If you love customer service – books such as Alpha Dogs written by Donna Fenn, Collins, 2005 should be on your reading list. Hopefully you read it more than once because the book is about how to make a small business grow.

The examples in the book are something every day businesses can learn from the first example is Zane’s Cycles in Branford near New Haven, Connecticut.

Every entrepreneur must realize there is never just one solution to a problem. To go from start up to the next level, the equation had to be changed. There is an old Star Trek movie where Captain Kirk was asked how he solved something that all recruits were failing. He answered, to solve the problem he changed the rules. Similarly Zane knew he had to challenge the conventional wisdom or change the game as it applied to his business of bicycles. For example he started offering one year guarantee – eventually it went to 5 and then to life. In reality most people only keep their bicycles for 5 years, going to life meant a great deal to your customers but not to your bottom line. If you can raise customer expectations, they will talk about it and you will do more business. The trick is having raised the bar, keep it or go continually go higher.

One critical aspect is knowing how much are you willing to spend on each customer. If you can offer him something less, you are further ahead. It is also critical to let your staff know the same answers as you, for they will have to make judgements. Some things can be taught but guessing the answer is not going to be done. In addition to knowing the same answer, the staff have to be able to make the judgement, which means when you learn about it your response has to measured and showing support otherwise the staff will not do it again. You only have to look at the Peter Principle to discover many examples. If the boss says no, and you want to keep your job, the no is not a maybe. If the boss says yes, then possibilities open up.

Linking to dividend paying stocks, if the company wishes to provide great customer service then all levels of the staff must be able to deliver great service. Judgements are and will be made, the supervisor’s attitude will determine the type of judgement. Paying close attention to what decisions can be made, will determine what type of competition is in the marketplace and that could affect the ability to pay dividends.

There are more questions than answers, till the next time – to raising questions

If you look at the art world today – some of the highest prices paid are those from the French Impressionists – names such as Manet, Monet, Pissarro, Cezanne, Renoir, Degas, Sisley and others. These mostly French citizens felt they had to paint something else than what was considered the norm. They used different techniques, perspectives, tried to capture the countryside differently. At the present time if you were the owner of one of the paintings it likely would be worth close to a million or more. Back in the 1870’s the paintings could be bought for considerably less, hundreds was more likely a cost, all of the artists had to do other things to earn a living in order to paint. In the book The Private Lives of the Impressionists, Sue Rose, HarperCollings Publishers, 2006 examines who the impressionists are in order to understand their work. If you were to paint, you subjects would be things around you and people you know. Therefore your background is needed to be looked at to understand who and why you are painting in the manner you are painting in. To be an artist, you first need to understand the masters in the museums for their technique, colours, the manner in which they painted. Next you go to studio and learn more and finally you develop your style. Hopefully, somebody likes it, a dealer is found to display it and the painting is sold. The more you sell or the higher the prices you sell at, the more time you can spend painting and the cycle repeats itself.

With the impressionists of France, the art dealer brought the work to the US which was developing a group of people interested in acquiring art and with sales in the US, the prices rose in France and Europe. The cycle continues as prices rise – museums need to have a piece to show and the cycle continues.

Linking to dividend paying stocks, the impressionists banded together to both challenge the existing painting dealers and to display their paintings. It is a continuing cycle in the art world – artists display their paintings at galleries who sell on consignment and the artists depend on the galleries to bring in potential buyers for the art. It is the reason galleries are forever hosting functions at the gallery. Unless you have a good eye, buy what you like, for you have to look at it. Every once is a while, a great talent is to be found and prices rise, but if you stick to what you like in the case of dividend stocks  while you are paid with a dividend, the stock will typically rise in value. If you enjoy looking at the painting, others will likely enjoy it and in the long run you may be  rewarded as the value increases.

There are more questions than answers, till the next time – to raising questions

Steve Jobs as head of Apple helped changed the world as we know it – the computer, music, movie, and telecommunications industries all have changed because of Apple and visionary founder Steve Jobs. In the book Innovation Secrets of Steve Jobs by Carmine Gallo,  McGraw Hill, NY,2011, the author points out what Mr. Jobs did and the 7 principles to follow. The seven principles are Do What You Love; Put a Dent in the Universe; Kick-Start Your Brain; Sell Dreams, not Products; Say No to 1,000 Things; Create Insanely Great Experiences; and Master the Message. The 7 principles will not bring you to the billionaire status, but it may bring you a better life. A better life for you, your company and your customers and in the end that is what we all try to do.

In Mr. Gallo’s there is a number of examples of how innovation can work and some of them are:

At one time, computers were big and bulky, Steve Jobs and Apple saw their vision as doing something better for people. Steve studied the way people used their rotary phones in their homes and many of them sat on telephone books. One day Steve brought in the telephone books and threw it on the desks and said the footprint of the computer can be no larger than the telephone book. The existing computers were 3 times the size of the phone book. The team eventually responded going vertical and smaller, more important Steve Jobs’ actions reinforced Apple was different and trying to do better.

