BALTIMORE - WASHINGTON FINANCIAL ADVISORS JULY 2020 - washington financial advisors july 2020
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BALTIMORE - WASHINGTON FINANCIAL ADVISORS • JULY 2020
Virtual
Cooking HEALTHY WEALTHY & WISE
Classes
with Amy von Lange
Chef/Owner of Schola
Backyard BBQ
TUES., JULY 7, 2020
4:30 PM – 6:00 PM
Margaritaville
WED., AUGUST 5, 2020
4:30 PM – 6:00 PM
Soup!
WED., SEPT. 9, 2020
4:30 PM – 6:00 PM
To register, email
Eve Kennedy at
ekennedy@bwfa.com
Virtual During the past few years BWFA has been incorporating more
Yoga wellness topics into our seminars and, more recently, our webinars.
Series While our top priority is always to provide you with excellent Financial Planning,
Investment Management, Tax Advisory & Business Services, we recognize that
with Dagmar Bohlmann wellness is also a key component to living a full and prosperous life. By enriching
Registered Yoga Teacher our offerings to include music, yoga, cooking, fitness, travel and health programs,
YOGAhikes Baltimore we hope to help promote your overall wellness. During this time of quarantine, it
seemed fitting to have this issue of The Advisor Magazine focus not only on the good
FRIDAY, JULY 10, 2020 fortune of your wealth, but also on the good fortune of your health and well-being.
9:30 AM – 10:30 AM
FRIDAY, JULY 24, 2020
9:30 AM – 10:30 AM
July 2020
4 President’s Address
ROBERT G. CARPENTER
President & CEO
6 Investment Management
ROBERT G. CARPENTER
President & CEO
8 Investment Management
JOSEPH MANFREDI | MBA
Do you know someone
COO, Senior Portfolio Manager & Executive Manager
Recognized as one of the Financial Times who could use guidance
10 Investment Management
Top 300 Financial Advisers 7 Years In A Row! with their investments? CHRIS KELLY | CPA, CFP®, M. ACCY
Financial Advisor, Portfolio Manager & Executive Manager
Today’s investment landscape is more complex than it has ever Maybe you know someone who
been. Increasingly, it takes a team of dedicated experts to effectively is retired or nearing retirement and
manage your money, and more and more people are realizing the could benefit from our services? 12 Financial Planning
value of working with a fee-only investment advisor such as BWFA. THAD ISMART | CFP®
We ask you, our existing clients, Senior Financial Planner
Recently, the Financial Times recognized 300 top RIAs*, based on criteria to recommend our services to
including: assets under management (AUM), AUM growth rate, years in friends or family members that
could benefit from our support.
14 Bon Appétit!
existence, compliance record, industry certifications (such as CFP® and
BWFA Family Favorites
CFA), and online accessibility.
By helping us grow our “family of
While it’s gratifying to be recognized, BWFA’s main objective continues to clients,” we get to share our passion 18 Tax Services
be serving our clients with undivided loyalty. We provide impartial advice with more people just like you.
BRIAN MURRAY
and work exceptionally hard at helping our clients achieve their goals. Tax Advisor
As always, we are dedicated to serving our clients’ best interests. PLEASE CONTACT MEGHAN
AT MMANAS@BWFA.COM
We invite you to experience the excellence that has built our reputation as 20 Tax Services
a leading Registered Investment Advisor in the industry. Contact us today LAWRENCE M. POST | CPA, MST, CFP®, CIMA®
to schedule your no cost or obligation consultation to learn more. This publication is not a solicitation to buy or sell any Senior Tax & Planning Advisor
securities or advisory products. Baltimore-Washington
Financial Advisors is an SEC-Investment Adviser.
Registration of an Investment Adviser does not
imply any specific level of skill or training and does 24 Business Services
not constitute an endorsement of the Firm by the
U.S. Securities & Exchange Commission. Investing
BRIAN MACMILLAN
involves risk, including the risk of principal loss. Managing Director Mergers & Acquisitions
Past performance is no guarantee of future returns.
26 What’s Happening at BWFA
28 Employee Spotlight
*“RIA,” as used in the Financial Times article, is an abbreviation for Registered Investment Adviser and is not a designation.
Registration as an investment adviser does not constitute an endorsement of the firm by securities regulators nor does it
indicate that the adviser has attained a particular level of skill or ability. FT 300 Disclosure: The 2020 Financial Times Top 300
Registered Investment Advisors is an independent listing produced by the Financial Times (June, 2020). The FT 300 is based LAWRENCE M. POST | CPA, MST, CFP®, CIMA®
on data gathered from RIA firms, regulatory disclosures, and the FT’s research. As identified by the FT, the listing reflected each
practice’s performance in six primary areas, including assets under management, asset growth, compliance record, years in
Senior Tax & Planning Advisor
existence, credentials and accessibility. Neither the RIA firms nor their employees pay a fee to The Financial Times in exchange
for inclusion in the FT 300. Third-party rankings from Financial Times and other publications are no guarantee of future
29 Upcoming Events
investment success. Working with a highly ranked adviser does not ensure that a client or prospective client will experience a
higher level of performance results. These rankings should not be construed as an endorsement of the adviser by any client.
President ’s Address
6 WELLNESS LESSONS
FROM THE WALTONS
ROBERT G. CARPENTER
President & CEO
rcarpenter@bwfa.com
I’ve admittedly been feeling a bit reflective lately.
