious or litigated claims.  
  7. Treatment refused: The claimant refuses a diagnostic procedure to confirm the nature or extent of an injury.  
  8. Late reporting: The employee delays reporting the claim without a reasonable explanation.  
  9. Claimant hard to reach: The allegedly disabled claimant is hard to reach at home and does not respond promptly to messages.  
  10. Frequent information changes: The claimant has a history of changing physicians, addresses or jobs.

How to prevent workers' comp fraud

Along with being aware of red flags, there are many things you can do to actively prevent fraud in your workplace – and avoid raising the costs of running your business by having fraud raise your premiums.

1. Screen applicants.

Start by carefully screening all job applicants before hiring them. Common predictors include criminal backgrounds and a history of frequent, suspicious injury claims.

2. Listen to your employees.

"The best way for businesses to prevent fraud is by giving workers regular opportunities to express their grievances," said Lieberman, "and trying to keep happy employees who want to work."

A consistently disgruntled workforce is going to take action one way or another, and you want to avoid that action being one that will harm your business. Allow your employees to share their thoughts and then act on their requests, showing that you hear them and respect their wishes.

3. Have detailed procedures.

In the event that something does happen to an employee, make sure you have detailed procedures in place that are followed consistently for every incident that takes place. Ensure there is ample documentation – interview the injured or ill employee and anyone who witnessed the incident, and get written statements.

4. Stay in contact.

After an employee is injured or becomes ill, be sure to stay in regular contact. This will help the employee feel valued and missed and discourage fraud because they'll feel that you are paying attention. When the employee does return to work, you should have a modified duty plan in place to reduce medical costs.

5. Communicate.

Make sure all your employees are well aware of their benefits under their workers' compensation coverage, as well as what constitutes fraud and the consequences – for them and the business – of committing fraud. Emphasize the fact that fraud hurts the entire business. It should be easy and confidential for an employee to notify management of fraud. Make sure there is a process that all employees are aware of and follow it in the event that someone does report.

What to do if you suspect fraud

The first thing you do should be to make sure you have a good reason for reporting. Accusing someone of lying about an injury or illness can land you in hot water, so you'll want to have thorough reasoning and/or evidence behind you.

Then you will report the case to your state. State regulations will vary, so be as detailed as possible in your report. Be sure to include a statement of what happened, written statements from the injured employee and any witnesses, why you believe fraud is being committed, and any other information you deem helpful.

After you file the report, there shouldn't be anything more you need to do. The state will investigate and determine if fraud is being committed and apply penalties.

Additional reporting by Nicole Fallon. Some source interviews were conducted for a previous version of this article.

5 Money-Saving Strategies for Small Businesses

Posted: 31 May 2019 10:00 AM PDT

Reducing your expenses does not take much time or require much effort. Here are five simple ways to make your small business financially more flexible.

1. Make more environmentally friendly decisions.

Going green is a great way to reduce costs, and it's helpful for the environment. Consider making these small changes to your office:

  • Switch halogen or regular lights to LEDs. LED bulbs reduce your consumption of electricity and give off better lighting. Where possible, use motion sensor lights to reduce your use of electricity.
  • At first glance, it may not seem like you spend a lot of money on paper, but if you have stationery, the costs of it, along with ink, toner, etc., can add up to be a lot. Ask employees to use e-mail whenever possible. Some people still believe that documents, such as contracts, need to be printed, signed and exchanged. However, most contracts can be digitally signed and shared via e-mail, which can reduce your long-term paper and printing costs.
  • Shutting down computers at the end of the day will save on your electrical bill. Ask employees to shut their computers down and to use a timer, or standby mode, on their computers. 

2. Be flexible in hiring employees.

With changes in technology and in the workforce, hiring independent freelancers brings many benefits to small businesses.  This can help you in several ways:

  • You can adjust your staff up or down as needed depending on your business's current workload. Further, you can quickly outsource – and find – the specific skills you need without needing to hire a long-term, full-time employee.
  • You can provide flexible working conditions that help you locate the talent you need and that also accommodates the freelancer's schedule. This flexibility can help you retain these experts for a lengthy period of time.
  • Because you're not having to provide office space and resources for in-office workers, you can reduce the office space you need and the office equipment you use.

In a volatile economic environment, the use of freelance and temporary employees can be a valuable and money-saving advantage as SMBs can rely on skilled temporary staff to quickly complete tasks without excessive financial commitment in the long term.

3. Automate your operation.

Technology allows us to save money and manage our business in smart ways that were not possible five years ago. There are online payments, open source software, applications and many other ways you can reduce project costs using technology.

Payroll software, for example, can perform all the functions – and more – of a payroll administrator. Payroll software helps you calculate staff salaries, it can pay employees a number of ways, and it helps ensure that your business complies with all federal and state tax regulations.

Editor's note: Looking for the right payroll service for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

 

In the era of Google Voice Assistant, Alexa, Siri and Cortana, it is possible to utilize these aids to your benefit. For example, long documents can now be dictated using voice commands.

4. Using a common working environment. 

Rent is often one of the biggest overhead expenses for small and medium businesses. You can eliminate this cost by moving to a shared work environment like WeWork, Work.Life or The Office Group.

Alternatively, companies can collaborate with each other to rent out office space that accommodates multiple businesses under one roof, which, in turn, makes rental costs more affordable for everyone.

