The other day I was at the bank making a deposit when I said hello to the customer at the next teller window. His name, for the sake of this column, is Donny and he manages a café in my town.
“Well, hello there, stranger,” Donny said. “I haven’t seen you in a while. How come?”
I hesitated, aware that the tellers were listening. I used to frequent Donny’s café and I hadn’t been there in at least six months.
“Do you really want to know?” I said.
“Yes,” he said.
“OK,” I said. “Here goes. I actually love the coffee and food there. I stopped coming in because of the drama.”
Already Donny was nodding as if he’d heard this before, so I continued.
“Your employees are very nice people, but there’s always drama,” I said. “I’m sitting in there with a cup of coffee and my journal and I have to try to tune out the stories of who got drunk last night, whose boyfriend stopped talking to them, and how they’re tired because they got no sleep last night. Because the place is small, you can hear their conversations at every table.”
Donny sighed. The tellers looked wide-eyed. I felt a little odd, but hoped upon hope that this information would help Donny with his business. Perhaps I shared because I’ve been reading a lot of Seth Godin lately, which means I’m particularly attuned to common sense in business. This certainly fell into that category and it was a potentially easy fix.
It’s even more instructive if we break it down. There are approximately a dozen places I could choose to have coffee within four blocks of my home. The café Donny manages has very good coffee, quality food and an optimum location with regard to my morning routine. A winner, right? The fact that I even know Donny by name says a lot about his interaction with customers.
But in fact, he was a big part of the drama. On most days, I could tell you whether he got stuck in traffic on his way in, got a parking ticket, or had enough sleep. Kvetching with clientele is acceptable once in a while, but when it’s a constant let’s just say it is not a business-building technique.
I am still not sure if I did the right thing answering Donny’s question with unbridled honesty, but I can tell you it has me thinking a lot about truth and when to go there. This word — truth — has been widely debated and defined by the greatest minds in religion, philosophy and psychology. I especially love Jules-Joseph Lefebvre’s interpretation in his painting La Verite (The Truth), which depicts a nude woman holding a light (mirror?) above her head much like the pose of Lady Liberty.
When is it appropriate and/or beneficial to hold up that light?
Had Donny been a client of mine and had I been coaching him without ever having gone into his establishment, would we have ever gotten to that particular truth? Hard to say, but probably not. Sometimes observations in daily interactions can be helpful.
In another scenario, there is much talk in this job market and beyond about how far to go in giving people access to your contacts. It has become a serious dilemma for well-intentioned folks who are inclined to want to help friends, but who want to be judicious about letting friends of friends use their name for professional relationships they forged with great care and nurturing.
There’s so much gray area. Can you in good conscience tell your boss he should hire your cousin’s husband’s sister, who you honestly don’t think is a good fit or haven’t even met? If a random friend of a friend who’s an aspiring author hears you published a book, do you really want to give her your agent’s contact info without knowing a thing about the quality of her writing?
Where’s the line for truth?
I recently suggested to an author friend in the latter scenario that she prepare a form letter for the [many] people who come out of the woodwork to ask her how to get published and want access to her contacts. I further suggested that she include a line about how diligently she researched agents and publishers and pitched and crafted proposals and how that is all part of the process to get to the publishing finish line. Is it hurtful truth to tell someone how crucial it is to pay their dues? Maybe I’m old-fashioned, but I don’t think so.
If you think back on some of the most truthful things that have been said to you in your life, what did you do with that information? Reject it? Take it to heart? In most cases it can be put to constructive use. Sometimes truth hurts, but if we’re open, that awareness can lead to a fresh perspective and new beginning.
I sure hope Donny thinks so.
Nancy Colasurdo is a practicing life coach and freelance writer. Her Web site is www.nancola.com. Please direct all questions/comments to FOXGamePlan@gmail.com.
Filed under: personalfinancenewsss.wordpress.com | Tags: business, Experts, Santa
Every year about this time, both children and accountants study Santa Claus and ask: How does he do it?
The kids, of course, wonder how their red-suited benefactor gets down all those chimneys in just one night. But the accountants have another question: Exactly how does the Santa business model work?