Perhaps this stems from the slower pace fostered 1. SPEND TIME OUTDOORS 3. EAT FRESH FOOD IN 4. ENJOY YOUR WORK 5. GET PLENTY OF REST
by the recent shelter in place orders or perhaps IN NATURE MODERATE PORTIONS AND MAKE TIME TO PLAY AFTER SAYING GOODNIGHT
TO LOVED ONES
I’m simply contemplating life a bit more these
The Waltons spent a good part of Another key to wellness is eating The Waltons demonstrated a strong
days. In keeping with this frame of mind, I’ve their days outdoors. Whether they fresh food fresh from the garden. work ethic. They also enjoyed their Everyone who is familiar with The
found myself revisiting a favorite TV series from were walking to school or town,
climbing Walton Mountain, or
In almost every episode, there is a
scene where the family is gathered
different crafts and chores and the
satisfaction of doing a good job. As
Waltons knows where I am going with
this one. Getting plenty of rest is a key
my childhood, The Waltons. fishing, they respected and enjoyed around the table for a home cooked John Boy Walton said, “One of the to personal wellness and to rest easy
nature’s beauty. Breathing in the meal consisting of fresh food grown things that I find distressing about life it’s a good practice to manage life’s
The show shares sentimental tales To offset all that delicious good- fresh mountain air and enjoying the or caught locally. With so many today is that people don’t really seem stressors. No matter how much Jim
of the close-knit Walton family’s ness, we’ve been taking long sunshine, the Waltons were probably people in the family, it was a necessity to enjoy their work anymore. When I Bob irritated Mary Ellen or John Boy
struggles and joys set against the walks with the dog and exploring never in need of extra Vitamin D or for them to keep costs down by was growing up on Walton Mountain struggled to write his next chapter
backdrop of an historic economic previously undiscovered hiking time at the gym. The Waltons drew growing and preparing their own my father and my grandfather loved with his siblings pestering him, they
depression. During its nine year run, it trails only minutes from our home. life and health from the outdoors. food.. In today’s quarantine period I their work and they instilled a respect always put aside their differences
tackled such weighty topics as death, This is a good reminder to us to get think we find ourselves reevaluating for work in each of us.” When work at the end of the day with an iconic
disease, war, discrimination and a I’ve heard from clients about how our daily dose of nature. the quality and freshness of our food was done, they made time to relax. goodnight. Goodnight Jim Bob, Good
host of other broad social and moral they are celebrating some of life’s and spending a lot more time in John Boy reflects on the weekends as Night Mary Ellen, and, of course,
issues. Through it all, The Waltons milestones with festive birthday 2. SPEND TIME TOGETHER preparation of our meals. It is a lot such a time to recharge, “We took it Good Night John Boy.
demonstrated the enduring power of car parades and Zoom-style AS A FAMILY of work, but the result can be a much easy or else worked at a slower pace
love and kindness in times of crisis. graduation parties. I’ve also heard more enjoyable when the whole and enjoyed a brief respite from the 6. BE MINDFUL AND THANKFUL
Granted the show, at times, can be how resourceful many of you family is together to enjoy it. cares that beset us during the week.”
have been in playing barber and Wellness is not all about physical Find time for play after working at
characterized as hokie, but its simple
hairstylist during the quarantine. fitness. It also includes loving and what you love! Another important component of
heartfelt message leaves a lasting
These times are challenging on supportive relationships. The Waltons, wellness is a mindset of gratitude.
impression on many, including me.
many levels, but we are resilient. like any family, had their arguments, This is based on being mindful of the
As my family has been spending more but love was at the core. That love bounty, both big and small, around
time being safer at home, we’ve been While reconnecting with the was built on spending time together you. As John Boy wrote, “I think if
fortunate to rediscover many of the Walton family, it occurred to me and learning the importance of family. we learned to listen, we could hear
simpler joys of life. that not only does the series John Boy was right when he said, While reconnecting with the Walton family, it all kinds of miracles.” Being mindfully
comment on resiliency in difficult “I’ve done an awful lot of thinking of present and thankful feeds your
As many of you, we’ve been enjoying times, it also speaks to how to what makes this family work, and I occurred to me that not only does the series health on many levels. Stop and take
family dinners with home-cooked promote well-being. These are think it’s because there’s enough love comment on resiliency in difficult times, it also time to listen.
meals and pulling out old family lessons that we can all benefit to go around and some to spare.”
recipes. The aroma of home-made from right now. Let’s all spare some love! speaks to how to promote well-being. These are
bread, pizza and too many baked lessons that we can all benefit from right now.
goods have been filling our kitchen.
4 5
Investment Management
THE POWER OF PERSEVERANCE
ROBERT G. CARPENTER
President & CEO
rcarpenter@bwfa.com
THE CASE FOR
STAYING INVESTED
The US Stock Market’s Largest Intra-Year Declines vs. Year-End Total Returns1
Although short-term volatility (December 31, 1969 – December 31, 2019) LARGEST DECLINES ANNUAL TOTAL RETURNS
swings can be difficult to stomach,
it’s important for long-term investors 50%
to persevere. While it may be 40% 38%
tempting to pull out of the stock 33% 32% 31%
30% 29% 29%
market, investors may miss out 30% 26%
23% 21% 22%
on a potential market rebound and 20% 16% 15% 16% 14% 12%
opportunity for gains while they 10% 11%
10% 8%
are on the sidelines. 5% 5%
1% 2% 1%
0%
In the chart on the right, the green -3% -9% -3%
-3% -6% -6% -5% -12% -6% -4%
bars represent the largest declines -10% -8% -7% -7% -7% -7% -7% -7%
-11% -12% -10% -10% -12% -10%
from a “peak” (high) to a “trough” -22% -14% -16%
-20% -19% -19%
-17% -19% -19%
(low) that occurred each year. Despite
intra-year volatility, the S&P 500 -30% -29% -27%
-37%
Index had positive year-end total -33%
-40%
returns 24 out of the last 30 years.
-50% -48%
-60%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
STAY THE COURSE WITH BWFA
BWFA will provide you with an important SOURCE: © 2020 Morningstar. All rights reserved. US stocks
Many investors know that the best way to endure volatility is to stay the course
guide that reviews your individual risk
are represented by the S&P 500 Index, a market capitalization-
weighted index of 500 stocks designed to measure total US
with a long-term plan and well-diversified portfolio. However, sticking to these equity market performance. Indexes are unmanaged and one
tolerance, asset allocation & performance fundamentals is sometimes easier said than done. If you’re rethinking your cannot invest directly in an index. Index returns do not reflect
any fees, expenses or sales charges. The chart above is for
investment strategy or considering a new direction altogether, we recommend illustrative purposes only. Past performance does not guarantee
of your current investments. This is a free that you contact us so we can run a personalized assessment of your current
future results. All investments involve risks, including possible
loss of principal. Stock prices fluctuate, sometimes rapidly and
service that we are providing to help you
dramatically, due to factors affecting individual companies,
portfolio before making any changes. BWFA will provide you with an important particular industries or sectors, or general market conditions.
Special risks are associated with foreign investing, including
guide that reviews your individual risk tolerance, asset allocation & performance
during these difficult and volatile times.
currency fluctuations, economic instability and political
of your current investments. This is a free service that we are providing to help developments. Diversification does not guarantee a profit or
protect against a loss. These and other risk considerations are
you during these difficult and volatile times. discussed in a fund’s prospectus. Investors should carefully
consider a fund’s investment goals, risks, charges and
expenses before investing.
6 7
Investment Management
We match long term investments
with long term goals, and short term
investments with short term needs.
