There is some good news about the economy — the recently issued “Fiscal Survey of States” reports that revenue collections are up in many states throughout the nation and fiscal conditions are continuing to improve into fiscal year 2013, although many state budgets are not fully back to prerecession levels.
“However, despite the increase, that is not enough to let down your guard when it comes to examining state tax nexus for your business enterprise,” says Timothy A. Dudek, director in the Tax Strategies Group at Kreischer Miller.
The term “nexus” as used in this article refers to what constitutes “doing business” in a state that requires the filing of tax returns.
“A large amount of revenue generated by the states in the past few years has come from aggressive enforcement measures with regard to their out-of-state nexus groups,” says Dudek.
Smart Business spoke with Dudek about why it continues to be important to address state tax nexus, even in years of improved revenue and cost-cutting actions by states.
If states have improved tax collections and are taking action on cost-cutting measures for the future, why do the aggressive enforcement measures continue with regard to state tax nexus?
Future revenue shortfalls are projected. Both the National Governors Association and the National Association of State Budget Officers warn that despite improvements in tax collections, states are now being squeezed in two different directions. First, the budget assistance provided to states via the federal American Recovery and Reinvestment Act is gone. The loss of that money alone wipes away state increases in tax collections.
Second, local governments are experiencing revenue declines due to lower housing values — a situation that will put pressure on state leaders to boost funding for cities, counties and schools.
What other factors prompt a state government to continue tax collection programs?
We tend not to think of the cost of state Medicaid programs, which continue to rise each year. The health insurance program now accounts for nearly one of every four dollars spent by states. Over the next 10 years, total Medicaid spending is projected to increase annually by 8.3 percent.
What is state tax nexus, and how do states reap the benefits of this type of program?
Nexus, under the Commerce Clause of the U.S. Constitution, requires that a business must satisfy certain standards before a state can exercise its power to tax the business. Nexus must have a definite link — some minimum connection between the state and the business it seeks to tax.
It embodies the spirit that a state cannot impose a tax on persons unless there is a certain level of presence or activity by a business within the state seeking to impose the tax. The trick is to understand that different taxes, such as income, net worth, sales taxes, may have different standards for establishing nexus in each state.
Many businesses may unknowingly have satisfied nexus requirements long ago but have never filed the required tax returns with the individual states. State enforcement measures in the nexus arena are designed to discover and ferret out taxpayers that are not in compliance with existing state tax laws. Once a state identifies a business through nexus discovery, the business usually must file tax returns and pay the tax, interest and penalties retroactive to when nexus was initially established in the state.
Depending on the term, that can be a very expensive proposition for a business if, for example, it has to file and pay for 15 years of back returns.
What action can a business take to address these types of state tax programs?
Businesses are well advised to become proactive and to have all of their state tax activities evaluated by a competent state tax consultant, especially knowing that increased nexus audit activity is being conducted by numerous states.
If the consultant determines that nexus exists and tax returns have not been filed, the best action to take on the taxpayer’s behalf is to minimize the exposure for prior years’ taxes, interest and penalties through use of a voluntary disclosure agreement. These agreements can be a valuable tool in resolving prior years’ outstanding state tax liabilities for unregistered businesses that have sufficient presence but have not filed state tax returns.
The benefits of voluntary disclosure agreements to the business include:
- Years open to statute because of unfiled tax returns are generally reduced from an unlimited period to a three- to four-year look-back period.
- Penalties for failure to file tax returns and failure to pay taxes are typically fully abated and waived, although interest continues to accrue.
Generally, the voluntary disclosure program is available to taxpayers who have not been in compliance with the state’s tax laws and who have not been previously contacted by the state department of revenue. Once the state has identified a taxpayer on its own, it is generally too late for the taxpayer to participate in this type of program.
Virtually all states are willing to work with most taxpayers in resolving their prior years’ tax liabilities in a settlement fair to both parties. Voluntary disclosure agreements are offered as a positive, money-saving option to resolve the taxpayer’s outstanding liabilities.
Timothy A. Dudek is a director of tax strategies at Kreischer Miller in Horsham, Pa., and chair of the firm’s State and Local Tax group. Reach him at (215) 441-4600 or firstname.lastname@example.org.
Insights Accounting & Consulting is brought to you by Kreischer Miller
Human beings find comfort in routine. As children, we gain a sense of security from knowing what will happen, when it will happen, for how long and how we are expected to react to each situation. As we mature, knowing that home and family will be where we left them allows us to go out and explore the world as young adults, secure in the knowledge that we can always come home if we need. However, as we age, this penchant for sticking to the routine can work to our detriment.
