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Many business owners find the benefits of leasing vehiclesmuddied by complicated lease contracts. New regulations that becomeeffective October 1, 1997 (but may be voluntarily adopted sooner),should simplify and clarify automobile leases and other consumerlease 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 previouslydispersed 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 forconsumers to understand;
- include a mathematical progression that shows how the monthlylease payment is calculated and the relationship of terms such as"gross capitalized cost" and "residualvalue";
- include strong warnings about possible charges for terminatinga lease early and for excess wear and tear; and
- include a disclosure with any percentage rate indicating thelimitations of the rate information.
In addition, advertising rules will be changed to determisleading ads.
For Your Eyes Only
Though the paperless office is still in the future, electronicdocuments are creating a privacy challenge for businesses. You canlock paper in a filing cabinet, but how do you protect yourelectronic documents from unauthorized eyes?
The first step is an awareness of the need for protection, saysRay Simonson, president of Xplor International Inc., a globaldocument technology association. Think about what the consequenceswould be if the wrong person had access to confidential data.
For sensitive documents stored in your computer, consider usinga security software package to encrypt files so only authorizedusers can access them. Most word processors allow you topassword-protect certain documents. Or you might make it a policynever to put sensitive documents on your primary hard drive.Simonson suggests using a removable hard drive or floppy disks thatcan be locked up.
Set up workstations with privacy in mind. Consider installingfilters on computer screens that limit the viewing angle to preventcasual passersby from reading the displays. Finally, Simonson says,train employees who work with confidential documents to shield theinformation when someone approaches by shrinking the document orchanging windows.
Fighting Back
One of the most valuable communication skills is the ability toturn a hostile exchange into a harmonious one. Mastering this skillcan help you prevent problems before they happen, handle thempositively when they do, and expand your customer base in theprocess.
Sam Horn, president of Action Seminars in Maui, Hawaii, andauthor of Tongue Fu! How to Deflect, Disarm, and Defuse AnyVerbal 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 somethingon time, you might say "You're right, I did promise thatto you this morning (agree). I'm sorry I didn't have it foryou (apologize). I'm finishing it up right now, and I'llhave 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 customersays "You don't care about your customers," ask thesimple question that will get you to the root of the problem; thenyou can begin resolving it.
- Stop arguments with a simple gesture. When people arearguing, bickering, blaming or fault-finding, hold your hand up,palm flat and out, in the traditional "stop" signal, oruse the sports "time out" motion. "If we try to talkover people who are arguing, they will just talk louder," Hornsays. Use the hand gesture, then simply say "Let's not dothis. Let's not waste time finding fault. Instead, let'sfocus on solutions."
- Understand that it's not only what you say, but how yousay it. Watch the small verbal nuances that put people off. Thephrase "you'll have to" is one example. "Thereare only two reasons we do anything," Horn says. "One isbecause we want to, and the other is because we have to. Saying`you'll have to' causes what I call the threeR's--resentment, resistance and reluctance. If instead we makea request or a recommendation, the person will cooperate willinglyinstead of complying reluctantly."
Words are one of the most powerful weapons in your businessarsenal. "Customers know they don't have to comeback," Horn says. "That is why it is so important tospeak to them in a way that makes them feel valued andappreciated."
Pricing Power
Looking to strengthen your bottom line? According to MarvinDavis, one of the easiest ways to increase profits is also the mostoften overlooked: raise prices.
Davis is president of Grisanti, Galef & Goldress, anAtlanta-based consulting firm specializing in turning aroundtroubled companies.
"When you make a price increase, it instantly drops to thebottom line," Davis says. But that doesn't mean you shouldimmediately raise prices across the board. "General priceincreases don't work. The technique I use is called nichepricing. It's finding the specific spots within the pricingstructure where you have the latitude to make a priceincrease."
The process requires some work. "Price is based on theperceived value of your product or service," Davis explains."You have to find the places where you are undervaluing theproduct or service."
Two types of analysis will help you find those places. First,study costs--both yours and your competitors'. Know how yourproduct compares on a price basis, as well as what your costs areand 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. Getyour sales staff to help gather as much competitive intelligence aspossible; your customers will also tell you a great deal of whatyou need to know.
Once you have identified areas where you are undervaluing yourproduct or service, adjust your prices accordingly. For example, ifyou provide two-day delivery and your nearest competitor takesthree weeks, you offer an advantage your customers will probablypay more for.
If you carry a wide range of products, you may find you'relosing money on certain products, but market forces won'tpermit a price increase; in those cases, it may be better to simplydrop those items from your line. You can indirectly raise prices byoffering and charging for various add-ons, such as warranties anddeliveries.
Davis insists customers rarely object to reasonable priceincreases; they understand adjustments are necessary to keepcompanies viable. Give them advance notice and provide a rationalefor the increase, such as a change in your costs. And if yourprices haven't changed in years--and, says Davis, chances arethat's true--remind your customers of that fact.
"The biggest resistance to a price increase doesn'tcome from customers; it comes from your salespeople," Davisadds. Make sure they understand the logic behind price adjustments,and train them to focus on the product's value rather thanprice.
Sense And Saleability
If your salespeople don't understand the financial aspectsof your business, they might make sales that don't generateprofits. Michael S. Cast, president of Wellington ManagementControls, a management development and advisory firm in Cornwall,New York, says salespeople often don't understand thebottom-line impact of the deals they make.
"Salespeople can poison sales by offering discounts withoutrealizing how much additional volume they need to make up for theloss in gross profits," Cast says. Other common mistakes areoffering extended terms when the cost of carrying the accountsreceivable is more than the profit on the transaction or spendingtoo much on marketing without calculating the sales necessary tosupport the campaign.
The solution, Cast says, is to build an alliance between youraccounting and sales departments. Invite your accounting staff tosales meetings to help salespeople understand the numbers andcost-accounting procedures.
Let your salespeople know that making profitable sales isfar more important than simply making sales; salespeople need tounderstand how the expenses involved in making a sale affect theprofitability of a transaction as well. This also gives yoursalespeople an edge in understanding their customers' needs.Says Cast, "A salesperson who can construct transactions in away that is profitable for both you and the client can form lastingrelationships with clients."
Scambusters
Beware companies selling office supplies--or you could become avictim 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 workand what your rights are.
Scams typically fall into three categories: the credible invoice(where the scam operator uses a gimmick to get information thathelps produce a legitimate-looking invoice), the order by trick(where the telemarketer misrepresents either the relationship withthe company or the quality or pricing of the merchandise), and thewedge (which combines elements of the above scams).
Follow these rules from The Federal Trade Commission to protectyourself:
1. Know and insist on your rights. Telemarketers arerequired to provide certain information, including the fact that itis a sales call, who is doing the selling, and the total cost ofthe goods or services.
2. Document orders. Limit the number of people whopurchase items, and keep track of all orders. Set up a system toconfirm that deliveries match invoices.
3. Train employees. Educate employees on the types ofscams, and establish a procedure for routing sales calls to theappropriate buyer.
4. Do not pay for--or return--unordered merchandise. Ifthe seller cannot produce evidence that you ordered the product andyou do not believe they made an honest mistake, you may keep themerchandise.
For more information and a free copy of the brochure OfficeSupply Scams, contact the Federal Trade Commission, PublicationDistribution 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 ofGovernors 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 ofGovernors 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.