WHAT A DIFFERENCE 100 In many cases, BWFA clients require
YEARS MAKES... OR NOT? ongoing withdrawals and they are
insulated from the downturns in
stocks like we experienced earlier
in 2020. Our portfolios are designed
JOSEPH MANFREDI | MBA so that we are not selling stocks at
COO, Senior Portfolio Manager & Executive Manager the worst time just to satisfy these
jmanfredi@bwfa.com
withdrawals.
The financial behemoth Vanguard
What can the 1918 has performed extensive research
studying how investors gauge value
influenza pandemic, the Dow Jones Daily Prices As of the writing of this article, we still WHAT DO WE DO NOW? from a professional advisor. According
wonder about potential future waves FROM OUR PERSPECTIVE: to Vanguard, the roles of the advisor
so called “Spanish Flu”, (1918 – 1919)
of additional COVID-19 outbreaks, can be assessed in these three
teach us about how the 110 certainly here in the US, and also
• Stay Invested
main categories:
worldwide. The Spanish Flu had a few
markets have responded SPANISH waves — two relatively ”mild“ ones, • Maintain diversification
Portfolio value - advisors help clients
100 by maintaining the optimal allocations
to current health FLU and a more severe outbreak in the in those investments
of stock, income and cash. This has
middle, all lasting over a period of
concerns—and also 90 about one year total. Even though the • Do not panic or overreact been shown to be less important than
other areas, but still vital for achieving
how to act accordingly? -10.9% mortality rates of the Spanish Flu were to changes in investments
long term results.
many multiples higher than the current
80 number of victims of COVID-19, the BWFA portfolios are managed Financial value - advisors assist
There has been a “protracted stock market in 1918-19 never went to attempt to take advantage of clients in identifying goals and
discounting” of the market and the into bear market territory, dropping long term opportunities while developing a plan to achieve the
underlying value of the stocks since 70 only 11% from peak to trough. weathering the storm of an goals. In addition to investing, this
6/3 7/2 8/1 8/30 10/2 10/31 12/4 1/6 2/4 3/6 4/7 5/8
the highs in mid-February 2020. The unprecedented and unexpected is very essential for client success
/18 /18 /18 /18 /18 /18 /18 /19 /19 /19 /19 /19
stock market once again continues Today, even after a stock market event like the COVID-19 crisis. because it looks more broadly at
to be an economic leading indicator, recovery (so far) of 30%+, we are still spending, saving, risk management,
anticipating the economic impact down more today, post recovery, than We invest in diverse areas for growth, and projecting for retirement, among
that emerged from the widespread Dow Jones Daily Prices the total downturn of the much more appropriately allocated to each other things.
business shut down in the wake of (YTD) severe Spanish Flu. client — seeking to determine the
the outbreak. “winners and losers” for the future Emotional value - advisors assist
30000 Of course, we must be cautious when clients in making prudent decisions,
economy while assessing short term
The “protracted discount” of the comparing two events 100 years particularly during challenging times.
risks. During the Spanish Flu, health
market from COVID-19, or a loss of apart, but it lends some perspective This tends to be the biggest compo-
26250 care businesses fared better than
over 30% in the US stock market when you see how the market reacted nent of value — the client trusts and
services and entertainment. In today’s
from peak to trough in mid-February in the past during a more deadly develops a personal connection with
-36.7% stressed economy we see similar
2020, was quickly followed by a 22500 COVID-19
pandemic. The existence of the 24 the advisor and this builds confidence
trends to 1918 with more options to
sharp recovery. This reminds us of hour news cycle and computerized in the advice and decision-making
invest today considering the “stay
the market reaction of another global institutional trading could account from the objective fiduciary acting
at home” conditions we have been
pandemic, the Spanish Flu of 1918. 18750 for the more drastic movements in in the clients’ best interests and in
experiencing.
While the two are not fully parallel, today’s market versus that of 100 accord with their stated goals.
we can draw some comparisons years ago. As you can view in the We balance with non-correlating
15000 We value our role as advisor to our
to frame our thinking about how chart of 1918-1919, the market investments seeking to smooth
1/2 1/14 1/27 2/6 2/19 3/2 3/12 3/24 4/3 4/16 4/28 5/8 clients. Our goal is to maintain a
we react in extreme conditions and /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 recovered while the Spanish Flu out volatility where possible (in the consistent philosophy of investing,
approach investing. pandemic ran its course (though not first quarter of 2020 pretty much coupled with our financial planning
without unimaginable suffering and everything went down-and by a work, so that clients can successfully
death and worldwide uncertainty). large percentage!) achieve lifetime goals!
8 9
Investment Management
BONDS, INTEREST RATES,
AND THE IMPACT OF INFLATION
CHRIS KELLY | CPA, CFP®, M. ACCY
Financial Advisor, Portfolio Manager & Executive Manager
ckelly@bwfa.com
There are two funda- However, the yield isn’t, because the
yield percentage depends not only
IF INFLATION MEANS
HIGHER PRICES, WHY DO
For example, when interest rates on
mortgages go up, fewer people can
Jane buys a newly issued 10-year
corporate bond that has a 4%
ALL BOND INVESTMENTS
ARE NOT ALIKE
mental ways that you on a bond’s coupon rate but also on BOND PRICES DROP? afford to buy homes. That tends to coupon rate — that is, its annual
can profit from owning changes in its price. dampen the housing market, which
in turn can affect the economy.
payments equal 4% of the bond’s
principal. Three years later, she
Inflation and interest rate changes
The answer has to do with the relative don’t affect all bonds equally. Under
bonds: from the interest Both bond prices and yields go up
value of the interest that a specific
wants to sell the bond. However,
normal conditions, short-term interest
and down, but there’s an important When the Fed raises its target interest interest rates have risen; corporate
that bonds pay, or from rule to remember about the relation- bond pays. Rising prices over time rate, other interest rates and bond bonds being issued now are paying
rates may feel the effects of any Fed
reduce the purchasing power of action almost immediately, but longer-
any increase in the ship between the two: They move
in opposite directions, much like a each interest payment a bond makes.
yields typically rise as well. That’s
because bond issuers must pay a
interest rates of 6%. As a result,
term bonds likely will see the greatest
investors won’t pay Jane as much
bond’s price. seesaw. When a bond’s price goes Let’s say a five-year bond pays $400 competitive interest rate to get people for her bond, because they could
price changes.
