Ten Ways to Cut It

It’s easy to be negative about cost-cutting. “Everything just costs more,” a business owner will say; the subtext being, “What’s the use?”

Don’t give up! There are ways to cut costs. The first step is to identify where the money goes . . . and why. Then look at creative ways to shave off the non-essential while keeping the shape of your business intact.

1. Look Beyond In-House

Outsourcing is the latest word in cost-cutting, and it can mean more than one thing. First–outsourcing labor. Temporary employees or contract workers are the answer for jobs that aren’t included in the daily running of a business. Temps make sense for holiday rush periods or for short-term assignments or campaigns. Outsourcing certain operations, such as photocopying, mailing, and telephone answering, is an increasingly popular way to cut down on carrying these costs in-house. Another, less typical, kind of outsourcing is “hiring” temporary space. If your business needs a conference room only occasionally or only a small portion of a warehouse, consider subletting the space from another business and cut the square footage of your own operation.

2. Don’t Assume Outsourcing Is Always Cheaper

It pays to keep some operations in-house. For instance, if your receptionist can do some on-line bookkeeping while waiting for the phone to ring, or if your warehouse worker can stuff envelopes for a mailing in between delivery deadlines, you should consider these as in-house candidates. In addition, there are some jobs that should stay in-house even if outsourcing may appear to be a bargain–those that involve issues of confidentiality or accounting operations that might help owners and managers to better understand the business.

3. Take Advantage of the “Free Lunch”

It may be food for thought instead of steak, but there are many free offers of benefit to business owners. Continuing education lectures, SBA seminars, informational evenings offered by local banks and corporations are often free or inexpensive ways to hone business acumen. Try these before going the more expensive route via consultants.

4. Go Electronic . . .

If you haven’t yet substituted a voice mail system for a receptionist, you are paying an unnecessary yearly salary. Using e-mail can replace the need for most correspondence–saving the cost of a secretarial salary, or at least full-time. Computer programs for bookkeeping and for riding herd on inventory and payroll can also reduce employee numbers or hours. Selling on-line is cheaper than traditional advertising, and the individual targeting may pay off in more “hits,” further reducing the cost of doing this particular type of business.

5. . . . But Don’t Get Shocked

The cost of sending faxes, using cellular phones, and certain on-line services can get lost in the glow of their convenience. Monitor the use of all such devices. If charges seem unreasonable due to the service provider’s fees instead of employee usage, negotiate with the carrier or provider. When threatened with a loss of business, they will often lower fees or at least negotiate payment schedules. Another electronic cost-saver: run certain equipment during off-peak electricity hours and save up to 30 percent annually in electric bills.

6. Shop Around

Don’t be a slave to recommendations. If your computer consultant has a “pet” equipment source, or your graphic designer has a favored printer, make a few calls to see how the prices stack up. You could end up with big savings for very little effort. The same holds for seeking financing. You should always talk to at least two banks, looking for the best loan terms and interest rates.

7. Offer Discounts; Take Discounts

By offering customers early-payment discounts, you can “borrow” their money instead of the bank’s. Compare the advantage of doing this against borrowing from a lending institution and see which works best for you. You can also be on the other end of discounting by checking out what may be available. It sometimes helps to join a professional organization, in order to get the best discounted rates on anything from advertising to shipping services.

8. Purchase from the Source

If you deal in a product, go to the source whenever you can. For example, the owner of a children’s clothing business specializing in sweaters goes directly to the spinning mill for her yarns. Not only can she specify the exact colors she wants, but she can shop for bargains and negotiate the best prices without any costs added by the knitting factory.

9. Curry Favor

Try to cultivate business favor by patronizing one operation per service. Be loyal to one printer, photographer, designer, or copy service, and they may repay you with reduced fees and/or discounts.

10. Understand that Deductibles Still “Cost”

A deductible expense is still a cost. The only “free” part is whatever your specific tax rate will allow you to deduct, which could be as low as 25 percent, perhaps even less. When tempted to splurge on a deductible expense, always look at your profits and see how much you’d have to earn in order to justify it.

