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July 2009

Embrace Six Aims for Improvement

Good advice is never outdated, especially when caring for patients or customers.

As our nation’s leaders focus their efforts on transforming America’s health care system, we can learn from a brief review of the Institute of Medicine’s 2001 “Crossing the Quality Chasm” report that helped lay the foundation to redesign medical care. Health systems across the nation responded to the report with an increased emphasis on quality, relying on business tools – such as Lean initiatives and performance improvement teams – to improve the patient care experience.

12965830-600x800_target According to the report, the goal of a reform effort should be to ensure that health care is marked by six essential attributes. But I believe any organization, from its clients to employees, also can benefit from these aims for improvement:

  1. Safety – Customers and your employees should be as safe in your organization as they are in their own homes. Maintain up-to-date employee training programs and encourage open communication to decrease workplace injuries.

  2. Effectiveness – In health care, this means matching patient care to science, often called evidence-based medicine. Other industries use “best in class” models or retain third-party research firms to establish the most effective business models.

  3. Patient Centeredness (or Customer Centeredness) – Honor the individual, respecting the customer’s choice, culture and specific needs. Implement opportunities to customize your product, such as Capital One’s® Image Card that lets users upload their favorite photo to create a personalized credit card for shopping expeditions.

  4. Timeliness – Eliminate wait times by analyzing workplace systems and processes to identify roadblocks (points where people, parts or information are delayed waiting for technology, materials or additional information), and then remove them. This unlocks valuable resources that could be used to deliver revenue building services and products.

  5. Efficiency – Determine the most efficient and cost effective methods to run your organization. Evaluate and eliminate inefficiencies in your process and reduce waste of supplies, equipment, space and resources. Deliver world-class customer service.

  6. Equity – Most organizations have anti-discrimination policies on the books. However, walking the talk is the next step to ensure a fair and dynamic work environment. Live your mission, vision and values to create a culture where all ideas are accepted.

An emphasis on these aims for improvement resulted in motivated employees, reduced wait times, decreased hospital-acquired infections and fewer frustrations for patients and families. Imagine what your team can accomplish.

How important is right?

67563318 Compromise.  Cutting corners.  Short cuts.  Accelerated timetable.  Last minute. 

These are words that fill our days as business owners and marketers.  And it would be foolishly idealistic (not to mention absolutely unrealistic) to suggest that we should eliminate them from our world.  If we could, we already would have!  But, I believe we have let the pendulum swing too far and it’s up to us to right it.

Sometimes doing it right needs to matter more than doing it right now.  We’ve become too responsive.  We let the marketplace jerk us around.  We let our competitors’ actions dictate ours. We have to stop that.  We need to take back the control.  We need to do what is right.  When it’s right.

I’m not suggesting that every marketing initiative needs to be the Mona Lisa.  Nor am I saying you should ignore the marketplace or our competitors. 

But be honest, do you even really take the time to stop and think “ideally, how would we do this?”  or “what’s possible?”   I think most business owners and marketing teams have gotten so used to being over burdened, under resourced and pressed for results that you don’t even consider those questions.  And that is costing you market share and money.

So how do you blend the reality of your world and this idealistic notion of doing it right?

Identify a couple efforts as being significant enough that you will not compromise.  They have to be done right.  Another thing to consider.  Do less but do it better.   Free up some time and resources to concentrate your energies on a tactic or two that could really move your business if given the right depth of your attention.

Think of it as going both deep and wide.  It’s much more effective than just spreading ourselves too thin.


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The Downside of Firing Social Networkers

Voices #62Image by eclectic echoes via Flickr

The Problem
According to the Des Moines Register, in the past year, several workers have been fired for posting unauthorized material to various social networks. The latest case involves a Casey's General Stores employee fired for posting material to YouTube. While the original postings were tame, after she was fired the employee posted a much more incendiary video to YouTube. While the repercussions of inappropriate material can be problematic, mishandling of the matter can cause the problem to snowball out of control. The key to managing company-related online activity by employees involves putting a plan in place before a problem arises.

The Solution
Understanding social networks is a key first step. Not everything employees post online about your company is bad. Learn how proactive social networking can not only help identify potential public relations issues early, but can also promote your company. Once you have a handle on social networking, develop an employee policy relating to online activities which relate to your company. Employees are willing to refrain from certain online activities if you advise them of written policies up front. Reprimanding them after the fact can lead to problems.

Starting the discussion with employees will help identify people with a natural inclination toward online public relations. You may wish to enlist these individuals to monitor social networks, advising you of any potential threats or opportunities. Start slowly at first. Be prepared for problems. Running social networking point for your company is not for the online-illiterate. It may take even a social media maven    weeks or months to find your company's social media "voice."

In additional to drafting a written policy regarding employees' online activity as it relates to your company, keep an open line of communication with your media savvy employees. Blindsiding employees for things they did years ago, or reprimanding them for things they believed were actually helping the company is a lose-lose scenario. Many times, rash action does nothing more than direct all of the employees social media moxy toward destroying your company's online reputation.

Brett Trout

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An Analysis of "The Age Curve"

So I finally got the chance to go through my book list and read a few books I’ve been eying for months.  Most of the books I read I'm attracted to by the cover. Then, when time is available, I sneak over to Barnes and Noble or some other book retailer and read the gist of the book until I get becomes bland and predictable. It had been a while since I read a book that really sparked my interest enough that I could not put it down. One book in particular caught my eye because of the title The Age Curve: How to Profit from the Coming Demographic Storm by Ken Gronbach. I grabbed the book with skepticism, but was surprised by how much I enjoyed it.

I was worried that it would be another book that addressed generational differences from a surface level approach that dabbled in generalities, broad conclusions and snarky commentary about millennial 411NICIKZVL._BO2,204,203,200_PIsitb-sticker-arrow-click,TopRight,35,-76_AA240_SH20_OU01_ behavior. Instead, I read an entertaining book filled with statistics and demographics, but clothed in stories and anecdotes that compel you to continue reading.

Gronbach is not afraid to call out certain industries and companies for their failed and failing approach to answering the generation question. He surprised me by spending significant time explaining the impact of the generation dip that is Gen X and the impact that will have in the business world. Finally, someone else sees this issue and is not overlooking them to focus purely on Millennials or Boomers. Gronbach shows how the dwindling number of Generation X and certain marketers failure to focus on generation demographic shifts caused a devastating drop in profit margin.  Just look at Honda's motorcycle and Levi jeans as examples.

