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Archive for January 2010

Interest rates – now is the time to act

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Before I start this week’s topic I wanted to follow up on a new development regarding the crisis in Haiti.  Today, the IRS issued a press release announcing that cash donations to Haiti relief made between 1/12/2010 and 2/28/2010 will be allowed to be deducted on the 2009 tax return if you are itemizing on Schedule A of the 1040.  See the link below for the full details on the IRS website.,,id=218678,00.html

 Today I wanted to speak briefly about interest rates.  As of right now the prime rate is 3.25% and has been since December 2008.  The Federal Reserve influences the prime rate based on the rate it charges bank’s for borrowing.  Right now that rate is at a historical low.  The last time the Federal Reserve spoke on the rate it charges banks it stated it would stay at the current rate for an extended period of time.  Many have speculated that meant at least until the summer months and maybe until the end of 2010. 

 I believe now is the time to be proactive and begin evaluating your borrowing needs.  Take a look at your anticipated capital spending projects requiring significant borrowing and consider moving them up to lock in lower rates.  Another item to consider is to convert your variable debt to a low fixed rate.  When doing so you will have to consider the cost to refinance your debt the same way as you would when refinancing your house. 

 Another item to consider is variable debt that has a provision to re-set the interest rate every 3 or 5 years throughout the term of the loan.  If you are currently paying an interest rate of 7.5% on a loan that is priced at prime plus 1.5% and the next reset will take place in a year, perhaps you should consider refinancing before rates go up.  Many speculate that once the economy recovers, interest rates may begin to rise drastically to slow anticipated inflation as a result of the stimulus and huge deficits.  It would seem to make sense to lock in rates now while they are low rather than risk having that prime plus 1.5% rate re-set at 10% once prime is at 8.5% next year. 

 Maybe an 8.5% prime rate is an unreasonable scenario but most every one believes interest rates will be higher a year from now and current rates have never been lower.  Crunch the numbers and it might make sense to pay a visit to your banker.


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January 25, 2010 at 9:03 pm

Earthqauke in Haiti

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For the second week in a row, news events have determined my topic. Today the topic is the Earthquake in Haiti.  One day after the shock waves of Mark McGwire’s steroid admission a much more serious shock devastated the island of Haiti.   All of us by now have seen pictures of the devastation on the news or the internet. 

 I urge everyone to donate to the relief effort in any amount.  Regardless of our economic troubles we are having right now in the US, we have so much more compared to Haiti. After the earthquake they have less than nothing.   The need is so great but do not be discouraged.  Give what ever you can.  This tragedy transcends politics and all our differences. 

 When giving, it is best to give to established charities that know how to mobilize and that have the lowest administrative costs so that that highest percentage of your donations go to the relief effort. 

 One final note of caution.  When tragedy strikes like this there are always dishonest people that try to take advantage of the situation.  Be very careful that you give to an organization that is credible and established.  If there are ANY doubts do not give to the organization.  Also, be aware of scams over the phone or the internet.  Do not give personal information such as your bank account or social security number to anyone no matter how “real” the scheme may appear.

 Let’s hope that by next week’s blog there may be some light at the end of the tunnel for the people of Haiti and that aid and stability will permeate the country.

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January 18, 2010 at 9:54 pm

You can’t destroy the game!

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I was wondering what I was going to write about this week for my non business related topic.  I was, that is, until the news about baseball slugger Mark McGwire hit the internet.

This, however, will not be a rant about steroids or Mark McGwire’s use of them.  It will be a letter in support of baseball.  Not the organized, multi-billion dollar industry that it has become but rather to my dear old friend the simple game that we all played when we were kids. 

I remember playing pick up games as a kid when we would use “ghost” runners when we only had a few kids on each side.  We played using the rule that you had to “push” the “ghost” runner over to score a run.  We also played the “pitchers hand” rule when the pitcher would serve as the first baseman when we were short handed.  I played baseball whenever I got a chance but never once played organized ball not even little league.  I never regret not playing Little League baseball.  When I played I was in the big leagues – at least in my mind. 

