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The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurship, start-ups and general business topics.

Tips on Responding to Job Seekers
By Carleigh Lowe Friday, September 18, 2009

Our friend, Matt Cholerton offers many great tips on his blog Everyone Hates HR. Check out his latest post on responding to job seekers, he makes some fantastic points and gives you tips on how to weed through the resumes. Below is an excerpt:

Respond to Job Seekers

With this tanker economy, there's been no shortage of articles and anecdotes about the shabby treatment doled out to job seekers - like here in this NY Times piece.

There is increased, and valid, criticism about the lack of communication with job seekers, even final stage candidates. I know it can be absolutely overwhelming to find and navigate a candidate through interviewing and onboarding. Responding to every applicant that floods your email on top of that seems undoable. Especially, at a startup where there is more to do than fits in a day - usually without a dedicated HR rep. As we open a new position here at my company I want to do better.

Here are a few strategies I suggest to help:

#1 Add some additional tasks to the job posting, and make it clear you'll only respond to applicants who respond to your additional requests. For example, ask applicants to name their favorite product in your line and why. Perhaps it's just asking them for the last book they read and loved? These additional, and non-traditional, requests can give you clear insight into an applicant's personality. More importantly, they serve as an immediate screening tool to gauge genuine interest. Seekers spamming their resume widely and blindly stand out like a sore thumb - as not being specifically 'into' your opportunity. You can also use the posting to notify applicants that it might be as long as a week or two before they hear from you while you receive and screen folks.

Respond to Job Seekers

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How Thin Is Your Corporate Veil?
By Paul Sponaugle Tuesday, September 15, 2009

Whether forming a Corporation or an LLC, the majority of entrepreneurs are looking for a way to separate themselves from the debts and liabilities of their business entities; otherwise, we’d all be sole proprietors and not consider the personal consequences of a failed business venture. Most think that by simply forming the company the job’s done, and they never take the time to organize the entity so it will provide a “veil” of protection. A good way to make sure your company is protecting you from the very start, is to GET A CORPORATE KIT!!!!

Too often I hear clients say how they can’t find their Articles of Incorporation, or that a bank wants to see company documents verifying authorized individuals. These are usually the folks that were looking to save a few bucks and a chose a filing only service at the time they formed their companies. If they had bought the kit, they would’ve had a place to keep their documents, and would’ve had that corporate resolution approved by the Board of Directors showing authorized persons elected for banking. It’s just better to be prepared.

For corporation or LLC owner’s, a well documented kit should include an organization chart to give the business person an overview of how the company is organized. When completed properly, the sample bylaws, resolution forms and minutes of meetings will help strengthen the veil of any LLC or corporation. Remember, when it comes to advice, whether legal or financial, nothing can replace a good lawyer or accountant, respectively. However, lawyers are not needed to draft boilerplate minutes, bylaws, membership agreements, etc. That can save you and your newly formed company a lot of money in the beginning. For issuing stock or membership certificates having a corporate kit is a real time saver also, with official certificates imprinted with the company’s name on them, a company seal and transfer ledger right at your fingertips. For LLCs, a sample operating agreement will help the members get organized quickly, so they can begin concentrating on business.

Do it right and make sure you get your corporate kit!

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Seth Godin's Tips on Hiring
By Carleigh Lowe Monday, September 14, 2009

I was recently reading the blog of best-selling author, Seth Godin. In a recent article he offers some interesting advice on hiring, below is an excerpt:

Two ways to hire (and a wrong way)

The wrong way first: interview someone for an hour. If you like them, have them interview three or four other people in your organization for an hour each.

You've invested five hours of your team's time, but really you only were looking for approval, because you'd already decided you liked the person enough to work with them for years.

All the evidence we've seen shows that this is a lousy predictor of future performance. And, let's tell the truth... if the first three people love the guy, are you really going to let the fourth, junior person veto him? Or is it just an annoying courtesy?

There are two approaches you can use as an alternative.

Click on the link below to read the full article where you can get the details on the two inventive interviewing approaches Seth Godin suggests:

Two Ways to Hire (and a wrong way)

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Three Step Self-Defeating Media Relations Strategy
By George Merlis Friday, September 11, 2009

For two decades I’ve urged my media training workshop clients to be candid with the press. In fact, the fifth of my Five Commandments of Interviews is: “Thou shalt not lie, evade nor speculate.”  (Only five commandments?  Yes, I haven’t the temerity to come up with ten.)

While I teach this candor lesson to all clients, it is particularly important for business people. The public is more tolerant of rides down the primrose path of near truth when the driver of the vehicle is a politician than it is when he is a businessman. Stephen Colbert, host of Comedy Central’s “Colbert Report,” came up with a word for what politicians speak: “Truthiness.” According to Colbert, as quoted in Wikipedia, “truthiness” is “something that seems like truth -- the truth we want to exist.”  (I recommend the Wikipedia article about Truthiness; it’s both entertaining and informative.) It can be found at: http://en.wikipedia.org/wiki/Truthiness

When you lie or evade and -- inevitably -- the media finds you out, you’ve destroyed your credibility. Perhaps because politicians start with so little credibility -- see “truthiness” -- the bar is a lot lower for them than it is for the rest of us.

I was reminded of this the other day when the lead parliamentarian of German’s Green Party, Jurgen Tritten, told Chancellor Angela Merkel,  “Your policy has been: cover up, deny, and when nothing else works, apologize for that which you previously disputed.”

