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Brand exceptionalism by Seth Godin

Seth Godin, the author of Linchpin, Purple Cow, Free Prize Inside, Tribes and most recently Poke the Box is an excellent source of marketing ideas and business strategies.

This is a recent cut and paste from his blog:

Your brand is your favorite. After all, it’s yours. You understand it, you helped build it, you’re obsessed with the nuance behind it. Your organization’s actions make sense to you, you sat in the room as they were being argued about… you might even have helped make some of the decisions.

So, your brand doesn’t do anything wrong. What it does is the best it could do under the circumstances. Someone who knew what you know would make the very same decision, because under the circumstances it was the only/best option.

Of course we should buy from you. You’re better!

When your brand starts falling behind a competitor (Dell vs. Apple, Microsoft vs. Google, Washington Mutual vs. Everyone and then Apple vs. Android, Google vs. Facebook)… you say it’s not fair, nor expected.

The problem with brand exceptionalism is that once you believe it, it’s almost impossible to innovate. Innovation involves failure, which an exceptional brand shouldn’t do, and the only reason to endure failure is to get ahead, which you don’t need to do. Because you’re exceptional.

In the battle for attention or market share, the market makes new decisions every day. And the market tends to be selfish. Often, it will pick the arrogant market leader (because the market also tends to be lazy), but upstarts and new competitors always have an incentive to change the game or the story.

Brand humility is the only response to a fast-changing and competitive marketplace. The humble brand understands that it needs to re-earn attention, re-earn loyalty and reconnect with its audience as if every day is the first day.

by dougworks on May 15, 2011
filed in Marketing

The US Dollar today… It is not looking pretty for the once mighty greenback…

The U.S. dollar tumbled for the third straight day as investors dumped the greenback and left little standing in the way of an all-time low against a broad measure of currencies. The dollar was taking a hit from all directions as investors fretted over ultra-low U.S. interest rates, the threat of a credit rating downgrade, and the competition of the euro as an alternative reserve currency. Expectations the Federal Reserve will keep U.S. interest rates at near zero for the foreseeable future, even as other major central banks have begun raising rates or are about to tighten have pressured in the dollar in recent weeks. Adding to the dollar’s woes was a threat by Standard & Poor’s on Monday to cut the United States’ prized triple-A credit rating. The euro has vaulted more than 4 cents since Monday and analysts said that few in the market were brave enough to counter insatiable euro demand from Asian sovereigns, which have been seen swooping in to buy the currency whenever it sells off. Market participants say central banks are recycling dollar proceeds into the euro, Aussie and other currencies. Asian authorities have increasingly had to intervene to buy dollars to limit the gains in their currencies and then shift them into other currencies and assets. This has helped the euro to brush off ongoing worries about the euro zone crisis, underscored this week by speculation that Greece may have to restructure its debt. Traders are warning the recent currency moves could reverse as investors take profit on short dollar positions before the long Easter weekend.

Please contact Jim Watson at 949-863-2458 or james.watson@usbank.com with any questions or to discuss further.

by Jim Watson on April 21, 2011
filed in Finance

#2 of the 10 things that you must know before entering into a new lease or renewing your existing lease

#2 – Alternatives – You must know everything about alternative comparable space in the surrounding area.

This topic really complements the article from last month (Lease Comparables) as well as the previous 7 articles from the Top 10 things that you must know before entering into a new lease or renewing your existing lease series.

Knowledge of the quality, quantity, and cost of relocation opportunities provides leverage when negotiating with your current landlord or a new Landlord as does knowing the length of time comparable commercial spaces have remained vacant.  This type of information can be obtained by driving around and making hundreds of sign calls or pulling potentially outdated or incorrect information off of one of the fragmented multiple listing services available to the public, but it is much more easily obtained, reliable, and useable through a professional commercial real estate advisor who has the technology and resources to  identify these alternatives and use that data in conjunction with lease comparables to persuade the Landlord to increase the concession package.  Knowing that the owner of the facility that fits your needs has several other similar vacancies in the business park or center that will be coming available before the end of the year and reminding them of that fact can enhance your leverage significantly.  In addition, negotiating on two or three alternatives simultaneously is an intelligent strategy especially when one of your options is a lease renewal as it creates a competition, which can be very good (as long as the supply and demand are out of balance, which should continue for at least a few more years in most U.S. markets).   

