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December 2013

Use the element of surprise to drive referrals

The best companies use surprises as a method of promoting their brand and inspiring customer loyalty. After all, it is hardwired in all of us to pick up on change– and as such, experiencing the unexpected conjures up emotions. Ka-Wham! A ramshackle car just backfired and you feel your ears move slightly and heart rate elevate. If not to startle per se, the most successful companies have discovered ways to invoke the same primal instincts in their customers– but have done so, delightfully. It does seem, however, that the ‘element of surprise’ has been used primarily by retail companies as a way to inspire repeat business. But for companies looking to use this powerful marketing tactic directly to increase referrals, and thus new business, keep reading.

First I would like to explore, just a little deeper, how surprises have such a positive impact on people. Scientists have recently used magnetic resonance imaging to determine that the part of the brain associated with pleasure really cares when you get something unexpected. Positive surprises provide a rush of dopamine and cause the happy center to light up like a Christmas tree. According to the study, Dr. Gregory Berns, professor of psychiatry at Emory University, stated: “If you get a present for your birthday, that’s nice. But you’ll like it a lot more if you get a present and it’s not your birthday.”

Now, it is crystal clear that by offering positive surprises to customers it will make them smile. Here is how it can be used to directly increase referrals. Send an unexpected and shareable gift to your best customers and ask that it is enjoyed with a friend or family member. The positive experience will resonate with your customers and transcend directly to their closest companions. The goal here is to make your already satisfied customers extra happy, and do so in a way that physically brings them in contact with people that trust them. “Oh, and by the way, where did you get that gift card?”

Starbucks_thanks1First identify who your best customers are. In an earlier post I mentioned the effectiveness of the Net Promoter Score survey in discovering your loyal customers. If you have not implemented the NPS you could also target customers that have given you a referral in the past, provided a testimonial, or openly expressed their gratitude for your service. Sending gifts only to those customers likely to refer will yield the highest ROI with this strategy.

So, what do you give them? At Rocket Referrals we have had great success when our clients give away gift cards to coffee shops. Again, the gift needs to be something that can be shared with others. This is the only way to encourage your happy customers to gather with your new potential clients. Besides, the caffeine might induce a little extra feel good– as long as it isn’t enjoyed on a Monday, right?

What's new in year-end tax planning

Joe Kristan is a CPA at Roth & Company P.C.

There are a few new twists to year-end planning this year. Some important tax breaks are scheduled to expire at the end of the year, and some new provisions affect how old tax planning tools can be used.  

Two key tax breaks for buying equipment are slated for big changes at year-end: "Section 179" and "50% bonus depreciation." Section 179 allows many taxpayers to fully deduct the cost of assets that would otherwise only be recovered over a period of years. The maximumm Section 179 deduction is scheduled to decline from $500,000 for tax years beginning in 2013 to $25,000 for years beginning in 2014. 

Bonus depreciation allows a 50% writeoff of otherwise depreciable property in many cases where Section 179 is unavailable. With few exceptions, it is scheduled to go away for assets placed in service after 2013. 

While there is a chance these breaks will be extended retroactively, how many of us want to place money on Congress doing something? To get either deduction, the property has to be "placed in service" by year-end. "Placed in service" means "in a condition or state of readiness and availablilty for a specifically assigned function." That means in the posession of the taxpayer on the premises where it will be used, and ready to go. It does not mean on-order, paid for, in a crate on the loading dock, or on a Fed-Ex truck somewhere.

Two old tax planning tools are affected by the 3.8% "Net Investment Income Tax" under Obamacare. This tax applies to individuals with incomes over $200,000 (single filers) or $250,000 (joint filers). It also applies to many taxable trusts. The two tools are prepaying income taxes and harvesting capital losses.  

Personal state income taxes are deductible in the year paid. (Iowa allows a deduction for federal income taxes). Estimating the tax due in April has long been in the tax planning toolkit. It has been less useful in recent years because it doesn't help taxpayers owing alternative minimum tax. But even if you have alternative minimum tax, prepaying state income taxes can reduce the net investment income tax.