5. Compare prices and quality before you buy. 

You can cut your monthly expenses by shopping online stores and comparing the prices – and quality – of items before buying. Price comparison sites can help you reduce costs.

Don't forget to search out better prices from suppliers. An e-mail request sent to a few competing companies can save a lot of money. Even if you want to stay with your current provider, getting a better offer from a competitor can result in a better, renegotiated price from your existing vendor.

Finally, the amount of money you save by making timely payments on outstanding loans should not be overlooked. Set up an automatic deduction from your bank account, either weekly, semimonthly or monthly. By making regular payments or even getting ahead on your payments, you'll save thousands of dollars in interest while also increasing your credit score.

5 Storytelling Tips for B2B Content Marketers

Posted: 31 May 2019 09:00 AM PDT

When marketing to other businesses, companies often forget that their target buyers are human beings who typically base their decisions on their emotions. Furthermore, 50% of B2B buyers are more likely to purchase from a brand if they can connect emotionally with them.

Storytelling is a powerful strategy that can help businesses create content that appeals to buyers' emotions. Here are five tips content marketers can use to tell their brand's story.

1. Show, don't tell

The concept of "show, don't tell" uses visuals, actions and emotions to convey a story. A vivid picture or video is far more compelling than a basic description and allows audiences to experience the content more fully. Companies can say their solution will help a business, but potential customers need to see it before they believe it.

Businesses can bring their product or service to life with specific client stories and examples and show audiences why they need their solution. Google's Adword Stories, for example, is a video series that highlights small businesses in order to convey the significant impact of using Adwords. In a short video, Google tells the inspiring story of how a small deli scaled to a $14 million national mail-order business with the help of its web advertising service. Using a compelling narrative from the co-founder, behind-the-scenes employee shots, and customer testimonials, Google illustrates the restaurant's rise to success and makes its customer the hero of the story.

Additionally, providing a revenue number further supports your company's service. Every business cares about how a product or service can impact their bottom line. Providing factual information, such as revenue numbers, statistics and data, gives audiences something to hold onto after they've interacted with your content.

2. Look for stories within the company

Getting employees to tell a brand's story humanizes a company. Employee-curated stories also allow businesses to showcase their company culture while increasing employee engagement.

Microsoft, for example, established the importance of brand storytelling by hiring a chief storyteller and developing Microsoft's Story Labs in 2010. This role is responsible for extracting and curating stories from all areas of the company. From audio creative directors to video game developers, Microsoft's Story Labs highlights employees across all departments.

People like to do business with other people. In-depth profiles feature the unique individuals behind a massive corporation such as Microsoft. Allowing employees to tell a brand's story creates transparency and authenticity while bringing team members together.

Editor's note: Looking for the right email marketing service for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

 

3. Let customers tell the story

Rather than recruit storytellers from within the company, businesses can allow customers to tell their story for them. Similar to a case study, companies can ask top customers to discuss their success with the company's product or service. Success stories are compelling – so much so that 90% of buyers who read positive customer success content claim it influenced their purchasing decision.

Salesforce, for instance, features customer success stories with its Trailblazer Spotlight. The technology company not only features businesses that have had success with its product, but it spotlights individual customers through interviews and fun facts. This type of brand storytelling allows audiences to see a company's impact on a business level as well as a more personal, individual level.

Kickstarter is another example of a company that makes its users' stories their own. Behind every project, there's an inspiring customer success story that the crowdfunding platform has helped to create.

4. Use visuals to add interest

Businesses, especially those that are more technically focused, can use visuals to keep their audience interested. Companies can share a screenshot of a product interface when discussing a solution, or they can add in a chart when citing a study. These types of visuals provide audiences with more detail and context, helping them understand a company's story better.

For instance, General Electric posts stunning photos and videos on their Instagram profile that show how complex projects have an impact on everyday life. Combining fascinating imagery with detailed captions, GE balances showing and telling to make even the most technical topics more relatable.

Visual storytelling is an excellent way for companies to share their stories and connect with other businesses.

5. Provide opportunities for engagement

Customers should be the focal point of every story. It's essential that companies consider how they can align their content with their customers' goals and objectives. Great B2B storytelling does not lead with a sales pitch. Companies should give their audience a reason to engage and connect with them.

For example, Intel partnered with Toshiba to create a series of short videos called The Beauty Inside. The interactive film made technology more relatable and gave the audience a chance to play a leading role in the story. The video was a hit, receiving more than 70 million views and winning an Emmy award.

Companies should look for ways to involve the audience in their storytelling when possible to increase engagement.

B2B content marketing done right

There are many ways businesses can use storytelling in their B2B content marketing efforts. When done right, storytelling differentiates a company's content, positions the brand as an industry leader and appeals to emotions. Well-done storytelling can help businesses differentiate themselves as the content landscape becomes increasingly competitive.

How Sleep is Essential to Work and Productivity

Posted: 31 May 2019 09:00 AM PDT

  • Sleep is a critical part of health and productivity that is important to learning, focus and emotional stability.
  • Roughly 1/3 of Americans do not get enough sleep.
  • Sleep deprivation is a productivity killer that costs the U.S. economy $63.2 billion each year.
  • Establishing a healthier sleep pattern can make you a better worker and happier person.

In a society based around work and productivity, it's not uncommon that sleep is the first thing to suffer. It often doesn't seem like there are enough hours in the day, so what's wrong with shaving a few off of your nightly sleep? As it turns out, sacrificing sleep could also mean sacrificing productivity and, in the long run, your mental and physical health.

