Ramblings on Business

The Birth of Yellow Journalism

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Thu, 19 Nov 2015 23:32:00 +0000

The Spanish–American War (April–August 1898) is considered to be both a turning point in the history of propaganda and the beginning of the practice of yellow journalism.

It was the first conflict in which military action was precipitated by media involvement. The war grew out of U.S. interest in a fight for revolution between the Spanish military and citizens of their Cuban colony. American newspapers fanned the flames of interest in the war by fabricating atrocities which justified intervention in a number of Spanish colonies worldwide.

Several forces within the United States were pushing for a war with Spain. Their tactics were wide-ranging and their goal was to engage the opinion of the American people in any way possible. Men such as William Hearst, the owner of The New York Journal was involved in a circulation war with Joseph Pulitzer of the New York World and saw the conflict as a way to sell papers. Many newspapers ran articles of a sensationalist nature and sent correspondents to Cuba to cover the war. Correspondents had to evade Spanish Authorities; usually they were unable to get reliable news and relied heavily on informants for their stories. Many stories were derived from second or third hand accounts and were either elaborated, misrepresented or completely fabricated by journalists to enhance their dramatic effect.

Both Hearst and Pulitzer published images of Spanish troops placing Cubans into concentration camps where they were suffered and died from disease and hunger. The term “Yellow Journalism,” which was derived from the name of "The Yellow Kid" comic strip in the Journal, was used to refer to this style of sensationalized newspaper articles. The American public purchased more newspapers because of this form of writing, and this strongly encouraged Hearst and Pulitzer’s newspapers to write more sensationalized stories. Some of the most sensationalized articles concerned “Butcher Weyler” and his reconcentration policies, and the Cuban Insurrection. Circulation continued to soar as the Journal reported that an American civilian was imprisoned without a trial and stating that no American was safe in Cuba as long as Weyler was in charge. Another major article that enraged the American public was written by one of Hearst's reporters, Richard Harding Davis, who came upon the story while on his way back from Cuba. The reporter learned of the story of Senorita Clemencia Arango. Arango was forced out of Cuba for helping the rebels, and was supposedly strip-searched by Spanish detectives. This angered the Victorian ideals of the American public even though the story was found to be in error

Hearst played a huge part in arousing the public’s intention to go to war with Spain. This activity reached its zenith after several years of articles concerning the situation in Cuba, Hearst ran a series of articles blaming the Spanish for the sinking of the MAINE with a mine. Hearst’s powerful articles pushed many Americans towards war with Spain. Because of his leading role in inciting the war, Hearst was nicknamed the “Father of Yellow Journalism.”

Why do I give you the history of yellow journalism? It is now the mainstay of news reporting. News outlets chasing advertising dollar have almost forgot the meaning of fair and even reporting. Fair and even reporting does not sell advertising. Sensationalism does. News outlets fan the flames of controversy in an attempt to boost readership. Ad rates are based on readership rates. Readers read, dollars come in. They really don't care about the overall affect on society. They rationalize that in a free press era the reader will get a fair and even story by reading multiple accounts from multiple sources. Except that people don't do that. They are sound bite addicts. We spend very little time checking the facts.

All you have to do it read the comments section of any article and you see that many of the readers didn't even comprehend the article they just read, more or less research it further. The media says that's our problem not theirs.

Folks, yellow journalism is alive and well. Do not believe what you read. Do not react to sensationalism. Small niches of society have managed to make great gains by using the media to project themselves as main stream. We need to seek the truth before we react. We no longer can rely on the media to present anything even close to resembling the truth.

Lessons from Kaki King.. and others....

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Tue, 21 Apr 2015 18:09:00 +0000

I have been thinking about a general principle that has come into my life several times in the past few weeks. It has to do with significant. Most of the time we feel we are far more significant that we really are. I'm going to paraphrase the conversation that started this line of thought.

I was watching TED Talks, a great set of programs if you have never heard of it. This specific TED Talk was a performance by a petite, introverted, Finger style guitarist names Kaki King (if you don't know her Google it, it will amaze you. She is the first female on Rolling Stones "Guitar God" List. I'm listening to her as I write this). She talked about her place in the universe. She first laid out the concept of time running infinitely in both directions. How every moment was insignificant within this spectrum. But if every moment was equally insignificant, then every moment was equally significant. Her final statement was "Therefore this music will be the most significant music in your life, at this moment".

This fundamental concept has worked in the shadows of several conversations over the last few weeks. More than likely this is the product of my Reticular Activating Systems, but let's say it is more than that. We think the universe is approximately 18 Billion years old. Now like the world is flat theory of old, this may prove to be untrue, but it us our current paradigm. So our entire life passes as a moment in the history of time. Each day we spend on this earth is even less significant. Each hour, minute, and second progressively less significant. But each unit of time is unique to us. There will only be one. If we do not use it we cannot store it for another time. What we did with it becomes part of history, even if we did nothing.

That makes it the most significant moment of our life, at that time. Kaki was right. So the question is; do we live like it is the most significant moment at the time? Do we realize how truly unique each moment is?

This bring me to list written by Andy Rooney, that I cannot verify, but hey it was on the internet so it has to be true....right..... here is a sample:

1. That I can always pray for someone when I don't have the strength to help him in some other way.

2. That no matter how serious your life requires you to be, everyone needs a friend to act goofy with.

3. That sometimes all a person needs is a hand to hold and a heart to understand.

4. That simple walks with my father around the block on summer nights when I was a child did wonders for me as an adult.

5. That life is like a roll of toilet paper. The closer it gets to the end, the faster it goes.

6. That everyone wants to live on top of the mountain, but all the happiness and growth occurs while you're climbing it.

7. That opportunities are never lost; someone will take the ones you miss.

8. That it's those small daily happenings that make life so spectacular.

9. That under everyone's hard shell is someone who wants to be appreciated and loved.

The life lesson that come from this list is that life's little moments are important. We spend an inordinate amount of time worrying about the big moments that lay ahead and very little time appreciating the little moments in front of us.

Is this the most significant moment in your life right now? What did you do with it?

How do We Help the Less Fortunate?

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Mon, 26 Jan 2015 21:02:00 +0000

I am always concerned about the right way to help those less fortunate. The conundrum centers around the old adage of giving fish verse teaching to fish. First of all, there is the perception of wealthy. A couple of interesting data points on that issue:

Wealth is not liquid. It is generally determined by the markets desire to own verses scarcity. I diamond has little intrinsic value outside of its ability as a tool. The real value is determined by the disposable income of the buyer and the scarcity of the object. The same is true of stocks and bonds, or art. You cannot redistribute this type of wealth because it loses its value once you eliminate the buyers ability to buy. The same might be true of a large ocean transport. They can cost tens to hundreds of millions to build. But if we assume no one has the cash to buy it (we are redistributing wealth and cash is wealth) then the wealth value drops to almost nothing. Wealth isn't so much redistributed as evaporated.

What is wealth (top 1%) and who are they? The top 1% includes anyone with net assets of $800,000 or more.(a) There are about 47 million people in the world who meet this classification. There are eighteen million in the United State. Switzerland has the highest density. There are a couple of things to take under consideration. First, it is assets, not income. Young professionals may have a household income of over $200,000 per year, but very few assets. Older people, especially those who have saved wisely for retirement, may have little income, but a lot of assets. For retirement planning it takes about two million dollars in assets to generate $80,000 a year in income. The second considerations is cost of living. A millionaire in Cape town will live much better than a millionaire in Paris.... By the way, to classify in the top 10%, your assets only have to be greater than $77,000.

So we can conclude that redistribution of wealth would be both hard to identify and hard to implement.

Let's say we find a way to redistribute some wealth without demotivating innovation. We find that fine balance that takes cash from the rich who have excess, but not from the middle class that just needs it to assure their futures. Also, we can't take too much via businesses, because businesses don't print cash, they get it from their customers. Taking too much from businesses will only cause inflation of prices as the business passes it on. Once we have the money, what do we do with it?

Second there is the methodology for helping. Well the "give a man a fish" approach won't work. We all know that. We have seen it over and over. Our entitlement system is living proof. A small per cent will learn to fish while they eat their first fish, but most will procrastinate as long as there is another fish. I have thought and written about the impact of advanced technology on the lower class. It's a train wreck waiting to happen. Most technology advancements displace low level jobs because those jobs are simple and repetitive. They are the exact jobs that the lower class is prepared to work.

Here, I think, is the hard lesson. It is a not so quick an answer. We have to elevate the lower class to have both a positive attitude toward and training in technology jobs. How do you elevate someone's attitude? Our attitude is more positive toward something that we are more comfortable with and understand. By increasing our exposure to different aspects of technology at a very young age, it loses its mystic. The UK has made it mandatory to teach children to code as early as age five. The idea is to get them comfortable with technology early enough to stimulate interest. They make a game out of it so it doesn't seem all techy and scientific. By the time they graduate it will be as common to them and reading and writing.I think the key is mandatory, because people will not do it of their own volition. I mean if they would, they would already be doing it, right.

Zack Simms is a Columbia School drop out that now teaches programming to over 26 million students at a time. Seriously, he really does. He found that most of his peers didn't have the fundamental computer skills to effectively work in industry, himself included. He first got a friend to help write a program to help him learn programming. This was so successful that other people wanted to use it. CodeAcademy now has 26 million students from over 100 countries, learning six different program languages. CodeAcademy is only three years old.

