Consulting « Larry E Vaughn

American Industry Woes June 16, 2011

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The economic woes of the last decade has caused the failure of some major companies and forced the redefinition of entire industries due to new technology, foreign competition and industry saturation resulting in stagnation. A recent report from research firm IBISWorld identifies ten U.S. industries that have experienced severe, and perhaps, irreversible declines over the past decade.

These industries have certainly experienced significant decreases in revenue since the early days of the recession, and are expected to experience further declines for the next five years. And while the decline of some high-profile industries have been well-documented for years, who knew that advances in our life style would be so far reaching?

Here are the industries mentioned in that study, with the biggest loser on top:

1. Apparel Manufacturing – Competition from abroad is sucking the life force out of the apparel manufacturing industry. Revenues are down 77.1 percent since 2000, and a further 60.5 percent decrease is expected over the next five years.

2. Record Stores – Almost 80 percent of record stores across the country have closed over the last decade.

3. Manufactured Home Dealers – In a market where new home sales are low and foreclosures the norm, manufactured home dealers’ revenue has decreased by nearly three quarters since 2000.

4. Photofinishing – Over the last ten years nearly 60 percent of photofinishers have closed, largely due to digital camera technology.

5. Wired Telecommunications Carriers – Due to digital technology, the wired telecommunications industry revenue has declined each year since 2000.

6. American manufacturing – Competition from abroad, combined with cheaper production costs in foreign countries have led companies to abandon 23.6 percent of the mills across America since 2000.

7. Newspaper Publishing – 28.6 percent of American newspapers have closed since 2000.

8. DVD, Game & Video Rental – Competitors like Netflix, online streaming, digital cable and satellite TV have hit the movie rental business hard, causing hundreds of stores to close. Revenue is expected to decline an additional 19.3 percent over the next six years.

9. Formal Wear – Things change. People just don’t get dressed up as often as they used to.

10. Video Post Production – Digital technology has made editing, production and animating much easier, and competent software is available to the novice user to do it themselves. 43.2 percent of postproduction companies have closed since 2000.

According to Forbes, there are other industries in trouble, including Bowling Alleys, Music Publishing, Self-Serve Laundries, Beer Production, Wired Telecommunications, Arcades and Entertainment Complexes, Tobacco Farming, and Footwear Manufacturing.

And then, of course, there’s the U.S. Postal System, which has reached the point that it is rapidly collapsing. Due to the ease of e-mail, instant messaging, on-line payments, and the resulting decline of first class letters, mail volume is falling at a staggering rate, and the postal service’s survival plan isn’t reassuring. Instead of comments from the postal service about stopping Saturday deliveries, we may soon be hearing about thousands of those endearing postal service vehicles for sale at government clearance prices.

What Are You Worth? Setting Rates for Consulting May 9, 2011

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One of the questions that always comes up in learning sessions for start up consultants is, “How do I set my rates?” The answer is, “It depends.” It depends on what fits your type of consulting business, and your clientele. In several of my own businesses, I have quoted “project rates,” or, the cost for the entire project, but, you have to take a few steps to know how to set that price.

There are several ways for a consultant to establish a fee structure that will let you establish hourly, daily, or project rates. You should do a little research to find out what your competitors are charging. Check their websites for information. Call their office number and ask for their hourly rate. Ask businesses that use consulting services what they typically pay. The information is out there. Some times you just need to do a little detective work.

If you conform to what everyone else in your industry sector is charging, you may send a message to potential customers that you’re just as qualified as your competitors. On the other hand, you may signal that there’s nothing special about what you provide your customers. It is always a good idea to look at your specific situation to determine what type of rate you really need to charge, and then you can compare your proposed rate to what others in your market are charging.

I recommend that you first work out a Base Rate. Use your base rate to calculate what you need to charge for half-day, day, or entire projects, as detailed below.

1. Determining A Base Rate. To set a Daily Rate, you first have to determine your Base Rate, then a Fixed Rate. Use online salary calculators to determine the annual salary paid an employee, at your experience level, performing the same tasks you will provide, in your community. Salaries vary by community or region, and benefit packages also differ by industry.

This research will help you understand what is a reasonable expectation for a full-time salaried worker in your area. Be sure to look at the entire compensation package, not just salary, because you can easily miss the value of the benefits provided a salaried employee.

Combine salary and benefits to arrive at the value of this salaried worker. Multiply 52 weeks by 40 hour work weeks to arrive at 2,080 available work hours per year. Don’t deduct vacation time from this, because salaried employees are still being paid when they are away from their desk. Here’s an example: ($80,000 salary + $20,000 benefits) = $100,000, divided by 2,080 work hours per year = $48.08 per hour. Round up to the next $5. This would yield $50.

In most consulting fields, the $50 working number in the example above is typically doubled or tripled to arrive at a Base Rate because of what is called the Rule of Thirds: 1) one third of your income will be actual “wage”, 2) one third will go to expenses, and 3) one third to administration, down time between projects, and bad debt. In this example, the hourly base rate would be $150 per hour ($50 X 3=$150).

2. Alternative Base Rate Method Many consultants prefer an alternative way to set the base rate. In this method you determine the base rate by calculating the number of full days you feel you can reasonably expect to be engaged in earning income. Many consultants start this calculation by deducting six weeks leisure time from the 2,080 available work hours each year (2,080-240=1,840 work hours).

You then estimate what percentage of your time will be spent on work that actually brings in money, as opposed to time invested in marketing, administration, and other non-billable work. Typically self employed business people project that 20% of their time will be spent on administration, 20% on marketing (including networking and website management), and 10% spent on other non-billable work. This means that 50% of your time will be spent on tasks that are not billable. (50% of 1,840 = 920 billable work hours).

Determine the amount of gross annual income you need to make your business solvent, while providing you the personal income required to maintain or improve your lifestyle. You then divide this income amount by the number of your billable hours: ($140,000 annual income divided by 920 billable hours = Base Rate). You can also gain considerable confidence that your rates are reasonable by using both the methods in Steps 1 & 2 so you can compare the results.

3. Calculating Bad Debt Unfortunately, despite your best efforts, not all your clients will pay you. Some will take weeks or months to pay, but a small percentage, (usually around 3%), will never pay the bill. You must also factor in this loss of earned revenue, which is called Bad Debt. You can estimate the dollar amount that needs to be included as bad debt by estimating your annual income by using the Base Rate established in step 1 and/or 2, then calculate Bad Debt as follows: (gross income X 3%=Bad Debt).

The decision of how aggressively you are going to pursue collections is an unfortunate reality for business today. You may have collection costs just to collect a portion of what is owed. Some consultants choose to just write it off as a bad debt after a certain point. You also, of course, risk losing the goodwill of the customer in the collection process. The question becomes, “Do you want them as a customer in the future?” In all cases, you need to protect your business interests by requiring a written agreement for every engagement.

4. Determining Overhead Regardless of which of the above methods you select to compute your base rate, you then must factor in the cost of overhead to arrive at your Fixed Rate. You must calculate ongoing and contingency expenses into your cost of doing business, such as the example expenses below.

accounting services
advertising and marketing
auto fuel
auto insurance
auto maintenance
bad debt
business cards
business licenses and permits
business meals and
business subscriptions
cleaning supplies and services
collection fees
computer hardware
computer software
insurance — health, life, business
Internet service
legal services

maintenance and upkeep
office furniture
office supplies
office telephone
paper goods (notepads, etc)
printer
printer supplies
professional association fees
professional continuing education
professional meetings, conferences and tradeshows
property taxes
rent or mortgage interest
shipping and postage
stationery
utilities
wireless phone

5. Setting Your Fixed Rate You now have the tools you need to calculate your fixed rate. Divide the total cost of your overhead by your projected billable hours. For example, $5,000 overhead spread over 920 hours equals $5.43 per hour. Add to the $150 base rate this yields $155.43, rounded to the next $5 increment results in a Fixed Rate of $160 hour. You can then estimate your annual income as follows: ($160 hour X 920 billable hours = $147,200 gross income)

6. Establishing a Daily & Weekly Rate (per diem) Using your Fixed Rate it now becomes much easier to develop daily, weekly, and “per project” rates. Most daily rates are simply (8 hours X Fixed Rate). In our example, it would be (8 X $160=$1,280).

The weekly rate is set by multiplying your Daily Rate times 5 days. However, some consultants give the client a discount for a full week’s work, often by reducing the overall cost by 5%-10%. Alternatively, this is often calculated by only charging a half day for the final day of the week. The method that best fits your situation is the one you should choose.

7. Project Fees I frequently submit a detailed Statement of Work with a proposal, and establish an overall price for completion and delivery of a project. You can accomplish this by estimating the number of hours you expect to spend on a project, then multiply by the hourly rate. Here, again, you may choose to factor in a discount that fits the situation.

When estimating the number of hours you are planning to invest in completing a project, you must make certain that you are realistic about the time it is going to require to deliver the project, and you must have firm control over changes made by the client that expand your body of work. New ideas, or twists, or expansion of the original project are going to cost you hours, so you need to be able to charge the client for those changes through what is termed a Change Control Process. I recommend being cautious about offering project fees until you acquire some experience in the market, and are comfortable working in the project environment.

