Hadannah Business

Living Outside the Box

Being There When It Counts with Rick Itzkowich

This is from my fellow National Networker Author Rick Itzkowich. It is so good that I wanted to post it.

Business writer and author of Change or Die, Alan Deutchman, writes in his article, Three Keys to Change (you can read it here), that even in “do or die” situations, fewer than 10% of the people facing them will make the necessary changes to survive.

I’ve been in the personal growth industry for over 25 years. I’ve worked with thousands of individuals during my career. And by far, change is one of the most difficult things for people to embrace. Big or small, it doesn’t matter. People in general object to change.

Because our world is rapidly changing, people’s opposition to change creates problems. The speed of change has increased exponentially, and there seems to be no signs of slowing down in sight. So our capacity to change – and to do so quickly — is of paramount importance in today’s business environment.

I’m convinced that people and organizations must reinvent themselves in order to thrive, let alone survive. What this means is that EVERYTHING should be up for discussion. There are no “sacred cows.” The world is a different place with different realities — ones that didn’t even exist a few years ago. Whining, litigating, fighting or ignoring these realities won’t help. We need to embrace this paradigm as opposed to resisting it.

Fact: the Internet has changed the way we do business. Fact: technology is making entire industries obsolete in a matter of months. Fact: how we shop, date, communicate, interact with our kids, etc. is incredibly different today than 10 years ago.

“When the facts change, I change my mind. What do you do, sir?”
John Maynard Keynes, British Economist

The past two years have been extremely challenging for our company. We knew we were vulnerable because many of our clients were in the finance, mortgage and real estate industries. We knew we needed to change some of our practices and diversify. And yet we didn’t. And so, we paid the price.

Although I must say, as a result of this, we have finally started doing things differently — more than we ever have before. We are pursuing opportunities we have both ignored and ridiculed in the past. These circumstances of change are both very exciting and very unsettling at the same time. People who have known us over our 18 years in business are wondering if we lost our minds. And to a certain degree we have. Fact: times have changed, and we have changed our minds.

How about you? Are you embracing, fighting or ignoring change?

No Comments by Joe on March 9, 2010
filed in Business, Economics, Entrepreneurship, Life
tagged , , , ,

New Garbage Banking Fee

Joe J. Wallace, Managing Director
Hadannah Business Solutions

Just when I thought that garbage fees had gotten to the point that there could be nothing else invented, the banking industry has given us THE ADVERSE MARKET FEE. Has anyone ever heard of an adverse market fee? The Wall Street Journal reports today in a front page story that refinancing now carries an ADVERSE MARKET FEE of $1,000 on all refinancing of residential property. It was one thing when there were a total of $500 for ten different garbage fees for everything from signing of documents to filing it in a cabinet, but an ADVERSE MARKET FEE is just saying drop dead to customers.

Banks that don’t lend money go out of business yet they continue to invent offensive ways to fee their customer base to death. Listen to Nancy Reagan’s advice in the war on drugs, JUST SAY NO. Do not borrow in a market that is so adverse that they charge customers for an adverse market that the banks made adverse. Ignore this fee. Just don’t accept it. Do not refinance anything that charges such a usury and meaningless fee to fatten the front end of the transaction before they sell the loan to the bankrupt Fannie and Freddie.

Banks are failing because they have forgotten how to be banks. The first rule of doing business in a crisis it to strengthen your core. For banks that is loaning money. They second rule is to embrace your existing customer base. Banks are doing neither.

No Comments by Joe on March 3, 2010
filed in Business, Community, Economics, Life
tagged , , ,

Economic Homicide: Part 2

Part 2: The Scorched Earth Policy

Joe J. Wallace, Managing Director
Hadannah Business Solutions

A scorched earth policy is a military strategy which involves destroying anything that might be useful to the enemy while advancing through or withdrawing from an area. At one time this was simply the practice of burning crops to deny the enemy food sources, in modern times the term is not limited to food. It includes the destruction of infrastructure such as shelter, transportation, communications, and of course access to financing. Here are some recent headlines in business publications:

The SBA loan volume plunged 36% in 2009 as banks slammed their vaults shut to small businesses

Top banks cut small business lending by $8 billion

Want a loan for your business? Hit the plastic!