At the Davos Conference they talked about 8.4 million jobs left unfilled in technology because of a lack of skills. Technology jobs run the gamut of aptitude. Some are creative like digital art. Some are more hands on like hardware maintenance. Others require planning, programming, installing. Maybe it requires only an high level of technology understanding as in customer service or sales. You don't have to be a geek or a nerd. You can be yourself.

The way to redistribute wealth is to find a way for the lower class to create their own wealth. We might have to give them fish for a while, but I would suggest that we simultaneously nurture them into fishing for themselves. Life is much more enjoyable when a person feels independent and self reliant. Waiting for the government to determine your fish allocation, knowing your life depends on it, is a form of slavery. But knowing you have the skills to catch fish in any pond is freedom.

As more and more simple jobs like lawn care, cleaning, ground transportation, Fast Food Restaurants give way to technology, the lower class has to find a new way of making a living. Building and maintaining the very machines that took these jobs is the best answer. Start them young and when the time is right they will forge their own path.

(a) Wealth report by the charity Oxfam

Moving Down that Slipery Slope

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Mon, 24 Mar 2014 19:12:00 +0000

I wrote a short blog on how we as a nation, in an effort to help those less fortunate then ourselves have created an environment that will eventually enslave the lower class. Hard truths are hard truths. It is not our nature to want to hear them. We prefer to gather information that supports our point of view, not challenge it. One of the roles of the Reticular Activating System within our brain is specifically designed to ferret out those sources of information that move us from internal conflict to peace.

Even agnostic George Holyoake's in his 1896 publication English Secularism defined secularism as: That it is good to do good. Whether there be other good or not, the good of the present life is good, and it is good to seek that good. So as Americans we strive to do what we feel is in the good.

I ran across an interesting whitepaper entitled "The Future of Employment: How Susceptible are Jobs to Computerization ", September 2013, Oxford University Engineering and Science Department. It's over seventy pages, but it boils down to the graphs below:

The population at the greatest risk of having their jobs replaced by automation are the low wage, low skill jobs represented by the lower class. If we add to this our propensity to compensate for low income by providing financial support through government programs, we are creating a class of people held in bondage. They just simply don't have the where with all to climb out of the dependance based inviroment they find themselves in. They have to find employment that catapults them from lower class to middle class in one fell swoop.

The problem is that they may find that the normal intermediary steps required to improve their financial life are punitive. They may actually have to decrease their standard of living, now at the bottom of the American dream, before they can move upward. They have to give up government subsidies, start paying taxes and still have enough income to maintain their lowly standard of living. Tough love...

Kerby Anderson talks about the ten stages in the decline of a nation. They are (with my interpretation):

1. Spiritual Faith (our founding fathers)

2. Great Courage (American Revolution)

3. Birth of Liberty (The Constitution)

4. Abundance (World leadership)

5. Selfishness (My specific wants and needs rule my decisions)

6. Complacency (sometimes under the guise of Tolerance)

7. Apathy

8. Moral Decay

9. Dependence

10. Bondage

I stopped notating after number six because I am not sure exactly where we are as a nation. We clearly have moved into, and perhaps beyond selfishness. Have we become complacent? It is hard to say. We seem to be broadening the definition of acceptable behavior. States now run the gambling concession through lotteries. States have also started to legalize drug use. Is this because we selfishly feel that we should not be stopped from doing what pleases us, or are we just too complacent to stop some fringe niche group from eroding our sensibilities.

Twenty, thirty or fourty years from now, where will we be? Will we be a nation that has a substantial population that is dependent on the government to the point that they are incapable of taking care of themselves. Will those who actively contribute to the cofferes of the government be able to contribute enough? Will we be overtaken by Stage 3 or Stage 4 countries, some of which have population three and four times ours.

If this does happen.... will we all slip into bondage because we do not have the resources to maintain our independence? Will their economic engines run ours?

The enslavement of the lower class or the unintended consequences of social engineering.

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Fri, 28 Feb 2014 15:31:00 +0000

Do government programs meant to help the lower income worker actually make it more difficult for them to rise above government subsidies, thus thwarting their drive?

Conservatives and liberals are at the vocal polar extremes of public opinion. Most of us are moderates and keep our opinions to ourselves. Mostly because there is no party to stand behind. I do fear that in the governments quest to save the lower class they have unintentionally built an economic system that further enslaves them. I'm a moderate so I give the government the benefit of the doubt. Liberals will say it's not true and conservative will say it is intentional.

Here's the makeup of the story. There are several moves the government has made that individually look like a good thing for the poor, but taken together it creates a spiral down system for their future.

The government is trying to raise the minimum wage from $7.25 to $9.80 (or $10.10 based on who you are). That's a minimum 35% increase. On the surface that seems like a good idea, the lower income worker would get a substantial increase in income and maybe climbs out of poverty. There are some problems with it. The CBO (Congressional Budget Office) predicts that only 19% of the recipients of this wage increase are actually below the poverty level. 29% of the benefit would go to families already making over three times the poverty level. The projection is that the increase will be a net 3% to those below the poverty level. Add to this the negative real income effect of -.4% for the rest of the wage earners, the projected 500,000 lost jobs and the real net earnings is negligible. But this isn't the real problem. We'll get to that in a moment.

The second great idea for the lower class was subsidized insurance. Again, I am not being facetious, it was a good idea. But it did not address the unintended consequences. Low income people thrive on hourly work that is typically at or less than 40 hours a week. Under the new ACA mandate that limit will lower to 35 hours. The ACA also mandates taxes for employees in place of benefits, further raising the cost of employees that exceed the threshold. There is a lot of evidence that businesses will try to work around the requirement by limiting employment. One way to accomplish that is to hire more full time workers that will work in excess of 50 hours per week (and get compensated for it) and fewer hourly employees that work 30 to 40 hours per week. So the lower middle class or middle class will get higher quality employment and the lower class will be squeezed out.

The combination of higher wages and higher ACA cost makes automation more appealing. The breakeven to replace employees with systems becomes more appealing. The jobs that will be automated are not the complex jobs that require analytical thinking, they are the repetitive manual jobs mostly populated by the lower class. McDonalds is already testing self serve ordering in California. This automation, much like self server check out and ATM's, further reduces job opportunities for the lower class.

So where does the lower class find themselves. Well first, the job market for semi-skilled or no skilled employees is shrinking. The 500,000 jobs lost is part of it and automation of repeatable manual tasks is the other part. Add to that the natural limit of hours to avoid taxes and fees and when they do get a job it doesn't pay much. Here is another problem. When they get a job they pay taxes and they lose food stamps, welfare, and insurance subsidies. How much will they have to make to cover all of the lost income to taxes and the loss of government subsidies? Probably a lot more than $350 per week they would make at minimum wage and 35 hours.

Now this isn't opposition to subsidies. You notice I didn't call them entitlements. In a prosperous civilized society there is a natural need to help other less fortunate. I do see one of the unintended side effect of all of these programs is that the lower income group does not see a way off of subsidies through work. The inflection point it above their ability to achieve. So they are now locked in the lower class. The divide between a life on government subsidies and the life of the lower middle class is too great. Society will eventually leave them behind.

Life Turns and Sprints Away

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Wed, 17 Jul 2013 18:10:00 +0000

I run across a number of quotes that I think are worth remembering, not so much, because they are motivational, but because they are true. They remind me of basic truths that I must learn to live by.

I think of motivation as the match used to start a campfire. Once the match is applied, it takes effort and fuel to keep the fire going. The match is destroyed and no longer serves a purpose. Of course, you can start a fire without a match it’s more difficult and typically takes much longer. Motivational speakers don’t motivate they provide the match. Each of us must provide the effort and fuel for motivation to take place. The quote may serve as a catalyst for action, but it’s just a catalyst. It’s not a substitute for sustained effort.

The quote I have been thinking about lately is "Life turns and sprints away, and what could you do but follow? “. It is from Dante "Gluefingers" Lavelli. Lavelli lived between 1923 and 2009. He originally played football for Ohio State but had to leave early to join the Army during WWII. We went ashore in France just after D-Day and fought in the Battle of the Bulge in 1945. On Christmas day of 1946 he caught the winning pass for the AAFC championship in New York City. He is now in the NFL Football Hall of Fame. He spent his years after football as the owner of a small furniture store in Rocky River Ohio.

Lavelli got an opportunity to play football at Ohio State, he followed. WWII started and life changed. Lavelli was drafted into the Army and left football behind. The war ended and life changed. Lavelli was back playing football but not as a college graduate. Lavellie went back to Ohio State between football seasons to earn his degree. Football ended for Lavelli and life changed again. Now he was a small business entrepreneur. Each time “life turns and sprints away” Lavelli followed. He didn’t hang on to the past hoping to prolong it’s existence. Good, bad or indifferent he embraced the future. Given a choice I’m sure he prefered Ohio States campus to the the French battlefield Ardennes. 19,000 soldiers died in less then 45 days. He didn’t live in the horror of those 45 days. He found a way to move on.

Just as I am sure he preferred the hurrah's of winning NFL Championships to the daily grind of keeping a small business running in Rocky River. He won seven championships as a wide receiver for the Cleveland Browns. But it was the furniture store that fed and housed his wife and three children.

