Profiting From Chaos

Does the world seem chaotic?  Unrest in the Mid-East threatens to disrupt world oil supplies.  At home, electric reliability is becoming suspect with whole regions experiencing rolling blackouts.  And now, the potential for a nuclear meltdown in Japan will push back the potential resurgence of nuclear energy.

How did we get here?  The answer has little to do with the quest for democracy.

And what does it mean for your business?  It may not be bad.

While written before the Japanese earthquake, my latest column for Contracting Business Magazine, titled, "Profiting From Chaos" attempts to address these questions for air conditioning contractors.

Click to read the column.

How do you see the world becoming more chaotic?  Where do you see opportunities to profit, whether in HVAC or some other field?

The Power of Appreciation

Service Roundtable and Retail Contractor Coalition member, Penny Luker from Mid-Cities Air Conditioning in Richland Hills, Texas, made my day when she sent me the card shown below...

Click on the image to read the copy.

It was incredibly nice and thoughtful. It stands out accordingly. It also stands out because it's so rare.

Why? It shouldn't be. Yet, all of us get so wrapped up in our own day-to-day activities we forget to show appreciation or complement others. Think how the simple act of showing appreciation, performed consistently, can affect everyone around us. Think how it can get reflected back to us.

Go ahead. Give it a try.

Who Sends Money For This Yellow Pages Solicitation? Apparently 162,000 Business Owners

This above pseudo-invoice came in the mail today. It's an "order form" for a "yellow pages" listing for just $396. Who would fill this out and send money? Apparently 162,000 businesses did.

A story from July 2010 on CBSNews.com reports, "Prosecutors say 162,000 companies responded to the money laundering scheme, and although United Directories did, in fact, publish a business directory in 2008, it contained only 55,000 of the 162,000 businesses that had paid for advertising space."

According to the story, these guys collected $425 million over a four year period. All they did was send solicitations like the one above and people sent them money. And it's apparently legal. The Jacksonville Business Journal reports that the prosecutors were forced to drop the charges.

Moreover, their attorney truthfully claims, "This company has an A+ rating from the Better Business Bureau."

It's really a half-truth (which is pretty darn honest coming from an attorney). The Florida Times-Union pointed out that three Better Business Bureau's rated the company. Only one was a A+. The other was a B- and the third was an F, which taken together says more about the Better Business Bureau than United Directories.

At the bottom of their solicitation United Directories (un)clearly states, "THIS IS A SOLICITATION FOR THE ORDER OF GOODS OR SERVICES, OR BOTH, AND NOT A BILL INVOICE OR STATEMENT OF ACCOUNT DUE. YOU ARE UNDER NO OBLIGATION TO MAKE ANY PAYMENTS ON ACCOUNT OF THIS OFFER UNLESS YOU ACCEPT THIS OFFER. WE ARE NOT AFFILIATED WITH YOUR LOCAL PHONE COMPANY AND THE DIRECTORY IS NOT DISTRIBUTED TO ALL LOCAL TELEPHONE SUBSCRIBERS. IF YOU ADVERTISE IN YOUR LOCAL PHONE COMPANY'S YELLOW PAGES AND ACCEPT THIS OFFER, THIS DIRECTORY LISTING WILL BE IN ADDITION TO YOUR EXISTING YELLOW PAGES ADVERTISING. THIS IS A NATIONWIDE BUSINESS YELLOW PAGE LISTING SOLICITATION. A LISTING IN WWW.YELLOWPAGESUNITED.COM WILL BE INCLUDED WITH EACH YELLOW PAGES LISTING OF $396.00. SEE TERMS ON REVERSE."

Aside from being poorly written and presented in all caps with narrow line spacing, reducing readability, it appears that nothing is being promised. If anyone demands that something must be provided, they have themselves covered. When I visited their website, I found my business "listed" exactly as it appears in the white pages.

Hmmm. I suspect they "listed" their entire business mail list, sent out the solicitations, and are sitting back waiting for the money to roll in. Paid or unpaid, the companies are listed. Since everyone is listed the directory can claim a service was provided if anyone complains.

There is so much wrong here on so many levels, it's hard to know where to begin...

• Apparently the courts don't find this deceptive. I do. If the courts can't stop this, but can drive small businesses under because of the actions of a rogue employee or because the company charges more than a lawyer thinks is right, what use are they?
  