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The Entrepreneur: Both Sides

Strong Points

  • Flexible and positive attitude
  • Creative and comfortable with risk-taking
  • Goal-focused and committed to success
  • Organized
  • Energetic

Weak Points

  • Impatient with achieving goals
  • Distractible; tolerant of interruptions
  • Distrustful of “the new” (especially technology)
  • Tendency to stray from business plan
  • Failure to delegate authority and tasks

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Success in the 21st Century: Do You Have What It Takes?

Now that we crossed that much-heralded bridge to the 21st century and once on the other side, there will be new challenges, but many of the secrets of succeeding in independent business will remain the same. Ask yourself the following questions to see how you measure up to these old-and-new standards of entrepreneurial excellence:

Are you in step with technology?

The 21st century will usher in a brave new world of marketing and financial transactions. The successful independent business person will be in touch with opportunities offered by technology for one-to-one marketing. For example, instead of advertising in print and on radio or TV, businesses can target and reach customers far more directly–through their personal computers.

Marketing on-line will be closely aligned with electronic monetary transactions. This phenomenon will have myriad repercussions on everybody from checkbook printers to the U.S. Postal Service. Many concepts, such as discounts for prompt payment, will cease to have meaning as electronic transactions will narrow and then obliterate the time-lag between receivables and payables. Savvy owners and managers will be prepare themselves now to sign onto these new ways of doing business.

Are you flexible?

A recent survey of successful small business operations revealed that 54 percent of respondents named flexibility as one of the secrets to their success. Today’s great product or service could well be obsolete tomorrow, as it becomes increasingly difficult to forecast the competitive environment, new developments in technology, and consumer trends. Success in the next millenium doesn’t just mean riding the tide of change; it means being the first to get to shore.

And when you refuse to be flexible? Consider this classic bad example from the world of big business: Apple Computer’s failure to foresee the wisdom of licensing rights to its Mac operating system. This failure in flexibility opened the door–and Windows–for Microsoft, thus initiating its own decline.

Are you focused?

Flexibility must be balanced with focus. The readiness to expand or diversify should never threaten the “heart” of the business. As the winds of change blow stronger, knowing the true strengths of a business and having a keen sense of its niche value is essential.

Here’s a good once-small-business example of focus: Krispy Kreme Doughnuts, the North Carolina-based company that began with one small shop in 1942. It’s going stronger than ever with new franchises all over the country, and has seals-of-approval from The New Yorker and other trend-setting publications. Ignoring the concept of multibranding, Krispy Kreme sells only its trademark doughnuts, and they are (literally) hot.

Do you have a plan?

The key to balancing between too flexible and too rigid is a good business plan. Although rapid change may make a five-year plan too long-range, the length of vision is not as important as its intensity. The chief value of a business plan is the hard thinking that it engenders. Planning forces business owners and managers to face issues head-on, examining closely the virtues versus the pitfalls of whatever next steps the business might take.

Although the good business plan will contain, in writing, goals that are specific, realistic, measurable, and time-driven, this document will mean nothing without the correct entrepreneurial spirit behind it. Successful business owners live by their goals. This has never been more important than it will be in an age where variables increase exponentially in every possible area–new competitive products and services, technological advances, industry trends and changes.

Are you prepared for your “next life”?

Once you’ve made it into the land of the successful (or you’re tired of trying to get there), what next? One of the signs of a wise entrepreneur is knowing when to make a graceful exit. Business owners who believe they should consider selling only when business is down are missing another opportunity to be a winner. Good timing is the secret to selling success. Instead of waiting for bad times, either in the business itself or in the marketplace in general, sellers should understand that last year might be too late.

A professional business broker can make selling an educated process, doing everything from accessing national and international data bases for marketplace information, to advertising and qualifying buyers, to handling the complex paperwork necessary for the completion of the sale. The business broker will also present and assess offers and, at the appropriate juncture, will help in structuring the sale and negotiating its close.

Even if exiting your business is a step you won’t take until the next millenium, it’s not too soon to create a strategic exit plan. After overcoming the challenges of making a business successful, the final triumph for the owner is profiting from its successful sale.