The great truth in this quote is not it’s ability to light a match under my performance, but to clarify a simple truth. “Life turns and sprints away”, what else can I do but follow. When I chose to not follow it simply leaves me behind.

Lady Franklin Bay Expedition of 1881

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Mon, 06 May 2013 14:14:00 +0000

It is interesting how things strike me. I read something, or hear something and it tugs at me. It causes me to look deeper.

My new great quote came from a documentary on the Lady Franklin Bay Expedition of 1881. Adolphus Greely wrote in his diary on March 13, 1884 as the expedition members had been without supplies for three years: ”It is not the end that affrights anyone, but the road to be traveled to reach that goal, To die is easy; very easy; it is hard to strive, to endure, to live”

The first part “It is not the end that affrights anyone, but the road to be traveled to reach that goal” I’ve felt was true for the most case. The specter of death is finality. As a believer, we see the prospects of heaven and the release from all earthly troubles. As a non-believer most only see an end. Most non-believers don’t believe in hell or they would soon become believers. So it’s not the end that frightens us. What gives us the most anxiety and trepidation is what we might have to go through during the process of dying. We want to die quick, suddenly, painlessly. If the road to be traveled is one of pain, physical or emotional, we want to be spared. We may look for a quick solution to shorten the road.

The second part of his quote is what really has my attention; “To die is easy; very easy; it is hard to strive, to endure, to live”. As I see in my mind’s eye the barren and frozen environment of Lady Franklin Bay, I can feel the desperation of men who have seen two summers pass without supply ships. The close quarters, the months of darkness and months of daylight. The boredom created by lack of purpose and hopelessness. “It is hard to strive, to endure, to live”. Yet these men strived to live.

Let’s not get high jacked into a discussion about proposed cannibalism. It’s not my point. I’m not thinking of what man will do to survive, I’m only thinking of man’s desire to survive, more importantly all of those who give up. All of us go through times of quiet desperation. These are times when “the road to be traveled” is difficult and uncertain. Sometimes the emotional pain is beyond comprehension. Maybe an illness has devastating results. The path forward is uncertain and sometimes seems impossible. To be sure there are impossible situations.

As people we need to care about those in desperate need. At one point the members of the expedition left 160 pounds of food because they had a choice of saving one of their own or saving the food. In another case a member of the expedition went 30 miles out of his way in sub zero temperatures to bury a comrade who has fallen prey to starvation. Striving to live is extremely difficult when one has to go it alone. It can be impossible. We need community and we need support to make it through these times. Each of us can be part of the community for another. It’s messy and it isn’t fun, but it can be the difference in someone’s life. It is a difference we may someday wish we had in our lives.

“There but for the grace of God go I,” John Bradford when he saw a group of criminals being led to their executions, 1550’s.

Everyone needs a miracle from time to time.

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Sat, 19 Jan 2013 21:20:00 +0000

Jeremiah 29:11 “For I know the plans I have for you,” declares the Lord, “plans to prosper you and not to harm you, plans to give you hope and a future.”

We all face times of desperate need. All of us at one time or another in our lives “need” a miracle. It might be saving our job/business depends on closing a business deal. It might be that we have a loved one with a medical emergency. But at some point we recognize that we can’t do it alone and “need” intervention. Most of us look for a “parting-the-Red Sea” type of miracle. We’re looking for that big, immediate, in-your-face solution to our problem. I know some of us can point to big “parting-the-Red Sea” miracles and I believe they exist, but for the most part I think if we critically looked at even those they would follow this process. It is just that we obeyed so naturally that we don’t see our involvement. What is the real pragmatic expectation to answered prayer? There are six points I’d like to make:

God knew the need before we asked for help
God could have solved the problem immediately without the help of other
God expects us to do what we can, he expects obedience
God uses resource that we have
God does what we can’t
Here is the hard part, the final solution always takes longer then we want, requires obedience even when we don’t understand the required task and is more painful than we would like.

I have listed five Biblical miracles at the end to use as examples. They are just five of many, but they demonstrate the principles well. They all share the six points above.

God knew the need before we asked for help

We are not going to surprise God with our need. Psalms 139:4 “Even before the words are on my tongue, you know it all together.” We are not bringing Him a perplexing problem that He needs to contemplate. Our problems are unique and immediate to us. Because we do not see the future, our need is for a quick solution. When we don’t get it we believe either God doesn’t know, doesn’t care or can’t help. The timing is a well thought out decision by God based on his plans for us.

God could have solved the problem immediately without the help of others

In Genesis 1 we learned that God created the heavens and the earth. There is nothing He cannot do without our intervention. Genesis 22:18 says "And through your descendants all the nations of the earth will be blessed—all because you have obeyed me." He wants to bless us by getting us involved. The first part of the blessing is that He wants us to work together. He wants a relationship with us. He wants us to trust and obey. He could have simply made the five thousand full. Or made the bridal party happy with what they had, or wiped out the debt of the widow. He wants us to experience the joy of working with him.

God expects us to do what we can, he expects obedience

You can’t steer a stationary ship, it requires movement. Obedience is movement. Many times we pray for a solution and wait for the answer. God will send us “nudges” as a call to action. He will not always show us an immediate result when we obey. The size of the blessing can be determined by our actions. In both the Water to Wine miracle and the Widow’s Olive Jar miracle, the size of the blessing was determined by the number of vessels the people gathered. Peter could have never walked on water if he hadn’t first gotten out of the boat. The cripple went to great effort to have his friends carry him to Jesus, lift him to the roof and dig a hole into which they could lower him. The first step is obedience. Obedience requires movement.

God uses resource that we have

This is the first miracle, we have everything we need. Generally we expect that the solution of the problem centers on the fact that we can’t get what we need, which presupposes that we don’t already have it. The cripple had friends that were willing to help. The widow had olive oil, the wedding guests had water jugs, and the 5,000 had five fish. It seldom seems like we have enough, so we overlook what we have. Whether it is money, friends, intelligence, energy, or experience, we have resources that God will use. We need to take the time to understand the resources available to us and we need to be willing to apply them even when they seem lacking.

God does what we can’t

He is where the magic happens. As the servants ladled out the water it turned to wine. As the widow poured out olive oil from her jar it kept filling jars until she was out of jars. As the five thousand took pieces of fish and bread, there kept being more fish and bread. The cripple picked up his mat and walked. You don’t really think Peter could walk on water without God’s help. This is the part of the miracle we see and expect. The blessing is a result of our obedience; we kind of forget that part.

The Hard Part

The final solution always takes longer then we want, requires obedience even when we don’t understand the required task and is more painful than we would like. Sorry I wish I could say more, but this is it. We have expectations that if we do what God wants, he will do what we want. Sorry, it’s not a trade. He knows so much more than we do. He knows what we want and need. He can see the future implications to all actions. We have a vision of our future based on limited knowledge. He has perfect knowledge.

“For I know the plans I have for you,” declares the Lord, “plans to prosper you and not to harm you, plans to give you hope and a future.”

Test this theory by reading about these five miracles in the bible:

Walking on Water (Mathew 14: 22 – 33)
Water to Wine (John 2: 1 – 11)
Widow trying to save her children from indenture (2 Kings 4:1 – 7)
Feeding the five thousand (Matthew 14: 13 – 21)
Cripple who is passed through the roof (Luke 5: 17 – 21) “get your hands dirty digging through the roof kind of faith”

Is the Tax Debate just Political Hype?

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Tue, 04 Sep 2012 14:36:00 +0000

(An internet search of “income tax breakdown of who pays” brings back 240,000,000 WebPages.)

I would say it is. The old adage the figures lie and liars figure holds true here. The entire debate is around collecting votes not improving America. First let’s look at the figure and then look at the strategy. The top 1% of the wage earners in America pays 40.4% of the total tax revenue bill. The bottom 50% pays in only 2.9%. Forty-five percent of the income earners pay no taxes at all. This rate has been relatively constant since the late 90’s. The variance is about 1% - 3%, give or take. Changes in tax policy don’t seem to affect the actual outcome by much, if at all. This makes it look like the top 1% is being screwed. However, the top 1% only pays at an average rate of 17.6% of their income. This is partly due to the maximum capital gains tax rate of 15%, which brings down the average. The Bottom 50% pays at 17.1% of their income. 75% - 80% of the taxpayers pay more in payroll tax then income tax.

Most studies don’t take into consideration total government tax burden of local, state, and federal taxes, including payroll tax, which constitutes another 10% of the income of the bottom 50%. The real burden on the poor is not the Federal Income Tax system. It’s all of the taxes paid to all government organizations. This 10% does not include sales tax, advalorem tax or property tax (that is included in their rent if applicable). Their 3% federal tax contribution can quickly balloon to over 20% when all taxes are included.

Total share of actual income for the top 1% is only 22.2%. The total share of the bottom 50% is around 12%. Therefore, the rich are paying twice their share in taxes while the poor are paying a third of their share. This seems like a just system, if not totally fair. We have accepted this as the American way for several decades, nothing new for several election cycles.

Here’s the real issue… The group that contributes only 3% of the total tax revenue represents potentially 50% of the voters. This group by the way is growing, up from 40% in 2007. A candidate is not elected through tax revenue; they are elected via the ballot box. If a politician can run on a platform of reducing low income taxes by 33% (real impact is a reduction in tax revenues of 1%) they can garner the allegiance of 50% of the voters. Similarly, that same politician can berate the wealthy as living off of the backs of the poor and only lose 1% of the voters.