This concept is also applicable in commercial real estate purchase situations in the form of alternatives for sale.

 - Check back in the next few months to learn about the #1 thing that you must know before entering a new lease or renewing your existing lease.  

If you have a current or upcoming commercial real estate requirement anywhere in the world, contact Doug Works of CBRE at 760-438-8591 or doug.works@cbre.com to schedule a free over-the-phone consultation.

 

by dougworks on March 31, 2011
filed in Commercial Real Estate

Doing business overseas?!!! Foreign Exchange and what it looks like today

The dollar fell to a 15-month low against a basket of currencies today, with sterling among the biggest gainers after a rise in UK inflation increased the chances of a UK interest rate hike sooner rather than later. Relative interest rate expectations also lifted the euro to its highest against the dollar this year, but a reported options barrier and a sharp sell-off in euro/sterling following the UK inflation data capped its gains. Consumer prices in the UK last month rose by 4.4 percent, a 28-month high, and more than double the Bank of England’s mid-point target of 2 percent. Money markets are now fully pricing in a quarter point rate hike from the Bank of England in July, versus August before the data. Markets now await tomorrow’s release of the budget and the last BoE meeting minutes. The dollar index, a measure of the greenback’s value against a basket of six major currencies, fell 0.2 percent to 75.254, the lowest since December 2009.   The euro remains well supported by comments from ECB President Jean-Claude Trichet and other ECB policymakers, reiterating their stance they are ready to act quickly to guard against inflation. Most economists expect a rate hike next month. German two-year bond yields have risen around 30 basis points over the past week to 1.75 percent, widening the gap over U.S. Treasury yields to around 110 basis points. The euro also drew support from a relatively strong Spanish T-bill auction, where demand rose and the yield fell compared with the last sale.
The yen, meanwhile, was little changed on the day and continues to trade in a tight range. Traders were wary of further intervention from the Group of Seven to counter yen strength, but reported nothing so far. Friday’s coordinated intervention totalled JPY 530 billion vs. the JPY 2 trillion of the BoJ solo intervention in September 2010. The markets interpret this as there is more intervention to come. Japan again warned it would act to keep the yen in check, but traders saw no action in the FX market on Tuesday from Japanese or other G7 authorities. That resolve could be tested if dollar/yen looks like breaking back below 80 yen. Yen volatility has eased significantly since late last week, and some analysts said calmer markets in the coming weeks would decrease the need for Tokyo to smooth any appreciation in the Japanese currency, even if the dollar creeps below 80 yen.   The Canadian dollar fell against the US dollar on disappointing January retail sales data, and below forecast February leading indicators. Canadian retail sales unexpectedly dropped by 0.3 percent in January from December, pushed down by lower sales at new car dealers. Furniture and home furnishing stores reported a 2.3 percent decline in January. The largest increase in terms of value came in the food and beverage subsector, which rose by 0.7 percent. Sales were off in seven of 11 subsectors, representing 55 percent of total retail sales, and fell in four major provinces, which account for 85 percent of total retail sales. Sales excluding autos and parts were flat, while sales in volume terms dropped by 0.6 percent. Canada’s composite leading indicator rose 0.8 percent in February from January, in part due to new-found strength in the manufacturing sector, Statistics Canada also said today. Analysts surveyed by Reuters had forecast, on average, an increase of 0.7 percent. In manufacturing, new orders for durable goods increased by 1.0 percent after three straight declines. Statscan linked this to a marked improvement in exports in December. Stock market prices, boosted by the energy sector, rose by 2.7 percent for their sixth straight monthly advance.