  
• Businesses like this tarnish everyone in business. Practices like these make people jaded and skeptical. This hurts above-board companies that legitimately try and help other businesses and it hurts the companies who need their services, but won't consider them out of fear of being defrauded.
  
  
• I won't even get started on the Better Business Bureau.
  
  
• Deceptive or not, I find it hard to believe that anyone would complete this form, send it in, and send money. Yet they do. If 162,000 business owners responded to this type of marketing, what are the opportunities for companies marketing legitimate products and services?

The answer is unlimited, provided the company is marketing.

Marketing? I knew there was a catch!

Cause & Effect

Our Sheltie, Humphrey Bogart, likes to herd things and to protect the house. It's instinctive. Unfortunately for Humphrey, we don't keep sheep or cattle in our backyard and the squirrels and rabbits have learned to keep their distance. So what's a Sheltie to do? Chase aircraft!

We live north of DFW Airport and can easily see planes flying over our house on final approach. Humphrey can see them too. He doesn't like them.

Humphrey used to leap into the air trying to catch the planes, but never got close. Now, he just barks at them until they leave. As far as Humphrey's concerned, he's chasing the planes away. He knows it's happening because every time he barks at one, it goes away.

Humphrey associates his barking with the plane's leaving and concludes one causes the other. In a way, he's right. The plane shows up and Humphrey barks until it leaves.

Getting cause and effect wrong is all too common. Service callbacks increase. Is this the result of a lack of training, poorly designed incentives, bad products, or something else? It could be anything. The mistake is to note a correlation and draw a conclusion without understanding the relationships.

In another example, a business owner hears from the media about the poor state of the economy. Nervous, he reduces expenses, cutting marketing and delaying business investment. Sure enough, business falls off, but the slide is more a result of the owner's actions than the economy.

A competitor fills the void left by the first owner by increasing marketing and investing in growth. He figures the economy might make growth more difficult, so he needs to put forth more effort.

In any economy, companies prosper and fail. This suggests the economy may not be as important as the actions of the owner.

Shelties can't tell the difference between correlation and cause and effect. You can. Where have you noticed a correlation that's mistaken for cause and effect?

Ten Ways to Protect Your Company’s Online Reputation

Online, anyone can say anything anonymously. What if someone says something about your company? How can you defend against it?

Click here to read the latest CB Hotmail and learn about ten ways to defend your online reputation.

Atlas Shrugged - Part One (The Movie)

On tax day, April 15, Atlas Shrugged - Part One, will premier.  If made true to the book, this may be the most important movie in a generation.  The trailer, show below, certainly looks promising...



Did you notice how Hank Rearden was unapologetic about making money? Too often, Hollywood, the media, and the government act as though profit is a bad thing. Profitability's not bad. Losses are bad. Bankruptcy's bad. Profitability leads to job creation, increasing standards of living, and investment in the future. There's no future in failure.

While Atlas is a story about individualism and liberty, the heroes are entrepreneurs and laissez faire capitalists. Rand celebrates the people who risk everything to create enterprises from the fruits of their own minds. It's about time business is painted in a positive light!

Crony capitalists, who seek to compete through government manipulation of the capitalist system rather than the free market, are not treated well by Rand. If you're unfamiliar with the book the movie is based upon, here's a short video about the book...



In a famous survey by the Library of Congress and Book of the Month Club on its readers' "lifetime reading habits," Atlas was found to be second only to the Bible in "significance to their lives" (as grudgingly reported in the New York Times). If you have never read it, it's a long book. Rand tends to ramble and lecture at times, though always with a purpose. Buy the book now, today. Read it before the movie comes out. It's amazing how a 50 plus year old book is more relevant today than when it was written.

The following interview with the director of the movie suggests that he "gets" the book and is shooting the movie true to Rand...



John Stossel dedicated one of his television shows to Atlas Shrugged. This is a six segment video series, with the first segment the longest. Part One (10:59)...



Part Two (7:43)...



Part Three (6:33)...



The next two segments do not involve a discussion of Ayn Rand or Atlas Shrugged, but the "Nanny State." Part Four (8:20)...



Part Five (6:10)...



In the final segment, Stossel returns to Atlas Shrugged and addresses the flawed notion that capitalism failed and caused our current financial challenges. Part Six (3:28)...

Brand Pollution

One of the advantages to franchising is the ability of a business owner to immediately become part of, and benefit from a well-known national brand. It's instant brand equity, bought at a discount. But what if the brand goes bad? What another franchise operator pollutes the brand?