Here’s the rub… the 1% can donate a lot of money to the election coffers of the politicians. The reality is that politicians don’t need the voters. If only three votes are cast and they get two of them, they win. In most cases, there are only two candidates for the voters from which to choose, one from the Republican Party and one from the Democratic Party. These parties provide the majority of the funding to run the election campaign. The politician’s allegiance is to their party, not the voter. The can get by without winning over the majority of the voting age population, but they can’t get on the ballot without the support of their party. Rich people know that changes in the tax code doesn’t bother them. They have a staff of smart people that will help them deal with it. The not so rich (PC statement) don’t have the staff.

The top 1% understands political rhetoric, the bottom 50% may or may not. Either way the bottom 50% gets more money in their pockets even if nothing in government changes.

The Ripple Effect

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Mon, 18 Jun 2012 13:52:00 +0000

Yesterday Rodney King passed away. His 15 minutes of fame came back on March 2, 1991. What brings this to mind is the tragedy of the situation. Rodney King was an ordinary man. Like many ordinary people he lived a life that put him in an extraordinary circumstance. We see this quite often in life. People living their ordinary lives, then faced with a circumstance that they didn’t seem prepared for. Mostly we hear of heroism, these ordinary people pulling strangers out of wrecked cars or burning buildings.

Rodney King did not wake up the morning of March 2nd thinking that this day would be dramatically different than all of the others. He had no idea when events finally played out fifty-three people would lose their lives. Rodney’s part on this was very small. Through his actions, he simply made himself available. ( the same could be said for the police officers involved)

Rodney embraced a life of alcohol and drugs. He was defiant, living for today. He was on a trajectory of failure. He was convicted of armed robbery in 1989, serving one year of a two-year sentence. By the time he hit the lime light in 1991 he was 26 years old, twice divorced and the father of 3 children. Just prior to his confrontation with police, his alcohol level was two times the allowable limit. Had this moment in his life not happened, we would have still read about him in the papers. We just wouldn’t have noticed.

On that March day, Los Angeles police overreacted to a simple situation they had been through many times. Their actions propelled Rodney into the lime light and a new trajectory. One that he was not prepared for and more than like would have liked to avoid. Rodney was driving a car being chased by the LAPD at speed up to 80 mph. When stopped by several police cars and at least one helicopter, his passengers surrendered without incident. Rodney started acting strange. He made a move that officers interpreted as aggressive. He later stated that he ran because a DUI would void his probation and send him back to jail. This was the extraordinary circumstance. This was the point that Rodney’s life and the lives of several people would be changed forever. This one decision, we all make them, most go unnoticed.

Rodney was tasered and struck at least 56 times with batons. George Holiday caught all of this on video. Video that would be used at the trial of the officers involved. The officers were tried in state court and found not guilty of criminal conduct. The outcome of the trial that ended on April 29, 1992 was the catalyst for the riots that started right after the verdict. Fifty-three people were killed in the riots. Twenty-three hundred and eight-three people were injured, there were around 7,000 fires and 3,100 businesses were damaged. It all happened in the very neighborhood of the rioters. They burned their own neighborhood down. Two years later, Lawrence Powell and Stacey Koon were convicted in Federal Court of violating Rodney King’s civil right and sentenced to 32 months in prison.

Rodney spent the next twenty-two years in notoriety, both a reluctant symbol of the civil right struggle and the catalyst of anger and rage. Our message today… when we get up tomorrow morning we will not know the ripple effect of our actions until they are complete. Are we living a life that could lead to positive or negative reactions? Are we one road rage away for notoriety? Are we one text message away from multifactorial events that will change lives forever? The lives of people we don’t even know. Neither the police officers or Rodney knew the people lost in the riots, yet each had an impact on their lives and the lives of those who did know them.

Don’t Lie to Yourself

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Wed, 28 Mar 2012 15:16:00 +0000

I look at literally hundreds of Income Statements for small businesses monthly. As a company, we do comparative analysis of these to have a better understanding of best practices for our clients. I find an extremely disturbing trend among many of them; I would even say the preponderance of them.

The core of our practice is not tax accounting. It is operational accounting, using accounting information to make better business decisions. Most of our clients are under the $5M range. Many of them have revenues below $1M. Making good business decisions is incredibly important to them. They generally don’t have the safety net of large amounts of collateral (inventory, receivables or capital assets) to leverage into cash during down times. Managing their business on a daily basis is mandatory. It’s not a luxury. There is no room for big or repeated mistakes. These will make their lives miserable at best and close them down at worse.

In spite of this urgency for creditable information, most provide only lip service to their accounting. I won’t get into the challenge of getting timely and accurate answers today. This is an ongoing problem for busy business owners. But I do want to address the incredibly inconsistent and sometime illogical approach used by most small business when it come to capturing financial business information. All small business people inherently know that there are certain expenses that happen every month. There is rent, utilities and payroll. If you are a franchisee, there are royalties and national advertising fees. Whether you have actually paid these bills or not, you owe them. They are a drain on your profitability. They will eventually be a drain on your cash. Not posting them to your accounting system doesn’t make them go away. That liability still exists and needs to be dealt with. Not posting them distorts the view you have of your performance. It hides problems that will come back to bite you. Just do it and do it every month.

This is the obvious part and it still happens, what about the less obvious business practices that skew your financial view? Your Chart of Accounts (the way you itemize revenue and expenses) doesn’t match the way you do business. What do I mean by this? Most small businesses use the Chart of Accounts that came with the software and made simple changes. For example, Cost of Goods Sold (COGS) is unique for most businesses. A business may start with the Chart of Accounts for their industry and modify it for their particular business. You don’t want to start with the Chart of Accounts that came with the software because it doesn’t fit the way you do business. It actually doesn’t fit any business, it’s just an example to get you started. This is true for labor cost, inventory and other items you manage on a daily basis. If you have a service business, you really should go to some level of job-based accounting so you know what jobs are profitable and which aren’t. You can’t sell at a loss and make it up with volume.

The bottom line is that we have seen very few new clients that didn’t think their accounting was at least in the ball park. We have had very few new clients that we didn’t have to perform extensive re-coding. We’ve had clients that we had to go back as much as 18 months to clean things up. These good, intelligent people run good businesses. It’s not about their intelligence, drive or commitment to their businesses. Their forte is not accounting. Their accounting never told them anything about running their business so they didn’t expect it to. They wanted to make sure they didn’t overpay taxes, that was about it.

I can’t help to improve some of the businesses I talk with because their numbers don’t make sense. We had a client that sold more products then they brought into inventory every month for as long as they were clients. We’ve had clients that’s COGS exceeded sales. We’ve had clients that posted negative payroll during periods. We helped them identify the problems and in most cases solve them. Some of them decided they didn’t want to fix the problem for personal reasons. They’re not clients today. That’s a liability we weren’t willing to accept.

If I can leave you with one message….Never lie to yourself…. You deserve better…. Understand the truth about your business. Initially it may be uglier then you thought, but it is the only way to get better. If you don’t feel you have either the objectivity or skill set, bring in a third party. The truth will set you free…..

Why would my employees care about me?

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Fri, 27 Jan 2012 17:02:00 +0000

Over the last 40 years of running organizations, I have come to understand why some managers are so autocratic in their management approach. It’s simple. They do a very poor job of hiring the right people. They may be good at assessing job skills and cultural fit, but most are extremely poor at assessing professional motivation. Why is that important?

I have long ascribed to the wisdom that people who care about you will work harder for you than people who fear you. The employees I have had that were more concerned about appeasing my wrath, did what I wanted, when I wanted as long as I was around. When I wasn’t there, they either used it as an excuse to do nothing, or were so in fear that what they did would dissatisfy me, they did very little. The employees who cared about me as a person, not just as their boss, wanted to do things that made me look good to others. They generally took this approach without supervision. They took the time to understand what was right and worked hard to do it. They made mistakes, but they learned…… the other group…made mistakes but never learned because their only real motivation was to keep me off their back……

Why would my employees care about me? Simple, I cared about them first. I wanted to see them get ahead. I wanted to see them become more valuable, either at their current job, if possible, or at another company if it was the only way. Most managers found this counter-intuitive. Why would I build up an employee just so they would go to work elsewhere?

Several reasons… Who wants an employee that doesn’t want to improve their value? Is it just a job, or a profession? They may not want a promotion, but they surely want to work smarter not harder….. An employee who feels they are acquiring a skill that will eventually make them more valuable will work harder and for less pay. They will see it as “Paying Tuition” for an education that will pay dividends down the road. If they are the right employee, they will know if the company has an opportunity for them to advance. If they know there is no real opportunity where they are, then they will sneak around to get the skill because they will be concerned their current employer will sack them if they find out. You have to get that off the table. If they are good and there is no growth opportunity where they are, they are going to leave. You can’t stop that. You should be concerned with what they are willing to achieve while they are at their current job. Be open and honest about their career path. Care about them first. Help them get to where they want to be.