Pay For Performance

Some clients offer project consultants a share of future revenue, profits or commissions. This is called Pay For Performance. Others offer the consultant a commission, or fee, based on the results of the consultant’s work.

Consulting fees based on performance pose several risks. For example, 1) the company’s performance in other departments or business sectors may negatively affect the area in which you are measured; 2) It may take months to see the results of the work, meaning that the consultant will not see any revenue for an extended period; 3) The company may not fully cooperate in implementing all of your recommendations, compromising their ability to reach the potential you projected.

Most importantly, in a Pay for Performance relationship you shift the focus from high quality planning to essentially becoming a partner by sharing in the client’s risk. It is very easy to lose objectivity. For your own protection, seek a base rate for your work, and then add on the performance pay or share of ownership

Summary

Setting your consulting fee may at first seem a daunting task. However, once you’ve worked through the simple process above, you’ll have confidence in knowing that your rates reflect your real cost of doing business and can provide you with the profitability you need to succeed. Revise your rates as needed, taking into account your experience, changes in the economy, client feedback, and your competitors’ current marketing strategies and initiatives.

Larry E Vaughn is an Entrepreneurial Consultant based in Austin TX, with over 20 years experience in operating a variety of consulting and marketing businesses. Larry is also founder of the daily internet based The Self Employment Journal, available free at http://paper.li/levaughn.

Growth Through Business Networking February 3, 2008

Posted by larryvaughn in Consulting, Technical Writing.
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As I have stated many times in my online Entrepreneurial webinars, successful business networking can lead to new clients and new partnerships by expanding who knows you and knows about your business idea. You have to be visible in the business community for business networking to work.

You have to get out there and actually connect with people. Business networking creates a pool of contacts from which you can draw leads, referrals, ideas, and information for your job search. You have to find the people you want to connect with and develop a plan for getting in front of them.

“It’s not just what you know or who you know, it’s also how well they know your skills and interests that counts when you are networking,” says Herb Watchinski, owner of Sirius International, Inc. and professional Career Center Consultant in Columbia, Missouri. “They have to know you well enough for you to come to mind when a manager describes the position they are trying to fill, and asks, “Do you know anyone good?” That is when the “work” part of the word networking pays off,” Watchinski said.

It is said that up to 80% of jobs are never advertised. They are filled when someone says, “You know who would be good at that?” And, the referral is made. It is a popularly held belief among career consultants that networking has always been the most effective way to find that new position you’re seeking.

Typically, less than 20% of jobs are filled through a combination of newspaper, search firms, and Internet. 80% percent are filled through networking referrals, and around 60% of executive vacancies are filled through networking. Most jobs are filled when a manager asks associates or peers if they know anyone good.

Initially, some of my business clients think business networking is just about mailing out brochures or circulating around a meeting room and handing out business cards, but it is really about building personal relationships over time. Today, who you know is just as important as what you know when that question is asked. You want your contacts to know about your goods and services so when someone asks, “Do you know anyone that would be good?” you come to mind.

Business networking and career networking are becoming so similar they are merging into what is increasingly being called social networking. Good business networking starts with networking socially through groups and organizations ranging from local service organizations like Rotary, Kiwanis and Lions Clubs to professional and trade associations. Chambers of Commerce and Merchants Associations offer venues where business people from throughout your community gather to promote the common good.

Churches often sponsor networking clubs for those in their neighborhood who are in job transition and networking groups are springing up in various specialty fields. But, the World Wide Web is the hottest new place to cultivate business relationships.

“Online networking is a phenomenon that really has just started to reach its stride,” Watchinski said. “Business networking services like Ryze.com, Ecademy.com, and LinkedIn.com let active networkers connect with others in ways not possible before the web. Netshare.com provides executives and professionals at the $100K level with networking opportunities, and a community of peers for the exchange of strategic information. Executives, of course, also have to network into headhunters and executive search firms. Your eNetwork can literally extend around the world, and can include a million or more contacts at your third level.”

Visualizing the Network

To visualize a network, think of the outline of a target, with you located on the bulls eye. In the first ring around the bulls eye are the people you already know through work, church, civic or social organizations, and your family members. These are called your primary contacts. Typically, there are 300 people in your primary contact ring.

You may not, at first, think you know 300 people, but keep in mind; this includes people you only know by first name, who are in your diverse social network. It also includes your doctor, dentist, attorney, accountant, and all other professionals with whom you interface. So, it isn’t as hard to come up with 300 primary contacts as you may have at first thought.

Now, if all 300 of those people each know 300 people the ring around them contains at least 90,000 Secondary Contacts for you to meet! The ring around them would contain an amazing 27,000,000! There are over eight billion in the fourth ring, and since that is much more than the population of the USA, you have worldwide contacts within reach. Fortunately, most referral jobs are located in the ring containing the 90,000, and you usually don’t have to network beyond that level.

There are frequent situations, however, where you will meet with one of the Secondary Contacts, and they say, “You know, one of my associates was mentioning to me the other day they were looking for someone to specialize in an area I think you would really fit into well. Let’s walk down to her desk to see if she is in.” Boom! All of a sudden you are in an interview!

Establishing Credibility

“Because networking is about building and maintaining relationships, credibility is a key element,” Watchinski said. New contacts won’t necessarily start driving business your way or give you a referral until they know you better. Referrals aren’t given easily today. You have to earn respect. If you don’t take the time to establish credibility, you’re not going to get that referral you might desperately need. People have to get to respect you, feel confident that you will consistently deliver quality.

Think of it this way,” he continued, “Referrals are very powerful. They will open doors for you. However, when I refer you, I am putting my own reputation on the line. If you do a good job, my Primary Contact that hired you will be pleased. But, if you do a poor job, that reflects badly on me and my judgment. That’s why you have to earn the right to be referred.”

Helping others is one sure-fire way to establish credibility. It really comes down to being willing and open to helping people. Look for ways to expand your network, and when you connect with people give them something useful, such as information, ideas, and contacts. That’s the best way to build credibility, especially if you give it freely without any strings attached. The more you give away the more you become an important contact in others’ networks.

People will come to you because you have the connections they seek. Networking is more about cultivating relationships, and is all about give and take and willingly helping people. If you would like to get your eNetworking started, visit my LinkedIn profile, and request to join the network at http://www.linkedin.com/in/larryevaughn.

In closing, there is a word of caution about eNetworking I feel compelled to share. With identity theft on the rise, we each have to be very cautious about the personal information we enter into online databases. Ask yourself, “Why does this website need this information?” If you can’t think of any reason, there may not be one. Be particularly cautious about information that can be reverse-looked-up as a step to stealing your identity, such as your mailing address and home telephone number.

There are eNetworking websites that provide adequate protection from hackers, but I would always recommend erring on the side of caution. I personally have avoided joining online eNetworking communities that require my mailing address to open an account, but do all their communication by email. What value does that mailing address have to them other than something they can sell to marketers? And, who needs more junk mail? Also, that database just might become an attractive target for hackers working for identity thieves.

About this Blog January 13, 2008

Posted by larryvaughn in Consulting.
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Larry E Vaughn is an experienced independent Writer/Producer of training videos, computer based training, multimedia presentations for multi-projector slide shows, and CD/DVD release. Clients have included ITT International, Eli Lilly & Company, JRL Studios, Allison Division-General Motors, Farm Bureau, L.S. Ayres, McDonald’s Restaurants, Southwestern Bell Telephone Company and United Airlines. Examples of these projects can be found in the links below.

Script writing experience gained from his radio and television background, combined with unique skills in interpreting instructional design requirements for an adult audience, led to the development of numerous successful industrial training videos, sales training, and task training. These materials have been used widely throughout North America to assist clients train new-hires and experienced personnel. Case studies of several of the projects are linked below.

As Executive Producer for a large film/videotape production company, responsibilities included: Develop client/server business applications delivered by remote multimedia kiosk; Coordination of designers, programmers and producers; Design multimedia projects; Script development; Client interaction; Management of multiple concurrent projects; CD-ROM and work-station training; Write and produce video projects: Broadcast commercials; Corporate sales & marketing; Public relations; Multi-projector slide shows.

Led design team in developing software for interactive retail kiosk for Hon Office Furniture; Designed and produced interactive multi-screen health lesson material grades K-12 for Ruth Lilly Center for Health Education;
Created design document and architecture for medical technician re-certification software for St. Vincent Health Center (Burdick EKG Machine); Led design team in developing software for retail interactive kiosk for Huffy Bicycle Company; Designed and produced 100+ units of computer based training for United Airlines’ Indianapolis Repair Hub.

Other clients have included Farm Bureau Insurance, College Life Insurance, McDonald’s Restaurants, Southwestern Bell Telephone Company, Missouri Heritage Trust. Managed in-house advertising agency for Association of Missouri Electric Cooperatives.

To view case studies of these projects, click here.

Request a confidential quote for your project; email detailed information on your project along with deadlines and other appropriate details.

Case Studies January 8, 2008

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This page contains information on eighteen case studies of Larry E Vaughn productions ranging from computer based training, television commercials, point-of-purchase videos, and multi-projector slide shows used for marketing and annual meetings.