What if you buy a franchise and a nearby franchisee has problems? Worse, what if the franchisee goes bad and it gets picked up by the media, making the brand toxic? Your operation could be golden and yet, your reputation could be tarnished by someone else carrying the same brand in an adjacent territory.

The nearby operator may not do anything wrong. He may merely be the subject of a witch hunt by an overzealous prosecutor out to make a name for himself by attacking a business. You can be sure a compliant media will be ready to pile on, calling the business, "unscrupulous," "greedy," and so on.

A recent example can be found in a Minneapolis Star-Tribune report on the operation of a national plumbing franchise. I don't know whether the local operator actually did anything wrong or not. After all, many in the media and government consider profit to be wrong. Regardless, the brand as a whole was attacked, not just the local operator.

Justifiably or not, consumers piled on. Their comments were harsh and overwhelmingly negative.

In today's wired world, this story and accompanying comments won't merely affect franchisees within the readership range of the paper. The story will come up nationwide on Internet searches. It's going to hurt business owners operating under the brand a thousand miles away and could haunt the brand for years.

The argument a franchiser will offer in defense is that headquarters monitors franchisee quality and reputation. In practice, for many franchisers, such monitoring is limited. Consumer complaints that reach headquarters are typically turned back to the local franchisee. If complaints get excessive, the power to act is limited by the franchise agreement.

The franchise laws that are designed to protect the rights of franchisees can limit the ability of the franchisor to take action. Not only is it legally difficult to remove a franchise, it's expensive. Franchisers will think long and hard before stepping in.

If you're considering franchising or licensing a brand, the risk of contamination by other operations using the brand should be factored into the decision. In the case of an extremely well-known and advertised brand, the risk might be worth it, especially if the brand enjoys a stellar reputation. If the brand is one you will be investing in, that is not already established in your market and that requires your efforts to build awareness, why assume the risk that the brand might be polluted by another company?

Why not build a brand that you control and that can't be polluted by another operator instead? Why not build your own brand?

Are Odors Hurting Your Repeat Business?

No doubt about it, the pest control technician reeked. I could smell the cigarette smoke half way across the room, and I have a weak sense of smell. I'm reasonably sure he chain smoked whenever he was behind the wheel, with the A/C on and the windows closed. The smell made it hard to be in the same room. I can't imagine it was good for repeat business.

Every now and then I indulge in a cigar. I enjoy the cigar smoke while I'm smoking it, but not the odor that clings to my clothes afterwards. In the act of smoking the cigar, I'm unaware of any bad odors. The next morning, however, the embedded smoke leaps from the laundry hamper to assault my olfactory senses.

If I can be unaware of the odor when smoking the occasional cigar, I imagine the chain smoking technician is oblivious to his scent. Yet, the smoker who is aware of the smell and who tries to cover it up with excessive amounts of cologne, aftershave, or perfume is far worse. Now, it's not simply cigarette smoke that's a problem, but an array of odors.

It's not only the combination that's a problem. Non-smokers who use excessive cologne, aftershave, deodorant, or perfume can be hurting their business. So can anyone with body odor and/or bad breath.

It seems we're more sensitive to odor than in the past. An MSNBC article quoted Dr. Alan Hirsch, with the Smell & Taste Treatment and Research Foundation of Chicago on the subject. According to Dr. Hirsch, "People are no longer being inundated by smoke. They’re aware of the ambient aromas around them and they’re also more sensitized to them."

In other words, as fewer people smoke and even fewer smoke indoors, our awareness of all odors has increased. Moreover, women appear to be more sensitive to odors than men. Since women tend to be the decision maker for the selection of home service companies, this gives the elimination of personal odors greater import.

What do you do? The best solution is to strive to be as scentless as possible. Use scentless deodorant and breath spray, but otherwise strive to be scent free.

Keep extra uniforms on your trucks. If summer perspiration gets excessive, put on the spare shirt.

If you must smoke during the day, do it outside, even in cold weather. Use breath spray afterwards. Also, wash or use hand wipes.

You or your field service personnel may not be aware of, or bothered by odors, but odors are present, it's almost certainly a problem for some of your customers. That's reason enough to take steps to minimize scents.

Most Talked About 2011 Superbowl Commercials

Internet company, Alterian, tracked the social media conversations for the Super Bowl commercials.  VW got the most buzz and it was positive by more than a 7:1 ratio.  Here's the VW spot...



