Small Business Administration (SBA) financing has been around for a long time, but these loans are available to more business owners than ever due to recent program enhancements.
Your banker should be able to take you through the programs and eligibility requirements to see if an SBA loan fits your needs, says Tim Dixon, SBA program manager and senior vice president at FirstMerit Bank. And if you work with a preferred lender who has the authority to make decisions on behalf of the SBA, the SBA lending process can be straightforward.
“We do the heavy lifting for the client and try to make the SBA loan process look very much like any conventional business loan,” Dixon says.
Smart Business spoke with Dixon about SBA lending changes.
What traditionally has been covered by SBA lending?
The core SBA 7(a) lending programs can help when your company:
- Has been in business for a short time.
- Is tight on collateral or is leveraged.
- Has some particular industry risk.
- Cannot meet standard down payments.
- Needs extended amortization to better fit with cash flow.
The two main SBA loan programs are 7(a) and 504, which is done with an area Certified Development Company. The 7(a) loans have a broad range of eligible uses and can serve a variety of purposes — real estate, equipment, working capital, refinancing debt, financing a change in ownership, etc.
The 504 program, which typically has slightly larger loan amounts, focuses on economic development and expansion, and the job retention and creation that come along with it. There are just a handful of eligible purposes, such as real estate purchase and expansion, or purchasing heavy equipment that has a useful life of at least 10 years. And certain types of projects may be eligible for special consideration, including energy efficient projects or projects located in targeted economic development areas.
What SBA program changes are enabling more companies to receive larger loans?
Several years ago, the SBA expanded its role by increasing the size of loans that can be extended. The maximum aggregate exposure of SBA-guaranteed loans for standard SBA programs is $5 million. However, under the 504 loan program, you can go even higher in terms of total project amount. Say you’re buying real estate or doing a significant expansion, your total project could be as high as $12 million when you leverage all your dollars together. The bank could do a first mortgage loan, and the SBA would do a second mortgage financing with a long-term fixed rate, while the borrower puts some equity into the project.
At the same time, the SBA increased the size of businesses that can qualify for lending. What might have been considered a midsize company now qualifies for these ‘small business’ loans.
Another change became effective Oct. 1. The SBA authorized a waiver of the SBA guarantee fee on 7(a) loans of $150,000 or less. The waiver is very broad, just based on the loan’s dollar size. It can be used for any number of purposes, such as working capital, equipment, refinancing, etc. It’s really targeted at benefitting traditional small business owners at those loan amounts — helping grow Main Street. It runs through this fiscal year, or until Sept. 30, 2014.
What has been the impact of these enhancements on lending?
Some of the changes have been in place for a few years, and have really had an impact on increasing the number of loans.
In addition, the SBA has been busy since some of its major program changes, providing continued enhancements. The SBA is always looking at the underlying eligibility requirements to try to provide simplicity for banks and businesses.
Have any SBA loan programs been reduced?
Yes. There was a temporary program that expired Sept. 30, 2012. It allowed banks to use the 504 program to refinance eligible projects and debt. It locked in a good portion of the deal at low 10- or 20-year fixed-rate financing. The banking industry has been lobbying to have that program resurrected again. The program might return later this year or in 2014. ●
All opinions expressed herein are those of the authors/sources and do not necessarily reflect the views of FirstMerit Corporation.
Insights Banking & Finance is brought to you by FirstMerit Bank
As we emerge from the worst recession in memory, employers are cautiously rebuilding their workforces. Many long-term unemployed are starting to get interviews and offers, and some are seeing a new wrinkle: credit background checks.
Those checks might unearth financial problems that would cause an employer to reject a candidate. But beware of the Fair Credit Reporting Act (FCRA), the Consumer Credit Reporting Reform Act and additional state laws.
It is important to protect the company’s bank account by ensuring that access is limited to those who can be trusted. So how can you tell for sure? While there is no fail-safe guarantee, credit background checks can raise red flags early in the process.
