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April 2011

Short term gain can equal long term marketing pain

93143831It's a rare business that doesn't partner with other companies to take care of all their clients' needs.  That's certainly true of my company.  We partner with printers, video & audio production companies, animators, media companies, and the like.

We count on them, their unique skills and their professionalism every day.  How they perform reflects as much on us as it does on them.  So we choose them very carefully.  The trust grows slowly over time until they become an extension of our team.

It takes a while for us to earn a clients' trust, doesn't it?  But once we've got it -- it's value is immeasurable.  It's one of our greatest marketing tools -- the trust of existing clients and the reputation that trust earns us.

We recently ran into a situation that reminded me of just how this impacts our ability to grow our business.  We're in the middle of a large project which required us to partner with a vendor.  We hadn't know him for too long but had high hopes that he would become a part of our extended family.

He called this week to cancel on us at the last minute.  Why? He got an offer for five days of work, so all of a sudden, the one day he had left to finish our project wasn't as profitable.  

He'll certainly enjoy a short term gain from this decision.  But...he just created a huge marketing problem for himself.

Why?  Because your reputation takes a long time to build, a nanosecond to destroy and a lifetime to restore.

Here are potential costs when your reputation takes a hit:

  • You lose that client's business.  Forever.
  • You lose all the referrals that client would have sent your way.
  • No matter how big or small your marketplace is -- word of behavior like this spreads sooner or later.
  • Once labeled -- it's really tough to change perception
  • You won't be able to charge a premium price -- you'll have to buy business by being at a lower price point.

In a crowded marketplace, the most significant differentiator is reputation.  If you're known as someone who follows through, who honors their word and who treats the client's best interests as their own -- your reputation and your business will flourish.

And if not -- you'll bear the fruit of that as well.  



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ESOP Ownership Balance

4375615847_dd3b436750_tOne of the elements that employee owners in an ESOP must come to grips with is the short term vs. long term views of business. Educating employee owners on how the company balances these two views should be a priority and a regular activity.  

The company may have great products, strong market penetration and high profits today, but maintaining this status typically requires investments in new products or services. These investments can be funded by internal cash flow or outside debt. Either way, these new ventures will diminish stock value in the short term with the hope that greater value will be created long term.

The timing of these new ventures in conjunction with when employee owners decide to leave the company can create an uncomfortable situation. Specifically, in a new growth cycle, the employee owner will receive a lower stock value for their ownership balance and may feel they are getting the short end of the stick.

To avoid these situations companies need to invest the time and effort in educating the employees on how a new venture will impact stock value and that the company has to look out for the welfare of employee owners today, as well as those five, 10, 20 or more years down the road. Educating employee owners gives them the information to make a better decision on when to the leave the company if they want the highest value they can get.

The is a balancing act that every ESOP company and every employee owner should become skilled at. 

Flickr photo by Hotdog Photography

Let People Be Different

Mind the dip! Ostrich, near Omuramba, Kunene, ...Image via Wikipedia

David Grayson said, "Commandment number one of any truly civilized society is this: Let people be different." And why not? People ARE different!

For some reason, we can be uncomfortable with people and groups different from ourselves, but we find extreme differences within the animal kingdom as intriguing. Think about it. When it comes to survival, the ostrich seems to lack good sense, has eccentric parenting habits, and can't fly even though it has wings. But it can run 60 mph for 30 minutes to survive a predator.

We appreciate that in the ostrich. But equally as remarkable is the bombardier beetle, which survives by carrying twin storage tanks on its back of hydrogen peroxide and hydroquinone. When threatened, the bombardier beetle mixes those chemicals together, shoots them through a special nozzle and blinds their foe. Now that's also a strategy worthy of admiration.

To survive and thrive in today's global marketplace, it's important that leaders see diversity within their workforce as key. Markets are more diverse. The labor pool is more diverse. And almost every global company's greatest opportunities are in cultures different and more diverse than its home country's. Managing global diversity well starts with understanding and embracing small, local diversity.

As a leader, do you:

  • manage all kinds and classes of people equitably?
  • hire variety and diversity without regard to class?
  • deal effectively with all races, nationalities, cultures, disabilities, ages and both genders?
  • support equal and fair treatment and opportunity for all?

To truly let people be different -- and recognize and embrace and leverage those differences -- you'll want to:

  • understand without judging those who are different from yourself,
  • see people more as individuals and less as a member of a group,
  • recognize your own subtle stereotyping and biases, and
  • be able to make a business -- and personal -- case for diversity.

Differences are good. Mark Twain put it this way: "It is not best that we should all think alike; it is difference of opinion that makes horseraces." The same can be said for successful enterprises.

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Boring Blog 3 - More Secured Interests

White&blackImage via Wikipedia

This is the final blog about secured interests.

Boring Blog 1 addresses security interests in goods sold.

Boring Blog 2 deals with perfecting security interests.

This blog addresses priority of secured interests.

Priority of a security interest may determine who receives payment when a debtor cannot fulfill obligations to multipe creditors. If the same collateral was used to secure different loans, or if a debtor is in bankruptcy, priority will determine distribution. Often, the first security interest that is perfected takes priority. This post is limited to Iowa UCC provisions on priority.

