Cheap High Quality Employees – Help out your Alum

In the midst of this economic downturn, it is easy to forget about people that do not show up in the employment number but do show up at the job fairs. I am talking about soon to be or recent college graduates.

I have just started a new business and, like everyone else, am doing it with limited cash. I believe in the business and have been working hard to make it succeed. But I can use any help I can get.

I received a call about a month ago from a former employee that I recommended for graduate school. In a fright, he told me that despite rigorous effort, there were hardly any internships, paid or unpaid, and that many kids were not getting anything.

So I called my former school and asked if I could offer some unpaid internships to the students and would that help. Not only did she say yes, but she asked if 2009 graduates could apply as well. I was shocked. She said that the market is so tough, they newly minted MBAs are having troubles as well.

So, for all you small business owners. You should call your schools and look for internship candidates. I suggest you pay them expenses and some monthly stipend, but you can get some quality people very quickly.

They get solid work experience; you get cheap quality labor.

Have a great weekend!!

Don

Customer Service – My Verizon Story – Investing

I was accosted today. Not but a mugger or a vandal, but by Verizon’s customer service. I have included the letter I wrote to them so you can laugh at my dismay. But I also included it  because, to succeed in business, you must take care of your customer and this is a good example of how NOT to do that.

I know I push Great Customer Service on everyone, but it is true. Customer Service is the #1 sustaining value of any ongoing business. I use it in my businesses, I instill it in my employees, and I preach it to companies.

I also have made money in the stock market on this premise. For long term investing (over 6 months), I always use the customer service rule. If I have received great customer service; I buy. Terrible customer service, I sell. I also read that in a book somewhere but cannot find the title, so a nod to the author, whomever they were. So, I am selling my Verizon stock and suggest you do the same.

So, if you do not believe me that customer service is important (especially in a down economy), then be patient, you will not have to worry about it for long.

Don

Thursday, March 05, 2009

Verizon – New England

185 Franklin Street

Boston, MA 02107

Dear Sirs:

I am writing to complain about the customer service I have received today regarding your services. Throughout this letter, I will reference prices but they are but a catalyst for the poor service I am writing about.

I have been a Verizon landline customer for over 8 years. During that time, I have had up to 3 landlines. For the past 4 years or so, I have also been a Verizon wireless customer. I have even tried DSL service, even though I am too far away from the Central Office (CO).

So, this morning, I was called by a Verizon customer service rep, saying that we made a call to the UK, lasting 34 minutes and would cost almost $100. If we signed up for a plan for 5.99 per month, it would only cost $0.08 per minute. I felt this was outrageous, in today’s telecommunication age, to have a base rate of $3.00 per minute for international calls. I can get a better rate using phone cards. Anyway, I was presented with no other options, so I accepted the plan until I could do further research.

I reviewed my account and I am paying approx $75 per month for landline service. So, I called a few companies and found that the average for the same service is $30 per month (no discounts). I was shocked again. I was paying twice as much as average and being asked for more to receive what the others included.

So I called customer service to leave a complaint, to say that I was unhappy, and that I would be leaving Verizon (all accounts). A wonderful woman named Joanne answered. I explained I was unhappy and was leaving. Her first response was that if I removed features from my phone service, then the price per month would go down. So again, if I received less service than your competitors, you would charge me less per month but still more than them.

But here is the real winner. Joanne then explained that I was under an older plan and that if she just reentered the plan, I would get a rate around $35 per month. That is what she said but here is what I heard: I have been paying too much for my service for too long and no one bothers to tell me unless I complain.

I also heard that for Verizon, keeping $40 per month in revenue is more important that losing a customer.

So, from an apparently unvalued customer, I am reducing my account (I have removed all wireless) and I am transferring my landline to another provider this month.

Although I am only one customer, if you don’t change your customer service, your competitors WILL service them for you.

Sincerely,

Donald Noble

President/CEO

Boston Accounting Group, Inc

Why the DOW should be at 7000.

First let me say that I am sorry for the hiatus. I have started a new company which I have been putting a lot of effort into and will continue to put time into. But I felt it was time to get back to my writing.

So, if you are like everyone else today, you were watching the stock market. 6763 was the close. However, what is strange is that I am not panicking. Instead, I am looking at this as a correction if a very inflated market.

See, last year, I went back and downloaded 40 years of DJIA data. When I ran a very simple regression, I found that the DJIA should be around 7700. What you say? Impossible? Using only data from 1985 to 1995 as a base, I extrapolated the standard growth from that period. Why? Because in the late 1990′s, we were so caught up in the DOT.COM companies, that we started the bubble then. However, if I go back and take data from 1970 to 1995, the outlook is worse and says we should only be in the high 5000s, but I do not believe that.