up, its yield goes down, even though every six months. Inflation means that to buy their bonds. New bonds paying buy a newer bond that would pay Also, a bond mutual fund may be
the coupon rate hasn’t changed. $400 will buy less five years from now. higher interest rates mean existing
Many people who invest in bonds them more interest. If interest rates affected somewhat differently than an
The opposite is true as well: When a When investors worry that a bond’s bonds with lower rates are less
because they want a steady stream later begin to fall, the value of Jane’s individual bond. For example, a bond
bond’s price drops, its yield goes up. yield won’t keep up with the rising valuable. Prices of existing bonds fall.
of income are surprised to learn that bond would rise again, especially if fund’s manager may be able to alter
costs of inflation, the price of the
bond prices can fluctuate, just as That’s true not only for individual That’s why bond prices can drop even interest rates fall below 4%. the fund’s holdings to try to minimize
bond drops because there is less
they do with any security traded in bonds but also for the bond market investor demand for it. though the economy may be growing. the impact of rate changes.
the secondary market. When interest rates begin to drop,
as a whole. When bond prices rise, An overheated economy can lead to it’s often because the Fed believes
yields in general fall, and vice versa. inflation, and investors begin to worry the economy has begun to slow. That FOCUS ON YOUR GOALS, NOT
Though the ups and downs of the WHY WATCH THE FED?
bond market are not usually as that the Fed may have to raise interest may or may not be good for bonds. ON INTEREST RATES ALONE
rates, which would hurt bond prices
dramatic as the movements of WHAT MOVES THE SEESAW? The good news: Bond prices may
Inflation also affects interest rates. even though yields are higher.
the stock market, they can still go up. However, a slowing economy Though it’s useful to understand
If you’ve heard a news commentator
have a significant impact on your also increases the chance that some generally how bond prices are
In some cases, a bond’s price is talk about the Federal Reserve Board
overall return.
affected by something that is unique FALLING INTEREST RATES: borrowers may default on their bonds. influenced by interest rates and
raising or lowering interest rates, you
to its issuer — for example, a change GOOD NEWS, BAD NEWS Also, when interest rates fall, some inflation, it probably doesn’t make
may not have paid much attention
bond issuers may redeem existing sense to obsess over what the Fed’s
THE PRICE-YIELD SEESAW in the bond’s rating. However, other unless you were about to buy a house
debt and issue new bonds at a next decision will be. Interest rate
AND INTEREST RATES factors have an impact on all bonds. or take out a loan. However, the Fed’s Just the opposite happens when
lower interest rate, just as you might cycles tend to occur over months
The twin factors that affect a bond’s decisions on interest rates can also interest rates are falling. When rates
refinance a mortgage. If you plan to and even years. Also, the relationship
Just as a bond’s price can fluctuate, price are inflation and changing have an impact on the market value are dropping, bonds issued today
reinvest any of your bond income, between interest rates, inflation, and
so can its yield — its overall interest rates. A rise in either interest of your bonds. will typically pay a lower interest rate
it may be a challenge to generate bond prices is complex, and can
percentage rate of return on your rates or the inflation rate will tend to than similar bonds issued when rates
The Fed takes an active role in the same amount of income without be affected by factors other than
investment at any given time. A cause bond prices to drop. Inflation were higher. Those older bonds with
trying to prevent inflation from adjusting your investment strategy. the ones outlined here. Remember,
typical bond’s coupon rate — the and interest rates behave similarly to higher yields become more valuable
bond yields, moving in the opposite spiraling out of control. When the to investors, who are willing to pay investments seeking to achieve higher
annual interest rate it pays — is fixed. Fed gets concerned that the rate yields also involve a higher degree of
direction from bond prices. a higher price to get that greater
of inflation is rising, it may decide income stream. As a result, prices for risk. Your bond investments need to
to raise interest rates. Why? To try existing bonds with higher interest be tailored to your individual financial
to slow the economy by making it rates tend to rise. goals and take into account your
more expensive to borrow money. other investments.
10 11
Financial Planning
Encourage your child to open a Explain to your child that a credit card
savings account too, especially if he is not an income supplement; what
or she has a part-time job during the gets charged is what is owed (and
TEACHING YOUR COLLEGE- school year or summer. Your child then some, given the high interest
AGE CHILD ABOUT MONEY should save any income that does rates). If your child continually has
not have to be put towards college trouble meeting expenses, he or she
expenses. After all, there is life after should review and revise the budget
college, and while it may seem instead of pulling out the plastic.
THAD ISMART | CFP® inconceivable to a college freshman,
Senior Financial Planner Teach your child to review each credit
he or she may one day want to buy a
tismart@bwfa.com card bill and make the payment by
new car or a home.
the due date. Otherwise, late fees
may be charged, the interest rate
LESSON 3: GETTING CREDIT
When your child first and when it will be coming in (at the
beginning of each semester, once a
You should also help your child
understand that a budget should
may go up if the account falls 60
days past due, and your child’s credit
started school, you doled month, or every week). Make sure your child remain flexible; as financial goals If your child is age 21 or older, he or history (or yours if you have cosigned)
out the change for milk Make sure your child understands understands the
change, a budget must change to
accommodate them. Still, your child’s
she may be able to independently may be damaged.
obtain a credit card. But if your child
and a snack on a daily the difference between needs
difference between ultimate goal is to make sure that is younger, the credit card company If your child cannot pay the bill in
and wants. For instance, when what goes out is always less than full each month, encourage him or
basis. But now that your considering expenses, point out needs and wants. what comes in.
will require you, or another adult, to
her to pay as much as possible. An
cosign the credit card application,
kindergartner has grown that buying groceries is a need and
eating out is a want. Your child should Your child should unless your child can prove that he undergraduate student making only
the minimum payments due each
up, it is time for you to understand how important it is to understand how LESSON 2: OPENING or she has the financial resources to
month on a credit card could finish
A BANK ACCOUNT repay the credit card debt. A credit
make sure that your child cover the needs first.
important it is to card can provide security in a financial a post-doctorate program before
paying off the balance.
has enough financial Determine together how you and
cover the needs first. For the sake of convenience, your
emergency and, if used properly, can
help your child build a good credit
your child will split responsibility for Make sure your child notifies the card
knowledge to manage expenses. For instance, you may
child may want to open a checking
account near the college; doing so
history. But the temptation to use a issuer of any address changes so
money at college. decide that you will pay for your
child’s trips home, but that your child
may also reduce transaction fees (e.g.
credit card can be seductive, and
it is not uncommon for students to
that he or she will continue to receive
automated teller machine (ATM) fees). statements.