We begin to settle in at home more and more, often opting to camp in front of the television rather than venture into a new neighborhood or to try a new vocation. Our sedentary ways can have damaging health consequences, most significantly for that muscle that drives the body: the heart. To stay strong, the heart needs daily movement that includes periodic challenges (to force it to pump more oxygen than normal), foods that declog blood vessels and keep them flexible, limited preservatives and refined foods, and regular activities that relieve stress. But, once sedentary, inertia can make it seem as if changing our habits is an insurmountable task.
However, with concerted effort in three areas, what I call affect, behavior: and cognition – the ABCs of Change - we can break the cycle and embrace good cardiovascular practices.
First, start by tracking your moods, your activities and your thoughts in relation to heart-healthy activities such as walking, jogging or any other activity that works up a sweat. Jot down on paper how you are feeling and what you are thinking at the moment when you decide to engage in any act that undermines your heart.
Next, write down how you will change your behavior each time you feel yourself slipping into the unhealthy mindsets that precede unhealthy behaviors. Now, write down what things inspire you to get up and move or to make heart-healthy decisions.
Then, commit to doing at least one heart healthy activity each day and to modifying your environment as needed each time you feel yourself sliding into unhealthy practices.
Last, give yourself time. Generally, it takes 21 days of repeat activity to develop a new habit; however, you may slip up. They key is to review your strategy and recommit each time you fall. Ultimately, your heart will be the better for it.
Patricia Adams is the CEO of Zeitgeist Expressions and the author of “ABCs of Change: Three Building Blocks to Happy Relationships.” In 2011, she was named one of Ernst & Young LLP’s Entrepreneurial Winning Women, one of Enterprising Women Magazine’s Enterprising Women of the Year Award and the SBA’s Small Business Person of the Year for Region VI. Her company, Zeitgeist Wellness Group, offers a full-service Employee Assistance Program to businesses in the San Antonio region. For more information, visit www.zwgroup.net.
In business, confidence is key. I would say that it is foundational. All other factors, such as motivation, training, drive and leadership, depend upon a core of inner confidence.
Whether you work for someone else or run your own business, tapping into your inner confidence is vital in order to succeed. A few people do this with the greatest of ease, but for most of us it is a daily challenge that takes hard work and determination.
Here are four “tools” that will help you to find and tap into your inner confidence in order to propel your business forward:
First: Refuse to give consent.
I pull this idea from a saying of Eleanor Roosevelt: “No one can make you feel inferior without your consent.”
Refusing to give consent to feeling inferior is the jumping off point for the daily challenge of using confidence in business. Here is what I mean:
Your first step into tapping your inner confidence is to refuse to see yourself as less, no matter what anyone else might say. This refusal forces you to take a stand and begin to think differently about yourself.
Dr. Wayne Dyer says reminds us here that: “Self-worth comes from one thing – thinking you are worthy.”
When you take this first step, it awakens your inner confidence. It stirs it up and gets the ball rolling. It becomes active in the process of your success.
Quite simply - it empowers you.
In business, being empowered leads to the desire to grow, the ability to step outside your comfort zone and the determination to act. I have discovered through coaching others that empowered, powerful people do powerful things.
Tapping into your inner confidence requires you to step up refuse to see yourself as inferior, less or wanting.
Second: Be willing to change.
Unwillingness towards change holds you and your business captive. It takes the wheels right out from under you and stifles vision and action. It halts growth.
I believe that fear of change is a problem of confidence. Most business people who struggle with change are, at the root, struggling with confidence. For some, it is easier to stay stuck and inactive.
They do not realize that being willing to change frees up your inner confidence. The willingness becomes the catalyst to move past the fear. It frees you up and drives you forward.
What kind of change must you be willing to consider? You must be willing to change your thinking.
Having the same thought patterns over and over again is not beneficial to your success. The problem is that the same old thoughts lead to the same old behaviors and, in the end, the same old results.
Albert Einstein said it this way: “We can’t solve problems by using the same kind of thinking we used when we created them.”
In order to propel your business forward, tap into your inner confidence by being willing to change your thinking.
Third: Envision the end result.
This tool is about making choices.
In his book, “Hostage at the Table: How Leaders Can Overcome Conflict, Influence Others,” George Kohlrieser talked about these choices when describing successful athletes:
“The power of imagination is incredible. Often we see athletes achieving unbelievable results and wonder how they did it. One of the tools they use is visualization or mental imagery….they made the choice to create their destinies and visualized their achievements before they ultimately succeeded.”
Story after story has been told about athletes, race car drivers and men and women in business who have taken the challenge of looking into their mind’s eye and envisioning the end result they desire. They “made a choice to create their destinies.”
In my opinion, visualization is the tool that sets your inner confidence in stone. Tapping into this well is a sign for all to see that you have the confidence needed to achieve your desired result, whatever it might be.
Fourth: Practice positive self –talk.
