August 2004, Issue No. 3, Thursday Edition

HOUSTON BUSINESS REVIEW

Please consider helping the people in Florida who were devastated by Hurricane Charley last week. The Network for Good website provides a list of organizations that can help you make a difference.

TEN OF THE BIGGEST CHANGES IN BUSINESS IN THE PAST 50 YEARS, PART 2 OF 3, by Kevin J. Price

Kevin J. Price is Host of the Houston Business Show and Editor of the Houston Business Review. He is the author of several books and worked as a policy analyst in Washington, D.C. during many of the Reagan years. Mr. Price is available to speak to your group or organization. Please call him at 713.984.0235 for more information.

Recently, American Heritage, one of the country’s premier mass market historical publications, published a fascinating article on 10 major changes that business has undergone over the last 50 years. As a result of those changes the face of business has changed dramatically. In this three-part article I will review those suggested by American Heritage.

If you weren't able to read Part 1 of this article, click here then come back and finish reading Part 2.

4) Financial Revolution. Following the Great Depression and the dramatic loss of income in the stock market for average Americans who invested substantially in that market, most people were extremely cautious when it came to the way they did business. Their hope was in their job and in their retirement, but little would be placed on Wall Street. Over the last 50 years we saw the restoration of confidence in the stock market driven by time-distance from the Great Depression, as well as government and industry reforms. Discount brokers began to rise in prominence as people made stock choices for themselves, at a low cost. With the advent of the Internet, people are able to easily do trading online, with up-to-the-minute information and just a few dollars per trade. In the beginning of the Reagan years just two decades ago, the Dow Jones Average hovered below 1,000 points. It had been at this level for decades. By the end of his administration it reached over 2,000, which was a mark that many economists had not believed possible. By the end of the last decade, and since then, it has stayed comfortably at above or near 10,000. This growth is due to the huge number of businesses that went from private to public as well as the increase in the value of all these businesses over time. In spite of the shake up of the market due to the bust a few years ago, the market seems to be back and growing steadily.

5) Management and Labor. There have been significant changes in the relationship between management and labor. In the 1950s, the power of labor unions was beginning to peak and their influence had become so pervasive that states with laws favoring unions, as opposed to favoring management, often saw a dearth in companies as they took flight in more favorable business environments. Intolerance, even among average laborers, towards the perceived omnipotence of unions and their ability to shut down economies forced a change between management and labor in general, and the moves have been more towards cooperation rather than confrontation. Ironically, the US may have won the military war in World Ware II, but we may have lost an economic battle for many years. Instead of adopting the confrontation approach of the West in the years just after WWII, the Japanese developed "company unions" rather than "labor unions." "Us" against "them" meant their company against competitors, not labor against management. Over time, this model has spread throughout US business and most labor leaders do not see any advantage to completely crippling a company like they use to do in the past. This doesn’t mean such doesn’t occasionally happen, but the when it does the result always leads to a negative perception of unions and not an increase in their value.

6) Productivity. For decades, the US has enjoyed a level of economic prosperity not seen anywhere else at any other time in human history. This was clearly the case in the middle of the 20th century and is even more so the case as we progress through the 21st century. This has happened in spite of a fundamental shift in the way our economy operates. We have shifted from an goods-oriented economy to a service-oriented economy. This doesn’t mean that the US isn’t productive. In fact, the US economy grew by over one-third during the last decade alone. It is just that the focus is now on services rather than goods. This fundamental shift in the nature of our economy has contributed to the decline of unions as well. Improved technology, driven by the rise of computers, has made it much easier for companies to be increasingly more productive through better tools and less sweat.

Next Monday, the focus will be on The Imperial (and Imperially compensated) CEO, Antitrust, and the Internet. The best way to make sure you are notified about these and other informative articles is to subscribe to this newsletter by sending an email to subscribe.now@houstonbusiness.com.

THIS WEEK IN DCR, HOUSTON'S DAILY BUSINESS NEWSPAPER, by HBR staff

It's official. The only place one can read Kevin Price’s Selling Tips is in the DCR , formerly known as the Daily Court Review. "Many people have not realized the fact that DCR is a business paper, first and foremost," said Kevin Price, Publisher of the Houston Business Review. "However, you can see such in its editorial content, highlighted with the addition of Selling Tips, that the paper is clearly about providing information for business. But it doesn't stop there, all of the lists and leads are powerful tools in building a business. "It is, in my opinion, one of the city's most established and reliable sources of business information." Furthermore, DCR has unique characteristics. It is Houston’s only locally owned daily business newspaper. The Houston Business Journal, arguably the most prominent business newspaper in Houston, is actually owned by Biz Journals, Inc., an Atlanta-based company.

