EMPLOYMENT No More Employee Termination Problems€¦ · MAY/JUNE 2013 Volume 37, No. 3...

MAY/JUNE 2013 Volume 37, No. 3 TheBusinessOwner.com

No More Employee Termination ProblemsEmployee terminations are hard enough, but when you bargain in good faith and end up in a lawsuit, it makes you want to "run screaming into the desert," as an old friend of mine used to say. So, we talked to an employ-ment law expert about how to slam the door shut on these types of suits. Here's what he suggests:

• Include on job applications a notice that only written representations and promises of the employer will be enforceable.

• Be sure the job description covers all the tasks the employee will be expected to perform. A worker dismissed for an inability to perform a task not listed in the job description may be able to file a wrongful discharge claim.

• Add an at-will policy statement to all employee handbooks, and delete anything that makes it sound as if the company has limited its rights to discharge.

• Warn supervisors and managers not to give oral assurances of job se-curity to applicants or employees.

• Try to ensure that performance appraisals are candid. Managers should avoid ambiguous, satisfactory-sounding reviews that would not sup-port the employer’s position in the event of a subsequent wrongful discharge suit.

• Whenever an unsatisfactory employee appraisal is inconsistent with earlier evaluations, management should investigate the matter and in-clude a written report of the review in the employee’s personnel file.

• Establish and apply uniform, progressive disciplinary standards to avoid charges of discriminatory treatment.

• Make sure that supervisors handle performance appraisals objectively so that problems are identified and remedial actions and timetables are specified.

• Employees should be required to read and sign written performance appraisals and be allowed to add their own comments. This step estab-lishes a clear record that will be hard to deny or dispute if the appraisal is questioned in the future.

• Make sure complaint resolution procedures are credible and work properly. This is one of the most effective ways to prevent wrongful

E M P L O Y M E N T

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No More Employee Termination Problems .................. 1Business Sale? Recast Extraordinary Expenses ...... 2Brand Clarity = Higher Revenue ........................................ 3Patents and Patent Law ......................................................... 4Before You Cancel a Life Policy ......................................... 6Focus on Value Drivers .......................................................... 7Curb Customer Defection...................................................... 8Fund Your Retirement Accounts! ...................................... 9Primer on Basic Percentage Calculations ................ 11

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Business Sale? Recast Extraordinary Expenses

B U S I N E S S S A L E

Buyers look at many things to project what the future might hold for a business. One is past performance. To that end, historical income statements provide information about income, expense and resulting profit for past periods. Given, however, the buyer is interested in the future rather than the past, the buyer seeks to understand historical income and expense only as a means for predicting the future. As such, some income and expense entries will need to be removed or modi-fied. That is, ones that cannot be expected in the future.

One type of expense that may be removed, i.e., added back, to histori-cal profit is extraordinary items. Because healthy and profitable busi-nesses are valued based on their earnings, every seller will want to “add back” as much as possible. The litmus test, however, is what the investor will accept. When it comes to classifying expenses as “ex-traordinary,” the buyer will ask, “Will this ever happen again in the fu-ture?” If the answer is YES, then he will reject the add-back.

So, was the loss of a valued employee extraordinary? Well, how often does this occur in business? A large bad debt loss? A large product return? Distributor failed to allow a return of excess inven-tory? Bad economy?

The Financial Accounting Standards Board (FASB) says for an event to be considered extraordinary, it must be “infrequent in occurrence” and “unusual in nature.” Infrequent in occurrence means the event could not reasonably be expected to occur in the foreseeable future. Unusual in nature means the underlying event or transaction should possess a high degree of abnormality and be of a type clearly unrelated to, or only incidentally related to, ordinary and typical activities of the entity.

In summary, the standards for classification as extraordinary are strin-gent. A few years ago, The Wall Street Journal noted an accounting textbook that quipped, “The only items that could qualify are ‘such items as a single chemist who knew the secret formula for an enter-prise’s mixing solution but was eaten by a tiger on a big game hunt, or a plant facility that was smashed by a meteor.’”

