William Hoffman

Friday, 20 December 2002 09:40

Grads and dads

Business owners now have a rich uncle who will help pay for their kids' tuition, books and fees, and his name is Uncle Sam.

That's what one local real estate developer discovered when his son decided to continue working for the family business while attending Duquesne Law School at night.

A 2001 amendment to Title 26, Section 127, of the federal tax code permanently includes post-graduate work -- full- and part-time degree programs and single courses -- in company tuition reimbursement plans. The inclusion specifically helps the children of business owners because Section 127 has always stipulated that an owner's children must be least 21 years old and nondependents to qualify. Those conditions put most students in the post-graduate realm.

In addition, an owner's children must be legitimate employees of the company, on payroll, with a job description, performing valuable services, and own less than 5 percent of the company. The developer's son met the requirements, making him eligible to receive up to $5,250 annually in tax-free reimbursements.

But his dad has a few more decisions to weigh before offering the plan, which must be open to all employees and offer workers access to the same dollar amount. And while the company can take a deduction for every penny it reimburses, owners still may want to set a ceiling below the $5,250 maximum, based on the number of employees, to limit total annual exposure.

The plan can be amended, but the employer must give workers reasonable notice and a clear description of changes. Also, the IRS mandates that the plan cannot provide more than 5 percent of its total benefit to the owner or the owner's dependents.

Plan administration is relatively inexpensive. Payroll services companies can develop and launch plans for between $500 and $1,000, leaving companies with the task of cutting and distributing reimbursement checks and filing paperwork. Compliance reporting involves updating a simple annual information form, essentially listing things like the number of employees eligible and participating, and the total payout.

The plan is easy on accountants, too. In April, the requirement to file a 5500 Series form was suspended, and a single itemized deduction on the company's tax return is all that's necessary now. David Hoffman is a tax partner with Pittsburgh-based accounting firm Trosch & Co. LLP, a full service accounting firm specializing in maximizing profits and reducing taxes for closely held businesses. He can be reached at david.hoffman@trosch.com or (412) 261-4895.

Monday, 22 July 2002 10:09

Shuffle to your right, do-si-do

Shuffle to your right, do-si-do

A new survey shows that some companies believe the grass is greener on the other side, though why is still a matter of dispute.

By William Hoffman

A Pennsylvania company has compiled the first-ever statistics on where and when businesses move.

The Camp Hill, Pa., Brandow Co.'s Business Migration Profiles rely on a comprehensive database of 10 million U.S. firms collected from private credit reporting services. The first full state-to-state migration report reviews company movements between states, regions, counties and smaller jurisdictions from 1991 through year-end 1995.

Highlights include:

Nationally, 56,783 companies representing 1.08 million jobs and almost $1.3 trillion in sales migrated between states (including D.C., Puerto Rico and the Virgin Islands). Yet these companies-often the target of hundreds of millions of dollars in public and private-sector relocation incentives-constituted less than 0.5 percent of all business facilities.

Florida netted the largest business immigration (2,240); New York lost the most (3,551). Interstate migrations were heavily influenced by factors within the same standard metropolitan statistical area, and border-state migrations accounted for a large portion of such moves.

The smallest firms are the least likely to move. The most substantial migration occurs among firms with fewer than 25 workers, though most relocating jobs come from the largest companies.

Businesses 10 years old and under are more liable to move than the business population as a whole, and the propensity to migrate is most pronounced at 3 to 6 years old-the traditional growth years.

Reasons for migration are beyond the scope of the report. Jonathan Brandow, president of The Brandow Co., explains that the new research tells what's been happening, but not why.

Trade deficit bingo

As the U.S. foreign trade deficit flirts with 10-year highs, so-called experts renew their debate over whether this is a good thing or a bad thing.

America's foremost outplacement and downsizing authority, Chicago's Challenger, Gray & Christmas, says: "The newly announced 21 percent trade deficit with Japan will make American-made products more expensive and is likely to cause the current increase in job cuts to move even higher."

Daniel T. Griswold at Washington, D.C.'s Libertarian Cato Institute say: "Larger trade deficits correlate positively with falling unemployment." Without a trade deficit, the United States would have to finance domestic investment solely from domestic savings, which would raise interest rates, he says.

Don't try to sort it out. There are as many competing opinions on trade deficits as there are on the economic effects of gambling, stadium options and solitaire strategies.