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When Selling Your Business: Confidentiality Is Key

You’ve make the big decision to sell. Your books are in order, you’ve spiffed up the premises. What are you waiting for?

Many sellers get to this threshold and then become concerned about confidentiality. They do not want the news of their decision to reach their customers, competitors, employees, or creditors. After all, they figure, customers may lose confidence in the business and go elsewhere, competitors might use this opportunity to spread rumors, employees might fear for their future security, and creditors might push for earlier payment. Not all of these qualms are reasonable; however, when selling a business, discretion is definitely the better part of valor. Few, if any, transactions have been wrecked due to excessive discretion. A breach of confidentiality, on the other hand, can severely alter the course of the transaction. What can you do to protect yourself against this possible deal-wrecker?

Your first step is to look for expert guidance. When a business broker is involved in the sale, he or she will channel the process to keep the transaction within safely silent bounds. You can expect your business intermediary to do the following:

1. Qualify the buyer.

Screening potential buyers is one of the most important benefits a business broker can provide for you. Keep in mind that roughly 90 percent of those who respond to business-for-sale ads are either not serious buyers or are not financially qualified. By screening prospects, the business broker will contribute to confidentiality by limiting the exposure of the business to the most promising buyers instead of to the merely curious time-wasters.

2. Use appropriate marketing strategies.

How can you advertise a business for sale without spreading the news too far? The business broker, as intermediary, is in an ideal position to do just that. Brokers place advertising and post listings that contain non-specific descriptions of the business. This “blind ad” approach can be phrased to attract interest in the business without revealing its name or exact location.

3. Prepare paperwork designed to promote confidentiality.

After screening prospective buyers and assessing the degree of interest and financial qualification, the business broker will also require prospects to sign a strictly-worded confidentiality agreement.

4. Manage appropriate release of information.

Until a purchase-and-sale agreement has been signed, the business broker can phase the release of information about the business to match the growing evidence of buyer sincerity and trustworthiness.

However, even with the most careful handling, rumors are unavoidable. The wise seller will expect questions from the curious and will be ready with answers. If you find yourself needing to muffle the business-for-sale buzz, aim for a mix of good sense and good humor. You might respond that many buyers have approached you over the years, making “news” before it happens. You could go on to say that you never refuse to listen to a great offer, adding that you are, in fact, all ears right at that moment!

No matter how close-mouthed sellers choose to be with the community at large, they might consider being open with their own employees. This is the group most likely to sense what’s happening, and sharing the news with workers can sometimes be a positive move. Since it’s often the unknown that causes the most anxiety, including employees in the decision to sell can actually calm over-active imaginations. Once enlightened, workers can be made to understand the need for discretion. Confidentiality will help protect their own future as well as that of the business.

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What Every Seller Should Know

Selling your business is a major decision! You have devoted your time, money and energy to building, running and operating your business. It may well represent your life’s work. You have decided that now is the right time to sell, and you want the very best professional guidance you can get. This is when working in tandem with a professional business broker can make the difference between just getting rid of the business and selling it for the very best price and terms. Following are some of the most common questions asked by sellers — and if you are contemplating selling your business, these are questions you should be asking, too.

1. What Can — and Can’t — A Business Broker Do for Me?

Business brokers are the professionals who will facilitate the successful sale of your business. It is important that you understand just what professional business brokers can do — as well as what they can’t. Business brokers can help you decide how to price your business and how to structure the sale so it makes sense for you and the buyer. They can find the right buyer for your business, work with the seller and the buyer in negotiating, and coordinate every step of the way until the transaction is successfully closed. They will also help the buyer with all details of the business buying process.

A business broker is not, however, a magician who can sell an overpriced business. Most businesses are salable if priced and structured properly. You should understand that only the marketplace can determine what a business will sell for. The amount of the down payment you are willing to accept along with the terms of the seller financing can greatly influence not only the ultimate selling price, but the success of the sale itself.