Priority by first to perfect/file:

Filing prioritizes security interests over later-created perfected interests and prior unperfected interests. Iowa Code Section 554.9322 provides the general rules for prioritization. Common interpretations include first to perfect, first in priority; and if no interests are perfected, first in time, first in priority. There are many exceptions to the priority by filing rules. Examples of exceptions include perfection by possession of collateral, perfection through a Purchase Money Security Interest (PMSI), and automatic perfection of PMSIs in consumer goods.

Filing a financing statement with the Iowa Secretary of State perfects a security interest in the listed collateral. If an interest is unperfected, Iowa Code Section 554.9317(2) provides that a future buyer of that collateral may take it free and clear of a security interest, leaving a secured party with an unsecured open account against the original debtor.

Perfection by possession or control:

Iowa Code section 554.9312 provides that perfection in deposit accounts, investment property and certain other collateral may be perfected by filing, or through possession or control by the secured party, without filing. The Iowa UCC defines possession and control, and, significantly, states that those taking a security interest in a deposit account may ONLY perfect that interest through control of the account as set out in section 554.9104.

Priority by PMSI[1]:

In Iowa, security interests may be created and perfected in categories of goods such as “equipment,” “inventory,” or “all confection ovens” (harkening back to examples in prior blogs). Section 554.9317(5) allows a PMSI in goods of a certain category (except inventory) to take priority over other pre-existing security interests for that category, if the PMSI is perfected through filing within 20 days after delivery of the goods to the buyer. For a PMSI in inventory, Iowa Code section 554.9324(2) states that, to take priority over pre-existing interests, the PMSI must be filed and any holders of perfected security interests must be notified before delivery of the goods to the buyer.

Automatic perfection, PMSI in consumer goods:

Security interests in consumer goods are perfected upon attachment (see Boring Blog 1), and require no filing. This rule makes business dealings in smaller goods, like dishwashers or stereos, easier as there is no need for a race to perfect by filing. Some consumer goods which are transferred through certificates of title (e.g., cars) may have specific requirements for perfection of security interests that are not listed in the Iowa UCC.

Perfection and priority tips[2]:

  • Inspect proposed collateral before accepting. First, to confirm the collateral is not in the possession of another, and second to assess the value of the collateral.
  • Ascertain the history of the collateral. When and how did the party receive it? Did the debtor borrow money to obtain the collateral?
  • Check online records under the debtor’s name and under any prior owners' names for perfected security interests. The Iowa Secretary of State offers two search sites to assist, here and here.
  • If a filed financing statement references the collateral, determine if the debt is paid. A termination statement may be filed.

I hope the boring helps you avoid the truly aggravating.

 - Christine Branstad

[1] Boring Blog 1 describes a PMSI as “a security agreement…where the entity which gave the funds to the debtor to procure the good/s has a security interest in those goods as collateral." As some may have expected, this special definition leads to special treatment when it comes to priority.

[2] These are only tips and cannot substitute for specialized legal advice.

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The ESOP Option

President's Advisory Panel for Federal Tax ReformImage via Wikipedia

Over the last two decades, employee stock ownership plans (ESOPs) - spurred on by various tax incentives - have become widely established among both publicly-traded and closely-held companies. One of the unique features of ESOPs is their effectiveness as tools of corporate finance. However, their use as financing tools also increases their complexity.

Here are some thoughts for consideration.

What is an ESOP? At its core, an ESOP is merely a tax-qualified savings or retirement account plan (such as a profit sharing or 401(k) plan). However, unlike profit sharing or 401(k) plans that invest in mutual funds or other general investments, an ESOP is designed to invest primarily in the stock of the sponsoring employer. And although some special rules apply to ESOPs that do not apply to profit sharing plans, most rules (including eligibility and vesting rules) are the same.

What is a leveraged ESOP?  

One of the unique features of an ESOP is its ability to use borrowed money to purchase employer stock. When an ESOP borrows, it is referred to as a "leveraged ESOP." With the proceeds of a loan, a leveraged ESOP can purchase employer stock on the open market, from any selling shareholder(s) or from the employer itself. Thus, a leveraged ESOP can serve a number of corporate objectives, such as reducing the number of outstanding shares, buying out existing shareholders and financing corporate expansion.

How does a leveraged ESOP work?  

In a typical leveraged ESOP transaction, the ESOP will use the proceeds of a loan from a bank or other lender to purchase employer stock. The employer will guarantee the loan and agree to make contributions to the ESOP in order that the ESOP will have money with which to repay the loan. Because contributions to the ESOP (a tax-qualified retirement or savings plan) are tax-deductible, the employer achieves something that can only be done through an ESOP -- the ability to repay a loan using tax-deductible principal and interest. The amount that can be borrowed is limited by the amount of tax-deductible contributions needed each year to repay principal on the loan (generally, about 25 percent of the payroll of ESOP participants).

The stock that the ESOP purchases with the proceeds of the loan is held as collateral by the lender. Each year, as the loan is repaid, a prorated portion of the shares held as collateral will be released and allocated to accounts of individual plan participants, where they will be held until distributed and/or forfeited following the participants' termination of employment.

