Flying Through Red Ink

Is it just me, or does anyone else have trouble understanding this article from USA Today.com?  It’s not the article, it’s the information in the article that doesn’t seem to make sense.

"United making money again 

CHICAGO (AP)  — United Airlines parent UAL (UAUA)
reported third-quarter earnings Tuesday of $190 million, marking the
first time it has posted back-to-back profits in more than six years.

Higher fares and lower costs as the result of
its three-year bankruptcy restructuring helped keep the nation’s No. 2
carrier modestly profitable despite still-lofty fuel costs.

The company’s earnings of $119 million in the second quarter was its first true profit since 2000."

How in the world do you go more than six years without making a profit and stay in business?  According to the article, United has lost "billions of dollars" since 2000.  If United lost billions, who found it?  And why is their stock selling for almost $38.00 per share?  Any thoughts?

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Just in Case You Missed It

From Sports Illustrated.com:

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Government Opportunities

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In a recent post (Selling to Your Uncle (Sam)), we discussed the possibility of selling things to the federal, state, and local governments.  We also published a poll, asking if you presently make any government sales.  Surprisingly, 100% of those who responded to the poll said "no".

If you’d like to pursue this additional business, we have a resource that might help you. We’ve gotten

our hands on a limited number of books called "Procurement Opportunities Guide".  This 72 page book is distributed by MasterCard and the Association for Small Business Development Centers.  While they last, you can get a free copy.  Just click on the "Email Me" link on the left and send me your name and address.  Please put "Government Book" or something similar in the heading.

Like I said, the quantity is limited, so if you want one, order it now.  They’re free while they last.

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They Want Your Business

Here’s a quiz.  Who drives brown trucks and is one of the top 20 SBA lenders in the country?  If you answered Dale Jarrett, you would be close.  He drives the brown (and white) car.  The correct answer is UPS.  Last year in Florida alone, UPS Capital issued $21.8 million in SBA backed 7(1) loans.  According to their web site, "UPS Capital Credit, a UPS Capital subsidiary (formerly First
International Bank), is a Preferred Lender of the U.S. Small Business
Administration (SBA) as well as a leading lender in the
government-guaranteed loan programs of the U.S. Department of
Agriculture (USDA) and Export-Import Bank of the U.S"

UPS, along with competitors Federal Express and DHL, is providing new, non-shipping services to attract small businesses.  According to Jim Wyss, reporting for the McClatchy Newspapers, "FedEx is now the nations second-largest producer of banners and signs, and it’s about to unveil a service aimed at helping entrepreneurs get into the direct-mail-marketing-industry", shipping via FedEx, of course.  Not to be outdone by USP, FedEX also sponsors a NASCAR team.

DHL now publishes a magazine for small businesses and is funding start-ups. 

Why the diversification?  In a word–small business.  OK, that’s two words.  Anyway, they want your business.  With some minor differences, they all provide the same service.  You give them a package.  They deliver it.  While FedEx pioneered next-day delivery, they all do it now and they all do it for about the same cost.  If they want you to choose them for your shipping needs, they all realize that they have to offer something extra to earn your business.

That’s a good business model for all of us.

You Can’t Keep a Good Factory Down

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Missouri weather can be very unpredictable.  If you don’t believe it, ask Major League Baseball.  On Friday afternoon, September 22, at about 3:20 in the afternoon, a tornado touched down in St. James, MO.  Tacony Manufacturing was right in its path.  It was one month, to the day, since the one millionth vacuum cleaner had rolled of the production line.  (See "That’s a Lot of Vacuum Cleaners" for more on the St. James plant.)

Thankfully, the plant works on a schedule of four ten hour days, Monday through Thursday so theSt_james_6
number of people working that afternoon was small and no one was injured.  The building wasn’t so fortunate.  When the storm had passed, those who were working that day found a 30′ X 70′ hole in the roof.  Several doors had been blown out.  Water was pouring in from the still-falling rain and from the plumbing for the sprinkler system, which ruptured when the roof blew off.  There was a 35′ X 16′ hole in one wall.

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The sprinklers were quickly turned off and most of the raw materials and material handling equipment was saved.  Employees living nearby soon arrived to help, dodging tree limbs, power lines and other assorted debris.  By early evening, a recovery plan was in place and materials had been ordered.

To make a long story short, in spite of the severe damage, the factory was up and running Tuesday morning, the 26th.  We missed one day of production. 