By way of example, the Financial Accounting Standards Board ruled that companies affected by the Hurricane Katrina disaster could not classify such expenses as extraordinary. They argued that in the south-ern region, hurricane damage and disruption expenses meet neither the “unusual in nature” nor the “infrequent in occurrence” hurdles. Granted, six hurricanes hit the U.S. in 2004 alone. By contrast, busi-ness expenses incurred from the 1980 Mount St. Helen eruption were deemed by the Financial Accounting Standards Board to qualify for treatment as extraordinary based on the fact that it had been 130 years since a volcano had erupted in the U.S.

Spring Greetings from your friends at The Busi-ness Owner. Just a couple months remain before summer distractions, so it’s time to make real prog-ress on your 2013 goals. This issue begins with an article that will allow you to eliminate your employee termination problems. That is, avoid being hit by a termi-nation-related lawsuit by implementing the suggested strategies. Nothing is more drain-ing than a lawsuit. Letting an employee go is hard enough.

In this issue you’ll also find encouragement for funding your retirement accounts; tips for reducing customer attrition; clarity for your marketing strategies; proven ways to build the value of your business; dealing with un-wanted life policies; and more.

What in the world would you do without The Business Owner? It’s your source for straight-to-the-point information you can trust to help you succeed.

MAY/JUNE 2013 3THE BUSINESS OWNER · THEBUSINESSOWNER.COM

Brand Clarity = Higher RevenueM A R K E T I N G

People have choices about from whom to buy. Whom do they choose? The one who offers the greatest benefit and least risk. How does one know which company offers the best balance of these? They don’t know. Largely, they guess – based on their beliefs and impressions. They pur-chase, that is, on their perception of your “brand.”

“Brand” is simply a word used today to describe what people think about your company. What they “think” includes explicit and implicit feelings, impressions and beliefs. Examples include “serious,” “smart,” “depend-able,” “assertive,” “rude,” “incompetent,” “rugged,” “too expensive,” “cheap” and “cool.”

Every person and business has a brand. For your busi-ness, your brand is created in the minds of customers and prospects with each exposure they have to your business service, materials, products, messages, em-ployees, ownership, logo, tag line, marketing materials, products, performance, stories, phone answering skills, website, word-of-mouth, building appearance, newspa-per articles, etc.

Brand vision is what the business owner wants his or her company’s brand to be. It’s the busi-ness personality and core values that are built into the business. When your company has a clear brand vision, you can de-velop a strategy to en-sure that the marketplace hears, sees and learns

who you are, for what you stand, and what they can ex-pect from you and your business (i.e., your brand). This approach is far superior to simply allowing your brand to develop on its own, without your conscious and proac-tive involvement.

The key benefits to a clear brand vision are:

Marketing Clarity: A strong brand vision means that you know who you are, for what you stand and what customers can expect from you. It is this that you want to communicate in your marketing efforts. As such, you’ll be able to make marketing decisions more quickly and easily.

Higher Revenue: Only through brand vision clarity can a strong brand be developed. A strong brand means more sales as prospective customers become attracted to who you are and for what you stand ... even before it is time for them to choose between vendors.

Lower Costs: When you have a brand vision, you will no longer waste time attempting to dream up marketing messages that are far afield. Your choices are narrowed to things that effectively communicate your brand vision. Similarly, you will waste less on marketing programs that are ineffective. Instead, you will get more for your money as your communications are consistently focused on cre-ating your pre-established winning brand.

In crafting your brand vision, bear in mind three key ele-ments of good branding:

Appropriateness – Your brand vision must be appropri-ate for your target audience. You need to understand your customers’ expectations and values and “be something” that will appeal to your audience. For ex-ample, if you sell skateboards you may want to go for “high performance.” If you sell cigars, you might want to go for “widest selection, freshly imported.”

Believability – What you say you are (referred to as your “brand promise”) must be believable by your customers. If you promise to be the “fastest” or the “best” in the business, can you really deliver it?