ESOP Loan Example

Assume an ESOP borrows $1 million to purchase 100,000 shares of employer stock, which the lending bank holds as collateral. Assume further that the company will make contributions to the ESOP sufficient for the ESOP to repay 10 percent of loan principal each year.

Each year, as 10 percent of the loan principal is repaid, 10 percent of the shares held as collateral will be released. Thus, after the first year, 10,000 shares will be released. The released shares are allocated to each participant's account prorated based on the compensation of such participant to the total of all participants' compensation.

Note that the value of the stock has no bearing on either the number of shares released from collateral or the number of released shares allocated to participants' accounts. Participants therefore receive the full benefit of any stock appreciation.

What other ESOP tax incentives are there?

In addition to enabling an employer to borrow using tax deductible principal and interest, subject to some restrictions, the following tax incentives further encourage ESOP borrowing:

  • Below-Market Rates: A lending bank is permitted to exclude from taxable income 50 percent of the interest it receives on qualifying ESOP debt, thus allowing an ESOP loan to be made at below-market rates.
  • Dividend Deduction: Although dividends are not normally deductible, they are when used to repay a qualifying ESOP loan. In effect, this allows dividends to be used to increase the amount of ESOP loan that can be repaid with tax-deductible dollars.
  • Tax-Deferral Opportunities for Selling Shareholders: A shareholder of a private company who sells his shares to an ESOP can defer recognition of gain on the sale by reinvesting the proceeds in publicly-traded U.S. companies. The seller's basis in the old shares is carried-over to the new shares. In effect, an ESOP provides not only a market for non-tradable shares, but also allows a private shareholder to convert an illiquid investment to one that is readily tradable. To qualify for the tax-deferral, the ESOP must hold at least 30 percent of the stock immediately following the sale and the selling stockholder must have held his shares for at least three years.

What are the drawbacks of an ESOP?

In exchange for the generous tax incentive afforded ESOPs, there are numerous requirements. Some of the more important requirements are the following:

  • Participant Voting Rights: In general, participants must be permitted to vote employer stock that is allocated to their ESOP accounts (regardless of whether or not vested). However, if the employer's stock is not publicly traded and the ESOP has a loan that does not qualify for the 50 percent interest income exclusion discussed above, then participants need only be given the right to vote on significant corporate matters (like a merger or recapitalization).
  • Put Option Requirements: In general, an ESOP can make distributions in either cash or stock, but participants have the right to demand stock. In the case of a closely-held company, participants must have the right to require the company to purchase their shares at fair market value. The "put" price may be paid in installments over not more than a five-year period. Stock of a closely-held company may also be subject to a right of first refusal requiring the shares to be sold to the ESOP or the company. It is important that a closely-held company budget for put option liabilities. If ESOP shares increase significantly in value, the put option requirement could become a drain on the company's cash flow.
  • Annual Stock Appraisals: If the employer's stock is not publicly-traded, the shares must be valued by an independent appraiser at least annually. The appraisal is critical for purposes of valuing distributions and put option rights. Annual appraisals can significantly increase the cost of maintaining an ESOP. Appraisals are also subject to scrutiny to ensure that they are performed independently and adequately reflect the fair market value of the stock. If the appraisal does not meet these standards, the fiduciaries of the ESOP may face liability.
  • Fiduciary Concerns: Fiduciaries of an ESOP are often officers and other key management personnel. As fiduciaries, they owe a special duty of care to the ESOP and its participants. However, they also owe a duty to the company. Because of the potential conflict of these roles, ESOP fiduciaries must be alert to possible conflicts of interest. Just as an independent appraisal of stock is required for ESOPs of closely-held companies, the use of independent fiduciaries and financial advisers to represent the ESOP may be appropriate in connection with transactions involving an ESOP.
  • The cost to maintain an ESOP can be significant.  ESOP’s require audited financial statements and most companies will contract with an independent fiduciary.
  • The annual capital requirements to support the ESOP can have a negative impact on growth.

Is an ESOP right for your company?

There is no quick and easy answer. Companies that establish ESOPs often do so for the following reasons:

  • to buy out shareholders who wish to retire, capitalize on all or some of his or its shares, or otherwise no longer own the Company
  • to reward employees who have contributed to the success of the Company
  • to improve productivity and reduce turnover by giving employees a stake in the business
  • to provide employees with a tax-favored retirement savings plan
  • to provide a tax-favored means of corporate finance

Implementation of an ESOP is a significant event requiring careful planning and analysis utilizing qualified financial and legal advisors. While many of the objectives enumerated above may be achieved in a number of ways, an ESOP is a unique vehicle that delivers on all of them.

- Steve Sink

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The Business Case for the Social Media Club Des Moines

SMCDSM logo I was on Facebook the other day, stirring up some political conversation. I happen to really love asking provocative questions on my page. It's part of who I am, but I never bring up a topic that I'm not prepared to defend. I guess I never listened to Sister Rachael - my grade school principal - who told me that "ladies don't discuss controversial issues."