Sure, the old guy picks up a handsome paycheck for all those shopping mall hours he puts in. And he has a few other sources of income. But then he gives away all those presents. As any parent can tell you, that’s not cheap.
So Bankrate.com, always fiscally responsible, decided to take a look at Santa’s balance sheet and see how this all works out financially.
Income
Since the 1950s, Santa Claus has found gainful employment at shopping malls across the United States, grinning for the cameras while hugging everything from screaming tots to drooling dogs. But the photography companies pocket the profit from those pricey picture packages — Santa is actually an hourly employee at the approximately 1,000 enclosed malls in this country.
According to the International Council of Shopping Centers, Santa reported for work at a majority of these locations in 2008 on Nov. 14, which gives him 40 days of employment. Because 97.1 percent of the malls extend their shopping hours during December, it’s a safe bet he’s on duty 10 hours per day, even with two meal breaks, for a time card of 400,000 hours. Then, of course, he has his traditional haunts: Macy’s on 34th Street in New York and rival Bloomingdale’s uptown. Not to be outdone, South Street Seaport has also jumped into the fray demanding his presence, so add another 546 hours.
That means Santa would bank $2,623,576.30 at the federal minimum wage of $6.55. However, a few years ago, this savvy dude capitalized on years of experience (not to mention a real beard) and negotiated an average salary of $8,000 a year with the photography vendors, so in reality he’s bringing home $8,000,000.
And because Christmas boils down to seasonal work, he has begun appearing at award nights, conventions, birthday parties and casinos throughout the year, commanding hefty fees between $1,200 and $10,000 per job. A couple of these gigs a month would pull in roughly $224,000 in extra cash throughout the year.
Unfortunately, he’s missing out on the real cash cow. According to Steve Weinberg, a shareholder with the Greenberg Traurig law firm, the holiday icon has no claim to any royalty income. For starters, his history is a bit too murky for a lawyer to establish intellectual property rights to the roly-poly, eye-twinkling, gift-giving image. Over the centuries, Santa’s identity has merged with those of Nicholas the Gift Giver — St. Nicholas, sans the red costume in Washington Irving’s tales — and Kris Kringle.
Haddon Sundblom created the current character known as Santa Claus as an advertising campaign for Coca-Cola in the 1930s, so the soft drink company actually has a stronger case to get the money than Mr. Claus himself.
“And assuming we could make the case he owns his reputation, he’s really given it up to the public domain,” Weinberg says. “In IP (intellectual property) law, if you don’t exercise control over other people’s uses of your reputation, you end up essentially abandoning your right to claim royalties.” Santa’s failure to send cease-and-desist letters to Tim Allen for portraying him in the movies was the final mistake.
Bottom line: Santa earns a little more than $8 million annually. Weinberg’s former clients, the Muppets, are actually richer than Santa.
Expenses
Santa’s gift-giving extravaganza certainly has come a long way from the days Ralphie yearned for a Red Ryder BB gun. Twenty-first century kids crave everything from interactive musical chairs to Nintendo Wiis. Using Dr. Toy’s lists of top toys in 2008 for infants through age 6 — face it, after that they stop believing in Santa, so the big guy is off the hook — we determined the average price per toy. One request per customer, please. The damage looks like this:
Average cost per present
Age Average cost per present Number of children
in 2000 U.S. Census Bureau Total dollar cost
0 – 2 $34.39 8,137,000 children $279,831,430
3 – 4 $32.08 8,077,000 children $259,110,160
5 – 6 $30.61 7,810,000 children $239,064,100
So Santa spends $778,005,690, which qualifies him for the free shipping deals. Lest you think him a spendthrift, these prices also reflect the lowest available on comparison shopping Internet sites, and he has been known to shave a few additional bucks by watching the Sunday newspaper ads.
The staff at InsureMyTrip.com say baggage coverage for these presents would be written as a cargo policy through Lloyds of London, priced at 15 percent of value, so he needs to budget $116,700,850 for the journey. On the other hand, “Santa’s never missed a Christmas, even when Rudolph’s nose was on the blink, so trip cancellation coverage is not an issue,” says Vikki Corliss, a spokeswoman for InsureMyTrip.