Capital losses. Individuals are allowed to deduct capital losses to the extent of capital gains, plus $3,000 ($1,500 for married filing separate returns). If you have capital gains, and you have some losers in your portfolio, now is the time to sell them off. Just make sure you avoid the "wash sale" rules by not replacing the loss shares in the 30 days preceding or selling the loss sale. Also be sure to not sell to a related party, as those losses won't be deductible. Newly-issued regulations make these losses available to offset net investment income, to the extent they are otherwise deductible.

Year-end tax planning is very taxpayer-specific. You can't look at an article or post and know how to proceed. Without a projection of your taxable income for this year, you can hardly even start year-end tax planning. Once you have an idea where you stand, you can take a shot at your year-end planning. 

In any case, get together with your tax advisor before you make any year-end moves. There are other tools that might fit your needs, and there's enough at stake to make sure you do it right.

Shhh... Can your business keep a trade secret?


Matt McKinney is an attorney at BrownWinick Attorneys at Law.

It's no secret that trade secrets are often invaluable to Iowa businesses. Without adequate safeguards, however, your trade secret's protectable status, value, and the business it supports may cease to exist. Indeed, whether information (a formula, technique, process, customer list, etc.) qualifies as a trade secret under Iowa law, and thus receives legal protection, may hinge upon whether and how your business guards the secrecy of its valuable trade secret.  

One of the most iconic and frequently cited examples of a trade secret is the authentic Coca-Cola formula. Playing on the secrecy of their formula and the extremes to which they guard their valuable trade secret, Coca-Cola released this advertisement:


With the foregoing in mind, businesses and business owners often inquire whether their valuable information will receive legal protection as a trade secret in Iowa. In November 2010, the Iowa Court of Appeals published an opinion (Full Opinion Here) identifying six different factors a court may consider when determining whether information qualifies as a trade secret in Iowa. The six factors the Iowa court cited are: (1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken to guard the secrecy of the information; (4) the value of the information to the business and its competitors; (5) the amount of effort or money expended in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. As may be gathered from these factors, generally speaking, the more secret and valuable the information, the more likely it will receive protection under Iowa law.

So, in coming full circle, can your business keep a trade secret? To read more about trade secrets in Iowa, including the type of information (such as a formula, process, list, data, technique, etc.) that may qualify as a protectable trade secret, click Here.

Even your best customers may not be referring you

Carl Maerz is a co-founder of Rocket Referrals, a startup company focused on helping businesses gain referrals from customers.

There is a prevailing theory among businesses that referrals are a natural byproduct of a superior product or service. That by exceeding expectations alone, referrals will make their way to their doorstep in the form of new business. It is true (as common sense would tell us) that positive word of mouth is abundant amid the best companies -- but research tells us that most of your best customers are not referring you. The problem unfortunately rests on the shoulders of the businesses themselves. The majority do not know the best way to turn their happy customers into referral sources. But thankfully there are a couple things you can do right away to start encouraging your best customers to refer you.

Understand the gap

Chances are, if you are a great company, then you are already gaining referrals via your best customers. But the gap between your referral sources and happy customers could be larger than you expected. A 2010 Economics of Loyalty study performed by Advisor Impact and Vanguard found that in the financial services industry 83% of satisfied customers reported a willingness to recommend services to others, but only 29% of customers actually do so. The best place to start in achieving more referrals is understanding that this gap exists, and that there are things you can do to convert the remaining 54% into active spokespeople.

Identify them

Fig1_NPSThe best way to get started is by identifying your best customers -- those that are willing to recommend you. When outlining a referral strategy, these are the people you will be reaching out to, so get to know them. We recommend performing the Net Promoter Score survey. It is easy to implement and from our experience, has a very high response rate. This quick metric is used by many of the nation's top companies including Southwest Airlines, Progressive, and Apple to name a few. It will give you an instant picture of who your promoters are and how you compare as a company to the rest of the industry in customer loyalty.