Imagine my surprise when someone who was not my friend chimed in to the conversation with some extremely offensive remarks. I don't mind a little smack-talk among friends, but this person was not my friend. Nor was he characterizing my views properly, and was clearly belligerent.

I glanced at his Facebook profile, where, lo-and-behold... I saw that he plainly listed his occupation and his company name. Turns out, he was an agent for a very large and very prominent insurance company here in Central Iowa!

That made me think of two things. The first? I wonder if that company has a social media policy? The second? I am never buying anything from that company!

A majority of companies are certainly aware of social media. I'd even venture to say that many are either already active in social media or exploring their options. But there are obviously gaps in knowledge. That's where the Social Media Club Des Moines (SMCDSM) comes in.

The SMCDSM is a group of Central Iowans who share an interest in social media from multiple perspectives. Some are responsible for their company's social media efforts. Some just want to meet new people who are interested in social media. Others are newcomers to social media who want to learn more. And a few are experts who are willing to share their time and talent to teach others. You can join the group by visiting the website.

The club is just entering its second year of existence. I'm honored to be serving as president this year and along with a great board of directors, we're tying to make the club a resource for the business community. In the next few weeks, we'll be planning some events that will specifically cater to the Des Moines business community. I'd love to use this forum to get your input on what you'd like the SMCDSM to address on your behalf.

Please comment on this post and let's get a discussion started.

Based on my experience with my "non-Facebook friend," I'd say a lunch-n-learn on corporate social media policy might be in order!

Is your problem everyone else's problem? Prove It!

Sliced breadImage via Wikipedia

No, I am not talking about personal problems here.

Many businesses started with someone who solved a problem that they personally experienced.  It is a recommended way to explore being an entrepreneur.  Solve a problem.

Here is the hard part.  Do others have the problem and will they pay you to solve it?  Can you prove it?

It is really hard to do.  Three buddies in a bar (after two drinks) telling you it is the greatest thing since sliced bread is not proof.  Having someone ask you your price and giving you the money is proof.

Large companies spend a lot of money on market studies and test marketing to see if people will buy the proposed product.  This is how they get their proof.  Even then, sometimes things don't work out.  Most small businesses do not have the knowledge or cash to test market their offering. 

If you wonder why so many tech companies start up these days it has a lot to do with the question of proof.  Many times, the product can be built and delivered for the same cost of testing the market.  And in the end the product is available for the next buying customer.  That is still not all the proof you need.

The final bit of proof required is can you reach the potential buyers.  Not only do you need to prove people will buy but:

  • you must prove you can reach them
  • and get them to listen to you
  • without spending more than you will make on your product each time you sell it
  • in a way you can repeat over and over
  • and deliver on what you promise

Can you do it?  Prove it!

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What's the point?

Screen shot 2011-04-18 at 4.33.21 PMThis is one of the critical questions a company needs to ask not only about its social media presence, but its overall online presence.

There are many creative ways to communicate with customers and other target audiences, but at the end of the day, the communication needs grounding in order to have a long-term positive outcome for the organization.

It may seem like a bit of a no-brainer on the surface, "We're using this social platform to accomplish ____". You might think, "Of course this is something the team considered and defined." In reality, more specifically in practice, this seemingly simple task is often ignored or the mark is missed either in the interpretation or execution.

Consider for example: A company's leadership team takes several steps to thoroughly establish the purpose for its social media presence. It interviews internal stakeholders and appropriate departments, and maybe even conducts an internal survey. Yet, it falls short of successful implementation, because that same amount of time defining the purpose was not communicated in an applicable way to those responsible for executing it.

Here are five considerations when defining the purpose for your digital presence:

  1. The answer should embody the end goals and purpose for participating on the channel. It must be both achievable and connected to a specific timeline.
  2. Answer the question completely. Brevity has its place. In this case, a greater degree of specificity will produce a better result. Consider it an essay question as opposed to multiple choices.
  3. The answer can and will change with frequently, so ask the same question on a regular basis and create a calendar item for it.
  4. Answers will vary depending upon whom you ask within the organization, so ask all departments who will be impacted and those who can utilize social media to make an impact.
  5. Success requires the appropriate blend of thorough planning, internal communication, training and execution.

Take the time to sharpen your point.

Where Everybody Knows Your Name

A photo of a cup of coffee.Image via Wikipedia

A few years ago, I wrote a post about a local coffee shop. I frequented the shop almost daily and worked there most weekday mornings for an hour or two. Two years later, after going there religiously, I had never once been greeted with a "good morning, Tom." Even though I ordered the same thing every day, I was never once asked if I wanted "the usual" nor did I ever find a cup of black coffee sitting on the counter waiting for me before I arrived.

I don't go there anymore.

A month or so ago, my wife and I stopped in at Grounds for Celebration on Mills Parkway Parkway. I lived near there more than seven years ago. It was my morning coffee stop for a couple of years and I had a thirst for some of their amazing Luna Tango roast. As my wife and I walked into the shop, we ran into the owner, George. His eyes grew wide with surprise. "Hey stranger! Welcome back! It's good to see you!"

I immediately felt like I was home.

I often remind customer service professionals of the theme song to that classic television show Cheers. Why do you go to Cheers? Because "you want to go where everybody knows your name."