Gronbach explains how, and more importantly why, Millennials are beginning to affect the market in significant ways. He goes on to answer the question that many generation critics have about the study and explains, through compelling case studies, why certain businesses and industries are doing well and others are not depending on how they've responded the change in generational size and taste.

Why not completely absolved of problems, for instance the book can be repetitive at times, Gronbach goes beyond what most similar books on generational issue miss and that’s explain not only the “what” but also the “why."

Kudos to The Age Curve for taking what can be a dry subject and injecting lively anecdotes in with interesting facts. Yes I did eventually buy this book.

Mirroring and Matching

A couple of weeks ago I was at a doctor appointment with my wife, Amy. She is about to give birth to our second child, but not until the end of August. As he always does at the end of the appointment, the doctor asked Amy if she had any questions. She hasn’t been feeling quite right lately and her questions were paired with some obvious stress and anxiety.

Rather than downplaying my wife’s concerns and treating her like a paranoid patient the doctor shut his mouth, listened and nodded as to acknowledge that he understood what she was expressing. He then sat down across from her with his hand on his knees just like she was sitting. He even went as far to level his tone to hers. The doctor answered all of her questions, completely putting her at ease. When we got out to the elevator, Amy looked at me and said, "I love that doctor."

What the doctor did (knowingly or unknowingly) is called mirroring and it’s an effective sales technique that works to put clients and prospects at ease if it’s done with a genuine and sincere intent, the way our doctor did with Amy.
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Kurt Mortensen, author of Maximum Influence and one of America's leading authorities on persuasion, motivation and influence, discusses “mirroring and matching” saying:

When you reflect your prospect's mood, you give validation to what he is saying and feeling. We often verbally mirror another persons mood by restating what he or she just said: "So, what I hear you saying is…" or "I think I would feel that way too, if I also experienced…." Be sure when you mirror your prospect's mood that your tone is very sincere. Your persuasive power increases when you sincerely acknowledge your prospect's comments, concerns, and feelings.

Sincerity is the key. Mirroring another person’s mood and matching their energy level should not be forced. It should be as natural as a smile or a handshake. It’s the same as looking someone in the eye when their speaking or acknowledging their concerns they way our doctor did.

If done in a genuine and sincere way mirroring and matching is a can give strength and trust to any relationship.

Avoid Problems - Protect Client Identity

An example of street markets accepting credit ...Image via Wikipedia

In the 1980s, bad guys stole Mercedes Benz hood ornaments. Today’s enterprising criminals steal identities. Identities are stolen from homes, from trash cans, from purses and from glances over shoulders. 


And, unfortunately, often from businesses. There are many ways individuals protect themselves from identity theft Unfortunately, many businesses are not so conscientious. When clients and customers hand over birthdates, social security numbers, addresses and credit card numbers to businesses, they trust the business to protect their identity.

 

Every business must have a method to secure and protect paper and electronic information . . . from the instant the information enters the business through final disposition.

 

Customers expect identity protection.

 

Failure to implement an information security plan may cost your business: clients, revenue, and time. One breach and clients will avoid your business as if there was police tape across your front door. In most cases, if identity is stolen from your business, you are not only liable for the ensuing damages, you are also required to assist in the investigation including: finding and providing applications and business transaction records or account records.

 

Penalties for those who fail to protect identity vary by state. The Texas Attorney General initiated suits against businesses for failure to protect identity of customers. (One suit settled for $220,000.00 against a business that disposed of sensitive information in dumpsters). The law upon which one of the Texas suits is based mirrors an Iowa law.

 

Implementing a security plan involves several steps:

1)     Review your document retention plan to decide what you need to have.

2)     Review your electronic documents to determine what you have. Don’t start deleting until you have a plan. Have you checked online storage? flash drives? Employees' home computers?

3)     Review your paper documents to determine what you have. (Stop, no shredding until you have a plan.)

4)     Review specific agency requirements for your business.

5)     Review specific privacy requirements for your business.

6)     Determine where/how to store your electronic documents.

7)     Determine where/how to dispose of electronic documents.

8)     Determine where/how to store your paper documents.

9)     Determine where/how to dispose of paper documents.

10) Review how you receive electronic documents. Is your website secure?

11) Review how you receive paper documents. Most identity thefts take place before the information is recorded.

12) Write down your plan and go over it. Set timelines and reminders.

 

None of this matters if your storage is not secure. Physical storage is easier: lock it, hide it and treat every document like cash (it may be).  Electronic storage is becoming increasingly complex. Network security experts (and expert criminals) are everywhere.   As a business owner, you must understand Internet Law. You must know terms like firewall, encryption, breach detection and offsite back up. You must also have a plan to update your security regularly. State-of-the-art security from five years ago is now as easy to breach as your grandparent’s old screen door.

 

The Federal Trade Commission has a detailed but usable 15 page guide for businesses to protect client information. You would not leave your cash on the counter. You wouldn’t post your own social security card on the front window. Don’t leave your clients' identification or money exposed either.

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Go on a Low-Info Diet

The 4-Hour WorkweekImage via Wikipedia

Tim Ferriss, author of the bestselling The 4-Hour Workweek, suggests that -- like those in the fast-growing subculture he calls the New Rich -- we need to learn to ignore or redirect all information and interruptions that are "irrelevant, unimportant, or unactionable."

And he says that most information we are bombarded with daily comes from these three categories. Time-consuming, negative and irrelevant to what we're working on now, and outside our scope of influence.

Think about that. Herbert Simon, recipient of the Nobel Memorial Prize in Economics, said "...a wealth of information creates a poverty of attention..." Can you argue with that? More is not always better. The challenge is discerning what deserves your precious attention.

A while back someone told me about a survival skill they'd adopted called "shucking." I've adopted it and love it. It's a way to handle the wave upon wave of fast-breaking, headline-making, attention-consuming information. Shucking is a two-part skill. The first is throwing away what you don't need; the second, deflecting stuff before it hits you.

  • Grab that pile of six-month-old business journals. Shuck it. Might there be some useful articles in the stack? Maybe. But you'll get new ones this month and next. And the longer those old ones sit there, the more you worry about reading them. Those anxious thoughts junk up your mind.
  • Compress your Internet files. That's shucking.
  • Shovel out your office. Shuck what you aren't using now and won't need in the very near future.
  • Shuck time-wasting phone calls and association memberships that you've outgrown.

Ferriss suggests developing the habit of asking yourself this question. "Will I definitely use this information for something immediate and important?" And if you answer "no" to either "immediate" or "important," he suggests that you don't consume it. Shuck it. It's useless if it's not applied to something important OR if you are going to forget it before you have a chance to apply it. (Like all those great ideas in that pile of journals.)