2. Why Is Seller Financing Important To the Sale Of My Business?

Surveys have shown that sellers who ask for cash receive, on average, only 75 percent of their asking price, while sellers who accept terms typically receive 86 percent of their asking price. In many cases, businesses that are listed for all cash just don’t sell. With reasonable terms, however, the chances of selling increase dramatically, and the time period from listing to sale greatly decreases. Most sellers are unaware of how much interest they can generate by financing the sale of their business. What’s more, seller financing tells the buyer that the seller is confident about the ability of the business to — literally — pay for itself.

3. How Long Will It Take To Sell My Business?

It generally takes, on average, between three to four months to sell a business. (Keep in mind, however, that an average is just that.) The sooner the business broker has all the information needed to begin the marketing process, the shorter the time period for selling should be. It is also important that the business be priced properly right from the start. Some sellers, operating under the premise that they can always come down in price, overprice their business, not understanding that buyers often will refuse to look at an overpriced business.

It has been shown that the amount of the down payment may be the key ingredient for a quick sale. The lower the down payment, generally 40 percent of the asking price or less, the shorter the time to a successful sale. A reasonable down payment also — as in the case of seller financing — sends a message to a potential buyer about the seller’s confidence in the health of the business.

4. What Happens When There Is A Buyer For My Business?

When a buyer is sufficiently interested in your business, business brokers will help in the preparation of an offer or proposal, which may have one or more contingencies. Usually, contingencies call for a detailed review of your financial records and may also include a review of your lease arrangements, franchise agreement (if there is one) or other pertinent details of the business. The buyer’s proposal will be presented to you for your consideration. You may accept the terms of the offer or you may make a counter-proposal. You should understand, however, that if you do not accept the buyer’s proposal, the buyer can withdraw it at any time.

Business brokers will submit all offers to you for your consideration. At first review, you may not be pleased with a particular offer: it may be lacking in some areas, but it might also have some pluses to seriously consider. Remember the old adage: The first offer is generally the best one the seller will receive.” This does not mean that you should accept the first, or any offer — just that all offers should be looked at with thought and care.

When you and the buyer are in agreement, the business broker will work with both of you to satisfy and remove the contingencies in the offer. It is important that you cooperate fully in this process; otherwise, the buyer might think you have something to hide. The buyer may, at this point, bring in outside advisors to help them review the information. When all the conditions have been met, final papers will be drawn and signed. Once the closing has been completed, money will be distributed and the new owner will take the possession of the business. Your business broker professional will work with you throughout the entire sales process.

5. Co-Branding: The New Age Business Combo

The store-within-a-store is not a novel concept. The tailor next to the dry cleaner, for example, is a combination that’s been around since the beginning of business time.

Now combining business forces has a new look — and a new name. It’s called co-branding, and the idea is going like hotcakes. Like hotcakes with a side of motor oil. Among franchises, where the concept is most popular, co-branding means selling combined products and/or services at the same place of business. The combinations may sometimes seem unlikely, but any way you slice it, co-branding seems to work.

6. Co-Branding for One-Stop Convenience

This type of co-branding can produce some stomach-churning combos. Fast food and fuel, currently the most popular oddball mix, proves it can be convenience alone that makes the idea work.

For example, it’s lunchtime and you also need gas. Why settle for Nabs and a Coke from the service station machine? Why go to McDonald’s for your fast-food feast and then hit the road again for gas? Instead, while munching on your double-decker Italian at a Subway, your car is being gassed and car windows are being washed. One stop — and two items are off your list.

When the combined franchises are both nationally-recognized big names, each one benefits from the business attracted by the other. And in cases where one member of the combo is better-known, the bigger name draws traffic to the other. There are also real financial advantages when two or more businesses co-brand. They will shoulder equally expenses such as rent, telephone lines, and most utilities.

7. Co-Branding for Synergy

Adding synergy to convenience makes a hard-to-beat selling technique. Business accounting services with a next-door-copy center, an office-supply store with a packing/shipping outfit, the bookshop that houses a coffee bar — when different franchises are placed within one location, each can concentrate on its own special products or services. From the franchisor’s point of view, co-branding increases efficiency and customer satisfaction.