Do you know your customers by name?

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Connect with humans or be abducted by aliens

Though time management has been a focus for the past few posts on the AlienSpaceShip_300px Life-Work Balance page here at www.iowabiz.com, I’d like to segue into a study and discussion about the importance of relationships and human connections.

We all have a need to connect with people in our personal and professional roles. It is core to the human race -- and what separates mankind from alien.

There are several reasons most of us earthlings fall short in connecting with others:

  1. Lack of time. Connecting takes time! We don’t have “beam me up, Scotty” kinds of technology to get us from A to B... yet.
  2. Selectiveness and Authenticity. With whom should we be connecting, and how do we maintain authenticity? “Take me to your leader!” isn’t the most effective approach for human connections.
  3. Methods to expand networks. The extraterrestrial method is greedy and seeks to steal natural resources. The human method is the go-giver kind.
  4. Online overwhelm. With no social media strategy or discipline in place, one can be captured by the online alien space ship, never to return to planet earth.
  5. Contact management tools and habits. There are so many gadgets to organize our contacts! And plenty of advice to increase the habits necessary for keeping relationships healthy.

This blog series will explore these challenges from three different perspectives:

  • the large corporation
  • the small business and entrepreneur
  • the individual

In what ways do you struggle to grow and maintain relationships, given your limited time? I’m counting on you to share your challenges and contribute online and offline resources for this discussion and continuing blog series. Then, together we can live long and prosper!

-Jocelyn Wallace

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The tax deadline isn't the time to cheap out

Maybe you spent hundreds of dollars to have a preparer do your the 1040 that reports your business income. Or maybe you spent the 32 hours the 1040 instructions say is the average estimated time it takes to do a business 1040. Either way, you've made a substantial investment in time or money.

But you still have to get it to the IRS. The best way is to file electronically. You get an electronic receipt to prove you filed on time, and any refunds come back much more quickly.

20110416iabiz If you aren't filing electronically, now isn't the time to cheap out. You ought to spring for the extra $5.10 to file your return "certified mail, return receipt requested." It's well worth the time and trouble of going to the post office to get that postmarked receipt. The tax law is full of sad stories of taxpayers who lost thousands of dollars because they didn't have a postmark to document that they filed on time. Don't let it happen to you!

If there's no post office open or handy -- or you don't finish your return until after the post office closes -- you can also use a mailing receipt from one of the designated private delivery services authorized by IRS for timely return shipment. As private delivery services don't deliver to post office boxes, you'll want to refer to this list of service center street addresses. But be sure the delivery service will get the date right, and that the shipment date on their records is the one you want.

Or you could just take your chances with a late-night post office.  Good luck with that.

And don't procrastinate, because Jiffy Express isn't a designated private delivery service.

Managing to Keep Managing

We're at the tipping point for climate change ...Image by kevindooley via Flickr

Failure to change is the number one reason that businesses fail.

I work with many entrepreneurs in the early stages of building their businesses. They are going the proverbial 100 miles an hour and experiencing most of the classic growing pains: working capital is tight, they work too many hours, they are going different directions at once trying to devote the time needed to the various facets of their business. 

One of the suggestions I make is for the owner to bring on a consultant to help him take his company to the next level by prioritizing obligations, adding systemization and positioning the business to be able to handle the challenges and changes required to grow.

The first reaction is almost always, “I don’t need to hire a consultant, all they do is ask me for my watch and tell me what time it is. I know how to run my business better than they will. I’m short on cash and already have too much on my plate.”  

I then suggest to the owner that the more successful an owner is, the more likely they will seek outside opinions and consultants do provide a tremendous benefit. A vivid example might be professional athletes hiring coaches to make them better. 

Hiring a professional helps keep you on top of your game and helps take you to the next level of your management capability. It’s so easy to get set in our ways, think that we know it all and be resistant to change. Like it or not, change is going to occur. So you must be ready and willing to prepare yourself for the journey.   

Epilogue:  I've seen a number of entrepreneurs who were too proud to ask for help and now the bank is managing their business.

- Steve Sink

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Seth Godin wants to know if you're really a leader

Your most valuable marketing tool is your employees.  No doubt about it.  They either deliver your brand promise or contradict every marketing message you put out there.  And if they don't deliver the goods -- guess who owns that?

Right -- you.  You probably spend fewer dollars communicating with them, less time with them and give them less attention.  I've got a way for you to resolve that.

Spend a day together -- learning, talking and listening to some of the brightest minds in business.  John Maxwell, Dave Ramsey, Texas Longhorn's Max Brown, journalist Suzy Welch and many more... including Seth Godin.

And you don't need to leave Des Moines to catch this star-studded ensemble.  The Chick-Fil-A Leadercast is available right here -- on May 6.  (click here for details)  For less than $100 a person -- you can ignite and excite your team.  And you can sharpen your own leadership skills as well.



Check out this video of Seth describing what leadership is all about.  Here's one of my favorite lines from the video: 

"Leadership is about finding the right people, agreeing on where you want to go, and getting out of the way."

This is one of those times to get out of your own way.  Don't let the nominal cost or the day away from the office keep you from growing your team.  Register today.

