Organizations lose 6 percent of their annual revenue to fraud and abuse, and the average organization loses more than $9 a day per employee. Make sure one person isnt in charge of your books and have your accounts periodically audited. Most victims say the person stealing from the company was the last person they would have suspected.
Do you have any secrets?
Is information critical to your business success about to walk out the door and start work for a competitor? Maybe, but heres how to tell whether that information is considered a trade secret:
- It must have independent economic value to people outside the company. Knowing your processes and pricing could give another firm an advantage, but knowing your management structure probably wouldnt.
- The information must be generally unknown and unlikely to be discovered by lawful means.
- The owner of the secret must make efforts to maintain the secret. If the information is not labeled as confidential and everyone has access to it, the court probably wont recognize it as a trade secret.
Cutting your own throat
Cutting prices to sell unused capacity may look like a good idea but its the first step on the road to bankruptcy.
- First, theres the cost of capital. Whenever you make a sale, you are, in effect, lending money to a customer, at least until the bill gets paid. You need to make sure youre getting a good return on your investment that youre using your capital to generate enough profit to keep you going. Its a mistake for any business to waste capital on low-margin sales. It can be suicide for a new business, which has limited capital by definition and will never get beyond the start-up phase if its capital runs out.
- Second, theres the opportunity cost. When you fill capacity with low-margin sales, you leave no room for high-margin sales, and bring a new competitor into the market: yourself.
- Third, prices always seek their lowest level. When you charge two prices for exactly the same service, you are competing against yourself. Sooner or later, your customers will figure out that youre willing to sell for less. When they do, youll have a very hard time getting any of them to pay more.
- Fourth, the practice alienates precisely those customers you must have to be successful, maybe even to survive.
A customer buying in volume may justify a lower price, but dont discount just to have work. You cant do business with everybody. There are people in this world who want more for their money than you can provide. Theres only one word you can use to deal with them, and you have to learn it, hard as it may be to say it when the customer is standing in front of you. That word is no.
Source: Norm Brodsky
Back to work
Five tips to get the most from your low-wage employees:
- Understand what motivates each employee.
- Determine your expectations and communicate them clearly.
- Create a positive environment.
- Hire the right people.
- Invest in training.
Source: Robert McIntosh, Minimum Wage, Maximum Results
Show me the money
Potential sources of venture capital include:
21st Century Internet Venture Partners Investment focus: start-up ventures pursuing opportunities born of the Internet, www.21st-century.com.
Accel Partners Investment focus: exclusively on three sectors communication; Internet and intranet software; services in technology and health care, www.accel.com.
Advanced Technology Ventures Investment focus: start-up, first-round and later-stage investments in electronics, communications, software and health care, www.atv-ventures.com.
Advantage Capital Partners - Investment focus: venture capital and mezzanine investments in communications, information technology, health care/life sciences, special situations/regional opportunities, recapitilizations and management buyouts, www.advantagecap.com.
Advent International Investment focus: companies at all stages of development, including early-stage, and virtually any industry, www.adventinternational.com.
Alpha Capital Partners Ltd. Investment focus: Midwestern enterprises, technical or nontechnical, including early, expansion or mature-stage businesses, as well as management buyouts or recapitilizations, www.cilnet.com/alpha.
Alta Partners A venture capital partnership investing in information technologies and life sciences companies, www.altapartners.com.
Altos Ventures Venture capital partnership focused on early-stage technology investments, www.altosvc.com.
Ampersand Ventures Investment focus: early and expansion-stage companies seeking capital for product development and growth in electronics, telecommunications, health care, life sciences, industrial and building products, process control and instrumentation, www.ampersandventures.com.
Apax Partners Investment focus: European and U.S. companies spanning all stages of development, from early-stage to buy-outs and turnaround operations, www.apax.co.uk.
Whose side are you on?
What other mechanisms, apart from ownership, can be employed to sustain psychological commitment as opposed to purchased compliance among your employees? Consider the following:
- Treat employees as adults who share your goals. What better way to reward a member of your start-up than to say, Your commitment to X Corp. has been proved beyond a doubt, so, henceforth, unless there is a crucial meeting, keep your own hours. When you show trust in a person, he or she will show devotion to you.