These two-for-one operations bank on the attraction of allied products or services. The key here is to predict customer need — and in the case of the bookshop coffee bar — mood. Having fulfilled his/her original shopping purpose, what might the customer be drawn to next? This leads us to the next type of co-branding …

8. Co-Branding for Impulse Purchase

The best example here is the national fast-food vendor, Arby’s. This company also owns T.J. Cinnamons (breads and muffins). How better to introduce a new food concepts than to put them side-by-side with good old established roast beef? After lunch, go ahead and get your breakfast buns as long as they’re right there.

From the point of view of the companies involved, this doubling-up (or even tripling up) means more than just increased sales. It makes good business sense all the way around. The space isn’t all that’s shared — a wise financial move in itself — but also payroll expenses and, in some cases, the workers themselves. After the breakfast rush, the crew can go next door and help set up for lunch. If one business melds better with the summer season and another with winter, employees can be concentrated to follow customer traffic.

So what’s not to like about co-branding? So far, so good. For franchisors everywhere, it looks like a win-win combination.

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Ten Steps to the Successful Sale of a Business

1. Make sure you have a valid reason for selling your business. Don’t decide to sell because you have had a bad week or because moving closer to the grandkids sounds like a good idea. Also, don’t decide to “test the waters” just to see what sort of price your business will command. Before you decide to sell your company, focus on your true objectives. The first thing a prospective buyer will want to know is the reason you are selling. The more valid the reason you offer, the more serious the buyer will be.

2. Don’t wait until you have to sell, for either economic or emotional reasons. You don’t want anxiety to force you into accepting a deal that’s not good for you–or for the buyer. During the two months preceding the new year, sellers always say that they don’t want to sell until the after the first of the year. This delay can be an unfortunate one.

3. Once you have made the decision to sell–and before talking to your business broker– you should gather the information needed to market and subsequently sell your business. Here’s a list of the key items:

  • Three year’s profit and loss statements
  • Federal income tax returns for the business
  • List of fixtures and equipment
  • The lease and any lease-related documents
  • Copy of the franchise agreement (if applicable)
  • List of loans against the business with amounts and payment schedule
  • Copies of any equipment leases
  • An approximate amount of the inventory on hand
  • Names of outside advisors

4. Remember that you are part of the marketing team. Your business broker can’t do it all–and might even ask you to come to an office meeting to tell the rest of the staff about your business. Follow your broker’s advice about dealing with prospective buyers–there’s a right and a wrong time to meet them.

5. Confidentiality works both ways. The broker will constantly stress confidentiality to the customers to whom he or she shows your business. However, as the seller, you must maintain confidentiality about a pending sale in your day-to-day business activities.

6. You, as the seller, should put yourself in a prospective buyer’s position. The next time you go to your place of business, pretend you are a buyer looking at it for the first time. How impressed are you?

7. Just because you are selling, now is not the time to let the business slip. It’s important that prospective buyers see your business at its best: bustling, and showing no signs of neglect. Here are a few areas to focus on:

  • Keep normal operating hours. There is a tendency for sellers to “let down” when they put their business up for sale.
  • Repair signs, replace outside lights, and do a general spiffing-up for first impression purposes.
  • Tidy the outside premises (if appropriate).
  • Spruce up the interior as well.
  • Repair non-operating equipment or remove it.
  • Remove items that are not included in the sale.
  • Maintain inventory at constant levels.

8. Engage an outside professional who understands the sales process. David Gumpert, former Harvard Business Review associate editor said, “Inexperienced lawyers are often reluctant to advise their clients to take any risks, whereas lawyers who have been through such negotiations a few times know that’s reasonable.” If you are going to use a lawyer, use one who is seasoned in the business sale process.

9. Be flexible! You need to keep the ball rolling once an offer has been presented. Study it closely. Just because you didn’t get your asking price, the offer may have other points that will offset it, such as higher payments or interest, a consulting agreement, more cash than you anticipated or a buyer that you are comfortable with. You have probably spent years building your business–you want it to continue to be successful. The right buyer may be better than a higher price, especially if there is seller financing involved, and there usually is. If you must counter-offer, do so only on those points that are really important to you. Be willing to “horsetrade” if you must to complete the deal. There is an old adage that the first offer you get is probably the best you will ever get–and it’s true.