If every day was Tuesday

A survey of 150 executives at the nation's largest firms finds that Tuesday is considered employees' most productive day.

Probably that doesn't come as a surprise, though this might: A similar poll taken 11 years ago placed Monday as fourth most productive, while the 1998 questionnaire placed Monday at No. 2. Of course, Friday ranked dead last in productivity by a wide margin in both surveys.

"The workweek appears to have its own business cycles during which productivity exhibits peaks and valleys," says Lynn Taylor, vice president at Accountemps, the Menlo Park, Calif., staffing service that commissioned the study. "Companies may long for a week of Tuesdays in order to keep major initiatives on track."

Fat chance. The first Tuesday would be like Monday, the fifth would be like Friday, and pretty soon no one could keep count. Besides, as the old song says, Nothing matters but the weekend/From a Tuesday point of view.

Monday, 22 July 2002 10:08

Paperwork when you want it

How much business do you lose because your employees go home after work? When it comes to processing orders for price lists, product specifications, credit applications and other routine paperwork, you may not need employees if you set up a fax-on-demand service.

"The rationale of fax-on-demand is to enable your business to be open 24 hours a day," says Maury Kauffman, managing partner of The Kauffman Group Inc., a Cherry Hill, N.J., enhanced facsimile consulting service to clients such as IBM, AT&T, Chemical Bank and Johnson & Johnson. Automated literature fulfillment through fax-on-demand allows customers and prospects to find out about your company on their timetable as well as yours.

A typical fax-on-demand system consists of a computer; voice and fax hardware installed on the computer; on-demand software to run the service; phone lines (usually at least four); and technical support to prepare the fax documents, record the voice messages and make the pieces work together. Turnkey systems start at $15,000.

If that's a bit over your budget, you can consider hiring a service bureau to lease and maintain the equipment, and handle all fulfillment, for about $500 a month, after a $500-to-$1,000 set-up fee. Most service bureaus (either listed in the Yellow Pages under fax services, or referred by a fax-on-demand client you've already used) also charge a nominal fee per page or per minute on customer requests.

Fax-on-demand is most appropriate for companies with large volumes of routine client and prospect requests for uniform pre-printed literature. This may be delivered more expeditiously by fax than by using office labor to locate, sort, fold, label, stamp and mail (not to mention making customers wait for) the materials. Trucking companies and those with far-flung sales crews rely on fax-on-demand when laptop computers are either too expensive or can't be connected remotely. Some very large firms use internal fax-on-demand systems to distribute insurance forms and human resource information to their employees.

To prepare an effective fax-on-demand service, Kauffman-who has authored dozens of articles and books on facsimile technology-suggests the following:

Analyze current customer service and document fulfillment. Likely your most requested materials include order forms, sales literature, technical documents, price lists, articles reprints, etc. Consider including surveys, special offers and other interactive forms that feed back data on your customer demographics.

Review your current materials for fax-worthiness. Don't use photos; they reproduce poorly. Keep documents under five pages in length. Only offer those documents most often requested.

Promote your service. Train your staff to tell everyone you use fax-on-demand. Ask employees to test the system before it goes live, and to familiarize themselves with the included documents.

Fax-on-demand isn't for everyone. For some companies, it's slowly being supplanted by e-mail-on-demand, and other Web-based services. Yet fax access and ease of use is still greater than that of computers. "You can put up a small fax-on-demand service for less than the price of what a Website would be," Kauffman says.

To find a fax-on-demand service bureau, Kauffman recommends calling a fax-on-demand client whose service you've found useful. Find out how long the bureau has been in business (the first were founded around 1990). Ask how long it'll take to set up-30 days is normal. How many one-page documents can they fax in an hour? Don't over-estimate your demand; it's likely to be one-quarter to one-third what your office hours' fulfillment volume is. Request that the bureau waive its first monthly minimum fee; it'll take at least a month for your service to get publicized and catch on.

Monday, 22 July 2002 10:08

Eye in the sky

When Sheraton Corp. received reports that employees were using drugs in the locker room of one of its Boston facilities, management installed a video camera there to catch the perpetrators.

It was a multimillion-dollar mistake. Employees discovered the camera. Sheraton first denied the surveillance, then claimed it was necessary to stop on-site drug dealing. But Sheraton never produced evidence of any illicit activity. The company recently settled out of court for a hefty sum.

