Teri Bernstein, MBA, CPA has been teaching full time in the Business Department of Santa Monica College since 1985. Prior to that, she worked in Internal Audit and Special Financial Projects for the 1984 Los Angeles Olympics, CBS, Inc., and Coopers & Lybrand. She attended the University of Michigan and Wayne State University.
image from the New Yorker, November 26, 2012
Businessmen, co-workers, relatives, friends and politicians are all voicing opinions about taxes these days. Many of the statements sound like facts. But few of us have been formally schooled in the actual history of US taxation. In last week's volume of the New Yorker, Jill Lepore tackled the whole complicated mess.
image from en.wikipedia.org
In her article she delineates the history of business interests fighting against taxes, beginning with Andrew Mellon, who helped re-define American citizens as "taxpayers. She talks about the history of "direct" taxes (real estate) versus "indirect" taxes (sales tax and income tax), and the way those taxes fit into constitutional questions.
The take-away, from the article: "Taxes are what we pay for civilized society, for modernity, and for prosperity. The wealthy pay more because they have benefitted more. Taxes, well laid and well spent, insure domestic tranquility, provide for the common defense, and promote the general welfare. Taxes protect property and the environment; taxes make business possible."
Source: abstract of article at: "Tax Time; why we pay" by Jill Lepore, New Yorker, November 26, 2012.To read the whole article, subscribe at the site, or visit your local library.
Follow up:
image from the article linked below
Podcast also available at Source link.
Bing, a search engine owned by Microsoft, has used very aggressive language to get the attention of Google users and convert them to the Bing search engine. "Scroogled!" combines a somewhat rude expression for "taken advantage of" with the rhyming end of the word "Googled."
The ad makes the case that Google originally promised users a real search of web resources, but now Google searches are skewed by paid advertisements. The photo of the disgruntled user and the clever language employed by the made-up word "Scroogled" combine to make a compelling advertising impact.
Source: "Google users get Scroogled in Microsoft's new ads," by Kai Ryssdal, Marketplace, American Public Media, November 28, 2012. Podcast linked from that page.
image from 48women.org
Carmen Bermudez is now CEO of Mission Management and Trust in Tuscon, Arizona. But the road to that position was very interesting, indeed.
She was born in Costa Rica, and was raised by a mother who'd been abandoned by her husband. She was poor, and she didn't like it. Early on, she imagined herself as a bullfighter as an antidote to her life's reality.
Her mother emigrated to the USA when Ms. Bermudez was 15. She went to Santa Monica High School and Santa Monica College, but returned to Costa Rica to pursue bullfighting after being trained by Hollywood stunt-people about how to manage the cape and the bull. Her success as a bullfighter caused her to become addicted to the "high life" but injuries forced her to stop. She then became a TWA flight attendant and race car aficionado.
While a flight attendant, she met her husband, a principal of Marathon Asset Management (an investment company), and relocated to La Jolla, California to work with him. She started a trust company spin-off a few years later. "We're a boutique company that caters to people who are conservative about their investments," says Bermudez.
Wow. She can really feel the success...
Source: "From Bullfighting to Finance" by Carmen Bermudez, NYT, November 25, 2012.
Every product has a "product life." Even if the product is a "name personality," there is an arc to the ascendance of the name brand, a long plateau at a market peak if the business is lucky...and then, a decline.
Is the "Oprah" brand in this decline phase? Maybe...but maybe not. Oprah had a long run as queen of afternoon talk--25 years that ended 18 months ago. Since then, her new venture, the cable network OWN, has struggled--both in ratings and in finances. Her magazine, "O," is in decline. However...magazine sales have NOT declined as much as her staff predicted, once Oprah left her network...and OWN seems finally to be on an upswing. In addition, Oprah is changing with the times--and is pursuing a younger audience.
Will she succeed? She is open-minded and open to new strategies. We'll see how well she does...
Source: "Oprah at a Crossroad," by Christine Haughney, New York Times, November 25, 2012
The Black Friday protests at Wal-Mart have brought to public consciousness the day-to-day realities of many of Wal-Mart workers. Making minimum wage in part-time positions (that do not include benefits), Wal-Mart employees can live only with the help of public assistance.
For some observers, this is a call for unionization, since unionized retail workers tend to raise the wages for all working in that industry. For others, it is a call to blame the workers for being too lazy or unproductive to get a better job. For others, it it a call to claim profit participation for taxpayers because of the "investment" in Wal-Mart workers.
