Southern California Archives

The First Two Strategy Sessions of the Association for Strategic Planning (Los Angeles Chapter)

I was adrift in a sea of strategists. Recently I conducted two strategy morning sessions for the Association for Strategic Planning, Los Angeles Chapter. Of the fourteen strategists in the room, we produced fifteen opinions. What a blast to be in a room with so many bright and creative people. We were able to hammer out a vision and mission with components of who were the customers (members) and what benefits we could offer them.

It wasn’t until tonight that I realized that we operated our session EXACTLY the way Barry MacKechnie suggested in Achieving Strategic Alignment. Barry wrote that there were six critical elements of a successful strategic planning session:

Define your expected outcome: Our academic compass Daniel Degravel from Cal State Northridge specialized in strategy and established a map that we were to follow.
Pre-planning session meeting with your executive team: There was a four person executive team: Daniel, Erik Bleitz, Rodney Stone, and myself that discussed the course we were to take during the broader strategy session. The phone calls were a logical step to the map laid out by Daniel.
Create an agenda: The agenda was created, but the timetable was left open. As the facilitator, I had to keep the process going or risk it running aground. The attendees made this easy for me since so many were focused. We knew we could not get this done in one three hour session. It looks like it may last three-three hour sessions.
Mandate participation:This step was also easy for me because nobody was required to attend. The attendees were both members and non-members who wanted to be a part of the Los Angeles Chapter’s future. As Barry stated in his book, “A great strategy planning session requires an atmosphere of open dialogue with a free exchange of ideas within an environment of creativity and common goal setting.”
Set expectations for clearly defined results: As stated, we knew where we were going but were not unrealistic on how long it will take us to get there. I estimate two more sessions should result not only in the plan, but the goals, assignments, and desired outcome. Barry set the timeline in his book at two full days. We may beat that estimate a little, but aim to implement the strategy with confidence.

CPA Fraud Alert: The Day the FAKE Giorgio Armani “Rep” Tried to Rip Me Off

I slipped the money from the ATM into my wallet as I hurried to my car. “Hey, excuse’!” I stopped. A young man yelled out his car window in the parking lot. “Can you a tell me to aeroporto?”

I answered using what broken Italian I knew. He was very grateful, and I told him my family was Calabresi. “Hey, me a too! My name is a Gianni!” He said. Gianni pulled his car over and told me he wanted to give me a present. He gave me his business card which read Giorgio Armani in big letters. Then he opened up his back door and showed my three “Giorgio Reportage Armani” leather jackets.

“I a give a to you. They are a worth $500 each. I don’t want to pay the taxes on them when I leave the country to fly back to Italy right now. ” He yelled. (I thought, why would HE pay any excise taxes for Giorgio Armani?)

He put a handled paper bag in my hand and folded the three coats in them. I started to laugh. Then my phone rang. It was my oldest son. “Sorry Brandon, I can’t talk right now, I am busy being swindled, ” I laughed.

I waited for the punch line, still smiling broadly.

“Hey, you a my friend. Take them as my gift.” Then he paused. “Oh, tomorrow is my son’s birthday and I would like to give him a present. Can you give me whatever cash you can?”

I doubled over laughing, still holding the bag. That was the worst con I heard in a long time. I opened the car door and stuck the bag in the back seat.

“Ciao,” I said getting into my car, still laughing.

So, what precautions should you take when approached by someone like this:

If it is too good to be true, it probably is: As a CPA, I have conducted fraud investigations, or exposed deficiencies in internal control. So, I am skeptical in any bargain. You should always start from a skeptical frame of mind and make the other party earn your confidence. Start with “the smell test.” If your intuition is tells you “no,” go with it and don’t look back.
Don’t venture outside of your expertise: The one thing that Gianni didn’t factor was that I don’t buy clothes. My wardrobe consists of birthday and Christmas presents. My wife buys things for me from time to time. But, I hate shopping, especially clothes. When my wife takes me to a mall, I bring a book and carry her packages. So, if you don’t know anything about an item, don’t buy it.
Don’t let anyone pressure you: Gianna spoke very fast and tried to increase the tempo of the transaction in order to cloud my thinking. Most people will say, “I have another offer.” Or, ” This deal will not last.” Take a breath and step back. If the person continues to talk, shut him down.
Look at all available data: If I had time, I could have looked closer at his card. Here is what I discovered after I left:
1. He did not have an Armani email address. His email address is Armanirep@yahoo.it. It bounced when I tried it later.
2. His address read Milano, but the phone number is in an American format 335-565-3504. The number was no good. An Italian number would have looked like +39 02 7602 1743.
3. I found a number of scams on the Internet selling the same fraudulent brand. https://reviews.ebay.com/How-to-Spot-a-Fake-Armani-Men-apos-s-Leather-Jacket?ugid=10000000002354776
4. Here is a similar incident to one who caved in. https://www.ripoffreport.com/organized-crime/rga-giorgio-armani-r/rga-giorgio-armani-reportage-l-2d487.htm
Don’t be afraid to say no to a “great” deal: “Once in a lifetime chances” usually come by all of the time. As I said to my son who could not close a deal with his first car, “Good deals come by all of the time. If you miss one, look for the next. But, bad deals will hurt you a long time, financially and emotionally.”

As a CPA. I have seen many shady dealings in the last 30 years. I guess part of my CPA training help me become a financial skeptic. Don’t be afraid to look at something from many different angles. You can also call on your CPA or financial professional to help you.

Check Out The Podcast! Click Link Below!
Episode #2 The Story Of ThePhony Giorgio Armani Salesperson Scam Artist & HowTo Avoid Rip-off artists

CPA Small Business Employment Practices Alert

Small business owners and executives need to keep abreast of labor laws. Make sure you assemble a team of professionals that you can rely on for changes. There are a number of bills that small business bills that will take effect on January 1, 2012. Here are some of them.

AB 469–Labor Code Section 2810.5

Effective 1/1/12, AB 469 becomes law and will require employers to comply with
Labor Code Section 2810.5 for non-exempt employees. A lot of this information should already be stated on employee pay stubs. This law requires employers to provide new hires with a written notice of various items of information:

(A) The rate or rates of pay and basis thereof ( hour, shift, day, week,
salary, piece, commission, or otherwise), including any rates for overtime, as
applicable.
(B) Allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances.
(C) The regular payday designated by the employer in accordance with the requirements of this code.
(D) The name of the employer, including any “dba” names used by the
employer.
(E) The physical address of the employer’s main office or principal place of business, and a mailing address, if different.
(F) The telephone number of the employer.
(G) The name, address, and telephone number of the employer’s workers’ compensation insurance carrier.
(H) Any other information the Labor Commissioner deems material and necessary.

Labor Commission has stated that they will prepare a template to help businesses.

AB 29 Employee Credit Reports

There are many laws, both federal (FCRA) and state laws that govern the use of employee’s credit reports when making an employment decision. AB 22, too severely limits employers use of credit reports when making employment decisions. Make sure you understand the list of guidelines before requesting a credit report.

SB 459 Independent Contractor Misclassification

I have warned employers about misclassifying employees as independent contractors verbally, and in articles. Now, SB 459 raises the penalties to the roof. Civil penalties could be imposed up to $25,000 PER VIOLATION if the employer did a “willful misclassification.” It is imperative that each small business examine the tasks of each independent contractor.

Labor law changes constantly . Contact your labor attorney about these and other changes that may affect small business.

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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any tax advice contained in this e-mail (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or state tax authority, or (b) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

Sales Tax War and Peace From a CPA

My wife dragged me to Beverly Hills estate sales. At first I was very disinterested because I hate to shop. You can tell that by my clothes. I still wear khakis and corduroys from five years ago. I guess that is a dead give away that I am a CPA.

Well, I still went to the sales, so to pass the time I learned about the antique and vintage items, and what they were selling for on the Internet. The prices of these items at some estate sales were from $1.00 to $15.00. Their E-bay values ranged from $30.00 to $99.00.

So, not being one to accumulated old things, my wife and I created Manhattan Beach, California Antiques. Now, before you start googling our name, let me tell you, its not there. I haven’t even opened a web site, but do sell many pieces we picked up. This puts me at ground zero of sales tax wars.

Internet businesses have a distinct advantage over brick and mortar businesses by not being required to collect sales tax unless they have a presence in the same state as the buyer.