Sleep is an essential part of wellness, and if you've been missing out on a few hours a night just to get more work done (or enjoy more of the day when you've finished working hard), you could be putting yourself at risk and diminishing the quality of your work. To be the best you can be, you must rest. Unfortunately, in today's fast-paced culture, that can be easier said than done.

The basics of sleeping

We all sleep, but how much do we really know about it? It's a daily activity for most but is often taken for granted in a big way.

"Sleep is an especially important and often underutilized component of brain functioning," said Lin Anderson, a psychotherapist at Family Addiction Specialist. "Adequate sleep will result in working more efficiently and effectively and subsequently being more productive and saving time in the long run."

Healthy sleep is composed of three components: quantity, quality and regularity. Each works in tandem to ensure your brain and body are well rested and prepared to operate at an optimal level.

  • Quantity: The amount of sleep you get is important. Some people need more sleep, and others need less, but fewer than 7 hours of sleep a night puts most people at risk of becoming sleep deprived. Setting a regular bedtime, even on weekends, can help ensure you get a full night's sleep.
  • Quality: While ensuring you get a full night's sleep is important, the quality of that sleep is equally relevant. While you might not be awake, your body and mind could still be restless. Avoiding things that disrupt your sleep, like stimulating activities and certain substances, can guarantee you sleep deeply.
  • Regularity: Sleep is based on the body's circadian rhythm, which helps determine sleep patterns. Think of the circadian rhythm as an internal clock that controls the production of melatonin, a hormone our bodies produce to make us sleepy. The circadian rhythm is governed in part by light received by our optic nerves, which is why consuming television or scrolling on social media before bedtime can be disruptive to sleep. Maintaining a regular and predictable sleep schedule will help your body's circadian rhythm to stay regular.

While you're sleeping, your brain is hard at work. Sleep allows your brain to clear out any waste. It also reenergizes your cells and helps consolidate information you've learned during the day. While sleeping, you also sort away that information to store as memories. When you fail to get the sleep you need, both in terms of quality and quantity, your brain cannot perform these much-needed tasks. When lack of sleep becomes a pattern, you enter a state known as "sleep deprivation."

How does sleep deprivation kill your productivity?

Sleep is essential to working effectively. Without enough sleep, you not only lose focus and work less efficiently, but over time, you could develop serious impairments to your productivity. Beyond decreasing your ability to be present and effective at work, lack of sleep increases your likelihood of getting sick and missing work.

What happens to your brain during sleep deprivation?

Sleep deprivation induces stress for your brain. As the most complex organ in the body, and the one responsible for governing virtually all bodily functions, a stressed brain has profound impacts on all areas of health and well-being. Even short-term sleep deprivation can cause your mental, emotional and physical health to suffer. These issues will only grow more severe with time, making it essential to correct any sleep problems before they worsen.

"Being sleep deprived slows the rate at which brain neurons fire the electrical impulses that carry 'the information' of thought," said Katharina Lederle, a sleep therapist at 92 Dental. "These impulses fire slower and are weaker in themselves."

Ultimately, that means it takes us longer to think and react. In particular, Lederle said, lack of sleep impacts the central lobe of the brain, which is responsible for memory and visual perception. Moreover, sleep deprivation significantly diminishes overall mental and emotional function.

"Most of the short-term consequences are cognitive," Lederle said. "This includes impaired memory, decision-making and emotional control."

Left unchecked, sleep deprivation can compound and develop into serious mental and emotional disorders, as well as put you at risk for serious physical ailments, said David Gregg, chief medical officer of StayWell.

"Long-term sleep deprivation can impact a person's immune system. It can alter their normal hormone production and lead to high blood pressure, diabetes, heart attack or stroke," Gregg said. "It can also impair sex drive and lead to depression and obesity."

Sleep deprivation is a significant problem in the American workforce. From 1975 to 2006, the number of "short-sleepers," those who get six or less hours of sleep nightly, increased 22 percent. This lack of sleep has a costly effect on the economy, translating to roughly $2,300 dollars in lost productivity per worker each year. That's a total cost of $63.2 billion nationwide annually.

How many hours of sleep do you need to be productive?

So, how many hours of sleep do you need each night to remain at your peak performance? The answer is different for everyone, but most experts recommend between 7 and 9 hours of sleep for a healthy adult.

"Sleep is one of the most essential things for proper brain function," said Amy Serin, a neuropsychologist at the Serin Center and author of The Stress Switch (Simply Good Press, 2019). "With adequate sleep, not everything will be perfect, but without it, you can be assured you're going to experience major problems with your mood and everyday functioning."

According to Serin, one-third of Americans don't get the recommended amount of sleep each night, and the majority of American teenagers are sleep deprived. To correct this problem, a cultural shift and increased awareness toward "sleep hygiene" are critical, she said. That all starts with developing consistent habits to promote healthier sleep patterns.

How to establish healthier sleep patterns

Understanding the benefits of sleep is one thing, but establishing a healthier sleep pattern can be a challenge. There's no silver bullet for sleeping better each night, but there are a few things you can do to prepare your body for the most restful sleep possible.

Neil Kline, a doctor and spokesperson for the American Sleep Association, said establishing a healthier sleep pattern is achievable in a few easy steps. Consistency is key, and forming a proper nighttime routine can help you sleep longer and more deeply, he said.

"Sleep is essential for our physical and mental well-being,' Kline said. "There are several things we can do to help us get better sleep. Following these simple sleep hygiene recommendations can be very valuable."