Make them feel good

Now that you know which customers are willing to recommend you, make an effort to communicate with them. Keep in touch with them in a way that makes them feel good. This can be accomplished as easily as making a phone call telling them you value their business. You could also write a personalized card telling them that you appreciate their loyalty and it has been a pleasure serving them over the years. The goal here is to keep your company in the front of their mind and synonymous with a good feeling, so that when the time comes to recommend you have given them every reason to do so.

Track them

Finally, it is important to stay on top of your referral sources and progress. Like any other area in a business, a referral strategy should be consistent and tracked over time. Keep a list of your customers that are willing to recommend and what efforts you have taken to communicate with them. You will be able to log the success of your strategy and adjust it over time. Most of all, make sure you are recording which customers are sending business your way. Thank your referral sources personally with a personalized card or phone call --they are much more likely to do so again! The best way to ascertain who is referring is by asking all new prospects “who referred you to us?” This alone will greatly enhance your long term strategy of gaining more referrals!

Marketing lessons from Rudolph

Rudolph-the-red-nosed-reindeerDrew McLellan is the Top Dog at McLellan Marketing Group

Sure, it's a Christmas classic… but have you really considered what marketing messages are woven into the classic Christmas story — Rudolph the Red Nosed Reindeer?

I didn't think so. Let's fix that mistake right now.

Marketing lesson #1:  You can't hide the truth.

Rudolph did not embrace the fact that he was different from all the other reindeer. He just wanted to have a cute little black nose and the chance to play some reindeer games.

You can fool people for a little while, but if you cannot walk the talk…don't say it in the first place. Your consumers know you're not perfect. They just want you to be straight about it.

Marketing lesson #2:  Never make assumptions about how your consumers feel.  Far better to ask directly.

One of the main reasons Rudolph took a hike was because he assumed Clarice wouldn't love him now that his nose so bright was common knowledge. Think of the grief he could have saved everyone if he had just checked in with her.

You are going to be hard pressed to find a more insightful marketing tool than a customer survey. Sometimes the news is tough to hear, but I guarantee you — you can make some simple changes to significantly increase your customer loyalty and retention.

Marketing lesson #3:  Your worst enemy can turn into your greatest ally.

Sure, the Abominable SnowMonster (or "The Bumble" as Yukon Cornelius called him) tried to eat his girlfriend, but Rudolph came to see him as a buddy — even letting him put the star atop the Christmas tree. All it took was someone (Hermey the elf) listening to the Bumble and finding his pain (tooth ache) to turn the grumbling beast into a helpful and happy pal.

When someone clearly dislikes or even hates your company, product or services' shortcomings, listen. If you really work towards understanding their perspective — you can not only save the relationship but you can turn that negative word of mouth risk into an advocate.

Marketing lesson #4:  Create raving fans and a community by giving first.

Rudolph didn't have to promise the Misfit Toys anything. At that moment, they couldn't help him. But with a generous heart, he promised them he'd try to find them good homes with children who would love them.

When you do something without regard for "re-payment" of any kind, you create value. When you create value, people keep coming back. When they do that, you begin to build a relationship and a sense of loyalty and no one has even tried to buy or sell yet. Which makes the selling a whole lot easier.

Marketing lesson #5:  When you find what makes you unique, it can be your ticket to new heights.

When Rudolph began to see his nose as an asset and recognized it was what set him apart from all the other reindeer, he suddenly got asked by Santa to take a leadership position.  From then on, it was his calling card. People told others about his nose and pretty soon, he was known from coast to coast. That's branding!

Companies like Apple and Disney rise to the top because they are proud of what makes them different. They don't try to be everything to everyone. They recognize that having a niche means you can create brand loyalty as opposed to being lost in a sea of sameness.

From all of us at McLellan Marketing Group -- wishing you a very happy holiday season!

~ Drew

Not your ordinary senior apartments

Rob Smith is a principal at Architects Smith Metzger

Each year the Committee on the Environment (COTE) of the American Institute of Architects selects a Top Ten  “green buildings”. This and future blogs will review some of the projects to see what is cutting edge in green design.

Merritt Crossing Senior Apartments in Oakland, Calif., is not your ordinary senior housing. The building provides 70 apartments for seniors in the 30%-50% of the local median income and about half are for people previously homeless.  Yet the design is spectacular and not what one would expect for low income housing.