“The wisest course for employers is to make the best hires they can, using all of the legitimate, nondiscriminatory information accessible to them within the law,” says Karen C. Lefton, a partner in the Labor & Employment group at Brouse McDowell.
Smart Business spoke with Lefton about her recommendations on conducting credit background checks.
What steps should a company take as it makes hiring decisions?
1) Get the candidate’s consent for the credit check in advance and in writing. Work with your attorney to create a clear consent form. It should state that the candidate acknowledges and agrees that the consumer-reporting agency will furnish a report to the employer, and that the employer intends to use the information for employment purposes.
2) Engage a reputable consumer-reporting agency, one well versed in the limitations of the FCRA, to conduct the review.
3) Provide the agency with reasonable criteria for its review, such as verification of the applicant’s Social Security number, balances totaling $2,000 or more that are at least 60 days past due, lack of credit, current garnishments on earnings, overdue child support or other outstanding collections of $2,000 or more.
4) Make sure the report is limited to the criteria sought. If the search turns up information that the employer should not know about — the candidate’s disabled child, for example — that information should be withheld to insulate the employer from any allegation of discrimination in the hiring process.
5) Before taking adverse action, provide the candidate with written notice that a copy of the report is available, as is a summary of his or her rights under the FCRA.
Keep in mind that errors occur. The ‘John Smith’ applying for a job may not be the same ‘John Smith’ with a horrendous credit history. Fairness requires that all candidates be given the opportunity to contest black marks. Only then can you ensure that hiring decisions are based on bona fide qualifications, or the lack there of. The hiring decision should be based largely on whether there is increased company risk, whether that risk is outweighed by the benefit of the candidate’s other credentials and the specific access his or her new position gives him or her to company funds.
Can credit checks be used as a basis to not hire or promote someone?
Yes, if you have followed the steps outlined. You are not required to hire a CFO mired in debt to collect your receivables or to pay your bills. Further, the FCRA does not distinguish between job candidates and current employees, meaning that consumer reports may be used to evaluate a person for promotion, reassignment or retention. But, again, employees must give conspicuous consent to the performance of credit checks.
What should be part of a background check, and does it vary by position?
Good credit and sound financial history are absolutely essential when an employee has access to money, whether yours or a customer’s. And don’t be lax because the sums aren’t huge. A local library employee, fired after $350,000 was discovered missing, goes on trial for aggravated theft later this month, accused of stealing nickels and dimes regularly over six years. Criminal background and driving records also might be relevant. A history of violence or criminal behavior are disqualifying for employees working in secluded areas with customers or in the customers’ homes. A bad driving record can knock out a delivery position candidate. Employers must be vigilant to avoid putting customers, co-workers or the public in peril due to bad hiring decisions. ●
Find out more about Brouse McDowell’s Labor & Employment law services.
Insights Legal Affairs is brought to you by Brouse McDowell
Not all high net worth individuals started out that way; they’ve spent years building a business and career, slowly accumulating assets and wealth. Even though they have more items to insure and face different risks, they often don’t adjust their personal insurance to reflect their changing needs.
“They are so busy building a business, they often don’t take the time to adjust their coverage as their needs and circumstances have changed,” says Kevin Franczkowski, a client advisor at SeibertKeck Insurance Agency, Inc.
Most of these people would never go without necessary coverages on their business, but there can be major inadequacies with their personal insurance, he says.
Smart Business spoke with Franczkowski about where high net worth individuals need more or different types of insurance coverage.
What is the biggest area that high net worth individuals underinsure?
The biggest concern is liability. While it is upsetting to lose an expensive piece of jewelry, it generally will not ruin someone financially; a liability claim, however, can. With inadequate liability and/or umbrella coverage, one incident can affect the total wealth and earnings of an individual and their family.
If the individual sits on non-profit boards, or is involved with charity work, he or she needs to consider increasing his or her limits and supplementing coverage with an umbrella policy. If a non-profit is sued, it is common to name all the individual board members in the suit as well. Without the proper coverage, you could be footing the defense or judgment bill yourself.