One of the most effective counter terrorism measures that the US has quietly taken has been to interrupt or eliminate funding sources to terrorist organizations such as Al Qaeda. An enemy that cannot eat cannot fight.  Similarly, a business that cannot access cash, cannot survive.

When banks retreated into the safe, secure, and regulated new world of easy 3% margins on money that the bailout and expanded government borrowing provided, what followed for small business was nothing short of a scorched earth policy.  The banking industry has instituted policies that essentially treat small businesses as enemy combatants. While the balance sheets of the banks were being propped up by taxes that came largely from small business, the small businesses and their owners were shut off from credit lines of working capital that ultimately has resulted in layoffs and shut-downs. Soon, a day of reckoning that the taxes collected from these small businesses won’t just decrease by 30% as our housing values have, they will disappear altogether.  The vicious cycle is just beginning to unfold.

American small businesses have finally realized that they are being manipulated and attacked by the banking industry. Our government officials make many eloquent speeches on the value of small businesses. They seem to recognize the value and say the right words. When it comes to passing tangible legislation, they sit complacently on the sideline.  Like Caesar at the Roman Coliseum, our government chooses winners and losers by a capricious thumbs-up or thumbs down signal, but real leadership in supporting entrepreneurship has not been forthcoming.  America’s small businesses are angry and they have good reason to be.

No Comments by Joe on February 25, 2010
filed in Business, Community, Economics, Entrepreneurship
tagged , , , , , ,

Economic Homicide: Part One

How Old Banks with New Rules are Murdering Small Business in America

Joe J. Wallace, Managing Director
Hadannah Business Solutions

Small and medium sized businesses have long relied on banks as a source of working capital loans that they have used to fuel the prosperity that has had a profound positive impact on the economy of the free world. The United States as the de-facto leader of the free world has been the locale of choice for visionaries and entrepreneurs to pursue their ambitions. The worlds best and brightest have enriched our nation with their energy and intellect and we are all better off for it. The intimate personal relationships between banks and small enterprise have played a large role in our countries attractiveness as a place for entrepreneurs to prosper.

These loans have typically been revolving credit lines that are renewable at defined times and have carried competitive interest charges that are a couple of percentage points above a traditional mortgage. Unfortunately, the partnership of prosperity that banks have forged with small business has been severely diminished by the events of recent years including, falling real estate prices, government bail-outs, and the new rules that have either been forced on banks or that the banks have embraced to increase their profits.

Importance of Small Business: The Kauffman Foundation in a recent publication titled “Where Will the Jobs Come From”, presents data supporting the fact that small business employs just over half of the entire American workforce. The study also concludes that excluding start-ups, in 2007 over two-thirds of all employment growth came from businesses that are less than five years old. It is safe to say that small businesses founded by entrepreneurs, as opposed to large companies or government are really the only mechanism through which the needed jobs will be added to our economy in a sustainable way. The last section of the Kauffman paper is simply titled “Entrepreneurs = Recovery”. It seems as though our very survival as a nation depends on stimulating and nurturing the entrepreneurial atmosphere that has lead us to be that de-facto leader of the free world.

A question worth raising in consideration of the importance of entrepreneurship and small business is why have our financial institutions basically acted as though they have declared war on small business.  In my next three posts I will present a fairly detailed description of a classic military strategy to weaken and subjugate an enemy that bears much resemblance to what banks are doing to small business today.

No Comments by Joe on February 22, 2010
filed in Business, Economics, Entrepreneurship, Life
tagged , , , , , , ,

Unemployment in America: Predictions off by 500%

How Can a 500% Error be Touted as an Accomplishment?

Joe J. Wallace, Managing Director

Hadannah Business Solutions

A year ago when the stimulus package was new and was offered as the magic bullet to prevent the “official” unemployment rate from exceeding 8%, we all were optimistic that our new leaders were really onto something.  Hope was alive in America and changes were being made.  The unemployment rate at that time was 7.6% and we were bracing for who would be part of the coming 0.4% increase due to unavoidable layoffs.