Consistency – You must implement your brand vision with consistency and clarity. “Good branding is bor-ing!” says Jean Wilcox of CattleLogos Brand Manage-ment Systems. “The only way you will be able to influ-ence people to remember you is by repeatedly using the same images and messages.”

Consistency also means that every encounter that per-sons have with your company must convey your brand vision. Every employee must understand the firm’s brand vision and represent and act in alignment with it. Your operations must be set up to deliver consistently in line with your brand. Failure to do so can render your efforts and expenditures worthless. A pretty logo and witty ad-vertisements won’t make up for a rude receptionist.

First impressions are very important. Statistics show that within a few seconds of meeting another person for the first time, we form opinions that are amazingly resilient. The same thing happens with your company. How you

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“Brand” is simply a word used today to describe what people think about your company.

MAY/JUNE 20134 THE BUSINESS OWNER · THEBUSINESSOWNER.COM

Patents and Patent LawL A W

The word “patent” is one of the most commonly thrown around words in American business. It’s universally un-derstood as something of value. It’s not, however, quite that simple.

Patent law is complex and not well understood by the general public. At the same time, there is an emotional, almost romantic association with the concept. For per-sons hoping they have developed something patent-able, there are often dreams of riches. Unfortunately, at the intersection of complexity, misconception and

dreams of riches, one of-ten finds wasted money and scam artists.

A patent is a type of in-tellectual property. The word “patent” means “to be open” or “open to the public.” When a patent is filed, it is made available to the public so that all of society might enjoy the benefits, and learn from and improve on the technology. The first patents were granted in Great Britain. The Queen would be-

stow on a person the exclusive right to sell and set the price for a particular product. The first patent granted in the United States was prior to the Declaration of Inde-pendence and was issued by the Massachusetts Bay Colony for a process for making salt. Thomas Jefferson is given credit for pushing a patent provision into the U.S. Constitution. It is found in Article 1, paragraph 8, as follows:

Congress shall have the power … to promote the progress of science and useful art by securing for lim-ited times to authors and inventors the exclusive right to their respective writings and discoveries.

What Is Patentable?U.S. law provides that a U.S. patent may be issued to any person who “invents or discovers any new or useful process, machine, manufacture, or composition of mat-ter, or any new and useful improvement thereof…” that

is “non-obvious.” The U.S. Patent and Trademark Office issues three types of patents:

Utility Patent: issued for a new or useful process, machine, article of manufacture, or composition of matter.

Design Patent: issued for a new, original ornamental design for an article of manufacture.

Plant Patent: issued for a new invention or discov-ery of an asexually reproduced, distinct and new variety of plant.

Where to Obtain a PatentMost every country has a patent office. In the U.S., it’s the U.S. Patent and Trademark Office (USPTO), under the U.S. Department of Commerce, that grants patents. The Patent Cooperation Treaty (PCT) coordinates patent rights among 140 countries and provides a mechanism for establishing patent protection in countries outside the U.S. Particularly, a patent filed in the U.S. will be granted protection in participating countries if an appro-priate filing is made within 12 months of U.S. patent office granting of the patent.

Quoting from the U.S. Patent and Trademark Office’s website, www.uspto.gov:

“A patent for an invention is the grant of a property right to the inventor.” “The right conferred by the patent grant is … the right to exclude others from making, using, selling, offering for sale in the United States or importing the invention into the United States.”

Generally, a new patent is in effect for 20 years from the date on which the application for patent was filed in the United States. Extension may be obtained under certain circumstances. A U.S. patent grants protection in the U.S. and its territories and possessions only. A person desiring a patent in a foreign country must make applica-tion in that country. In most foreign countries, publication of the invention before the date of the application will disqualify the application.

You Think You Have Something Patentable?If you think you have something that might be patent-able, here is what you should do:

Patent law is com-plex and not well understood by the general public. At the same time, there is an emo-tional, almost ro-mantic association with the concept.