Case Study #1- Enterprise Virtual Team

Challenge: CTG, Inc. recognized the potential of the web integration opportunity that existed with their current main frame clients, for whom they traditionally had supplied staff augmentation on a contractual basis. They knew that many of their 6,000 employees had provided a variety of web enabled services for their clients in a one-off project basis, but didn’t know what skills were available, or the services that might be available to take to market.

Solution: Given responsibility for identifying the web skills available in the present workforce, and unifying them into a talent pool from which service offerings might be identified, I initiated a Web Technologies Virtual Team. Using the input of Regional Managing Directors and their staffs to identify web projects which had been produced within their territories, persons with web skills were identified, and assigned to the Virtual Team.

This initiative organized Web/EDI/E-Commerce/E-Business/Internet Security into an enterprise-wide Virtual Team. The purpose of this initiative was to cultivate web experienced employees in other practices within CTG, and those with an interest in learning, to develop knowledge transfer through monthly conference calls.

Results: This initiative improved communication links between Virtual Team members and improved CTG’s ability to respond to engagement opportunities. In the course of three months, the available skills were categorized into five primary disciplines, and appropriate individuals assigned to Virtual Teams organized by categories. Subsequent communication between these individuals identified the skills available to CTG for assignment, and improved CTG’s ability to go to market with web integration products.

Case Study #2 – CTG-Strategic Marketing Core Team

Challenge: CTG desired to enter the e-Business/e-Commerce development market, taking their mainframe-staff augmentation orientation into an additional line of business. Largely unfamiliar with web enabled technologies, and without a known base of web developers, CTG sought to identify the skills available on staff, and the services they might offer.

Solution: A core team of planners was created from directors, senior consultants, and team leaders to identify the skills available on staff, and the service offerings which might be developed to take to market. The team was responsible for conducting research, forging partnership agreements, developing business plans, cost models and budgets.

Results: CTG accomplished its objective of identifying its service offerings, and reorganized its business lines, competency groups and business philosophy from Flex Staffing to Managed Services, to include web integration, web development and deployment, steady state management, and hosting services. In order to permit maximum flexibility in responding to market forces, appropriate employees were transferred, and the web development business was spun off into a separate business unit.

Case Study #3 – CTG – Project Management

CTG Strategic Planning Team – Active on numerous Computer Task Group, Inc. (CTG.com) committees addressing issues such as redesign of CTG’s public and intranet Web sites, retooling courseware for legacy programmers, training for Graduates (new hires), marketing support materials. Larry was a pivotal player on the Strategic Planning Team, completing a redefinition of team goals through 2002.

Certified Project Manager in the Platinum Process Client/Server Methodology – Successful utilization of CTG distributed web project development team members working from their homes or offices to develop projects, while reducing the development costs of a traditional brick and mortar development center operation. This development process not only reduced costs, but enabled team members to work on multiple projects simultaneously.

IP Solutions – An Internet brochure web site for CTG which detailed e-commerce and e-business services available to the customer, partner relationships, etc. The site was developed in HTML, with Flash and Visual Basic navigation menu systems, CGI search engine, compressed audio and video, and Flash animation. Served as Project Manager, leading a distributed development team of four developers, programmers, working on development via a staging server, and communicating daily via Internet chats and instant messaging.

CTG Internet and Intranet – Primary architect for redesign of public web site and international intranet service, using Novell Groupwise. With 55 offices, 6 regions, and numerous vertical industry groups, project information was available within depositories on the intranet, but were hidden in information silos. The solution architecture recommended was a Plum Tree corporate portal, using two NT servers; one installed with a web server to host the portal, and the other a job server to process new information from data sources and applications.

Lone Star Steel - Internet and Intranet – Lone Star Steel has seven factories using a variety of main frame technologies. These factories were linked by dedicated T1 leased lines, and were able to share only limited types of information. A Virtual Private Network was proposed as the solution to their growing need to communicate, with appropriate middleware developed to enable an increased level of data transfer between locations. The VPN also enabled additional capabilities which reduced overall operating expense, and generated an excellent return on investment.

Case Study #4 – E-Commerce Web Site

Challenge: The Asher Walton House Bed and Breakfast wanted an easy to navigate web site which offered the virtual visitor to see the beauty of the facility, make reservations, and purchase amenities on line. The site needed to be easy for the owner to maintain once it reached a steady state, with the ability to block out dates rooms were booked through means other than the web site.

Solution: An attractive 800×600 HTML home page was developed, using Javascript mouseovers, which gives the visitor two means of navigating through the various information repositories on the site, including history of the Walton House, travel directions, on line reservations, amenities available, credit card purchase system, and a virtual tour of the premises. The virtual tour permits the visitor to enter each of the main rooms, and turn to look at each of the four walls, viewing the decor, and reading a text message describing items in the view. An on line calendar/reservation system was incorporated into the site, which offers simple maintenance of available room dates, rates, amenities, etc. for the innkeeper. The system prints an e-mail for the innkeeper advising that a reservation has been made, and lists all details entered by the user. An autoresponder notifies the user that their reservation has been made and confirmed.

Results: The site was very effective, posting numerous reservations in its first few months. More amenities have been sold to those making on line reservations than to those who make reservations through other means. Guest book comments regarding the virtual tour were very complimentary.

Case Study #5 – Web Site: Membership Appeal

Challenge: The Whitewater Valley Railroad is a historical organization which runs antique railroad equipment on 17 miles of track. Traditionally, the railroad utilized a steam engine to pull their passenger excursions. Since replacing their steam engine with more modern diesel locomotives, they have experienced a reduction in passenger traffic, and in new members joining the railroad. Operating as a volunteer organization, new members are key to their operation.

Solution: An HTML web site was developed for the railroad which gives detailed information about their operation, accepts reservations via e-mail, provides a discussion board for their members, and offers the opportunity for interested parties to register for free training as a railroader. To attract the interest of visitors, the site contains a large repository of the railroad’s equipment roster, photos, and descriptions.

Results: In its first few months of operation the web site generated large numbers of on line passenger reservations, private charters, and requests for additional information. During the most recent training class it was determined that 11 of the 22 new students learned of the railroad from the web site. Plans are currently underway to expand the web site to provide additional services such as an on line version of the monthly newsletter, chat area for members, and an on line version of the railroad’s gift shop.

Case Study #6 – Motivational Presentation; Mixed Media

Challenge: ITT International proposed to introduce a new marketing strategy for the coming year, which was expected to derive considerable resistance from long term employees. The new strategy was conceived to address rapid changes in ITT’s market, and meant a new marketing methodology which could initially adversely impact the income of the sales and marketing team. A negative reaction to the new strategy could result in loss of vast experience vested in the sales and marketing team. Retention of these team members, and their enthusiastic support, was essential to success of the new marketing strategy.

Solution: A three-day theme meeting was conducted in which the attendees were treated with the respect and courtesy due them, including custom airport transportation, arrival gifts in each guest’s room, extensive spouse activities, recreational and social events, and numerous opportunities for peer meetings. Every effort was made to make the attendees feel appreciated and an important component of ITT International.

Three customized mixed-media presentations were specially produced for the meeting. The first presentation introduced the theme of the meeting, “Meeting the Challenge,” during the opening session. The presentation format was large screen, covering the entire width of the theater, and incorporated a fifteen projector slide show with video inserts, dry ice for, surround sound, and a laser light sequence. The presentation style was celebratory and motivational, with upbeat music, and a collection of slides and video clips acquired on the day of arrival, with the main thematic material.

The second mixed-media presentation was a fifteen-slide projector program which followed the “Challenge” theme, but addressed the issue of how ITT was responding to market change through a restructuring of their strategy. This program was presented during the banquet on the second evening, and was coordinated with table and room decorations. As part of this program, several of the top producing individuals and teams were recognized, brought to the stage, and awarded a nice gift.

The third mixed-media presentation was an integral part of the closing session, and incorporated photos and video acquired during business and social sessions the first and second days of the meeting. The theme was team work and individual achievement, and was accompanied by custom three-ring notebook binders containing comprehensive marketing and collateral materials to assist the sales and marketing personnel address the change in strategy with their clients and prospects, and to achieve their sales objectives in the coming months.

Results: ITT responded to the changing market conditions in a proactive manner, preparing in great detail the marketing, collateral, sales support, and media release information well in advance of announcing the change to their sales and marketing force. This preparation combined with an outstanding 3-day announcement meeting helped the attendees accept the strategy change, and leave the meeting knowing that they were an important part of the company’s implementation strategy. Over the next several months ITT exceeded its sales projections, and experienced below normal attrition levels. The meeting format has since been subsequently successfully employed by ITT.

Case Study #7 – Customer Education: Video/Collateral/Direct Mail

Challenge: Eli Lilly Company’s Qualicaps capsule manufacturing business was expanding to meet market demand. Qualicaps relied on independent Field Representatives to market their capsules to pharmaceutical and medical manufacturing companies throughout the free world. To meet growing demand, Qualicaps was purchasing a capsule manufacturing competitor in Puerto Rico. This company had a well established client base for their distinctive style capsules, which was a client base Eli Lilly wanted to retain. Since the equipment to manufacture these capsules has a finite life span, Eli Lilly was faced with the cost of continually replacing the existing equipment, or transition customers to the more ubiquitous style manufactured by Qualicaps. The potential of this market represented millions of dollars in potential income for Qualicaps.