What if they are not the right employee? That is, they have no desire to improve their value. They don’t care if you care about them, because they really don’t care about themselves. There is no point in micromanaging them, or being authoritative in your approach. This is a short-term solution, which enables a counterproductive behavior. Let’s face it, these people are gone, it’s just a matter of when. Don’t argue or fight with them. Don’t get frustrated. Replace them as soon as you can. Replacing an employee is an easy task that just takes planning. After several attempts to get them to take an interest in themselves, put them on a specific performance improvement program (PIP) with deliverables and target dates. Make it objective so there is no wiggle room. They hit the targets or they don’t. The PIP should clearly state the actions to be taken if they don’t make the targets.

If you take this approach a couple of other things will happen… the good employees won’t tolerate the poor employees and want them off the team…. Prospective new employees will want to work for you not just because of the opportunity at hand, but because they will have heard that you will help them enhance their careers. You get and keep better employees.

The micromanagement authoritarian approach gets you sleepless nights, pent up frustration, unresolved anger and poor results. The control freaks out there…. A big part of the fear of losing control is believing that no one has your back. You tell yourself that you are the only one who cares enough and is smart enough to get the job done. And if the job doesn’t get done you’re the one that suffers… Get professional help…. you may have just built your own dilemma by the way you manage others… they don’t care about you and want to see you fail…. You’re not paranoid…..

Here are great follow-up articles to read….

Forbes Hire for Attitude

Harvard Business Review

Congressional Reform Act of 2011

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Thu, 27 Oct 2011 20:56:00 +0000

This concept is sweeping the nation. I think it has merit and is at least worth discussing. It would have to be passed over the objections of Congress. If there was ever momentum to work toward a resolution the problem of Congress, now is the time.

Congressional Reform Act of 2011

1. No Tenure / No Pension. A Congressman collects a salary while in office and receives no pay when they are out of office.

2. Congress (past, present & future) participates in Social Security. All funds in the Congressional retirement fund move to the Social Security system immediately. All future funds flow into the Social Security system, and Congress participates with the American people. It may not be used for any other purpose.

3. Congress can purchase their own retirement plan, just as all Americans do.

4. Congress will no longer vote themselves a pay raise. Congressional pay will rise by the lower of CPI or 3%.

5. Congress loses their current health care system and participates in the same health care system as the American people.

6. Congress must equally abide by all laws they impose on the American people.

7. All contracts with past and present Congressmen are void effective 1/1/12. The American people did not make this contract with Congressmen. Congressmen made all these contracts for themselves. Serving in Congress is an honor, not a career. The Founding Fathers envisioned citizen legislators, so ours should serve their term's), then go home and back to work.

Let them Eat Cake

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Mon, 17 Oct 2011 20:44:00 +0000

DNC Chair Debbie Wasserman Schultz insisted to CNSNews.com October 4^th that “anyone’ can see that the economy is improving even though 115,730 people lost their jobs in September (the most in more than two years). Pres. Obama admitted that Americans were not better off today than four years ago.

Fed officials “saw considerable uncertainty surrounding the outlook for a gradual pickup in economic growth,” with the economy showing only a weak bounce after the recession in contrast to past recoveries. Reasons for this weakness remained “unclear” although some blamed business and consumer debt and the distressed housing market.

Interesting isn’t it?

Here is a piece of good news. Bloomberg has gone on record as saying that a string of stronger-than-projected statistics -- capped by the news on Oct. 7 of a 103,000 rise in payrolls last month -- has prompted economists at Goldman Sachs Group Inc. and Macroeconomic Advisers LLC to raise their growth forecasts for third quarter growth to 2.5 percent from about 2 percent. That’s nearly double the second quarter’s 1.3 percent rate and would be the fastest growth in a year. The interesting aspect to this is that Bernanke projected the economy to grow at 3% back in July.

Here's the really good news: Restaurant industry sales in 2011 are expected to reach a record $604 billion and sales are projected to improve 3.6% over 2010 sales. Every dollar spent in restaurants generates $2.05 in the overall economy and restaurant employees comprise nearly 10% of the entire U.S. workforce. One of the barometers of economic improvement: When we start feeling flush enough to order the wine and the dessert again.

Fundamentally, I trust the fact that we are all starting to buy dessert as the most pragmatic indication that things might actually be getting better. We know that the government is not going to help in the short term. If we are going to see this thing turn around it is going to be one dessert at a time. There isn’t going to be a bailout of the pie factory or a fork ready stimulus plan at the diners. It’s going to be businesses feeling better about the economy and willing to talk about it over dessert.

It’s not the Lobby Groups, It’s the Politicians Stupid

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Tue, 04 Oct 2011 14:43:00 +0000

I read, with some alarm, an article circulated by the Associated Press entitled “Protest against Wall Street spread across US” ( Chris Hawley 10/04/2011). The alarming part was quotes from demonstrators like “We feel the power in Washington has actually been compromised by Wall Street,” Jason Counts computer analyst in St Louis. Alternatively, “we support the notion that rich folks are not paying their fair share.” John Samuelsen, President of the Transport Workers Union in New York. How about “How to fix the deficit: end war, tax the rich” chanted by a group dressed as zombies marching on Wall Street.

The article did represent the other view voiced by one passer by wearing a suit named Roland Klingman, who works in the financial industry, “If they believe everyone down here contributes to policy decisions, it’s a serious misunderstanding.”

The political systems have been extremely successful in deflecting their personal agendas onto the masses. If it is true that the financial industry is adversely affecting the policy decisions in Washington, (and I do agree with this), it is a problem of the political system, not the financial industry. The financial industry wouldn’t try to influence policy if they didn’t have a historical perspective that says they can. If politicians want the public to take up arms against those who adversely influence their future, they should demonstrate against the politicians that enable this behavior.

Politicians are in a unique position to take action which we the public cannot. Politicians can end the influence of any lobby group by passing legislation to do so. Why don’t they? Political parties live and die on contributions. Contributions are the lifeblood of political parties much the same as revenue is to a business. They use influence to gain contributions. It’s not just big business that is the target. The people who are protesting the financial industry are the people that have benefited, at one time or another, from an entitlement program targeted toward them. These entitlement programs are designed to solicit contributions for the sponsoring party.

I understand the rage that most of us are starting to feel over the state of politics in America. The people have taken a back seat to fund-raising. Both political machines are far more interested in catering to the deep pockets then the public they represent. We need focus and reasoning in our actions.

If we allow any political party to emotional highjack us into believing that they, the politicians, are the victims, we have lost. If we want to believe; it is the contributor who is causing the harm, not the recipient; we are fools and deserve exactly what we get.

Many Americans are a gullible people with short memories. They are happily lead in any direction in which they feel will improve their personal comfort in the short term.

I’m not pro or con Lobby Groups, just as I am not pro or con political parties…. They have their place…. I am opposed to political groups putting their own agenda and well-being above those who they are paid to represent. Our 546 political representatives in Washington are starting to act like the royal family of America. They feel above the law and beyond the reach of the people.

Exactly How Do I Put a Value on Outsourced Accounting?

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Tue, 06 Sep 2011 20:56:00 +0000

This is a stream of consciousness concerning the value of accounting for small businesses. I’m not an accountant, I’m a business guy trying to understand how to put a value on what I should spend for accounting. I am concerned with the adage that a man who represents himself in court has a fool for a client. Should I do my own accounting?

Aside from the obvious need to file taxes, it is stated that accounting provides four essential services to a small business. First, it records revenue obtained through the sale of products and services. Second, it provides an accurate record of the expenses associated with the sale of those products and services. Third, it keeps a record of monies owed in relationship to those expenses and finally it is a record of what the company owns.

This is very succinct. So what? Running a company is about cash. Knowing your profitability is important in the long term. However, staying in business in the short term is about cash management. Cash based accounting helps the owner understand their cash position more clearly in the short term, but makes it difficult to determine if the company will be profitable in the long term. There are four types of taxpayers that cannot use cash based accounting; Corporations over $5M, C Corp Partnerships, tax shelters and taxpayers with revenues over $1M requiring inventory. (You might want to talk with your tax preparer about reporting inventory if you are using cash based accounting). Accrual accounting is great for accessing the financial health of an organization over time, but tells you almost nothing about your cash position on a real time basis. Mid-size to large organization use accrual accounting with cash projection reporting. That is they run a separate set of books that keeps track of cash sources and cash uses.

Therefore, it would seem the best approach would appear to be accrual based accounting with a cash projection worksheet. Sounds like double work. I don’t have the time to do this myself. The way I save time is using summary data as opposed to detailed data. The problem with summary data is that it tells me almost nothing about how to run my business better. If I hire someone to do this thing for me, how does the effort pay for itself? I’m a guy that believes you don’t invest in a business expense that won’t pay itself back with profit. So how much net profit will I generate by having a bookkeeper or accountant? That’s a tough one….

Well for one thing, I know inventory consumes cash. Increasing the velocity of my inventory (that is the inventory turnover rate) will help me hold on to my cash longer. In my business, it won’t earn me much interest, but it may help avoid a late penalty on a payment due. Having a detailed analysis of how much I buy verses how much I sell, by item, will help me conserve cash. It might also help me identify waste, spillage or theft.

Knowing the profit margin on each product I sell could help me set pricing better. The market is going to drive many of my prices, so I might end up discontinuing products I can’t make money on. This could help me pay for help.