1) Keep a Journal: Keep a journal of your work, thoughts and methods. Periodically, show the journal and your de-veloping invention to someone that has the capacity to understand your writings, drawings and the usefulness or utility of the work. Such a person should not be a close friend or relative, and should be someone you trust and that has first signed a non-compete agreement.

2) Determine the Patentability: To investigate, consider the information in this article and go to www.uspto.gov to learn more. In summary, in order for an invention to be patentable it must be new, which means that it must not have been patented or described in a printed publication in this or any other country, nor may it have been in public use or on sale in this country.

3) Find a Patent Attorney or Agent: If you think your invention meets the criteria, find a patent attorney or agent that has experience, good references, and with whom you are comfortable. Discuss your invention

to obtain advice. Inven-tors may prepare and file their own applications and conduct the pro-ceedings themselves, but unless you are famil-iar with these matters or study them in detail, you will likely find consider-able difficulty.

It is important to know that while a patent may be obtained by persons not skilled in the particular work, there would be no assurance that the patent obtained would adequate-ly protect the invention.

The implication is that HOW the patent is written is just as important as IF it is granted. A poorly written patent may be worthless.

The USPTO maintains a register of attorneys and agents. To be admitted to this register, a person must comply with the regulations prescribed by the office. Persons who are not recognized by the USPTO for this practice are not permitted by law to represent inventors before the USPTO.

4) Complete Your Invention: Once completed, utilize that knowledge that you have gained about the patent process and commercialization, and give deference to the advice of your skilled, experienced and trusted patent attorney or agent.

A patent is not a be-all and end-all. Many inventors or inventing companies choose not to patent their invention but rather move directly to commercialization (i.e., mak-ing or selling the invention for monetary gain). Here are some reasons why:

Money: Application, filing and attorney’s fees can eas-ily run $3,000 to $12,000. Then, if someone violates your patent rights, you’ll need to spend money to take legal action.

Time: It usually takes at least two years to go through the patent process and receive approval.

Secrecy: Once a patent is granted, the world has ac-cess to the details of your design or invention. A com-mon complaint is that others are then able to study your invention, change it slightly and then offer a simi-lar product in the marketplace. Given this, many deem the process to be flawed to the extent that the patent does more harm than good. Likely, this issue hinges on the invention at issue, so discuss your concerns with a knowledgeable attorney or agent.

There are persons and organizations that prey on the hopes and dreams of inventors. The typical scam is for or-ganizations to promise unrealistic returns of quick riches if you will pay money up-front. The patent experts that contributed to this article said that they know of NO “in-vention services houses” that are reputable.

If you are considering hiring a company to assist you, instead of an attorney, read the “Scam Prevention Bro-chure” published on the www.uspto.gov site. You will also find a list of invention promotion companies with any complaints filed against them.

If you are con-sidering hiring a company to assist you, instead of an attorney, read the “Scam Prevention Brochure” pub-lished on the www.uspto.gov site.

"Do not hire a man who does your work for money, but him who does it for love of it."

Henry David Thoreau


Before You Cancel a Life PolicyP E R S O N A L F I N A N C E

Life insurance policies are purchased well in advance of when the proceeds may be needed. They’re used to pro-vide liquidity to pay estate taxes, financially provide for dependents in the event the breadwinner prematurely passes, and to mitigate risk to a business from the loss of a keyman. But as time rolls forward, things change.

The insured end up worrying more about money to live on than how much will remain after one dies. A depen-dent spouse departs before the breadwinner. Keyman risks diminish. When life insurance policies are no longer needed, you have three options:

1. Cancel the policy / Stop paying the premium

2. Sell the policy

3. Keep paying the premium

When the policy was purchased, risk mitigation was the driving factor. When the risk is no longer germane, the smart thing to do with the policy becomes a purely finan-cial decision. The inputs to the equation are:

Life expectancy of the insured, in years (N)

Death benefit (B)

Annual cost to maintain the policy ($)

Required rate of return (R)

Credit quality of the underwriter (Q)

Here’s the equation for a term policy, i.e., no cash buildup:

PV = [B / (1 + R + Q)N] - (N * $)

Let’s assume the life expectancy of the insured is 10 years, the death benefit is $500,000, the annual premi-um cost is $2,000, our required rate of return is 10%, and the credit quality of the underwriter is good but not great (so we’ll add 2% per year to the required rate of return).