New information about Wal-Mart's employee practices has recently come to light. From the Sacramento Bee:
"Last week, journalists obtained a copy of Wal-Mart's 'Field Non-Exempt Associate Pay Plan' for 2013. The 'Pay Plan' is one of the first internal documents made public that clearly contradicts Wal-Mart's misinformation on compensation. It details Wal-Mart's rigid pay structure for hourly employees, and makes clear why it is so difficult for associates to earn more than poverty-level wages.Despite what the company claims about paying competitive wages, the reality is that almost half of Wal-Mart's associates make less than $10 an hour, with many of them relying on public assistance as well as their wages to support their families. Average Wal-Mart employees make just $8.81 per hour, with many of those making more than $10 an hour having worked for the retail giant for a decade or longer."
A broader discussion about the costs to taxpayers of a minimum wage that cannot support an above-poverty-level lifestyle is possibly warranted.
Sources:
image from dailydot.com
Thanksgiving falls on the earliest day possible this year, resulting in the longest "shopping season" before Christmas. This pleases many retailers, who project that the additional days will result in additional sales. I found it quite amusing to read about the projections regarding sales to various categories of giftees--family, friends, co-workers...and oneself. A serious omission to the retailers projections, in my opinion, were gifts to service-persons (mail carrier, newspaper deliverer, gardener, kid's teachers, etc.).
At any rate, the somewhat adversarial history regarding the date of Thanksgiving has its roots in business factors. Between 1936 and 1941, President Franklin D. Roosevelt changed the date of Thanksgiving to lengthen the shopping season, appealing to business interests. Some Americans protested this decree, and celebrated Thanksgiving on the "real" date...a week later.
A compromise was written into law in 1941, setting Thanksgiving as the "4th Thursday" in November. This means that some years, like 2012, there are 5 Thursdays in November. Thanksgiving "comes early," making the shopping season longer.
image from article linked below--photo gallery available there, representing the anticipated earlyshopping on Black Friday, and the additional shopping frenzy anticipated online on Cyber Monday
“All signs point to 2012 being the biggest year yet for scammers,” said Mark Risher. “In the week leading up to Cyber Monday, we’ve already seen a five-time increase in the amount of shopping-related spam across social networks.” Mark Risher is the CEO of Imperva, a business security provider .
For some reason, when employees get back to work on Monday, there is a tendency to troll the internet for bargains rather than staying focused on the job. In addition, smartphone users blithely use their cellphones in unsecured WiFi hotspots--where they make themselves vulnerable to hackers.
To make matters worse, crooks are:
Stay away from all of these.
Source: "How to Avoid Shopping Fraud on Cyber Monday" by Meghan Kelly, Venturebeat.com via The Washington Post, November 23, 2012.
image from USA_Today.com
Here we go again. Hewlett Packard, once a solid performer as far as stocks and business stability was concerned, but recently in the news for management missteps, is now in the spotlight again. This time, though, it might not be entirely HP management's fault.
Last year, HP acquired Autonomy, a British software firm. But it seems that Autonomy overstated its bundled-with-hardware software sales, and improperly inflated revenues by 10-15%. In addition, it violated the "matching principle" and booked sales in time periods before they actually occurred. The total effect of these accounting errors was to show operating profits of 40-45% instead of the more accurate 28-30%. Hewlett Packard based its purchase decision on these misstated profit figures. The stock price of HP fell 12% on the day this was announced.
photos by Ryan Anson/Bloomberg News, via Getty Images: "Catherine Lesjak, Hewlett-Packard’s finance chief, said Autonomy’s profitability was less than it seemed. Mike Lynch, its former chief, denied any improprieties." from article linked below
Analysts note that similar misstatements plagued other software companies about a decade ago. The Securities and Exchange Commission had filed charges. Analysts also suspected that Autonomy had been using these discredited reporting strategies prior to the HP announcement.
Disclosure resulted from a whiste-blower who came forward in May of this year.
Source: "HP Claim Highlights a Gray Area in Software Sales" by Peter Eavis, NYT Dealbook, November 21, 2012.
image from blackrockcoffeebar.com
Business is supposed to be cut-throat, right? Every person for themselves? Dog-eat-dog? Buyer beware?
That cynical view of business does not apply to the Black Rock Coffee Bar and its customers. After two recent robberies, to help the coffee bar recover a customer organized support and collected donations. Customers lined up to give.
Does this make sense? Giving donations to a profit-making business? Maybe the business engendered support because Black Rock had a history of giving back to the community.