If my accounting could tell me how much profit-per-employee I make it might help me manage my labor cost more closely. I might also be able to assess how much I really spend on marketing if I can include all the ancillary expenses like meals and give-a-ways. Knowing how much I spend will help me understand its value better. All I really have to do is find a one per cent reduction in expenses or a two percent increase in revenues. With the right help it might be there…. There might even be more…. However, I’m going to have to find someone who understands both my business and how I manage my business… they need to understand both accrual based accounting and cash projections to really be useful..... what I don’t need is another employee to manage….

Sustainability is the Key to Success

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Tue, 30 Aug 2011 13:43:00 +0000

There are three key areas that most business owner under-value when it comes to driving sustainability in their business. It is safe to say that many small business owners never even think about sustainability in relationship to operational issues. But, sustainability is the key to success.

Three areas that a lack of sustainability will kill a business

Labor

Many managers think that high turnover is an issue of bad hiring practices. Generally, that is not always true. High turnover is attributed more to mismanagement after they are hired than making a bad decision during the hiring process. What does high turnover cost you?

Your employee never achieves optimum productivity. The longer someone does something the more productive they become doing it. They stop thinking about what they need to do next and start thinking about how to do it better. When they leave, you lose that productivity. You also lose some of your productivity as you go through the hiring process to replace them and the training and mentoring process to make the new employee productive. During the hiring process you are down two employees not just one.

Here is another important point to remember. People do business with people they like and trust. When there is no continuity in your customer facing employees this customer/client-employee bond either doesn’t mature or becomes broken. The emotional tie between your customers and your business is weakened. Referral business is the cheapest and most profitable lead generation any company can have. A lack of continuity can adversely affect referrals.

So what can you do from a management perspective to keep employees? First, understand that motivators and demotivators are not linked. The elimination of a demotivator does necessarily motivate. Providing a motivation does not always overcome a demotivating characteristic. You can give a person a promotion with more responsibility, which they crave, and they will still leave you because they don’t like the corporate culture. Removing excessive overtime might remove a demotivator, but it won’t motivate anyone to work harder. Understand what works and what doesn’t work. Create motivators while removing demotivators. Don’t assume that work is called work because it is work. Life can be better than that.

Everyone is different; learn what works for each one of them. People are not robots that need to be treated uniformly. Don’t let the lawyers convince you that everyone should be treated like a clone. Be fair with everyone, but create programs that reward people in ways that are unique to their needs. This takes knowing them, not a pleasant task for some managers. This also takes time to build programs that are more flexible. This might require too much thinking for some people.

Lead Generation

The second area that businesses waste a lot of time and money because of a lack of sustainability is lead generation. In this world of multiple electronic channels, which many seem nebulous at best, there is a tendency to try anything once. It takes time to fine-tune a new lead generation process. Owners need to take the time to fully understand the details of what they are trying to achieve before they start. They need to fine-turn their idea of a prospect. They need to fine-tune their idea of an offering. They may even have to fine-tune their perception of the buying process. Marketing is changing. People don’t buy the same way they did before. They have access to much more information. They have less geographic constraints to whom they do business with.

Plan on going through several iterations before you see results. Using a start-stop approach will only burn cash, confuse your employees and produce limited results as best. I don’t know how many times I have heard an owner say “We tried that and it didn’t work for us.” Did they have a plan for sustainability before they started, or were they just hoping to find something that might work?

Cash is King

Spend money only when you know, or reasonably expect, it will make money. Everything you do must have a tangible return on investment. Even branding strategies must have a payback somewhere out there, or why do it? Track what you spend against what you get back. The only way to sustain a program is if it generates as much income as expense. Otherwise, it will die a slow death as the cash runs out. Don’t throw money at something just to see if it might work. There is no such thing as discretionary income to a business, it’s all critical to the operation. You can’t bet money you can afford to lose, there isn’t any.

The key is to fully fund a program before you implement. Most businesses plan on using cash created by the program to fund the program. That is a recipe for disaster. Use the cash generated by the program to fund another program. Then you will see growth.

Think about sustainability. Think about how you will use what you are planning to do it replenish the resources you use to accomplish it. Ideally, it should pay you back more than what you use.

Businesses should Become Profitable Before they Become Big

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Wed, 17 Aug 2011 12:41:00 +0000

Great article concerning the pit falls of creative accounting. Groupon reported earnings of $80M when they actually lost $114M.

Groupon Doomed by Too Much of a Good Thing

“Clayton Christensen would agree with the intuition that Groupon displays but ignores: businesses should become profitable before they become big. The best way to manage a fledgling business is for managers to be impatient for profit but patient for growth. Such a strategy limits an early venture's funding in order to force the business to develop a profitable business model and then invests heavily in growth once such a model is identified — Christensen terms such investments "good money" for incubating growth businesses and extols the strategy for three reasons.

First, when a business is impatient for profit, managers are forced to validate their assumptions and demonstrate that customers are fundamentally willing to pay an acceptable price for the company's offering.
Secondly, expecting a business to be profitable quickly forces it to keep its fixed costs low. Because a business's cost structure determines which customers it finds profitable, keeping these fixed costs low preserves strategic options for the company when it is choosing which customers to target.
Finally, reaching profitability quickly ensures that when outside financing dries up, the venture can succeed on its own.”

We are so all consumed by winning that we lose sight of what score keeping is about. It’s about showing position and progress. It is not about the score, but what the score tells us. If things are not going as well as we would like or if we know according to the Sigmoid Curve that they will get worse before they get better, wouldn’t we want to know exactly what our position is? Wouldn’t we want to know as factually as possible the levers that we can push and pull to make things better?

I talk with many small businesses that I know will never achieve the level of success they should because of the way they keep score. In some cases it not just the way they keep score, they haven’t developed the skill to know what the score is telling them. They are too busy trying to look successful by redefining success.

Don’t fit the score keeping to your desired results…. Drive the desired result with better score keeping…

Service verse Sustainability, The Government Way

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Wed, 17 Aug 2011 12:14:00 +0000

I’ve toyed with this idea for some time. It seemed we needed to wake up to what we as voters and taxpayer have allowed to happen. Our country is now run by two major corporations whose only true interest is sustainability. It’s no longer about the people or the nation, it’s about sustaining the life of the party. 546 people have become the royalty of the “republic for which they stand”. For the most part they hold themselves above the law and only answer to their parties. The voters for the most part only get to chose between the candidates the two parties have put forward.

Starbucks CEO Howard Schultz stated, "All it seems people are interested in is re-election,". "And that re-election -- the lifeblood of it is fundraising."

There are a number of similarities between corporate America and political parties. Both know to continue they need a revenue source that is sustainable over time. Otherwise the corporation dies out. For political parties that is fund raising. Build up a large enough war chest and new parties cannot afford to enter the marketplace. Both major political parties, combine, raised $1.9B during the 2008 election cycle. Corporations sell products and services to generate funds, what do political parties do?

Political parties use taxpayer money to fund projects targeted toward potential donors. Potential donors might be individuals, corporations or lobby groups. It really doesn’t matter to them, money is money. It would appear that the goal of legislation is primarily to garner good will among potential donors. One of reasons so much “pork” is added to every bill is to influence potential donors to contribute. Why else would congress add something like a library or bridge to a bill on healthcare or immigration? Why would a bill exclude certain groups from participating? Why would congress exempt certain groups from taxes or levies? It’s all about fund raising.

Both corporations and political parties engage in branding, advertising and public relations. One of the major differences is that corporations must reinvest their own money in product development to keep the revenues flowing. Political parties on the other hand have the ability to tax the general public to create “products” they can give to the market in exchange for donations. The money comes from the public but goes to the party. It’s a nice scheme. There is no direct connection between taking money from the tax payers… providing a “service” to the public… and collecting donations for the party. But those most willing to donate to the party are the ones who reap the most benefit from the “services” and generally don’t pay as much tax toward its delivery.

Almost 50% of those who filed taxes at the federal level paid no taxes. This does not include all of those who survive but have no taxable income, mainly due to entitlements. (not saying all entitlements are bad, just pointing out a fact) So the majority of the constituents (voters) are not currently paying for any of the services that they receive. From a business standpoint this is not sustainable. Why would congress pursue an unsustainable strategy? Because sustainability is about fundraising, not government spending. When worse comes to worse, they can just print more money or add more taxes.

The system has been broken for some time. It is now coming to a tipping point. Unfortunately the political parties will not chip in to bail us out. They will simply tax the voters and use the money to influence donors. It’s what they do…..

Personal Value in Economic Terms

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Tue, 28 Jun 2011 17:13:00 +0000

One of the things that I constantly come back to when I hear dissension concerning compensations is “What was fair to you when you made the decision to take the job?” There is so much discussion concerning wealth redistribution and income parity. There have been numerous editorials and op-ed articles on CEO compensation. The NFL players union is in negotiations with the NFL owners concerning the distribution of revenue. There seems to be a lot of focus on the other guy. There seems to be a prevailing opinion that income is fixed and therefore compensation must be rationed between parties.

I was raised in the Midwest in a farm community. My thinking is somewhat molded by this experience. The concept of retirement is just not a real concept to a farmer. The farm never retires, there is always work to be done. It doesn’t provide medical benefits, 401K, or promotions. You can’t negotiate with Mother Nature to get a pay raise, try going on strike and see how that works. You make a commitment to a life style and you live up to that commitment or you change professions. Many children are leaving the farm because of that very issue. They expect medical benefits, they expect a retirement plan, they don’t want to work past 62, and they want their income to rise with the cost of living. These are all foreign concepts to farming.