"The thing that employers have to watch out for is thinking that just because they own the [electronic surveillance] system, they can do anything they want," says Lewis Maltby, director of the workplace rights office of the ACLU in Princeton, N.J. Sheraton's first mistake in dealing with its phantom drug problem was not exploring a less-intrusive solution first. "Where employers get into trouble is by doing something even though it isn't reasonable."

Nearly two-thirds of 906 companies surveyed by the American Management Association use one or more forms of electronic surveillance. Most use cameras to counter theft, violence or sabotage; to check phone numbers and call duration; and to record computer use. But more than half of those using electronic surveillance also tape phone conversations, review computer, e-mail and voicemail files, or videotape employee performance. "The practice tends to occur because the technology allows it," notes AMA director of management studies Eric Rolfe Greenberg. And monitoring in ignorance of the law can be a recipe for disaster.

Navigating the maze of federal and state monitoring laws only makes matters worse. "I'm not sure it's a developing area of the law," says Robert Ellis Smith, publisher of the monthly Privacy Journal. "It's a misunderstood area of the law." In addition to his newsletter, Smith offers a "Compilation of State & Federal Privacy Laws" (1997; $31; updated as necessary) to sort state-by-state through the rules governing access to arrest, bank and tax records, credit and prior employment information, and electronic surveillance. For example, each state has its own rules on whether and how many people must be informed of taping if a phone call is recorded, if it can be recorded at all. An interstate call can be a challenge.

Some basic themes need always be kept in mind. Anything private is out of bounds under federal and most state laws. The 1986 Electronic Communications Privacy Act prohibits electronic eavesdropping even on on-the-job conversations of a private nature. Video surveillance is off-limits except where illegal activity, or activity contrary to explicit company policy, is strongly suspected.

There is no law defining "reasonable", yet that is the standard routinely applied by courts when deciding surveillance disputes. "Is someone selling heroin in the bathroom or are they just writing on the wall?" Maltby asks; i.e., what is a proportionate response to the alleged offense? Most courts grant employers the benefit of the doubt as long as they can prove their surveillance efforts met the "reasonableness" bar.

Don't jump the gun on surveillance, either due to rumors or curiosity. You have an obligation to investigate rumors that might lead to surveillance, not simply plug in a camera so you can watch. "Whether it's legal can't depend on luck," Maltby notes.

If it’s true as pundits these days are wont to repeat, that great historical events happen twice-once as tragedy, once as farce-then recent events appear to be a weird amalgam of both tragedy and farce, wherein the silliest pantomime takes on an undeserved gravitas , and the weighty issues of the day are obscured by balloons and flags. Two recent examples set the tone.

In New Mexico’s 1st Congressional District, vacated last March by the death of GOP Rep. Steven Schiff, Democrats and Republicans faced off. It was a contest upon which rested the fate of the nation, if one believed the media coverage and party hype. Democrats hailed millionaire Phil Maloof as a harbinger of their return to power in Congress, and trotted out political celebrities from the First Lady on down to strengthen his vote. Republicans, who counterattacked with a vehemence usually reserved for wars, poured more than $1 million into GOP challenger Heather Wilson’s campaign.

In China, the next century’s most powerful nation, President Clinton provided a fig leaf against right-wing attacks on his ill-disguised but historically significant trade junket by hectoring the country’s Communist leadership about human rights. What was lost on many here at home is this: His televised lecture to the Chinese people was made possible in part by the same satellite technology that the new Cold War crowd has been criticizing Clinton for selling in the first place. Conservative critics castigated China for arresting a few dissidents and Clinton for not goading the “Chi-Comms” more strenuously about Tiananmen Square.

What’s missing in both cases is perspective, a quality lacking from so much public discourse today. Heather Wilson’s victory was no more a sign of solidified Republican control than Bill Clinton’s re-election in 1996 was a triumph of resurgent liberalism. Clinton and the conservatives’ campaign to impose American standards of behavior on foreign cultures is no more likely to succeed than were Mao Zedong’s exhortations of long ago for American workers to throw off the shackles of capitalism. That a local election should be interpreted as a national turning point, or an international opening sullied by partisan sniping, demonstrates what little part perspective plays in our national dialogue.

Still, there is a reason that the big was shrunken and the small was magnified. In each instance, perspective was eclipsed by interest. In the case of the New Mexico election: the interests of political parties in holding the attention of an attention-deficit media. In the case of China: the interest of political enemies and economic powers in denying the president even the tiniest victory. Each interest shrouded its appeals in the popular mantle of morality, ignoring the fact that interest is the principle of all morality. It is the substitution of interest for perspective that leads individuals to blow small matters out of proportion or to assume that the normal course of great events can be changed with a few bold words.