Over the years, I have encountered two very distinct groups of people when it comes to self-talk. The first is the over-the-top, fake, often arrogant folks who can’t stop talking about themselves – always with a positive “I’ve done that and better than you” attitude.
The second is the self-humiliating, always down on their luck, also fake folks who can’t find one good thing about themselves.
Both groups are uncomfortable to be around. Neither group will work well in business.
The ability to speak to yourself in kind and affirming ways builds up the well of inner confidence and keeps it alive and well. This ability is necessary to energize yourself as you encounter the ups and downs of life and business.
Positive self-talk is the maintenance tool. It keeps everything running smoothly.
There you have it – four distinct and powerful tools. Refusing to give consent, together with a willingness to change, the ability to envision the end result and positive self-talk, will allow you to tap into your inner self confidence and propel your business forward.
I wish you all the best on your journey.
DeLores Pressley, motivational speaker and personal power expert, is one of the most respected and sought-after experts on success, motivation, confidence and personal power. She is an international keynote speaker, author, life coach and the founder of the Born Successful Institute and DeLores Pressley Worldwide. She helps individuals utilize personal power, increase confidence and live a life of significance. Her story has been touted in The Washington Post, Black Enterprise, First for Women, Essence, New York Daily News, Ebony and Marie Claire. She is a frequent media guest and has been interviewed on every major network – ABC, NBC, CBS and FOX – including America’s top rated shows OPRAH and Entertainment Tonight.
She is the author of “Oh Yes You Can,” “Clean Out the Closet of Your Life” and “Believe in the Power of You.” To book her as a speaker or coach, contact her office at 330.649.9809 or via email email@example.com or visit her website at www.delorespressley.com.
You might think I’m a warm, fuzzy and “Kumbaya” kind of Guy. Most of the time I am, but I have strong feelings about e-mail etiquette and what it takes to get your e-mail read — and answered.
As someone who gets dozens of e-mails every day and sends a handful of e-mails every day to get strangers to do things (“digital evangelism”), I offer these insights to help you become a more effective e-mailer.
Craft your subject line. Your subject line is a window into your soul, so make it a good one.
First, it has to get your message past the spam filters, so take out anything about sex and money-saving special offers.
Then, it must communicate that your message is highly personalized. For example, “Love your blog,” “Love your book,” and “You skate well for an old man,” always work on me. While you’re at it, craft your “From:” line, too, because when people see the “From:” is from a company, they usually assume the message is spam.
Limit your recipients. As a rule of thumb, the more people you send an e-mail to, the less likely any single person will respond to it, much less perform any action that you requested.
This is similar to the Genovese Syndrome (or the “bystander effect”): In 1964, the press reported that 38 people “stood by” while Kitty Genovese was murdered in New York.
If you are going to ask a large group of people to do something, then at least use blind carbon copies; not only will the few recipients think they are important, you won’t burden the whole list with everyone’s e-mail address. Nor will you inadvertently reveal everyone’s e-mail address.
Don’t write in ALL CAPS. Everyone probably knows this by now, but just in case: Text in all caps is interpreted as YELLING in e-mail. Even if you’re not yelling, it’s more difficult to read text that’s in all caps, so do your recipients a favor and use standard capitalization practices.
Keep it short. The ideal length for an e-mail is five sentences. If you’re asking something reasonable of a reasonable recipient, simply explain who you are in one or two sentences and get to the ask. If it’s not reasonable, don’t ask at all.
My theory is that people who tell their life story suspect that their request is on shaky ground, so they try to build up a case to soften up the recipient.
Another very good reason to keep it short is that you never know where your e-mail will end up – all the way from your minister to the attorney general of New York. There is one exception to this brevity rule: When you really don’t want anything from the recipient and you simply want to heap praise and kindness upon him or her. Then you can go on as long as you like!
Quote back. Even if e-mails are flying back and forth within hours, be sure to quote back the text that you’re answering. Assume that the person you’re corresponding with has 50 e-mail conversations going at once. If you answer with a simple, “Yes, I agree,” most of the time, you will force the recipient to dig through his deleted mail folder to figure out what you’re agreeing to.
However, don’t “fisk” either (courtesy of Brad Hutchings). Fisking is when you quote back the entire message and respond line by line, often in an argumentative way. This is anal if not downright childish, so don’t feel like you have to respond to every issue.
Use plain text. I hate HTML e-mail. I tried it for a while, but HTML is not worth the trouble of sending or receiving it. All those pretty colors and fancy typefaces and styles make me want to puke. If you can’t say it in plain text, you don’t have anything worth saying.
Control your URLs. I don’t know what’s gotten into some companies, but the URLs that they generate have dozens of letters and numbers.
It seems to me that these 32-character URLs have almost as many possible combinations as the number of atoms in the universe — I don’t know how many URLs a company intends to create, but it’s probably a smaller number than this. If you’re forwarding a URL and it wraps to the next line, it’s very likely that clicking on it won’t work.