So, using 7700, the DJIA is only off about 10%, which coincides with the about of decline in GDP we have seen recently. Shocker? I don’t think so.

We have been in a global economic bubble since 1995. Deluding ourselves that this kind of growth was sustainable. Robbing Peter to pay Paul is what is was.

I say this for a few reasons.

1. For those that have not gotten out of the market so far, well you are basically never going to see that money again. Sorry.

2. The DJIA will not hit 14000 anytime soon, so if that is your definition of a recovery, you will not see it.

3. Business should not look at the market and look at their customers. Something I have been saying, well, forever.

So, the next decade is going to see slow growth because realistic behavior is setting in. Mark my words.

Donald Noble

Boston Accounting Group

Well Virginia, it is not about real estate anymore!!!

It looks like it is time for a complete revolution in the retail space. I remember when, during the Internet revolution of the late 90s, that they said that retail brick and mortar stores would be obsolete within 5 years. As with all the predictions during that time, they were right but with the wrong time frames. Albeit slowly, we are seeing a definite decay of the storefront retailing locations, especially the larger stores.

The Wall Street Journal in an article today (Retailers Brace for Major Change) talk about lower profits and changing in products. They also talk about the debt load of these companies causing the biggest problem. I have another theory.

When I was in Grad school, my tam and I analyzed the Sears purchase of Kmart. In the end, we could barely make the numbers work using the assumptions of the deal makers. However, if we stripped out the real estate, we could not make the deal work at all. The assumption was that when they bought Kmart, some of the stores would be worth more as real estate than they discounted cash flow of the ongoing operation. That makes a big assumption, that there are other retailers (whom else would move into a large store) that would want the real estate.

So, I say it now, a collapse of the retail real estate space is imminent. In addition, if you see a valuation of a retail company that has a large real estate component, cut the value. It will not be worth the same.

These companies are not only going to have to change they current operations but also change the entire structure. You will see more large retailers consolidate. You will see more morphing of Internet and brick and morter. Hopefully you will see more quality of products and less cheap, low quality products.

So Virginia, we are not in Kansas anymore but retail is not about real estate anymore as well.

Don

P.S. I just skimmed some of the larger retailers. Sears, Kohl’s, Tj Maxx. I was shocked at home much real estate they have on their books (either as a direct asset or as a lease obligation). I am going to start looking at my retail investments.

What is the number one thing that businesses should focus on?

I have to admit, the current situation has most of my clients trying to figure out what steps to take to prepare for whatever happens, whether good or bad. So, they come to me and ask the usual questions of a CFO. How much cash should we hold? Should we consider fewer purchases? Is our money safe? What will the market do next year?

But very few ask me for my opinion on the most important questions they should be asking: How do we maintain/improve our customer service? Don’t think that is important? Read on……

Over the past two weeks, I have had some good and bad experiences with customer service that have really caused me to focus. First, I went to a Target to buy some sheets for my son’s dorm room. After looking for several minutes, I tried to find someone to help. When I finally located someone (in toys), I asked for help and he said it was not his department and walked away. I found the sheets on my own and went to the checkout. There were ~10 people waiting in line for two cashiers. Other employees were standing around. When I got to the checkout, I said Good Morning and the cashier barely looked at me and rushed me through (I am not surprised because I read an article about how sales metrics are reducing the conversation at checkouts). Now I thought, in a store where they are having slowing sales, they should be doing whatever possible to make the customer happy, but I guess not.

I then called my BMW dealer to have a flat tire repaired. I asked if I could bring it by today or should I make a formal appointment. The Service Rep said “I don’t think we can fit you in but I will check and then left me on hold for 10 minutes (I stayed on hold because I was in traffic). Then another person came on and asked what I wanted (exactly like that). I asked where the first rep went and he said that she went to lunch. Well, I hung up on that one.

Are these indicative of a downturn in an economy? Maybe, but read on.

I was looking at a new monitor for my computer. I have to admit, I only go to two websites anymore. www.tigerdirect.com and www.microcenter.com. At TigerDirect I purchase on-line, at Microcenter, I look for what is in the store and then drive there.  Anyway, Tigerdirect had a good price on a large monitor but I was not ready to buy just yet. I received an email from them on Sunday night stating that they were almost out of stock on the monitor and if I still wanted it they suggest I order now. No sales, not specials, just good customer service. I bought the monitor and it arrived 2 days later. Amazing customer service.

I have noticed that when the economy turns, the first thing that happens is that a polarization of customer service happens. Some companies push customer service and others don’t seem to care. To be honest, I think that is the difference between companies that survive and companies that fail.

