From the February 1997 issue of Entrepreneur

Many business owners find the benefits of leasing vehicles muddied by complicated lease contracts. New regulations that become effective October 1, 1997 (but may be voluntarily adopted sooner), should simplify and clarify automobile leases and other consumer lease transactions.

The new rules, issued by the Federal Reserve Board last fall, require leasing companies to adopt a revised disclosure format, which includes segregating certain disclosures that were previously dispersed throughout the contract. To make comparisons easier, contracts must also disclose the total amount of payments.

The new rules also require leasing companies to:


  • make the disclosure of costs paid at lease signing easier for consumers to understand;


  • include a mathematical progression that shows how the monthly lease payment is calculated and the relationship of terms such as "gross capitalized cost" and "residual value";


  • include strong warnings about possible charges for terminating a lease early and for excess wear and tear; and


  • include a disclosure with any percentage rate indicating the limitations of the rate information.

In addition, advertising rules will be changed to deter misleading ads.

For Your Eyes Only

Though the paperless office is still in the future, electronic documents are creating a privacy challenge for businesses. You can lock paper in a filing cabinet, but how do you protect your electronic documents from unauthorized eyes?

The first step is an awareness of the need for protection, says Ray Simonson, president of Xplor International Inc., a global document technology association. Think about what the consequences would be if the wrong person had access to confidential data.

For sensitive documents stored in your computer, consider using a security software package to encrypt files so only authorized users can access them. Most word processors allow you to password-protect certain documents. Or you might make it a policy never to put sensitive documents on your primary hard drive. Simonson suggests using a removable hard drive or floppy disks that can be locked up.

Set up workstations with privacy in mind. Consider installing filters on computer screens that limit the viewing angle to prevent casual passersby from reading the displays. Finally, Simonson says, train employees who work with confidential documents to shield the information when someone approaches by shrinking the document or changing windows.

Fighting Back

One of the most valuable communication skills is the ability to turn a hostile exchange into a harmonious one. Mastering this skill can help you prevent problems before they happen, handle them positively when they do, and expand your customer base in the process.

Sam Horn, president of Action Seminars in Maui, Hawaii, and author of Tongue Fu! How to Deflect, Disarm, and Defuse Any Verbal Conflict (St. Martin's Press) offers these tips:


  • When people complain, don't explain. "Explanations come across as excuses," says Horn. Instead, she suggests, take "the AAA train"--agree, apologize and act. For example, if you failed to deliver something on time, you might say "You're right, I did promise that to you this morning (agree). I'm sorry I didn't have it for you (apologize). I'm finishing it up right now, and I'll have it delivered before the end of the day (act)."


  • Know what to say when someone says something outrageous. Ask a question that will let you get to the real issue, says Horn. The best one is "What do you mean?" If an irate customer says "You don't care about your customers," ask the simple question that will get you to the root of the problem; then you can begin resolving it.


  • Stop arguments with a simple gesture. When people are arguing, bickering, blaming or fault-finding, hold your hand up, palm flat and out, in the traditional "stop" signal, or use the sports "time out" motion. "If we try to talk over people who are arguing, they will just talk louder," Horn says. Use the hand gesture, then simply say "Let's not do this. Let's not waste time finding fault. Instead, let's focus on solutions."


  • Understand that it's not only what you say, but how you say it. Watch the small verbal nuances that put people off. The phrase "you'll have to" is one example. "There are only two reasons we do anything," Horn says. "One is because we want to, and the other is because we have to. Saying `you'll have to' causes what I call the three R's--resentment, resistance and reluctance. If instead we make a request or a recommendation, the person will cooperate willingly instead of complying reluctantly."

Words are one of the most powerful weapons in your business arsenal. "Customers know they don't have to come back," Horn says. "That is why it is so important to speak to them in a way that makes them feel valued and appreciated."

Pricing Power

Looking to strengthen your bottom line? According to Marvin Davis, one of the easiest ways to increase profits is also the most often overlooked: raise prices.

Davis is president of Grisanti, Galef & Goldress, an Atlanta-based consulting firm specializing in turning around troubled companies.

"When you make a price increase, it instantly drops to the bottom line," Davis says. But that doesn't mean you should immediately raise prices across the board. "General price increases don't work. The technique I use is called niche pricing. It's finding the specific spots within the pricing structure where you have the latitude to make a price increase."

The process requires some work. "Price is based on the perceived value of your product or service," Davis explains. "You have to find the places where you are undervaluing the product or service."

Two types of analysis will help you find those places. First, study costs--both yours and your competitors'. Know how your product compares on a price basis, as well as what your costs are and what your competitors' costs are.