With crazy diseases flying about, medical and medical evacuation coverage is critical this year. He can lock in a $2 million medical and $2 million medical evacuation policy for a mere $129 premium for the night. Corliss says her company would be pleased to cover the cost of the personal policies in exchange for an InsureMyTrip.com logo on the side of Santa’s sleigh.
He needs to consider the endorsement. After all, the volunteer group of seniors in Santa Claus, Ind., save him $3,700 a year that he’d otherwise have to spend on postage answering letters from children who choose this route over the more popular e-mail option.
The sheer volume of presents means Santa’s elves need to work extended hours. While seasonal wages tend to be lower than salaries, Dan Maddux, executive director for the American Payroll Association, is very conscious of the fact the North Pole’s minus-31-degree winter temperatures puts a damper on recruiting. As a baseline, Maddux estimates Santa pays each elf $1,624 in biweekly salary.
“Since the elves are under Santa’s control and direction, and work on-site at the workshop, they are considered seasonal hourly employees rather than independent contractors,” he says. That means Mr. Claus must also pay employment taxes and provide worker’s compensation.
And let’s face it, if Macy’s had to hire 8,500 seasonal workers across just its Western division this season, Santa needs to at least match that number.
So over the five-week frenzy, he must budget $34,510,000 in payroll needs.
Finally, tired of the same old scenery, Santa Claus indulged in a summer home in North Pole, Ala., this year. He secured the 4 acres on Lot 3 on Santa Claus Lane from a Re/Max Realtor at $1,425,283 and built a six-bedroom, 5,300-square-foot home valued at $550,000. A 30-year mortgage loan for the $1,975,283 at 6 percent with 5 percent down means he has to cough up an $11,250.67 monthly payment, or $135,008.04 on the year.
So what’s it all add up to? Well, Santa’s dimples won’t be so merry when his calculator determines that he owes $931,191,823 — at least $922,967,823 more than he makes. That’s serious bankruptcy material, and he has yet to feed his reindeer.
Tara-Nicholle Nelson, a licensed real estate broker and attorney in Oakland, Calif., who owns Tierra Real Estate and Mortgage Services, offers Santa one small option. She sized up the value of his current workshop at the North Pole — which includes a 3,000-square-foot single-family residence with special features like a gourmet chef’s kitchen, a campus that houses a 2,500-bed dormitory, a 500,000-square-foot warehouse and stables — against similar properties in Alaska and determined that he is sitting on $39,745,720 worth of property.
“He’s going to have to find other work if he wants to make money,” Weinberg says. “Maybe he can be the next Harry Potter character, but of course this is only one Jewish guy’s opinion.”
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FOX Translator
Indices
No data currently available. (more…)
Every year about this time, both children and accountants study Santa Claus and ask: How does he do it?
The kids, of course, wonder how their red-suited benefactor gets down all those chimneys in just one night. But the accountants have another question: Exactly how does the Santa business model work?
Sure, the old guy picks up a handsome paycheck for all those shopping mall hours he puts in. And he has a few other sources of income. But then he gives away all those presents. As any parent can tell you, that’s not cheap.
So Bankrate.com, always fiscally responsible, decided to take a look at Santa’s balance sheet and see how this all works out financially.
Income
Since the 1950s, Santa Claus has found gainful employment at shopping malls across the United States, grinning for the cameras while hugging everything from screaming tots to drooling dogs. But the photography companies pocket the profit from those pricey picture packages — Santa is actually an hourly employee at the approximately 1,000 enclosed malls in this country.
According to the International Council of Shopping Centers, Santa reported for work at a majority of these locations in 2008 on Nov. 14, which gives him 40 days of employment. Because 97.1 percent of the malls extend their shopping hours during December, it’s a safe bet he’s on duty 10 hours per day, even with two meal breaks, for a time card of 400,000 hours. Then, of course, he has his traditional haunts: Macy’s on 34th Street in New York and rival Bloomingdale’s uptown. Not to be outdone, South Street Seaport has also jumped into the fray demanding his presence, so add another 546 hours.