Sources: "Customers help robbed coffee kiosk recover" podcast by Renee Montagne, NPR, November 20, 2012.
image from csmonitor.com
Wal-mart has long resisted unionization of its workers. But that isn't stopping union organizers this year. A big protest is planned for Black Friday--the day after Thanksgiving and the biggest shopping day of the year. Wal-mart has filed a protest of its own with the National Labor Relations Board, trying to get the picketing action planned for Friday to be stopped. Since the NLRB doesn't rule on actions for several weeks, this move by Wal-mart was probably intended to intimidate workers who may have opted to participate in the protest...not to actually effect a restraining order.
The issues for Wal-mart workers are many. Several are addressed in this satirical faux-job-ad, in the Huffington Post piece by Joe Hanson:
"Wanted: Store Associates who will work for low pay, poor working conditions, erratic schedules -- including working on Thanksgiving Day -- and not enough hours to qualify for health care. Associates must be willing to live on public subsidies at taxpayer expense in order to survive. Those who try to speak out or unite as a group to address workplace issues will be silenced and possibly terminated. Please apply within your local Walmart store."
A combination of union organizers, sympathizers, and Wal-mart workers will be on the picket lines protesting on Friday. It remains to be seen whether the protests will result in more full time jobs, and better wages and benefits.
Sources: "Protests Backed by Union Get Wal-Mart's Attention," by Steven Greenhouse and Stephanie Clifford, NYT by way of cnbc.com, November 19, 2012.and"Home for the Holidays? Not for Wal-mart workers" by Joe Hansen, Huffington Post, November 20, 2012.
image from redorbit.com
Some of us would feel squeamish or silly going to a psychic to have our palms read. But few of us are mindful about the types of data that are being recorded by marketers, statisticians and other business people when we do business. And we don't know what conclusions are being drawn about our lives and our interests. When we blithely check off the "I AGREE" boxes after scrolling through the legalese required to gain access to an online site, we rarely imagine to what uses the information gleaned about us will be put. It gives many of us pause, however, when gaining access requires biometric recognition software--the veins in your palm being scanned for identification, rather than taking each individual at their password.
Wow. Maybe biometric identification is an improvement. Maybe it is refining the data-gathering, so that individuals who might share a Netflix password, for example, can be more precisely identified as to likes and dislikes by having to register through a biometric marker. Maybe biometric identifiers will save us the trouble of remembering a host of passwords with varying parameters.
The primary downside to this would be that a person who successfully impersonated someone else would create havoc for the person who was being impersonated. How would one go about repairing an error?Nevertheless, it appears that, for medical and other records, we will see an increasing number of biometric identifiers. The business opportunities for applications in this area may be expanding faster than individuals comfort with the process.
Source: "When a Palm Reader Knows More than Your Life Line," by Natasha Singer, NYT, November 11, 2012.
image from skreened.com
It is amazing that a food with very little nutritional credibility can engender such loyalty and passion. Twinkies are a real cultural icon. The maker of Twinkies, Hostess Brands, produced their last Twinkie on Friday, November 16, 2012. The "straw that broke the camel's back" was a breakdown in labor talks, so unions are taking the rap for the demise of this beloved product.
The real story is a little more complicated--one of high finance and arbitrage. Private equity backers, who bought up Hostess--perhaps with the goal all along to close its doors--saddled Hostess with additional debt. Then management went into labor negotiations demanding concessions on top of concessions. When the baker's union finally decided to go on strike, management decided to stop production and liquidate the company.
This was perhaps a melodramatic gesture, as many believe the brand still has value. It is possible that another company will buy up the trademark and resume production.
Source: "As Labor Talks Collapse, Hostess Turns Out the Lights" by Michael J. De La Merced and Steven Greenhouse, NYT Dealbook, November 16, 2012.
image from lilsugar.com
Decision-making is an important part of business, but also an important life skill. Many of our decisions are primarily based on QUALITATIVE factors--what we "like" or how something makes us feel. But in business, sometimes the QUANTITIVE aspects of decision-making take a higher priority. The NYT Bucks Blog linked below applied Quantitative analysis to what is often a Qualitative decision: the decision to raise a child.
Government estimates of child-rearing have come in at a low of around $435,000. The Wall Street Journal estimated about $1.6 million. But the Bucks Blog estimate was quite a bit higher. One of the reasons was that the parameters of their estimate was more in line with real life experience: costs don't stop when the kid turns 18...or even when they finish college.The estimates in the linked article also include costs of visiting grandchildren.