Second, analyze your competitive advantages and disadvantages. Brutal honesty is critical here. Don't try to "sell" yourself; you must honestly assess your products and services. Get your sales staff to help gather as much competitive intelligence as possible; your customers will also tell you a great deal of what you need to know.

Once you have identified areas where you are undervaluing your product or service, adjust your prices accordingly. For example, if you provide two-day delivery and your nearest competitor takes three weeks, you offer an advantage your customers will probably pay more for.

If you carry a wide range of products, you may find you're losing money on certain products, but market forces won't permit a price increase; in those cases, it may be better to simply drop those items from your line. You can indirectly raise prices by offering and charging for various add-ons, such as warranties and deliveries.

Davis insists customers rarely object to reasonable price increases; they understand adjustments are necessary to keep companies viable. Give them advance notice and provide a rationale for the increase, such as a change in your costs. And if your prices haven't changed in years--and, says Davis, chances are that's true--remind your customers of that fact.

"The biggest resistance to a price increase doesn't come from customers; it comes from your salespeople," Davis adds. Make sure they understand the logic behind price adjustments, and train them to focus on the product's value rather than price.

Sense And Saleability

If your salespeople don't understand the financial aspects of your business, they might make sales that don't generate profits. Michael S. Cast, president of Wellington Management Controls, a management development and advisory firm in Cornwall, New York, says salespeople often don't understand the bottom-line impact of the deals they make.

"Salespeople can poison sales by offering discounts without realizing how much additional volume they need to make up for the loss in gross profits," Cast says. Other common mistakes are offering extended terms when the cost of carrying the accounts receivable is more than the profit on the transaction or spending too much on marketing without calculating the sales necessary to support the campaign.

The solution, Cast says, is to build an alliance between your accounting and sales departments. Invite your accounting staff to sales meetings to help salespeople understand the numbers and cost-accounting procedures.

Let your salespeople know that making profitable sales is far more important than simply making sales; salespeople need to understand how the expenses involved in making a sale affect the profitability of a transaction as well. This also gives your salespeople an edge in understanding their customers' needs. Says Cast, "A salesperson who can construct transactions in a way that is profitable for both you and the client can form lasting relationships with clients."

Scambusters

Beware companies selling office supplies--or you could become a victim of one of the most common and costly business scams. Frequently, scam artists use telemarketing to sell poor-quality, overpriced goods. Protect yourself by knowing how the scams work and what your rights are.

Scams typically fall into three categories: the credible invoice (where the scam operator uses a gimmick to get information that helps produce a legitimate-looking invoice), the order by trick (where the telemarketer misrepresents either the relationship with the company or the quality or pricing of the merchandise), and the wedge (which combines elements of the above scams).

Follow these rules from The Federal Trade Commission to protect yourself:

1. Know and insist on your rights. Telemarketers are required to provide certain information, including the fact that it is a sales call, who is doing the selling, and the total cost of the goods or services.

2. Document orders. Limit the number of people who purchase items, and keep track of all orders. Set up a system to confirm that deliveries match invoices.

3. Train employees. Educate employees on the types of scams, and establish a procedure for routing sales calls to the appropriate buyer.

4. Do not pay for--or return--unordered merchandise. If the seller cannot produce evidence that you ordered the product and you do not believe they made an honest mistake, you may keep the merchandise.

For more information and a free copy of the brochure Office Supply Scams, contact the Federal Trade Commission, Publication Distribution Center, Rm. B-3, Sixth St. and Pennsylvania Ave. N.W., Washington, DC 20580, (202) 326-2222.

Jacquelyn Lynn is a business writer in Winter Park, Florida.

Contact Sources

Action Seminars, P.O. Box 6810, Los Osos, CA 93412, (800) 726-3455, (805) 528-4351;

Federal Reserve Board, Public Relations Office, Board of Governors of the Federal Reserve System, Washington, DC 20551, (202) 452-3205;

Grisanti, Galef & Goldress, 80 Seville Chase, Atlanta, GA 30328, (770) 396-7557;

Ray Simonson, c/o BlueGill Technologies Inc., (519) 742-8740, (http://www.bluegill.com);

Wellington Management Controls, (800) 832-1035, nancygiges@aol.com.

Contact Sources

Action Seminars, P.O. Box 6810, Los Osos, CA 93412, (800) 726-3455, (805) 528-4351;

Federal Reserve Board, Public Relations Office, Board of Governors of the Federal Reserve System, Washington, DC 20551, (202) 452-3205;

Grisanti, Galef & Goldress, 80 Seville Chase, Atlanta, GA 30328, (770) 396-7557;

Ray Simonson, c/o BlueGill Technologies Inc., (519) 742-8740, (http://www.bluegill.com);

Wellington Management Controls, (800) 832-1035, nancygiges@aol.com.

Jacquelyn Lynn is a business writer in Winter Park, Florida.