N = 10

B = $500,000

$ = 2,000

R = 10%

Q = 2%

So,

Of course, life expectancy is impossible to determine, so one will have to employ the services of an actuary, guess, or use a range and assess the pattern of PV values derived.

Present Value (PV) represents the net financial impact of keeping, i.e., continuing to pay, the policy premiums. A neg-ative PV implies you are better off letting it go. Of course, the PV you obtain will be greatly influenced by the Required Rate of Return you choose, any premium you add to the same for financial weakness of the underwriter (which is rare due to considerable regu-lation), and the life expec-tancy of the insured.

Likely, you will need some assistance making the calculation, but the main thing to understand is that you should not let a policy lapse without good consider-ation. And once you consider how much value the policy might have to you, there are third parties that might be willing to purchase the policy from you. Talk to your insur-ance broker, banker, and search online. Of course, if a third party will pay more than the PV, it might make sense for you to sell. This is unlikely, however, because inves-tors will have to pay tax on any death benefit. As such, the policy will have less value to them.1

Keep in mind, as well, that terminated life policies provide a windfall to underwriters. Millions of life insurance poli-cies lapse each year. Policyholders pay premiums and then the underwriter never has to pay a death benefit.

1 Most policies originate with an insurable interest and – so long as premiums are paid with pre-tax dollars – no tax is owed on the death benefit. However, when a policy is sold, the purchaser will – in most cases – not have an insurable interest and will therefore owe tax on any death benefit received.

The main thing to understand is that you should not let a life insurance policy lapse without good consideration.

PV = [$500,000 / (1 + .10 + .02)10] - (10 * $2,000)

= ($500,000 / 1.1210) - $20,000

= ($500,000 / 3.105) - $20,000

= $160,987 - $20,000

= $140,987


Focus on Value DriversM A N A G E M E N T

The day will come when you (seriously) want out. Given all your hard work and sacrifice, you deserve a big pay day. So, why not set yourself up today for it to happen?

As it turns out, buyers have a lot in common. Below is a list of value drivers that, when present in a business, entice buyers to pay more. Conversely, a lack of these characteristics detracts from the price received. The val-ue drivers are listed in rough order of importance. Inci-dentally, adding elements of these will build value you’ll enjoy every day you own your business, as well.

Growth: Revenue and profit growth is the number one driver of value. Establish a pattern of growth and you will establish a substantial premium for your business.

Profit and Profit Margins: Buyers buy businesses to make money. The higher the established profit, the more the buyer can and will pay to obtain those profits for his or her benefit.

Customers: Diversification of customers, and customer tenure, loyalty and credit worthiness are important con-siderations when valuing a business.

Management Quality and Depth: Buyers try to esti-mate whether the proven profit stream will continue after purchase. To the extent the business has a di-verse group of top managers and employees that will continue with the business, the buyer’s perceived risk will decline. Healthy, High-Growth Industry: Industry health and growth make it easier to grow revenue and profits. Find and serve an expanding industry and your job will be eas-ier ... and your sale price larger.

Multiple Industries: If the product or service offerings of a company are sold into multiple industries, a higher value is justified. The business can grow to twice the size (assuming each industry niche is of equal size) and enjoy meaningful industry diversification.

Proprietary Products: The more proprietary in nature the products or services, the higher the value. In other words, is what you offer unique compared to anything offered by anyone else?

Product Mix and Diversification of Gross Profit: Busi-nesses with a healthy product mix and good gross profit diversification deserve and earn higher valuation multiples.

Market Niche, Market Position, Brand Awareness, Identity: If a company fills a definable niche, commands a special leadership position in a niche or niches, or has strong and favorable brand awareness in its market, the business probably enjoys higher profit and growth rates.