  • Maintain a regular sleep schedule. It's important to set your body on a routine by going to sleep and waking up at roughly the same time every day, even on weekends. Otherwise, you will seldom be tired when you should go to sleep, and you could feel excessively groggy when you wake up.
  • Prepare your bedroom. Your bedroom should be dark, quiet, and cool to better facilitate a deep and restful sleep. Clear the room of any distractions. If you work overnight and need to sleep during the day, consider installing curtains that block out any ambient light.
  • Avoid caffeine for a minimum of six hours before sleep. Caffeine is a stimulant that can make it difficult to fall asleep and will disrupt the quality of your sleep. It's best to avoid caffeine a minimum of six hours before you go to bed, though many experts recommend cutting off caffeine intake as many as 10 hours before bedtime.
  • Avoid cigarettes and alcohol. Cigarettes, alcohol and some over-the-counter medications can disrupt the quality of your sleep and fragment your sleep cycle. Do your best to avoid nicotine products and alcohol, and if you take any over-the-counter medications, understand how they could impact your sleep pattern.
  • Exercise during the day. Vigorous exercise is a great way to tire out your body, but when exercise is performed too close to bedtime, it can keep you awake and restless. It is best to exercise in the morning or during the first half of the day to promote healthier sleep patterns.
  • Avoid stimulating activities before bed. Stimulating activities, especially those that involve electronics, should be completely avoided before going to bed. Certain activities, like watching television or playing video games, not only elicit stress and excitement reactions but also flood your eyes with blue light. Blue light disrupts our circadian rhythm because it closely mimics the light we receive from the sun during the day.

Adjusting to a new nighttime routine can be difficult, but sticking to it is rewarding. If you are able to create a healthier sleep pattern for yourself, the results will show in your life and work. A better mood, more energy, sharper focus and emotional buoyancy are all just a good night's sleep away.

 

 

A Guide for New Leaders

Posted: 31 May 2019 05:00 AM PDT

Whatever the scenario, leadership is all about charting out the path you need to take as a team or as an organization to achieve the desired objective. It's basically impossible for a company to grow and flourish without effective leadership. In today's dynamic times with ever-changing technology and changing ways of business and customer engagement, leadership becomes even more important. An organization without effective leadership in such times will be like a ship that sets sail without a captain.

What makes a great leader?

An effective leader is someone who creates an inspiring vision for the future, they set the direction. They then use some management skills to guide the people toward that direction in a smooth and efficient way.

  1. Decisive. In today's complex business environment indecisiveness can prove costly for the business. Leaders are required to think on their feet and take strategic decisions quickly. Good leadership is all about informed decision-making. Also what's important is for leaders to stick through the decisions, commit to it and see things through.
  2. Good examples. If you want to be a good leader and establish a positive culture in your organization, you've got to practice what you preach to others. You need to exemplify the values that you want to instill in the employees. Keep in mind that as a CEO or a leader, you're a role model for your employees and they take cues from you about how to behave. 
  3. Forward looking. Great leaders are effective problem-solvers. They always have the bigger picture in mind and never lose sight of goals they set at the beginning. They focus on working toward the solution rather than dwelling on problems. 
  4. Passionate. As a CEO or a chief, you can't see your profession as just a job. Good leaders have to feel passionate about their work and the organization's vision and goal. You care about the company and the people you lead and work with.
  5. Humility and accountability. Leaders command rather than demand respect. People don't respect them because of their title or position but because of their behavior and approachability. They are humble, open-minded and willing to listen to their employees and their teammates. When things go wrong, they are willing to take responsibility and don't play blame games.
  6. Praises others. Good leaders don't just take responsibility for their actions when things go wrong, they also give credit to the others where credit is due. A leader realizes the fact that an organization's success does not depend on one man but on the collective effort of the team.
  7. Innovative. Great leaders are open to new ideas and to testing new theories. Leaders face failure head on. Leaders are willing to take risks and experiment because that's what keeps an organization's competitive advantage alive.
  8. Excellent communicator. Communication skills are crucial to effective leadership. Good communication isn't all about talking but also listening to others, trying to understand what they are saying and then making an informed decision. It's about encouraging people to put forth their ideas. Leaders speak clearly and effectively to influence people. 
  9. Confident. Great leaders are fearless. They are ready to take on challenges. They are visionaries who are not afraid to step out their comfort zone to try out new things in order to achieve their goal.
  10. Trustworthy. Great leaders never violate the trust of anyone. This makes them more approachable among employees who feel confident sharing their concerns and queries with them.

Good leaders aren't just born. They are made with years of learning and myriad experiences of dealing with people, situations and handling circumstances. My advice to all young budding managers out there, if you want to grow up to be a successful leader you got to be focused and curious. Love what you do and excel at it. Be ready for any challenges and situations that might come your way and face them with confidence. 