That means Santa would bank $2,623,576.30 at the federal minimum wage of $6.55. However, a few years ago, this savvy dude capitalized on years of experience (not to mention a real beard) and negotiated an average salary of $8,000 a year with the photography vendors, so in reality he’s bringing home $8,000,000.
And because Christmas boils down to seasonal work, he has begun appearing at award nights, conventions, birthday parties and casinos throughout the year, commanding hefty fees between $1,200 and $10,000 per job. A couple of these gigs a month would pull in roughly $224,000 in extra cash throughout the year.
Unfortunately, he’s missing out on the real cash cow. According to Steve Weinberg, a shareholder with the Greenberg Traurig law firm, the holiday icon has no claim to any royalty income. For starters, his history is a bit too murky for a lawyer to establish intellectual property rights to the roly-poly, eye-twinkling, gift-giving image. Over the centuries, Santa’s identity has merged with those of Nicholas the Gift Giver — St. Nicholas, sans the red costume in Washington Irving’s tales — and Kris Kringle.
Haddon Sundblom created the current character known as Santa Claus as an advertising campaign for Coca-Cola in the 1930s, so the soft drink company actually has a stronger case to get the money than Mr. Claus himself.
“And assuming we could make the case he owns his reputation, he’s really given it up to the public domain,” Weinberg says. “In IP (intellectual property) law, if you don’t exercise control over other people’s uses of your reputation, you end up essentially abandoning your right to claim royalties.” Santa’s failure to send cease-and-desist letters to Tim Allen for portraying him in the movies was the final mistake.
Bottom line: Santa earns a little more than $8 million annually. Weinberg’s former clients, the Muppets, are actually richer than Santa.
Expenses
Santa’s gift-giving extravaganza certainly has come a long way from the days Ralphie yearned for a Red Ryder BB gun. Twenty-first century kids crave everything from interactive musical chairs to Nintendo Wiis. Using Dr. Toy’s lists of top toys in 2008 for infants through age 6 — face it, after that they stop believing in Santa, so the big guy is off the hook — we determined the average price per toy. One request per customer, please. The damage looks like this:
Average cost per presentAgeAverage cost per presentNumber of children
in 2000 U.S. Census BureauTotal dollar cost0 – 2$34.398,137,000 children$279,831,4303 – 4$32.088,077,000 children$259,110,1605 – 6$30.617,810,000 children$239,064,100
So Santa spends $778,005,690, which qualifies him for the free shipping deals. Lest you think him a spendthrift, these prices also reflect the lowest available on comparison shopping Internet sites, and he has been known to shave a few additional bucks by watching the Sunday newspaper ads.
The staff at InsureMyTrip.com say baggage coverage for these presents would be written as a cargo policy through Lloyds of London, priced at 15 percent of value, so he needs to budget $116,700,850 for the journey. On the other hand, “Santa’s never missed a Christmas, even when Rudolph’s nose was on the blink, so trip cancellation coverage is not an issue,” says Vikki Corliss, a spokeswoman for InsureMyTrip.
With crazy diseases flying about, medical and medical evacuation coverage is critical this year. He can lock in a $2 million medical and $2 million medical evacuation policy for a mere $129 premium for the night. Corliss says her company would be pleased to cover the cost of the personal policies in exchange for an InsureMyTrip.com logo on the side of Santa’s sleigh.
He needs to consider the endorsement. After all, the volunteer group of seniors in Santa Claus, Ind., save him $3,700 a year that he’d otherwise have to spend on postage answering letters from children who choose this route over the more popular e-mail option.
The sheer volume of presents means Santa’s elves need to work extended hours. While seasonal wages tend to be lower than salaries, Dan Maddux, executive director for the American Payroll Association, is very conscious of the fact the North Pole’s minus-31-degree winter temperatures puts a damper on recruiting. As a baseline, Maddux estimates Santa pays each elf $1,624 in biweekly salary.
