Alarm Systems:

I have never had an monitored alarm system that did any good. Buy the time the monitoring company calls you and you get to your place of business the crooks are gone.

I usually install an alarm system with a very loud bell or horn to scare away intruders. I put up signs that say "alarmed and video monitored". The noise keeps the violators out, and/or reduces their time inside.

I would make exceptions for some types of business with high theft occurrences such as pawnshops, jewelry stores etc. The lack of monitoring keeps cost down.

Business Insurance:

Loss of property: You will need an all risk insurance policy to cover your inventory, and your building if you own it. I recommend a deductible of $2,000 on inventory insurance. Cover any leased equipment with a replacement rider.

Damage to other peoples property: Liability insurance is needed. Consult with your insurance agent about general public liability. In the past 25 years, the only liability damage claims we had were when delivering a product. Those claims were covered by our transport cargo, and auto liability policies.Â

Auto insurance: Auto insurance is needed. Non-owned auto liability insurance policy covers damage by any person working for you when they use their personal vehicle. You need this one. Your auto liability insurance needs to be of the commercial type if you do any deliveries. Transport cargo insurance covers the products in transit.

Credit Card Machines:

Credit Card Machines:

Rent, your credit card machines by the month or buy it paying cash. Do not lease it. With a rental you can exchange it if the technology changes, and you can get out of the deal if need be. If you lease a machine, the cost is almost twice as high. 1st of Omaha or Bank, and Bank of America, both have rental programs.

Dumpster Rental Contracts;

Trash dumpster contracts are one sided, written to protect the trash company, and can cost you money. When renting a trash dumpster there are some contractual clauses in the contract you should line-out, and some clauses you need to add.

I have the trash company's salesperson leave the contract with me to be faxed or mailed in.

I then line out the clause that states, "I the user am responsible for their equipment in the event it is damaged or stolen".

I line out the clause that says "I have to agree to rate increase without notice".

I line out the clause that says, "I agree to a multi-year term".

I add clauses that say:

"If a competitive lower rate is found during the contract period this contract may be canceled at users discretion if the competitive rate is not matched."

"This contract can be temporally suspended, or canceled with thirty days written notice, with no further payment obligation by the user, if the user's business is interrupted for any reason to include, fire, loss of lease, street repairs, or user, renter ceasing business operations at this location." (Substitute your name or business name for user)

Line out the unwanted clauses, add the new ones, and send the contract to the trash company. I have never had the changes prevent me from getting service. I have had to remind the trash company that the clauses were changed when adverse conditions caused me to make changes to the service that they did not like. It has saved me money!

Magical Business Operating Concepts

 Here are some concepts that I use in operating my businesses. Over the past 45 years I have learned that some things are not what you think, or the results you get will not be what you thought. I have learned that some things you think you should do, you shouldn't. I have learned that sometimes doing nothing is the best thing you can do. I have learned that sometimes it is just to costly to fix a perceived problem.

 When I look at how companies operate today I see a lot of people running around enforcing rules and polices. Then spend half their time being policy enforcers. That begs the questions?; Is the cost of having the polices more expensive in money, time, and frustration then not having the policy at all?

Hot checks; At our companies we do not check drivers license, we do not verify checks or use a check guarantee service. We just take them. Our losses are less then 1/10 of 1 percent of total sales. This saves lots of time ,and the customers appreciate it. This will not work in all businesses, but it will in most. We found the cost savings in employee time alone to be more then the losses from hot checks. We do turn all hot checks over to the DA, but we never collect anything on them.

Customer service; I use to have three full time customers service employees. I laid them all off five years ago and will never have another one. In our company who ever writes the order has to deal the customer service for that order. If no one wrote the order, who every gets the customers call deals with that customer's service, and that includes me. My customer service calls declined 80% after the sales people had to stand behind their words. Savings are huge, customer response...wonderful. (We do pay a 1% commission to whom ever writes and order). The employees have come up with all types of innovative ways to help the customer so that they will not have a customer service issue.