Guy Kawasaki is the co-founder of Alltop.com, an “online magazine rack” of popular topics on the Web, and a founding partner at Garage Technology Ventures. Previously, he was the chief evangelist of Apple. Kawasaki is the author of 10 books including “Enchantment,” “Reality Check” and “The Art of the Start.” He appears courtesy of a partnership with HVACR Business, where this column was originally published. Reach Kawasaki through www.guykawasaki.com or at firstname.lastname@example.org.
Most of us sincerely want to be a better person, manager, spouse, significant other, parent, child or Indian chief. Certainly, good intentions and desire are the first steps in self-improvement. The second step is an introspective discovery process combined with a bit of discipline in order to make meaningful progress.
To get started, ask yourself several pointed questions. Has anyone ever made suggestions to you about your management or communication style? Maybe it was a boss or mentor, a good friend or an associate earnestly trying to give you a few constructive tips on how to improve. Best yet, it might have been self-discovery after you did something that did not quite measure up to your own expectations.
Reality is, for most of us, our strengths can also be our biggest weaknesses. As an example, if you're a type A, anal-retentive person who is detail-oriented to a fault and always crosses every T and dots every I, possibly this strength has morphed you into becoming a micromanager of others. Or, maybe you consider yourself a disciple of the great communicator, the late President Ronald Reagan, because you are a terrific speaker who can captivate the other person in one-on-one conversation or every individual in a large audience. The downside of this is maybe you're not a great listener because you fall in love with the sound of your voice and your words. This could translate into you talking too much and unintentionally giving the wrong impression of not being receptive to another person's point of view.
The list can go on and on. The trick, however, is to recognize what you are and what you're not, and then tweak your style for the greater good, helping not only yourself but also those with whom you interface by making yourself more effective and perhaps even a little easier to take.
Try this. Create two columns on a legal pad or spreadsheet and list all of the attributes you think you possess in terms of your management capabilities/style. Keep the list short and focus on what's important, as this is not an inventory of everything you've done or learned since the third grade. Once you've captured two, three or four key characteristics, in the next column record a corresponding set of those things you know don't help your cause.
Next, re-read this personal inventory of pros and cons and look for patterns. If you note, as an example, that you are incredibly disciplined and seldom give yourself any slack, see if you also jotted down on the detractor side of the ledger that people tend to think you push subordinates too hard without differentiating between what is mission-critical versus basic tasks. If you spot this corresponding weakness, it doesn't necessarily mean that you suffer from obsessive compulsive disorder, but you might just need to recalibrate your standards when dealing with others, recognizing that your subordinates don't have to become your clone to be successful.
Once you've drilled down on the most important characteristics that you want to change, it's time to develop a game plan. For illustrative purposes, let's again assume you're that great communicator, but you sometimes go over the top and incessantly interrupt others, which leads to missing out on their ideas, not to mention becoming a bore. If this is your Achilles' heel, you must focus on the triggers that cause you to behave in this manner in order to strive for improvement.
Maybe you're really not self-consumed, but instead, your mind races ahead to follow-up thoughts that you want to make without allowing enough time for others to absorb and comment on your initial words of wisdom. This suggests you need to put a mental circuit breaker on your lips after you make your first major point, allowing for a long pregnant pause to let others amplify on your point or introduce an opposing or complementary thought. By doing this, you'll help make the conversation or presentation more interactive, which may lead to better resolutions or open the door to new unexplored concepts or opportunities.
Armed with this newly created self-assessment, you'll become a more productive and better leader who has learned to make your strengths stronger and reduce the negative effects of your weaknesses.
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. Reach him with comments at email@example.com.
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Also available wherever books and eBooks are sold, and from Smart Business Magazine and www.SBNOnline.com. Contact Dustin S. Klein of Smart Business at (800) 988-4726 for bulk order special pricing.
There are plenty of warnings about wanting too much in this world, whether it is in your personal life or as the CEO of a company.
Remember the dot-com bust? Prior to the technology market bubble bursting, tech companies could do no wrong. Investors were ignoring basic fundamentals because “this was a new era” and the old rules didn’t apply. Well, it turns out the rules did apply. As did one very old rule about “what goes up, must come down.”
Tech company valuations were slashed by billions, thousands were laid off and the ripple effect was felt throughout the economy.
More recently, we experienced the real estate bust. It was pretty much the same story — people ignored basic investing and common-sense rules and the prices for real estate went sky-high, and then the bubble burst. The results were also the same: billions in value lost, thousands of jobs affected and the ripple effect was felt throughout the economy.