For example: A high net worth individual sat on a youth athletic league’s board of directors, and a former coach sued all board members for improper dismissal. Thankfully he had a personal umbrella policy that covered him for liability resulting from unpaid or voluntary positions and paid for his entire defense.
Auto accidents are a common source of claims and can result in financial pain if you and your estate are not adequately covered. For example: An individual has a $1 million umbrella policy over a $250,000 per person liability limit with his automobile policy. Unfortunately, he or she had an accident in which a child was severely injured. The child’s care will more than likely exceed $5 million within 15 years; his or her estate, business, and earnings will all be at risk to cover this situation.
What problems do you see with homeowner’s policies?
Homeowners policies come with limitations on certain items like fur, jewelry, fine arts and firearms. These provided limits are not usually adequate for high net worth individuals. As individuals gather wealth, they tend to gather expensive items that with a standard policy have a very limited amount of coverage. It is important to review these items with your insurance agent to be sure the items are properly and fully covered. Collectibles and rare or unique items often require a separate policy, known as an Inland Marine Policy.
Making sure the values on your homeowner’s policy are correct, and ensuring you use insurance products that are designed for higher risk, will be extremely important in the event of a claim.
How should household help be covered?
If household help, such as a gardener, nanny, cleaner etc., doesn’t come from an established company, you need to pay workers’ compensation. This will protect you in case they are injured in your home. If the employee comes through a service company, ask for proof of coverage with a workers’ compensation certificate. It is also important to inquire with the company about background checks for anyone coming to work in your home to make sure there’s compatibility, experience and no other issues. Your insurance agent can assist you with determining if the company’s coverage will extend to the employee, or if you need to purchase your own policy for them.
A good agent will do a risk management audit, asking what you’ve got to protect and walking you through the different items you have to ensure there’s adequate coverage. By spending time with a qualified high net worth agent, you’ll know your assets and income are properly insured. ●
Kevin Franczkowski is a client advisor at SeibertKeck Insurance Agency, Inc. Reach him at (330) 867-3140 or firstname.lastname@example.org.
Insights Business Insurance is brought to you by SeibertKeck
At first glance, dropping health insurance for employees and sending them to the exchanges sounds like a win for everyone. Companies can give raises to make up the difference for employees, who then buy insurance for less, and everyone saves money.
But that’s not the result when you factor in all of the numbers, says William F. Hutter, CEO of Sequent.
“Drop your health insurance and give employees the same money is the mantra we keep hearing. It is not a simple decision and should not be treated as such for middle-market companies,” Hutter says.
Smart Business spoke with Hutter about the costs associated with this decision, and its potential impact on your business.
Would companies rather not worry about health insurance because of its volatility?
Companies are tired of thinking about health insurance; it’s becoming another distraction away from their business. Of course, that’s just considering cost and not taking into account the cultural issues involved with the perception of whether you’re taking care of your employees.
For example, a client was advised that it could save money by sending everyone to the exchange and just giving employees raises. That has proven to be a fallacy. When you review all of the numbers, the savings are not there.
The company has 109 employees, and 79 are covered by the health plan. It has a high deductible, so the company contributes to a health reimbursement account (HRA) for employees.
Basic costs of the plan are:
- Total insurance premiums — $653,000.
- Company share — $522,400.
- Employees’ share — $130,600.
- Company HRA cost — $200,000.
- Total cost to company — $722,400.
Dropping insurance and giving those employees $7,500 in raises each — a total of $592,500 — would appear to save the company $129,900. But you have to consider the total cost impact, including deductible burden, taxes and penalties.
What are the tax implications under this scenario?
Because of the loss of the pre-tax deduction, employees and the company both pay more in taxes on the $592,500 in raises — $199,937 by employees and $73,395 by the company.
There’s also an Affordable Care Act (ACA) penalty of $114,000 the company would be required to pay because it would no longer be a health plan sponsor. And now the employees also are paying all of the plan deductible, so that’s another $158,000, assuming a $2,000 deductible.
When you consider all of those factors, the total cost is $779,894, or about $57,000 more to not offer health insurance. When shown the entire picture, the client was blown away.