Jim Watson

U.S. Bank

by Jim Watson on March 25, 2011
filed in Finance

#3 of the 10 things that you must know before entering into a new lease or renewing your existing lease

#3 - Lease Comparables – You must know where to find reliable market information that can be used to create leverage. 

By obtaining and understanding where your prospective landlord and other landlords in the area struck their most recent deals (including free rent, annual increases, tenant improvement dollars, rental rate, and other concessions), you will have much more leverage when negotiating a renewal or new deal.  This type of information can be obtained by spending weeks interviewing your neighbors and other tenants in the area and hoping for credible information (which is not likely), but it is much more easily obtained, reliable and useable through a professional commercial real estate advisor. 

Remember that negotiating a lease is much like playing the game of poker.  The more market intelligence that you have in hand, the greater the amount of leverage created.  If you are completely aware of the cards that your landlord is holding via lease comparables (and completely aware of one other thing, which I will reference in next month’s article) it is much easier to dominate the lease negotiations and achieve results that will positively influence your bottomline for many years to come.

This is also applicable in commercial real estate purchase situations in the form of sale comparables.

 - Stay tuned for #2 in March.  

If you have a current or upcoming commercial real estate requirement anywhere in the world, contact Doug Works of CBRE at 760-438-8591 or doug.works@cbre.com to schedule a free over-the-phone consultation.

 

by dougworks on February 14, 2011
filed in Commercial Real Estate

ASPN members attended SIMA Image Awards

Orion Barca, Doug Works, Marie Case and Jim Watson recently attended the SIMA Image Awards at the House of Blues in Anaheim.

by dougworks on February 5, 2011
filed in Uncategorized

The A B C’s of Entity Selection… or in this Case the C, S, and LLC’s… (Part II)

S Corporations

As noted in the first installment of the series, the three most widely used entity form alternatives in the apparel, action-sports, accessories, and hard-goods industries (essentially consumer products) are the; C corporation (“C-corp”), S corporation (“S-corp”), and Limited Liability Company (“LLC”).  Part I of the series focused on the C Corporation.  Part II focuses on S Corporations and can be used as a for basic informational and discussion purposes to provide a background on the S Corporation and summarizes the advantages and disadvantages of this type of entity form.  The information below is not an substitute for or intended to replace your business attorney and CPA whom both should be consulted thoroughly prior to making a decision to select a particular entity form for your business.

Background

S Corporations provide the liability protection of a C corporation without the disadvantage of being subject to double taxation of distributions/dividends.  S Corporations operate as pass through entities.  This means that income generated by an S Corporation is not taxed at the corporate level for Federal purposes but rather is passed through to the individual shareholders based on their ownership percentages and taxed at the shareholder’s individual level.  Consequently, distributions by an S Corporation to its shareholders generally does not result in additional tax.  Note however that individual states impose different taxation requirements on the net income of S Corporations.  For example, California imposes a 1.5% tax on the net income of S Corporations with a minimum of $800 up to a maximum corporate rate in New York City of 8.84% for net income derived from within the city.