There is plenty of blame to go around for these events, both by investors who got caught up on the hype and CEOs who were trying to get rich, or at least richer than they already were. It was a quest to have the biggest paycheck, the biggest yacht, the biggest plane and the biggest house. The reckless CEOs were trying to use get-rich-quick methods that are dangerous to everyone.
There are four common ways to grow a company:
- Going public through an IPO
- Mergers and acquisitions
- Debt financing
- Self-funded organic growth
IPOs cost a lot of money to launch and even more money to maintain. The second and third methods are all about leverage. Overvalued stocks and overleveraged companies were major contributors to the tech and real estate busts. Too many CEOs were borrowing more and more money to fund the next great merger or open more locations. When tough times hit and the money dried up, they had lived well beyond their means and a harsh reality set in.
Despite these recent economic failures, many companies are still playing with borrowed money, overleveraging themselves and putting their entire company at risk. You have to understand the leverage game and the risks that come with it. The best way to grow a company is to create an environment that fosters growth and to focus on building long-term relationships.
This isn’t to say that you won’t make a strategic acquisition here and there or occasionally borrow money to fund needed expansions. The key is to do it in moderation and understand how too much debt can hurt your ability to grow. Making a mistake with debt can spell doom for your company and everyone in it.
Your responsibility as CEO goes far beyond yourself. Investors obviously are counting on you, but so is everyone that works in your organization. For some of your vendors, you might be their largest account. If you suddenly went out of business, how would it affect them? Would you create your own mini “bust” that rippled through the local economy, even on a micro scale?
In today’s world, you need to take a hard look at how you are leading your company. One wrong move could cut you off from the credit you need to fund your leveraged growth. With no money, the organization often collapses under the weight of its own debt.
It’s OK to be satisfied with what you have and not play the high-risk game of leveraged growth. Growth is good but not when it requires an “all-in” risk that can ruin your organization and the lives of the people who work there. Remember, more often than not, slow and steady wins the race.
Fred Koury is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or firstname.lastname@example.org.
Whether your business is just getting started or just hitting its stride, finding the right office space is one of the most important decisions a CEO can make. And not just because office space is one of the biggest fixed costs for a company — or, for that matter, because the average CEO spends one third of their waking life in their workspace.
The truth is, your office is much more than just space. It can affect what talent you attract, which vendors you’ll do business with, which mentors you’ll gain access to and just how effectively you’ll transform your customers into fans.
As a young business in the midst of explosive growth, with a workforce that has more than doubled in the past two years, discussions about office space are a near-daily occurrence at Petplan. As a result, we’ve learned a few critical points to consider when choosing office space:
Location, location, location
Legendary actor and comedian Bob Hope once said, “I’ve always been in the right place and time. Of course, I steered myself there.” The location you choose for your business — whether it is your corporate headquarters, regional offices, customer care center or brick-and-mortar retail outlets — will, quite simply, impact every other aspect of your business.
If you’re getting started, your office location will impact the employees you’ll attract, the suppliers you can use and the customers you’ll win over with your competitive advantage — all of which are critical to the pace you’ll set for your business and the successes you’ll achieve.
If you’re already established and are considering a move to accommodate future growth, location becomes an even more critical part of your decision-making process. The right location is an opportunity to reinvigorate your teams, advance productivity and increase employee satisfaction. The wrong location has potential to turn a minor disruption into an HR crisis. When considering potential office space, place the most importance on its location.
A close second to location in terms of importance is culture. What kind of culture do you want to create with your organization? Do you really need individual offices? How can the space be optimized for collaboration and productivity? For Petplan, culture is king. We strive to maintain the classic “start-up culture” — an open culture in which everyone is a hands-on contributor and shares ideas and opinions. So for our office, we prefer an open floor plan that promotes interaction across all employees, including staff, managers and executives alike.
Your office space is more than a place to work. Consider how it can solve the needs of both your business and your employees. Does the building have adequate parking? Access to ground transportation? Proximity to rail or air transport? Are there facilities, such as restaurants, shops, dry cleaners and overnight couriers on site or nearby? Is it safe? Does it allow pets (obviously, an important one for us)? Seek space that answers questions critical to the needs of your business.
One to grow on
Just as you wouldn’t seek a technology solution that merely answered today’s needs without any consideration for the future, seek space that allows you to be nimble. Is there contiguous space available? Is the landlord willing to work with you as you grow? Picture your business 24 months from now — does the space support your needs? Can the building provide additional solutions?
Make a good impression
Your office is an extension of your brand. If your office is dull and disheveled, chances are your business will follow suit. Choose a space that reflects your brand’s personality, and will allow your team to communicate that personality, and your business’ core values, to the world at large.
Natasha Ashton is the co-CEO and co-founder of Petplan pet insurance and its quarterly glossy pet health magazine, Fetch! — both headquartered in Philadelphia. Originally from the U.K., she holds an MBA from the University of Pennsylvania Wharton School of Business. She can be reached at email@example.com.