Take advantage of this amazing day of learning -- for your team's sake and to better your business.

Note:  This event is being sponsored by Character Counts in Iowa (I'm on the board) and ServiceMaster Green.  

~ Drew

The Secret to Savings: Access to Medical Records

Tax season seems to bring on a frantic look in a lot of people’s eyes. Searching for documents, double-checking forms and filing returns are tasks that all endure and none enjoy. After the deadline, a common refrain can be heard almost anywhere:

“Next year, I’ll have all my stuff together in one place.”

As important and urgent as taxes are, there is something more pressing: your health.

Preparing for your annual “health audit” doesn’t take as much effort as preparing for taxes. It merely involves contacting specialists and former primary care physicians and requesting that they send copies of records to your current primary care physician. Medical Records Check Up 4-12-11

Better yet, keep a copy of records for yourself, so that you can add to it and take it with you to every doctor you may see in the future.

Gather your medical records under your primary care provider. It can result in lower health care expenses and earlier detection of potential problems.

Dr. Davis Liu, a family physician and author of "Stay Healthy, Live Longer and Spend Wisely," recently saved a patient the cost and hassle of an unnecessary exam that had been recommended by another doctor.

The key to the cost savings? Dr. Liu had access to all of her health records.

Unified, centralized records can be a hassle to collect, but once they are gathered in your primary doctor’s hands, he or she is much better equipped to treat any health issues you do have and to avoid spending a dime on any health issues you do not have.

Corporate Policy Meets Social Media Justice

Hey Home Depot, I got your 'corporate espionag...Image by Ben McLeod via Flickr

There's a controversy brewing in Ankeny over a corporate decision, and now social media justice is being meted out by everyday people. Here's the story.

In May 2010, Heather DeJoode was driving her minivan in Ankeny and was hit by a reckless driver. The result was devastating. Heather's two children, Carson and Claire, were killed. Heather survived, but she has been unable to return to work and is continuing her recovery.

Troy DeJoode, the father, was left to care for and comfort the surviving child, Chase.

Shelley Huss, the director of Chase's daycare in Ankeny, contacted her corporate office to see what the company could do for the DeJoode family. The company agreed to provide a week's worth of free care. Huss decided to offer free care to the family as long as it was needed. The family resumed paying for Chase's care in March 2011, but an audit caught the fact that Chase's care was provided at no cost.

Shelley Huss was fired for her decision to contradict corporate policy.

What happened next is a corporate nightmare. A spontaneous uprising is taking place on Childtime's Facebook page. Parents and other community members are expressing outrage that Childtime would fire Ms. Huss for her decision to extend free care to the family.

Here is some advice to help any company that is dealing with negative comments on social media pages.

  1. Get out in front of criticism: Childtime's first error was not to proactively address the controversy on its own page. By doing this, they left themselves open to getting slammed by negative comments, which is exactly what happened.
  2. Most importantly: Do NOT delete relevant comments. As tempting as it may be, most comments should be allowed to stand as is. Only off-subject and abusive comments should be deleted. Some posters to the Childtime Facebook page have reported that their posts have been removed, so they've reposted repeatedly. Don't get into a pissing match with people. Once you've deleted a comment and it reappears, you have a decision to make. Either allow the comment to stand, or delete it and block the person.
  3. Have a comments policy in place ahead of time. This policy should be posted on your Facebook page and website, and detail company policy for dealing with comments.
  4. Exercise limited control over "wall posts." Childtime's Facebook wall allows links and videos to be freely posted. At this point, they should not change the setting, but all companies should discuss limiting this option.
  5. Answer comments within reason. In this case, when all the comments are so overwhelmingly negative, it does not help to answer each and every post. Childtime is attempting to answer some negative posts with its side of the story, but it has also resorted to "astroturfing" its own profile with positive comments from made-up Facebook accounts. Classic case of what not to do!!!
  6. Offer to take hostile conversations offline. Childtime should host an informational conference call or post an online Q&A. Do not confront angry commentors with defensive posts.
  7. Don't change the subject. Instead of calmly answering complaints, Childtime is attempting to change the conversation by posting thank-you messages to the few people who agree with their point of view. They are killing themselves with that tactic, it's only making people angrier.

Social media presents both opportunity and risk for Childtime. Since the mainstream media has caught on to the story, the company should keep the conversation going. What do you think Childtime should do? Should they buckle to popular opinion and rehire Shelley Huss, or should they stick to their guns?

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House Votes to Overturn FCC Network Neutrality Rules

Cable You may recall my post last December discussing the so-called “net neutrality” rules adopted by the Federal Communications Commission (FCC).

The concept of net neutrality boils down to the principle that Internet service providers (ISPs) should treat content providers equally (i.e., they shouldn’t give preferential treatment to their own content or hinder access to others’ content). The FCC adopted rules it believed would protect open access to the Internet. The rules, and net neutrality in general, have been vigorously debated. Both camps make some valid arguments, although I stand by my earlier declaration that "it seems the rules have done more to fuel the debate than to settle it.” 

Indeed, that’s still the case. 