How to become a great leader

  • Be ready to take on challenges. A great leader isn't afraid to face the consequences. Be brave, yet prudent.
  • Work on your skills. No one is a born leader. It takes years of learning, unlearning and experiences to acquire the skills it takes to be a great leader. Develop expertise in your niche and learn management skills. Remember a great leader is someone people like to follow and people would only follow you only if they see some exceptional work or knowledge on your part.
  • Become a great communicator. This one requires discipline. Make it a habit to talk less and listen more. Pay attention to what is happening around you by observing things. Focus on nuances of the conversation, only then will you be able to make informed judgments.
  • Be a part of the team. A great leader is somebody who sees himself as a part of the team. They are team players and focus on collective efforts by the team toward a shared objective.
  • Never micromanage. Micro managing means keeping a track of every move and action by the team; monitoring every step they take. This can sometimes stifle creativity as team members feel they are always being watched and are hesitant to think freely. While it's good to be aware of what your team members are up to, it is also important to give them space and room to think freely and voice their concerns. This is bound to have a positive impact on the team's productivity.
  • Lead with love. Last, but not least, love everything: Your organization, your work, colleagues, seniors; love one and all. What you do, do it with passion and love will show. Love people working with you, for you and people will love you back and follow you.

Conclusion

Each of the qualities is essential to great leadership. Without them leaders will not live up to their full potential and, as a result, neither will the employees. Therefore it is essential for companies to instill these values in their employees from the very beginning to encourage young and emerging leaders.

How to Successfully Launch a Legal Cannabis Business

Posted: 31 May 2019 05:00 AM PDT

Building an industry from the ground up takes a lot of hands; the cannabis industry has attracted entrepreneurs of all stripes, from cultivators to distributors to tech experts, all of whom want a piece of the multibillion-dollar pie. While the industry has already experienced rapid growth, projections suggest it is still in its early stages. With seemingly nowhere to go but up, you might be considering launching a marijuana business of your own.

The cannabis industry is a complicated space, due to both its youth and the legal circumstances surrounding it. This cannabis industry startup guide will provide a bird's-eye view of some things you should know about the marijuana business before launching a company of your own. Whether you're planning on opening a dispensary, obtaining a cultivation license or running an ancillary business, knowing the basics of the industry is essential to building a successful legal marijuana business. 

The birth of an industry

Medical marijuana is legal in 33 states plus Washington, D.C., while adult-use cannabis (sometimes called "recreational marijuana") is legal in 10 states plus D.C. An additional 15 states have decriminalized cannabis, reducing possession under certain amounts to a civil charge rather than a criminal one. The rash of legalizations began with California's passage of medicinal cannabis measure Proposition 215 in 1996 and culminated in Colorado and Washington's legalization of recreational cannabis in 2012. Since then, more states have followed suit. In just 20 years, what was previously a black-market product has become the cash crop of a new industry.

However, as the cannabis industry rises to prominence – multiple estimates place anticipated growth eclipsing the $20 billion mark by the early 2020s – the federal government maintains cannabis as a Schedule 1 controlled substance. That means cannabis is considered an illegal substance with no accepted medical use and a high potential for abuse.

Despite the federal prohibition, the cannabis industry grew and thrived largely on the back of the Department of Justice's 2013 missive known as the Cole Memorandum, which stated the feds would not interfere with cannabis operations that abide by their state's legal framework. The Cole Memorandum was rescinded by former U.S. Attorney General Jeff Sessions in 2018, but the industry remains protected by a hands-off culture among prosecutors, as well as a congressional measure known as the Rohrabacher-Blumenauer amendment that protects the medical cannabis industry. Rohrabacher-Blumenauer essentially states that no federal dollars will be appropriated for enforcement actions against state-compliant medical cannabis businesses. Unfortunately, even with these protections, the federal prohibition continues to create obstacles for legal cannabis businesses in other ways.  

Even with this albatross around its neck, the legal cannabis industry is a burgeoning one. According to industry analysts New Frontier Data, the U.S. cannabis industry was worth $10.4 billion in 2018. That value is projected to grow rapidly through 2025 to $26.3 billion. Already, the cannabis industry has directly created nearly 300,000 jobs, not counting those indirectly created by support businesses like marketing companies or professional advisors.

A variety of business

With big numbers like $10.4 billion in value, you might be thinking the window of opportunity has mostly closed, but industry insiders told business.com that it's still early in the game. Stuart Titus, Ph.D., president and CEO of industrial hemp company Medical Marijuana Inc., said startups of all stripes still have ample opportunity to launch, grow and succeed in the cannabis space.

"The whole industry itself is at the very ground-floor level," Titus said in an interview at the Cannabis World Congress & Business Exposition. "We're certainly nowhere near maximizing what we could do. Look at alcohol prohibition. Suddenly, legalization spurred industries and businesses … We think the same is true for this industry."

Cannabis businesses come in all shapes and sizes. Most people think of massive cultivation operations or dispensaries with jars full of shimmering emerald buds. Those are certainly key elements of the industry; however, many cannabis entrepreneurs never even touch the plant itself. These include logistical support businesses, like distribution and transportation companies, or technology companies, such as dispensary software development or high-tech infrastructure for grow houses.

Science is also a huge driver of the cannabis industry, as it is in other agricultural endeavors. Labs are needed for testing the potency and genetics of cannabis flowers, extractors are required for harvesting oils, and ongoing research provides insights into the specifics of cannabis for medical treatment. Glass blowers, vape purveyors and edibles creators are also in high demand. [Want to find out more about where the opportunities lay? Check out the tips from these industry insiders.]

"I believe there is plenty of opportunity," Titus said. "It's the very, very early stage [for] everything from medicinal to recreational, support industries and infused products. Creative minds, unique products and delivery methods will just continue to move along as time goes, and I think there's ample opportunity for people to make a significant business opportunity in this incredible industry."