Are there other variables to consider, even if dropping health insurance for employees made financial sense?
In addition to how it would be perceived by employees, there’s a concern about making a decision based on the short term. Organizations need to think more strategically, rather than looking just at how to fix a current problem.
No one knows how the exchanges are going to shake out. They are getting a tax subsidy for the first two years in the form of a $62 annual tax on every employee covered by an insurance carrier outside of the exchanges. In theory, that provides a pool of money carriers can draw on until the exchanges find their own balance regarding enrollees, costs and risks. That could result in a significant increase in premiums in two years when the subsidy goes away.
Also, you want to be cautious about dropping insurance and giving up the tax advantage of sponsoring a plan because it’s difficult to go back. That’s really the objective of the ACA — it’s a revenue enhancement bill rather than a health care bill. That goes back to the 2005 study by Sens. Max Baucus and Chuck Grassley, which flowed right into health care reform.
This analysis and case study is a dramatic illustration of how the changes written into health care reform are really about closing tax loopholes. Companies may be better off keeping the tax advantage of health care for themselves and their employees by providing access to predictable health care coverage. ●
Insights HR Outsourcing is brought to you by Sequent
Regulatory audits of retirement plans are on the rise — in number and scope — from both the Department of Labor (DOL) and the IRS.
“The DOL has hired hundreds of plan auditors and they are actively looking for violations. Trivial issues, or issues often overlooked in the past, are now being scrutinized during a regulatory audit,” says Mike Spickard, CEO and Chief Actuary at Tegrit Group. “The IRS or DOL will always find something during an audit; often, there are penalties, interest and some pain involved.”
Smart Business spoke with Spickard about avoiding regulatory audits, and what to do if that’s not possible.
Why has there been an uptick?
From the DOL’s perspective, the No. 1 trigger of a regulatory audit is a pattern of participant complaints. Additionally, the IRS and DOL have started to communicate with each other more frequently in the past four or five years. So, if the IRS tags you for an audit and auditors see problems within the DOL’s jurisdiction, you could be dealing with two audits.
How can plan sponsors avoid audits?
To prevent an audit, be an engaged plan sponsor. Know what’s going on with your plan and manage it as part of your corporate operations. Though a plan sponsor’s primary responsibility is running his or her business, it must be recognized that a retirement plan is both an asset and a liability, and needs to be managed as such.
Your plan must be amended if the law or your company changes. Everything needs to be up to date, and the plan administered pursuant to the terms of its document. At a minimum, have an annual review with all service providers, your recordkeeper, third-party administrator (TPA), financial advisors, etc., to ensure everyone is on the same page.
Further, it’s important to stay in tune with your employees. This enables you to deal with plan issues, real or perceived, before participants call the DOL.
What triggers a regulatory audit?
The IRS does not disclose how it selects plans for audits. Audits are partly random, but certain activities may raise flags, such as a late Form 5500 or negative publicity surrounding a troubled company. Certain Form 5500 responses also may trigger an audit. For example, one question on the form is: Did the plan have a fidelity bond in place throughout the plan year? A fidelity bond is required; a ‘no’ may indicate you don’t know what you’re doing, causing a response from the IRS.
What should you do if tapped for an audit?
When you get the initial audit notice, let all your service providers know. Often one service provider, usually the TPA, takes the lead. But it’s easier to respond if records are organized and information is readily available. Disorganization causes auditors to linger, which ultimately costs more.
The DOL or the IRS gives the sponsor, and its advisors, time to gather plan documents, amendments, payroll records, contribution reports, record-keeping reports, etc. Screen all necessary information, as well as any additional information that could be required later. Only give auditors what they ask for.
After the initial review, auditors decide if they want to do a deeper dive on specific issues, or expand the audit to additional years. If your service providers compare notes and plan, you can at least stay in step with the auditor, if not one step ahead.
Afterward, how can business owners thrive?
Pay attention to the audit findings, not only addressing problems throughout the audit, but also indications of future problems.