A decision was made to continue the production of the newly acquired company’s capsules, while establishing a parallel Qualicaps manufacturing line, and to transition the established client base to Qualicaps capsules. Clients would have to retool their production facilities to use a different style capsule, which could mean hundreds of thousands of dollars in capital investment. Field Representatives would have to be trained in a new dual marketing role, and taught how to address these issues with the newly acquired company’s client base.

Solution: Eli Lilly agreed that controlling the Field Representative’s interaction with clients was going to be necessary to make the marketing transition successful. Since the Field Representatives were a mobile force, traveling by private and public transportation, a compact 8mm videoplayer solution was employed. A carefully structured series of video productions was designed, each for a specific segment of the market. One was for use by the Field Representative during an initial presentation. Another was designed as a leave-behind for the prospect. A third was targeted to the mass-mail market, and was accompanied by appropriate collateral material, including a custom packaged oversize fortune cookie, with appropriate message, announcing the new campaign. The fortune cookies were mailed to each of the newly acquired clients, with a message specific to them, and another version was shipped to the Field Representatives.

A series of seminars announcing the new campaign were produced, with a variety of target groups: new employees, new clients, existing manufacturing employees, Field Representatives, marketing support staffs, and various management groups.

Results: The Field Representatives experienced excellent reception when calling on the new client base, and had very little resistance getting the opportunity to play the videotape for appropriate one-on-one audiences. Successful transition of nearly 72% of the existing client base occurred over the ensuing four years, with most of the client losses being attributed to business failures. Only a handful of the clients made a change to Qualicaps’ competitors.

Case Study #8 – Market Positioning: Promotion/Direct Mail

Challenge: Allison Division-General Motors manufactures the 250 hp aircraft and marine turbine engines which had enjoyed wide acceptance, particularly in the aircraft manufacturing and refurbishing industries. With the advent of the competitive small jet engine, however, new sales of the 250 turbine engine were waning, as aircraft manufacturers focused on introducing new jet powered models. GM wanted a tool to renew the manufacturer’s interest in the long proven 250 engine, and to recapture a major segment of the new aircraft engine market.

Solution: GM agreed that aircraft manufacturers are airplane buffs, and that the most important aspect of their business was safety and reliability of their aircraft. They also agreed that the power and ambient noise level of the Allison 250 turbine could not match the new jet engines, while the maintenance costs, historical reliability and availability of repair facilities were superior. A plan was put into place to conduct a research study in Allison Division’s archives for success stories relating to the safety and durability of the Allison 250 engine. This study resulted in an amazing number of reports and comments from military, airline and private owner sources.

A 15 minute videotape production was created, addressing the historical significance of the wide variety of aircraft that, coincidentally, used the Allison 250 turbine engine. Ranging from military and civilian helicopters, airliners, cargo liners, and private owner aircraft, the television production became an aircraft lovers cornucopia of rare photographs, film and video footage, and stories of the many times these aircraft historically performed well beyond the norm. It was only at the conclusion of the presentation that the viewer was reminded that all of the aircraft shown used the Allison 250 engine.

Results: Allison Division was overwhelmed with requests for copies of the videotape, and immediately produced an entire marketing collateral packet to accompany the gratis shipment of the custom packaged videotapes. The aircraft manufacturing market place was subtly reminded of the reliability and ubiquity of the Allison 250 engine. New commitments were received for employment of the Allison 250 for future aircraft models, and an entire line of collateral materials has been developed over the years celebrating the historical aircraft which employed the engine.

Case Study #9 – Market Positioning: Advertising/Direct Mail

Challenge: Motorola Communications was experiencing erosion of their two-way radio communications market, due to the proliferation of cellular telephone service. Motorola wanted to position their products against the more expensive cellular telephones in the public service and craftsman markets, to recapture lost or postponed sales, while avoiding positioning themselves in a manner that would prevent their own entry into the cellular market.

Solution: Motorola Communications agreed that cellular service was here to stay, but that two-way radio service had its own niche which could be expanded within certain market segments. It was decided to produce a television documentary which explored the historical significance of two-way radio communications, and reaffirmed the economical cost of operation of these systems over their lifetime. Used as a marketing tool, the documentary was direct mailed to clients and prospects, along with a supplemental information sheet that compared the costs of two-way radio to cellular.

The documentary was shot on videotape in numerous locations throughout the Midwest, using dozens of actors, antique automobiles, police and fire departments, props from the Motorola Museum and private collections, and file footage from military archives. Thirty minutes in length, the documentary began with the first transmission by Marconi, and continued through the introduction of automobile radios, two-radio communication for public safety, the military handie-talkie, and concluded with scenes depicting the critical role of two-way radio communications in situations where cellular telephones would not be adequate or appropriate.

Results: The documentary was widely employed as a direct mail promotional item, a leave-behind by field representatives, and as a filler program for cable television systems. Copies of the videotape were distributed to many public school system libraries throughout the United States. A shorter revision of the documentary was created within a few weeks after the documentary’s release, to fulfill demands from the field sales force for a sales tool that could be presented one-on-one with prospective clients. The documentary received an independent production-industry award for excellence, and was attributed with achieving great success in improved sales within the public safety and commercial segments of the communications market.

Case Study #10 – Market Positioning; Computer Based Training

Challenge: Hon Office Furniture was experiencing difficulty in maintaining their extensive product catalogs in their thousands of retail outlets. Although they stressed timely distribution of sales collateral material to their outlets, they found that the material often didn’t get placed in the catalog, and many clerks on the sales floor were unaware of the revisions when presenting Hon’s products to prospects. This often led to a purchase of a competitor’s product, which was perceived to be more modern or expansive in options. Although the retail catalog was an excellent sales tool, if it was not maintained in a current fashion, it was often perceived as being out of date. Hon needed a new way to present their product options to the shopper.

Solution: Working in conjunction with Office Depot, one of Hon’s largest retail outlets, a plan was developed to produce an interactive computer-based retail kiosk which the shopper could utilize to select products, view color and fabric options, and then place the products into a scale room, to see how the new purchases would fit into the space. The project was developed on IBM’s Digital Video Integration platform, and used an automated modem to receive periodic video updates to products. Thus, the shopper was always looking at the most up to date product line from Hon.

Results: This system was adopted by Office Depot, and now incorporates many of their product lines, including Hon. The work stations are now Web based, and updates are downloaded from scheduled satellite feeds from corporate headquarters.

Case Study #11 – Education: Multiplexed Video

Challenge: The Ruth Lilly Center for Health Education provides classes for school children ages 6-18, delivering more depth and detail than can be effectively delivered in the traditional classroom. School districts in their service area utilize the facility on a field-trip basis, paying a small fee per student, selecting classes from a variety of subjects available. Most of the educational material had been delivered via multi-projector slide shows with synchronized sound tracks. Burned out bulbs, slide trays out of sequence, and unfamiliarity with multi-projector system operation often prevented teachers from being able to present a class. The slide show format was viewed as outmoded, and much of the material outdated. A more reliable solution was desired, as well as a means of presenting the material in a more contemporary format.

Solution: IBM’s Digital Video Integration technology was coupled with rear-view LCD projectors to present action video and graphical material on three viewing surfaces simultaneously, and stereo sound brought the material to the student in a manner consistent with big theater presentations. Each classroom was equipped with a video server, a graphics server, a program sequencer, and the Center’s existing slide projectors.

Each lesson was revised and updated prior to production. Upon approval of the production script, custom produced video, graphics and sound were created to develop an engaging theater style production designed for the appropriate age group. Involving dozens of locations, countless set designs, and approximately one hundred actors, the course material required almost seven months of production. Lesson material was deployed as soon as it was produced, while other material remained in the writing or production process.

Results: The acceptance of the material produced was widely acclaimed, and was featured in a front page article of the local newspaper. Schools were unanimous in their support of the improved material, which resulted in a surge of participation by school districts. The successful deployment of this new technology became the model for other health centers around the country to immolate, and continues today as a Web enabled teaching model.

Case Study #12 – Employee Education: Computer Based Training

Challenge: St Vincent Hospital’s nursing staff and technicians trained in administration of electrocardiograms are required to recertify on the EKG machine each 90 days. Testing includes a written examination and demonstration of the testing procedure on a patient. Since the staff of trained operators are constantly responding to emergencies while on duty, the recertification process presented a very difficult challenge for the training department. It was common practice to allow technicians to operate well beyond the 90 days allowed before testing. St. Vincent had recently been inspected by the state health department, and found to be deficient in training currency for their operators. A concerted effort to bring their staff into compliance required significant overtime pay. A better means of training was required.

Solution: St. Vincent agreed that the written examination could be administered through alternative means, and that this was the most difficult portion of the recertification process to achieve, since testing had to be done in a monitored environment, usually a classroom. A proposal to place a large battery of randomized questions on a computer terminal was accepted. The technician could log into the system using their employee number, initiate the test, receive a randomized list of questions, and could respond to the questions through a multiple choice array. The test was then scored, and submitted through e-mail to the training department. If a technician was called away during the test, the test could be bookmarked and completed at a later time. If a test question was twice answered erroneously, the computer opened a help window in which text and/or video instruction was displayed. The subject question was then offered again for a correct input.