Last week, the House passed a Republican-backed bill to repeal the FCC’s net neutrality rules, saying the FCC lacked authority to adopt the rules and, in any event, the government shouldn’t regulate the Internet. Though the resolution passed the House, it passed largely along party lines. It’s not expected to pass the Democrat-controlled Senate, and President Obama has threatened to veto the measure if it showed up on his desk. Thus, last week’s vote may have been more symbolic than anything else. 

What do you think about net neutrality? 

The Changing Job Market

San Francisco Peaks from Kendrick Mountain Fir...Image by Al_HikesAZ via Flickr

While asking around on hot young professional topics to blog about, as you can imagine, the word “jobs” came up several times. As overwhelming of a topic that it is to blog about, I’ve decided to tackle it in a three-part series. Hopefully, in reading this, you can learn as much as I did researching and drafting it.

Things aren’t what they used to be. The recession is going to have permanent effects and younger generations are demanding a cultural change.

First let’s explore a couple of facts for our three-part series…

1) Entrepreneurialism is at an all-time high, especially in the YP community.
2) Corporations are contracting out more and more work/projects.
3) Younger generations demand a more casual and flexible work-life balance.

Part I: “Why Now is a Great Time to be a Young Entrepreneur

The 2007-2009 recession naturally spurred a jump in entrepreneurialism. However, it’s not going away. More and more success is being had by start-up companies. Beyond that, today’s young professionals have a strong case of independence. No, it’s not a disease! But it is a desire they have to do their own thing.

With that comes more of a demand for work-life balance and an ability to drive your own schedule. There is a lot less desire in the younger generations to find that 8-5 desk job. Many of today’s entrepreneurs consider their local coffee shop or a co-working space to be their office. It’s not a barrier to entry anymore, and it’s where young professionals want to be.

Social networking has enhanced the tools available to YPs looking to make it on their own. There is more of a focus on personal branding than ever before. With personal branding comes the need to determine what identity you would like to take on. Find me a young professional working through the corporate grind that considers their 8-5 jobs as part of their identities. If you can find one, I’ll show you 1,000 that don’t.

As a young professional, now is the time you can afford to take the risk and make it happen on your own. With a good business plan in place, there are more and more grants becoming available at both private and state level for entrepreneurs.

We all want to have a job we can truly love. What better way than to make it happen on your own?

Next week: Part II – “6 Ways the Recession Has Changed Hiring Practices”

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Is WOO You?

A Sundial by a church wall in Lannion, Brittan...Image via Wikipedia

Raise your hand if you haven't heard of Gallup's StrengthsFinder. Most of us have.

The book, which introduced the concept of nurturing your strengths, came out in 2001: "Now, Discover Your Strengths." Since then, there's been a worldwide conversation about the importance of identifying, nurturing and developing one's strengths, rather than focusing on the difficult and counterproductive task of overcoming weaknesses. Even Benjamin Franklin got it. He said, "Hide not your talents. They for use were made. What's a sundial in the shade?"

Makes sense. And it's a lot more fun than swimming upstream, taking the path of most resistance, rather than flipping over and floating with the current of least resistance.

That's where WOO comes in. It's one of the 34 themes in the StrengthsFinder repertoire. WOO stands for winning others over. Individuals who have this as one of their five greatest strengths enjoy the challenge of meeting new people and getting others to like them. Strangers are energizing if you're high in WOO. Learning the names of others, asking them questions, and finding areas of common interest are fun and exciting for you.

Once a connection is made, those high in WOO are happy to wrap it up and move on to meet new people in new places. It's not necessarily about making friends; it's about making connections.

Sounds like the quintessential net worker in today's speed-meeting, Facebooking, LinkedIn world, doesn't it?

If WOO is you:

  • Be prepared to explain to others that making connections is an innate part of who you are and how you're wired. To those with a lower WOO ratio, you could seem insincere and overly friendly otherwise.
  • Tap your talent for meeting and greeting new people and putting them at ease. You're the ideal person to serve as a greeter at your church! Find a job where you interact with lots of people over the course of a day.

If WOO is NOT you:

  • Don't despair. (Imagine what the world would be like if everyone had WOO as a top strength!) Reach out to someone with strong WOO talents and let them help you expand the range of your network. It'll be a win for both of you.
  • Don't take it personally if those with WOO as a strength are super friendly, but then don't stay in touch. It's not about you. They're just a sundial looking for more sun!


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The Lazy Chef Salad - So Who Gets To Be Lazy?

Red bell peppers.Image via Wikipedia

There are two restaurants in Ankeny - where I live - that I like to go to. As part of trying to live a more healthfully, I tend to eat a lot of salads.  In one restaurant, the salad is served with all of the various ingredients finely chopped.  I can put on my dressing and start to eat.  In other words, I get to be lazy.  I do not have to work too hard for my dinner. 

At the other restaurant, the chef is lazy and I have to work for my dinner. The same basic ingredients are in both salads. The different is that at the second restaurant the ingredients consist of large wedges of tomatoes, huge rings of green pepper, large circles of onion and very large pieces of lettuce. You get the picture. 

So who gets to be lazy, the chef or me? Since I am paying for each of the salads, I assume that I would get to be the lazy one.