10. Remember that most successful transactions are successful because they create a win-win situation for everyone involved.

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Under-Reporting Comes Under Fire

What is the true income of an independent business? This is a question of interest to many parties–including prospective buyers, investors, and lenders–but nobody is more determined to know the answer than the Internal Revenue Service.

What makes the “truth” about a company’s income so elusive? Isn’t this what financial record-keeping is all about? Yes and no. Business owners have been known to go from minor figure-fudging to major-league cheating, in an effort to lower the amount of income necessary to report to the IRS in any given fiscal year. In fact, the IRS estimates that two out of three business owners regularly under-report income.

“Unreported income” is the official phrase for this practice; however, in the trade, the word often heard is “skim.” It sounds light, healthy, and maybe good for you. But is it? Consider an item from a newspaper in a typical Main Street town, bearing the headline “Business Owners Sentenced”:

Two Myrtle Beach business owners were sentenced in federal court in Florence [S.C.] for not declaring money received from poker machines in their bar on their income tax returns, according to a statement by the US Department of Justice.

Roy Gipson of Charlotte and Ann Willis of Myrtle Beach, former operators of Players, a sports bar in the Galleria Shopping Center, were indicted by the federal grand jury in September. They pleaded guilty in October to filing false income tax returns.

(Sun-News, Myrtle Beach, SC)

This is a depressing story, resulting in the sentencing of one of the defendents to three years’ probation, three months in a halfway house, several months of home detention, and a $5,000 fine payable within six months. The second defendent was sentenced to three years’ probation, two month home detention, and 400 hours of community service. All this for a little poker-machine skimming? How was anyone to know? How did anyone find out?

It’s the story behind the story that should really catch the attention of business owners. And especially of potential business sellers, because the unreported income in this case was discovered by IRS agents who went undercover, in “disguise” as typical business buyers.

The undercover agents, acting as any savvy prospective buyer would, wanted a close look at the true worth of the business in order to make an informed “offer.” The sellers were happy to comply, and readily admitted that they were not declaring on their tax forms money received from poker machines that had generated more than $120,000 over a two-year period. Truth, in this instance, did not set its tellers free. Business owners are often tempted to have it both ways–under-report to the government, and then, to sellers, reveal that the news is much better than it looks. The Myrtle Beach bar owners are not the only ones who have been tempted to slant the worth of a business in two different directions at the same time. This practice, although illegal, is not uncommon. And when “everybody does it” becomes the perception, even the most reputable, otherwise law-abiding citizens can get caught in their own trap.

As one Delaware restaurant owner of 20-years’ excellent standing in his community says, “I made more than a decent income which I disclosed on my tax return. However, over and above my regular salary, I also skimmed a geat deal of unreported and untaxed cash for myself and some of my employees. I always thought that most people do it and if I got caught, I could just pay the IRS the taxes due plus some interest and penalties.” Instead, when it came time for the restaurateur to sell his business, he disclosed its true worth to prospective buyers who turned out to be–yet again–undercover IRS agents. The restaurateur says, “Without my knowledge, they tape-recoreded everything I said. You have no idea what it is like to hear your own voice on a tape recording. I never knew the IRS conducted undercover operations.” He adds, “I thought that very few people go to jail for committing tax crimes and those that went to jail were mostly organized crime figures and drug dealers. I now find that sixty percent of all the people committing tax crimes go to jail. They generally serve between one and three years. I am now waiting to be sentenced, but whether or not I go to jail, by the time I’m done paying the taxes, interest and penalites, for every one dollar I skimmed, I will have to pay the IRS three dollars.” (This business owner is presently serving a six-year prison sentence.)

Even if a business owner who skims escapes being caught by such a sting operation, he or she will still face a dilemma when it comes time to sell. Whether or not business owners have made the immediate decision to sell, they should prepare for the future by building the image of a successful business. The picture they have painted for the IRS is not likely to be admired by buyers, who will want to pay only for what is reflected on the books, including what is revealed by the tax return. The seller may think it’s possible to set a fresh scene for the buyer–one based on the theme of potential; however, buyers will be far more impressed by proof of a good track record.