Since reading The 4-Hour Work Week, I've consciously avoided saving articles, researching sites and looking for books that might be helpful for future clients or projects. My files, my office, my mind is less cluttered. And when I need certain information, it's always there. Practice shucking. That low-info diet will help you lose what you don't need anyway.

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The Cause of Plane Crashes

5263907_thl What do you think is the number one cause of plane crashes?  Many people answer birds, lack of sleep, weather and other reasons.  Pilot error is the macro answer.

In his book, Outliers, Malcolm Gladwell gives a mirco answer for plane crashes - the PDI (Power Distance Index) rating.  The PDI was created by a Dutch psychologist, Geert Hofestede.  PDI is one of "Hofstede's Dimensions", a paradigm used in the world of psychology. The PDI is concerned with attitudes toward hierarchy.

Gladwell points out in several plane crash examples how PDI was strongly correlated to the cause of these crashes.  Simply stated it was the fear of questioning authority that led to these fatal crashes.

What is the PDI in your company's culture?  If you think is does not matter, then think of those who died on these plane crashes.  Those passengers counted on the crew in the cockpit to safely fly them to their destination.  Similarly, employees count on the company for a pay check, benefits, education and social interaction.

How easily do your employees question authority in your organization?  Their questions and the answers to them may very well be a silver bullet waiting to kill your organization or it may be the saving grace for your organization.  Create the culture and take the time to hear the questions and answers of your employees before you experience a fatal crash.

Sad Tale of a Phase 1

In today's environment a Phase 1 Environmental Study is a requirement in the sale of a business.Blog   Occasionally this may mean a very unpleasant surprise for the owner.

I had a customer who ran a very clean and well managed printing business located in a shopping center and was seeking to retire.  In discussing the sales process he assured me that there were no environmental issues and a Phase 1 would not be necessary. After all he was in a shopping center.  He did not want to spend the money ($2,000 to $3,000) and just wanted to sell the business and retire.

I found a buyer for the business and in the process of negotiating a lease, the landlord demanded that a Phase 1 be done.  The landlord was concerned with the chemicals that were being used for printing.  The Phase 1 was ordered and it came back indicating serious problems in the floor drains and in the adjacent parking area.  How the chemicals got in these places is a mystery.  However, the owner did have a problem employee who was terminated for cause just prior to the testing.

The landlord required that the ground be cleaned, the seller was forced to comply and the buyer found another business.  The clean up cost the seller almost $200,000.  The cost of the clean up forced the seller to work an additional 8 years.  So much for the early retirement! 

Perhaps none of this could have been avoided, but it is a sad story.  All business owners need to be aware their potential exposure in this area and the need to protect their estate from the potential for financial ruin.

Does your business have e-risk?

Laptop Is your businesses trying to go “green?”

It seems to me that there is a push to be paperless. I remember a time when small businesses did not have computers – it was an old fashion paper and pencil to process accounting books (ledgers – remember these?), accounts receivables/payables, invoices and payroll – okay, we had calculators.

We sure have come a long way fast. Now there are multiple software programs available that a business owner can use that will pretty much do everything for your business operation.

You can keep everything stored right on your computer and everything is available to you at the touch of a keyboard.

With our online capabilities, business owners are able to operate in many different forms and offer their clients an easier way to do business and a convenient way to pay.

Let’s face it – there is so much you can do with computers and online access. From a consumer perspective, it is great! It’s easy and convenient, with less paperwork and less mail. Need I say more?

However, from a business perspective, there may be some risks that you are not aware of. I touched on this subject last year in my blog titled - Are you protecting your customer's identity?

However, in light of the recent settlement announcement with TJ Maxx and Marshalls, I felt it was a good idea to touch base on it again.

A breach in data can be critical to a business that handles confidential information. The breach can take on different forms, too. It is not always someone hacking into your network and accessing your data.

  • It could be an employee that forwards information from your business to their home or elsewhere.
  • It could also be someone that steals your laptop, cellphone or mobile device.
  • Do you have your computer programmed to remember your user name and password?
  • Do you have your passwords stored on your Blackberry?

It does not matter the size of your company or the industry that you work in. If you have a computer in your business and/or utilize any online transactions that involve personal information with your clients, you are at risk.

When it comes to insurance – there are typically limitations on these risks unless you increase your coverage or add additional coverage. So dust off your insurance policy and call your agent today to make sure that you are properly covered.

I REALLY GOTTA GO!!!!!!!!!!!!

Occupied Today, my family is headed home after spending some time with my wife's parents in a cabin in Brown County State Park in southern Indiana.  It was a fun time out in nature and we enjoyed catching up with and enjoying quality time with family.

Except for one small detail: Bathrooms.

You see, our otherwise perfect cabin in the woods was equipped with only one bathroom.  I have a general rule about bathrooms, which has served me well over the years: Never share a bathroom with women, those under 10, or those over 60.

I just described every other member of my party.

(Caveat: The 10- to 60-year-old male can go for hours without needing a bathroom. Their use of a bathroom will make it look like the cross between a train wreck and a hurricane when they are done, but at least they don't need it that often.) 

You can guess what commodity became valuable during our few days together.

In projects, we have to "share a bathroom" a lot of the time.  It's called resource contention.  It's that one person (or piece of equipment or single-license computer program) everybody wants, the one who (except for the legalities of human cloning) would be dedicated 100 percent on EVERY STINKIN' PROJECT PLAN in your organization (um... no pun intended). 

It's the Web designer who cranks out perfect web pages.  It's the claims examiner who always seems to know what to do in every situation.  It's the accountant who is abreast of every financial law and policy in every state.  And we can't have them because every time we think we need them somebody runs ahead of us, gets inside, shuts and locks the door, and leaves us crossing our project plan legs in excruciating agony until the resource is available again.