Regulatory landscape

The state of the industry remains very much in flux. Beyond the federal prohibition, or perhaps because of it, varying state frameworks have led to a fragmented industry that looks very different based on geography. Everything from licensing to reporting can be vastly different between states, making it difficult for a company to expand. Experience gained in Colorado, for example, does not necessarily translate to the New York market.

"Since we're not a federally recognized industry, there are many things that are affected," said Sara Gullickson, CEO of DispensaryPermits.com, a consulting service for marijuana entrepreneurs. "In terms of regulations, every single state program varies. They're crafting programs specifically for their environment. So, things that are important in Arkansas might not be as important in Ohio, and so we're seeing that kind of flesh out."

As knowledge of the industry improves, newer markets are including mandates that don't exist in older markets. For example, Gullickson said, Arizona's legal cannabis program includes no mention of testing, while newer markets mandate testing to ensure that cannabis is a safe, quality medical product for patients to use before it hits the market.

The lack of federal policy has created a sort of experimental period, where states are borrowing what works from one another and trying to scrap what doesn't, Gullickson said. While the federal prohibition creates a lot of confusion and many problems, this trial-and-error period has been a good thing for the industry's evolution in her estimation.

"I'm a little bit more optimistic than most," Gullickson said. "I almost think if the feds stepped in and pushed something down everybody's throat, there'd be a lot of resistance. How could the feds come up with something that's uniform, implemented across the U.S., that works in every state? It's something that's necessary but also scary, because we do know what we're doing in different states and there are some really good programs. We don't want something to come into play that diminishes what good we're already doing."

Taxation

Since cannabis remains federally illegal, cannabis companies face different taxation challenges from other industries. Most notorious of these challenges is the Internal Revenue Service's Section 280E, which does not allow cannabis companies to deduct ordinary business expenses from their tax bills.

Section 280E was born of a 1981 court case in which a convicted drug dealer successfully wrote off his business expenses related to his illicit activities. Shortly after, Congress enacted Section 280E to avoid a repeat incident. Section 280E stipulates that any expenses related to the "trafficking of controlled substances" shall not be eligible for deductions or credits. Since cannabis remains a controlled substance under federal law, state-compliant legal cannabis businesses are subject to this tax rule.

The result is that cannabis businesses pay a larger amount in taxes than they would if they sold a federally legal product. Cannabis companies must pay taxes based on their gross income, rather than their income minus cost of goods sold. The result is an average effective tax rate of 55% on cannabis businesses, compared with an average effective rate of 30% on similarly situated non-cannabis companies.

Beyond the federal tax code, cannabis companies must abide by various state tax plans. Some states charge excise taxes on top of their normal tax structure, such as Washington, where cannabis companies owe an excise tax of 37% on all sales. Your tax obligations as a cannabis business owner are significant and sometimes complex, so be sure to familiarize yourself with both federal and state tax policies.

Licensing and permitting

For businesses that touch the plant, licensing and permitting is essential. The process varies by state and can be rather arduous. In addition to outlining policies and procedures, applicants must provide an overview of who comprises their organization and to prove that what they say is true. According to Gullickson, balancing a level of detail in applications of limited length has become a skill set of its own in the consulting industry.

"About three or four years ago, when you were sending applications, everyone threw in the kitchen sink – thousands and thousands of pages to confuse people and hope they wouldn't read it," she said. "Now, the application process is often to describe in five pages what your operation looks like. You need someone to communicate to an uneducated audience what your policies and procedures look like. We had to sharpen our skill set to be as granular as possible in limited characters."

Ultimately, cultivators and dispensaries looking to score a license should be prepared to spend between $150,000 and $200,000 navigating the process, Gullickson said. For larger companies aiming for a sort of "super license," costs balloon from $500,000 to $750,000.

Banking and finance

Another problem caused by the federal prohibition centers on banking. Many banks are hesitant to do business with cannabis-related companies, while others refuse outright. Working with cannabis businesses is a risk for banks: On one hand, it opens the bank up to additional oversight and liability; on the other, there is a palpable fear that a federal crackdown could result in seized assets and a business catastrophe.

The lack of conventional banking options has led cannabis entrepreneurs, especially those who touch the plant, to work primarily in cash. Not only is that dangerous – cannabis entrepreneurs are regularly targeted for robberies – but tracking cash payments for tax and regulatory purposes is incredibly difficult.

"It's crippling right now," said Keegan Peterson, CEO of payroll and HR company Wurk. "You don't realize how important banking is until you don't have it – just giving employees a paycheck is just brutal. In a cash environment, it's difficult to even prove you paid [your employees], or your vendors, or your tax liability."

Moreover, cannabis businesses are often unable to open a traditional line of credit, limiting a common early-stage option for additional growth financing. That means bootstrapping or raising money from friends, families and angel investors is the most common way young companies gain a foothold.

Luckily, the industry has developed some workarounds in the meantime. Angel investors willing to take the risk provide a lot of startup and growth capital, and several startup accelerators and incubators have burst onto the scene to help their cohorts get to the next level.

Venture capital firms tend to play it closer to the vest but are also intently watching the industry and making some preliminary investments. Still, the industry is holding its collective breath in hopes that the federal prohibition will soon be lifted, opening access to traditional banking and improving cannabis's already immense growth prospects.

David Goldstein, CEO and co-founder of medical cannabis software company PotBotics, told business.com it's important for a startup to allocate resources effectively, whether conventional banking becomes available soon or not. He also advised newcomers to bring in people with professional expertise elsewhere who can apply their knowledge to the cannabis industry.