will need to pay for art supplies or find themselves over their heads in
Show your child how to track Ideally, a checking account should
other miscellaneous expenses. debt before they have declared their Tell your child that when it comes
LESSON 1: BUDGETING 101 expenses by saving receipts and require no minimum balance and
majors. Unfortunately, a poor credit to creditors, students do not get
Warn your child not to spend too keeping an expense log. Knowing allow unlimited free checking; short
history can make it difficult for your summers off! Your child will need to
much too soon, particularly when where the money is going will help of that, look for an account with
Perhaps your child already under- child to rent an apartment, get a car continue to make payments every
money that has to last the entire your child stay on track. Reallocation these features:
stands the basics of budgeting from loan, or even find a job for years after month, and if there’s a credit card
semester arrives at the beginning of resources may sometimes be
having to handle an allowance or • A simple fee structure earning a degree. And if you have balance carried over from the school
of a term. Too many evenings out in necessary, but help your child under-
wages from a part-time job during cosigned your child’s credit card year, your child may want to use
September eating surf and turf could stand that spending more in one area • ATM or debit card access
high school. But now that your child application, you will be on the hook summer earnings to pay it off in order
lead to a December of too many means spending less in another. to the account
is in college, he or she may need to for your child’s unpaid credit card to start the next school year with a
draft a “real world” budget, especially evenings in eating cold cereal. Encourage your child to plan ahead • Online or telephone access debt, and your own credit history clean slate.
if he or she lives off-campus and is for big expenses (the annual auto to account information could suffer.
Acknowledge that college is not Finally, remind your child that life after
responsible for paying for rent and insurance bill or the trip over spring
all about studying but explain • Overdraft protection Here are some tips to help college often involves student loan
utilities. Here are some ways you can break) by instead setting aside money
that splurging this week will mean your child learn to use credit payments and maybe even car or
help your child plan and stick to a for them on a regular basis. To avoid bouncing checks, it is
scrimping next week. While you responsibly: mortgage payments. The less debt
realistic budget: essential to keep accurate records,
should include entertainment Caution your child to monitor your child graduates with, the better
Help your child figure out what expenses in the budget, encourage especially of ATM or debit card usage. Advise your child to get a credit card off he or she will be. When it comes
spending patterns to avoid excessive
income there will be (money from your child to stick closely to the limit Show your child how to balance a with a low credit limit to keep credit to the plastic variety, extra credit is
spending and ask him or her to come
home, financial aid, a part-time job) you agree upon. checkbook on a regular (monthly) card balances down. the last thing a college student wants
to you for advice at the first sign of
basis. Most checking account to accumulate!
financial trouble.
statements provide instructions on
how to do this.
12 13
Bon BWFA FAMILY FAVORITES
Appétit!
Fresh Tomato with Catalan
Stone Fruit & Mozzarella Tomato Bread
INGREDIENTS INGREDIENTS
8 oz fresh mozzarella, sliced 6 large slices crusty bread,
about 1/2” thick
Salt and pepper
2 cloves garlic
1 lb tomatoes, sliced (heirloom if you can Granola
find them, just make sure they are ripe!) 2 very ripe tomatoes,
halved crosswise
2 stone fruit, cut in thin wedges (mix it up, INGREDIENTS DIRECTIONS
I like peach and plum, but nectarines or Extra virgin olive oil
apricots work too!)
Salt 4 cups of old fashioned oats Preheat oven to 350 degrees.
Basil leaves, torn (not instant) Grease 13 X 9” baking pan. Combine
DIRECTIONS oats, sunflower seeds & almonds in
Pinenuts, toasted (optional) 1 cup sliced or slivered almonds
large bowl. In separate small bowl,
Lemon-honey vinaigrette 1 cup of sunflower seeds combine oil, honey & vanilla. Pour
1. Grill bread slices over medium
honey mixture over oat mixture & stir
Whisk together the juice of 2 lemons and hot heat, about 2 minutes per side 1 cup of craisins
well. Pour into prepared pan. Bake
2 tbsp honey. Add 3/4 cup extra virgin until brown and crisp.
1/3 cup of vegetable oil about 25 minutes or until toasted,
olive oil while whisking (until blended).
2. Each “eater” gets a garlic clove stirring once or twice after the first
Season with salt and pepper. Store in 1/3 cup of honey
and half a tomato, and should 10 minutes. Stir in the craisins while
refrigerator, covered, until ready to use.
rub their bread with the garlic, 1 tsp vanilla extract the mixture is still hot. Cool. Store in
then the cut side of the tomato tightly covered container. Enjoy!
DIRECTIONS to apply thin layer of juicy tomato.
— SHARED BY
3. Drizzle with olive oil, sprinkle some CHRISTINE CARPENTER
1. Lay mozzarella on a platter and season
salt (and pepper if you must).
with salt and pepper. Top with tomato
slices and fruit wedges. Enjoy!
2. Drizzle vinaigrette and shower with torn — SHARED BY ERIC MANAS
basil and pinenuts.
— SHARED BY ERIC MANAS
15
Watermelon Tomato Salad Russian Bear Claws
INGREDIENTS INGREDIENTS
4 cups seedless 1 tbsp cider vinegar 1 cup butter 1 tsp salt
watermelon, cut 1 cup sugar 1/4 cup
½ tsp grated
into 1” cubes lukewarm water
lemon zest, 1-1/4 cup milk
2 tsp sugar plus 1 tbsp juice 1 cup sour cream
4 packages yeast or
12 oz yellow cherry 1 shallot, sliced equivalent thereof 6-7 cups flour
tomatoes, halved into thin rings
Salt and pepper ¼ cup fresh basil DIRECTIONS
leaves, torn
2 tbsp extra-virgin
olive oil, plus extra 6 oz fresh Scald milk. Add to butter, sugar and
for drizzling mozzarella cheese, salt in large bowl. Stir until dissolved.
Lemon-Butter Bars torn into 1” pieces Add sour cream. Set aside to cool.