If you successfully defend an issue, the fact that an auditor challenged it is an opportunity to seek a better solution. For example, it was discovered during an audit that one small business mailed checks to its recordkeeper, delaying the deposit into participant accounts while the check was in transit. This delay isn’t necessarily a violation, but a better alternative would be an automated clearinghouse or wire transfer. Even in successful audits there are opportunities for improvement. ●
Mike Spickard is CEO, Chief Actuary at Tegrit Group. Reach him at (330) 644-2044 or email@example.com.
Insights Retirement Planning Services is brought to you by Tegrit Group
According to Ad Age, the nation’s 100 biggest advertisers spent an estimated $104.5 billion on advertising last year, an increase of only 2.8 percent from the previous year. This is the lowest growth rate since the ad industry recovery began in 2010, reflecting the slow pace of the U.S. economy as a whole. So the challenge for savvy marketers now is to be certain that every promotional dollar spent grows their customer base.
A few decades ago, media choices could be counted on two hands. Today, there are several dozen thanks to the burgeoning digital marketing sector: social media, mobile websites, Web display ads, paid search and email marketing, to name a few.
What to do with so many choices? We asked the Covey-Odell Advertising staff that has worked for more than 100 organizations for more than four decades to suggest the three most effective marketing tools in the challenging second decade of the millennium. The top three are:
1. Research. In an economic downturn, research budgets are often the first to go, though vital to customer satisfaction and growth. Survey your customers to determine how well your company is performing; your strengths and weaknesses; customer input regarding phone, personal and written communications; the attitudes and professional performance of your support staff; and how you can boost your image, service and quality.
Customers with a problem will relate this to 10 other people, and you’ll be able to use this research to improve future communications.
2. Media. With dozens of choices, basic principles apply to all. Newspapers, magazines, cable/broadcast TV, radio, outdoor, direct mail and online strategies are proven business builders, but you should continually assess each regarding their efficiency in reaching target audiences.
Repeat ads to maximize efficiency through their cumulative power. Consider a mobile website, blogging and one or more social media channels. All are extremely cost-effective and reinforce an image of your company as progressive. Promote your website via every means — in your ads, publicity, customer handouts, lobby signs, emails, invoices and business cards.
3. Creative. This is the most important, because it is the bottom line of effectiveness. A bad ad is a total waste of your marketing dollar. A good ad is unique, interesting, to the point, tightly written, consistent and, most of all, spells out benefits to the readers or listeners.
We track ads of every size and in every media and find that at least a third are a waste of the advertisers’ money. Good creative backed by solid research will make your ads rise above the din and increase your company’s sales, brand identity and market share. ●
Rod A. Covey is president of Covey-Odell Advertising Ltd. of North Canton. He launched Covey-Odell Advertising in 2008, and the North Canton Area Chamber of Commerce named the company the 2009 Business of the Year. For more information, visit www.covey-odell.com.
The greatest baseball game I ever saw was Game 7 of the 1991 World Series. The Minnesota Twins defeated the Atlanta Braves 1-0 in a 10-inning nail bitter, adding an exclamation point to what many consider the best World Series ever played.
In that deciding game, Twins’ ace Jack Morris gave one of the gutsiest pitching performances in baseball history — scattering 7 hits over 10 scoreless innings while throwing a staggering 126 pitches.
Morris, who in 1994 spent a short stint with the Cleveland Indians, spent nearly 3 1/2 hours on one of the world’s grandest stages and barely broke a sweat. From first pitch to last, he relentlessly attacked Atlanta’s hitters. Whenever a batter reached base, he dug in his heels and adjusted his approach.
One of the things I love most about baseball is the strategy that unfolds during a game. It’s fascinating to watch as the players make adjustments throughout the game as the situations change.
Morris’ performance, as well as the entire 1991 World Series, demonstrates a close correlation between effective adjustments and victory. In the business world, this same ability to swiftly adapt to marketplace fluctuations often means the difference between success and failure. Newton’s Third Law of Motion offers one reason why: “For every action there is an equal and opposite reaction.”