Advantages

  • The primary advantage of an S corporation is that it is not subject to double taxation.  S corporation income is passed through to the individual shareholders to be taxed at their marginal tax rates (currently the maximum federal and California rates are 35% and 9.3%, respectively). California does impose a 1.5% tax on S corporation taxable income derived in California with an $800 minimum tax/franchise tax.
  • Another advantage of operating as an S corporation is that income passed through to the individual shareholders is not subject to self-employment tax.  Currently, employer and employee FICA taxes are imposed at 10.4% for Social Security/old age survival disability insurance (OASDI) and at 2.9% for Medicare/hospital insurance (HI), for a total tax of 13.3% on the first $106,800 (for 2011) of wages.  Employee owners of C and S corporations can control to a degree how much compensation they pay themselves and, therefore, can limit their exposure to the 2.9% HI premium. On the other hand, general partners and LLC members treated as general partners cannot control the amount of self-employment income taxable to them. Therefore, they could easily pay much more HI tax than would similarly situated owner-employees of C and S corporations. This creates a current advantage in favor of electing S status.
  • Another advantage is the avoidance of the corporate alternative minimum tax.  As discussed earlier, a C corporation pays tax on the higher of its regular income tax or its alternative minimum tax.  This tax is avoided by operating in S corporation form.  Note that S corporation shareholders are potentially subject to alternative minimum tax at the individual filing level based upon the shareholder’s individual circumstances.
  • S Corporation’s are not subject to unreasonable compensation adjustments by the IRS.  As a means to bail out corporate earnings and avoid double taxation, C corporations sometimes pay unreasonably high salaries to its shareholders.  The IRS can re-characterize the salaries as dividends thereby resulting in double taxation to the shareholder.  S corporations, by virtue of their income pass-through nature, avoid the unreasonable compensation issue.
  • Since all S corporation income is passed-through and taxed at the shareholder level, S corporations are not subject to the accumulated earnings tax.  S corporations are free to accumulate earnings within the corporation to any extent desired.
  • Unlike a C corporation, S corporations are allowed to use the cash method of accounting even if the average gross receipts in the prior three years exceeds $5,000,000 (if not precluded by other tax law requiring the use of the accrual method of accounting).
  • Unlike C corporations, the losses incurred during the initial years of a business may be passed through to the individual shareholders and used to offset other income thereby providing an immediate tax benefit.  The losses are subject to the normal limitations imposed by the passive loss, at-risk and basis rules.

Disadvantages

  • One of the primary disadvantages of operating as an S corporation are the restrictions on the ownership structure.  In order to qualify as an S corporation, the following restrictions apply:
  • 100 or fewer shareholders
  • Eligible shareholders are limited to US citizens or resident alien individuals
  • The corporation can only have one class of stock (no preference items), although voting and non-voting common stock is generally not considered separate classes.
  • Shareholders cannot be C Corporations, other S Corporations, LLC’s, Partnerships, or certain trusts
  • There is also a lack of flexibility in allocating income and losses to the shareholders.  In general, the income or losses generated by the S Corporation must be allocated to the shareholders based on their specific ownership percentages (pro-rata).  This is in contrast to LLC’s which are allowed to allocate income or losses without this restriction.Distributions from an S Corporation must also follow the ownership percentages, which can at times require distributions to shareholders who may not otherwise require a distribution.
  • For S Corporations that operate in multiple states, it can result in additional administrative burdens at the shareholder level since the shareholders may be required to file individual income tax returns in the various states that the S Corporation does business in.  This burden can be reduced to some extent through the filing of composite returns for the shareholders relieving them of the filing burden.
  • Unlike a C Corporation, shareholders that own more than 2% of an S Corporation generally are taxed on certain fringe benefits such as group-term life insurance, medical benefits, and meals and lodging.

Hopefully this gives you a high-level understanding of the advantages and disadvantages of a S Corporation as an entity selection option.  Part III of the series will go into the workings of the Limited Liability Company (LLC).  As stated in the intro paragraphs, the information above is not a substitute or replacement for in-depth consultations with your legal advisor and CPA prior to forming an entity.

Orion Barca, CPA

President

Barca Company, Inc.

Orion@BarcaCompany.com

949.235.6933

Circular 230 Disclaimer
Any tax advice contained in this communication, was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties that may be imposed on the taxpayer under the Internal Revenue Code or applicable state or local tax law or (ii) promoting, marketing or recommending to any other party any tax-related matter(s) addressed herein.

by Barcaco on January 25, 2011
filed in Accounting, Business, Legal

Riding Positive Trends Into 2011

By Angelo Ponzi, Co-Founder Board-Trac, Inc.