Laboratories with tanning booths?
That’s what Lewis Shender sees. The president and CEO of Sewell, N.J.-based Hollywood Tans sees his chain of tanning salon franchises as a nationwide collection of 140 labs conducting experiments in marketing and customer service.
“Each of our locations does things a little differently,” Shender says. “Ultimately, the stuff that does work, the stuff that does not work, people find out about that. It sort of reaches its own level at some point. I think insisting on rigid compliance to certain corporate standards can create an ivory tower. You develop a bureaucratic style of leadership, and it becomes more like checking-the-box leadership, as opposed to managing the business to really work at a particular location, with a particular set of customers and a particular staff.”
Shender speaks from experience. Previously, Hollywood Tans — officially known as Hollywood Tans Group LLC — was governed by a highly structured and compliance-oriented model. Like many franchise systems, the corporate leadership at Hollywood Tans was focused on driving uniform standards across its entire chain, so that a customer who walked into a location in Pennsylvania would have the exact same experience as a customer walking into a location in California, or anywhere in between.
But then the recession hit, and Shender quickly realized rigid adherence to a corporate rule book was not going to help his company weather the storm.
“The dramatic freezing up of the credit markets and the loss of employment was a real game changer,” Shender says “It super-accelerated what we needed to do to respond to the crisis. It really was an existential threat. Many companies did not make it through that patch.”
Hollywood Tans reshaped itself. The company got out of the tanning accessory manufacturing business, it revised its franchise model from a royalty-based system to a flat fee-based system, lowering the startup costs for franchisees in the process, and the company revised its culture to put more power in the hands of the store owners and managers.
“We moved from the compliance-oriented model to more of ‘Here is our way, but if you have a better way that works for you in your location, if you feel you need to do something unique to beat a competitive threat, you’re free to do that,’” Shender says. “It is much more flexible, and it is interesting to see how that is playing out in a positive way for so many people.”
Attack the market
Like just about every business, Hollywood Tans has tried to develop market separators — unique advantages that customers can’t obtain from the competition. Hollywood Tans’ market separators, including stand-up tanning booths and proprietary tanning lotions and skin care products, have played a big role in the company’s growth to $60 million in revenue during 2011.
But if the separators stopped there, the competition would have caught up and surpassed Shender’s company. With the ability to offer variations and add-ons to only a single service, Shender and his leadership team had to get creative as the economy hit the skids.
More specifically, he had to let everyone else under the Hollywood Tans umbrella get creative.
“We have salons in affluent communities in Southern California, in college towns in the Northeast, in urban areas in the central Atlantic states,” Shender says. “Those are very different types of customers, so if we try a one-size-fits-all approach, it just won’t work.”
The trick for Shender and the corporate team has been to allow local salon owners the latitude to tailor their approach to the needs of their respective markets while still maintaining a well-defined vision and set of values for the company’s brand. Shender’s team answered that challenge by providing some basic, systemwide marketing materials to all locations while still allowing salon operators to sit in the driver’s seat on marketing initiatives in the community.
“We try to give some structure in terms of coherent, timely and current marketing initiatives,” Shender says. “We have posters for salons, and there is always marketing collateral that goes along with that. Then there is online-based initiatives and other complementary creative projects that go along with that, so hopefully we are all communicating with the public in a unified way, with a single voice.”
Beyond that, it is up to the salon owner to crunch the numbers and decide how to best spend his or her marketing dollars.
“For instance, in Philadelphia, if our salon owners want to put commercials on the radio, and that works for them, that is great,” Shender says. “But it might not necessarily work for the guys in Birmingham or Nashville. So those are the types of situations where we try to get them to the right vendors who can help them make the decision about which path to take. We look at our data and give them our best judgment on it. But ultimately the decision for how they want to address the consumer is up to them.”
Shender looks at local marketing through two lenses — creative and media. In other words, what form the advertisement takes, and through which medium it is delivered. When the recession hit, everyone at Hollywood Tans had to place a newfound emphasis on creativity and discovering new ways to utilize various media outlets.
“In our old model, owners were required to contribute a certain percentage of their revenue toward an advertising fund,” Shender says. “Those funds were used to advertise in our various markets, and that worked particularly well in areas like Philadelphia, where we are highly penetrated. Philadelphia is our densest urban market in terms of coverage. But when the recession hit, the money dried up and the contributions began to sink. We were making more calls for collections, more owners were worried about paying their mortgages ahead of paying for advertising. So we had to rethink the whole strategy at that point.”
Utilize new media
Shender and his team came up with a plan that took advantage of new media. Hollywood Tans’ primary customer demographic is 18- to 32-year-olds — a majority are women, but with an increasing number of male customers. Younger customers are more apt to use social media platforms to interface with businesses.