The leadership of Congress will be decided this fall by the voters in 435 districts, who will be only marginally influenced by the outcome of one race in the summer. China will continue its march down its own road toward free markets — and possibly democracy. If that happens sooner rather than later, it will be because of the Chinese people and virtually not at all because of President Clinton’s televised comments. Perspective can help us see the common interests at work all around us, and to express them in a way that is influential rather than imposing. Indulging our self-interests may bequeath some temporary advantage, but will ultimately rob us of that perspective we need to seize greater opportunities.

Monday, 22 July 2002 10:07

Not just caveat emptor

Mergers and acquisitions activity in the United States are approaching another record high this year, and that means new challenges for some small and growing businesses.

Mergerstat Review, which tracks publicly announced U.S. M&A transactions, counted 3,013 deals totaling more than $657 billion in 1997, up from 2,658 deals worth $494 billion in 1996. This year’s figures are expected to exceed last year’s.

For customers, suppliers and vendors of those merged companies, that means a new and sometimes uncertain working environment. “Most small and growing businesses can’t change this environment they’re in,” says R. Jerry Grossman, director at Houlihan Lokey Howard & Zukin, which owns Mergerstat. “But they can at least think about it and consider how they can grow their own business to keep in step with the consolidators.”

Most at risk in a merger or acquisition are the vendors, according to James R. Gollihugh, managing director at Management Resource Center, Inc., a Los Angeles M&A consultant. “I’d be more concerned as a supplier than as a customer, because a customer can always go somewhere else,” Gollihugh says.

Grossman notes that many newly merged entities apply “supply-chain management” techniques to reduce their number of suppliers, while imposing price reductions and inventory management technologies to ensure that the supplier follows the buyer’s needs. Vendors working in industries with a lot of M&A activity should scrutinize their customer bases and diversify if possible, according to Grossman and Gollihugh.

Customers are protected more effectively from the turbulence that usually accompanies a merger, says Nicholas B. Merkel, president of Merkel & Associates, a Cleveland firm. That’s because “most buyers would not go through with an acquisition if they felt there was a big threat of losing customers.”

But size matters. Smaller customers of a newly merged bank may find themselves hit with new or increased fees, which larger customers can get waived. Smaller customers are also at a disadvantage because merger candidates rarely announce the fact to any but their largest customers until the deal is complete or nearly so.

Many buyers use an “earn-out” provision in the seller’s contract to ensure that the business continues flourishing after the sale, Merkel says. This percentage of gross or adjusted pretax profits to the seller in years after the sale can be cut or eliminated if business begins to decline, thus coincidentally protecting the company’s customers as well.

Still, Merkel says, “A buyer should be prepared for a major problem within the first few years after the purchase, which can either be the loss of a major customer, or the loss of an important employee, or some other major business reversal.” The cause is usually insufficient or inadequate transition planning by the buyer or seller.

Banking and financial services, communications and health-care industries have seen the heaviest merger activity of late, according to Grossman and Mergerstat. “As the regulatory environment has moved from tighter to more of a laissez-faire view over the years, all of these industries have begun to change and consolidate,” Grossman says. “Change in general, absent government interference, drives consolidation.”

Looking ahead, Grossman expects intensified M&A activity in the information technology, hotel and motel industries, business services and retail, and electric and gas utilities. Office suppliers, auto dealerships and even golf courses have been hit with recent waves of mergers, driven by cheap capital, government deregulation and new technology enabled economies of scale.

Monday, 22 July 2002 10:05

Pulp friction

Elites love little more than to acclaim their achievements, and the millennium's end offers our market culture's elites an opportunity to inflict this shortcoming on the masses. The proliferation of "Top" lists is only one of the more annoying public displays of elitist tub-thumping indulged (too often witlessly) by the mass media. Recent examples illustrate how elites think about themselves, their work, their peers, and we, the plebeians.