And though Newton lived long before the Grand Old Game arose, he had the right idea: In business, like in baseball, those who react best win. Adjustments, however, aren’t made in a vacuum. Success depends on two equally important pieces — a leader and a team. The leader has four responsibilities: Develop the game plan; lay out a vision for success; achieve buy-in by inspiring others to step up and follow; and execute on the plan. In baseball, this role falls to the pitcher. In business, that often means the CEO or another senior executive.
The team also must effectively play defense behind the pitcher. They need to collectively grind out base hits on offense and score a few runs — at least one more than the other guys. Victory represents having the ever-so-slightest edge on your opponent. It isn’t necessary to engineer a massacre to secure the W.
As the innings pass, the plan requires continuous adjustment. The leader’s tactics need to be tweaked so they better address what’s happening at any given moment.
Trust is just as important. A leader must trust the team to do its job, especially when that job looks more like a curveball than a straight fastball. And in return, the team must trust its leader to make the right adjustments at the right time.
But just like Morris grinding it out inning-after-inning, batter-after-batter, if you want to make successful adjustment in business, you have to know your end goal. And then, make sure your focus is clear and accept nothing less than success. By doing so, you can rally your team to rise to the occasion and make adjustments.
Then, maybe, just maybe, your organization will end up winning its own version of a World Series ring. ●
Dustin S. Klein is publisher and vice president of operations of Smart Business Network, publishers of Smart Business magazine. Reach him at firstname.lastname@example.org (440) 250-7026.
ABCO Fire Protection, founder of the Live Safe Foundation, took top honors recently as recipient of the Shatten Civic Distinction Award from The Entrepreneurs EDGE.
Each year, as part of the Leading EDGE Awards Program, The Entrepreneurs EDGE highlights one of 101 companies with the award. The award recognizes a Leading EDGE honoree that exemplifies the spirit of Richard Shatten, who had a strong love for the Northeast Ohio community and gave his time tirelessly in an effort to make it better for everyone. His life was cut short in 2002 when he died of a brain tumor. By shedding light on companies that give back like he did, EDGE honors his memory and continues to build on the ideas that he so passionately supported.
The Live Save Foundation was founded in 2009 by Jill Marcinick of ABCO to provide safety education, awareness and lifesaving tools to the community. It is an Ohio based non-profit devoted to causes that will reduce national fire fatalities and losses.
ABCO employees and volunteers at Live Safe have worked to enhance the missions of such organizations at The Ohio State University Medical Burn Center, Society of Fire Protection Engineers, Center for Campus Fire Safety, Christine Wilson Foundation, Phoenix Society for Burn Survivors, Christine’s Christmas, International Association of Fallen Firefighters, Leadership Dublin and others.
As part of the activities at the awards ceremony, EDGE asked attendees to participate in an exercise to demonstrate the power of a dollar. Attendees were asked to place $1 in an envelope. As a result EDGE matched funds and $500 was raised that ABCO could use for the charitable cause of its choice.
Inspired by the exercise and the Shatten Civic Distinction Award, the Live Safe Foundation through a strategic programmatic partnership with ABCO Fire Protection is partnering to provide the “Live Safe with the ABCO-Shatten Education Fund.” The fund has been established to support the communities where ABCO associates live and work. The $500, as a starting point, will offer financial assistance for college students.
The education fund application requires students to submit an essay on creating unique education solutions related to fire safety and living in a fire-safe environment. According to the U.S. Department of Education, there were more than 19 million students enrolled in two- and four-year institutions in fall 2009, and for many, this was their first time living away from home and facing new experiences.
The National Fire Protection Association reports in a fall 2010 survey that U.S. fire departments responded to more than 1.3 million fires and 2 million false alarms in 2009. The data represents a serious problem in the country as home fires caused 85 percent of the civilian fire deaths. ABCO and the Live Safe Foundation believe through leadership and awareness, students can make an impact on their peers.