Natural ventilation is important to seniors so the long and narrow building allows 85% of the spaces to be within 15 feet of an operable window. The floor-to-ceiling windows also let in plenty of natural light compared to the dinky windows many apartments get.

Green space is very important to seniors but with on-site parking requirements little exterior space remained. Lifts were provided in the lower level garage so cars could be stacked making way for a landscaped garden area.

A central high-efficiency hot water system is augmented with a roof top solar system which meets 70% of the hot water needs, something we don’t see often in Iowa. 

An array of solar panels also provides about 40% of the electrical energy for common areas such as lobbies, halls, and a community room.

All of this fits in with Des Moines Age Friendly City Initiative: attractive housing for seniors located near shopping and entertainment options.

Stay tuned for a school renovation and expansion project.

Send your thoughts to rsmith@smithmetzer.com

Selling or buying a convenience store

Steve Sink is the founder and managing partner of Phoenix Affiliates Ltd.

There are two types of convenience stores.  There are those with gas and those without gas.   

While there are variations from this generalization - i.e. with a car wash, full liquor and those with a fast food franchise - in both cases this is a very difficult business to run successfully. Owners work very long hours, weekends, nights and holidays. Most of the employees are paid a minimum wage and the employee turnover is very high. 

In addition, much of the business is done on a cash basis making, tracking and managing cash a priority.

General sale guidelines are:

C-stores with gas:
Sale price is based strictly on reported sales
       -15 to 30% if annual sales plus the cost of the inventory
       -2 to 3 times SDE (Seller Discretionary Earnings) plus the cost of the inventory
       -2 to 5 times SDE when real estate is involved
Profit Margins: 15%

C-stores without gas
Sale price is based strictly on reported sales
The sale price is:
       -15 to 35% if annual sales plus the cost of the inventory
       -1.5 to 2 times SDE (Seller Discretionary Earnings) plus the cost of the inventory
       -2 to 5 times SDE when real estate is involved
Profit Margins: 1 to 3%

Merry Christmas!

Steve Sink




Young and optimistic

-Kyle Oppenhuizen is a Business Record reporter and the 2014 president-elect of the Young Kyle mug Professionals Connection (YPC). 

I went to my first Young Professionals Connection event shortly after I moved to Des Moines in 2010. To tell you the truth, I’m not sure I remember what the event was, although I’m pretty sure it was a happy hour and I’m absolutely sure I left thinking there was little chance I’d get more involved in the organization.

Fast-forward three or so years, and here I am taking over as president-elect of YPC.

I’m also taking over as the Young Professionals blogger for IowaBiz. As a Business Record reporter, I have helped manage IowaBiz for a couple of years. One thing I always tell new bloggers is to keep the focus of their blog content on helping others; not promoting their organization. Yet here I am, writing my first blog, with the overwhelming desire to shout from the rooftops about how great YPC is.

So let’s get this out of the way.

I’m young, motivated and pretty much in love with Greater Des Moines. You can read why in a previous guest blog post here. There are so many opportunities to get involved in this area. Why have I chosen to make such a strong commitment to YPC?

Personally, the organization has given me a chance to connect, learn and grow in this community. Rewind again to 2010. Before I joined YPC, my life consisted of: Go to work at 8 a.m. Get off work at 5 p.m. Go home. Repeat.

I dragged my feet on getting involved in the community, or doing much of anything outside of work and driving up to Ames to watch Cyclones football and basketball (not that I’ve given that up).

Two things happened. One, as a writer at the Business Record, I got to see the accomplishments of other young professionals in the community. Most of them were part of YPC. Around that same time, the Forbes ranking came out. I wanted to be a part of that.

Two, great people, such as former YPC President Jason Wells, kept hounding me about getting more involved.

YPC became my way to make friends. It became my way to get involved in and connected to Des Moines, and helped me grow as a person and professional. Without YPC, I might not still be living in Des Moines.

Now is my chance to give back, and to do everything in my power to give other people the same experience. And ultimately, make Greater Des Moines a better place for all of us.