But I know why I'm a project manager.  I used the same strategies for handling the bathroom constraint that I do handling resource constraints:

  • Communicate ahead - I'm a relatively strong creature of habit, so communicating that I needed the bathroom from 6 to 6:15 every morning seemed to work for basic needs.  If you know you will need a resource for your project, talk to them and to their functional manager and get it on the calendar.
  • Make alternate arrangements - we were half a mile from the lodge, so I made sure to use the ample facilities there whenever possible.  Instead of insisting on using this one available resource, can you train another person in the company or outsource to another company?
  • Change and be flexible - instead of showering in the morning, I changed my routine and showered at night.  This alleviated competition for the one available resource every morning when all of the others wanted to use it.  In the same way, find ways to use your resource at different times when they may not be as busy and are more inclined to want to help you.
  • Share - "Oooo!  Oooo!  Oooo!  Me next!" was heard a lot in the cabin.  Four adults and two children learned to wait in line and take turns.  Unless it makes your constrained resource feel like a piece of property, simply communicating your intentions and then standing in line may be the best course of action.
  • Relax - no amount of pouting, shouting, whining or breath-holding will make another person finish their "work" faster.  I've seen a lot of project managers make silly mistakes because they can't take a deep breath, relax and think.  (Project puddles are a bad, bad thing.)
  • Do you REALLY need to?  Sometimes we only think we need to go (curse the power of suggestion).  Similarly, I've challenged project managers who knew for sure they needed one specific resource... and when questioned, they backed down quickly knowing they could get by without.

Knowing what is really constraining your project is critical.  Gregg Phipps wrote an excellent piece on critical chain management and understanding how to deal with these constraints.  Resource contention can derail your project faster than you can say "toilet paper."  If you can identify and isolate these constraints on your project resources and time, you have taken a giant leap forward in solving the problem.  So what - or who - is holding your project up?  What excuses are causing the slippage?  Can you use one of the above strategies to fix it?

And once you do fix it, don't forget to flush and wash your hands.  You always want to leave the project resource in great shape for the next person.

Carpe Factum!

Courtesy Can't Make Up for Poor Products or Bad Policy

Capresso coffee therm 455 Two years ago my wife bought me a super cool top-of-the-line all-in-one coffee grinder and coffee maker. She'd scrounged and scrimped for almost a year to spring for the pricey CoffeeTherm 455 by Capresso. The grinder and coffee maker work like a charm and make great coffee. 

A year after I bought it, however, the LED display began to give out. I couldn't read the time or any of the settings. It rendered the programming useless and forced me to always brew my daily setting of six cups. If I had company over, I couldn't brew a full pot because I couldn't see the settings on the display.

I called Capresso.

First, they asked me to unplug it for two hours and then plug it back in. It still didn't work, so they told me to send it in. A few weeks later, I got it back working like new. It was a pain, but it I had it back and working again.

Well, it was working again for about a year.

Like clockwork, the same thing began to happen 12 months later. I wondered if I had a lemon, but my friend Kyle said he had the same model and his has done the same thing three years in row. I called Capresso again and went through the unplug it for two hours routine. It still didn't work. This time, however, Capresso told me that it would now cost me $85.00 plus shipping to get it fixed again.

So, let me get this straight. I pay top dollar for a quality coffee maker, but it appears Capresso put a faulty LED display in the unit. Based on the experience of me and my friend, I can expect the LED to go out every 12 months. My almost $400 coffee maker will now cost me another $85 a year to keep replacing the LED display. If my coffee maker has a life span of 10 years I can plan on having invested well over $1000.00 in my morning cup of joe.

The Customer Service Reps at Capresso were kind, courteous and empathetic when I called, but no amount of courtesy can make up for faulty manufacturing and short-sighted corporate policy. I wonder if Capresso is listening.

Facebook's Fan Box adds social interaction to your website

250px-FanBox Facebook recently unveiled the Fan Box, which is essentially a "social widget" that you can bolt into your own website. This widget pulls in streams of social activity from your company or organization's Facebook Fan Page and plants it where all of your website visitors can see it.

In order to use this feature, you do need to have a Facebook Fan Page set up first. For the sake of discussion, we'll assume that you already have one. (If you don't, you can read more about the benefits and features here.)

In the past, websites and Facebook Fan Pages were completely seperate destinations. You may have been frustrated by lack of visitors to your website, meanwhile, your company's fan page was getting all sorts of activity and engagement and you naturally wondered: Why can't the these two things be integrated?

Well, now they can. And this is such a better solution than the "Find us on Facebook" badge that many websites have, which is simply a bridge that carries you off to the social network.

In addition to the benefit of increased social activity on a typically static website, you also gain more "discovery" of your company's Facebook presence. The Fan Box lets visitors become a fan of your company on Facebook in one click without ever leaving your site.

This is just more proof that the age of "brochure-ware" websites is quickly ending. Go ahead, stamp one of these Fan Boxes onto your website and tell me what you think.

Will the IRS help pay for your vacation?

A golf ball directly before the holeImage via Wikipedia

Even in tough times, everyone could use a vacation.  While Congress takes its sweet time in enacting a vacation subsidy, creative taxpayers boldly try to enlist the IRS to help pay for their summer fun.  The results have been, at best, mixed.

Sherman Miller, a teacher in Roseville, Minn., sold insurance on the side. When he bought a condo in the resort town of Hayward, Wisconsin, he claimed that his trips there were all business.  The Tax Court tells the story:

Petitioner's insurance-related activity in Hayward consisted primarily of “prospecting” in the years here in issue. Petitioner considers that when an insurance agent meets potential clients who are willing to speak about insurance, the agent is “prospecting”. Petitioner's “prospecting” activities in the Hayward area consisted of going to dinner, playing golf at the Tagalong Country Club and having drinks with persons he considered potential clients.

Nice work if you can get it.  The judge wasn't convinced that it was all about business:

Petitioner called his business activity in Hayward “prospecting.” He said that he used two primary methods of prospecting, which were direct mail and “sunshining," and that the method he used in Hayward was “sunshining”. “Sunshining”, according to petitioner, was meeting people who would be likely candidates for purchasing insurance. Petitioner stated that a potential client was “anyone that is living and breathing and of appropriate age." If petitioner asked a golfing partner whether he needed insurance, he considered the game to be a business meeting and the expenses connected with that meeting deductible.

Unfortunately for Mr. Miller, the IRS tracked down some of his golfing partners, none of whom remembered the "insurance" parts of their rounds with him.

If you want to deduct travel expenses, the tax law makes you jump through some hoops.

  • You need to show the trip is "primarily" for business.  Unless the trip is primarily for business, you get no travel deduction.  While facts and circumstances control, the main factor is how you spend your time.
  • Document your business activity on the trip.  Be ready to show who you met with, what business you discussed and why it affects your business.  Receipts are good; results are even better.
  • Leave the family behind.  Mr. Miller brought his wife to Hayward, where she spent her time knitting in the condo.  The judge said this was evidence that it was a personal trip, not a business trip.  But when you tell your spouse that the IRS is making you take separate vacations, don't blame me for the consequences.

And I know what you're thinking: "you're blogging this on your vacation and writing it off."  I wish.  The Tax Court has held that writing on the road doesn't by itself make your vacation deductible.  I'm sure the same goes for blogging.