It's hard to top cute kids. But does it make you want to run out a test drive a VW? Uh, no. For that reason it fails.

Doritos and Pepsi had some clever and some disgusting user generated spots that generated the most buzz for their brands after VW (and Pepsi Max needs it can get). Worth noting is the following, rather disgusting Doritos spot, because the door-to-door salesperson who created it only spent $82 according to Forbes Magazine. That's a budget most contractors can afford.



Disgusting or not, it does communicate the message that Doritos taste good. Plus, it does a good job of reversing the negative of Doritos' mess.

Groupon followed, but their fake "save the Tibetan people" ad generated twice as much negative buzz as positive. Personally, I didn't have any problems with it. I think it accomplished it's objective.



Other than the Tibetan thing, the ad highlights that Groupon is a way to buy stuff for less. Mission accomplished.

Next up was the Motorola Xoom spot, which made fun of Apple. Somehow the buzz was 2:1 positive, despite legions of Apple drones tweeting that they found nothing humorous about it...



By inference, the spot refers to the legendary Apple 1984 spot...



Part of the point is that Apple is now Big Brother. The bigger point is that there's an alternative to the iPad, with different and better capabilities. Mission accomplished.

While this year's collection of Superbowl commercials weren't as entertaining as past years, I thought they were more effective as advertisements. Most of them were not the work of agency creatives self-actualizing at client expense. They had a message and conveyed it. Give me an ad that sells over one that entertains without selling any day!

Does Johnny Need a Four Year Degree?

The Pathways to Prosperity Project, which is based at the Harvard Graduate School of Education, released a fascinating report yesterday titled: Pathways to Prosperity: Meeting the Challenge of Preparing Young Americans for the 21st Century.

Do you know what Project Lead the Way is?

According to the press release, the report contends that our national strategy for education and youth development has been too narrowly focused on an academic, classroom-based approach. I know what you're thinking, "leave it to the Harvard intellectuals to publish a report stating what you've known for years." I thought that. Then I thought, but what have I done about it?

Visit Harvard's site here for the press release details. Here is the link to the Pathways to Prosperity report.

Upon reading the report you might think something like this, but I'm just one contractor, I cannot organize government, the public school system and industry into one cohesive machine that can tackle these problems head on. I agree. By understanding the stated problems and offered solutions however, you can begin to prepare for the road ahead. Actually, if you read this report with an open mind, you'll probably begin to get ideas that you can use in the near future. For instance...

If a middle school student asked you for a detailed pathway of education that they could pursue in order to work as a technician or tradesman for your company, could you provide it?

The authors of the report discuss Project Lead The Way. It was developed to introduce high school students to engineering. Right now the program involves 3,500 high schools and 300,000 students. I wonder if there might be value in employing one of these students part time, while they go to school? Visit Project Lead The Way to learn more about what they do and for a high school near you.

Collecting Customer Email Addresses

Roy Hauser asked, "Any ideas on how to obtain email address' from our customers? Service Techs say customers don't want to share their address' because of spam."

First, collecting email addresses needs to become as routine as getting a phone number.  It should not be an option.  Include it on the invoice and every other form where an address is requested from the customer.  Otherwise, technicians will use the slightest hesitation from the homeowner as a reason not collect the emails.

If the tech is afraid of asking the customer for an email address, instruct him to present the invoice to the customer to complete name and address information and authorization (i.e., signature).  People are so used to providing email now that many will simply fill in the blank.

If homeowner fails to provide a phone number, address, or email address, ask for the missing information.  If the homeowner demands to know why an email address is needed, explain...

"We're trying to reduce our impact on the environment and to keep our prices low by communicating with our customers by email rather than postal mail.  Would you rather we communicate with you by email or postal mail?"

Some may say neither, but that's not being offered as a choice.  If the customer is insistent on remaining incommunicado, there's nothing you can do but these customers will be exceptions.

You're giving the customer a choice.  The choice is between email and postal mail.  Most people will choose email.  Pressing "delete" is easier than opening and throwing mail away.

You might add a third option, which is phone calls.  Given the choice between email, regular mail, or phone calls, email clearly wins.

However, you should collect email addresses before the technician is dispatched.  Some will hesitate to give the call taker an email address.  You must give a reason to get an email address. So create one!