Radio, TV and billboards weren’t completely kicked to the curb, but for franchises to survive, they needed the tools to connect with new customers in the target demographic.
“Our new customers don’t listen to the radio like I did when I was younger,” Shender says. “They don’t focus on billboards like I did, and they might not read the newspaper at all. So at a time when we were losing resources for advertising because our owners couldn’t contribute as much to our advertising fund, we found better and more focused ways to advertise online, targeted demographically and geographically.”
Needing to reach a younger customer base, Shender has helped spearhead social media initiatives, utilizing platforms such as Facebook and Twitter to allow individuals stores to connect with potential customers without any mediation from the corporate level.
“As an example, we have a graphic package every month or season, in order to promote salons and refresh what we are marketing to consumers,” Shender says. “There are icons that people can use on Facebook or Twitter, so that every month, whenever there is a change in our marketing campaign, we go online with locations that haven’t picked up on the new icon and connect with them. We don’t force them to change their icon, but we say ‘Have you seen this icon, we think it goes well with everything else we are doing, is this something you could think about?’ Most salon owners are happy to participate when it is in a constructive, partnership kind of way.”
The company’s online marketing efforts are styled in a way that attempts to relate to many different types of tanning customers. It’s something Shender says the rest of the industry can tend to ignore, in the name of selling out for celebrity endorsements.
“The ‘Jersey Shore’ TV show has really captured the attention of a lot of people in our marketplace, and many businesses in the market are using affiliations with ‘Jersey Shore’ stars to promote themselves,” he says. “We are going in another direction for a variety of reasons, one of which is recognizing that our customers tan for a variety of reasons, and might not identify with ‘Jersey Shore.’
“You need to embrace what you believe is a relatable and reliable method of reaching out to people. For us, we want to recognize that people don’t just tan to look hot for the weekend. Some people tan because it makes them feel better. Some tan because it’s a nice break in the week. People in sales might tan because they believe it gives them a competitive advantage. We love New Jersey, our home is in South Jersey, but you sometimes really need to question the mentality of the herd. We want to move beyond the stereotype of the fist-pumping ‘Jersey Shore’ guy, because we’re a lot more than that. If you try to identify too closely with one thing from a marketing standpoint, you sell yourself short.”
Shender has found that the Internet can be more forgiving than traditional media when it comes to marketing. Your business can alter or terminate media campaigns and online ads more readily than ads on TV, radio or billboards, which could involve a contract that lasts several months or longer.
“We have found that the newer forms of media are shorter term and come with less risk,” Shender says. “When it’s online, if you find something isn’t working the way you wanted it to, you can turn it off. It’s very easy to make changes on the run.”
Recognize your role
In Hollywood Tans’ new organizational setup, Shender sees himself as a promoter of his vision and a facilitator who can help everyone else in the organization realize the vision. In order to maintain every customer interface point as a laboratory, each experimenting with new ways to reach and maintain customers, you need to pay constant attention to what is happening on the front lines of your business, what is working and not working. The ideas that aren’t working might need an adjustment, or in some cases, might need to be altogether abandoned. The ideas that are working need the type of support and systemwide publicity that only upper management can provide.
“I have the bully pulpit as the CEO of the company, and I can see broadly what is occurring in the different markets, beyond what an individual salon owner could see,” Shender says. “With that kind of vantage point, you can be helpful in trying to move the entire organization toward what is working best for everybody. That is why we let go of our compliance-oriented culture to build more of a laboratory atmosphere.”
The people who interact directly with your customers have a great deal of power in your organizational structure. They might be on the bottom rungs of the organization, but they are the face of your company to outsiders. They build the relationships that drive sales. By putting more power in their hands, you deliver the message that you trust them, and over time, everyone in the company develops a more collaborative mindset.
“If people trust you, you trust them more, and it becomes a better overall environment,” Shender says. “For us, it is much less adversarial between the company and salon owners. It is much more open, and people are going in the same direction.”
How to reach: Hollywood Tans Group LLC, (856) 716-2150 or www.hollywoodtans.com
The Shender file
Company background: We have approximately 44 salons in the Philadelphia area and approximately 140 salons nationwide. So Philadelphia is a big part of our business. It is our hometown, so it is sort of the heart of our business. Most of our employees are in South Jersey; we have a distribution center in South Jersey, our accounting and finance teams are there, our internal sales teams are there. We have a very small office on the West Coast for marketing and administration.
Shender on setting his company apart: Our salons are generally based on a stand-up (tanning) model, which is a faster way for people to tan, which sets us apart. But it is not like walking into McDonald's, which is exactly the same no matter where you go. Here, there is a lot of opportunity for store owners to customize their situation to better address their competitive challenges, and operate the way they want to operate.