 “Don’t look back unless you plan on going there,” is one of my friend’s favorite sayings.  I always liked, “Things look clearer in the rearview mirror.”  Bon Jovi.  And, let’s not forget, “hindsight is 20-20 or the glass is half full, not half empty.”

Looking back on this past year, we have certainly seen many changes in the action sports industry, both internally and externally that have had an impact on business.  Given all of these changes, I could focus this article on the impact that they have had on the overall industry, I’d like to focus on some positive nuggets and get us all looking forward again.

According to the specialty retailers that participated in our Q3 2010 Board-Trac/Board Retailers Association Quarterly Specialty Retail Survey, 62.3% indicated that they were either on plan or exceeded their planned forecast through the end of Q3.

This is an 8.4% increase among retailers from the same quarter (Q3 09) last year.  What’s exciting about that is the percentage of retailers reporting that they were under forecast by 10+% or more, decreased by 8%. Those on plan increased by 6%, and those exceeding plan by 10% increased 4.6%.  These results followed the trend of the positive growth we’ve seen since we began tracking in Q1 2008.  Overall, there has been a 42.7% increase in the number of retailers reporting that sales were up over the previous year.  Also of note is that in Q1 2009 only 18.5% of our participating retailers reported sales were up Q1 ‘09 compared to sales of Q1 ‘08.  In our latest survey, Q3 2010, 50% reported that comp sales were up over the previous year.  We’ve come a long way, baby!

This of course has had an impact on margins as well.  Almost forty-one percent (41.1%) of the retailers reported increased margins, while 29.4% reported a decrease in their margins.

Here’s where that rearview mirror concept comes in.  One of the best ways to help you figure out strategies for the future is to look at the past.  Ask yourself, among those retailers that were increasing their sales and having various degrees of success, what external influences existed and what did those retailers do to help increase their sales throughout the year?

While we are certainly not offering any crystal ball, eight-ball or a definitive solution, you need to examine what the retailers that had increases in sales implemented to help determine your strategies for 2011.

In the chart below, you can see that during the seven quarters represented, better customer service (you can also combine better employee training here as well), better mix of existing brands carried and carrying exclusive brands were three key areas retailers focused on to help improve their sales and most likely a way to differentiate themselves from their competitors.  Note: percentages represent the number of retailers that indicated they implemented the strategy/tactics and should not be added together.

Riding Positive Trends Continued…

by Angelo Ponzi on January 10, 2011
filed in Market Research, Marketing

Flat Fitty/Lavish Headwear engage CBRE

Flat Fitty/Lavish Headwear recentlysigned a letter of engagement with Doug Works of CB Richard Ellis (CBRE) to assist in securing U.S. real estate for domestic expansion. The company is currently investigating domestic production options across the country. For the entire story click on: http://business.transworld.net/53733/news/flat-fitty-partners-with-cb-richard-ellis-for-us-expansion/

by visitor on January 4, 2011
filed in Commercial Real Estate

#4 of the 10 things that you must know before renewing an existing lease or entering into a new lease

#4 - Holdover Clause – You must know about this clause and understand how it can affect you.  

Leases are generally written with complicated legalese designed to give the landlord an easy out on every commitment.  One area of a lease that is often overlooked is Holdover.  A Holdover clause, which is included in most leases, states the amount of rent that you will be obligated to pay for every month that you stay past the lease expiration.  This amount can range from 120% to 300% of your monthly payment.  This can be negotiated when entering into a new agreement and sometimes when renewing, but it is crucial to be aware of as it relates to the timing mentioned in #6. 

Holdover clauses, as well as other troubling clauses such as relocation clauses (and many others depending on the lease form), should be identified, understood, and negotiated prior to signing the document.

 - Stay tuned for #3 in January.  

Happy Holidays.

If you have a current or upcoming commercial real estate requirement anywhere in the world, contact Doug Works of CBRE at 760-438-8591 or doug.works@cbre.com to schedule a free over-the-phone consultation.

 

by dougworks on December 11, 2010
filed in Commercial Real Estate
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