Approach #1:  The call taker tells the customer he/she wants to send the customer a photo and bio of the technician being dispatched and asks for an email to send it. We have a template for this on the Service Roundtable.

Approach #2:   The call taker informs the customer there’s $5 or $10 internet coupon available and will be happy to email it. On the website, require the customer to enter an email address to receive the coupon.

Approach #3:  The call taker asks for an email address to send the homeowner a service call warranty.

Do you have a better approach?  If so, let me know!

State of the Internet

Some interesting stats about the current state of the Internet from Focus.com (with my comments in blue)...

Email

• Used by 1.9 billion people
• There are 2.9 billion known email accounts
• 25% of email accounts are business or corporate accounts
• 294 billion emails are sent daily
• In 2010, 107 trillion emails were sent (as a number, that's more than seven times the size of the U.S. national debt)
• Spam accounts for 89% of all email (I bet closer to 95% of my email is spam)

Websites

• There are 255 million websites
• 21.4 million websites were added in 2010, representing 8% of all websites
• There are 109 million domain names
• 7 million domain names were added in 2010, representing 6% of all domain names (what's really incredible is that there are any domain names left)

Internet Use

• The Internet is used by 2 billion people
• The number of people using the Internet increased 14% in 2010 (amazing that usage is continuing to grow at this rate)
• The leading web browsers are Internet Explorer (47%), Firefox (31%), Chrome (15%), Safari (5%), and Opera (2%) (for all of the hype Apple generates, one would think Safari would enjoy greater share)
• Internet use is greatest in 
• Asia (42%)
• Europe (24%)
• North America (14%) (Wow!  I would not have guessed North America would trail Asia and Europe by this amount)
• Latin America/Caribbean (10%)
• Africa (6%)
• Middle East (3%)
• Australia/Oceania (1%)
• Spam is greatest in 
• Europe (39%)
• Asia (34%)
• Latin America/Caribbean (13%)
• North America (10%) (I also would not have guessed North America would be underrepresented in spam - of course, the amount of offshore spam also suggests that there's not much we'll be able to do about it)
• Africa (3%)
• Australia/Oceania (1%)

Social Media

• There are now 600 million Facebook users (gulp)
• In 2010, 250 million Facebook users were added (big gulp)
• Every day, 20 million Facebook apps are installed
• 70% of Facebook users live outside of the U.S. (conversely, this means that 58% of the U.S. population is using Facebook)
• During 2010, 100 million Twitter accounts were created
• During 2010, 25 billion Tweets were sent
• There are 152 million blogs

Online Media

• Every day, 2 billion videos are watched on YouTube
• Every minute, 35 hours of video is being uploaded to YouTube
• Videos are watched by 84% of Internet users (how can 16% of Internet users spend any time online and avoid video?)
• Only 14% of Internet users have uploaded a video
• Every minute, 3 thousand images are uploaded to Flickr
• More than 5 billion images are hosted on Flickr
• More than 36 billion images were uploaded to Facebook in 2010 (this has gotta be a typo... right?)

So what does all of this mean for your business?  No matter what kind of business you operate, you better get wired or you will get wiped out.

The Copper Theves

Plumbing contractor, Tom Sondergeld took a call from the supply house. An employee was trying to pick up some copper. He was wearing a company shirt and using a company purchase order. The only problem was he wasn't on the list of employees Sondergeld sent to the supply house.

When Sondergeld arrived at the supply house, he did find an employee. The employee wasn't the guy picking up the copper. The employee was waiting in the truck, while is buddy posed as an employee. Both got arrested.

If Sondergeld hadn't sent his suppliers a list of current employees and required his suppliers to check IDs, it's unlikely the wannabe copper thieves would have been caught. Read the full story.

What steps have you taken to protect your company against theft?

(c) 2011 Matt Michel

The Power of Fun

Credit Andrew Twidwell from ABT Plumbing & Electric in Nevada City, CA for sharing this on Facebook....



As the video shows, fun matters. When we insert "fun" into business, we attract more people.

Fun can be as elaborate as the design of the Rainforest Cafe's restaurant or as simple as John Price's Hawaiian theme for his Texarkana, Texas company, Aloha Aire.

How can you put fun in your business?

What's Your Company's Hassle Factor?

How friendly are your policies to your customers?  How easy are you to do business with?  What's your company's hassle factor?