The vision for the fund is to enable recipients to support their education in areas where ABCO associates live and work. The funds may be used to help purchase supplies and textbooks. In the future, it may provide a “lifeline” to students overcoming the impact of an emergency and helping them stay on track. In addition to the funds provided, students will be given a special Custom Student Fire Safety Kit when going off to college, including a fire extinguisher, photoelectric smoke detector, and access to the Flashpoint online fire safety curriculum from the National Institute of Fire and Safety Training.
The Shatten Civic Distinction Award is presented by The Entrepreneurs EDGE with sponsorship support from Fairmount Minerals and Davey Tree. In addition to recognition at the annual Leading EDGE Awards Dinner and Program, recipients are recognized with a tree-planting ceremony at their company location in the fall. The program has honored eight exemplary companies since its inception, including ABCO Fire Protection, BrandMuscle, Fairmount Minerals, HumanArc, Main Street Gourmet, Marous Brothers, PartsSource and Shearer’s Foods.
The Entrepreneurs EDGE drives growth for companies by bringing together their leadership teams to share best practices and inspire each other to pursue high-value opportunities. EDGE is a 501(c)(3) non-profit and is the only NEO economic development group that is focused on helping midsized companies strengthen their leadership teams in order to take their companies to the next level. ●
EDGE operates with a mission of enhancing the Northeast Ohio community where quality of life and opportunity abound for all. Civic engagement is intertwined in everything EDGE does, from the Leading EDGE Awards Program to their midsized company membership and student programs. For more information on The Entrepreneurs Edge, go to www.edgef.org.
Thirty years ago, motivated by a desire to be healthier, I quit smoking. That change had an unanticipated outcome that altered the course of my life: I learned that I had the ability to break a habit and replace it with a new one.
That might sound simple, but for me it was transformative. It extended far beyond a physical act and changed the way I thought about not only myself, but also the world around me.
I started by replacing smoking with new habits — “positive addictions.” If I wanted a cigarette, I would brush my teeth instead, or run up and down a flight of stairs. Eventually, I took up running. In a sense, I was running from a former self to a new self. I came to see myself as someone who could change, no matter how unlikely that change had once seemed.
While we often discuss shifting paradigms in work, we often forget about the need for shifting our individual paradigms. We must actively reshape the mental models we have that tell us what is and isn’t possible.
These models so often condition failure. Deep ruts form in our thinking that lead us to do things as we’ve always done them. Creating new habits helps to steer us into new territory.
When we think about harmful habits, or habits that are limiting our growth, we might think of things like smoking, overeating or disorganization. But there are countless others that can be holding us back.
Out with the old, in with the new
Here are steps for overcoming an unwanted habit and replacing it with a beneficial one.
1. Identify the triggers
All of our habits have triggers, the hidden motivations that make us engage in the habit. In my case, I smoked when I was stressed, upset or tired. I believed that smoking helped me feel better.
2. Recognize the tradeoffs
I was “trading” stress for a cigarette, or so I thought. Of course smoking didn’t solve anything — it didn’t get at the root of my stress, just momentarily alleviated it. Once you know what you’re trading, ask yourself — is it worth it?
3. Define the possible
In order to quit smoking, I needed to have a vision of my smoke-free life. Who would I be as a non-smoker? What was the value and benefit to me of being smoke-free? I saw my future self as a healthy, vibrant, energetic person. I seized that image and held on to it when I was tempted to smoke.
4. Identify a new habit to replace
the old one
When I had an urge to smoke I replaced that urge by doing something else to occupy my mind, such as running. Find a new habit that will make you a better person.
5. Strengthen the new habit
To become comfortable with a new habit will take time. It’s unrealistic to think you will unlearn one way of doing things and learn a new way overnight. It takes repeated and renewed effort, but with practice you will become more confident.
6. Reward yourself
We all appreciate recognition of a job well done. In this case though, don’t wait for someone else to congratulate you. Do it yourself. Set goals and then reward yourself when you meet them. ●
Donna Rae Smith is a guest blogger and columnist for Smart Business. She is the founder and CEO of Bright Side Inc.®, a transformational change catalyst company that has partnered with more than 250 of the world’s most influential companies. For more information, visit www.bright-side.com or contact Smith at email@example.com.