Of course it is a challenge. Manager’s have to acquire new business, worry about old business, manage cash, and basically keep a company together. who has time to worry if employees are servicing the customers. Besides some fo the employees will not be here tomorrow so why try. WRONG! WRONG! WRONG! WRONG! I cannot stress this enough, WRONG!

If you focus on customer service, people remember. I do. I pay for customer service. I pay extra for customer service. Real and genuine customer service. If you make sure you are servicing your existing customers, your past customers, and your future customers the best you can, then other things will matter less.

Don’t believe me? Do this test. Keep a list of good and bad customer service you have received over the next month. Then in 6 months, see which companies are doing well and which are not. You will see the difference immediately.

It is strange to see a CFO talk about customer service as a priority over sales or cash flow but I truly believe this and will prove it to anyone who doubts me.

Don

Best Advice – Stop Watching the Stock Markets

You cannot get away from it. Everyone everywhere is watching the markets and commenting on it. “Hey, did you see what happened yesterday?”, or “Hey, how are your stocks doing?”

But this can be at best distracting and at worst destructive for business owners and managers. The stock market is one of the worst predictors of economic conditions. Consider that now we are more in a state of panic than rational thinking. Companies share prices are at or below the cash on hand per share. So people are selling without understanding the basic failure of the underlying asset. In addition, the stock market predicts a recession only 50% of the time.

Now, consider that although the stock market make go up and down, the share prices have little to do with general business. GM is in a sour shape, but they are still spending marketing and advertising dollars to solidify their brand and increase sales (although I think we will all agree it should be spent on better automobiles). AIG is in the tank but they are spending money and signing new policies everyday.

So, I am going to share some advice from the one CEO who taught me the most. He started a company and to it from $2MM per year to $200MM per year in 4 years. He went public and sold his company in the middle of the tech market tumble. He said to me “Do not even talk about the market. There are plenty of people who watch it and will tell you when you need to do something and it should not be you.” He also said that if you go into a sales meeting and someone starts talking about the markets, simply say that you have not been following closely because our business has been so good.

Please understand that I am paid to watch the markets (credit, stock, commodity, and international) for companies. As an independent CFO, I have to understand what is going on and what it means to my clients. Should we hoard cash, should we slow down spending, should we acquire a competitor? These are always on my mind as I watch. But I do not watch and groan, I watch and advise. I do not gamble and I do not fret.

If you are a business owner and the markets are on your mind for more than 5 minutes a day, that is too long. This is why a good CFO is worth a lot of money to a company. CFOs do not just balance the books, they ensure that the company is on a good financial footing and makes solid financial decisions. Sometimes these decisions are behind the scenes and sometimes then are more pronounced.

For each company having financial difficulty, there are more that are not. Many companies are strong and are spending. Many companies are weak and are spending. The point is that economic downturns are a part of all business cycles. Some are deeper and sharper than others but in the end, they all end and go back up.

I must add that I feel terrible at mass layoffs and companies that have to shut down, but from a purely economic standpoint, this is a revolution and should be taken that way. New companies will be formed from the old. New regulations will be enacted and old ones replaced. New leadership will be installed that will take the United States and other countries into the 21st Century properly.

Don

Coming Soon – a U.S. Government Owned Car Company

I was reading a post on Bloomberg.com about GM’s problems. The article is correct in that GM should file for bankruptcy.

However, that is not what caught my eye. It was the quote from Rahm Emanuel, chief of staff to President-elect Barack Obama , who said the U.S. auto industry is “essential” to the economy.
This scares me for about one million reasons.

This sounds like we are going to have a national car company soon. Owned and operated by the U.S. Government. Can you imagine this? I have to say that this is a terrible idea. I worked in Malaysia for a year and they had a national car company, the Proton. If you have every driven one, you know. They are the worst cars ever. They are as flimsy as paper, break down often and have very little resale value (sorry to all my Malaysian friends).

Now imagine taking GM, or any other American car maker, who cannot build reliable and fuel efficient cars, and putting the government in the mix. Huge taxpayer subsidies to fund poorly designed cars. More taxpayer subsidies to incent people to buy them (buy a US/GM and you do not pay any taxes). Designed cars that get unlimited MPG because they do not run. And, no lawsuits against the car company because you cannot sue the government.

So, my (hopefully wrong) prediction for the Economic Recovery Plan will be for the government to Nationalize businesses that they consider strategic. They will not call it Nationalization, but will buy this car company, and that bank, and this airline and that real estate company. The problem is that once the government is in, it is very tough for them to get out. “In for a penny, in for a pound!”

We have worked so hard to deregulate industries and it has always been better for the consumer in the long run. I think we should shoulder a little pain and let the market decide what to do.

Don