In addition to finding Selling Tips, you will also find daily updates on HoustonBusiness.com™ media, including the Houston Business Show (Sundays at noon on 650 AM), and the Houston Business Review, found exclusively at HoustonBusiness.com™. You can find DCR at Barnes & Noble, Borders, and in numerous vending boxes throughout the city. To get more information visit DCR's website.

DO YOU HAVE AN AWARD-WINNING MESSY OFFICE?, by HBR Staff

In the last issue of the HBR it was announced that Kevin Price, Publisher of this newsletter and Host of the Houston Business Show (AM 650, Sundays at noon) will be one of five judges in the media from all over the country who will be judging who has the messiest office. The winner of the contest will win great prizes (including advice on how to get organized) as well as recognition in several media. For more information on participating in this contest visit the Organize IT website. Next week, information on each of the judges will be found in this newsletter.

NEED A GREAT SPEAKER?

Don’t look any further than the Houston Business Show Speakers Bureau, sponsored by HoustonBusiness.com™. The Speaker's Bureau features award-winning writers, nationally recognized experts, and entertaining speakers. Perhaps best of all, we provide these speakers free of charge to qualified organizations and speaking engagements receive free publicity for the event in this newsletter, on the HoustonBusiness.com™ Business Calendar, and on the Houston Business Show.

Houston Business Show Speakers Bureau members will be speaking at several events in the next two months. Kevin Price, Richard Sonnier, and Aubrey Theode (Houston Business Show co-host) will be speaking at the Ravenaux Breakfast Club. For more information send an email to arch@achillesgroup.com. Mr. Price will also be speaking at the Houston West Chamber of Commerce, for more information send an email to info@hwcoc.org.

Recent Comments about Kevin Price on the Stump.

Mr. Price has recently given several speeches about the Houston economy. Following are some of the commments about his speech at the Services Cooperative Association ("SCA"):

• Kevin was GREAT! (SCA comment sheet)
• Very clear voice, very interesting! (SCA comment sheet)
• Good stage presence (SCA comment sheet)
• Very thorough and knowledgeable! (SCA comment sheet)
• WOW! (SCA comment sheet)
• Great presentation...Dynamic! (SCA comment sheet)

Get Mr. Price--or one of our other great speakers--and the free promotion that comes with one of our speakers, by calling 713.984.0235 and asking for Stacy Walston.

EMPLOYEE VS. INDEPENDENT CONTRACTOR: WHICH IS BEST FOR YOU?, by Henry J. Fasthoff, IV

Houston Business Show legal commentator Hank Fasthoff, of Stumpf Craddock Massey & Farrimond, provides weekly information on our show about business law issues. He can be reached at 713.871.0919.

Does it make better sense for your company to hire its help as employees, or independent contractors? Each business has different needs, so you should consult a qualified professional if you're not sure which is appropriate for your company. This brief article provides an overview of the differences between employees and independent contractors.

First, an employer-employee relationship creates special obligations on the employer. For example, employers are responsible for paying the Social Security taxes, FICA taxes, and the like for all of its employees. In addition, employers can be held legally liable for the conduct of their employees, including, in some cases, criminal and negligent acts.

If you want to hire someone but don’t want them to be an employee so that you may avoid the obligation of paying taxes and being subject to liability for their actions, you’ll want to make sure that you have a written agreement spelling out the details of the relationship. The contract must expressly state that the person being hired is an independent contractor, among other things.

If an employer is sued for the conduct of one of its workers, the employer may, in some instances, avoid liability if they can show that the worker was an independent contractor rather than employee. Some factors the courts use to determine the distinction between employee and independent contractor include:

1. the extent of the employers control over the details of the work;
2. the actual control exercised by the employer over the worker;
3. the kind of occupation at issue and whether that type of work is usually done with the employer’s supervision;
4. whether the worker is skilled in a distinct occupation;
5. the skill level required by the worker;
6. the extent of integration of the worker’s work in the employer’s business;
7. the employer’s right to discharge the worker;
8. the worker’s opportunity to receive profit and loss from the business;
9. length of time and permanency of the relationship;
10. who supplies the tools, supplies, materials and place of work; and
11. whether the parties believe they are creating an employer-employee relationship.