Interim Results: Buyers are interested in what the busi-ness will do in the future. The best indication is the past and present. Strong current performance can justify higher prices.

Off Balance Sheet and Contingent Risks: Risk and un-certainty lower values. If elements exist (such as a law-suit) that create uncertainty, get them cleaned up before attempting to sell your business.

Future Maintenance Costs and Capital Expenditure Requirements: For the business to earn the profits pro-jected by the buyer, or to continue to expand, how much money must be spent? Future capital expenditure needs will have to come out of future profits, lowering the value of the business.

Quality of Financial Information: To the extent that a buyer feels certain that these reports are accurate and may be relied upon, his or her perceived risk will be low. So, keep detailed and accurate books and records that will breed comfort and confidence in them.

Appearance: Does the business “show well?” Is it at-tractive in appearance? Is the facility clean, painted and bright? Just as a clean and waxed car sells for more, so will a business.

A Growth Plan: Buyers are interested in the future. Lay out a path for significant future growth and profit and … if the buyer believes he or she can make it happen … he or she might be willing to pay more. At times, much more.

Whether you're building your business to sell, or to keep for generations, building in these value drivers will pay dividends. For more information, visit www.Acquisition-Advisors.com.


Curb Customer DefectionM A N A G E M E N T

Lost customers kill profit. A study published in the Harvard Business Review found that repeat customers are five times more profitable than new customers, on average. Attracting and securing new customers is incredibly expensive.

How may one curb cus-tomer defection? Set up an early warning system.

It entails tracking cus-tomer usage patterns and identifying changes in those patterns. Basically, keep tabs on the patron-age frequency of each

customer so that, when a patronage break occurs, you can take action. For example, if you have a customer who visits once a week, on average, with a typical variance of one week, you’d have to consider him “missing in action” if three or four weeks go by without a visit. The key is to find actionable information based on a customer’s indi-vidual frequency and not rely on the shopping patterns of the “average customer.”

Of course, customers break behavior patterns for lots of reasons that have nothing to do with you. Vacation, ill-ness, new job, etc. So, you have to be careful.

Alert triggered. Now what?When a customer goes MIA, the task is to make contact, gather data, and get them back. Contrary to popular belief, it’s not that hard. The customer already has a relationship with you. He knows what you can do and has patronized you in the past, above others, for a reason. Time is of the essence, however. You must entice him back, or address the issue that is causing change, before he establishes a new pattern of behavior that does not include you.

Experts say if you discover that someone’s MIA and with-in a few weeks begin a campaign to get him back, you have a high probability of success. If you let six months go by, the odds are stacked against you.

For a cigar store, action might mean sending him an in-vitation to an exclusive “showing” of a new product or signing him up for online purchasing or automatic mail delivery. For a supplier of educational supplies, it might be the same, or an invitation to a seminar on a new teaching method. For businesses that have fewer but

larger-dollar customers, it might be a personal phone call or visit.

Include in your program methods for obtaining feedback from MIAs. What is causing defection? Then use the in-formation to lower incidences of attrition or “wandering.”

Loyalty programs Implementation of a customer retention program is usu-ally combined with a loyalty program. These programs, like frequent-flier miles programs, allocate points, rebates or awards for patronage, usage or purchases. Loyalty pro-grams don’t work if they’re based on marketing gimmicks. They work only if they help build genuine relationships.

An effective customer retention program is an incredible competitive advantage. While all your competitors’ customers go through the revolving door at a rate of 30% a year, you’re at 10%. Not only are your customers more profitable because they are almost all repeat customers but you also deny your competitor his normal flow of your defections. Eventually, you’ll end up with the lion’s share of the mar-ket – booking superior profits via repeat business which, in turn, allow you to afford to further improve your offer-ings and customer attraction and retention programs.

Repeat customers are five times more profitable than new customers

Reducing customer churn may be the most profitable place for you to focus right now.

"I see big changes in your future. Which reminds me, my fee is going up beginning next week."