Now a year later, after the 8% number was just a speedbump on the road that peaked at 10% unemployment, it is time for reflection.  As the Obama Administration crows about how they kept us from the abyss of another great depression and is prepared to stimulate us some more, let’s reflect a bit about just how much their projections were off.

How Bad Did They Miss The Number?

The Obama Administration predicted an increase in unemployment of 0.4% but what we actually lived through was a 2.4% increase.  This is an error of 500%. Error rate is calculated by dividing the actual by the projection, then subtracting 1 and multiplying that result by 100 to convert to a percentage.  Sorry guys, but an error of 500% is not acceptable performance to merit being trusted to do this again.

The Credibility is Gone!

A NYT/CBS News poll reported only 6 percent of Americans believe the stimulus has created jobs.

CBS News polled Americans in 2002 on the 25th anniversary of his death, and 7 percent thought Elvis was still alive.

So more people believe that Elvis lives than believe that the stimulus did what the administration says it did.  Santa, leprechauns, the Easter bunny and banshees have similar levels of belief.

The economics and predictive powers of the Obama Administration have become laughing stock for most of the population. This administration is to economics what Tiger Woods is to fidelity in a marriage. They just don’t understand that what feels good and draws applause today may just not be the right thing to do. I truly hope that someone in the administration realizes missing their projection by 2.4% is really a 500% error.  If they can’t understand that simple calculation then we are in for a very difficult future.

No Comments by Joe on February 18, 2010
filed in Business, Community, Economics, Life

The Basics of Forming a New Business

The Basics of Forming a New Business

Joe J. Wallace

Hadannah Business Solutions

It is not required to form a business entity to operate a business. It is however recommended for protection of personal assets such as vehicles and real estate that entrepreneurs strongly consider the protections provided by doing business through a formally recognized business entity.

This guide is only directed at the USA proper. As the most appropriate and cost effective ways to form an entity are not always the same from state to state, I have made every effort to identify the areas that are state dependent. The step by step guide covers the details needed as follows.

1. First Steps to Form a Business Entity

a. Name of Business
b. State of Business Entity
c. Type of Business Entity

2. Actions to Take

a. What Form to Choose
b. Getting and Employer Identification number (EIN)
c. Establishing a Business Checking Account
d. Licensing and Regulatory Agencies

All of these steps and actions will get you to a point where you are ready to write documents called “articles of incorporation, your letter to your Secretary of State, and your acceptance by registered agent. Once these are approved you will proceed to take actions a, b, c, and d, in that order.

Being a business owner is a trying but fulfilling experience. Everyone is not cut out for this but if you are one of those people please contact me by email for a free ebook that contains example letters and articles of incorporation that you can use to handle all of the paperwork that will be needed to get you ready to pursue that first revenue opportunity.

Hadannah Business Solutions offers a Free EBook to all qualified people who request one.  Drop me a line at hadannahbusiness@aol.com with a sentence or two about your business idea and I will send you the EBook.

1 Comment by Joe on February 13, 2010
filed in Business, Entrepreneurship

Exploitation Cuts Both Ways

Exploitation Cuts Both Ways

Joe J. Wallace, Managing Director, Hadannah Business Solutions

Do the strong exploit the weak? Is it not the duty of the powerful to protect the rights of people without power?   Some believe that the biggest myth in America today is that if you work hard, obey the law, pay your taxes, etc., etc. you can achieve the American dream. Does government not have the duty to provide for the common good? Are the social programs that many rely on like Social Security, Medicare, and Medicaid part the ménage e trios of exploitation regularly indulged in by the strong, the weak and the government?

The weak would not survive were it not for the enterprises that the strong create. Some call that exploitation, I call it employment. It is not technically the duty of the strong to protect the rights of the weak but it is in their best economic interest to do so. The most powerful weapon that the weak possess is the weapon of civil unrest. It is in the interest of the strong to maintain order and thus to co-exist with the weak in an economic system of mutual dependence.  No one can choose where they are born, but with all of its flaws the USA still provides at atmosphere of achievement where people can transcend poverty through education, honesty, and work. I know many people who have lived the American dream and the dream is different for each individual and each family unit. Some had a head start but that is just the way it is.