When milk mixture is cooled to
lukewarm, then dissolve yeast in
INGREDIENTS DIRECTIONS DIRECTIONS
1/4 cup water and add to cooled milk
mixture. Stir. Then, beat in 2 cups of Roll into rectangle; spread 1 cup of
Crust 1. Heat oven to 350 degrees 1. Gently combine watermelon and sugar the flour with a wooden spoon for fruit filling (commercial or homemade
in large bowl. Transfer watermelon 2-3 minutes. Knead in remaining for pastry) over entire area. Sprinkle
1-1/3 cups all purpose flour 2. In a small bowl, combine
to colander and set colander in now- flour 2 cups at a time until dough is with 1/4 cup finely chopped nuts; 2
crust ingredients
1-1/4 cups sugar empty bowl. Cover colander with plastic firm and does not stick to sides of tsps cinnamon; 1 tsp allspice; 1/4 cup
3. Cut the butter into the dry wrap and refrigerate for 30 minutes. bowl. Place bowl covered in a warm raisins (optional), dot with butter. Roll
1/2 cup butter, softened slightly
ingredients until you have a spot away from direct heat or draft jelly fashion. Place on lightly greased
(you don’t want it too soft or your 2. Toss tomatoes, 1/4 tsp salt, and 1/4 tsp
crumbly mixture, where the and also to rise to double its size. cookie sheet, to form crescent. Pinch
crust will be more like cake, so pepper together in small bowl; set aside.
crumbs are of fairly even size Divide dough into quarters.* ends together. With a sharp knife
I don’t leave it out too long)
(I hope that makes sense) 3. Whisk oil, vinegar, lemon zest and make cuts 2/3 of the way through the
Filling juice, 1/2 tsp salt, and 1/4 tsp pepper *At this point dough may ring at 1” intervals. Turn each section
4. Press mixture onto the
together in large bowl. Add shallot, be refrigerated and kept on its side. Let rise until double (35-
3/4 cup sugar bottom of an 8” square
basil, drained watermelon, and till the following day to be 40 minutes). Bake 375º for 25 to 30
baking pan
2 eggs tomatoes and toss gently to combine. rolled and baked. minutes. Yields 4 (make great gifts).
5. Bake for 15-20 minutes, Transfer to platter and evenly scatter
2 tbsp all purpose flour Frost with frosting made by beating
until edges are lightly brown mozzarella over top. Drizzle with
1/4 tsp baking powder extra oil and season with salt and 1 cup confectioner’s sugar with 1/4
6. Meanwhile, combine cup cream, 2 tbs butter; 1 tsp lemon
pepper to taste. Serve.
3 tbsp fresh or bottled filling ingredients in extract; 1/4 tsp grated lemon rind.
lemon juice another small bowl — SHARED BY LARRY POST Sprinkle with nuts if desired.
7. Beat at low speed until
— SHARED BY
mixed well
EVE KENNEDY’S MOM,
8. Pour filling over hot crust MILLICENT KENNEDY,
FROM HER COOKBOOK
9. Continue baking for 18-20 CONCOCTED
minutes, until filling is set CONFECTIONS
10. Cool well before cutting or
they will fall apart (sometimes
I chill them before I cut them)
11. Top with powdered sugar
— SHARED BY
CHRISTINE CARPENTER
16 17Tax Services
The Lifetime Learning credit is HOW DO I KNOW WHICH
generally worth a maximum of CREDIT TO TAKE?
$2,000. It’s calculated as 20%
of the first $10,000 of tuition and
The American Opportunity credit and
EDUCATION TAX CREDITS related expenses that you’ve paid
the Lifetime Learning credit cannot be
for the year.
claimed in the same year for the same
One major difference between the student, so you’ll need to pick one.
BRIAN MURRAY American Opportunity credit and the Because the American Opportunity
Tax Advisor Lifetime Learning credit is that the tax credit is available for all four years
bmurray@bwfa.com Lifetime Learning credit is generally of undergraduate education, is worth
limited to a total of $2,000 per tax more ($2,500 vs. $2,000), and the
return, regardless of the number of income limits to qualify are higher,
It’s tax time, and your kitchen table is littered with students in a family who may qualify that credit will probably be your first
choice. But if your child is attending
in a given year. So if you have twins
papers and forms. As if this isn’t bad enough, you who are in their senior year of college, school less than half-time, the
recently paid your child’s college semester bill, and your Lifetime Learning credit would Lifetime Learning credit will be your
only option (assuming you meet the
be worth $2,000, not $4,000.
you don’t know where you’ll find the money to pay income limits).
the taxes that you expect to owe.
HOW DO I CLAIM EITHER
CREDIT ON MY TAX RETURN?
Well, you might finally catch a break. To take the credit, both you and If your child has paid the tuition
your child must clear some hurdles: expenses, you can still take the credit Because a tax credit is a dollar-for-dollar
Now that your child is in college,
you might qualify for one of two • To qualify for the maximum
as long as you claim your child as a reduction against taxes owed, it’s more favorable Every year that you pay college
tuition you should receive Form
dependent on your return. But if your
education tax credits — the American American Opportunity credit in child has paid the tuition expenses than a tax deduction, which simply reduces the 1098-T from the college, showing
Opportunity credit and the Lifetime
Learning credit. And because a tax
2020, your MAGI must be below
$80,000 if you’re a single filer and
and isn’t claimed as a dependent on total income on which your tax is based. the tuition expenses you’ve paid for
the year. Then, at tax time, you must
your return, your child can take the
credit is a dollar-for-dollar reduction $160,000 if you’re a joint filer. credit on his or her own return. file Form 8863 to take either credit. If
against taxes owed, it’s more A partial credit is available for you are married, you must file a joint
favorable than a tax deduction, which single filers with a MAGI between The American Opportunity credit can return to take either credit. For more
simply reduces the total income on $80,000 and $90,000 and joint be taken for more than one student in information, see IRS Publication 970
which your tax is based. filers with a MAGI between the same year, provided each student LIFETIME LEARNING CREDIT To qualify for the maximum Lifetime
or consult a tax professional.
qualifies independently. So, if you Learning credit in 2020, your MAGI
$160,000 and $180,000.
have twins who are in their freshman must be below $58,000 if you’re a
AMERICAN The Lifetime Learning credit is a
• Your child must attend an eligible year of college (and you otherwise single filer and $118,000 if you’re a
OPPORTUNITY CREDIT tax credit for the qualified education
educational institution as defined meet the requirements), your credit joint filer. A partial credit is available
expenses that you, your spouse, or
by the IRS (generally, any post- would be worth $5,000. for single filers with a MAGI between
your child incur for courses taken to
The American Opportunity credit is secondary school that offers a $59,000 and $69,000 and joint filers
improve or acquire job skills (even
a tax credit that covers the first four degree program and is eligible However, there are other restrictions. with a MAGI between $118,000
courses related to sports, games,
years of your, your spouse’s or your to participate in federal aid You can’t take both the American and $138,000.
or hobbies qualify if they meet this
child’s undergraduate education. programs qualifies). Opportunity credit and the Lifetime requirement!). The Lifetime Learning
Learning credit in the same year for As with the American Opportunity
Graduate and professional courses credit is less restrictive than the
• Your child must attend college the same student. And whatever credit, if you withdraw money from
aren’t eligible. The credit is worth a American Opportunity credit. In
on at least a half-time basis. education expenses you cover with your 529 plan in the same year that
maximum of $2,500. It’s calculated as addition to college expenses, the
a tax-free distribution from your 529 you claim the Lifetime Learning credit,
100% of the first $2,000 of tuition and • Your child can’t have a felony Lifetime Learning credit covers
plan can’t be the same expenses your withdrawal cannot cover the
related expenses that you’ve paid for conviction. the tuition expenses of graduate
you use to qualify for the American same expenses that you use to qualify
the year, plus 25% of the next $2,000 students and students enrolled
Opportunity credit. for the Lifetime Learning credit.
of such expenses. • You must claim your child as a less than half-time.
dependent on your tax return.