Fund Your Retirement Accounts!R E T I R E M E N T

Taxes are a huge drain on your wealth. Each time you earn income or realize a gain on an investment, you pay Uncle Sam. One of the only ways to plug the hole is to get investments into tax-sheltered accounts. Re-tirement savings accounts such as the IRA or 401(k). Investments in these accounts accumulate tax-free. The cumulative benefit over time is substantial. Here is a comparison.

The table below shows the tax-free equivalent annual rate of return when your taxable return is 8%. If your overall state and federal tax rate is 35%, you actually earn the equivalent of 12.3% in your tax-sheltered account. In this case, you earn an additional 54%!

Tax-Free Returns Substantially Higher

Your OverallTax Rate

AnnualReturn

Pre-TaxEquivalent

BonusReturn

PercentIncrease

40% 8% 13.3% 5.3% 66%

35% 8% 12.3% 4.3% 54%

30% 8% 11.4% 3.4% 43%

Over time, the impact of this additional rate of return – coupled with the pre-tax contribution allowance – is substantial. To illustrate, let’s assume that Joe puts $5,000 of his income (after tax) each year into a regu-lar investment account and earns, on average, 8% per year. Julie puts the same after-tax amount away but because she is taking advantage of a salary reduction option in a retirement saving plan (and therefore the dollars go into her account pre-tax), her $5,000 after-tax commitment equals $7,692 on a pre-tax basis (as-suming she’s in the 35% overall income tax bracket). Like Joe, she earns 8%, but investment returns in her account compound tax-free. The table to the right

shows the difference in the account balances of Joe and Julie at 10, 20 and 30 years.

Regular Vs. Tax Sheltered$800k

10 20 30

$700k

$600k

$500k

$400k

$300k

$200k

$100k

$0

YearsA

fter T

ax V

alue

s

Julie has done little more than take advantage of basic retirement planning options offered by the IRS and used by millions of people, but her savings is substantially higher than Joe’s.

Note: The money in Joe’s account ($400K at 30 years) is tax paid so he will owe no tax on his funds upon withdrawal. Julie’s money will be taxed upon with-drawal at her ordinary income rate, but we have ad-justed her account balance in the table above to show the after-tax value, assuming an overall tax rate of 35%. Julie’s actual account balance after 30 years is $1.064 million. The after-tax amount is the $692,000 value used in the table.

Taxes are a huge drain on your wealth. Each time you earn income or realize a gain on an investment, you pay Uncle Sam. One of the only ways to plug the hole is to get investments into tax-sheltered accounts. Fund your retirement accounts!

RegularTax Sheltered

Have you been approached about selling your business?Considering hiring a firm or buying a competitor? Buy out a partner?

Call David Perkins, author of the articles in this publication. He's assisted on the purchase and sale of hundreds of businesses, literally, and is passionate about helping buyers and sellers in the specialized areas of business purchases, sales and valuations.

Call him on his cell phone any time. 918-760-2715. You'll be glad you did.


discharge lawsuits because it provides opportuni-ties to correct misperceptions and to rectify mis-takes internally.

• Train supervisors to record all significant employee problems so that subsequent discipline or discharge actions are documented and can be justified.

• Require supervisors to avoid spur-of-the-moment terminations, when emotions may be out of control. Utilize suspensions to provide time for investigations, documentation and careful analysis.

• Provide for internal review of all termination decisions before implementation. The reviewing person or per-sons should be experienced in making employment decisions and understand employment law. This pro-cess can provide an objective review of the documen-tation and steps leading to termination and can help assure that the process is being administered fairly and consistently and that the termination action fits the circumstances.

• Conduct the termination notification privately and have at least two members of management present. Have a written termination statement that is carefully and accurately written so as to minimize allegations of defamation or intentional infliction of emotional dis-tress. Give the employee the opportunity to review, comment on, and sign the statement and if the em-ployee refuses to sign it, make a note of that fact.

• Make sure any termination is discussed only with persons on a need-to-know basis so as to limit the potential for claims of defamation, invasion of privacy and emotional distress.