Government has the duty to provide for protection and to insure that we can all pursue happiness so long as we do not violate the laws. All of the programs that are mentioned were started during the great depression and all of them are somewhat socialistic. They all rely on tax money to exist. They are also all insolvent and marginally effective. Their insolvency is a result of years of waste, abuse, and yes exploitation. Exploitation of all of citizens both strong and weak by a government that is always quick to start programs but never seems to have the will to end them or change them when they are crippled by obsolescence.  The legacy of entitlement has become a very heavy weight on the American republic.

We can’t all be Bill Gates or Warren Buffet, both who came from humble roots, but we have all benefitted from their efforts in creature comforts and the advancement of knowledge. We can all be better tomorrow than we are today. Sometimes that means stronger and other times it just means more prepared or well rested. I for one wish for this country to remain strong. If the United States of America becomes a second rate power, and we seem to be doing our best right now to do exactly that, Mr. Putin or some other strong foreign leader will show us the true meaning of the word exploitation.

1 Comment by Joe on February 10, 2010
filed in Economics, Life

What Companies Should Do for Profits and Valuation

What Companies Should Do for Profits and Valuation
Joe J. Wallace, Managing Partner, Hadannah Business Solutions

Preamble: Profitability is what is called the amount of money that a business has remaining after the expenses incurred to produce, sell, market, secure the future, and operate the office functions, and depreciate long life items.

Alert: There is a difference between working in a business and working on a business. Working in a business is when the owner/manager spends time on tasks that could be and often should be done by someone else. Working on a business is that time that an owner/manager spends on strategic thinking and implementing plans that have the sole purpose of increasing the value of the business. Owner/managers of small to medium sized business often are caught up in the day to day tasks and neglect to work on their business. This is a fatal mistake.

Key Metrics:

Revenue: Revenue is simply how much money has been brought into a business from carrying out the efforts that the business is doing. This is most often known as the TOP LINE.

Direct Costs: The amount of money that it costs to directly produce the product or service being sold. Raw materials, purchased subassemblies, direct labor, and the overhead associated with direct labor such as workers compensation and FICA taxes typically make up these costs.

Gross Profit: Revenue minus Direct Costs equals gross profit. A good general metric for targeting gross profit is that it should be equal to or greater than 50% for a growing and thriving business.

Operating Costs: Operating costs are the costs of operating a business that are not classified as direct costs. These costs include, facilities, maintenance, marketing, sales, product development, warranty costs, interest, insurance, general administration, insurance, licensing, permits, training, and utilities are items that most companies incur in day to day operation. The total for operating costs should not exceed 30% unless direct costs are below 50%.

Profit Before Taxes: Gross profit minus operating costs equals profit before taxes. Companies should be priced and sized so that this metric is at least 20%.

Net Profit: The amount of profits earned by a business after all costs including local, state, and federal income taxes. This number depending on the business location should be in the 12% – 15% range.

EBITDA: Earnings before interest, taxes, depreciation, and amortization. This is a term that is the basis of valuation for a non-public company. A healthy small or medium business should have an EBITDA that is at least 20% of revenue.

Some Tips for Profitability:

1. Always assure that the gross profit is adequate and above 50%. If it is below that there are only three things to do to correct it. First is to increase the top line without hiring more people. That can be done by raising your price or by selling more products or services. Second one can renegotiate the prices paid for the raw materials purchased. Third, if the first two actions do not work, you to reduce the cost of labor. That means either pay cuts or layoffs. Caution: In most companies when the gross profit is too low it is either a pricing problem or a cost of labor problem. This is an opportunity to innovate for the business owner. Innovation can find ways to ad value to justify a price increase or to increase the efficiency of the labor force.

2. Match the size of the overhead (operational costs) to the size of the company. A minimum number of functions just have to happen. The number of employees can be minimized by cross training. Some functions such as payroll and janitorial services are much less expensive when an outside service firm is hired to do the work. Health insurance is an important benefit in attracting good people to a business. It is also one of the most expensive line items in a company’s budget. By cost comparison, promoting and rewarding healthy lifestyles, doing background checks, drugs screens, and hiring people who have a healthy lifestyle this cost while still high can be minimized. Make sure that your marketing is well invested and portrays your business in the more favorable terms possible.