My wife bought a couple of pallets of pavers for a backyard project from Home Depot.  When it came time to return the left overs, we took them to a different Home Depot and were informed we could only get store credit.  We could get cash if we returned them to the original Home Depot.

I looked at the big stack of very heavy pavers we unloaded from the SUV on to the cart, which we wheeled from the parking lot to the return desk.  I didn't want to push the cart back to the parking lot, reload the SUV, drive to the original store, unload them to a different cart, and push them to that store's return desk.  I protested.  The clerk didn't budge.  We ended up taking the store credit.

Still irritated, my next home improvement purchase was made from Lowe's.  I bought a couple of items I didn't need and returned them.  Because I wrote a check I expected to get the "We need to issue store credit or wait 31 days for the check to clear" nonsense.  To my surprise, I was handed cash back, without a fuss, without arguments, without a hassle.

To be honest, I don't care whether I buy from Home Depot, Lowe's, or some other store.  Yet, going forward I intend to buy from Lowe's.  The retailer has won my business.  And it was easy to win.  All they had to do was be a little easier to do business with than the competition.  Price was not a factor.

Unless Lowe's does something to blow it, I'll drive past their competitors and go out of my way to buy from them.  Why?  Fewer hassles.

Just like I'm agnostic about home improvement purchases, your customers probably don't care who they call for service.  Simply by answering your phones after 5:00 p.m., allowing consumers to schedule service online, offering service on the weekend, accepting credit cards, and otherwise being easier to do business with than your competition will win you business.  Ask yourself how you can reduce your hassle factor.

The Kid in the Gym

Tonight the importance of practice was driven home.

After a run on the treadmill at the city gym, I walked a lap on the indoor track to cool off.  The track is on the second floor of the gym and circles the exercise equipment and looks down on the basketball courts.  As I walked by the second court, I noticed a kid shooting baskets by himself.

The kid was no more than 13 or 14.  He would toss the basketball in the air with a spin, grab it on the bounce, and drain a basket from beyond the 3-point line.  After he drained one, he would move a few feet to his right and repeat the process.

Spin.  Bounce.  Shoot.  Swoosh.  Move.

Again and again.  While I walked around the court, the kid drained five 3-point shots in a row.  Each was taken from a different point.

I thought, "This kid's going to be awesome when he gets to high school."

Then, I wondered how many baskets he sank before he could hit five 3-point shots in a row.  I wondered how many shots he would take tonight.  He was by himself.  Spin.  Bounce.  Shoot.  Swoosh  Move.  Again. And again.  And again.

He was barely in his teens and it was clear he must have practiced thousands of hours to reach his current level of proficiency.  This was for a game.

How much do you practice for business?  How much do your people practice.

Once, after a presentation at a sales meeting, one of the salespeople came up to me and asked how I seemed to know what was coming next, before the slide appeared.  I brushed off the question with a joke, but the real answer was practice.  Before I gave the presentation at the sales meeting, I gave it over and over again with an audience of none.

How often do your salespeople practice their presentations?  How about your technicians and plumbers?  How easy do you make it for them to practice?  What can you create more practice opportunities?  Is it role playing?  Is it creating and recording scenarios for them to respond to when driving to and from appointments?

If we're professionals, we should practice at least as hard as a middle school athlete.  So think about it.  How can you help your people practice?

Marketing plan musts for 2011

Everyone wants 2011 to be better than last year, but only a few plumbers will take active steps to ensure improvement and prepare a marketing plan. If you haven't already created a marketing plan for 2011, here's what you can do now to ensure improvement this year.


Read more in Contractor Magazine

Do You Cut Off the Ham in Your Company?

One of Zig Ziglar's classic stories involves a woman who cuts off the end of her ham before baking it.  As he discovers why, he learns a fundamental truth that affects many businesses.  What is it?  You'll have to read the story in Contracting Business.

The Evolving Technology of Learning

The following column first appeared in Southern PHC Magazine...

Training in service companies is about to undergo a revolution. The widespread diffusion of broadband Internet access will make more training available for more people, more conveniently.

Want an example? Omega Plumbing’s Allan Ferguson brought in Charlie Greer to conduct a training class for his plumbers. Omega Plumbing is located in Sydney, Australia. Charlie is based out of Fort Myers, Florida. Charlie trained a group of plumbers on the other side of the world using video conferencing from his personal computer. Charlie was projected on the wall larger than life in Sydney, while he watched the audience on his screen.