In your business, you do many things to keep the amount of time spent to a minimum. This is completely understandable with the financial pressure all businesses are under. Make sure that your time efficiency efforts are not viewed by your customers as laziness on your part. Customers want to be served. Be aware of being perceived as the lazy chef. All else equal, I am going to the restaurant where I can be lazy. Let the chef do the work!

Mike Colwell

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Like a Good Neighbor

Wrecked car MoroccoImage via Wikipedia

There is a popular perception that bloggers are all angry, ranting miscreants. I must admit that I do my share of complaining when I have a bad experience. Yet, I appreciate bloggers who consistently share positive examples of service. And so, let me give a shout out to a great experience I had with my insurance agent yesterday.

I have most all of my personal insurance policies with my local State Farm agent, Kevin Van Wyk. Between home, cars, recreational vehicles, life insurance and personal property, we have about eight policies that Kevin manages for us in representing State Farm. I received a letter from the folks at State Farm corporate stating that because of our college-aged daughter's gruesome list of recent driving mishaps, State Farm would not renew our policy for a car on which she's listed as a driver. Upon a little investigation, I then discovered that the underwriters at State Farm were going to cancel ALL of our auto insurance policies (including the policies for me and my wife) because of a list of issues related to our daughter. As you can imagine, this made no sense to me and I immediately began preparing my threats. I would take my business elsewhere if State Farm was intent on making such a shortsighted decision for a loyal customer.

  • I called my agent, Kevin Van Wyk to protest. As it happened, at the moment I called, he was already on the phone talking to the underwriter about their decision to drop us (Lesson: Anticipate your customer's question/issue before they ask/call).
  • Kevin explained that the underwriter he spoke with quickly understood that the issues on the report were all related to our daughter and that they had worked together to find a logical solution for us. "State Farm will be more than happy to continue to insure you and your wife and your cars, but we'll need to exclude your daughter and her car moving forward," he explained (Lesson: Focus on the solution, and represent your company and the situation in a positive light).
  • Kevin then added, "I would be happy to get on line and look at your daughter's options and try to find the best solution for her." (Lesson: Go the extra mile.) His time and effort to help our daughter find insurance would not make him any money, but the gesture and keeping us as loyal customers will profit him in the long run).

Our agent did an exemplary job of navigating what could have been an ugly, customer service nightmare and turning it into a tangible reason for my wife and I to remain his loyal customers. I know that I could likely find slightly cheaper rates elsewhere. I might be able to "save 15 percent or more on car insurance" if I wanted to pick up the phone and look for a deal, but I have no interest in making that call. Kevin takes good care of us, and he doesn't work for those other companies.

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Can I deduct my K-1 loss?

Losing money in your business is no fun, but that dark cloud can have a silver lining at tax time. Many small businesses are "pass-throughs" taxed as S corporations or partnerships (often in the form of "limited liability companies," or LLCs). As the income of these businesses is taxed on the owners' 1040s, the owners get to deduct the business losses reported on the business Schedule K-1 -- right?


It depends.  There are three hurdles that a K-1 recipient has to clear to deduct K-1 losses. 

The first hurdle is basis. Your basis starts with your investment in the K-1 business; it is increased by income and cash contributions and decreased by losses and distributions. In partnerships  -- but not S corporations -- an owner's basis may include a portion of the company's borrowings from third parties.

Unfortunately, the K-1s do a poor job of tracking owner basis.  You, or your tax preparer, may need to keep a separate schedule of your basis to determine whether you might deduct K-1 losses.

The next hurdle is whether your basis is "at-risk." The "at-risk" rules are an obscure leftover of tax shelter battles of the 1970s, but they still apply.They can be very complex, but their gist is that if your basis is attributable to borrowings that are "non-recourse" -- that you aren't personally liable for -- it is not "at risk," and losses attributable to that basis must be deferred. You may also not be considered "at risk" for related-party borrowing, especially if you borrow from your business or from a business associate to fund your ownership in the K-1 issuer.

Partnership K-1s provide some useful information in determining whether you have an "at-risk" issue. If you have losses in excess of your cash investment, and your share of debt on the K-1 part K is on the "nonrecourse" line, you are likely to have an at-risk problem. You will have to go to IRS Form 6198 to figure out whether you have to defer losses under the at-risk rules.

The "passive loss rules" are the final hurdle for deducting K-1 losses. These rules were enacted in 1986 to shut down that era's tax shelters. If you have "passive" losses in excess of "passive" income, you have to defer the losses until you have passive income in a future year, or until you dispose of the "passive activity" in a taxable transaction.

A loss is "passive" if you don't "materially participate" in the business. There are a number of tests that you can use to determine whether you materially participate, but the most common is working at least 500 hours in the business in a year. 

Real estate rental is passive by law, unless you are a "qualifying real property professional."  Special rules keep you from generating "passive" income to allow you to deduct passive losses. For example, land rent and most investment income is not considered "passive" under these rules. The passive loss limitation is computed on Form 8582.

These rules are complicated, even for tax pros. If you aren't sure where you stand, and the losses are significant to you, get in touch with a tax pro who works with small businesses.

Flickr image by naotakem under Creative Commons license.

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