3. Awareness of the industry trends is of the highest importance for an owner/manager. Knowing where pricing is on a global basis and adjusting as appropriate is paramount to having a good business model. Make the effort to know everything that your competitors are doing like hiring, firing, pricing, changing locations, and adjusting benefit plans. Never stop learning what your competitors are doing and always have a way to differentiate your business from the pack.

4. Have a compensation policy that puts your business at the absolute top of your industry. Pay professional talent at least 20% above the averages and enjoy the premium output that those employees will generate. Never ever hire less than excellent people to save money. If you pay critical thinkers average or below average salaries you will eventually have a mediocre business.

5. Take advantage of upgrades and accessories. Selling ad-on items or services is nearly always the highest profit margin enhancers that a business can use to grow earnings. As an example if a business has $1M per year in revenue and a net profit of 10% ($100,000), and grows its revenue by 10% with accessories that have a net margin of 50%, the newly sized company will be a $1.1M business with 15% profits. By growing 10% in the right way the company’s profits can increase by 50%.

6. Concentrate on valuation. An additional dollar of profit increases the value of a business by up to $10. Remember that when making spending decisions.

No Comments by Joe on February 9, 2010
filed in Business, Economics, Entrepreneurship
tagged , , , , ,

The Wages of Invention and Innovation are Wealth

The Wages of Invention and Innovation are Wealth

Joe J. Wallace, Managing Director

During a recent vacation on the island of Maui, I became interested in how the recession had affected the real estate industry in a market that is dominated by second homes and investment property.  The numbers are similar to what is happening on the mainland.  The quantity of sales are down dramatically, the average sale prices are lower by some 20%, and properties languish on the market for in some cases over a year.  That being the case, I decided to drop in on an open house and speak with a local realtor.

The house that attracted my attention is very similar in size and quality to my own home in rural Vanderburgh County.  The price however is as the realtor put it “a steal at only $8 million dollars”.  Now that is quite a difference in what such a house commands in my neighborhood.  It must be that oceanfront thing and the perpetual great weather.  I was intrigued.  During the course of conversation, I learned that the home is owned by a dentist from Georgia who bought another home just across the bay so he could have a sunset view instead of the sunrise view that this home offers.  The dentist’s total investment in the two homes now stands at a cool $20 million.  I was beginning to think that I should have become a dentist instead of a CEO.

Dentistry is a profession that requires the highest levels of both education and dexterity, but $20M houses?  I learned through the Bureau of Labor & Statistics that a general dentist in Georgia earns a median wage of $171,280 and that in Indiana that figure is $158,080.  I don’t understand why we pay less in Indiana than Georgia but who am I to argue with statistics.  I further learned that by specialization, a dentist can earn as much as $315,000.  This will enable one to have an extremely good lifestyle but not to own $20M in Maui real estate outright.  The numbers just don’t add up.

Invention and Innovation are the Keys to Wealth Creation

A further conversation yielded the knowledge that the owner of these homes is no ordinary dentist.  He actually owns a portfolio of patents that he invented to improve the way that dental care is provided.  What happened is that this gentleman while working as a dentist identified and developed ways to improve his dental practice.  He furthermore took the initiative to design, build, test, patent and commercialize his inventions and innovations.  So, what this dentist did is assumed the risk, made the investment, and ultimately reaped the rewards for his ideas and initiative.  He transcended from dentistry to become an inventor, innovator, and a successful entrepreneur.  He also created new knowledge that has been used to improve the lives of dentists and their patients the world over.