Like any "budgeting" process, where costs are estimated, there are a wide range of fixed and discretionary costs. The source of some of the basic costs in the Bucks Blog estimate were parallel to the government estimates: Department of Agriculture annual reports on family spending. But the author adjusted housing costs to be more realistic for New York City living. Actual health insurance costs were included. College costs were included. "Opportunity costs" of being on the "mommy track" were factored in as well. The costs added up.
The cost/benefit of raising a child in the 21st century is a more difficult calculation than the cost/benefit of raising a child in the agrarian economies of the 1800's. In those times, a child not only paid his or her own way, he added value to a farm economy. Today, the cost far outweighs any economic benefit. Nevertheless, this exercise highlights the importance of qualitative factors in a decision-making process--as well as quantitative. Based on qualitative factors, some "investors" might still opt to raise a child.
Source: "The Cost, in Dollars, of Raising a Child": by Nadia Taha, Bucks Blog, NYT, November 13, 2012
image from theyodeler.com
Think about this: if a corporation has gross revenues of $2,000,000, and has $1,500,000 of those revenues in California...should that corporation be taxed on 3/4 of its income in California?
That seems fair...but the way the tax laws have been written in the past, there were ways to circumnavigate common sense. The proposition that just passed in California ensures that there will be a more equitable distribution of "income," and therefore a more equitable distribution of tax revenues. The fact that it will result in about $1 billion in tax revenues to the state of California, however, gives many observers a reason to pause and assess.
Source: "For Prop 39, a quiet but decisive victory" by Marc Lifsher, Los Angeles Times, November 10, 2012.
photo by Teri Bernstein
The photo above represents the Energy Info screen on the center post of the Volt. The report that I am getting 250+ miles per gallon on this charge means that, since the last charge, I haven't used any gas. I have, however, driven further than the 40+ mile radius of the battery, so I have used SOME gasoline. So far, that brings my mpg number down to 150 miles per gallon. Sigh.
Why did I buy this car? I'd say the quantitative decision-making factors were both sustainability and cost/benefit based. The qualitative decision-making factors were:
Sustainability is really an issue with the Volt. A major factor is the source of the electricity that will be used to charge it. For me, that was a no-brainer: we have solar panels on our house so the sun is the source. Any other electricity use that, on cloudy days, the Volt would displace comes from SCE, which primarily uses hydro-electric sources...with a little bit of nuclear energy from San Onofre, which is currently off-line. If I were in an area where my electricity was coming from coal...I might have to re-evaluate whether the Volt was a good decision in terms of carbon footprint.
Another sustainability issue (which was a factor that I made a low priority was): will there be other, better technologies in the 10 year period in which I usually own my cars? I decided that the Volt was cutting-edge enough to be a good choice at least over the term of my loan (5 years)...so I didn't investigate further.
As to cost/benefit: First of all: this car is expensive! I got an almost top-of the-line car and, with taxes and everything else, it cost me $45,000. That price is mitigated in the short term by the $7500 Federal tax credit and a $1500 rebate from the state of California. So this car "really" cost me $36,000. It is gorgeous, and it has Bose speakers, Navigation and leather/suede seats...but...REALLY? $45,000 for a car that doesn't have power seats?
I would have been happier if I had paid $26,000, which is what the comparable Chevy Cruze would have cost, similarly appointed. So: How long would it take for me to "make back" the $10,000 difference??
First, let's just say that close to 100% of my Volt electricity charges are free. Partly it is the solar, and partly it is that I live in a community that provides free charging stations at malls and parks. So...$10,000 in gas: how long would it take me to accrue THAT?Well, gas in the Los Angeles area is currently costing $4.79 per gallon. This car is supposed to get 42 miles per gallon of gas, so:$10,000 divided by {$4.79/gallon) = 2088 gallons of gas.
2088 gallons x 42 miles per gallon = 87,606 miles to break even with respect to car price.
OK, I keep my cars 10+ years and 100,000+ miles, but it was a little sobering to find out that I would hit break-even for this car almost nine years out.
...of course...that is compared to a Chevy Cruze...I, on the other hand, am driving the very hip Chevy Volt.
No "range anxiety" like the Leaf.
Tons of gas savings.
Lots of social capital.And...if gas is ever higher than $4.79/ gallon...I am doing even better.Actually, since I charge it free most of the time, then once I have the 87,607 accrued with electric charges...I am HOME FREE.