Employee errors; If a staff member has no errors in six months they will be interviewed by management. For example, what have you been doing? What have you done outside your area of expertize? What have you been doing to push the envelope?

If an employee makes an error they admit it and present a solution to take care of the issue or to take care of the customer, no matter what the cost is. They do this because no bad consequences are here had by making errors. You will not get chewed out or reprimanded, and no records are kept on errors. If your employees are not messing things up once in a while then they are not trying hard enough. Errors are the price of breaking new ground, of pushing the envelope, of advancement of the staff and your company. Learn to relax and charge the cost of errors off to business development. I seldom if ever see the same error twice.

Credit: We just do it. No credit checks unless from experience someone sees red flags. We do not run a lot of 30 day open accounts, maybe $20K a month, so this is a small issue for us. Our losses are less then $5,000 a year and that includes credit card charge backs. We do not get credit card signatures and we never check ID's. After a while, you or your staff will get a sixth sense about bad deals and you then deal with the exceptions rather then have everyone dealing with loss prevention procedures. This saves far more in employee time, moral and customer good will then it cost.

Take your losses for one year and divide that by your total sales, what is the %? I bet the loss percentage is smaller then the cost of the loss prevention procedures. I know some companies business and types of customers makes this impractical, but it should be a consideration,worth a least a cost benefit annalists.

Policy management; I have a rule that I have used for the past thirty years. If I want to implement a new policy or procedure for any reason I write it up and leave it lay on the corner of my desk for three days. If I still want to implement the policy or procedure I ask for a management staff review. If they can not talk me out of it, it gets implemented. Very few make it that far. This is great for cost savings and moral.

Keep in mind that every policy or procedure you put in place cost money and lots of it. Money for training, for enforcement, for the unintended consequences such as loss of customers good will, and employee moral. Is you latest idea, or solution for a perceived problem worth the cost?

Customer is wrong; From time to time a customer is just wrong. They screwed up and you are going to pay for it one way or another. We look at each situation and determine if the cost is reasonable. Most often we just say thank you customer, stuff happens, here is what we will do about it, I hope you have a nice day. If the cost is less then $50 it is automatic, any employee can fix the issue. If the loss is over $50 any manger can approve it without further review. Because we are an internet retail sales company our customer errors tend to be returns, damages or the customer ordered the wrong item. Most often we have to send the customer more of something, or replace something in the correct size or color. It has been my experience the fastest money spent to fix a issue is the cheapest money spent.

The Magic; What you have just read is contrary to the way most businesses are managed. It took me a long time to come to the realization that management by letting go is the best way of managing. Empowering your employees is the best way to reduce cost, improve moral, cut employee turnover, and free up management's time. I also found that an open book policy, open door policy, and no secrets policy, are concepts that make management easier and cost you nothing. You will find that the staff will be more protective of your business then you are.

Renting or leasing a business location:

Before you sign a lease you should understand what is in the lease contract, and you should consider changing some clauses, and adding clauses that protect you. As everything is negotiable, it cannot hurt to ask for everything you want and compromise were need be. I am not a lawyer and cannot comment on all the clauses in a particular lease, having said that, there are areas where my experience might assist your thinking. Here are some areas I have found need consideration and changes in leases.

The lease will obligate you as to payments, and spell out the obligations each party has to the other. Read the lease carefully and agree to all the terms that seem fair and reasonable, negotiate everything else. Be certain your insurance agent covers you for all of the contingencies in the lease. The lease is a big commitment, multiply the monthly amount t by the number of months and you will see just how much you are promising to pay.

When ever possible try to lease directly from the owner. Most of the time you can negotiate a better deal, as the owner will not have to pay the commission money to the agent. The owner of a vacant property is paying the carrying cost of the un-rented property and that is a big motivation to do a deal. The property owner has a vested interest in leasing the property quickly.