Here are some suggestions to sellers for unveiling hidden profits and putting them where they will do the most good–in front of prospective buyers:

  • Think Ahead. Remember that the future is now, and set your mind on long-term instead of short-term benefits. Show maximum profits for each quarter.
  • Take a Step Back. If necessary, look back on the previous months’ financial records and work toward showing the truest–and hopefully, the best–profit situation.
  • Delve Into the Past. Go even further back and reconstruct records (without showing “skim”) that reveal the legitimate profit situation over a meaningful period of time.
  • List Tax-Deductibles. Make a separate list of salaries, and of fringes and perquisites that are tax-deductible and that provide a current benefit to the business.
  • And don’t forget–it won’t be only the buyer who will be impressed by true profits. Loan underwriters and potential investors will be more apt to show favor. And the IRS will send its agents-in-disguise to somebody else’s door.

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Consumers Voice Complaints: And Business Owners Should Listen

“Your salespeople didn’t listen when I placed my order, and when I wrote a letter to complain, they still didn’t get it right. I guess they don’t read any better than they hear.”

Daniel Langley, the owner of a central Massachusetts mail order company, took this call on a recent Monday morning. It happened to be a holiday, or he might never have got this close to a customer complaint. He was glad he did.

“I needed to be reminded,” he said, “that the problems are always out there. I tend to hear a lot from customer service about the record-breaking order or the customer calling from New Guinea. I realized we haven’t been paying enough attention to the everyday, not-so-happy news.”

Langley is typical of many business owners and managers in that respect. A lot of companies–large and small–do much less than they could in dealing with customer problems and complaints. This is an unfortunate omission, and an unnecessary one: achieving good customer service is neither costly nor complicated. What’s needed is a well-considered plan, coupled with a positive attitude.

The following steps can help any business convert problems into solutions . . . and into good PR as well.

Fight fire with anything but fire.

An unhappy customer calls expecting a fight. If they aren’t downright angry, they are at the very least upset and on the defensive. The salesperson should be careful not to echo the customer’s attitude. Instead, the person answering the complaint should aim for just the opposite tone: a calm expression of interest in listening to the problem, followed as soon as possible by the desire to solve it. This is not always an easy task, and salespeople should be trained to realize that customer complaints are not (in most cases!) personal attacks. Short of a free case of Perrier, employee courtesy is the most effective means of dousing customer fires.

Quick action is the best action.

And in most cases, it may be the only acceptable one. What you do in the first minute or two may well determine whether you will lose the customer–and create a ripple effect of ill will–or gain a “friend” forever. Research shows that the sooner the problem is resolved, the more likely you are to end up with a happy, loyal customer. Proper handling will turn around 95 percent of customer complaints, but the statistics get gloomier in proportion to the time that is allowed to elapse. Wait an hour, and you have a tentative customer; wait a day, you have a disgruntled one; wait longer, and you may have no customer at all.

Place authority where it will do the most good.

It’s one thing to advocate quick action to quell customer complaints. However, if the manager or other superior in a company’s hierarchy is the only one who can “sign off” on problems, delays will be, in most cases, impossible to avoid. If possible, salespeople should have the authority to approve returns and exchanges and solve other problems–up to a predetermined dollar limit.

Approach problems with a can-do attitude.

Obviously, not all complaints can be resolved to the every customer’s satisfaction. However, each problem should be handled with a sincere attempt to make the customer happy. Working within the rules (and financial limits), the salesperson should give the customer the feeling that it is he or she who is important–not the rule book. What should the price tag be on customer contentment? Good business sense says it can’t veer off into extravagance; however, generosity can pay big dividends. The cost of solving one problem may be far less than losing a valuable account, client, or customer.

Measure the quality of your “damage control.”

Many midsized businesses are following the lead of the larger corporation and asking their customers for feedback. If you aren’t already including some form of questionnaire or survey form in your mailings, you might consider trying a simple postcard or product enclosure.

Watch for patterns in customer problems.