• Consider negotiating with the terminating employee a general release of all claims relating to the employ-ment relationship. Such an agreement may be appro-priate in situations where there is a high probability that the employee will take legal action because of the termination. However, if one is used, it should be drawn by legal counsel experienced in this type of document, as there are a number of elements that need to be included. There may be certain circum-stances where such agreements are not appropriate.

• Conduct exit interviews and inform workers of the specific reasons for a termination. Exit interviews can be used to correct misperceptions about the termina-tion and to uncover and defuse a potentially litigious situation. Outplacement counseling also is useful.

• If you feel you should call your lawyer – DO!

Terminating an employee can be gut-wrenching. Use these strategies to prevent bad apples from unjustly causing you additional grief.

Mike Lissau, an employment law expert with Hall Estill, provided his expertise for this article.

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No More Employee Termination Problems

present your company to potential clients is as important as how you present yourself.

There are two facets to your brand personality: explicit and implicit. The explicit parts of your brand are the things that you actively say and do to promote it – the content of your marketing materials, your web copy and your press releases. These should be crafted to promote your key messages and, more importantly, should directly address questions that customers ask.

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Brand Clarity = Higher Revenue

The implicit parts of your brand are more subliminal things that people notice. For example, how is your message de-livered? Does the style of your presentations and personal communications support your brand promise or detract from it? Do the colors and images you use elicit the right kind of emotional response from your customers?

Does marketing frustrate you? Confuse you? Avoid the mayhem. Decide who you are and want to be and tell the world. Don’t be afraid to have personality.


Primer on Basic Percentage CalculationsM A N A G E M E N T

What is 50% of 86? To determine this, the percent (aka the Rate) is first reduced to a decimal fraction. 50% is the same as 0.50. So, 0.50 of 86 = 0.50 x 86 = 43.

In this example, 50% is referred to as the Rate. 86 is referred to as the Base. 43 is the Percentage.

Rate x Base = Percentage

Using this formula, when any two of the three are given, the third can be found. Consequently, there are three ba-sic cases of percentage:

(1) given the Rate and the Base, to find the Percentage

(2) given the Base and the Percentage, to find the Rate

(3) given the Rate and the Percentage, to find the Base.

Now consider each of these cases.

Find the Percentage. Finding a percent of a number is another way of finding a fractional part of the number. In finding a percent of a given quantity, first reduce the percent to either a common fraction or a decimal fraction, and then multiply.

Example: Find 25% of 128.16

Solution: Reducing to a common fraction, 25% of 128.16 = 1/4 of 128.16 = 32.04. Reducing to a deci-mal fraction, 25% of 128.16 = 0.25 x 128.16 = 32.04. Here, 0.25 is the Rate, 128.16 is the Base, 32.04 is the Percentage.

Find the Rate. It is rather common to need to determine the percent a number is of another.

Example: Find what percent of 48 is 12.

Solution: The base, 48, and the percentage, 12, are given. Using the fundamental relationship (base x rate = percentage), Rate x 48 = 12. This means that the product of the two numbers is 12 and one of the two numbers is 48. Division is the process of finding either of the two numbers when their product and the other number are known. From the definition of frac-tion, the other number may be found by dividing; rate = 12 / 48 = 0.25 = 25%

Example: Find what percent of 160 is 68.

Solution: Rate x 160 = 68, or rate = 68/160 = 0.425 = 42.5%

Find the Base. To find the base when the rate and per-centage are given, reduce the rate either to a common fraction or to a decimal fraction.

Example: A store building rents for $12,000 per year and the rental represents 10% of the value of the building. Find the value of the building.

Solution: 0.10 x base = $12,000. Here, the product of the two numbers and one of the numbers are given. From the definition of division, the other number can be found by dividing. Base = $12,000 / 0.10 = $120,000

Refreshing oneself on basic financial analysis may not be the most fun, but smart and skilled business own-ers and managers should have a working knowledge of such things.

EMPLOYMENT No More Employee Termination Problems€¦ · MAY/JUNE 2013 Volume 37, No. 3...

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