Related: IRS discussion of business travel.

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What would your customers stand in line for?

50150422 At 12:01 am last night, I escorted a gaggle of teen-aged girls into the premiere showing of Harry Potter and the Half-Blood Prince, the sixth installment of the Harry Potter movies.

We've had the tickets for at least a month and as a pre-cursor to the movie, I re-read the book to refresh my memory on all the details.  For the record....I would have been at that showing of the movie, with my daughter and her friends...or not!

Why?  Because I've been waiting to see the movie adaptation since the book's release in 2006.    No book or movie series in my recollection has done a better job of building anticipation for their product...and then over-delivering once the product is in your hands.

Apple is also brilliant at making their customers hungry for the next new phone, iPod or computer.  When Apple first released the iPhone, people literally waited in line for 2-3 days (and nights) to be sure they were able to buy one.

How does the Harry Potter franchise and Apple create that kind of pent up demand?  And more important -- how can we do the same thing for our business or product?

Give them a reason to keep coming back....before the big reveal:  There need to be updates, little teases and rewards (coupons, discounts, early adopter advantages) that keep bringing them back.

Don't give it away too soon (allow time for the anticipation to build):  The power of anticipation marketing is the word of mouth buzz.  As more and more people get caught up in the frenzy, it gets very contagious.  So don't let it end too soon.

Too much can be too much:  Don't let it drag out too long.  It's a fine art to making someone hungry for what you're teasing them with, but not frustrating them by too much time passed.  Apple's release of the original iPhone was over 6 months.  Only Apple could pull that off.

Make it shareable:  Again, remember that you want the anticipation to be contagious.  People wouldn't have hung out at their local bookstore for the latest Harry Potter book if they had to stand there alone.  Create ways for enthusiasts to infect their friends.

Be sure the show is worth the wait:  Remember, you've kept them waiting.  So when you finally reveal the goods...make sure there is plenty of sizzle in your show.   This is not the time to scrimp or be shy.  If you're going to use this marketing tactic...go big or go home!

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Stretch to Success

It’s not easy finding time to exercise.

Committed fitness enthusiasts usually squeeze in their daily dose of cardio, but who among us always takes time to stretch after a workout? With increasing responsibilities and the need to “do more with less” business leaders are finding ways to streamline their health and fitness activities and focus on the next project, deadline or crisis of the day.

11745987-1024x683_stretch When it comes to prioritizing, it’s easy to select the exercise options that yield noticeable results instead of stretching. However, stretching at least 20 to 30 minutes a week can provide lasting benefits, especially as you get older. According to the American College of Sports Medicine, we should spend at least 10 minutes after exercising to stretch major muscle and tendon groups.

Stretching offers many perks, including improved flexibility, circulation, balance and coordination. If you need structure and encouragement, participating in a class is an excellent way to get started. Our own City of Des Moines can help with its free “Yoga in the Park” Saturday morning sessions at Gray’s Lake this summer.

Stretching also holds importance in today’s business world, and I think it’s time to revisit the “stretch goals” philosophy of Jack Welch, former CEO of General Electric. Stretch goals, by definition, seem beyond reach at the present time, and can be used to inspire employees and encourage innovative ideas. 

Using Welch’s goal-setting theory, consider these questions when evaluating professional stretching:

  1. How has the stretch goal helped improve performance relative to past performance?
  2. What impact has the stretch goal had on your level of performance in comparison to your competitors’ performance?
  3. If not yet achieved, how close have you come to the stretch goal? Was the progress meaningful?

Make time to stretch. As in exercise routines, striving for stretch goals may not be an immediate priority, but working toward them can have a tremendous positive benefit on your future.

Leverage Social Media Before It Is Too Late

NEW YORK - DECEMBER 08: Paul Costiglio, a mar...Image by Getty Images via Daylife

The Problem
There are two kinds of companies doing business online: 1) those that have had an online public relations problem; and 2) those about to
have an online public relations problem.  Whether it is a disgruntled customer, a security breach or some other unintentional blunder, any public relations problem has the ability to snowball out of control. Ignoring or mishandling the problem often makes things worse. Once the problem reaches a critical mass, it may become too big for a small, or poorly positioned, company to recover.

The Solution
Social media is the perfect tool for not only identifying potential public relations issues early, but for turning them into a platform for showcasing your great customer service. Using social media as a radar to identify and address customer concerns early can save headaches down the road. Generating an evangelical social media following expands both your reach and message. If a catastrophic problem does occur, social media followers often come to a company’s rescue, solving problems hundreds of thousands of dollars and a courtroom of lawyers could not. Most importantly, transparent use of social media may cause a customer to contact you directly, before airing grievances online. Your social media solutions however, must be in place long before a problem arises. The key is in understanding social media, and implementing a coordinated social media initiative sooner, rather than later.

Brett Trout

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Generation X: Who needs them?

Image representing Twitter as depicted in Crun...Image via CrunchBase

Gen X sucks! It's just not as sexy as the other generations it falls between. The Silent Generation defeated the Nazis, Boomers started a revolution, and Millennials are saving the planet. Generation X is so bad it doesn’t even have a name, just an X. Gen Xers are the smallest of the four generations with a dip in the population line by about 20-30 million. While most of the attention of young professionals is focused on this overconfident, happy and resourceful millennial generation, what’s forgotten is that YP’s still have a large Gen X segment in them. 

If we use the current membership guidelines of most YP groups the age out limitation is usually 40 years of age, the most restrictive are capped at 35 years of age. Most research points to 1980 as being the arbitrary gateway to be considered a Millennial. Those two facts together suggest that the working world has at least five to 10 years left of Gen Xer’s preparing to take over. The population gap gives opportunities to Boomers to stay past their prime and Millennials to seize the day as well. However, for the Xer, their life experience of critical thinking, skepticism, isolation and standing in the shadows will be a highly valuable experience for management and leadership.

Gen Xers experience being caught in the middle positions and will have to deal with the largest generation gap since 1969 and the subsequent problems that brings, such as differing views on politics, religion, leadership and technology. In regards to technology, Gen X is already showing its leadership. While many seek Millennials for understanding of the latest Web 2.0 technology, it is Gen X, not Millennials, that is leading the charge with the most buzz worthy of social media tools: Twitter.