18 19
19Tax Services
QUALIFYING FOR THE
HOME OFFICE DEDUCTION
LAWRENCE M. POST | CPA, MST, CFP®, CIMA®
Senior Tax & Planning Advisor
lpost@bwfa.com
Working from home THE HOME OFFICE
DEDUCTION IS REALLY
Now let’s consider the IRS
requirements. To qualify for a home
These tasks might include billing
customers, keeping books and
for storing inventory). As you might
expect, this test requires you to show
In plain English, this means that
your employer must ask you to work
can certainly provide A GROUP OF DEDUCTIONS office deduction, you must meet records, ordering supplies, setting that you exclusively use a portion of out of your home. The arrangement
you with personal two threshold tests — the place of
business test, and the regular and
up appointments, or writing reports.
For example, assume you’re a
your home for business purposes on
a regular basis.
must serve your employer’s business
needs, not vice versa.
First of all, what is a home office? A
benefits, such as a home office is a room in your home, a
exclusive use test. doctor at a local HMO who’s been
given examination space but no For example, assume you set aside The home office deduction for an
flexible schedule and portion of a room in your home, or a
office space. You use a room in one room in your home as your home employee who works at home is
separate building next to your home THE PLACE OF BUSINESS
more family time. But (such as a converted garage or barn) TEST IS SOMEWHAT FLEXIBLE your home regularly and exclusively office. You also use this room as a
playroom for your children. Here, you
taken as a miscellaneous itemized
deduction on Schedule A of Federal
to correspond with insurance
increasing numbers of that you use exclusively and regularly
companies, bill patients, and read wouldn’t meet the exclusive use test. Form 1040. This deduction is
to conduct business activities.
people are discovering To pass this test, you must show
that you use part of your home as:
medical journals. You have no other Now assume that you use one room
in your home exclusively for your
subject to the 2 percent limit for
miscellaneous itemized deductions.
This definition is important, because fixed location for conducting these
the tax advantages you may be able to deduct part of types of activities. In such a case, side business of selling insurance. However, as noted, this deduction is
• The principal place of business You engage in this business only not currently available.
as well. your housing expenses (such as for your trade or business, or
your space would likely pass the
occasionally. Because you don’t use
rent, utilities, and insurance) on your place of business test for a home
the office on a regular basis, you
federal income tax return if you have • A place where you regularly meet office deduction. IF YOU QUALIFY FOR THE
It’s no secret that you generally can’t still won’t qualify for the home office
a home office. This deduction (or with clients, customers, or patients DEDUCTION, YOU CAN
deduct certain personal expenses What if your home office is in a deduction.
group of deductions) is known as a DEDUCT ALL DIRECT
(e.g., homeowners insurance, utilities, In some cases, you can also meet separate structure next to your home,
home office deduction. To take the EXPENSES AND PART OF
and home repairs) on your federal the principal place of business like a shed or garage? In that case,
deduction, you’ll need to file Form TELECOMMUTERS MIGHT YOUR INDIRECT EXPENSES
income tax return. But if you’re using requirement if you conduct substantial it needn’t be your principal place of
8829 with the IRS. To even consider ALSO QUALIFY FOR THE
part of your home as a home office, administrative and management tasks business. However, you must use
the home office deduction, though, HOME OFFICE DEDUCTION You can deduct both your direct and
you may be able to write off part of for your outside business at home that office regularly and exclusively
your at-home business activities must indirect expenses regarding your
these expenses. To qualify for the and have no other fixed location in connection with your trade or
involve a trade or business — a NOTE: For 2018 to 2025, the home office. Direct expenses are
home office deduction, you must first where you conduct these activities. business. Be sure you use this
hobby won’t do. deduction for miscellaneous itemized costs that apply only to your home
understand the IRS requirements. structure only for business purposes
— you can’t store your car there. deductions subject to the 2 percent office. You can deduct these costs
floor (including unreimbursed in full against your business income.
employee expenses) is suspended. Some examples include the cost of
YOU MUST ALSO MEET a business telephone line and the
THE REGULAR AND If you telecommute or are an
To take the deduction, you’ll need to file Form EXCLUSIVE USE TEST employee who works at home, you
cost of painting your home office.
However, no deduction is allowed for
8829 with the IRS. To even consider the home may also qualify for the home office basic local telephone charges on the
deduction. You’d have to meet the
office deduction, though, your at-home business In general, you must also pass the
regular and exclusive use test before above requirements. In addition,
first line in your home, even if that line
is used for the home office.
activities must involve a trade or business — a you can take a home office deduction though, your home office must be for
the convenience of your employer.
hobby won’t do. (exceptions apply for taxpayers who
run day-care facilities from home and (CONTINUE READING ON PAGE 22)
for sellers who use part of their homes
20 21(CONT’D FROM PAGE 21) Qualifying for the Home Office Deduction
Indirect expenses are costs that CAN YOU SPELL “AUDIT”?
benefit your entire home. You can
deduct only the business portion
Historically, the IRS has closely
of your indirect expenses. Some
scrutinized home office deductions.
examples of indirect costs include
Here are some steps you can take
rent, deductible mortgage interest,
to substantiate the existence of
real estate taxes, and homeowners
your home office:
insurance. The business percentage
of your home is determined by • Use your home address on your
dividing the area exclusively used business cards, stationery, and
for business by the total area of the advertisements
home. For example, assume your
home is 2,000 square feet and your • Install a separate telephone line
home office is 200 square feet. Your for your business
business percentage is 10 percent
• Instruct clients or customers to
(200 divided by 2,000). In such a
visit your home office, and keep
case, if you rent your home, you can
a log of those visits
deduct 10 percent of your rent as part
of your home office deduction. • Log the dates, hours spent, and
type of work performed in your
Even if you don’t qualify for the home
home office
office deduction and are unable to
deduct home-related expenses (e.g., • Have business mail sent to Homeowners who NOTE: In addition, where the Because this area is complex, you You cannot use the simplified method
homeowners insurance), you can
still take a deduction for your regular
your home meet all require- business portion of the home is
separate from the dwelling unit (e.g.,
should consult a tax professional.