Results: Recertification of technicians and operators was achieved much more easily during a normal working shift, eliminating the requirement for periodic classroom instruction. The entire staff was quickly brought into compliance with recertification requirements on written tests, and the training department’s tasks were greatly reduced.

Case Study #13 – Point of Purchase Kiosk: E-Commerce

Challenge: Huffy Bicycle produces a large number of bicycles for various market segments. Few retailers could devote enough floor space to display the full Huffy Bicycle line of products. Often, floor space was divided among multiple bicycle manufacturers, meaning that shoppers were not often able to compare Huffy’s model to a competitor’s which might on display. Huffy needed a way to present their entire line to shoppers, without requiring retailers to stock and refill large amounts of collateral material.

Solution: In conjunction with K-Mart, one of Huffy’s largest retail outlets, a prototype retail kiosk was developed and tested on the retail floor. The initial software/hardware used for the prototype comprised IBM’s Digital Video Integration package, a custom retail kiosk, a touch screen for client interaction, and a cell phone to place the orders over night. The software presented full color photographs of each model bicycle in children’s, lady’s, men’s and mountain bicycles. After the model in which the customer was interested was selected and displayed on the screen, the preferred color could be selected. If the shopper was interested in more information, a touch of the screen would bring up an action video clip of the bicycle in use, with an appropriate narration of the features and benefits of that model. If the model was not in stock, the shopper could place an order through the kiosk, and given priority order status by K-Mart’s purchasing department. The bicycle was usually available for pick up within four to five days.

Results: The results of the month long retail floor test of the kiosk demonstrated that shoppers were willing to wait for delivery of their bicycle in order to get just the model and color they desired. The test also demonstrated that K-Mart could expand their sales of bicycles by making a wider selection of models available, and the kiosk eliminated the requirement for more dedicated floor space in order to display additional models. This system experienced wide acceptance, and can be found in a Web enabled model in many retail outlets today.

Case Study #14 – Training Design: Computer Based Training

Challenge: United Airlines established an international repair hub for its 737 aircraft at a Midwest location where no repair facility had been located previously. Employees familiar with 737 maintenance were being transferred to the new city, but the bulk of employees were new hires with no experience with this model aircraft. The processes being employed for maintenance included newly designed infrastructure and support equipment, which was innovative and unique to this facility. United needed to train their entire team on all facets of the new hub, from building maintenance and support systems, to aircraft maintenance procedures.

Solution: United recognized that the best instruction available for many of the systems being installed in the new building were the manufacturer’s representatives who were on site during installation of their products and systems. Each supplier was required to provide detailed instruction on each component of the system installed, which would be captured on video tape. As each phase of the construction was completed, and instructional material grouped into categories targeted at specific maintenance groups, the video was transferred to CD, and placed in the training library. Over one thousand subjects were covered, and distributed on nearly 400 CDs available for viewing in the training room. Instruction was delivered to employee groups and new hires as needed through this system.

Results: This training system was very effective in delivering detailed training not usually available to support the manuals and maintenance manuals provided by manufacturers after the initial training session. The information contained in the volume of work continues to be a source of reference for infrastructure maintenance personnel, and continues to be effective in training newly hired technicians.

Case Study #15 – Consumer Motivation; Media Production

Challenge: During times of extended extreme heat the ability of electricity producers to provide sufficient power to prevent brown outs is tested to the ultimate. Operating costs for the electrical companies is highest when operating at full capacity, and requires considerable overtime expenditures for maintenance personnel to be in a constant state of readiness. The Association of Missouri Electric Cooperatives is a trade association representing the regional rural electric cooperatives in the State of Missouri. Rather than being constantly in a defensive position when temperatures were high, the Association sought a way to be proactive in reducing the demands on their member’s systems.

Solution: The Association agreed that the best method of alerting members of the rural electric cooperatives was through announcements on radio and television. The cost of such a concept, however, was seen as prohibitive. A plan was developed to create an in-house advertising agency to place advertising with the media, and recoup the ad agency discounts available through each placement. the agency was also empowered to develop 4 thirteen-week schedules annually with each radio and television station throughout the state, to gain the discounts available for bulk advertising.

In order to receive as much exposure for the Association as possible without the expenditure of huge advertising budgets, a plan was developed to educate electrical consumers through press releases and a carefully planned series of newspaper and statewide magazine advertisements. These ads explained the system that was being devised, and informed the public that Alert announcements would be aired on their local radio and television stations during peak usage times. When these announcements were aired, consumers were asked to reduce their consumption, to help reduce the annualized cost of electricity.

Concurrently, television stations in each market throughout the state were contacted about a plan to gain television exposure at minimal costs. The plan was to form a planning group comprised of a representative from each television station to determine the public service programming they were required to address as part of their licensing agreement. Each station was required to conduct quarterly studies in their markets to ascertain issues that the public felt needed to be addressed by the media.

By determining which issues were common to all markets, an arrangement was made to produce a single half hour program addressing each of the issues, which could be aired in every television market. This plan saved the television stations the cost of producing the programs themselves, and met the requirements of their license agreement. The programs were produced at the expense of the Association, and provided to the station in exchange for Alert announcements to be run upon demand.

Results: The alert system, named Peak Alert, was aired successfully in all Missouri markets, and in each instance had a measurable impact on the peak loads being experienced by the electric utilities. The cost of the program was far outweighed by the savings, and was continued in operation for four seasons. The Peak Alert program gained national media recognition and received the Missouri Broadcasting Association’s annual Award of Excellence. The half hour television programs were widely lauded, and received numerous awards and honorable mentions for production excellence. The Association was awarded the George Washington Honor Medal by the American Freedom Foundation for its sponsorship.

Case Study #16 – Railroad Engineer Training Program

Challenge: Consolidated Grain Company’s facility in Jeffersonville, Indiana operates a grain and fertilizer handling business that includes river barge traffic and railroad traffic. The railroad traffic had traditionally been handled by having the incoming revenue cars dropped off in their yard facility by the delivering railroad. Elevator employees would then take one of the facility’s two locomotives to the yard, couple to the required string of cars, and take them to the elevator for loading or unloading.

Over the years, the area around Consolidated Grain Company became formalized as the Clarksville Maritime Facility, an industrial complex which included additional businesses. New sidings of railroad track were laid to the new industries, all leading to the switching yard operated by Consolidated Grain. Elevator employees from Consolidated Grain began handling delivery of loaded or empty cars to and from their switching yard and the industries on an on-call basis. In time, Consolidated Grain formed a short line railroad company, MGRI, and began charging the industries railroad tariff rates for pick up and delivery of their cars.

In 1995 the MGRI railroad operation, by federal law, had to meet all operating standards required by the Federal Transportation Act, pertaining to certification of all individuals who operated railroad locomotive. The certification of the engineer roster had to be achieved in a short period of time to continue operation, or the railroad, and therefore Consolidated Grain Company, would be subject to fines levied by the Federal Railroad Administration.

Solution: In July of 1995 Larry Vaughn was selected to develop and administer a three-year training program for Consolidated Grain Company, to transfer the necessary knowledge to their engineers during an intense classroom and field exercise training program. The initial six-month training period was required to design and conduct the classroom sessions, conduct field training in federal safety standards, and to develop proper locomotive and train handling techniques. During the first quarter of 1996, the entire staff of engineers, except one person, passed the written knowledge examination. Of those who successfully completed the classroom training, all performed satisfactorily on their operating field tests, and received federal licenses as locomotive engineers.

For the remaining two years, the engineers received periodic observations of their field operating practices, and annual classroom sessions dealing with federally mandated topics. Simultaneously, one of the senior staff members also received training as a Supervisor of Locomotive Engineers, and completed the training during the third year of the training program.

Results: MGRI met, and in some cases, exceeded the federally mandated requirements for the education and training of their engineers, and continued to improve their operation to such a level that they became a model operation for other short line railroads to implement in their operations. Each MGRI engineer continued to increase his knowledge of proper operating practices, and improved in train handling skills, throughout the three year training program. One member of their engineer staff received additional classroom and field training in the federally mandated requirements for a Supervisor of Locomotive Engineers, and assumed responsibility for management of the Engineer Training Program in the third year of its implementation. The railroad’s program became a model program, and has been adopted by similar operations throughout the United States.

Case Study #17 – Marketing & Training Using Mixed Media

Case Study #18 – Customer Education: Video/Collateral/Direct Mail

Solution: Eli Lilly agreed that controlling the Field Representative’s interaction with clients was going to be necessary to make the marketing transition successful. Since the Field Representatives were a mobile force, traveling by private and public transportation, a compact 8mm video player solution was employed. A carefully structured series of video productions was designed, each for a specific segment of the market. One was for use by the Field Representative during an initial presentation. Another was designed as a leave-behind for the prospect. A third was targeted to the mass-mail market, and was accompanied by appropriate collateral material, including a custom packaged oversize fortune cookie, with appropriate message, announcing the new campaign. The fortune cookies were mailed to each of the newly acquired clients, with a message specific to them, and another version was shipped to the Field Representatives.