Millennials have not caught on to Twitter as much as Gen X has, but looking at the 3-year-old service that Twitter is, its millions of users, its rapid growth, diversity of third party applications, and its saturation in print and media., makes it a force to be reckoned with. In addition, its ability to break real time events like the overseas uprising in Iran, the stateside death of Michael Jackson in and even more localized events like the dismissal of public from the State Capitol, give Twitter a legitimacy that other platforms just don’t have. Gen X can be proud to lead the charge in this area and be content with anticipation over joining the leadership circle and finally getting some respect.

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Table Stakes

For months now, along with many others in my line of work, I have been lamenting about the "impending" talent crunch. Make no mistake about it...there may be a surpluss of labor out looking for work but there is still a very low supply of great talent. Baby boomers will soon start exiting the market place by the millions. It's been my argument that companies will no longer be able to compete for the best sales professionals with things like salary and benefits. Today, those things are what Mark True at MMG would refer to as table stakes. Salary and benefits are simply the ante to get you into the game of recruiting the top sales professionals.

Recruiting Trends published this report that begins to validate my argument.

Research conducted by the Kenexa Research Institute (KRI), a provider of talent acquisition and retention solutions, asked workers what their reasons were for joining their current organization. The report analyzes data drawn from a representative sample of workers surveyed through WorkTrends™, KRI’s 2008 annual survey of worker opinions. For some time, many have speculated on the reasons as to why people accept a job with a new organization. While KRI’s research confirms that there are a variety of them, two top items emerge as critical decision points: compensation and corporate reputation. An organization’s reputation consists of a variety of characteristics, including their involvement in corporate responsibility initiatives, product quality or profitability. Poker_2

The survey results also reveal that senior managers and sales people place the most value on the organization’s reputation in weighing an employment offer, as did employees in India, Italy, Russia and Brazil. “The correlation between the organization’s reputation and successful recruiting efforts strongly supports the importance of employment branding,” says Jack Wiley, executive director of the Kenexa Research Institute. “It’s not about each individual job offer – this research highlights the value of presenting and maintaining positive brand messaging to the potential employee talent pool.

Why will the most talented sales people choose to sell for your company rather than your competitor?

Avoid Litigators– Broken Arms and Business Owners

My posts are about avoiding litigation. The most commonly discussed litigation involves injuries. As business owners, we think about products, services, marketing, and accounting. If we don’t have a store front, we may spend little time contemplating work environment. Attention to real life surroundings is important for employees and for business visitors.

Employee injuries result in workers’ compensation claims, lost productivity and decreased morale. Ergonomic correction may be simple. Local providers may even provide free in-office consultations on improving workstations and postures while your employees are working. Evaluate your worker’s duties and workstations to pinpoint repetitive stress injury hazards and take action. For example, a simple electric stapler may prevent carpal tunnel for an employee who spends hours collating. An quick method to evaluate workstations is to ask employees for suggestions related to comfort and efficiency.

Safety-sign-slippery-when-wetConsidering employees’ health and welfare may be second nature to savvy business owners who shepherd their own flocks; Safeguarding guests from injury is too often an afterthought. It’s not that we don’t care about the well being of our patrons, quite the opposite; we assume they are aware enough to keep out of harm’s way. Our employees know about the seam in the carpet, that one little step down in-between the office and the hallway, or the loose latch on the door to the loading dock. We take these little hazards for granted. Adopt the eyes of grandmother reviewing your workplace like her grandchildren will take a field trip there the next day: round corners, pick up debris, remove or secure potential hazards.

Conscientious business owners stock up on sand or a melting agent in the fall. After snowfalls, they arrive early and shovel. They systematically mop puddles in entryways following rains, never taking for granted that all employees or customers have sensible shoes. Whether it is your supplier, a new client, or a random stranger who wanders into your building, you face liability for a wrist broken in a fall. The people who walk through your door are expected to take reasonable care and may assume risk for exposing themselves to certain obvious dangers. On the other hand, attention to safety may save you countless hours defending an avoidable claim.

One Iowa lawsuit involved a business patron who walked down a corridor with an unmarked service door and an exit. The patron did not see the small exit sign and went out the service door to find an unexpected drop-off and a broken ankle. The question was whether the exit marking was adequate. Even though the area was not meant to be public, the error was foreseeable and the business paid for the patron’s injuries. The door now has a red and white "not an exit" sign. $4 would have saved thousands.

Another Iowa case involves a beautiful marble bench in an atrium. Unfortunately, the floor pattern and the lighting camouflaged the bench at certain times of day. When a patron fell over the bench, breaking both arms, she sued. An expert found there were aesthetically pleasing affordable alternatives to make the bench safe. The business paid for the patron’s injuries. A stainless steel garbage can is now at the end of the bench. $100 would have saved tens of thousands.

Yet another Iowa case involves a worker who caught his arm in a machine, severely injuring his arm. Neither he nor the employer knew the machine was originally sold with a guard that would have protected him. A review of the manual (and a free guard replacement) would have saved tens of thousands.

Walk through your building. Have your grandmother walk through. Look at it from the perspective of someone who has entered it for the first time. Are hazards lit and marked? Are employees comfortable? Do you need a consultant to evaluate your environment?

OSHA has a handbook to make your small business workplace safer. Iowa Workforce Development offers links to look for health and safety related sites. Employee suggestions may lead to safety improvements. The simple adage is true; an ounce of prevention is worth a pound of cure.

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Acting Paradoxically for Success

Let's say you have to deliver a tough message about layoffs. Can you deliver that message in a compassionate way?

Let's say that you feel strongly about a certain issue. But can you jump on board and loyally implement another plan even if it opposes your view?

Can you both lead and follow equally well? Do you confront people when they don't perform but still be  approachable and easy to talk with? Layoffs

Learning to shift gears readily like this is critical to being a good leader. (Especially today, when the landscape can change in a matter of seconds!) If you're a leader today, you have to be able to think and act in seemingly contrary ways at the same time, or when moving from one task to another.

One of the biggest leadership challenges for me is re-thinking the value of being "consistent," being who I am, deep down, all the time, following one set of beliefs. When called on to act paradoxically, what I do is push out my borders a bit and expand my normal range of beliefs, behaviors and style, using two extremes at once: I'm loud and soft, strong and flexible, persistent and adaptable.

How does paradox show up for you? How do you have to shift gears at work? What kinds of quick and difficult transitions do you have to make in the course of a typical day?

Write down the five toughest for you? How do these discontinuities make you feel and what might you do in that moment that gets you into trouble as a leader? Now decide what you'll do next time such a paradox shows up that will keep you out of trouble and lead you to success.















































































































































































































































































































































































































































































































































































































































































































































































































































































































Is Your Contingency Plan In Order?

