Half a Loaf Buffet

Warren Buffet’s got an interesting op ed in the Wall Street Journal this morning about using the earned income tax credit to lift folks out of poverty.

But, he went only part way.

Businesses will normally pay whatever they think an employee is worth to secure his or her services. That might not be a living wage if there’s a family of four.

The minimum wage is a Democratic concoction that would guarantee an entry level wage to everyone who wants to work. Some one’s got to hire you, though. A livable wage is a lot different in Omaha Nebraska than it is in New York or Chicago.

And, while we’re at it, why not require everyone who is able to work to have a job if they’re on welfare? President Clinton tried it back in the nineties, and it worked well. Somewhere along the line, it got repealed. If one can’t work, say for medical reasons, then an exemption is granted, and the earned income tax credit sorts it all out.

This is the other half of the Buffet loaf: workfare, not welfare. OK if it’s not enough to live on….at least there’s the nobleness of work. This situation is where the earned income tax credit comes in, and it would seem to us that it should be adjusted for the area one lives in.

OK, Warren, what do you think?


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Memo to Chrysler: Better Benchmark the Chyrsler 200

I recently had a Chrysler 200 for about a week while my Lincoln was being repaired (a LOL ran into the driver side door), and here are some thoughts ( I have some expertise in the field, having been a product planner and manager for Ford (Mercury Merkur and Scorpio), plus numerous ideas to Jim Farley and Allan Mullaly. Mark Fields came up through product planning, so he’s ok.

1. The car feels larger than the competition (Fusion, Chevy something), but not as large inside as either. Can’t speak to a Chevy, but the Fusion is clearly better. The Dart appears smaller, for whatever reason, even though they’re probably the same. Seats need to be deeper for larger folks over 6-3.

2. The inside feels smaller, probably because the window sills are higher. I’m slightly claustrophobic, so I notice this stuff. Steering wheel position clearly designed by Italians, if you’ve ever driven a Fiat or Ferrari; needs a tilt/fore/aft lever on steering column. Hide those wires, too.

3. Where’s the hybrid or diesel version? In city/suburban driving. I averaged about 22 mpg. That’s below the competition. The four banger in my car sounded pretty industrial. It did rev well, though, and the tranny was  smooth, although it’s fun to know which gear you’re in.

4. The dash nav system is easy to use, but you still have to take your eyes off the road, which is a common complaint for everyone. Or wait until you’re stopped. Google Maps on IPhone is the benchmark, guys, with voice readout.

5. Suspension feeds back a lot of road noise, but then so does everyone except the Camry.

Nothing here that can’t be fixed for the 2016 model year, guys. Sergio, send me an email where to send my stock.

For everyone, if you haven’t benchmarked against your competition, you can use these ideas as starters. Call us on the 800 line if you need help.


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Do You Know When It’s Time to Hire Professionals?

There’s a great article on Chobani, the Greek yogurt pioneer, and it’s founder, who almost lost it all because he didn’t build a structure of competent professionals to help him manage the business.

But, the big question the article didn’t answer is a what point do you decide to upgrade your personnel? For Chobani, it appeared to hit when they built a second big plant 2,000 miles from their first plant and headquarters, and as a result, got into financial trouble, only to be rescued by a vulture capitalist, who lent them a bunch of money in return for an equity stake in the company, in addition to normal repayment terms (I’m guessing, since the article didn’t say). And, Chobani had to hire a CEO, since it’s founder had long ago run out of ability to manage a much larger company. Not too onerous, all things considered.

The professionals have apparently saved Chobani a bunch of money in logistics and purchasing, which isn’t surprising.

And, continued growth has also indicated a need for a seasoned professional CEO, to take over from the owner. We have a couple of Solutions Forum members in the same position, and one of them has got to hire a professional CEO, but is resisting. We’ve decided to let him crash and burn again (he’s stubborn).

The point of it is, you have to know when to bring in higher grade professionals. It’s hard to figure it out, too, because I have a lunch next week with one of our clients who might have done it too soon, and is drowning in added expense. On the other hand, we normally advocate hiring the right people when they’re available. The finances can be rejiggered, which is probably what we’re going to do for him.

So, at what sale ranges do you decentralize your people and upgrade? It all depends, on a lot of factors. Start at $1million, start upgrading at $5 to $10 MM, which is the part it looks like Chobani got right.

At some point though, the founder’s got to step aside and admit that he/she doesn’t have the wheelbase for expanding as rapidly as one must, but that’s hard, too.

We’d be happy to provide a sounding board to talk it over.  You can take some courses at our School, but this is a hard one.

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The Rise of the CEO Support Group

Welcome to the party Fortune.