The editorial board at Modern Library, a division of Random House, this summer turned out its pick of the "100 Best [English-language] Novels of This Century." The board included literary lions like Gore Vidal (whose autobiographical title "Palimpsest" sent bibliophiles hurtling for their dictionaries), historical recycler Daniel J. Boorstin, and Washington hanger-on Arthur Schlesinger Jr. Only a handful of their choices were written during the last quarter-century. They reflect the board's cerebral lifestyles and patrician sensibilities rather than any popular impact or cultural significance. They range from the meritorious if unread ("U.S.A" trilogy) to the surreal ("Slaughterhouse Five") to the impenetrable ("Finnegan's Wake").

Not to be outdone, reading's arch-enemy, the American Film Institute, released its own "100 Greatest Movies." Fifteen-hundred leaders of the American movie community agreed the best film was-hold onto your hats-"Citizen Kane" by Orson Welles. Then they bowed to every pop-culture wave that's broken on Malibu shores, including musicals ("Singin' in the Rain"), noir ("Double Indemnity"), neo-noir, ("Chinatown"), post-neo-noir ("Pulp Fiction"), science fiction ("Star Wars"), and willful stupidity ("Forrest Gump"). Since Americans made all the greatest movies, AFI's prudently anonymous selection committee didn't have to consider works by Costa-Gavras or Sergei Eisenstein, but granted Hollywood green cards to the unavoidable Alfred Hitchcock and David Lean.

These lists say more about the biases of their authors than about the richness of America's polyglot culture. There isn't one black filmmaker on AFI's list; fewer than a half-dozen African-American authors make Modern Library's. Women score slightly better in the Top 100 novels, but just once in the Top 100 films. This isn't because America's women and minorities haven't excelled, but because the guiding principles of 20th-century mass media are less literary merit or cinematic originality than net profit and market share. Until very recently, and still most often, white studio executives and publishers sold white films and books to a white paying audience. Only this can explain honoring D.W. Griffith's racist paean "The Birth of a Nation" over Spike Lee's troubling "Do the Right Thing," or selecting James Baldwin's spiritual "Go Tell It on the Mountain" over Alice Walker's searing "The Color Purple."

The mass-market elites will be first to protest that these lists are not compendia but conversation-starters. "After people get finished attacking [us] for putting something in or not putting something in, they generally acknowledge that here we are talking about important books and not talking about Monica Lewinsky," says Random House spokesman Tom Perry.

AFI's Seth Oster adds, "Everyone's opinion counts." Modern Library established a Web site for readers to select their choices. Yet here again, market culture triumphs: In the pay-for-play medium of the Web, only the payers get to play. Thus ML's "Readers' 100" list is dominated by the Cro-Magnon libertarianism of Ayn Rand, interrupted by high-school standards like "The Catcher in the Rye," and shrunken by popcorn classics from Stephen King, Robert Heinlein and J.R.R. Tolkien.

The Top 100 lists from movie-makers and literary lights will undoubtedly inspire animated cocktail chatter, but probably few bar fights or even dinner-table disputes. Elites converse among themselves, but they talk down to the masses. That's because the film and publishing elites are held hostage to people's disposable incomes, so that every accomplishment must also be a selling point. Rarely does a brilliant newcomer have both the talent and the market potential. John Kennedy Toole's hilarious "A Confederacy of Dunces" is an example. The novel won a Pulitzer Prize in 1981, years after Toole killed himself in frustration over his repeated rejections. His eventual editor wrote a moving foreword to the early editions that was prominently advertised on the book's jacket.

William Hoffman has seen all of the movies and read all of the books mentioned, with the exception of "Ulysses," which he is trying again to read at the insistence of Modern Library. He welcomes your comments at whoffman@erols.com.

Monday, 22 July 2002 10:05

Going, going... going faster!

There is no bustling crowd. No high-speed cattle call. And the auctioneer may be hundreds or even thousands of miles away when the highest bidder buys an item with a few keystrokes or the click of a mouse.

Online auctions racked up $337 million in sales during 1997, or about 15 percent of all direct online sales of goods, according to consultant G. Patton Hughes, publisher of the now-discontinued Auctionland Online Report newsletter. Forrester Research projects that business-to-business sales alone in online auctions will hit $52 billion annually by 2002-this from an industry that barely existed two years ago.

"It's a very, very hot phenomenon, and it's going to continue," says Michael Brader-Araje, founder, president and CEO of OpenSite Technologies Inc., in Research Triangle Park, N.C. "This is not a fad."

Brader-Araje started the company in February 1996 to design Web sites, but abandoned that concept just three months later to focus on online auctions. His business has since grown from two employees to 25; his service hosts The Sharper Image, Auctiongate Interactive (computer equipment and peripherals) and almost 100 other businesses that accept bids online.