Tacony Manufacturing works on a lean production system, meaning that we don’t keep a lot of finished product on hand.  Merchandise is produced as it’s needed to supply our customers.  Had we been shut down for any length of time, it would have been a big problem for a lot of dealers.  The quick work of Jim Fleming, our plant manager, and all of our associates in St. James not only ensured that our business would continue with little interruption, it also ensured that our dealers’ business would not be disrupted.

We were very fortunate, especially that no one was hurt.  It just shows that you can be celebrating a milestone one day and repairing major damage the next.  If you haven’t reviewed your own disaster plan recently, now would be a good time to do it.

Jim has prepared a more complete report of the events of that weekend and you can read it here.  Click on any of the small pictures below to see them in larger size.

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Protecting Your Reputation

From today’s Startup Journal (Wall Street Journal’s Center for Entrepreneurs), Sarah E. Needleman offers some tips on protecting your business from attacks on the web.  Since anyone with a computer and an Internet connection can become an on-line author, businesses, especially small businesses are easy targets for angry or malicious attacks.

Disgruntled customers tend to be the worst offenders.  Maybe they bought something that doesn’t work.  Maybe they felt like they weren’t treated fairly.  For whatever reason, they decide to bad-mouth you and your business.  If you become the target of an on-line attack, Needleman offers five tips:

1.  Review the situation carefully before you do anything.  Be calm.  Don’t do anything that might make the situation worse.

2.  Sometimes it’s best to do nothing.  If you’re dealing with a personal vendetta, if it’s an isolated incident, if the claims are so outrageous that no one is likely to believe them, if it doesn’t seriously affect your business, or if the issue is minor, you may be better off to just let the matter die. 

3.  If the information is false, correct it right away.  Contact the person responsible and do your best to straighten out the misunderstanding. 

4.  Give your customers a way to contact you directly.  They may just want to vent.  It’s better for them to vent directly to you than in a public forum.

5.  Be aware of what’s being said about you.  Google your business name at least once a month to see what’s out there.  You might just find some good things, too.

6.  (The article says 5, but it’s always better to under promise and over deliver.)  Sue the %$@#!  But that’s a last resort.  It’s expensive.  It’s time consuming.  And, it could backfire by generating more on-line attacks.

Of course, the number one way to avoid the problem in the first place is to always do whatever it takes to make your customers loyal fans and not angry critics.

Be sure to check out the side bar article Restaurateur Fights Online Mudslinging for one man’s experience.

 

Impulse sales

We all know that grocery stores love to put high-margin impulse items near the cash register.  They know that, while you’re waiting in line, you’ll keep your mind occupied by looking over the merchandise that’s right there in front of you.  Most of us will be tempted by something, if not every time, at least enough times to pay for the shelf space. (Isn’t it ironic that the slower the service is, the longer you have to stand there and, up to a point, the more you’re likely to buy?)

This same psychology is used throughout the store.  The most profitable items are always located at eye-level, with the less profitable ones near the floor.  The higher profit may be in the form of larger margins, or it may be in the form of rebates from the manufacturer for the prime spots.  A successful grocery store will never put staple items like milk and bread in the front of the store.  Intense competition on these items makes them very low-margin.  If you’re going to buy them, you’re going to have to walk past other, more profitable areas of the store, much like the Las Vegas casinos make you walk past the slot machines to get to the cheap buffet.  There are many other ways that grocers, who work on razor-thin profits, use human nature to increase both sales and margins.

How about your store?  Have you studied your customers to see what areas of your store they naturally gravitate to?  If you haven’t, you should.  If you carry something that’s a staple, the equivalent of milk and bread, it should be at the back of the store.  High-margin accessory items should be displayed near the check-out just like the grocer’s candy bars and magazines.  This is also a good place to have an add-on item that the customer may not have considered buying when they came in.  And, in case they don’t have their glasses on, your staff should mention these add-ons to every customer. 

I once managed an electronics store.  One year I had an opportunity to buy a pretty nice car ice scraper for 50 cents.  I marked them $1.99, stacked them by the cash registers, and paid my salesmen a quarter for every one that they sold.  We sold hundreds of ice scrapers that winter, at $1.24 profit each.  The customers were happy because they got a nice ice scraper that wouldn’t break off in their hand the first time they used it.  My salesmen were happy because they made an extra quarter, and sometimes more, on just about every sale (this was when a quarter was really worth a quarter) and my boss was happy because I was adding extra margin to almost every sale.

As we approach the busy Christmas season, it’s important that every square inch of your selling space generates the maximum amount of profit.  A little time spent analyzing customer traffic patterns and placing the most profitable items in the spots where they are most likely to sell could pay big dividends.