They did a nice article on the value of CEO  support groups, and it’s nice to have some validation. Basically, we provide support to CEOs and owners who are wrestling with decisions on anything….mostly marketing and sales, and personnel, but also finance.

We and our competitors think we’re good, but 95% of business owners have never heard of the idea. This is amazing to me; we all need to do more p.r.

As Fortune alluded, we all consult with startups and ongoing companies, and we are available 24/7.  All the companies in this space are probably available 24/7, but none of us advertises it. Memo to self: fix the websites.

All of us add a great deal of value to the clients we counsel, although we like to think that Solutions Forum is the most cost effective (www.thesolutionsforum.com).

We recently added another service, CEO to Go, www.ceotogo.info), because it was apparent that many owners.

So, if you’re reading this while your brain is subconsciouly mulling over a decision you’ve got to make, pick up the phone and call us, at 1-800-716-9626!

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In Defense of NSA Surveillance

This isn’t strictly speaking a business comment, unless your business gets blown up by a terrorist, as happened in the Charlie Hebdo bombings.

However, the increased NSA surveillance practices that were passed in the aftermath of 2001` are coming up for reauthorization by Congress, presumably the House, in late May.

Now, I have some expertise in the field, having led a team that designed some of the first data-mining techniques. And I participated in some expansions of it. And kept an eye on it professionally for about 20 years, and continue to do so.

What is at issue is the ‘bulk’ collection of telephone records by NSA, before it has the permission of the Foreign Intelligence Court. Normally, NSA gets a probable cause warrant from the FISC before it requests big bunches of data from the telcos, or others.

The same procedure applies to domestic surveillance, of the type that was used to locate the two combers homing in on Pam Geller in Garland Texas, If anything, these two worthies should have been detained and interrogated a little earlier, before they descended on Ms Geller’s convention. However, since they’re dead, no useful intelligence can be gleaned about who their associates are, although it might be known through datamining.

I know that the ACLU is and has been up in arms about these surveillance practices, but I have seen no real abuses, and I watch these things closely.

I would propose that Congress reauthorize the surveillance, both domestic and foreign, because it’s in the national interest. We will have to trust NSA that they do it right and don’t for example, arrest someone because they head a conservative charity. It seems to be that they’ve earned our trust.

I would also insert some advanced AI procedures into the software, to anticipate where suspected terrorists might be likely to go, so they can be stopped an interrogated by local police, the French. the Brits, or whoever is potentially impacted. Cut the FBI into the loop in all cases….they’re a little stretched, but they seem to be getting the job done. They knew about both the Garland shooters before it happened, but didn’t interrogate them. Local police departments should be the primary contact, as they were in Garland. They’re more numerous than the FBIs, and generally do their jobs quite well.

So, there you have it Congress. And, you readers out there, you have my permission to forward this blog to your Federal Congressmen and women.


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Bimbo Customer Service

Yeah, that’s right: Bimbo Customer Service, or what passes for customer service.

There is  Bimbo Baking Company, which bought Orowheat Baking Company of San Francisco, which makes my favorite bread, Honey Wheat Berry. Now, this is the bread on which Orowheat was founded in 1932, if memory serves. And it’s not distributed in the Phoenix Metro area as of the 1st of May. Lots of brand equity being thrown away here.

And Oro was sold a few years ago to Bimbo Baking Company, which is I think a Mexican company. Talk about your name not translating.

Anyway, I called the Bimbo Marketing Department today to find out if they’d consider selling the license to make Honey Wheat Berry, and they reacted with total indifference.

And it happens that one of my clients has kitchens and bakeries. So, off we go.

Needless to say, Bimbo is living up to its name in  customer service.


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Keep Your Manufacturing Efforts Out of Commodity Hell

We’ve all heard that manufacturing in the US is a dying effort.

Well, it need not be. Yes, you probably have to spend more in capital to make up for our higher labor costs, to meet (or go slightly above) imported prices. And, you might have to outsource some basic operations to Mexico or Canada. These two are generally considered to be better than China.

But, final assembly and finishing is doing fine in the US.

A 2013 study by Booz Allen highlighted the way: Innovation.

I can personally vouch for this as a great way to run a manufacturing company, having done it some 20 years ago. Apparently, the old lessons are still out there.

So, where do you get innovation? Here are some ways:

1. Look at what your competitors aren’t doing, and do for your customers what they aren’t. This can cover a wide variety of things: coatings, products, upping your service game, better people/processes, etc.

2. People first. I heard an interview recently with the CEO of a recent startup and he was absolutely manic on the subject. They hire good people even before they can technically afford them.

3. Have your inside/outside sales people talk to customers and find out what they’d like you to do. I got 10 years of innovations out of this method, and some of the ideas were still in the pipeline when I sold the company.