“Katrina is comparable in intensity to Hurrica...Image via Wikipedia

The economy is struggling, a vital customer quits ordering, you loose a key employee, or a natural disaster strikes – is your business ready for these types of scenarios?  Great businesses answer YES and they may even be offended if someone asks.  

The reality is that most businesses have not given the time to create a contingency plan.  Why? Below is short list of reasons:

  • Business is thriving
  • It requires discussion on tough issues that typically are avoided
  • It takes too much time
  • We are rock solid and do not have to worry
  • Poor management

Contingency planning is equally as important as your annual business plan or your strategic plan.  Remember that you have a group of employees, owners and their families counting on the fact that business survival means their own survival.

Without a contingency plan, recovery from a tough situation becomes difficult and may lead to the death of the business.  Gather your key people, talk about the issues that could drastically impact your business and create a plan to cope with the issues.  Contingency planning should be a part of sales, profit and stock growth planning. 

Do not wait for the storm to happen, make sure you are equipped and ready when the storm arrives!

Victor Aspengren

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Business Brokers Can Help with Due Diligence

Most business brokers would use a simple definition of "due diligence" to mean the process through which a potential buyer evaluates a target company or business for the purpose of acquisition.

The process is similar to a forensic analysis. According to many business brokers, relevant areas ofBlog concern can include financial reports, the business's place in the market, real and personal property, insurance and liability coverage, review of debt, employee benefits, immigration and international transactions.

Business brokers can be instrumental in the process of due diligence. According to the U.S. Securities Act of 1933, business brokers must conduct a due diligence investigation for the businesses they are selling and disclose their discoveries in order to not be held liable for non-disclosure. Due diligence is now performed by business brokers for public, as well as private mergers and acquisitions.

Business brokers say that due diligence should be performed before a company goes to market. This helps to uncover any hidden or unexpected costs that may be associated with the sale of the business, ensuring that the seller is receiving a fair sum from the buyer. The best advice is to employ the help of a qualified business broker. Protecting the seller is a business broker's job, and properly performing due diligence is one of the most important steps to take when selling your company.

Finding your social synergy

In my last post, I wrote that social networking is organic.

I’ve also been learning that social networking is – to use a term I picked up from Scott Berry, one of the biggestTodd's ESGR pic networking guys I know – “synergistic.”

As I was leaving Jeff Garrison’s BYOB Gathering at McLellan Marketing Group’s office last month, I happened to walk by the Des Moines Social Club. I learned from an acquaintance of mine standing out front that the Greater Des Moines Young Professionals Connection (YPC) was hosting a social function that evening.

I’d been looking forward to making a connection with the YPC group for some time and it seemed like the perfect opportunity.  I had no agenda.  I just wanted a closer look.

As I stepped inside, one of the first people I recognized was Lacy Brunnette, an up-and-coming twentysomething with Global Reach Internet Productions LLC in Ames. Lacy knows my company has been looking for some locals to contribute photos of professional business events for our Web site. So she introduced me to Doug Enright, YPC’s webmaster.

I appreciated the introduction and enjoyed chatting with Doug.

A few days later, Doug sent me an e-mail asking if I’d be interested in flying to Camp Ripley, Minn., that coming weekend, to watch members of the Iowa National Guard taking part in their annual training. Doug is the state office manager for Employer Support of the Guard and Reserve, which coordinates the annual BossLift program. I jumped on the opportunity.

Not only did the 24-hour trip give me a chance to connect with Doug, but it also allowed me to tour a 53,000-acre military installation, catch a glimpse of a few fairly classified areas on the base, meet dozens of officers and soldiers, handle a variety of automatic weapons and artillery shells, ride in several Humvees, try on a Kevlar vest and helmet, observe some really cool demonstrations, watch businessmen blow stuff up and just talk to a bunch of people.

I also added a number of local professional contacts to my Rolodex.

In short, taking the time to drop in at the Social Club that night – after attending another networking event where I finally put faces with the names of several social-media gurus I’d been hearing more about recently – led to dozens of new contacts, the publication of a story and photo gallery, the production of a video and a heck of a good time.

And I have to say that riding in the cockpit of a Boeing Chinook CH-47 helicopter for about an hour with zero visibility was probably one of those once-in-a-lifetime experiences.

Here’s my point. Networking tends to have a snowball effect. If your network consist of one person, that’s great. He or she knows people. And those people know people that can help your career and business. You just need to get the ball rolling.

Remember, networking doesn’t have to be forced. Reiterating yourself, your business and your brand – sometimes by just showing up – can ultimately lead to a closing a deal, making a sale, finding a job, publishing an article or hooking up with individuals and groups who can point you in the right direction.

See you in the news!

Todd Razor

Do you know how "products completed operations" can affect your business?

Injury 3 Do you know how "products completed operations" can affect your business?

Not surprisingly, most business owners don’t.

Often times, when I review this coverage with a client, if their business is not manufacturing, they don’t think they need it. I have even been asked if it can be removed from the policy since they do not make any products within their business.

So what I would like to do is review some simple scenarios that can show how useful and important this coverage really is.

  • A self employed contractor builds a deck for a client – three months later the deck collapses and the client is injured. It is later determined that the contractor neglected to fasten the deck correctly and caused the deck to collapse.

  • A customer eats a hamburger at your restaurant and later makes a claim against the business claiming that they received food poisoning from eating at your establishment.

  • A heating and cooling business installs a new water heater in a client’s home. Three months later, the water heater leaks and causes property damage to the client’s home.

While some of these situations seem simple - they are common, everyday business operations that can affect many different industries.

It is important to note that to be covered, the injury or damage must occur away from your own premises, unless your business includes selling, handling or distributing your product for consumption on your premises.

Just as important to know is that this coverage only provides protection while the policy is in force.  So, if a business owner cancels the policy, closes their business or retires - and a claim arises three months later for work they performed during their policy period - they’re probably not covered.

So the next time you are reviewing your policy, make sure that your Products Completed Operations coverage is adequate for the risk you bear.

As always, I welcome any feedback that you may have and click on the above links for more information on this coverage.

Preamble Your Project

Constitution_preamble Happy Independence Day from Iowabiz!

To celebrate our nation's birthday - and with help from my friend, Josh Nankivel, and his fellow authors at PMStudent - I thought it appropriate to look at our constitution as one big project charter:

We the people At their core, projects are about people.  They are of the people, by the people, and for the people. People skills are the chief component of what makes a project work.

In order to form a more perfect union Does your project support the cohesive mission of your organization?  If not, you'll have stakeholders pulling you in every direction.