Business interruption clause: Add a clause that states. "This contract (lease) can be temporally suspended, or canceled, with thirty days written notice with no further payment obligation by the user if the user's business is interrupted for any reason to include, fire, loss of lease, street repairs, or user ceasing business operations at this location." Try to get this inserted, or some version of it. If you cannot get the landlord to agree to the clause, get them to agree to a lower monthly rental amount equal to the cost of business interruption insurance. This is a very important clause.

Parking: Often over looked, parking problems can cause major headaches for your business. Have parking spelled out in the lease; Consider covered parking, on site, off site, number of spaces for your staff, designated area for your customers, etc.

Rent increases: There is nothing worse than a lease that expires and you get hit with a big increase when you are not prepared to move. I try for a negotiated renewal rate of a 5% increase or the inflation rate whichever is less.

Triple net leases: When I am the renter I try to avoid triple net leases. When I am the landlord, I love triple net leases. A triple net lease means you, the renter, pay all cost including insurance, maintenance, repairs and taxes. Do not agree to repair A/C units over three years old. Do not agree to fix plumbing over five years old. Never agree to parking lot or roof repairs. Limit tax increases to 10% a year. Make the landlord liable for any special assessments.

Premise Condition: It has been my experience that when a landlord wants to rent space they will agree to most reasonable repairs or alterations. After you move in every expense is a reduction in their income, and thus will be very hard to get done. The reason this is true is that the value of the property is directly related to the net operating income, (NOI), the property produces. As a general rule of thumb, for every dollar reduction in NOI there is a reduction of ten dollars to the properties market value.

Free Rent: Try to negotiate free rent. A landlord would rather give you free rent for the move in period, (or if you do the work he would normally hire a contractor to do), rather than giving your a rent reduction. The reason this is true, is that the value of the property is directly related to the net operating income, (NOI), the property produces. As a general rule of thumb, for every dollar reduction in NOI there is a reduction of ten dollars to the properties value. The higher the monthly rental amount, and the lower the landlords expenses, the more the property is worth. Ask for one or two months free rent.

C of O (Certificate of occupancy): Most leases have a clause that states you have inspected the property, find no defects for your intended use, and that you will bear the cost of compliance to get a C of O inspection. That means you are accepting the property as described in the lease. I suggest you add a clause that states. "The landlord warrants that the property complies with all city codes, will pass inspection for a C of O, and that the landlord will bear the cost of any requirements of the city not related directly to tenet's intended use." If you cannot get the clause, get the inspection by the city prior to signing the lease, or make the lease subject to you getting the C of O. I have seen cases were the tenet paid rent for months waiting to get the C of O.

Deposits: As a renter, I do not want to put up a rent deposit and I want to get the first month or two as free rent. As a tenet, deposit money is better used in my business than being tied up as a rent deposit. Over the years I have been able to talk the landlord out of a security deposit about half of the time.

As a landlord I want largest deposits (an interest free loan from you), and no free rent!

The Competition

Facing The Competition

Every business has some type of competition. This is a good thing! Without competition we would not have the highest standard of living in the world. Think of the old communist countries were competition was not allowed. Where would you rather live? Competition forces you to think of better ways of running your business. From the competition you can get new, and maybe better, ideas to improve your own business. Having competition allows you to compare your operation with the other people in your industry.

If you look at the competition as a learning resource your outlook will be totally different. What is the competition doing? What new products have they found? who are their venders? What price points? How do they buy? What are they doing wrong? Any new ideas you can steal? Are your prices to low or theirs to high? What business opportunities have you missed? Etc...

To many times I hear people say the field is over crowded. There are already to many people doing that, etc. Just remember, the older and bigger the competition is, the less nimble and more set in their ways they will be. Think of Mr. Michael Dell of Dell computers, he came to the PC game late and ended up as the leader in the category.

Each morning I look in the mirror and I tell my self,

" I am the competition"

If I do my job correctly, and run my company to the best of my abilities, then the competition will sooner or later be looking at me and my company as "the competition".

If you will maintain that "I am the competition" attitude, you will become the competition to everyone else.