The good news is that YPC is a top-notch organization in this community that truly connects young professionals to everything Des Moines has to offer. The even better news is that we can and must do better. In the past year, we have sought and listened to specific feedback from our membership, and as a board, we spent eight hours with a consultant, Alan Feirer, to evaluate who we are as an organization. We are not resting on our laurels, and that is exciting.

I’m passionate about YPC. Hopefully you have found something you are equally passionate about to give your time to.

Moving forward, I hope to share with you lessons I’m learning as a young professional in this community in the hope that YPs and non-YPs alike can learn something. I like to learn, and I like to share what I’ve learned. Luckily, I have plenty of opportunities to draw experience from my reporting duties at the Business Record, my aforementioned role in YPC, and even through my everyday interests. Don’t be surprised when you see me share life lessons that I learn from watching Iowa State University football games. (No. 1: Never give up when times are tough. See how easy that was?)

Thank you for reading.

-Kyle Oppenhuizen

I welcome feedback and ideas. Email me, follow me on Twitter, or comment on this blog.

Email: kyleoppenhuizen@bpcdm.com
Twitter: @KyleOppenhuizen

Email marketing tips for your business

Katie Stocking is the owner of Happy Medium LLC.

Every business needs a way to communicate with its customers. This is where traditional advertising – television ads, radio ads, newspaper ads, and billboards – comes in. Of course, there’s digital advertising, too – Google Adwords, display ads, video pre-roll ads, and others.

But what about email marketing? Everyone and their uncle has used email before, and people are quite used to the notion of hearing from businesses through that medium.

However, email is complicated. It’s not like a billboard ad where it’s there no matter what, and people who choose to see it will see it. Email has to jump through many digital gates before it arrives in your customer’s inbox. And once it gets there, it can be tricky to make the content look and act like you had intended.

Here are a few tips to get you started in the right direction:

Avoid the Spam Folder

First of all, you want to keep your subscriber list clean. This means making sure your customers are opting in to your email list (you didn’t add them to it without their permission) and that you send them email frequently enough that they remember they meant to sign up in the first place.

Email marketing company Mailchimp has a few best practices for lists.

Update it as often as you can. Keep your list clean, if you haven’t sent an email to this list in a few months, there’s a good chance your subscribers might forget they’re on the list or why they’re on the list. That could lead to a few unfortunate “unsubscribe” or “mark as spam” actions.

Treat It Like Any Other Form of Communication

You’ll often hear email marketing referred to as “e-blasts”. Try to avoid that term. If your company refers to communication with your customers as a “blast,” then you’ll likely start treating it like that. Who likes to be blasted in the face with a bunch of salesy info? Not a single person.

Email is one of the most personal forms of digital communication we have, so make it so. Deliver readable, worthwhile content to your subscribers in the form of an email or digital newsletter. Make it quick – nobody likes their time wasted – and make it feel personal.

Treating email marketing like a digital ad space isn’t what successful email marketing is about.

Think About Mobile

At a recent luncheon, AMA Iowa tweeted an interesting fact from a talk given by Gina LaMar-Nykerk:

“80.3% of consumers delete an email on their mobile phone if it doesn't look good.”

That, alone, is a huge eye-opener regarding subscriber behavior on mobile devices. Even back in 2011, studies showed a major increase in mobile email opens. It’s time to get on the mobile bandwagon!

Either optimize your email in a single-column, mobile-friendly fashion or develop a responsive email template which expands/contracts based on screen size. Your subscribers will love you for it.

Consider Handing it off to a Professional

“What kind of open-rate should I expect?”

“What should I do in order to stay out of my subscribers’ spam folders?”

“How do I target certain groups of people based on interests?”

“How do I design a responsive email?”

These are questions you might already have, and a company who regularly does email marketing should be able to answer them. Sometimes it’s worth the money to make sure email marketing happens the right way instead of dealing with the hassle trying to do it yourself.

An email marketing professional will be happy to help you manage your list; write punchy, succinct subject lines; and arrange your content to be the most readable and effective. They’ll help you stay out of the spam folder, and will reach your target audience. They can also assist with setting up a responsive, mobile-friendly email template so your emails look great on any device.

