Business Banking E-Newsletter - October 2011

Mutual Fund Fees: Look at the Total Picture

Why should you care about mutual fund fees? Because fees are deducted from your account balance, they reduce your total return and, ultimately, the size of your nest egg when you retire. Consider how just a one percentage point difference in fees - for instance .5% vs. 1.5% - could affect your account over time. Assuming an average annual return on a hypothetical account bearing 7%, that 1% could make the difference between a plan participant retiring with $298,301 vs. $402,608 after 35 years of investing.1

All About Fees
When evaluating redemption fees, it's important to understand how they fit into a fund's overall fee structure and the services you receive in return for the various fees you pay. 

Management fees are used to pay for the ongoing expenses that keep the fund operating, such as the portfolio manager's salary, the fund's prospectus, etc. Management fees vary significantly depending on the nature of a fund's investments. For example, actively managed stock funds in which portfolio managers conduct extensive research may have higher fees than passively managed funds that track a particular index. 

So-called 12b-1 fees cover fund marketing and distribution expenses such as broker and trading commissions, advertising, and various service fees. 

Total operating expenses combine management fees, 12b-1 fees, and other miscellaneous operating expenses into one figure often called the total expense ratio. The total expense ratio is a fairly accurate estimate of how much a shareholder may pay annually as a percentage of his or her total investment in a fund. Total operating expenses are deducted throughout the year from the fund's NAV (Net Asset Value) and in effect, reduce the return an investor would otherwise receive. 

Redemption fees are different from other mutual fund fees in that they are incurred only as a result of redemption action taken by an individual investor and therefore are applied only to that investor.

1Source: Standard & Poor's. Example assumes beginning balance of $25,000 and continuous contributions of $100 a month. This example is for illustrative purposes only. Investment results
will vary.

Investors should consider the investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus contains this and other information about the investment company. You can obtain a prospectus from your financial representative. Read carefully before investing.

*Source: Standard & Poors. © 2010 Standard Poor's Financial Communications. All rights reserved.
*Securities offered through LPL Financial, Member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates

Not FDIC insured

No Bank Guarantee

May lose Value

Not a Deposit

Not Insured By Any Federal Government Agency

Coulee Bank and Coulee Investment Center are not registered broker/dealers and are not affiliated with LPL Financial.

Give Your Seasonal Business an Off-Season Boost

How-to keep cash coming in throughout the year

Whether it's a rush of leaf-peeping tourists in autumn or a fast-ringing register during the December holidays, seasonal businesses are often faced with the challenge of generating a year's revenue in just a few months. But there are some ways to keep the cash coming in all year 'round.

To keep the money coming in, even after the key season has passed, you may need to think creatively, learn more about the needs of your customers, and test new ideas -- even if they may seem a bit zany, says business consultant Elly Valas, whose firm, Valas Consulting Group, is based in Glendale, Colo. Here are five ideas for getting started.

1. Add complementary products and services. One of the most obvious ways to move into a new season is to add products and services to serve the other seasonal needs of your customers, says Valas. Joe Densieski's Nu Green Landscaping in Riverhead, N.Y., did this when he shifted his company's cold-weather focus from snow removal -- the obvious choice for many landscaping companies in cold-weather climates -- to becoming a supplier of de-icing products.

Instead of competing with everyone who had a snow plow, Densieski, 45, became the Suffolk County, N.Y., distributor of an environmentally sound liquid de-icing product that doubled his snow-season revenue from $150,000 to $300,000 and allows him to keep three to four of his seven employees on staff all year.

2. Extend your season. When Thomas Harman, 35, founded Redwood City, Calif., Balsam Hill Christmas Tree Co., a purveyor of artificial Christmas trees, in October 2006, he soon found out that the Christmas tree season had begun more than a month earlier. Valas says that's a common mistake among seasonal businesses, which could broaden their selling season by kicking off their marketing earlier and holding sales or promotions immediately after the close of the season. As he learned more about Orthodox Christmas, which is celebrated by Orthodox Christians on or near Jan. 7, he realized his marketing opportunities and season was even longer than he'd thought.

3. Generate off-season excitement. In addition to extending his traditional season, Harman has become good at generating events and excitement during the slower months. When he noticed that retailers and direct television sellers like QVC were promoting Christmas in July, Harman jumped on the bandwagon and offered deals. People who had missed out on buying the artificial tree they wanted the previous year often jump at the opportunity to snap it up at a discount during the summer. "It surprised me, frankly," says Harman. But he's not complaining. Balsam Hill sells a Christmas tree every season of the year.

4. Look for niche markets. Seasonal businesses can often find successful income supplements serving niche markets, says Valas. A bakery that does brisk business during the holidays or during a peak tourist season may find success in its slow months by developing products that sell evenly over the course of a year to a smaller audience, such as gluten-free or sugar-free products.

"When you make the majority of your income during a season, you may be able to supplement that by finding a smaller market with a need that is season-less," she says. Densieski sells to his own niche -- landscapers and landscape contractors -- that needs his specialized product to expand their own seasons.