"What we see is that it's been tough to get institutional investment," he said. "Wealthy individuals that are passionate either because they went through chemo and cannabis helped or because they see the growth potential – those are the two types of investors we see. I think institutional money is coming … but it's important for a startup to run lean but at same time bring in people who maybe worked in other industries … so they can add their expertise to bring this out of [the] black market into white collar."

Frequently asked questions about starting a cannabis business

Looking for information not provided in the above cannabis industry startup guide? These FAQs might help you get started on the path to opening your own cannabis business, whether it's plant-touching or ancillary.

What is an ancillary cannabis business?

The term "ancillary cannabis business" refers to a company that provides needed services in the cannabis industry without actually touching the plant. These can be marketing agencies, professional advisors, payment processors, security companies and more. Ancillary businesses tend to provide B2B services to other cannabis companies.

Ancillary businesses tend to avoid the onerous licensing and permitting requirements of plant-touching businesses. Many entrepreneurs entering the cannabis industry are pivoting their existing skill set or business and adapting it to the industry to provide necessary services.

How much does it cost to open a dispensary?

The cost of opening a cannabis dispensary depends on many factors, including your location, the size of your dispensary, and your state's application and licensing process. In some cases, opening a cannabis dispensary could be a multimillion-dollar process, while in others it could cost a few hundred thousand. The bottom line is that opening a cannabis dispensary isn't cheap. Moreover, it is a detailed and complicated process that requires meticulous planning.

If you're considering opening a dispensary, it is important to line up the right partners, obtain funding and familiarize yourself with your state's application process. Every state will look for slightly different things, so it's important to optimize your plan based on what the state is looking for in an applicant.

How much does it cost to start a cannabis grow house?

Similar to opening a dispensary, launching a cannabis cultivation operation is no cheap endeavor. Estimates for the total initial investment for a 7,700-square-foot facility with 1,000 plants suggest it could cost more than $800,000, and certainly many cultivation operations become multimillion-dollar investments. Also similar to opening a dispensary is navigating the licensing process; it's important to understand what your state is looking for in an applicant and then building your team and business plan to suit those needs.

Where do you obtain a cannabis cultivation license?

To obtain a cannabis cultivation license, you will have to go through the regulatory body in your state. Typically, this is some kind of marijuana control board, but the exact process varies from state to state. Some states require your operation be vertically integrated, for example, meaning that you cultivate and sell your cannabis products from start to finish. Other states separate cultivation and dispensary licenses, meaning your company can only do one or the other.

What other permits does your marijuana business need?

Depending on where your business falls in the cannabis supply chain, you could require some other permits or licenses as well. In addition to cultivation and retail licenses for grows and dispensaries, there are processor licenses for value-added companies like extractors or edibles businesses, research licenses, and transportation licenses. Before launching your business, be sure to familiarize yourself with all the requirements of your state's law and to obtain all necessary licensing and permits before beginning operations.

How can I guarantee my cannabis business will be licensed?

There is no guarantee your cannabis business will be licensed but following your state's guidelines to the best of your ability will increase your chances. A strong team and good business plan are a must, backed up by realistic financials and a source of funding that makes your project credible. Some states prioritize social justice and diversity, giving a boost to teams led by minorities and veterans. Identifying the specific priorities of your state's regulators and tailoring your company and plan to suit them greatly increases your chance of getting a license; however, obtaining a license is never a guarantee.

How can entrepreneurs learn the cannabis laws?

Besides conducting your own research, it is critical to engage an experienced attorney when starting a cannabis business. Ideally, you will want to develop a relationship with an attorney who helps educate you on the applicable laws. Entering the cannabis industry without legal counsel is especially risky given the ever-changing laws from state to state and the uncertain future of federal policy.

How do you start a cannabis transport or logistics business?

To launch a transport or logistics business for the distribution of cannabis and cannabis products, you will likely require a transportation license. In some states, direct-to-consumer cannabis delivery is legal, while in other states it is not. Regardless, every legal cannabis company will need transportation for moving harvested product to processing facilities and dispensaries. Again, every state has its own specific rules and regulations regarding cannabis transport, so do your homework and follow all available guidelines.

What types of financing are available for cannabis businesses?

Traditional loans are rare in the cannabis industry, because the FDIC will not back any bank that lends money to a business that breaks federal law, which all state-compliant legal cannabis companies currently do. While conventional loans can be nearly impossible to come by for cannabis businesses, funding sources are available. In addition to angel investors and venture capitalists, cannabis-specific funding companies have launched to fill the gap left by banks too hesitant to provide loans to young cannabis companies. Many ancillary cannabis companies are also bootstrapped, started from the owners' own savings or personal financing options.

Some source interviews were conducted for a previous version of this article.

What is Tax Freedom Day?

Posted: 31 May 2019 05:00 AM PDT

Tax Freedom Day is the day when the country has theoretically earned enough money to pay off its annual tax bill. Every dollar of income is counted and compared to every dollar taxed by the government. Once the income earned reaches the amount of tax due for the year, it is considered Tax Freedom Day. In the U.S., Tax Freedom Day fell on April 16 in 2019, which was the 106th day of the year.

"Prior to Tax Freedom Day – in a theoretical sense at least – all of [people's] earnings have ended up in various government coffers at the federal, state and municipal levels; and thus, determining the date of Tax Freedom Day each year can help average citizens visualize the nation's total tax burden," said Timothy Wiedman, a retired associate professor of management and human resources at Doane University.