Well, the fight has moved from the state to the national level. The Main Street Fairness Act, sponsored by Dick Durbin last August, helps the states in their enforcement. The Act would allow states to require Internet and mail-order retailers to collect state and local sales taxes. To exercise this authority, a state must sign on to the Streamlined Sales and Use Tax Agreement (SSUTA) and adopt legislation implementing its provisions.

So far, almost half the states have implemented SSUTA. Small businesses (less than $5 million) are exempt from this enforcement. The act places a policy of basic fairness among the states so that large retailers can’t run from state to state to avoid sales taxes.

But what does this mean for the small business person? For those under $5 million, nothing. You still report all sales and collect applicable taxes. For larger Internet companies, you must really get your sales tax infrastructure in place. So many companies of all sizes do not report sales in the correct state, if they report it at all.

As a CPA, I advise any client to impliment whatever software they need to track sales tax correctly. Don’t wait for your state to exercise its this agreement, or law if it passes. And if you are an Internet business, do the right thing before the government does it for you.

Sales taxes must be taken as serious as income taxes. Discusss this and any tax decisions with your tax advisor before acting.

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Business Opportunities: Gas Stations Making Their Own Music

Back in the 1960s, it wasn’t unusual to find four gas stations at an intersection in Los Angeles. These were full service stations who would fill your tank, wash your windshield, and check your oil. You would also just hand them your money (not credit card) from your open window to pay. These stations would try so many ways to attract customers and build a niche market in their neighborhoods.

Union 76 (currently Unocal) distinguished itself by creating a relationship with the former Brooklyn Dodgers. Union 76 would give away many different types of Los Angeles Dodger’s baseball memorabilia when you purchased a certain amount of gas. One such item was a flexible 45 rpm record of a Dodger player interview. Vin Skully would interview a Dodger player like Sandy Kofax. Union 76 had found a niche market with Dodger fans–forget about the gasoline.

Jon Ostrow’s article, How To Conquer Your Musical Niche reminded me of Union 76’s niche serving with automobile/Dodger fans. He laid out a number of items that a band should consider:

Demographic (age, gender location)
Similar / influential artists (remember to start locally, then branch out to the regional, national and global scale)
What are the influential promotional outlets?
Where do the fans exist online?
What blogs do they read?
How do they find out about new music?
Are they into fashion? If so, what brands?
What are their favorite hobbies?

At first glance, you may think this pertains to only musicians. But, look again. Here is the list converted to a 1965 Union 76 strategy:

Demographic (age, gender location)–Are they near a freeway that can lead to Dodger Stadium? Are they male?

Similar / influential artists (remember to start locally, then branch out to the regional, national and global scale)–Unocal may have start in certain neighborhoods and branch out.
What are the influential promotional outlets? Use Dodger radio to advertise Union 76 items.
Where do the fans exist online? What radio stations do Dodger fans listen to?
What blogs do they read? Advertise in the Sports Page of the Los Angeles Herald Examiner.
How do they find out about new music? Who do auto owners learn to about gas? Mechanics? Make sure each station has one.
Are they into fashion? If so, what brands? Sell Dodger hats at the stations.
What are their favorite hobbies? Unocal hit the head of the nail with Dodger fans.

Each business or band can use similar questions in nailing their niche market. The Blue Ocean Strategy is a strategy concept that can help you in searching for it.

The Prowess of Small Business Job Creation

I have spent almost my whole career owning or working for a small business. My family has a long entreprenuerial history in many different trades and businesses, from restaurants to contractors. Most of these businesses, though were in the service sector. But what about manufacturing?

You hear it all of the time, especially in California, that manufacturing is leaving the United States. But, according to Small Business Labs, “Over the next five years, a U.S. manufacturing renaissance in home appliances, car parts, and other sectors could accelerate—boosting output by $100 billion and adding 2 million to 3 million jobs.”

We heard all of layoffs by big corporations, but the driving factor is really small business. “So, if GE and other large corporations aren’t big players in job creation, who produces all the new jobs in America? The answer is small business.