“Since the elves are under Santa’s control and direction, and work on-site at the workshop, they are considered seasonal hourly employees rather than independent contractors,” he says. That means Mr. Claus must also pay employment taxes and provide worker’s compensation.
And let’s face it, if Macy’s had to hire 8,500 seasonal workers across just its Western division this season, Santa needs to at least match that number.
So over the five-week frenzy, he must budget $34,510,000 in payroll needs.
Finally, tired of the same old scenery, Santa Claus indulged in a summer home in North Pole, Ala., this year. He secured the 4 acres on Lot 3 on Santa Claus Lane from a Re/Max Realtor at $1,425,283 and built a six-bedroom, 5,300-square-foot home valued at $550,000. A 30-year mortgage loan for the $1,975,283 at 6 percent with 5 percent down means he has to cough up an $11,250.67 monthly payment, or $135,008.04 on the year.
So what’s it all add up to? Well, Santa’s dimples won’t be so merry when his calculator determines that he owes $931,191,823 — at least $922,967,823 more than he makes. That’s serious bankruptcy material, and he has yet to feed his reindeer.
Tara-Nicholle Nelson, a licensed real estate broker and attorney in Oakland, Calif., who owns Tierra Real Estate and Mortgage Services, offers Santa one small option. She sized up the value of his current workshop at the North Pole — which includes a 3,000-square-foot single-family residence with special features like a gourmet chef’s kitchen, a campus that houses a 2,500-bed dormitory, a 500,000-square-foot warehouse and stables — against similar properties in Alaska and determined that he is sitting on $39,745,720 worth of property.
“He’s going to have to find other work if he wants to make money,” Weinberg says. “Maybe he can be the next Harry Potter character, but of course this is only one Jewish guy’s opinion.”
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With the country going through its worst financial crisis of the last 70 years, it’s not so easy for small businesses to obtain bank loans.
But that doesn’t mean banks have completely turned their backs on small businesses. It just means that owners of these businesses must work harder to get banks to open their lending spigots.
The big picture
Financial institutions are definitely curtailing their loan activity. Federal Reserve data show that the total of commercial banks’ business loans has stagnated between $1.5 trillion and $1.52 trillion between May and early September.
Several elements of the credit crunch are limiting loans. First, banks already have so many troubled loans on their balance sheets that they are reluctant to make new ones that carry any risk, says Bob Seiwert, director of commercial lending for the American Bankers Association, or ABA.
“Second, there is a liquidity crisis. Banks need money to lend. If they can’t sell the loans on their books, they can’t get money to make loans to you and me,” he says.
In addition, the economic slowdown has curbed the formation and growth of small businesses, crimping their demand for bank loans.
Banks also report that “the borrowers they see are less creditworthy than a year ago,” says Eric Zarnikow, associate administrator for capital access at the Small Business Administration, or SBA.
The number of loans the SBA guarantees will probably drop to somewhere between 75,000 to 80,000 this year from 110,000 last year, he says. That represents a decline of up to 32%.
But not all banks are sitting on their hands. “We’re expecting double-digit growth in our small business lending this year, which is quite a reversal of past years,” says Kent Stone, who oversees much of small business lending for U.S. Bank.
The number and quality of loan applications from small businesses are rising at U.S. Bank, he says. Dwindling competition accounts for much of that.
“A number of our peers, especially in fast growing markets, such as the West, are having troubles. Other competitors continue to change strategy,” turning away from small-business lending, Stone says.
“We’re instilling a sense of normalcy despite times that are anything but that.”
Improve your chances
Experts recommend taking the following steps to improve your chances of receiving a loan in this difficult environment.
1. Establish a strong bond with your bank before requesting a loan
“The most important thing you have with your bank is not money; it’s the relationship you have with the bank,” says Rich Sloan, co-founder of StartUpNation, a small business consulting firm in San Francisco.
You can create a productive relationship with your banker by visiting in person and letting the banker know the important details of your business
“It’s better to make your first meeting in person than on the phone,” says George Cloutier, chief executive of small business consulting firm American Management Services in Orlando, Fla. “You’ll learn a lot from how you’re treated, even the banker’s body language.”