There are two basic kinds of auctions sites. The first operates like a traditional auction house, buying items for resale or selling them for others on commission. The second charges a fee to people or companies offering items for sale. A host company, such as OpenSite, licenses software that links sellers with buyers and ensures secure transactions. According to Hughes, sales on the latter's sites have far eclipsed those on the former. And Joe Keefhaver, executive vice president of the National Auctioneers Association, says his 5,600-plus members have shown increasing interest in taking their online counterpart for a spin.

As with any hot new opportunity, however, online auctioneering has attracted its share of frauds. The Federal Trade Commission issued its first "Consumer Alert" on the subject this spring, after issuing a cease-and-desist order to a Florida company that accepted bids for computers that it allegedly never delivered. "As [online auctions] grow, so does the amount of fraud, and we felt it was important that we step in and show that we are on the beat, so to speak," says Lisa Hone, staff attorney for the Bureau of Consumer Protection at the FTC in Washington, D.C.

The FTC doesn't release figures on the number or volume of frauds resulting from online auctions, though Hone says, "It's a growing problem." Brader-Araje says his company will revoke its software license to an auction site if that company breaks the law. "It's in our interest to have [sellers] who are reputable," he adds. Meanwhile, the FTC and auction specialists urge potential buyers keep a few cautionary tips in mind:

  • Buy only from companies you know, or at least established, reputable companies you know about. Try to reach the seller by phone. Try to verify a permanent address, and otherwise perform the same diligence you would with any other out-of-town vendor. Beware of untraceable e-mail addresses. "One of the benefits of the Internet is relative anonymity," Hone notes, "which can cut both ways."

  • Pay by credit card. You can challenge the charges later if the seller doesn't deliver the goods. Also, a purchase may be insured. Ask about paying c.o.d. Ask about return policies. Consider using an escrow agent, which may be worthwhile despite the fee for larger purchases. And shop the online price; it may still not be the best you can get.

  • Complain if you feel cheated. Start with the auction house or host. Turn to the FTC, which maintains an online complaint form. And don't neglect calling your local or state police. While these officers may be catching up on online fraud, they're doing so quickly, Hone and others say, and most treat it as seriously as other multijurisdictional crimes.

Monday, 22 July 2002 10:05

Connection pays

Businesses have never had more ways to communicate. Whether by voice, video or data, on handsets, headsets, pagers or cell phones, the telecommunications industry offers more choices to reach out and touch someone, and promises even more in the future.

Yet a 1998 survey by administrative staffing company OfficeTeam found that the average executive spends 17 minutes a day on hold-up from 15 minutes a day in 1993. With the myriad of services offered to growing companies, some phone bills have begun to resemble tax returns. The pressure from customers for instant response round-the-clock means that high-tech multifunction communications systems are being transformed from a competitive advantage to just another cost of doing business.

"Customer expectations are changing based on the technology and what the competition is offering," observes Jeffrey Kagan, author of Winning Communications Strategies and a telecommunications consultant to Fortune 500 firms. Your system should be at least the equal of your most advanced competitors, Kagan advises. "It's not a question of choice. You either do what the customer wants, or the customer will find a competitor who will."

It takes the work of a professional telecommunications consultant to select a phone system that will grow with your business, given the variety of products and prices available. Fred Voit, senior analyst at the Yankee Group, a Boston-based technology market-research consultancy, says, "It's something you can't afford to gamble on." Smaller companies may rely on referrals from friends, Voit notes, but a growing company can't afford the luxury of buying or leasing a system that will be out of date in two years. Kagan agrees: "Most businesses don't have a clue; I don't have a clue. If I had to go out and buy a phone system now, I'd get some professional help."

Whether or not you hire a consultant, the experts agree there are some basic considerations:

  • Scalability. Your system should be tailored to your business plan, plus some, says Joseph Villarosa, director of the small and medium business practice at the Yankee Group. PBX, or private branch exchange, is the heart of the modern business phone system, and usually is expandable, says Voit. Find out from your consultant or your value-added reseller, also known as VAR, just how much functionality is built in, and how much may need to be added as your company grows. Plan on establishing and building a relationship with a reliable phone product and service provider that can install, repair, maintain and expand your system as needed.