PRICE COUNTS: DETERMINING HOW MUCH TO CHARGE by Jim Sapp, Special for the Houston Business Review

Mr. Sapp was a guest on the Houston Business Show to discuss his book Starting Your First Business. The book is an excellent reference tool and a great resource for anyone facing the challenges of creating their first business. Find out more information about Mr. Sapp and his book by visiting his website.

A new business owner has to keep an eye on employees, operations, and inventory—but sales are the true key to financial success. Sales are what will keep you in business next month. Nothing is more important. Sales are the very lifeblood of your business. Your company will grow quickly as long as you are selling your product or service and being paid for it. On the other hand, your company will fail if you don’t pay close attention to sales.

During your first year of business, you will need to track your sales (also known as “revenues”) every day. This number should be the first thing you review every morning and the last thing you look at before you close. How many widgets did you sell today? How many service hours did you invoice? How much money will those sales bring in? When is that money due? Do not think for a moment that sales will come easily, or that customers will come knocking at your door. You must plan your sales strategy. Remember, “Nothing happens until a sale is completed and paid in full.”

How much should you charge customers for your product or service? This, of course, depends on the nature of your business. There are no specific formulas. You must do some research to find an appropriate price for your specific product.

Research Your Industry

A place to begin is to research your specific industry. Make a list of similar products or services and how much other companies charge for them. This information will tell you what the market is accustomed to paying.

Review Your Costs

Once you know what the market will bear, review your costs for producing the product or service—the cost of goods or raw materials, the amount of staff time (including your time) it will take to produce the product, as well as the amount of administrative time to invoice your customers and collect payments. You also need to include overhead—general operating expenses and administrative costs, also called “G&A”—when calculating the cost of your product or service. G&A expenses include rent, leases, marketing, sales expenses, administrative costs, insurance, and inventory costs, which vary by industry.

Mark Up for Profit

When you know what your costs will be to produce the product or service, you then increase the price by a certain percentage for profit. Do not be ashamed to “mark up” your product or service. Your new business must make a profit to grow next year, pay off debt, and continue to be a viable enterprise.

The amount of the markup varies by industry, service, potential liability, and general overhead. Generally, you should at least double your fixed costs to get a selling price. In retail, this is known as “keystone” pricing. When retailers apply a discount of ten to forty percent for a sale on their products, they still make a profit because they used keystone pricing. Be careful not to over price or under price. Increase your prices with inflation and as the company grows. If appropriate, vary your price depending on customer demand, the season, or the timing of your service.

AFFORDABLE HEALTH INSURANCE?

Who says you can’t afford health insurance? Truth is, you can’t afford to not have health insurance. With measures for cost containment that have been implemented, today health insurance is more affordable than at has been at times in the past. Contact the Benefits Division and ask for information on how to offer health insurance through your business at no cost to the employer, how to reduce your tax burden through your health insurance, or inquire about the most affordable and convenient ways for the unemployed to get coverage (hint: it isn’t through COBRA). Call 713.984.2431 and ask for Stacy to request more information.

AUBREY THEODE ON ABSENTEEISM, by Aubrey Theode

Aubrey Thoede is the co-host of the Houston Business Show. He is the President and CEO of Dirt Free Carpet, the largest independently owned carpet cleaning business in Texas. Learn more about his company at www.dirtfreecarpet.com. Mr. Theode brings his wisdom to every program and we will occasionally share his thoughts in this newsletter.

At Dirt Free Carpet I have a very specific approach to dealing with days off that must be seen as unconventional to most. Many employers are troubled over how to deal with absenteeism. We simply provide 5 days a vacation of year, any time more than that comes out of the employees own pocket. I have a very simple, but specific system set up for people to ask for an allotted amount of time off (they have a chart to request the time which they cannot do more than three times a year). Unexcused absenteeism or false reports of illness are dealt with immediately and employees will learn quickly that it will not result in a successful long-term relationship in this company. This approach helps my teammates to develop an ownership attitude about how--and even when--they work. Like me, they know that if you don’t work, you don’t earn. That attitude of productivity prevails throughout the Dirt Free Corporation.