Establish justice In a project setting, "fair" is a myth. There will always be somebody who perceives your project solution as unfair.  As a leader, you are shooting for an equitable solution.

Ensure domestic tranquility Keeping your stakeholders and end users at the forefront of your focus can prevent embattlement down the road.

Provide for the common defense Projects will always be embattled by office politics.  Why not keep your sense of humor and be prepared for the worst?

Promote the general welfare While you are meeting deadlines and building deliverables, why not develop your people and manage their skills and talents in the process?  It could save your project.

Secure the blessings of liberty While there are many tools and approaches in project management, the best practice is to maintain your flexibility, try new things, and ultimately just do what makes sense for your project and your team and your organization.  Rigidity kills projects.

To ourselves and our posterity What kind of legacy is your project leaving for the organization?  Will people ignore and dismantle the solution once you have moved on, or will they embrace what you have accomplished?

On behalf of my fellow Iowabiz authors, I wish you a safe and happy Independence Day holiday.

Carpe Factum!

The Right Way to Approach Customer Service

Not what you want to see when you walk up to y...Image by Jim Frazier via Flickr

Several months ago I found myself in the midst of a real life version of Planes, Trains and Automobiles and I learned a valuable lesson in customer service. I was on my way home from a business trip and, to make a very long story short, I was stuck with a bunch of other travelers at Chicago's O'Hare International Airport. We'd loaded the plane. We'd sat on the tarmac for hours. We'd returned to the terminal to correct a problem. We'd reloaded the plane. Then we were told we'd have to get off the plane and be shuffled to another flight. It was your basic travel nightmare.

As I stood in the back of the line at the service counter waiting for my reassignment, I watched as my fellow travelers verbally accosted the ticket agent. Granted, they were saying all the the things I was thinking, but the poor guy was getting mercilessly yelled at and berated.

I was the last person in line. As I approached the lambasted ticket agent, I noticed that he defensively refused to make eye contact.

"Tough night for all of us, isn't it?" I asked with the most cheerful tone I could muster.

He finally looked at me as he held out his hand for my boarding pass. I forced out an "I know how you feel" smile as I gave it to him. He rolled his eyes, nodded, and began to work on my reassignment.

"Thanks for taking care of us," I said as his fingers clickety-clacked their way across the keyboard.

The printer whirred and he pulled out the new boarding pass.

"Thank you," he said to me with deliberate earnestness. With that, he handed me a first-class ticket home.

Like it or not, Customer Service Representatives have the power to help or hinder our quest for resolution. How you approach them may determine which it's going to be. As my Grandma Golly always said, "You can catch more flies with honey than you can with vinegar."

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Why corporations block social media sites: Security and productivity

My social Network on Flickr, Facebook, Twitter...Image by luc legay via Flickr

Recently, The Des Moines Register reported that the Iowa DOT (Department of Transportation) blocked the use of Twitter, MySpace, Facebook and other social media applications among its employees, citing security concerns.

So, how unsafe are social networks, anyway? In my opinion, social technology is no more or less safe that any online destination and function (Web sites, e-mail, et cetera).

As an individual user, there are many precautions you can take, including using a safe browser: Firefox and Chrome get high marks for their advanced safety features, while Internet Explorer is frequently full of holes and security exploits.

You should also have some form of security software on your desktop machine or laptop that scans for viruses, malware, spyware and phishing apps once every 24 hours.

Thirdly, and probably most importantly, have some common sense. Don't click on anything that looks suspicious sent from someone you don't know, whether it comes to you in the form of an e-mail message, a tweet or a Facebook post.

Now, to the other issue, is the Iowa DOT really concerned about security issues, or is this a smokescreen to ensure that employees remain productive? I truly believe social networks (when used properly) can enhance a business or organization, and blocking them may simply result in missed opportunities.

Security and productivity should be addressed, in my view, with proper educational training, internal policies and employee culture. It's up to each individual company to talk to their employees about what goes and what doesn't go.

In the Iowa DOT's case, I'd recommend keeping these applications open for marketing and communications staff as a start. These are the people who will need to make use of social media tools and channels right now. Other employees, especially those on machines with access to sensitive data such as social security numbers, can remain closed-off and perhaps activated on an as-needed basis.

For a good analysis of what an internal social media usage policy might look like, here's a Mashable article on the topic including examples from Ford and Zappos.com.

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Should your S corporations be in a holding company?

The way the economy is going, a lot of entrepreneurs are going to be looking at taxable losses for 2009.Blog   Those who run multiple businesses in separate S corporations should ponder an S corporation holding company before year-end.

S corporations generally don't pay their own income taxes.  They report their income on a Schedule K-1 issued to their owners, and the owners pick up the K-1 income on their 1040s.  S corporations are popular because they can distribute their earnings without further income tax, in contrast with double taxed C corporations.  They also can enable their owners to reduce their income with K-1 losses.

Unfortunately, shareholders need to have basis in their S corporation stock, or in loans they have made to their S corporations, for their K-1 losses to be deductible.  Entrepreneurs with multiple S corporations might find themselves with plenty of basis in a profitable S corporation, but no basis at all in a money-losing corporation.  That means they might pay tax even though they didn't actually make any money:

Example: Todd owns 100 percent of S corporations Razor Corporation and Market Street Brewing Company.  Razor has $1 million taxable income, while Market Street has a $1 million taxable loss in 2009.  At the beginning of the year, Todd has no basis in either company.  He makes no distributions or cash contributions to either company in 2009.  At year end, he has $1 million in basis in Razor, because undistributed taxable income increases the basis of S corporation stock.  Unfortunately, he still has no basis in Market Street, so his losses only carry forward until he either contributes basis to Market Street or it generates its own taxable income.

 Even though between the two companies Todd has no taxable income, he has to report $1 million of income from Razor without deducting any loss from Market Street.

A far better solution would have been to have the S corporations all under a single roof in an S corporation holding company.  For example, Todd could set up a new S corporation -- we'll call it Todd Holdings -- and contribute his stock in both companies to it.  The old S corporations would elect to be "Qualified Sub-S Subsidiaries," or "Q-Subs," of Todd Holdings.  Todd could then count the basis of the corporations together, enabling him to use the $1 million of year-end basis in Razor to take his Market Street loss.

Setting up holding companies is normally uncomplicated, but it can cause huge tax problems if not done properly.  Don't mess with your corporate structure without consulting a competent tax advisor.  If you get it set up by year-end, a holding company should provide the same benefit as if it were in place the whole year.

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