  • Usability. Your phone system should be easy for your customers to use, even if it's not as easy as you'd like it to be for you. "How many customers do you have to lose before you realize that saving Mary Jane's salary wasn't worth it?" Kagan asks. Too many businesses install elaborate voice-mail directories that frustrate buyers who wind up looking elsewhere for their purchase. Offer callers an "escape hatch" from voice- mail to a human operator. Consider your other phone services from the customers' point of view.

  • Price. Often the most daunting factor for smaller companies, this is becoming less so with the advent of PCS-personal communications services-and cell phones bundled with hundreds of free minutes per month. It won't be long before individuals use personal, lifelong phone numbers that reach them anywhere, anytime. Companies that employ the telecommunications advantages appropriate to outdoing their competition will see the earliest returns. "It's not a matter of how much the technology is costing you," Kagan says, "but how much business you're losing by not having it."

Monday, 22 July 2002 10:04

Finder's keepers

Finder's fees have a suspect reputation. Mergers, real-estate deals and myriad other business transactions big and small have gone wrong over disputes about them. But if your company needs an unusual piece of equipment, a discontinued spare part, or capital when the bank won't come through, a professional "finder" may be just the person who can get it for you.

"Most businesspeople do it inadvertently. They just don't consider themselves to be a finder," says J.F. (Jim) Straw, author of the self-published Finder's Fees and a Cleveland, Tenn.-based veteran of almost 40 years in business of finding things for people. "Finding" isn't really an entrepreneurial activity, Straw cautions: "Most finders get started because they know someone who has something, and they know someone else who needs it."

In fact, "finding" is one of the world's oldest professions. Traditional Jewish yentas have been matching mates for a fee since biblical times. In modern Europe and the Middle East, professional finders ply their trade even among larger businesses. Arms-trader Adnan Khashogi is said to have begun his billion-dollar fortune as a young finder for oil-rich sheiks. Though the practice might have a sullied reputation in America, old hands such as Straw estimate there are several hundred professional finders in the United States.

"Finder's fees are more of a personalized service than anything else. It's not a business, per se," according to Straw. "It's strictly catch as catch can." Businesses hire finders to save time and money locating otherwise hard to locate items. There are unscrupulous operators, as in any business. To steer clear of them while still taking advantage of a valuable service, Straw and other advise:

  • To find a finder, advertise a fee. Finders aren't usually listed in the Yellow Pages. Place a classified ad in your nearest metropolitan daily, and specifically note your willingness to pay a fee. "There's a finder reading every publication in the world," Straw notes. Use the term "fee" only if you want to attract a finder. Conversely, a finder offering to locate something will suggest a commission, but never a fee.

  • For a request that doesn't need to be filled right away, you might consider placing a notice in the Finder's International Network Directory, published by Ron Wyatt in Memphis, Tenn. The eighth edition of the directory lists several hundred opportunities each year. "I guess the best sign that people are satisfied with it is that we don't get any returns," he says, noting he offers a money-back guarantee on the directory. Wyatt, an assistant city attorney for the city of Memphis, and his wife, Peggy Birmingham (also his editor) welcome calls from readers in need of informal finding advice.

  • Don't pay up-front money. "The act of finding is bringing together two people, then stepping back," says Tyler G. Hicks, publisher of International Wealth Success, a 33-year-old monthly newsletter for start-up opportunities. Bona fide finders get paid a fee from the buyer only after he or she has agreed to purchase from the seller.

  • Treat the finder as you would any other contractor. Write an agreement, spelling out exactly what you're looking for, how much you're willing to pay, what will be the fee, and any other stipulations (conditions of the merchandise, time limits and so on). Pay the finder's fee only after you've checked out the seller and satisfied yourself the found item fits you needs.

  • Consult with an attorney or your accountant about any potential legal or tax ramifications of a finding transaction. Some items may be taxable; others may require regulatory clearance. Don't expect the finder to deal with these considerations. "The only time that a finder gets in trouble is when they inadvertently or otherwise cross the line and become an agent or a broker," Straw says.

While business owners are more likely to use a finder than to become one, anyone can be a finder. You don't need a license. You do need to be:

  • Inquisitive. According to Wyatt: persistent (Birmingham could average 30 phone inquiries to find one item, her husband notes.)

  • Curious.

  • Good on follow-up.

  • Detail-minded and precise.

  • Willing to accepted repeated rejections.

Straw's book, Finder's Fees, spells out how to get started in the business.

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