Baseball is a friend that is always there for me during the spring and summer months.  You can ignore your friend baseball for a few days or a week but it will be there with games on TV, night and day, every day of the week and will always welcome you back with open arms.  The long season of 162 games lends itself to a leisurely, relaxing pace rather than a hectic sprint such as the 16 game season of football.  Some people may say that the length of the season de-values the games making each game less important.  I contend that the length of the season and the failure rate is the best thing about baseball.  What do I mean when about I speak of the failure rate?  I am sure you have heard many times that a good hitter is one that fails 70% of the time, a good team may win their division by winning 56% of the time or 90 games out of 162.  Winning 56% of the time in football will get you about 9 wins – rarely good enough for a wild card spot.  

What do I like that about baseball?  Well, I suppose it is a forgiving game in a world that is not very forgiving and very results oriented.  Winning 56% of the time?  That’s good for baseball, failure in schools.  Having success 30% of the time?  That’s good for a hitter in baseball, but the pink slip in business.  Sometimes it is nice to relax and forget the competitive rat-race world and hearken back to a less complicated time. 

The BUSINESS of baseball has endured the Black Sox scandal, racism until Jackie Robinson broke the color barrier, the reserve clause until the Curt Flood case, labor strife, lock outs, no World Series in 1994, Pete Rose betting on baseball and now the steroids era.  The GAME of baseball has endured all these calamities and remains pure as ever.  In this day and age it is the one sport that I can watch a spectacular play, whether it is a home run or fielding effort, and not have to see some sort of victory dance or other ridiculous display of self promotion.  For now, even on the day of Mark McGwire’s shameful admission, the GAME still has class.

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January 11, 2010 at 11:46 pm

Ways to increase sales in 2010

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This week its time for us to get back to business.  We all need more sales.  If we don’t have more sales, we will not be able to expand our businesses and increase profits. The cost cutting was done in 2009 we need to get off our back sides and increase sales in 2010. 

 Today’s topic – 4 ways to increase sales.  This was explained to me first by my father 35 years ago after he went to a sales seminar.  Over the years I have heard various forms of the message and it needs to be drilled into our heads.  Frankly, it is very simple.  The 4 ways are: 

  1. Increase frequency of transactions
  2. Increase price of transactions
  3. Increase number of transactions
  4. Increase value of each existing transaction 

Increase frequency of transactions – (come in more often) think frequent flyer or frequent diner programs as an example.  This is also used by various companies that offer 1 free item for every 4th, 5th, 6th or “Nth” item purchased.  Pizza shops, car washes, donut shops to name a few use this.  This won’t work for companies that only offer their service infrequently.  H & R Block, for example, can’t use this because each customer uses them once per year.  (They can use other strategies) 

Increase price of transactions – add a few extra dollars to hourly rate, add $1 to the price of all restaurant menu items.  The difficulty with this strategy is how to do so without appearing to reduce the “value” for the price.  It is best to avoid competing on price. 

Increase number of transactions – (new customers) Advertising initiatives, more marketing efforts, networking etc.  Down side to this is the cost of those strategies may not lead to adequate results or the time spent by a small company may lead to poorly servicing current customer needs.  The cost to get a new customer is greater than keeping existing customers or increasing sales with existing customers.  This leads to the next point. 

Increase value of each existing transaction – (the classic adding fries to the hamburger order) This is one of my favorite strategies.  It can be a win-win situation if you can provide the added service or product for an equal or lesser value than the existing provider.   Your customer will be much more likely to add more of your services than you finding and adding a new customer.  There may be a very good reason why you can provide goods or services for a lesser amount than the existing provider beyond your lower overhead costs or other reason.  Let me provide a couple examples that may help.  If you are an Accountant, in addition to “taking care of the books” perhaps you can provide other services that your customer is currently purchasing.  Examples would be payroll processing, Human Resource/benefits consulting, computer services and the list can go on depending how varied the talent in your firm is.   If you are a carpet cleaning service perhaps you can offer air duct cleaning services or dryer vent repair/cleaning.  Since you are already at their location the travel time and other costs are absorbed in the price of the original transaction.  You may be able to offer them a discount yet still have a higher margin on the service than the existing provider.  That is a nice a win-win situation.  By providing this service at a lower price it also builds your relationship with your customer and can lead to referrals – new customers see item 3 of 4. 

I hope this quick refresher will spur you on to make a push to increase your sales.  I am going to keep it in the forefront of my thoughts as I enter 2010.

Good luck!

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January 4, 2010 at 9:44 pm

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