5. Go where the season is. The snuggly pajamas that Valerie Johnson's Big Feet Pajama Company Co. produces are suited for the cold climates of places like the company's Lakebay, Wash., headquarters. But during the slow summer months, Johnson, 43, began to notice a steady stream of orders from Australia and New Zealand, where winter was in full effect. As she began to cultivate that market, it made up as much as 70 percent of all orders between March through August. This year, Johnson launched a targeted Australian Google AdWords campaign and invested in a small distribution facility in Australia to reduce costs like shipping and customs to down under customers and to exploit the winter season in key southern hemisphere markets. "We expect this move to result in exponential growth," she says.

"You have to stop thinking of yourself as solely a seasonal business. Your customers have different needs all year. You just need to find a way to serve those needs in a way that fits with your existing business," she says.

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Preventing Cringe-Worthy Customer Service

A List of must-dos to prevent losing a customer

There's never been a worse time to fail at customer service. Where once only a few of your wronged customers' friends and neighbors might have heard about how you neglected to make that customer happy, now your customer-service blunder can go viral and be discussed by thousands or even millions of consumers. Like the time United Airlines lost a musician's precious guitar -- and he made a YouTube video about it.

Bad customer service is an all-too-common way to lose a customer for good. A recent Consumer Reports survey found 64 percent of customers walked out of a store in the past year due to bad service.

By the same token, good service can earn you customer loyalty -- an American Express Global Customer Service Barometer survey found 70 percent of consumers said they'd spend 13 percent more with businesses that provide great service. Three out of five customers said they'd switch to a new brand or company if it offered superior service.

The barometer report also found small businesses have the edge here -- 81 percent of consumers in the survey said they believe small businesses provide better customer service. On the flip side, that means the expectations for small businesses are higher and it may be easier to flub it.

How can you prevent cringe-worthy customer service? Here is a list of must-dos:

  • Answer the phone. "Can't get a human on the phone" was the biggest customer-service flub cited in the Consumer Reports survey. So kill the robots and make sure the phone gets picked up by a real person, within a couple of rings.
  • Reduce voicemail steps. Banks, are you listening?
  • Teach politeness. Rude salespeople also topped the consumer complaint list.
  • Cut the pushiness. The hard-sell is dead, dead, dead. These days the only thing it's good for is driving people away.
  • Eliminate red tape. Many companies get bogged down in elaborate policies and procedures, leaving employees' hands tied when it comes to fixing problems on the fly. Empower workers to solve problems using your guidelines.
  • Surprise and delight. Do something unexpectedly nice for a customer -- send a thank-you note or a small extra gift in a mailed package.
  • Use social media. Big companies such as Comcast are winning over customers by setting up a Twitter channel where they can report problems and get a rapid response. At the very least, do a scan once a day to make sure nobody is venting to the Twitterverse about what you did wrong.

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How to Rock the (Industry) Boat

Ask these two questions to start being disruptive

A lot of companies will say they want to shake things up in their industry, but the truth is they are stuck focusing on themselves, says David Croslin, former chief technologist at Hewlett-Packard and author of Innovate the Future: A Radical New Approach to IT Innovation. "They end up trying to please themselves or beat competitors," he says, "rather than considering their customers."

Startups, for example, can squander resources by hiring staff before it's necessary, or even spending too much energy thinking up a flashy name. "One time I got this call from a company that poured $40 million into a product," says Croslin, now a market trends consultant in Colorado Springs, Colo. "And then they asked me, ‘Where do you think we can sell this?' They were too busy looking at the wrong thing."

Established companies go wrong when they start worrying about cutting costs or beating the competition. For years, the mobile phone business was caught in a kind of arms race, with each side adding more and more tools to keep up. "They kept trying to top each other with features that most people never used," he says. That is, until the iPhone hit. The iPhone was actually simple in comparison, but its design--stylish, user-friendly and super-convenient--was all about the customer.

You don't have to be Apple to upend a market, either. Some of the biggest disrupters are small companies, such as IQware. The Richfield, Ohio, firm develops software for the healthcare and hospitality industries--users of databases that usually require an army of IT hires. Instead, IQware offers a rules-based platform that even history majors can use to create workable software. And the company, started in 2005, is now looking at a $12 million offer for a quarter ownership.

So, if you want to be disruptive, start by asking two questions: What are the pain points in my life, and what can I fix in my customers' lives?

"Going back to basics," Croslin says, "can fix a lot of things."

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How to Combat Decision Paralysis

Three ways to infuse decisiveness

Leaders and employees alike often struggle to make or follow through on decisions, but there are some ways around the problem, says Harvard Business Review.

"Indecisiveness plagues many companies. Often, both leaders and employees struggle to make or follow through on decisions. The result? Chronic underperformance.

You can conquer this and infuse decisiveness throughout your organization by doing these three things:

  1. Engage in decisive dialogue. During each interaction with employees, model honest, open, and decisive dialogue. Make sure every meeting ends with a clear understanding of decisions and next steps.
  2. Turn dialogue into action. Indecision is often the result of confusion. Clarify accountability for reaching and executing decisions.
  3. Use follow-through and feedback to sustain action. Once you've set an expectation for decisiveness, you need to follow through. Give people honest feedback and discourage indecisive behaviors."

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