According to data from the Tax Foundation, which calculates Tax Freedom Day, Americans will pay $5.29 trillion in taxes this year with $3.42 trillion coming from federal taxes and $1.86 trillion coming from state and local taxes. That's 29% of national income, according to the organization.

To calculate when Tax Freedom Day falls, divide the country's federal, state and local taxes by total income. Multiply the resulting number by 365 to determine how many days into the year Tax Freedom Day falls. If you get a decimal, which you almost certainly will, round up. For example, if you get 107.1 days, Tax Freedom Day falls on the 108th day of the year, which would have been April 19 this year. Leap days are excluded from calculations for accurate year-to-year comparisons. Below shows this year's calculation:

$5.29 trillion / 18.24 trillion = 0.29 or 29% x 365 = 105.85 days = 106th day of the year or April 16

Changes in legislation also affect annual comparisons. According to the Tax Foundation, Tax Freedom Day came about five days earlier in 2018 and 2019 than in 2017. This is largely credited to the implementation of the Tax Cuts and Jobs Act.

How did Tax Freedom Day start?

Dallas Holstetler, a Florida businessman, created the concept of Tax Freedom Day in 1948. Until 1971, Holstetler did all the math himself as he kept tabs on his creation for over two decades. Then, Holstetler retired and passed along the intellectual property to the Tax Foundation, which has performed the calculation ever since. The calculations for each of the 50 states began in 1990 and has continued for the nearly three decades since.

When is my state's Tax Freedom Day?

According to Tax Foundation, each individual state's Tax Freedom Day is determined when the state's taxpayers "have collectively earned enough money to pay off their federal, state and local taxes for the year." The calculation is similar to the calculation for the country, however, some additional factors are included on a state-by-state basis. While these dates vary each year, the 2019 dates for each state are included below.

  • March 25: Alaska
  • March 30: Oklahoma
  • April 4: Florida and Louisiana
  • April 5: Alabama, Tennessee and Texas
  • April 6: Idaho and Montana
  • April 7: South Dakota and Georgia
  • April 8: New Mexico and Arkansas
  • April 9: Arizona, Indiana, Mississippi, Missouri and Wyoming
  • April 10: Kentucky, South Carolina and West Virginia
  • April 11: North Carolina and Utah
  • April 12: Delaware and Nebraska
  • April 14: Colorado and Ohio
  • April 15: Iowa and Kansas
  • April 16: Michigan, Pennsylvania and Virginia
  • April 18: Nevada and Oregon
  • April 19: Maryland, New Hampshire and Wisconsin
  • April 20: California, Maine and Washington
  • April 21: North Dakota
  • April 22: Vermont
  • April 23: Hawaii and Massachusetts
  • April 24: Illinois
  • April 25: Connecticut, Minnesota and Rhode Island
  • April 30: New Jersey
  • May 3: New York and Washington D.C.

Knowing when your state's Tax Freedom Day falls gives you a better understanding of when you might want your business to reach its own Tax Freedom Day. A business in Alaska might earn more income than it has to pay in taxes by late March, while it can easily take a business in New York until early May to see its Tax Freedom Day. These specific dates give more context to businesses than the national date. It's worth noting that the Tax Foundation changed how it calculates each state's Tax Freedom Day in 2018, so comparing the most recent data to previous years won't yield accurate insights.

When is my business's Tax Freedom Day?

Your business's Tax Freedom Day varies. Each individual business brings in different amounts of money and owes differing amounts in taxes. Calculating your Tax Freedom Day depends on your specific business. Regardless of when the day occurs, it's a good idea to monitor when it does. If it's showing up well after your state's Tax Freedom Day, you might want to take a closer look at why your income is taking so long to overtake your taxes owed.

"For small businesses, Tax Freedom Day is especially relevant, because taxes tend to impact them much more than a large corporation," said Chane Steiner, CEO at Crediful. "If a small business is struggling to reach their Tax Freedom Day early in the year, then it may be a sign to alter payout or accounting practices accordingly."

When is my personal Tax Freedom Day?

Much like individual businesses, this varies based on where you live, how much income you make and other factors.

"Tax Freedom Day is important to individuals because it lets them calculate the impact that taxes are having on their life," Steiner said. "The further into the year someone's Tax Freedom Day is, the greater the impact taxes are having on their finances."

To get a better sense of what you can change to reach Tax Freedom Day earlier in the year, consider speaking with a financial professional. Getting legal advice from an advisory firm or an investment adviser can help you, and your business, get a better sense of what you can legally do to reduce your taxes and reach Tax Freedom Day in a more reasonable timeframe.

Some people opt to connect with a registered investment advisory, or RIA, in their area. Speaking with a registered investment advisor can help you distribute wealth more effectively to increase your income, which helps speed up when your Tax Freedom Day occurs. Investment advisers cost money, but using an investment adviser or financial planner might be worth the money to track your finances more effectively.   

The bottom line

What is Tax Freedom Day? Know that it's the day each year when people in a country theoretically earn enough money to pay off their taxes. There's one national day for this, but dates vary for each state, business and individual. The concept was created in 1948, and the calculation has been completed by the Tax Foundation every year since 1971. Each state's Tax Freedom Day began being calculated in 1990. If you're alarmed by your business's or personal Tax Freedom Day, consider speaking with a financial professional like an investment adviser to help increase your income.
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