These businesses do everything, including building most of the houses constructed in America. Small business employs 67 percent of the private-sector workforce and pays out 44 percent of the private payroll. As the population grows, small firms provide the bulk of the new jobs needed. For many, small business provides their first experience in the world of work.” (Dunkelgerg, philly.com, July 4, 2011)

What this means is that growth is in the wind for small businesses and labor will be a major factor, especially for manufacturing. Small business is defined by the SBA as one that has fewer than 500 employees. For an owner, this means the following:

As stated in previous articles, don’t build the business around you. Train others to perform your duties allowing you to supervise and grow your business. This especially applies to the manufacturing sector.
Don’t be afraid to hire people that have skills in other industries. You may have to spend a little more time training them, but they can bring a new perspective to your industry. “Outsider’s eyes” should be welcomed.
Incorporate increased employment into your strategy instead of the knee-jerk reaction of downsizing. Sometimes you have to downsize, but reinventing you business may not only save jobs, but create new ones.

Small businesses, whether in the manufacturing sector, or service sector should never cave into current economic hysteria. A level head with good strategy and tactics will usually be the better mindset.

How to Launder(for More)Money Without Getting Washed Up

I know that title can get me into trouble, but I couldn’t resist.

I had lunch today with a childhood friend (no he is not nine years old). I hadn’t seen Gary in about 30 years. He still looks the same (except for the white hair and long white beard). Anyway, Gary is in the Laundromat business. His story came back to me tonight when I was reading the article, Grow Your Sales Without Selling by Mike Periu.

All in all, it wasn’t a bad piece. He gave a handfull of suggestions to growing your small business outside the sales cycle. The first suggestion he offered was the one that reminded me of Gary: Grow through acquisitions. He offered his support for it, but then he narrowed it by industry. He wrote, “…if companies in your industry are selling at relatively low valuations, and if existing customers generate recurring revenues then growth through acquisition could be a very viable strategy.”

I always have cautioned clients about acquiring small businesses. (See my video Selling a Small Business for the flip side). Many times, a small business financial statements (and sometimes tax returns) don’t truly reflect the reality.

Gary owned a small business laundromat and found a opportunity to buy another one. The other small business was selling for a low price and it generated recurring revenues. Sounds simple? Not always. Even though these aspects exist, there are many other variables that can sink a laundromat (pun intended). For example, repairs. If you buy a laundry mat whose machines are old and breaking down, your profit margin can evaporate.

Gary, however, had a solution for that. He was (and is) mechanically inclined and had developed systems to personally fix all of his machines. Thus, his cost of repairs was usually limited to parts, even used parts.

I find that so many new small business owners do now look at the threats of a business acquisiation, or if they do, they do not have a plan (like Gary) to address them. So, though Mr. Periu offers an option in growing your small business, he fails to even mention this serious drawback.

A friend of mine bought an accounting practice. He acquired dozens of clients for a fixed fee. To his suprise the seller accountant was grossly negligent in maintaining his client’s financial records. This unexpected turn forced my friend to incur many, many hours to correct the financial records that he did not get paid for because he had acquired the accounting business. In addition, he lost a substantial number of clients.

In the small business arena, I always recommend that my clients prepare a bullet proof contract with their attorney and of course do their due diligence. It is very rare that a buyer can walk into a small business with a plan to comfront the downside like Gary did. That kind of strategy takes a special skill. If you have that skill, then you minimize your risk. If you don’t, find someone that does. Either way, you must look at all possible and develop strategies to

Small businesses usually don’t have the depth to absorb such oversights in an acquisition.

Where Do We Go From Here? Strategic Planning In the Fog

The yellow bus lights glowed in the dark as my only beacon. I couldn’t see 20 feet in front of me on Highway 99 in the central California valley, but we had to get to Lake Huntington. The four cars packed with my companions followed my lead. At last, I saw the exit. Moving off the highway onto a dark farm road, my concern peaked. Where were the street signs behind the foggy shrouds? At last I stopped at an intersection and was able to see a sign, but only after I stood in the middle of a dark intersection looking almost straight up.

If you have been planning for the last three years, this story should sound like your attempt to plan strategically. Hugh Courtney’s Strategy under uncertainty lends us a flare in such dismal times. He offers a four-level framework for determining the level of uncertainty surrounding strategic decisions and for tailoring strategy to the uncertainty:

Level one: A clear enough future: Courtney states that managers can use the usual strategy tools in a clearer future as this. However, I see that medium and small businesses do not know what those tools are. The biggest private producers of jobs in this country, small business, usually work in a strategy void. Thus their decisions and plans are usually uninformed and a product of crises management even in the best of times.