In presenting information about your business, don’t just focus on past performance. “You want to make sure you present your track record in a way that’s clearly transferable to the future in the banker’s mind,” Sloan says.
By nurturing ties in this way before asking your bank for a loan, “you’re essentially creating a relationship where the banker understands your business and is excited and updated,” Sloan says. “So when you’re calling for funds, the banker doesn’t have to go through the education process.”
2. Be prepared to show banks evidence of your business’ strength
Existing businesses need to show they are making money or will be profitable soon to obtain a loan.
“If you’re running in the red and not generating cash flow, you simply won’t get a loan,” says Cloutier. “Bank lending based on assets was the old way. Lending on cash flow and profit performance is the new way.”
If you are profitable, you must show that clearly to your banker. “You need a good presentation of your current balance sheet, profit-and-loss statement and a detailed budget on how you’re going to make money for the next 24 months,” Cloutier says.
“Talking and waving your hands in the air isn’t going to impress any lenders.”
Giving your banker confidence in the success of your business is even more important at a time like the present, when banks are gun shy.
3. Contact multiple banks
If your regular bank is unwilling to offer a loan, don’t give up.
“Try 10 banks rather than just two or three,” Cloutier says. “Within those 10, it’s highly likely that one or two will be in a mood to lend. Failure on the first two or three is meaningless.”
While you won’t already have developed a bond like you have with your regular bank, institutions eager to lend will be happy to start up a relationship with you as you proceed through the loan approval process.
But you have to be selective in your pursuit. “Be careful not to spend too much time chasing ghosts with banks that just aren’t serious about lending,” says Cloutier.
4. Get to know banks just like they are trying to learn about you
Most of what you need to know you can learn by simply asking the bank’s staff. “Be candid with them,” Cloutier says. “Ask on a scale of one to 10 how interested they are. Also make clear that it’s OK if it turns out you’re not their cup of tea.”
You want to make sure that banks you approach lend to businesses like yours. Some banks focus their lending on mature small businesses rather than startups, for example.
“And some banks specialize in lending to firms in certain industries. It is better to do business with bankers who understand the risk of lending to firms in your industry,” says the ABA’s Seiwert.
5. Anticipate your banker’s concerns
Give your banker an honest assessment of the risks in your industry and how you plan to deal with them. But realize that banks still will analyze risk on their own, of course.
However, “you may be able to provide a perspective that the banker has not thought about,” Seiwert says. “And it’s important for the banker to know that you recognize the risks and have a plan for dealing with them.”
6. Show some flexibility
Showing flexibility on the amount of the loan is especially important in this period of tight credit. If you sense resistance from the bank to your loan request, consider shrinking the dollar figure.
“That way there’s less skin in the game for all parties, and you will build confidence,” Sloan says. “As you show you can service a small loan, you will have an easier time building to a bigger loan.”
But don’t settle for a loan that is too small to help your business grow. “You could be taking more risk if the loan doesn’t provide a meaningful impact for you,” Sloan says.
You also might want to consider bringing in an outside party to guarantee your loan, thereby easing any concern the bank has about repayment. “If there are people in your network who are angel investors or shareholders, they can act as guarantors to cut the lender’s risk,” says Sloan.
7. Look into SBA loan programs
The U.S. Small Business Administration works with lending partners, partially guaranteeing loans that banks otherwise wouldn’t make. “Banks have a level of credit that they will provide on a conventional basis,” says the SBA’s Zarnikow. “We allow them to stretch the box further to give additional capital to small businesses.”
The SBA will guarantee a 50% to 90% portion of the loan, guaranteeing about 75% on average. In general, the larger the loan, the lower the percentage the Small Business Administration will guarantee. The SBA usually backs loans up to $2 million, and as high as $4 million for a few industries.
“The SBA represents a great opportunity to get capital for small businesses,” Zarnikow says. For more information, go to the Small Business Administration’s Web site; one of the agency’s 68 district offices; or SCORE, a small-business counseling group that partners with the SBA and has chapters around the country. (more…)