Keep a careful record of all customer complaints and determine if there is a particular product or service that generates the majority of problems. If you can detect a pattern, these customer problems will actually have helped you, in the long run, to target company problems of your own. If no pattern emerges, you will be affirmed in treating each case as separate challenge–and, following the steps outlined above, you will have the tools to make quality customer service one of your primary–and attainable–jobs.

How Did We Do?

Here is the follow-up to customer problems Massachusetts one business owner recently implemented. Each customer complaint is tagged in the customer service data base and automatically “personalized” with the customer name and specific problem addressed.

Dear [Customer]:

Our records show you recently [returned/exchanged/had questions concerning] one of our products. To help us continue to offer quality service, please take a moment to answer the questions below:

  • When you called [with your question/to advise us of a problem], did you receive a courteous response?
  • How much time (approximately) lapsed between your [question, complaint] and our [answer/suggestion as how to resolve it]?
  • Did you receive a satisfactory [refund/item in exchange, answer to your question]?

Thank you!

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The Big Question: Independent versus Employee Status

Are your workers independent contractors or employees? This is a compelling question, especially where the Internal Revenue Service is concerned. Every worker claiming status as a non-employee means payroll taxes and social security contributions that won’t fall into the IRS’s pocket.

Now many states are taking a closer look at the question, too. They are increasingly on the lookout for new sources of state revenue, including workman’s compensation and unemployment insurance, both of which can be bypassed when a business uses independent workers.

What can a business owner/manager do to keep on the right side of both federal and state tax patrols? Here are a few precautionary steps to safeguard the status of workers as independent contractors.

  • Encourage (or at least allow) the worker to provide his own assistants, including their hiring, supervision, and compensation.
  • Allow workers to establish their own schedule of work days/hours.
  • Be sure that workers provide their own equipment and most supplies.
  • An alternative may be to use an employee of a temporary service. These services can provide personnel experienced in the job required and, since this worker is actually an employee of the temporary service, all federal and state taxes and fees are handled at that end as well. Although you may pay more for this type of worker, you will avoid concerns about meeting government regulations and restrictions that often come packaged with the independent status. When in doubt, always consult your legal and financial advisors.

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Selling Your Business? Follow These Ten Commandments To Avoid Wrecking the Deal.

1. Place a reasonable price on your business. Since an inflated figure either turns off or slows down potential buyers, rely on your business broker to help you arrive at the best “win-win” price.

2. Carry on “business as usual.” Don’t become so obsessed with the transaction that your attention wavers from day-to-day demands, affecting sales, costs, and profits. Since the selling process could take as long as a year, the buyer needs to keep seeing a healthy business.

3. Engage experts to insure confidentiality. A breach of confidentiality surrounding the sale of a business can change the course of the transaction. Expert intermediaries can channel the process and the parties involved to keep the sale within safely silent bounds.

4. Prepare for the sale well in advance. Be sure your records are complete for at least several years back and do all pertinent legal or accounting “housecleaning”–as well as a literal sprucing-up of the plant or store.

5. Anticipating information the buyer may request. In order to obtain financing, the buyer will need appraisals on all assets as well as information to satisfy environmental regulations (when real estate is concerned).

6. Achieve leverage through buyer competition. This can be tricky; you are wise to let your business broker, as a third party, create a competitive situation with buyers to position you better in the deal.

7. Be flexible. Don’t be the kind of seller who wants all-cash at the closing, or who won’t accept any contingent payments or an asset transaction. Depend on the advice of your intermediaries–their knowledge of financing and tax implications– to keep the deal sweet instead of sour.

8. Negotiate; don’t “dominate.” You’re used to being your own boss, but be prepared to learn that the buyer may be used to having his way, too. With your business broker’s help, decide ahead of time when “to hold” and when “to fold.”

9. Keep time from dragging down the deal. To keep the momentum up, work with your intermediary to be sure that potential buyers stay on a time schedule and that offers move in a timely fashion.

10. Be willing to stay involved. Even if you are feeling burnt-out, realize that the buyer may want you to stay within arm’s reach for a while. Consult with intermediaries to determine how you can best effect a smooth transition.

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