- Encourage employees to pursue their dreams while finding a way for the company to benefit as well. Let anyone who has a desire to move to research and development (or your companys equivalent) do so on a part-time basis. Companies such as 3M call that intrapreneurship. I call it fostering the motives that underlie sweat equity. Telling people that they can develop their ideas and that the company will reward them for doing so says, in essence, We value you for what you have in yourself: your intellect. That attitude brought 3M Post-it Notes and millions in profits. It also begets commitment.
- Fully vest them. When cash compensation is involved, dont tell your people you mistrust them by forcing them to be vested for seven years before they can reap the benefits of labors they invested in your start-up. Vesting can never engender devotion to a company among those who are counting the days until they can cash out. From my vantage point, vesting is effective only in retaining disaffected employees who have no stimulating alternatives in sight. Truly talented executives will leave cash behind if they dont have any psychological gratification and take a tantalizing offer to join something they believe in comes their way.
It may be hyperbole to say that money is the root of all evil, but money sure can undermine psychological commitment. Dangling it at the end of a stick may budge the lazy, but it will also wreak havoc on those who have joined the crusade because they buy the mission. Theres no need to try to buy the commitment or the loyalty of those employees. All entrepreneurs need to do is share the vision and share the rewards.
Source: Steven Berglas, a clinical psychologist and a management consultant, is the director of Executive Development Resources in Boston and San Francisco.
Save your euros
To save money on your next trip overseas, consider the following:
- Buy bundles. The easiest way to keep your costs down is to buy a land/air bundle from a travel packager. They purchase huge blocks of everything airplane seats, rooms, theater tickets, sightseeing tours so they can offer big discounts. Worried that a package means guided tours? Dont be. Packages are now so flexible that you can build your own vacation by mixing and matching hotels, itineraries and options such as meals, museum excursions, car rentals and train passes.
- Pay now, play later. Even when it benefits us, the relationship between currency rates and travel costs is convoluted. You can save money though if you pay for as much of your European travel as possible before departing. That not only includes your trans-Atlantic flights and lodging, but also the incidentals local transportation, meals, sightseeing, theater tickets.
- Reclaim the value-added tax. The price tags on goods purchased in Europe include value-added tax levies as high as 24 percent. In many cases, however, the VAT is refundable. VAT reclamation is paper-intensive and confusing, but you can call Europe Tax-free Shopping (800-KNOW-VAT) for help. The company is allied with more than 100,000 European retailers in 23 countries and offers a relatively painless VAT-refund program.
- Use your plastic: cash or credit. Pay with credit cards in Europe whenever you can, and if you need cash, use ATMs. Banks get a special wholesale rate on currency conversion, so you will be billed between 2 and 10 percent less than it would cost you to change your dollars into the local currency and then pay cash. Of course you will need cash during your trip, but dont change dollars for local currency at cambio shops. Youll do better by heading for the nearest ATM. Your checking or savings card will work in most ATMs throughout Western Europe if it carries either the Cirrus (800-424-7787) or PLUS (800-THE-PLUS) logos. Youll not only get that advantageous wholesale exchange rate, ATM fees are much less than cambio commissions.
- Stay on track, ride the rails. Firms such Auto Europe (800-223-5555) and Kemwel (800-678-0678) offer terrific European fly/drive packages, but driving in Europe isnt for everyone. Gasoline prices are very high ($4 to $5 a gallon), many European rental cars are tiny and driving in towns like Rome or Amsterdam is harrowing. Your best bet: Stick to public transit in Europes big cities. And unless you plan to meander the scenic back roads, travel by train between cities. Every national rail system sells inexpensive domestic passes and RailEurope (800-4EURAIL) sells cost-effective multinational deals.
- Save with city passes. Most of Europes big towns have great deals called city passes. Although they vary by city, all the programs slash the cost of mass transit, entertainment, dining and cultural attractions. One example: The Vienna Card. It costs less than $20 and is valid for three days of unlimited public transportation; reduced-price admission to museums and tourist attractions; and shopping, dining and sightseeing discounts. For details, check with the tourist board of the countries you plan to visit.