Business Research Links January 8, 2008

Posted by larryvaughn in Consulting.
1 comment so far

Basic Business Research Methods
Topics include: Planning Your Research, Various Research Methods (including advantages and disadvantages), Selecting Research Methods, Analyzing, Interpreting and Reporting Results, Ethics and Conducting Research, Related Library Links, On-Line Discussion Groups.

Brint
If Brint doesn’t have it, then you probably don’t need it.

Comfind
Useful site for finding corporate web sites. Search by company name, business category, product, etc.

Companies Online
To find a particular company’s website, you can search this database by company name, city, state, industry or stock ticker symbol.

SBIR
Department of Defense Small Business Innovation Research (SBIR) Program– $1/2 billion in early-stage R&D funding for small technology companies.

Business.com
The leading business search engine and business directory designed to help its usersfind the companies, products, services, and information they need.

Business Week
Information you need from Business Week and other valuablesources on the Net.

CEO Express
Daily News & Info, Business Research Office Tools & Travel BreaktimeExecuDiva.

Center for Women’s Business Research
The premier source of knowledge about women business owners and their enterprises worldwide. The Center’s mission is to unleash the economic potential of women entrepreneurs by conducting research, sharing information and increasing knowledge about this fast-growing sector of the economy.

CIOBC
The CIO E-Business Research Center examines the current stateand future directions of conducting commerce on the Web.

Company Home Pages
Dogpile

Company Overviews
Hoover’s Online

eBusiness Research Center (eBRC)
Now the pre-eminent center for research in e-business, e-business on demand and adaptive organization.

Entrepreneurial Links
Links to sites that offer help and advice for the entrepreneur.

Great Plains Info
Relevant information and insightful data on economic conditions, in Nebraska, the Great Plains, and the USA as a general service to individuals and businesses in the state.

Go.com
Find corporate websites. Click on the Business subhead, then choose Companies in the websites section. Links to numerous sites to help find corporate pages.

Hoovers
Online database of 50,000 companies. FEE for some of the detailed information.

Jobnet.com
Philadelphia’s Career Site

MSU Business
Current information on the business climate, news, history, political structure, economic landscape, and relevant statistical data for 196 countries.

McMaster Business Research Center (Canada)
E-business Knowledge for a Changing World. McMaster E-commerce Research Center, McMaster University, Hamilton, Ontario, Canada

MIT Center for eBusiness
MIT, Cambridge, Massachusetts

Monster
Research Companies in Monster’s Business Section

National Institutes of Health
Small Business Funding Opportunities

New York SBDC
New York State’s SBDC is often recognized as the premier business assistance program in the state.

National Bureau of Economic Research
Business Cycle Expansions and Contractions from Business Cycle Dating Committee of the National Bureau of Economic Research

NUA Internet surveys & Demographics (Canada)
Comprehensive round up of all internet related news worldwide as well as a mailing list.

Research Magazine
Free subscription to Research Magazine.

Riley Guide
Puts the top business research sources (both print and online) in one easy-to-use place.

State and Local Governments on the Net

Strategis Research Center (Canada)
This web site is designed to encourage small business researchers and policy analysts across Canada to share information on small business research and policy.

UMass Library
Digital business library at University of Massachusetts at Amherst.

Entrepreneurial Research Links

Franchising January 8, 2008

Posted by larryvaughn in Consulting, Technical Writing.
4 comments

The success rate for franchise owned businesses is very high according to the U.S. Department of Commerce. Less than 5 percent of franchised businesses fail, but this level of success doesn’t come easily, and success is not guaranteed. According to the Small Business Administration (SBA), One of the biggest mistakes that you can make is to be in too big a hurry to get into business.

Don’t feel pressured to purchase a franchise that isn’t a good fit for you. You need to conduct a broad study of opportunities to understand what is available, and which franchise is going to be the best business for you to undertake. You need to conduct a Due Diligence process when considering a franchise, just as you would when considering the purchase of an existing business. You will find some guidelines to help you with the process in my article “Buying A Business”.

Personal Assessment

Perhaps your most important step in evaluating a franchise opportunity is examining your own skills, abilities and experience. The ideal franchisee is a creative, outgoing person who is eager to succeed, but not so independent that he or she resents other people’s advice. Are you this type person? Maybe you think so, but haven’t pursued a self-assessment tool to help you see clearly what skills you have as well as those you may lack. There are a number of assessment tools available, and you should avail yourself of at least one of these.

Then, ask yourself how this decision will affect your family. Do they understand the risks and sacrifices required, and will they support your efforts? Beginning a franchise business is a major decision that does not ensure easy success. However, an informed commitment of time, energy and money by you and your family can lead to an exciting and profitable venture.

What Is A Franchise?

A franchise is a legal and commercial relationship between the owner of a trademark, service mark, trade name or advertising symbol and an individual or group seeking the right to use that identification in a business. In its simplest form, a franchiser owns the right to a name or trademark and rents that right to a franchisee. In the more complex Business Format Franchising, a broader and ongoing relationship exists between the two parties. Business format franchises often provide a full range of services, including site selection, financing, marketing plans, training, and a source of supply to products.

As in all major business decisions, however, nothing substitutes for thorough Due Diligence investigation, planning and analysis of your options. The Small Business Administration recommends the questions below to guide your research and cover all the bases.

What Is The business?

Determine whether the business opportunity would be a successful venture on its own, apart from the benefits offered by the franchiser.

· Is the product or service being offered new or established? Does the business require special skills or aptitudes that you may lack? Do you feel strong motivation for producing the product or providing the service?
· Does the product meet a local demand? Is there a proven market?
· Who is the competition?
· If the product requires servicing, who bears the responsibilities covered by warranties and guarantees? The franchisee? The franchiser? If neither, are service options available?
· What kind of reputation does the product or service enjoy?
· Are suppliers available? What reputation do they enjoy?

Who Is the Franchiser?

Visit at the very least one of the firm’s franchises. More would, of course, be better. Ask for a list of all of the firm’s current franchises and make sure that you select the one(s) to visit. At the very least, the franchiser must provide you with the names of 10 franchises in your prospective market area. If you can visit only one franchise operation, avoid those most recommended by the franchiser, but look to those on the list who were not as highly recommended. These may often give you a better picture of a typical operation, and the feedback from the franchisee may be more reflective of the opportunity.

The Discovery process for franchising is much like the process for any business, except that you need to know what you can expect from the franchiser, and what conditions of operation will be required of you. When you make a site visit, discuss franchisee expenses and ask how well the franchiser supports the franchise units. Does the franchiser actively promote and market the products or services of the franchise? This will help you determine the reputation, stability and financial strength of the franchiser.

Here are some additional questions from the SBA that you should ask:
· How long has the franchiser been in the industry? How long has the firm granted franchises?
· How many franchises are there? How many in your area?
· Examine the attitude of the franchiser toward you. Is the firm concerned about your qualifications? Are you being rushed to sign the agreement? Does the firm seem interested in a long term relationship, or does that interest end with the initial fee?
· What is the current financial condition of the franchiser? Check the franchiser’s financial statements in the disclosure document. If the franchisees are paying their upfront fees but not their royalties, this may indicate that franchise units are being sold to investors but that they fail to open or perform too poorly to pay royalties.
· Who are the principal officers, owners and management staff? What is each person’s background? How much experience in franchising do they have? · Compare sales promises with existing documentation. Be certain that the sales presentation is realistic and that major promises are clearly written into the contract. Be alert for exaggerated claims and pressure tactics.
· For newly established franchises, make sure the franchiser has registered the company’s trademark. If not, the company’s name and logo may have to be altered, forcing you to change your market identity after you have established yourself.
· Verify earnings claims and compare them with other business opportunities. Investigate all earnings claims carefully. Earnings claims must (1) be in writing; (2) describe the basis and assumptions for the claim; (3) state the number and percentage of other units whose actual experience equals or exceeds the claim; (4) be accompanied by an offer to show substantiating material for the claim; and (5) include certain cautionary language. Treat this opportunity like any other investment. Does the franchise offer the return you require? If not, you may want to look at a different business.
· What is the legal history of the franchiser? Have any of the executives been involved in criminal or civil actions? Is any litigation pending, particularly involving any restrictions on trade that may affect the franchise?
· Is the franchise a member of the International Franchise Association (IFA)? If the franchise is not a member, find out why. The IFA has a strict code of ethics that must be met before a company can become a member.

What Is The Franchise Package?

Bring all your information and resources together as you examine the contract. Think carefully about the level of independence you will maintain as a franchisee. How comprehensive are the operating controls? Be very clear about the full costs of purchasing the franchise. Involve a franchise attorney, accountant and/or business advisor as you examine the following questions.

· What is the full initial cost? What does it cover?
· Licensing fee?
· Land purchase or lease?
· Building construction or renovation?
· Equipment?
· Training?
· Starting inventory?
· Promotional fees?
· Use of operations manuals?
· What ongoing costs are paid to the franchiser?
· Royalties?
· Ongoing training?
· Cooperative advertising fees?
· Insurance?
· Interest or financing?
· Are you required to purchase supplies from the franchiser or a designated supplier? Are the prices competitive with other suppliers? · What, if any, restrictions apply to competition with other franchises?
· What are the terms covering renewal rights? Reselling the franchise?