More from Shender on developing a marketing strategy: You have to understand if you are the market, because everything we look at, we look at through our own lens. One of the hardest things for me to realize is that I am not the target market. Just because I happen to watch a certain TV show or listen to a certain radio station, or read a certain paper, doesn't mean my consumers do. It's not that they might just watch a different TV show or read a different newspaper, they might not watch TV or read the papers at all.
I think particularly with the rapid changes in technology, we have to be very humble about what we know and maybe not so much rely on experts, but get good input from some solid vendors on how to reach the market you want to reach, and then just test the hypothesis to see if it is working or not. We can market so much more efficiently now, it is just stunning to me.
Cloud computing is revolutionizing information technology, and if it hasn’t yet impacted your business, it will soon, says Mike Maloney, vice president of business services at Comcast.
“Cloud computing is a new way of delivering resources, not a new technology,” says Maloney. “And the timing for cloud computing to reach critical mass couldn’t come at a better point.
In today’s belt-tightening climate, this new economic model for computing is enabling companies to accomplish more with less, and the move to cloud-based computing marks a historic point in the evolution of business.”
Smart Business spoke with Maloney about how to harness the power of the cloud for growth, profit and success.
What is cloud computing?
Cloud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources that can be rapidly provisioned and released with minimal management effort or service provider interaction. The cloud allows users to connect from anywhere at any time, making connections via a shared platform.
Until the advent of the cloud, computing tasks were not possible without the application of software on a computer. You bought a license, installed the application and then used the program. With the development of local area networks, or LANs, the client-server model of computing was born, offering an opportunity to begin sharing resources.
Today, cloud computing has leapfrogged the client server model by providing applications from a server that is accessed from a web browser.
Is use of the cloud catching on with U.S. companies?
In a June 2011 survey of U.S. companies, only about 28 percent were using cloud computing in a meaningful way. However, there’s a lot of enthusiasm for cloud capabilities.
More than 90 percent of IT executives believe that the cloud will provide some kind of business advantage to their businesses, 63 percent say they’ll realize cost savings and 29 percent say they’ll achieve increased flexibility.
How can the cloud environment impact businesses?
When it’s deployed properly, it should give a business extra value over a long period of time. It should be able to address the quick-changing needs of businesses better than traditional IT services do, and the cloud should enable business innovation. When you go to the cloud you reap the benefits of speed, agility, price, innovation, simplicity, a managed system and availability. Most of all, it’s about scalability. Whether you’re talking SaaS, DaaS, IaaS or any of the services, you can quickly scale up your activities to meet demand, add new users and cut costs.
What are the shortcomings of the cloud?
The biggest concern may be security, which includes privacy, compliance, and legal and contractual issues. To be considered protected in the cloud, your data must be properly segregated from that of another company. Data protection, then, is a requirement for any enterprise that seeks to protect the core of its business. Businesses must also address other key areas, including physical security where data are stored, and customers must be sure that they will have regular and predictable access to their data and applications.
Cloud computing can offer the enterprise or mid-sized businesses a significant business advantage, but it’s up to you to understand the opportunities and risks involved. When evaluating any cloud model, make a detailed checklist to ensure you answer all the key questions fundamental to a successful deployment and utilization. Smart customers ask tough questions before committing to any cloud vendor.
What other factors should companies consider when looking at cloud use?
For any company looking to move to the cloud, it’s important to note that you are transferring new operating risk and requirements on to your network. Upon moving to the cloud, 100 percent of your application has to travel the WAN every time users want to access it. So it’s critically important to invest in your network infrastructure to ensure you have the uptime and reliability you need.
As you conduct your evaluation of network providers you should look at four key criteria:
- Absolute speed. What is the absolute speed of the underlying transport that is available to you as more traffic from all users begins traversing the network? Traffic doesn’t necessarily grow linearly, but it will grow with your users and the number of applications you add over time. Your ability to turn up bandwidth quickly is critical.
- Network reliability. Now that you have 100 percent of your traffic traversing the network every time a customer or employee accesses the application, the reliability of your network becomes that much more important.
- Scalability. This is critical to scale up to add applications, users and sites. The network must provide immediate opportunity for growth. In this new cloud-based approach, you can easily manage capacity by adding bandwidth, and that changes the conversation with your network service provider.
- Application-specific bandwidth control. Not all applications are created equal. You must be able to deploy application-specific bandwidth controls so that you can decide where to prioritize your traffic to address load conditions, or just to ensure that those mission-critical real-time applications get the bandwidth they need.
These criteria serve as a starting point, but you should pull back the covers on any communications company to examine the network infrastructure and the core attributes in the heart of the operation.
Mike Maloney is vice president of business services at Comcast. Reach him at Michael_Maloney@cable.comcast.com.
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