Yowza.
photo: T Bernstein 2013 Chevy Volt
This is my new Chevy VOLT. I can't tell you how much I love this car. It is peppy, drives smoothly, looks like a real sedan, and gets fabulous mileage.But buying it was a challenge. I test-drove one, I liked it. I did my homework online--I got the Consumer Reports coupon deals from dealerships near me, which would save me up to $2000. I checked the inventory of dealerships before calling them. And I'd read the tips at Car Sales Professional.com.
Anyway, I found the car I wanted. I asked how much it would cost. That was when the trouble started. The salesperson asked how much I wanted to pay per month. I told him that I'd always bought my cars before, but I was considering a lease, since the technology was rapidly changing, so I asked what the deals were for a lease and for a purchase. After we waited for about 40 minutes, a different person returned to tell me the lease price was around $380 for a moderately equipped Volt, for 3 years, with $2,000 down. I asked what the purchase price would be at the end of the lease. "Why do you need to know that?" he asked. "No one ever asks that.""I need it to calculate the total price of the car," I said. I asked again what the car would cost if I bought it outright. The salesperson said that I wouldn't want to do that, because I could finance it for 5 years with 0% interest and a $2000 discount--which I wouldn't get if I paid cash. After another half hour in the back room he came back to tell me a purchase would cost me $725 per month.
To the salesperson it looked simple: "$380 vs. $725? Take the lease! Drive off the lot today!" I left. It took an hour of number-crunching with my Excel spreadsheet at home...and four visits to two different dealerships to sort the half-truths from the facts and to finally make a deal. There was a $14000 difference at the end of 5 years between what it would cost to lease or buy the car outright--in favor of buying. Since I own my cars for 10 years, ownership made sense...especially because of the $7500 tax credit I'd get in April when I file my return. Here's how I cost-compared the first year costs of buying versus leasing:
Buy
Lease
Downpayment
2000
12 lease @380
-
4560
12 buy @725
8700
Tax credit
(7500)
n/a
Total
3200
6560
Difference
$3360 more
In my next post I'll discuss the costs of ownership, as well as the "sustainable accounting" factors.
image from China National Bureau of Statistics via nationalturk.com
Though most of us still believe that the Chinese economic is growing at an unstoppable pace, analysts are looking at the reality of the numbers and seeing something else.
It looks as though Chinese production in many sectors--"clothing, foods, steel and cement"--began falling last October. And observers predict that the Chinese will have a real debt problem if leaders do not begin to "rebalance" the economy soon. "The challenge," according to Michael Pettis, an economist at Peking University, "is that Chinese officials need to start sharing -- taking money hoarded by the state and putting it into the hands of real people, balancing who gets what." (from the article cited below)
image from foreignpolicy.com
If Chinese consumers continue to increase consumption, and Chinese production continues to slow down, it is possible that more US products could be exported to China. We'll see...
Source: "Has China's Bright Future Turned Dim?" by Rob Schmitz, Marketplace Morning Report, American Public Media, November 9, 2012.
Now that election season is over, the attention in Washington, DC will turn to the "Fiscal Cliff." Several events, delineated in the graphic above, will occur as of January 1, 2013 or shortly thereafter. Every person with a financial presence in the US will be affected by at least one component of the fiscal cliff. The effect on businesses--particularly small businesses--could be devastating, and might throw the country back into recession.
...Unless lawmakers take action that will require visionary thinking and compromise.
The elements of the fiscal cliff fall into two main categories:
The tax cuts that will expire include:
The mandatory spending cuts were instituted by the Super Committee when the US debt ceiling was maxed out in the summer of 2011. The bi-partisan Super Committee could not come to a compromise then, so they put into place the catastrophic cuts to go into effect at the beginning of 2013. This mandate was intended to put pressure on Congress to solve the problem of mounting debt. The cuts are mandated to affect both social programs and the military. Since Congress has procrastinated on this issue once again, and it will come down to the wire:
All of this uncertainty is bad for business decision making--especially since it involves tax breaks for investing in income-producing assets. Stay tuned for updates...this topic will be in the news a lot over they next several weeks.
image from gobankingrates.com
People use credit and debit cards more frequently than ever. Banks, since deregulation in the 1980's, have used creative ways of charging fees to customers using the cards...as well as the vendors who accepted them as payment. Banks make money on the "interchange fee," or the difference between what the customer pays, and what the card issuing bank in turn pays the merchant. [Banks make additional money from the interest they charge the customers, as well.]
In the recent Durbin amendment to the Dodd-Frank Act, new transparency was required, and the interchange fees, which were higher than those in other countries, were required to be reduced.