Level two: Alternative futures: Outcomes are clear by hard to predict. Take the Ford Edsel, for example. The car seemed like a good strategy with a ready market, but it went the way of the do-do bird. This is where probability analysis can come in according to Courtney. For small businesses, look at the downside to each alternative. Is one downside greater? You may want to go the other way.

Level three: A range of futures:Taking Courtney’s cue, small businesses must limit their strategic options. Don’t take the shotgun approach and consider ten different strategies, for example, because you can. Your brain will explode, not a pretty site. Again, focus on the downside of your options.

Level four: True ambiguity: This option happens in an economic free-fall, or at least a controlled fall. More than ever, I recommend small business to take a Blue Ocean Strategy viewpoint and focus on the needs of your clients. Eliminate those attributes that your industry is providing clients that they can live with, e.g., meals on a commuter flight. You can take this approach for any other above levels, but at this level, it is usually a matter of survival. The wrong decision could land you in bankruptcy very quickly.

If You Are Reading This, You’ve Proved My Point

Last January, I again participated on the planning committee for the 2011 Entertainment Industry Conference for CPAs and attorneys. We agreed on most of the usual topics to be presented at the conference. Then, I suggested social networking. The idea was written on the board.

Fifteen minutes later, a respectible CPA turned to me and said, “Rick, I know social networking is a sexy topic, but I doubt it is what our attendees are looking for. They won’t come away with anything.” I nodded my head and thought to myself: Thank you. You just gave me an extra 12 months to blow my competition out of the water using social networking and SEO.

Skeptical? 5 Key Social Media Findings That Affect Your Business by Glen Stansberry lists some new findings:

1. Americans spend most of their time online on social network and blogs–If you are reading this blog, you have contributed to the 23% statistic that more time is used reading blogs and social networks than checking emails. You may have also found me because of what I have been doing for over a year. Writing

2. Seventy percent of active online adult social networkers shop online–Sell where your buyers live, online. We are all going there. Have a bigger presence than your competition.

3. Fifty-three percent of active adult social networkers follow a brand(only 32 percent follow a celebrity)–Adults follow brands across social networks.

4. Sixty percent of social media users create reviews of products or services–When was the last time you reviewed a book on Amazon, or rated a restaurant on Opentable? You are contributing the movement. If your business is not on there, then you are behind the curve.

5. The number of mobile Internet users is up 47 percent from last year–I have actually trashed a rude restaurant that made us wait an hour beyond their seating estimate. We were outside with our 85 year old father-in-law on Father’s Day in the dark. My bad review went into Yelp before I reached my car in the parking lot.

If you are resisting the social network, SEO revolution, you are risking the well-being of your business. But, before you jump in, do some research and learn. There are consultants that can help you. Then, create a strategy and stick to its implimentation. Your online presence will not increase overnight, but the constant creation of content will get you noticed.

Small Business Promotion Using Social Media–How We Did It

I couldn’t believe it. Well, actually I could, but I didn’t want to. Gregg Towsley of WSI Quality Solutions sat down with me me 18 months ago and showed me that my business’s social profile was dead. In other words, if you typed in industry key words, we didn’t even show up on ANY page.

I came across What Drives Small Business Social Media Engagement? by Dan Schawbel. He cited a study by Roost which offered advice to small business owners who want to create brand awareness, customer, acquisition, and customer services.

Using only Facebook and Twitter, the study suggested the following:

Publishing photos: The study suggested photos of employees, products, and functions. I remember when I first put up our web page, our most valuable search term was my assistant Maddy Curley. She was an actress that had (and has) some success on television and film. People googled her after seeing her on a TV episode and came up with her picture on our personnel page.
Ask Questions:Start a discussion by asking questions. You see this a lot on LinkedIn. I feel that providing information along with questions is a better strategy. What do you think?
Share Quotes:There are way too many twitter sites and blogs quoting wise people. I don’t like to. I find it is far more interesting to coin my own phrases that display my expertise. You don’t convince others of you knowledge and wisdom by using someone else’s brain. (You can quote that).

The main activity that got our firm on the front Google page ahead of CPA firms much larger than us is our content and consistency. To be successful, you must give to the business community. We provide advice and steps to individual businesses that can help them in managing their finances.