I can’t tell you how many discussions I have had with employees who think their compensation is somehow relational to someone else’s. X-genres are the worst. “I’m doing all the work and fat old man in the corner office gets the big bucks.” And yet they agreed to do the work for the compensation offered. At the time they made the decision is seemed like a fair deal, or at least fair enough. Shouldn’t my concern be more along the lines of “I hope he makes a fortune because some day I’ll have his job…” Then figure out what it takes to get a job like his, build the prerequisite skills, knowledge and experience and apply. In economics, value is not derived by labor and materials. Value is created by demand in the marketplace. If I can find someone else who can perform your duties as well as you can for the same or less, then as a business stakeholder I have an obligation to consider them for employment. That job candidate should consider all possible avenues they can take to earn a living and take the most productive. What anybody else is doing only affects you as it relates to your decision to continue doing what you are doing.

I do think that many CEO, entertainers and sports figures are grossly overpaid, but that is because they don’t have a high level of value to me. I would never pay them at their current level. (Don’t misinterpret my statement as meaning they don’t have considerable value, just not as much in my view) The people who are paying them see their value or they wouldn’t pay them. If someone with higher value comes along then they will displace the current employee. That is how it works. The fact that I make less than them does not enter into the equation. My value and their value are independent.

An interesting read for those who want to understand economic value is “I, Pencil” by Leonard Read. He chronicles all of the independent people who help create the pencil. Everything from the tree growers, saw mills workers, and truckers, and graphite miners, and wax producers, and lacquer makers to Paper producers…. Everyone from all over the world…. Most of these people do not know they are involved. They all have a part. No one understands the entire process completely. This is how we fit in our perspective organizations. We all have a part. Each of us chooses to contribute or not. Each of us chooses if our compensation is enough or not. None of us, as individuals, depends on the value of others to create our own unique value. For a healthy economy we should all look for ways to increase our value independent of the value of others. If each of us increases our own value the economic ship will rise on the tide. If our goal is to drag others down to make ourselves feel better, no one will prosper.

It is not bad to want what others have. It is bad to want to take it from them as a form of compensation. Create value; create value in yourselves and others. Do not spend time trying to minimize the value of others. It will only bring everyone down.

Importance of Operational Accounting in the Small Businesses

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Mon, 16 May 2011 12:38:00 +0000

I read an interesting article this week written by John Nessel. John Nessel is the President of Restaurant Resource Group, a Boston-based consultancy providing financial tools and support services to independent restaurants and the hospitality industry. John’s number one red flag to restaurants failure is “Absence of a well organized and implemented accounting system.” He goes on to say “Printed copies of basic financial statements (Profit & Loss and Balance Sheet) are not adequate for this task because they do not verify the accuracy of the numbers presented.”

Luis Luarca of Allectus, a business management advisory, says “As proper and accurate accounting is the life blood of business, accurate and relevant accounting procedures allow for the opportunity to affect all aspects of business efficiently and effectively.” They both agree on some simple yet extremely important indicators of a poorly run business.

1. An overall lack of understanding concerning financial statements and their importance in business decision making

Understanding the technical definitions of items portrayed in financial statements is a long way from understanding what it really means and how an understanding of the meaning can be used to help run the business for efficiently and more profitably. The structure of the financial statements can mask potential risk and hide growing concerns. Not knowing what do don’t know can hurt you.

2. Over reliance on online bank balances to manage cash flow

The statement or online bank balance doesn’t tell the real story. It doesn’t tell what deposits haven’t cleared, what checks have not been cashed or what credit card transactions are not reconciled. More importantly it does not provide a vision into future cash needs. It is a point-in-time view of the health of cash. It can be dramatically different within minutes as transactions clear.

3. Inaccurate posting of financial information

This can run from simple transposition errors, to the more complex allocation error. One of the most overlooked concerns for small businesses is that the chart of accounts does not reflect the way the owner operates their business. A badly thought out chart of accounts can actually hide business problems until they are too late. Because of this, the allocation of expenses may not accurately show their impact on the business.

4. Daily and Weekly financial information is not routinely collected, reviewed and acted upon.

Many business owners are too preoccupied with data input to take the time to routinely apply a logic test to the financial information. Expand the effort to daily or weekly information gathering and little time is left to run the business. Owners should spend the majority to their time reviewing financial information for trends and taking action on those trends to improve the business performance. Instead many spend their time with the low level activity of capturing data.

5. The absence of a well organized and implemented accounting system that includes business specific Chart of Accounting, key performance tracking and repeatable procedures.

This seems to be the last thing any small business owners wants to take on. There are a lot of reasons for this. Tactical operational issues take precedence. There is a lack of understand as to the quantifiable benefits. There is a lack of interest or aptitude. All of these are the very reasons that a small business owner should look outside of their own expertise and time. This is a primary skill, much like tax accounting, that should be outsourced.

These trying economic times have brought to the surface ongoing operational issues that were previously covered by a better economy. Although poor profitability might have still been a problem, cash flow allowed these problems to go unaddressed. Many companies managed this through short term borrowing or lines-of-credit. Once credit was constrained and cash flow became an issue, operational inefficiencies came to light.

A lack of attention to good operational accounting may have masked many of these issues until they became a crisis. Crisis management is never a good answer. For some companies it became the only viable answer. The owner must take back control. To accomplish this there must be an in-depth review of how they currently account for financial activity and what that tells them or doesn’t tell them about the health of their business. This many times requires a third party that can objectively assess the environment exclusive of day-to-day operational bias and business ownership pride.

Social Entrepreneurship

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Tue, 05 Apr 2011 13:47:00 +0000

Let me start out with a few definitions from Wikipedia.

Capitalism is an economic system in which the means of production are privately owned and operated for profit. Income in a Capitalist system takes at least two forms, profit on the one hand and wages on the other. There is no consensus on the precise definition of capitalism, nor how the term should be used as an analytical category. There is, however, little controversy that private ownership of the means of production, creation of goods or services for profit in a market, and prices and wages are elements of capitalism

Social capitalism (Socio-capitalism), as a theory or political or philosophical stance, challenges the idea that socialism and capitalism are inherently antagonistic. The essence of social capitalism is that markets work best and output is maximized through sound social management of the macroeconomy. Social capitalism posits that a strong social support network for the poor enhances capital output. By decreasing poverty, capital market participation is enlarged.

Social entrepreneurship is the work of social entrepreneurs. A social entrepreneur recognizes a social problem and uses entrepreneurial principles to organize, create and manage a venture to achieve social change (a social venture). While a business entrepreneur typically measures performance in profit and return, a social entrepreneur focuses on creating social capital. Thus, the main aim of social entrepreneurship is to further social and environmental goals. Social entrepreneurs are most commonly associated with the voluntary and not-for-profit sectors, but this need not preclude making a profit. The terms social entrepreneur and social entrepreneurship were used first in the literature on social change in the 1960s and 1970s

Many people, this people tend to be workers or politicians rather than owners or investors, see capitalism as a system of moving money from the poor to the rich. They believe that the entire ecosystem is disproportionately tilted toward the rich. The poor may benefit to some extent by having jobs but the preponderance of the benefit is given to the rich. I can’t argue this view. Capitalism rewards those with resources, who reinvest them, with greater gains then those without. I could argue that without those who are willing to risk what they have there would be no jobs for those who have little to risk. But only the truly greedy person would accept this as a valid response. After all, one person can only consume so much. The incremental value to their quality of life of spending more on themselves diminishes as assets accumulate. It’s the law of diminishing returns.

Social capitalism says that there is an inherent benefit to the economic enterprise to address social issues. That by building a business around serving the community, the business prospers. True social capitalist suggest that government should regulate the social interaction. I disagree with this mainly on the grounds that politicians are not free of bias. They tend to sponsor bills that promote their own longevity. Fundamentally political parties are just a special form of capitalism. The exchange rate is not calculated in dollars but power and influence. They produce a product, they raise funds, they distribute funds, and they pay wages. They do not fund social programs outside of their specific agendas.

Free of regulation companies and individuals could determine where social investments create the best return. Money would not be spent on programs that look and sound good but do not produce positive change.

There is the caveat to social capitalism and social entrepreneurship; enterprises must be economically driven to be sustainable. If they do not have a good profit structure, they too will become a social casualty. Without a true long term profit driven approach the enterprise will dry up for lack of capital and its social value will go away. The failure of most social entrepreneurs is not that their idea for social change was not valid; it was they lost the concept of perpetuating their enterprise by failing to more aggressively promote economic capitalism.

Transactional versus Transformational: Franchisers Lament Lack of Skills

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Wed, 27 Oct 2010 14:46:00 +0000

The British Franchise Association (BFA) claims that the biggest obstacle to growth is finding people with the right skills to run their own outlet. A survey conducted in conjunction with NatWest revealed that a quarter of franchisers are finding it difficult to attract new franchisees because applicants lack the skills and funds to take on the job.