Also, you might want to read IRS
if you are an employee with a home
office, and you receive advances,
business expenses, such as the
HAVING A HOME OFFICE
ments can generally an office in a converted detached Publication 587, Business Use of allowances, or reimbursements for
Your Home. expenses related to the business
purchase of file cabinets, business
equipment, and supplies.
CAN BE A FACTOR WHEN exclude from federal garage) any capital gain on the sale
of the house has to be apportioned; use of your home under an expense
YOU SELL YOUR HOME
income tax up to only the part of the gain allocable to OPTIONAL SIMPLIFIED METHOD or reimbursement allowance with
the residential portion is eligible for your employer.
SOME OF YOUR HOME OFFICE
Unless you’re careful, deductions $250,000 of capital exclusion.
OF CALCULATION AVAILABLE
EXPENSES MAY BE LIMITED
today can cost you money when you gain (up to $500,000 For example, assume a self-employed For tax years beginning on or after
Each year, you can choose whether
to use the simplified method of
sell your home. Homeowners who
If the gross income from your meet all requirements can generally if you’re married and accountant bought a home in 1998 January 1, 2013, you’re able to calculating the deduction or to use
actual expenses. There are two
business (the one associated with
the home office) equals or exceeds
exclude from federal income tax file a joint return) and sells the home several years later
at a $20,000 gain. Although the house
use an optional simplified method
of calculating your home office things to keep in mind, though:
up to $250,000 of capital gain (up
your regular business expenses to $500,000 if you’re married and when a principal was always used as his principal deduction. The simplified method
• If you use the simplified method
residence, the accountant used one doesn’t change the requirements
(including depreciation), all expenses
for the business use of your home
file a joint return) when a principal
residence is sold. You may end up
residence is sold. room within the house as his business for claiming the deduction, it simply
in one year, and in a later year use
office. Over the years, the accountant actual expenses, special rules will
can be deducted. But if your gross paying some taxes, though, if you changes the way the deduction is
claimed $2,000 of depreciation apply in calculating depreciation
income is less than your total have a home office. That’s because calculated. Instead of determining
business expenses, certain expense when you sell your principal residence, deductions for his office. Under IRS and allocating actual expenses, • If you are carrying forward an
deductions for the business use of an amount of capital gain equal to regulations, $18,000 of the capital under the simplified method you unused deduction (because your
your home are limited. The deduction certain depreciation deductions you gain will be tax free. Only the $2,000 calculate the home office deduction business deduction exceeded your
isn’t lost forever, though. It’s simply were entitled to (as a result of having of the gain equal to the depreciation by multiplying the square footage of business income in a prior year),
carried forward to the next year. your home office) won’t qualify for the deductions will be taxable. the home office (up to a maximum you will not be able to claim the
exclusion. Specifically, the exclusion of 300 square feet) by $5. Since deduction in any year in which you
If the accountant’s office had been square footage is capped at 300, the
won’t cover an amount equal to use the simplified method — you’ll
located in a converted detached maximum deduction available under
depreciation deductions attributable have to wait for the next year you
garage on his property, he would the simplified method is $1,500.
to the business use of your home use actual expenses to claim the
have to treat the sale as two separate
after May 6, 1997. unused deduction
transactions and pay tax on any gain
allocable to the converted garage.
22 23Business Services
Your new (slightly-outside-the-bull’s- Having unhappy customers often
eye) customer tells her friends about leads the owner to step in and “fix”
how great you are, and how willing the problem. While some founders can
THE BIG THING HOLDING you are to listen to your customers, indeed create the customized product
BACK SMALL BUSINESSES and she refers a prospect even or service for their new, outside-the-
further outside your bull’s eye who bull’s-eye customer, they are making
again, asks you for another tweak. their company reliant on them in
the process.
BRIAN MACMILLAN Making these changes to your
Managing Director Mergers & Acquisitions original product or service to A business reliant on its founder will
bmacmillan@bwfa.com accommodate customers outside stall out at a handful of employees
your bull’s eye seems innocent when the founder runs out of hours
enough at the time, but eventually, in the day.
Small businesses stay Why do entrepreneurs go outside
their bull’s eye? When you’re a self-
it undermines your growth. Think about teaching a toddler how
to tie his shoes. The first few attempts
The same is true of your employees.
They need time to truly master the The secret to avoiding this plateau,
small either by choice, funded start-up, you’re scrambling Why? are usually rough. It’s a new skill delivery or your product or service. and continuing to grow, is to be
brutally disciplined in only serving
or because they start — just trying to bootstrap your way
to a company. You don’t have a lot of To grow a business beyond your
and their tiny hands have never had
to make bunny ears before. You
Every time you make a tweak for a
new customer outside your bull’s customers in your bull’s eye for much
chasing growth in the money to invest in formal marketing, efforts, you need to hire employees
(or build technology) that can do the
break it down for the child and show eye, it’s like changing the instructions longer than it feels natural. When
so you rely on word-of-mouth and them how to master each step. It can on tying your shoe laces. It’s dis- you want to grow, the temptation is
wrong places. referrals, which also means you’re work. As humans, we are usually take weeks, but eventually they get it. orienting for everyone and leads to take whatever revenue you can, but
lousy at doing something for the first the kind of growth that comes from
often talking to people outside of As adults, we don’t even think about substandard products and services,
When you strip away the layers, it all time, but can master most things serving customers outside your bull’s
your bull’s eye. tying our shoes — we’ve mastered which customers receive and are
comes down to darts. with enough repetition. eye can be a dead end.
the skill by repetition. less than enthusiastic about.
These prospects may experience
Imagine a dart board with a bull’s eye the problem you’re trying to solve,
and around it is a series of wider and but they are slightly different (that’s
wider circles. The bull’s eye is where why they’re not in the bull’s eye).
the people just like you hang out. They like your product or service
They are the people (or businesses) but want a little tweak to it: a
who feel the problem your company customization or a different version.
set out to solve. They are usually your You don’t see the harm in making
first customers and raving fans. a change and start to adjust your
offering to accommodate the
The further you go outside of your customers outside your bull’s eye.
bull’s eye, the less these prospects
feel your exact pain.
To grow a business beyond your efforts, you need
to hire employees (or build technology) that can do
the work. As humans, we are usually lousy at doing
something for the first time, but can master most
things with enough repetition.
24 25You can also read