The fees were high because there is almost no competition in the credit card business: Visa and MasterCard have 82% of it. The big banks that issue these cards are also operating in a market with little competition. They used their clout to increase interchange fees to above-market prices and businesses had no way to fight it because consumers wouldn't buy from them if they didn't take the plastic.
A combination of a huge anti-trust class action lawsuit, the financial collapse and the subsequent legislation has put pressures on banks to lower fees. Banks don't like it and are fighting back.
Source: "The Big Swipe"by Nancy Folbre, NYT Economix, November 5, 2012
The page above is from a free online game called SPENT. I was drawn to this site (again) because of the current business environment. The economy may be improving slightly, but things are still really tough for those who have been downsized and who have not found another job.
A college acquaintance who has been employed for 33 years has been only able to get temporary work for the last year and finds herself in the same position as the avatar in this game: with no job and only enough money to pay rent one more time. She's gone through her 401K money (which was badly hit twice by market crashes). She looks for work every day, but can only land temporary jobs that are outside of her technical area of expertise.
Others in my neighborhood, with long, successful careers in the film industry or television have lost their homes because financing money for new ventures has become scarcer and only the biggest players still have the clout to get their projects made. These are people who have lived all of their adult lives as thriving, middle-to-upper-middle class professionals.
We all think it can't happen to us. Or, like me, some of us were lucky to have made it through a rough patch of almost no money in the bank and no job, and trust it won't happen again. It wasn't just hard work that helped me on my way--it was the generosity of others, just plain good luck...and a government safety net that let me delay payments on my student loans till I got back on my feet.
I played SPENT twice today. The first time, I failed the typing test and then quickly made other errors; I ran out of money after 5 days. The second time I lasted 12 days before I ran out of money. It was the page that I pasted above that did me in. Faced with a moral dilemma, I opted to "do the right thing" (possibly because, in the game, I had my child with me). This drained my bank account. It made me realize that sometimes one cannot afford to adhere to one's principles. But this excuse is a slippery slope. It may be one thing to choose paying rent over choosing to make a payment for another person's car repair. What is at stake when one is running a business and a moral dilemma gets in the way of a target profit level?
Other sources: "Nickel and Dimed: on Not Getting By In America" by Barbara Ehrenreich, 2001."8 Rules of Thumb On Saving and Retirement," by Claes Bell, Bankrate.com.j"Employment Outlook Index", US Department of Commerce.
image from orientaltradingcompany.tumblr.com
The go-to party favor company when my kids were growing up was Oriental Trading Company. They had cheap items for party-favor bags that were sure to provide instant fun for the kids. The timing of this purchase seems ideal for Berkshire Hathaway, as the holiday season is not only party-filled...there are stockings to stuff as well.
Oriental Trading Company is an 80-year old catalog and online-based retailer. Warren Buffett's Berkshire Hathaway purchased Oriental Trading from Kohlberg Kravis Roberts (KKR) for an estimated $500 million. KKR was the most recent owner; Oriental Trading company has had a series of owners over the last several years. It was originally started by a Japanese immigrant, whose son, Terry Watanabe, expanded the business dramatically through increased catalog sales and creating relationships with churches and schools.
KKR bought the company when it was having financial difficulties, so KKR's profit on this sale to Berkshire Hathaway is considerable.
Source: "Berkshire to Buy Oriental Trading Company," by Michael J. De La Merced, NYT Dealbook, November 3, 2012.
Ever hear of "Halloween Candy Buy-Back"? It turns out that some dentists have conjured up a plan to collect excess Halloween candy and funnel it to "Operation Gratitude." The candy will go to US military troops serving overseas. Dentists and parents concerned about dietary and dental health can keep the candy-consumption on the home front down to a manageable level, while helping to make a difference in the care packages sent to US troops on active duty.
image from bluezones.com
A non-profit like Operation Gratitude is a business. It has to balance its cash receipts with its expenditures. Professionals working for the business market ideas to the public in order to accomplish a goal. In the case of a non-profit, the goal is not making money for stockholders, but rather it is making a difference in the lives of others. But even though the goal might be different, getting to that goal is in the form of a business. Operation Gratitude is a non-profit corporation.
Accountants, managers, fund-raisers and business-law experts are all business jobs that are a part of the non-profit organizational structure. A non-profit must maintain positive cash flow just like any other business. But the "dividends" they pay are in "social capital" rather than in unearned income for investors.
Source: Bucks Blog, NYT by Ann Carrns, November 1, 2012.