Finally, a professional can help you analyze your open rate, click rate, and other metrics to make your time spent on email marketing the most effective.

Whichever method you choose, make sure your business considers making email marketing a priority in the coming year.

Tweet me your thoughts @interactivekate!


Get to know Matt McKinney

Matt McKinney Iowa Attorney

Matt McKinney is an attorney at BrownWinick Attorneys at Law. This is his first post for IowaBiz.

My name is Matt McKinney. I am a trial attorney and government relations consultant that counsels business owners and entrepreneurs on how to protect their rights, navigate Iowa’s court system, and when necessary, traverse Iowa’s political theater.

Through future blog posts, my goal is to provide Iowa entrepreneurs and business owners with a unique perspective and insight into Iowa business law. From describing basic legal concepts that affect Iowa businesses to analyzing new business law cases and alerting readers to upcoming legislative changes, I hope to provide valuable content to our local business community. 

By way of background, I am a native Iowan that grew up on a family farm just outside of Booneville, Iowa. I dedicated four years at the University of Iowa to studying political science and entrepreneurship and immersed myself in the law at Creighton University School of Law, graduating cum laude. Following graduate school, I served as a prosecutor in Des Moines where I cut my teeth trying misdemeanor and felony cases with the Polk County Attorney’s Office. 

I was then called to the desert southwest where I litigated, almost exclusively, lawsuits on behalf of Arizona businesses, shareholders, officers and directors.  In 2010, my wife and I returned home to West Des Moines where I joined BrownWinick, a full-service law firm located downtown Des Moines.  

Outside of the office, I enjoy hitting the links, staying up on the latest technologies, and pawing around with our French Bulldog, "Judge."   

Should you have any questions, comments, or rotten tomatoes to throw my way, you can find me on BrownWinick’s website, or read more on my business law blog, CorporateDispute.com.

Email:  mckinney@brownwinick.com

Phone:  515-242-2468



Law Firm Websitehttp://www.brownwinick.com/our-attorneys/matthewmckinney-A38.aspx


Leverage existing customers for referrals

Carl Maerz is a co-founder of Rocket Referrals, a startup company focused on helping businesses gain referrals from customers. This is his first blog on IowaBiz.

Having spent a considerable amount of time working in 10 different states and across three continents, I realized that Iowa offers something truly remarkable -- a sense of community like nowhere else. Here, relationships are king.

The heartland ideology is woven into the threads of business as companies understand that in Iowa, perhaps more than anywhere else, the customer matters.

As a consequence, many local businesses excel in customer satisfaction. We get it here. But what most businesses have yet to understand is that for this very reason there is a substantial opportunity for new business via referrals. Therefore, my goal is as an IowaBiz blogger is to explore the topic of referral business for local Iowa companies. I am here to provide some useful information in the topic and to investigate the reasons why people refer, and strategies businesses can implement to actively increase their referral equity.

RR8I am a native of Iowa myself. Growing up in a small town, I began experiencing business through the eyes of a child observing my father’s local retail business. Even at such a young age I was able to understand the importance of word of mouth for a company’s growth. Following my education at Creighton University, I was the head of North American sales for a software company based out of Frankfurt, Germany. My early career took me all over Europe and North America.

At this point, I had a firm grasp of business from a sales and marketing perspective, but I was still missing part of the human aspect that I gained in the military. After several years in software, I served as intelligence officer in Afghanistan for the US Army. It was here that I really began to understand more of the psychology behind people and grasped social network theory. After my term ended in the Army I returned to Iowa to lead Rocket Referrals with my brother and cofounder Torey. We have developed software that automates many of the strategies I will talk through in later posts.

Most of the topics I discuss will be tactics that businesses can apply right away that will lead to an increase in referrals. I will reference personal experiences and research while tying each post into an overall strategy and investigating current trends in referral business.

This site is intended for informational and conversational purposes, not to provide specific legal, investment, or tax advice.  Articles and opinions posted here are those of the author(s). Links to and from other sites are for informational purposes and are not an endorsement by this site’s sponsor.