“Where a new invention promises to be useful, it ought to be tried”

Thomas Jefferson

One Person, One Region, One Nation

The free enterprise system has richly rewarded this dentists inventive efforts and he is now truly one of the super wealthy.  That which works for individuals can also work for societies and nations. By creating new knowledge, forming risk capital, and unleashing the energy of inventors and entrepreneurs, the United States has become the leader in both Nobel Prizes and wealth creation.  The world’s best and brightest, but more importantly the most ambitious have routinely flocked to our shores to pursue their business dreams. Some places are much more attractive and supportive of entrepreneurial spirits than others.  Attractiveness is about lifestyle and amenities of place.  Supportiveness however is about access to talent, tolerance for risk, the ability to form local investment capital, and having an atmosphere where being an entrepreneur or inventor is looked upon favorably.  As this dentist has proven, one can go it alone, but a full support network and a culture of creative achievement are what will insure that more and more transformational people will succeed in the wealth creation that is most certainly the only sustainable way to provide continuous growth to the nation’s economy.

No Comments by Joe on February 8, 2010
filed in Business, Community, Economics, Entrepreneurship

The Effects of Awareness on Entrepreneurship


The Effects of Awareness on Entrepreneurship

Joe J. Wallace, Managing Director

Hadannah Business Solutions

Entrepreneurship is a term that everyone seems to want a piece of these days. Cities, regions, states, universities, and even nations have launched initiatives and invested millions of dollars to promote entrepreneurial culture and attract recognized entrepreneurs to their regions in hopes that wealth and economic prosperity will follow.

Just what is this elusive thing called entrepreneurship that is so attractive to leaders all over America? How does it start and why does it flourish in some places, yet lie dormant in others? In a 2007 report titled, “On the Road to an Entrepreneurial Economy”, the Kauffman Foundation defined it this way.

“At it’s most fundamental level, entrepreneurship is about the successful development and commercialization of novel ideas.”

The report went on to say that:

“This process is impossible without highly creative people . . . who aspire to become high impact entrepreneurs.”

The origins of entrepreneurship are the ideas and perspectives that people have and then act upon to create changes that often have profoundly positive economic outcomes. These outcomes are in the form of a robust and expanding economy in the immediate proximity to where the entrepreneurial activities are undertaken.

Ideas and perspectives germinate in the minds of acutely aware individuals during the day to day activity of living. By the powers of observation and through a healthy feeling of discontentment with the status quo, curious visionaries identify potential solutions to society’s problems. When these visionaries have ambition, drive, and access to capital, sometimes they become entrepreneurs. When their ideas become successful products and services, the entrepreneurs and their communities can accumulate wealth and enhance quality of life.

Awareness starts the process. Curiosity and cognitive thought define the opportunities. Ambition, focus and a willingness to assume risk are the final steps that culminate in the commercialization of novel ideas. Real change is measured by the amount of risk that one is willing to take and knowledge is the key ingredient to gaining comfort with risk.

Living a day to day lifestyle that is characterized by awareness is vital to individuals and regions that aspire to entrepreneurial success. To solve problems and present solutions, one must be aware of the sources of discomfort and have the initiative to ponder how to improve life for all. The status quo is the target. Ideas, thoughts, and awareness are the arrows in the quivers of aspiring high impact people.

“You must constantly challenge the status quo”

Dr. Martin Luther King Jr.

Higher consciousness is just as necessary for invention and technical innovation as it is for the initiation of sweeping social change. It all really starts with the acute awareness that leads to the recognition of a need for change.

Where are today’s opportunities for innovation and entrepreneurship? We can all benefit from innovation in the areas of food, energy, education, healthcare, government, travel, workforce development, and a multitude of yet to be defined areas. The same was true 10 years ago, 50 years ago, and 100 years ago. A better question would be, “Where are we not in need of positive disruptive change”.

If one can not see it, then one can not dream it. If one can not dream it, one will never do it. This is as true for cities, regions, states, and countries that are in pursuit of entrepreneurial initiatives as it is for aspiring entrepreneurs. Ideas are the seeds from which clusters of global economic relevance are grown.

It is vital that we all “know our place”. It is even more vital to realize that we have the power to positively change “our place”. Awareness, cognitive thought, and decisive action are the keys to continual improvement and to sustainable prosperity


No Comments by Joe on February 8, 2010
filed in Business, Economics, Entrepreneurship

« Older Posts

  • Editing

  • Archives

  • Categories

  • Ezine Designation

    As Featured On EzineArticles

  • Hadannah Website

    www.hadannahbusiness.com

  • The National Networker