Now while Tritten’s context was a political debate over foreign policy, his statement was a perfect formulation for a media disaster (although it would have been even stronger had he worded it: “Your policy has been: deny, cover up, and when nothing else works, apologize for that which you previously disputed.”)

Often, we are tempted to deny unpalatable facts. Once denied, the inconvenient facts must be covered up to “prove” the denial. We are now two lies into the morass and when the facts emerge there is nothing left to do but apologize. The public will suspect that you’re sorrier about the unfortunate fact being revealed than about the fact itself. Cutting out the denial and the cover-up; getting straight to the apology after acknowledging the fact, goes a long way toward keeping your credibility.

Studies of public response to crises have repeatedly found people can handle bad news. Falsehood, on the other hand, is only a notch below evasion on the intolerable scale. Also, a quickly-delivered apology is much more effective -- and believable -- than a long-delayed one.

The rapid and candid response of Johnson & Johnson in the “tainted” Tylenol incident in 1982 remains a textbook case on how to handle bad news. Six people in the Chicago area died after taking tainted extra-strength Tylenol and there were fears that some of the pain relief medication had been contaminated in the factory or in shipment.

Johnson & Johnson went into full-disclosure mode, pulling all Tylenol off the shelves and reaching out to citizens, hospitals, doctors and others, urging them not to use Tylenol. Ultimately, it turned out that the “tainting” had been done in area drug stores as part of an elaborate murder scheme and was in no way caused by any lapses by Johnson & Johnson. (The FBI thinks the murderer was trying to make it appear his target was simply a random victim in a group of people poisoned in a widespread accidental contamination case. In other words, he killed six to get at one. The bureau is said to have a prime suspect, but it never gathered sufficient evidence to charge him.)

During the scare, J & J recalled and destroyed about $100 million worth of Tylenol products. The company’s response, while costly, was characterized by proactive candor. And, partially as a result, Tylenol quickly regained its market position as the nation’s number one pain-killer.

From a media relations point of view the choices when there’s bad news for your business are:

A: Deny, cover up and apologize when the facts come out.

B: Acknowledge, apologize and explain why this will never happen again.

There’s really no contest, is there?

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Finding Value In a Business When Cash Flow Is Negative
By Jerry Barney Tuesday, September 8, 2009

Can a company have a negative cash flow and still have goodwill value? The answer, maybe surprisingly, is YES! There are three elements that create Going-Concern or Goodwill Value. Not all three need to be present to create the value.

They are:

  • Assets in place and ready to use as a going-concern (capital, labor and management)
  • Excess economic income over that justifiably allocated to other assets
  • Expectation of a valuable future event, such as gains on a sale

An appraiser must assess all of the attributes of a business to determine if items one and three on the list above pertain.

We have written in past articles that a company’s cash flow is the key to its value – greater cash flow begets not only greater value, but it fetches a higher “premium”, or multiple of revenue or cash flow, as the size of the cash flow increases. But, what if the cash flow is negative? All is not necessarily lost; there may be value to be found even when times are difficult.

These days, with the massive challenges all businesses face in our economy, cash flows for most companies have suffered. If you are looking for opportunities to sell your business, or merge with or acquire another business, you may look beyond the cash flow to find its real value.

Tangible Assets are the first place to find value. Your equipment, furnishings, vehicles, etc. all have some value depending on their age and condition. The tangible assets typically will sell for their market value without much of a premium (although in some cases they have greater value if sold as a functioning set, rather than sold off as individual items). Intangible assets that may be transferred (called discrete intangibles), such as franchise fees and licenses, also carry value.

Next, look for other intangible value; that is, value beyond the tangible and discrete intangible assets of the company based on what they add to company performance.

Here are some common places to look:

Location and Facilities of the business: Excellent location and leases with favorable terms that can be transferred may add intangible value.

Customer List: For businesses with a great deal of repeat business from its clients, the database of clients certainly has value.

Proprietary Processes: Businesses whose success is partly due to proprietary processes, technology, or methods, have value in those processes or technologies. These processes should be documented in such a way as to be transferable and repeatable by a new owner.

Patents and Copyrights: Patents and copyrights for useful, saleable products or information add to the value of the company, as long as they belong to the company and not the owner.

Personal Goodwill: If a significant proportion of the company’s success is related to the owner’s knowledge, skills, personality, reputation, etc., that is called “Personal Goodwill”. This means there is significant risk to the business if the owner leaves the company (and the value leaves with the owner). Some ways to keep the value with the company and not the owner personally are to sign a non-compete agreement and to transfer the Personal Goodwill to Institutional Goodwill. This transfer happens through training remaining employees, formalizing agreements into contracts, and staying with the company after it is sold for an agreed period of time in order to train the new owner.

Certifications, Best of Breed: Certifications and recognitions of the company as a valued supplier or “best in breed” will also likely add to the value of the company. Oftentimes, communities have publications of certified suppliers, and to be included requires an application process.

In general, anything that can be done to formalize the advantages of a company into something that is transferable and repeatable should increase the Intangible Asset value.

Also, information can be determined for sales comparisons of companies with significant negative cash flows which still sell at a premium over hard asset value. This is common, for instance, in health care facilities, where the entity has significant value in licenses, certifications and entitlements, which create an expensive replacement value component, which is not discrete – that is it cannot be detached from the business and sold, and therefore contributes to non-discrete intangible asset value, or “goodwill”. A professional business appraiser can assist in determining that value, and a broker can help you market all the advantages your company has to offer.

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