This may sound miraculous (and it is), but it’s no longer all that unusual. Well, it’s no longer unusual outside of the service trades. With exceptions, the service trades are likely to be among the last to embrace changes in training technology. It won’t be the first time.

Twenty years ago I ran marketing for the geographic division of an HVAC manufacturer. While I was based in California, I spent a lot of time attending meetings in Texas. During one of the plane flights it struck me that the entire notion of a geographic division was an anachronism. It was a relic of the days when people traveled by train and getting from North Texas to Northern California required days, not hours. Eventually, this was recognized by top management. The geographic divisional offices were closed. Fewer people provided better support from a central location.

Just as the industry was slow to recognize the impact of changes in the economics and availability of travel technology, we’re probably going to be slow to accept changes in training technology. However, there are exceptions. One of the exceptions is the new Service Nation Alliance.

Service Nation is embracing technology at a deeper level than any other contractor group. Here are three ways the organization is using technology to improve training…


Multi-User Video Conferencing

Broadband has made it personal computer based, multi-user video conferencing feasible. Small groups of contractors meet monthly to share financials, hold each other accountable, solve mutual problems, and push each other to higher levels of performance.

The alliance is also using multi-user video conferencing to create support groups of managers and contractor action teams to focus on best practices. While contractors think twice about flying service managers across the country to meet with the service managers of non-competitive companies, it’s virtually free online.


Distance Learning

The office staff of most contracting companies seldom receive much formal training. Yet, the CSR is the public face of the company. He or she is the first person the prospective customer engages. If there’s any position that merits training, it’s the CSR. Thus, Service Nation is using distance learning training so that CSRs, for example, can receive training at the desktop through short training modules that contain specific learning objectives and post-module testing to ensure the learning objectives were realized. Through the alliance’s learning management system, owners can easily track the progress of each employee.


Webinars

Many contractors have attended a webinar. Most webinars today are glorified sales pitches, disguised as an online seminar. Service Nation is using webinars to reinforce and review their boot camp training class, giving graduates an constant refresher without leaving the office.


Streaming Media

Service Nation is bringing in top consultants, contractors, and vendors to offer short training clips for contractors to use in service meetings. It gives meetings an extra kick and another voice than the boss to reinforce the message.


Apps

The proliferation of smart phones and tablet computers is further revolutionizing the training arena, making it possible to easily deliver training resources to field employees.

Will these changes in the technology of learning eliminate the need for face-to-face meetings and in-person training classes? Hardly. There will always be a need for people to interact and converse. It’s built into our DNA. However, the evolving technology of learning will allow us to train more people with better systems for less money.

While it may take longer for the majority of the organizations in the service trades to apply new technology than other industries, it will happen. In fact, it’s already begun.

For more information about the Service Nation Alliance, call toll free 877.262.3341.

Year-end tax planning......what should we do?

Congress adjourned in late September without a bi-partisan agreement to extend the tax cuts before the election; apparently many members of Congress were more concerned about saving their own jobs than they were about coming to an agreement on these important tax laws. And important they are: according to the Wall Street Journal, if the existing tax cuts are not continued, taxes will increase for more than 150 million Americans. This issue is now left to the lame-duck session of Congress.

The Bush tax cuts aside, here’s a look at what is clear at this point.

Energy Tax Credit (IRC Section 25C)

This popular industry tax credit expires on December 31, 2010. It allows a taxpayer a 30% tax credit on the installed cost of qualifying equipment (high efficiency furnaces, boilers, water heaters, air conditioners, heat pumps, and wood stoves and main air circulating fan). This credit applies to existing principal residences only. The maximum allowable credit is $1,500 so the credit is maxed out at installation costs of $5,000 and above. This is not an annual credit. If you took any credit in 2009, that amount must be subtracted from the $1,500 limit to see what, if any, credit amount is available for 2010. This provision is not expected to be extended even if the Bush tax cuts are.

Businesses Taxes

Typically, an asset purchased must be depreciated (written off) over a number of years. Section 179 of the Internal Revenue CodeThis deduction allows a business to immediately expense qualified property in the year it is bought.

The Section 179 deduction limits have been increased for 2010 and 2011. The maximum deduction is now $500,000 and the maximum investment limit is now $2,000,000. Any asset purchases in excess of $2,000,000 will reduce the allowable Section 179 deduction dollar-for-dollar from the $500,000 limit. The allowable Section 179 deduction is limited to the taxable income of the business. Any amounts not deductible in the current year may be carried forward. The allowable deduction for luxury autos (i.e. SUVs) is $25,000. The remaining cost is depreciated over five years.