What Is the Disclosure Document?

The Federal Trade Commission (FTC) requires sellers of franchises and other business opportunity ventures to provide prospective investors with the information they need to make an informed investment decision. It also requires that all earnings claims be documented, that the information investors receive is complete and accurate and that investors have adequate time to consider and evaluate the disclosures before making any final purchase commitment.

All required information is given to prospective investors in the form of a franchise disclosure document, which must be furnished at least 10 business days before any purchase may occur. This document includes 20 important items of information, such as

· Names, addresses and telephone numbers of other franchisees.
· A fully audited financial statement of the seller.
· The cost required to start and maintain the business.
· The responsibilities you and the seller will share once you buy a franchise.
· Litigation involving the company or its officers, if any.

Information Resources

U.S. Small Business Administration (SBA) – The SBA offers an extensive selection of information on most business management topics, from how to start a business to exporting your products. Much of the information contained in this report is listed in their Small Business Directory library.

Buying A Business January 8, 2008

Posted by larryvaughn in Consulting, Technical Writing.
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Many entrepreneurs today are considering buying an existing business, rather than starting a new business. This approach offers the ability to enter self-employment with an established, on-going business, which offers an existing stream of income. Advertising and marketing for the startup phase has been achieved, and those months of establishing a reasonable cash flow have been accomplished.

The main reason to buy an existing business is the drastic reduction in start-up costs of time, money, and energy. In addition, cash flow may start immediately thanks to existing inventory and receivables. Other benefits include pre-existing customer goodwill and easier financing opportunities, if the business has a positive track record.

In many cases, this can be the most financially sound method of entering the self-employment field. However, there are some important issues you need to address if you are considering purchasing an existing business. The biggest block to buying a small business outright is the initial purchase price.

Because the business concept, customer base, brands, and other fundamental work has already been done, the financial costs of acquiring an existing business is usually greater then starting one from nothing. Other possible disadvantages include hidden problems associated with the business and receivables that are valued at the time of purchase, but later turn out to be non-collectable. Good research is the key to avoiding these problems.

You must do a thorough investigation of the business to make sure you understand ALL facets of the existing owner’s situation. This process of digging down into the operation of the business is called Due Diligence, a process that begins after you’ve done your preliminary investigation and determined that you are sincerely interested in buying the business.

When you’ve made this decision, you will submit to the owner a document called a Letter of Intent, which states that you are going to buy the business if the Due Diligence process goes smoothly, and the results of the process don’t turn up any red flags. At this point in the process the owner(s) should open up the business’s books to you, to let you investigate them thoroughly, looking for any financial problems with the business.

You would be well advised to obtain the services of a professional accountant to help you with this process. In fact, the accountant will usually work alone during this process and supply you with a written final report of the findings, and any recommendations that need to be brought to your attention.

It can be to your advantage to retain an accountant that has an established practice in the community where the business is located. It may also be to your advantage to use an accountant familiar with the industry segment the business is in. An established accountant is going to know a lot about the business community where they practice, and will be able to recognize problems with the business that may be otherwise overlooked.

You can also check online resources such as Bizcomps.com and Business Valuation Services, to get a good idea of what businesses similar to the one you’re investigating commonly sell for in your geographic area. The cost of information at this point is outweighed by future savings.

A significant portion of the asking price for a business is what is called “Blue Sky.” The Blue Sky” is merely an estimate of the income potential of the business over the next few years. This usually represents how much income the current owners might have expected to receive from the business if they had continued to own and operate it.

Blue Sky can range from a few months to a few years worth of income depending on the type business. This is also the portion of the asking price you need to fully understand, as it will also likely be the area of most negotiation. Think of it this way: If you pay three years worth of income as the Blue Sky piece of your purchase price, you will have to make that level of profit for three years to be able to start earning real income from the business.

A well-structured Due Diligence process will include a close look at the cash flow of the business under consideration, the accounts payable, the age of accounts receivable, and a detailed listing of clients and their financial status. There are some obvious factors here: noticeably high accounts payables may indicate an inability to pay the bills. Aged accounts receivable can indicate difficulty on the part of customers to pay their bills.

There has been more than one case where the accountant has been able to identify customers who are in dire financial straits, and may not continue to be customers much longer. This would be extremely valuable information when considering the purchase of a business. There are a number of resources that need to be utilized during this process, including Dun and Bradstreet reports on each of the major customers. These $125 reports will help you get a better understanding of the client or customer base for the business, and may point to the need for further investigation.

While the accountant is checking out all things financial, you should also do Due Diligence on the legal side. You need to discover any liens, judgments or other legal actions against the company. You can often discover this type of information by doing some searching of files at the Recorder’s office at the county courthouse. The Secretary of State will also be able to provide you with any information of legal activity against the company.

It is at this point a small business attorney becomes very important to this process. If the company has passed all the tests, and you are favorably impressed with the results, you need to take one more step. Have your attorney do an investigation of the business. Potential buyers are often surprised by the information an attorney can uncover for you, and it can result in saving you a great deal of money.

Attorneys have access to the workings of the legal system, and during their discovery investigation may turn up information about pending legal actions that a layman could miss. One participant on my Entrepreneurship webinars related a story about a business he had been considering, and during the Due Diligence process, the attorney uncovered a pending lien by the Environment Protection Agency.

It seems the small manufacturing business under consideration had a very well established niche in the marketplace, and would have been a good business to operate. However, the business was operating out of a former gas station, and there were still gas tanks underground. The EPA was going to require that those tanks be removed at an estimated cost of over a million dollars!

Uncovering this kind of information is what Due Diligence is all about, and the process will cost you in reports and fees for the professional support. The savings, however, if you decide to purchase the business can be dramatic. The process normally knocks the top edge off the Blue Sky price, resulting in a fair purchase price, and a much easier transition into owning your own business.

Risk Assessment January 8, 2008

Posted by larryvaughn in Consulting, Technical Writing.
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There are nearly 20 million home-based businesses in the United States. But some 60 percent of them are gambling with the future of their businesses and don’t even know it. According to the Independent Insurance Agents of America Inc. (IIAA), an Alexandria, Virginia-based trade group, these home-based entrepreneurs don’t have nearly enough business insurance coverage.

Many entrepreneurs mistakenly believe they’re covered by their homeowners insurance. However, most homeowners’ policies limit loss of business property to around $2,500, won’t cover losses away from the home, and exclude liability coverage for business-related activity. Consider these ordinary risks:

· A graphic artist can easily have $20,000 in computer equipment and software in the home office. Homeowners insurance usually has limits of about $2,500.
· Sales representatives often take a laptop and cell phone on the road to meet with customers. Homeowners insurance doesn’t cover these when away from the home.
· A client could slip and fall during an appointment at a home-based bookkeeping service. An accident in your home is not covered if related to business use of the home.
· A home-based manufacturer could be held liable if his or her product injured someone. This coverage is not a component of homeowner’s coverage.

Types of Insurance

As a home-based business owner, liability and property damage are two types of insurance you need to investigate. Liability protects you against someone getting injured on your premises or by one of your products, while Property Damage protects against damage to things from computers to carpets. The most protection you can receive will be from a Business Owner’s Policy, although a Home Office Policy may provide enough protection in your situation. If you are won’t have customers coming to your premises for business purposes, a Business Pursuits endorsement on your homeowners policy may be enough. A Business Owner’s Policy (BOP) includes both liability and property damage coverage, and usually covers typical hazards like loss of data, software or income; theft; and general business liability. In many cases, the structure housing your business is also covered, so this might duplicate your homeowners’ coverage. A BOP also provides some off-premises coverage, including liability coverage for products you sell or parts you install. Things like flood protection or insurance for outdoor signs may be optional in some cases. And, be certain that tools such as laptops and other equipment taken to a job site are covered in the policy. This, too, may be an add-on.

A Home Office Policy is a step down from a BOP. This policy combines homeowners and business insurance, eliminating duplicate coverage, such as the structure itself. This is a good choice for a company with no more than a handful of business visitors each week and an investment in quality office equipment. It covers general business liability, lost income and ongoing expenses like payroll for up to one year if the business can’t operate because of damage to your home. Also covered are loss of records, accounts receivable, some off-site business property, fire, theft and personal liability. Many policies don’t cover “options” such as floods or earthquakes, so be sure to ask about these if they are important in your situation.

A Business Pursuits endorsement to your homeowner’s policy provides the least protection, and isn’t recommended for most home-based businesses that have customers on site or costly equipment. However, it may be well suited to your business, so ask about this type protection to see if it is a lower cost fit. Read the fine print on your current homeowners’ policy to find out the restrictions on business property and activity in the home.

Cover Your Assets

Examine your business and your assets to determine your net worth, likelihood of business interruption, and liability “red flags.” When you’ve found a policy that’s within your budget and covers possible losses, review it yearly to make sure it’s still adequate. If your business has employees, you will be required to have workers’ compensation insurance, which covers employees’ injuries on the job. Requirements vary from state to state–check with your state’s employment office to see what’s required.