HOUSTON BUSINESS BRIEFS

This section of the Houston Business Review is dedicated to companies who have sent a business-focused story or article to us at press.releases@houstonbusiness.com, or other Houston area business stories that are important to our readers. The Houston Business Review and HoustonBusiness.com™ are unique in their commitment to providing information about and for small and micro businesses. If your story is not getting heard, stop complaining and send it to us at press.releases@houstonbusiness.com.

Sales Tax Revenues Are Up. A recent article in DCR, the Houston Business Review’s print ally, indicated that sales tax revenues are significantly higher than the level of this time last year (over 4%). This is only one of many indicators of an economy on the mend. DCR--the only locally-owned daily business print publication--is an excellent source for articles and information that is difficult to find elsewhere. For more information visit www.dcrhouston.com.

Two Local Firms Have Taken the Plunge to Go Public. It was recently reported in the Houston Business Journal that the Mattress Firm and Westlake Chemical Corporation have raised or, in the case of the Mattress Firm, will be raising, the monies required to go public. The apparent objective of the Mattress Firm is to improve its position towards further expansion. Meanwhile, Westlake has already gone public. On August 11, 11.8 million shares became available at a cost of $14.50 a share. Both companies are taking steps that are outside the industry trend since the rise of Sarbanes-Oxley (which has placed significant additional scrutiny on public businesses). While many public companies are entertaining going private, and as the number of IPOs have reached a new low, these two firms are bucking the trend.

BMC Changes First-Quarter Earnings. After surprising many by having a fairly optimistic first-quarter announcement of reporting earnings of $51.8 million or 23 cents a share, BMC Software corrected that report by saying that actual earnings were actually only $10.7 million or 5 cents a share.

HOUSTONBUSINESS.COM™ PRESS RELEASE SERVICE

HoustonBusiness.com™ now offers a free press release service. To submit your release to us just send us an email with the completed, ready-to-publish press release at press.releases@houstonbusiness.com. If it meets our editorial guidelines (no sexually-oriented businesses) we'll post your release to our site in the Media Room section of our site. You can put a link on your site back to your press release on ours and increase your presence, credibility, and, most importantly, get your message out to the public.

GET IT FIXED RIGHT THE FIRST TIME

Take your car to Metro Auto Repair at 14743 SH 249 and tell them that Kevin Price sent you. This excellent repair shop has two decades experience of working on domestics and imports. It also handles state inspections, making it the perfect place for all your repairs. Call Arun Desai at 281.444.1176 for more information.

A paid endorsement.


GOT MAGAZINES?

"Readers are Leaders" and the Houston Business Show and HBR are leaders in business information because our staff and advisors spend a tremendous amount of time getting the best information from business publications that demand to be read. Spend some time reading these same publications by visiting Got Magazines? where subscriptions are as high as 90% off the cover price and every subscription comes with a 90-day risk free, money-back guarantee!

ON FUTURE SHOWS AND NEWSLETTERS

Coming up on future shows and in future newsletters:

Sarah Morin to Guest Co-Host. Sarah Morin, Publisher of DCR, Houston’s only locally-owned business daily, will be the guest co-host on the Houston Business Show, this Sunday at noon on AM 650. In addition to interviewing several guests, Sarah will also discuss the unique niche of DCR among business media.

Don’t Forget to Read the Houston Business Show Commentators. Each issue of the Houston Business Review features Houston Business Show Commentators. Make sure you keep an eye out for Richard Sonnier with Nimble Services for articles about information technology, JP Magill with The Achilles Group for articles about human resources, and the many others who keep your business on track.

The Expanded Presence of HoustonBusiness.com Hank Fasthoff, a principal with HoustonBusiness.com, is going to write an article about the continued growth of HoustonBusiness.com in the business community.

NONE OF THE OPINIONS EXPRESSED HEREIN ARE THOSE OF HOUSTONBUSINESS.COM™, THE HOUSTON BUSINESS SHOW, THE HOUSTON BUSINESS REVIEW, OR ANY OTHER FIRM OR COMPANY REPRESENTED OR REFERENCED HEREIN. FOR ADVICE OR OPINION, WE SUGGEST YOU CONTACT A QUALIFIED PROFESSIONAL OF YOUR OWN CHOOSING.