The 50% bonus depreciation provision that expired at the end of 2009 was re-instated for 2010 only by the Small Business Jobs Act passed by Congress in late September. This allows a taxpayer to write off an additional 50% of the adjusted basis of the property placed in service during the year. Again, this revived provision expires December 31, 2010. First year depreciation limits for luxury autos are capped at $10,96011,060 (including the bonus depreciation). First year depreciation limits for light trucks and vans are capped at $11,06011,160 (including the bonus depreciation).

The Work Opportunity Tax Credit allows a business to claim a credit equal to 40% of the first $6,000 of wages paid to employees in a targeted group. The employee must work over 400 hours during the year. Otherwise, the credit is reduced to 25% for those who work at least 120 hours during the year. The 12 targeted groups include qualified veterans of service in the U.S. Armed Forces, vocational rehab individuals, ex-convicts and disconnected youth. For the complete list of targeted groups, go to the U.S. Department of Labor website (www.doleta.gov). This program is administered at the state level. This credit expires on December 31, 2010 as well.

If you are an “S” corporation that previously was a “C” corporation, the built-in gains (BIG) tax holding period for 2010 is seven years. That means any conversions before 2003 can now sell appreciated assets and avoid the BIG tax (35%). Recent legislation has decreased the holding period to five years in 2011.

If you are considering selling your business, you may avoid higher tax rates by closing the sale in 2010. You may also consider electing out of the installment method and recognizing the entire gain in 2010. It’s important that you do the calculations to make sure it makes sense in your situation. You should also consider selling and recognizing the gain on any other appreciated property.

You also may consider paying out “C” corporation dividends prior to the end of the year. The current dividend rate (maximum 15%) is much more favorable than the dividend rate would be in 2011 if the rates are allowed to increase. In that case, dividends would be taxed at ordinary income rates, which would be as high as 39.6%.

Individual Taxes

In this environment, it is extremely difficult to offer year-end tax planning guidance. Traditional general tax planning strategy is to defer (postpone) taxable income and capital losses and accelerate (pull into 2010) deductions. If the Bush tax cuts are allowed to expire, then the strategy would be reversed: you would accelerate taxable income into 2010 and defer above-the-line deductions into 2011. Above-the-line deductions include: IRA contributions, health savings account, self-employed health insurance, self-employment taxes and alimony, among others. Whether itemized deductions (medical expenses, real estate taxes, mortgage interest, charitable contributions, etc.) should be deferred into 2011 would be determined on a case-by-case basis. This is especially true if the itemized deduction phase-out provision returns for higher-income taxpayers.

The following chart shows the ordinary income tax rates for this year and 2011 if the Bush tax cuts are not extended.

Tax Rates
2010 2011
10.00% 15.00%
15.00% 28.00%
25.00% 31.00%
28.00% 36.00%
33.00% 39.60%
35.00%


The dividend tax rate (currently 0% for those in the 10 & 15% brackets and 15% for all others) would go to ordinary income rates (which could be as high as 39.6% for some taxpayers)! The long-term capital gain tax rate (currently 0% for those in the 10 & 15% tax brackets and 15% for all others;) would go to 10% for the 15% bracket and 20% for all others (different rates for qualified five-year gain property).

Estate Taxes

There currently is no estate tax for 2010. The estate tax returns for 2011 with the exclusion amount (amount exempt from estate taxes) scheduled to be $1 million and a top tax rate of 55%. In 2009, the exclusion amount was $3.5 million and the top tax rate was 45%. I expect that the estate tax issue will be addressed very quickly by Congress, as five billionaires have died so far in 2010, including New York Yankees owner George Steinbrenner. The government has lost over $8 billion in estate taxes from these five families alone because of this.

As you can see, with all this uncertainty surrounding the tax laws, it is difficult for businesses and individuals to do their year-end tax planning. While I expect that many of the Bush tax cuts will be extended, it may be well into 2011 before this gets resolved. At this point, my best advice is to pay close attention to news reports coming out of Washington, D.C. and stay in close touch with your CPA or tax preparer.

U.S. Treasury Department Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. This article is not intended to be comprehensive in nature and competent professional tax advice should be sought in determining the issues that impact your specific situation.