If you will be operating your business from your home, make sure you have the necessary insurance protection, and take additional steps to protect yourself. Here are some suggestions collected from insurers and risk assessment consultants:

Crime Prevention
· Notify your police agency that you would appreciate regular patrols;
· Install smoke and fire alarms, fire extinguishers, emergency lights, and deadbolt locks on exterior doors;
· Install motion-sensing lights in dark outside areas;
· Keep your office equipment out of view from the street;
· Keep money and important documents in a fireproof safe, or off site;

· Have your electrical circuitry inspected for overloads by a professional;
· Keep driveways, steps and walkways free of ice and debris;
· Remove loose throw rugs from walking paths;
· Do not allow customers to operate any of your equipment;
· Establish safety rules, and enforce them;
· Conduct regular preventive maintenance on all equipment.

Liability prevention:
· Don’t accept work assignments you aren’t qualified to perform or make promises you can’t keep;
· Have an attorney review contracts to avoid assuming someone else’s liability.

Disaster Recovery
· Make clearly labeled backups of important documents and store them at another location off site;
· Develop a disaster recovery plan to help you return to normal operations quickly;
· Test your disaster recovery plan on an ongoing, periodic, basis.

Honestly Assess Your Insurance Needs

Commercial or business insurance offers property and liability coverage, but only to the limits you establish when purchasing your coverage. If you are self-employed, in effect you own your own business and are responsible not only for your own equipment and supplies but also for any damage to your clients and their property. Make sure you acquire adequate coverage for your situation. Rates for this insurance will vary depending on the risks involved in your business.

The Independent Insurance Agents of America Inc. states the primary factors in determining cost of business insurance coverage are: · The likelihood of a loss occurring-The greater the probability a loss will occur can mean a higher rate {e.g., earthquake insurance in California). · The potential size of the claim-If you purchase a large amount of coverage (that is, if the item you are insuring is quite valuable), the chances are there could be a large claim and the premium will need to cover that possibility.

The percentage of loss the insurance company will be required to pay-If you have no deductible, the company will pay 100% on a covered loss. This increases their risk and your premium. To understand how a deductible works, consider the following: If the deductible on your auto insurance is $100, it means you agree to pay this amount first, and your insurance company will pay for damages exceeding this deductible. By increasing your deductible from $100 to $250, or even $500, this decreases the insurance company’ risk, which may mean a savings in your premium.

Other factors can influence premiums, too, such as the volume of lawsuits and the average amount awarded in your state in litigation that could arise from your business practice. In short, your insurance company tries to ascertain how much it needs to accumulate from its insureds to cover all the claims it will potentially receive.

Talk to your local homeowner’s agent, and ask a lot of questions to determine the amount and type of insurance your business needs. If you can’t get satisfactory information, seek out a commercial insurance agent. Independent agents typically will represent half a dozen or more carriers, so be sure to ask for coverage comparisons and rates.

Start your search with this information in hand:

· What inventory items do you have at home?
· How much equipment?
· How much would it cost to replace your inventory and equipment?
· How many customers come to your home office?
· Will you be taking equipment to customer sites?
· What would happen to your business if a disaster forced you out of your home temporarily?

As with so many factors in business, the better you understand what details you must analyze the better you will be able to prepare. Risk assessment is certainly one of those areas that requires your most forthright effort.

eCommerce January 8, 2008

Posted by larryvaughn in Consulting, Technical Writing.
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Today’s entrepreneur has more business opportunities available to him or her than ever before in history. The global economy coupled with the Internet has fueled a tremendous explosion of service-oriented businesses, many of which reside only on the World Wide Web. When considering an online business, there are a number of factors that need to be analyzed. Below is a brief overview of some of these factors compiled from the E-Commerce Article Archive.

Select Your Product or Service

You can find practically everything you can imagine already on the Internet. So, how do you determine the products or service you can offer through your business to make it successful? Once again the answer lies in research. There are a number of site on the web that provide newsletters and articles online to help you find out what the trends are, what product is moving best, and how etailers are achieving sales success. Do a search for “eCommerce Sales Trends.”

Selecting Your Business Website Name

The importance of a website that reflects the type business you operate, and its stability as a reliable source, can’t be overemphasized. Your website name becomes your brand. It is the name by which you will be identified.

The initial step in selecting a name is to determine what you’d like it to be, and then do a search for availability of the name. Find a name that will be a good reflection on your business, design your website and place it on the web through a webhosting company. Within about 24 hours after activation, servers around the world know where to send the visitors requesting your website.

Website Design

Experts say that better website designs attract more visitors and make more sales. Web design consultants or webhosting companies can put together a professional looking, basic, website for a small business for $1,500 to $5,000, and an e-commerce site for about $10,000 to $50,000.

If you do choose to do it yourself, first we’ll assume you’ve got a decent computer and the time to put your business website up for all to see. Usually you can’t do that without amassing an arsenal of Web authoring software. Thankfully, there are companies like Sirius International that specialize in making it easier, and more cost effective to design and deploy a website by providing all the authoring software you need online. This software is included with each eCommerce account and includes over 100 software tools for your use.

Search Engine Placement

A key factor in positioning your website so it will be ranked appropriately is to begin with search-conscious design of each page. You will need to decide what the keywords for your business are going to be, and then use those words strategically in the metadata of your pages. These keywords don’t appear on screen, but are picked up by search engines visiting your site.

The text within the body of your page is very influential, too, in search engine positioning. If your website’s navigation system is consistent with the primary keywords, it will reinforce those keywords when indexed by a search engine. Even the headlines, subheads, links to other documents and the text within paragraphs on your page will influence search engines. Try to keep each of these elements consistent with your primary keywords, and you should consistently get excellent search results.

Copy Writing

One of the most effective secrets of sales and marketing is well known to professional copywriters, who use the techniques to turn a prospect into a buyer. It is a standardized process for reaching into the subconscious of the reader and stimulating the impulse to buy at the emotional level of the mind. I discussed this process in another article called E-Mail Marketing Techniques, because it is a key to successfully writing copy for every sales medium from print to broadcast, and yes, the web, too.

This is a powerful concept, and is often overlooked by e-tailers, particularly those who are just starting out in their business. By being aware of this concept you’ll have a much better chance to be successful with your e-tail store. Understanding that good copywriting is important to your site’s success will help you continuously evaluate the patterns of traffic to your site and keep you focused on what works well and what could work better. As an e-tailer, you have to analyze the effectiveness of every element of your web page design to ensure every element is working for you as effectively as possible.

Selling Service

When you sell your services, you’re selling the possibility of a mutually rewarding relationship between yourself and your client. This means that your website has to do more than one selling products; it has to establish your credibility and develop a level of communication with your visitors that helps them visualize how you can help them. You need to not only establish the benefits of the service you’re offering but also establish the value of having you provide this service. Design your website so all your services can be seen on the homepage. If you bury services several pages into your site, you’re unlikely to get the exposure you need to generate sales.

E-Mail Marketing

If you want your website to be robust enough to generate sales you must consider the option of collecting e-mail addresses of your visitors and using those e-mails to stay in touch. One of the most common practices is to mail monthly newsletters to subscribers, But what about e-mailing standalone product promotions to your subscribers? When used properly this practice can be a useful tool for your visitors. When you first enter the e-mail promotion arena, you need to feature one of your most popular products, or one that is in popular demand from other sources. Feature something current, and fashionable, so you can get a good feel for how effective this medium can be in building your business. This is no time to unload dated inventory! If you design your e-mail to give people a good reason to buy one of your best-selling products, you can guarantee yourself a terrific response!

Online Payments

Getting your e-tail website on the Internet is a big step to becoming an online merchant. But, if you’re a first time merchant, how do you get merchant status so you can accept credit card payments? The first place to start your search for merchant status is your own bank. Most banks issue credit cards, and if you have a long-term relationship, you may be able to arrange for a credit card in your business name.

If that doesn’t work, do a search online for “merchant account.” You’ll receive thousands of hits from companies who are looking for small businesses that need their first merchant account. You will also find that many webhosting companies have arrangements with online merchant account processors to get you started through their connections.

Shop around for your best deal, but also be aware of hidden costs in many of these merchant accounts. Credit card processing from any source isn’t cheap, however, at least not for a start-up. A typical fee schedule for a small-volume account (fewer than 1,000 transactions monthly) would include start-up fees amounting from two hundred to five hundred dollars and monthly processing fees of around $20-35.

Summary

There are many benefits enjoyed by the online entrepreneur in terms of a potentially stable and growing income, sense of accomplishment, partnering with a spouse, and often creating a family-wide business. The range of business opportunities is truly unlimited. Research the 8-10 online opportunities that interest you most, and you may discover the one that can lead to great satisfaction and personal achievement for you.

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Larry E Vaughn

American Industry Woes June 16, 2011

What Are You Worth? Setting Rates for Consulting May 9, 2011

Growth Through Business Networking February 3, 2008

About this Blog January 13, 2008

Case Studies January 8, 2008

Business Research Links January 8, 2008

Franchising January 8, 2008

Buying A Business January 8, 2008

Risk Assessment January 8, 2008

eCommerce January 8, 2008

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