4. Look at foreign markets, even with the dollar up. Europe, Mexico, South America and even China and India are possibilities. Partner with local firms, though, because culture differences can kill you. Back in the day, my company had 25% of its sales in foreign markets, again during high-dollar times.

5. It takes money, but money is out there for well considered plans. Forget borrowing from the banks though. All sorts of alternative lenders are out there.

So, don’t just sit there in your exec chair….innovate!


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Inside PayPal’s MicroLending Program

You can put this one down under ‘who knew?’

Entreprepeur ran the summary of the PayPal program in their March issue, and it’s a revelation.

Since launching the program, which is called Working Capital (we can’t even say how you access it on the PayPal website), they have granted some 35,000 loans and lent more than $200 million, so it’s not small potatoes.

There is a catch, however: you need to be using PayPal’s platform, presumably for your ecommerce. PP will lend you up to 8% of your total PayPal volume, and most of the borrowers have used the proceeds for working capital. You must also have at least $20.000 of sales with PayPal in the last 12 months, and the cap for the loan is $60,000.

APR rates are 2% to 11%, and the higher the percentage of your sales that goes towards repayment, the lower the rate. This is an interesting way to do repayment.

When you consider what the banks associated with the credit cards you use might do for you, or what alternative finance companies might do (maybe 25% of sales), it’s not such a big amount, but it’s out there. And, if you have seasonal imbalances in your cash flow, the PayPal program could be just the thing for you.

PayPal could do more to publicise their program too: we’d never heard of it until the Entrepreneur magazine ran the story. And we use PayPal for about 20% of our payments to various entities.

So, there you have it: useful program, if you can meet the qualifications.


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The High Cost of Saving a Failing Business?

Ya gotta love the Wall Stree Journal. They had a big article on March 26th on the high cost of saving a failing business, by putting it into Chapter 11, which might have amazed some, and scared some with the high costs.

I checked with one of my clients who went BK three years ago, and the initial journey cost him about $50k, but he continues to spend about $50 k a year on added record keeping and the added costs of high-rate loan that he took out to keep going (we’re trying to help him get in refi-d. But, he’s alive and prospering, which is the whole idea of Chapter 11 in the first place.

A couple of things jump out at me:

1. The major culprit in the WSJ’s article seems to be–you guessed it–the lawyers and outrageous fees, both up front and continueing. My client spent about $1500 as a retainer for his BK (we’re in AZ, things are cheap), and we strategize  on how to keep stuff out of a lawyer’s hands. He spends $500 a month, as opposed to several times that much with lawyers doing their thing.

2. Clearly, if BK is in the cards, get a mentor to work with you on the perils and pitfalls; we’re available on our 800 #, 716-9626, and via Skype, at johnheinrichtwo. We’ve been doing some telemarketing of our new service, CEO to Go, www. ceotogo.info, and one of the more bizzare things we’ve discovered is that 50% or so of the companies that could have used us have failed in the past 3 years.

3. Cities and counties charging property taxes on your property can be your friends, because their collection efforts are poor. and they seldom follow up.

4. Normally, your longtime suppliers will work with you if you confide in them that a BK is in the cards. This can free up working capital.

5. Really take a look at your sales effort….could it be better? Sure it could, and we can help.

These are just some of the ideas out there. The point is, don’t throw your hands up and quit on your business that you’ve lovingly built.

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Marketing That Pays Off

This was the topic of a recent article in the Wall Street Journal which probably embodies what many startups think.

We assume that you’ve got a product or service that is perceptually distinct from the competition as defined by your target market.

Even if you meet the big differentiation test, we, as is our custom, we have a few things to add:

1. Spend money on a classy web site. Don’t go for the bargain brands. Remember that the site is your window to the world. A blog is about the cheapest form of self promotion you can do (which is why we started this one), but have something to say in your industry and make it read and sound well.

2, We agree with not spending wasteful money on advertising. Really focus on what influences your target market the buy your product. Our blog is now second only to forbes.com as a source of business wisdom. in three years.

3. Even in view of number 2 above, remember that spending marketing dollars is an interative process, and you’ll waste some money.

4. Figure out the maximum you can spend on marketing, because, unless you’re spinning of from a previous employer in a field where you’re well known, not many will know your name.

5. Be patient: it takes the search engines as long as two months to get your search terms and your site indexed.

6, Free publicity, from media press releases, does have some benefits, but they’re becoming less and less, in our humble opinion. Print space is increasingly valuable, so expect that at least you’ll get an online mention.

8. Sprending money on marketing doesn’t make a lot of sense if you can’t close the prospects. Talk to my friend Mike DiCarlo about that.

7. And lastly, be prepared to spend your own time doing publicity. Perfect those elevator pitches. Don’t take more than five or ten minutes for your formal presentation. Focus on lines that make potential investor say ‘tell me more’.

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