Dr. Michael Davis, who received his PhD in accounting at the University of Massachusetts, wrote a great article entitled “The Ten Lessons for Entrepreneurs”. One of his ten important lessons is that you can’t overestimate the value of good marketing, yet many small business people are woefully unskilled at this vital function. Most small business gets their marketing education at the hands of an aggressive sales person or at a half day seminar. Dr. Davis also extols the virtues of knowing finance and accounting as a primary tool for business decision making. The lack of this skill is a primary reason that many small business are overly optimistic about potential which leads to underfunding and collapse. Both of these skill sets are required to be successful. Small business manager don’t have the time or resources to stay current on finance, accounting, marketing, sales, operations, human resources and business practices.

One of the most important indicators of a successful franchise system is the repeatable methodologies embedded into the franchisee culture that both optimizes revenue and minimizes expense. Having a great brand, a great product and a great delivery system are critical to getting any franchise system off the ground. But it is repeatable methodologies that the franchisee can execute against that bring in new franchisees and helps existing franchisees grow. These repeatable methodologies must assume that there is a fundamental lack of business skills available within the franchise system to implement these methodologies. Doing so assures that the methodology will be mildly successful for most and wildly successful for the rest.

Most franchise systems provide excellent tools, if used properly and consistently, that help the franchisee become and stay successful. The problem arises when the franchisee either doesn’t have the skills required to use the tool properly and consistently, or doesn’t have the time. The tool, expensive to acquire, does not achieve its goal of improved profitability. Most of the time, the tool is blamed for the lack of success. Pragmatically the assessment is right. If the user can’t use the tool, then it’s the wrong tool.

Franchisor need to start looking at providing the required skills along with the required tools. The franchisor can either have the franchisee outsource these activities to the franchisor or an independent third party. There are some inherent benefits to outsourcing to an independent third party, but either will work. The franchisor should determine what high value activities MUST be done by the business manager for the business to be successful. They should then see which of those activities must be done exclusively by the business manager and what can be done by support staff. Most small businesses can’t afford a support staff. The franchisor should then help the business manager acquire the required support staff on either a part-time or ad-hoc basis. Every business must provide accounting and marketing expertise. Why leave it up to the franchisee to find the appropriate resource. If you know then have to have it, make it part of the value of your franchise by providing access to it.

The tools help reduce the cost of acquiring the prerequisite skills by automating as many of the process as possible. Automation reduces errors and cost. Tools can’t replace human involvement; they can only improve their results and reduce the cost.

The goal of any franchisor is to fill their franchise system with people who are not as focused on the day-to-day transactional processes as they are focused on finding transformational programs and projects that will take their business to the next level. Franchisors need to provide tools and the prerequisite resources required to operate these tools so that the business manager can solve problems before they become problems.

Healthcare Reform is Not Just About Healthcare

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Mon, 18 Oct 2010 14:31:00 +0000

Part of H.R.3200 - America's Affordable Health Choices Act of 2009 is Starting January 1st 2012, all businesses, DBAs, sole proprietors, independent contractors, etc., will have to report ALL transactions (goods & services) through the use of an IRS 1099 form. All "accumulated" transactions of $600 or more per year, will require a 1099.

The IRS currently has a reporting requirement for businesses who hire independent contractors. If a business hires a contractor, and pays them more than $600 in a tax year for services, the business must file a Form 1099. One copy of the Form 1099 goes to the contractor to remind him/her that taxes must be paid on the amount of income received. Another copy goes to the IRS which utilizes the form to ensure that the contractor accurately complies with the tax code by paying the proper amount of taxes on income.

As of 2012, every business -- big and small -- will be required to issue a Form 1099 to any vendor of services or property to which the business has paid more than $600 in a tax year for those services or property, regardless of the method of payment. A copy of the Form 1099 must also be sent to the Internal Revenue Service. Think about the hundreds of millions of transactions performed daily...credit card transactions, checks, money orders, cash, bank wires, E-pays, etc.

According to a survey conducted by the National Association for the Self-Employed (NASE), micro-businesses (fewer than ten employees) issue approximately two to three Form 1099's to independent contractors under the current reporting requirement. Under the new expanded regulation, these businesses have estimated that they will have to issue roughly twenty-seven Form 1099s, mostly to large corporations. This is a 1250% increase in the amount of paperwork that will be required of small business come 2012. In addition to issuing form 1099s, a business will have to get Taxpayer Identification Numbers (TINs) from all qualifying vendors. Should the business owner be unable to do so, they would be required to withhold a portion of that vendor payment and send it to the IRS. The IRS will have to use a significant portion of the 16,000 new employees authorized by H.R. 3200 just to audit the flow of new 1099’s.

Should a business not file or inaccurately file their form 1099s, significant penalties will apply.

Is there good news along this front? Yes, Small Business Paperwork Mandate Elimination Act of 2010, S.3571/ H.R. 5141, is designed to repeal or modify this regulation.

Five Acronyms Every Small Business Should Know

noreply@blogger.com (Tomme - Winning is the Science of being Prepared) — Fri, 23 Jul 2010 18:12:00 +0000

P&L – Profit and Loss Statement

Your Profit and Loss Statement (or income statement) describes your company's overall performance. The P&L tells how much money you're making in your business and how you're making it. It measures revenues received and costs incurred over a certain period of time. It tells you if you're making money or not, and how much you're making or losing.

Go over each line item, and compare it with the previous month's P&L. If you don't understand what a line item represents, find out. The numbers should make sense to YOU, not to your accountant. And if you haven't already, organize the line items so that similar items are closer together. The default setting in most financial software usually lists the expenses alphabetically. For example, it makes sense to see "Product Packaging Materials" next to "Merchandise Purchased for Resale." Feel free to combine line items to make your P&L more concise, and/or break apart line items to show you more details so you can make some sound business decisions based on what the numbers are telling you.

COGS - Cost of Goods Sold

Also referred to as the "cost of sales," COGS are the direct costs attributable to the production of goods sold. This includes material cost and production (labor) costs but does not include indirect cost like advertising or R&D. COGS will show up on your P&L Statements. Watch the percentages, not the actual dollar amounts from one month to the next. The percentage should stay pretty much the same with regards to revenues.

EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortization

This is the most complicated of the acronyms we're discussing today, but essentially EBITDA measures the core income that your company earns before your cover your debt payments and income taxes. It's an indicator of operating performance and profitability, but it's not a good measure of cash because it doesn't include changes in working capital.

EBITDA will be important if you want to sell your business; it allows buyers or investors to evaluate your operating profitability and profit trends without the unique variables that might distract from bottom line performance.

EBITDA is a good way to measure your profitability, but be forewarned: even businesses with a great EBITDA can go out of business due to cash flow. EBITDA leaves out the cash needed to fund working capital and the replacement of old equipment. Profits are great, but if you have no cash, your business will "bleed out" pretty quickly.

BEP – Break-Even Point

This is one of those numbers you want to know by heart and just like it says, this important indicator tells you at what point your business "breaks even." It is the dollar amount of revenues that exactly covers all your operating expenses (variable and fixed costs), with nothing left over for profit. It's an important indicator of risk because it shows you how close your business is to the "no profit" line. For instance, if your business is currently producing revenues at the level of $100,000 per month, and your break-even point is $60,000 per month, you are comfortably above your no profit line. You want your BEP swimming in your head at all times. It's your minimum target for slow months, and it's where emergency on your hands.

CR and QR: Current Ratio and Quick Ratio

Current Ratio = [Current Assets ÷ Current Liabilities]

The current ratio measures your ability to meet short-term obligations by determining if you have enough current assets to cover current liabilities. Ideally, your current ratio should be near 2.00, meaning your current assets are two times, or 200%, of your current liabilities. If your current ratio is below 2.00, your short-term debt-paying ability is reduced. This is an unstable financial position, and you should examine your finances to see where improvements can be made. If your current ratio is above 2.00, you have above average debt-paying ability; however, if it is too high, it may mean that you are not utilizing your assets effectively. If it's below a 1, then you've got an emergency on your hands.

Quick Ratio = [(Current Assets - Inventory) ÷ Current Liabilities]

Like the current ratio, the quick ratio measures short-term debt-paying ability. It is calculated without inventory because inventory is not as easy to turn into cash as your other current assets. Thus, the quick ratio examines assets that can be turned into cash in the least amount of time. Businesses that carry a lot of inventory need this important planning tool. Ideally, your quick ratio should be at 1.00 or higher. If it is lower than 1.00, you may have trouble meeting your current obligations. Below 0.5 is an emergency. Note that if you don't carry inventory, your current ratio and quick ratio will be the same.

This doesn't have to be complicated, or difficult to control

All it really takes is a commitment to two things: (1) understanding the relationship between money and your business activities and (2) creating and implementing—on a regular, ongoing basis—a few straightforward money management tools and strategies. When you understand how money flows in your business and you can control your money systems, you will make informed decisions about prioritization, management and investments.

You don't have to be a finance expert; you just have to understand enough to make the decisions that matter. You begin all of your budgeting and forecasting. At a minimum, your revenues (sales) should be at least as high as your BEP. The goal, of course, is to increase this number over time so that revenues (sales) are above the BEP.

If you don't know what your BEP is, you need to find out now. And how many customers does it take to hit your BEP this month? Per week? Per day? How many leads do you need to get that many customers? Also: if you want to lower the breakeven sales number, reduce your cost of goods sold or your operating expenses.