If you wish to be an innovator, you need to be curious – if you start with How can it be better? you will likely lead to small improvements. If you ask Why? Why not? and What if? those type of questions will lead to more explosive large improvements. Always going back to your customers and how they actually use the device, this knowledge will lead you in the correct path.

In terms of products you offer, each product you offer has people behind it – to help sell, to improve, to do administrate, to do something. You have a finite amount of resources – is it better for your customers and yourself to limit the product offerings and make the ones you have great?

Everyday, people do things, at the same time they do not other things, sometimes what you do not do is equally as important as you do. What do you say no to?

Apple stores have some of the highest gross revenue per square foot which makes looking at the Apple store very important – the concepts include: 1) design uncluttered stores – open, light, airy. 2) locate the stores where people live their lives – the mall 3) allow customers to test-drive the products – make it friendly to browse 4) offer a concierge experience – display the product and offer solutions 5) make it easy to buy  and 6) offer one to one training – anyone who buys a product can come in and learn how to use the products.

Whatever your product or service you sell, you have to tell people your story. Be a great storyteller. Steve Jobs followed the same outlined every time – you can copy him. 1) Create a Holy Smokes Moment 2) Stick to the Rule of 3 – most plays are 3 acts for a reason 3) Share the Stage if a long presentation 4) Introduce Heros and Villains – good and bad guys 5) Think Visually – the slides are meant to complement your presentation, sometimes all it takes on a slide is a picture or one word; 6) Create Twitter-Friendly Headlines – make it simple to talk about your product and 7) Sell Dreams not Products – what you can do with it

Linking to dividend paying stocks, most dividend paying companies are not going to be great innonvators, but they might be great implementers of well tested ideas. If a company does nothing but pay dividends, eventually others will start chipping at it, unless it is a regulated monopoly. Dividend paying companies can continually see what others are doing and do test marketing to see what can be adapted to their company. Often change comes slowly, but profitable change is what shareholders desire,

There are more questions than answers, till the next time – to raising questions

Steve Jobs as head of Apple helped changed the world as we know it – the computer, music, movie, and telecommunications industries all have changed because of Apple and visionary founder Steve Jobs. In the book Innovation Secrets of Steve Jobs by Carmine Gallo,  McGraw Hill, NY,2011, the author points out what Mr. Jobs did and the 7 principles to follow. The seven principles are Do What You Love; Put a Dent in the Universe; Kick-Start Your Brain; Sell Dreams, not Products; Say No to 1,000 Things; Create Insanely Great Experiences; and Master the Message. The 7 principles will not bring you to the billionaire status, but it may bring you a better life. A better life for you, your company and your customers and in the end that is what we all try to do.

In Mr. Gallo’s there is a number of examples of how innovation can work and some of them are:

Every industry has and needs innovation in it – one of the basics which every household needs is a vacuum. James Dyson saw a major problem, in his eyes, the performance of the vacuum cleaner lost suction as they picked up dirt. After 5 years and 5,126 failures, Mr. Dyson solved the problem which was great. The next step was to take it to the big vacuum companies such as Hoover. The folks at Hoover as the biggest company had a couple of choices of what to do – nothing or something. Hoover could have bought the company and folded it into a division to raise its head in another 20 years (which is often done), instead they were thinking they had a good profitable business of selling vacuum bags and decided to do nothing. Dyson had to do it the long way or independent distribution and has great results – the best selling vacuum in Japan, UK and and can be easily be found in North America.

Innovation is often seeing what others do not see – people see a higher usage for a program, for example early on in Apple, Steve Jobs and his programming team were touring Xerox PARC – a research facility owned by Xerox. The folks at PARC had developed a graphical user interface (GUI) which allowed people to interact with computer via icons on the screen instead of text based commands. In the hour long demonstration the Apple team understood and knew where this technology could go. The numerous Xerox executives who had years of demonstrations never could get past their copying perspective. Microsoft and IBM have a similar story. Passion with vision leads to innovation.

A great story from Hurricane Katrina of 2005 is the company Entergy – the power company. The CEO told employees to deal with their own personal crisis – take as much time as you need, their jobs would be guaranteed. An astonishing thing happened, recognizing the importance of electricity in people’s lives – just about every employee returned to work the next day until the lights were on. – working for a noble purpose.

To improve the school in the neighbourhood of Chicago’s East Lakeview – with the full encouragement of the principal, the mothers found innovative solutions. They partnered with artists to paint the classrooms which resulted in murals, sculptures and vibrant colours. They asked the ballet, karate, music teachers to hold classes after hours, and they asked local chefs to teach culinary classes, as well as host of other things. The school went from an undesirable one to a model for other schools including most important better grades.

Linking to dividend paying stocks, innovation has risks attached to it, to change something often is to reallocate resources. If it is a new product or category – it is easier, if it is change an existing structure besides a great idea you need people willing to say yes to try. In many organizations finding those people is a challenge, find them and things can happen.

There are more questions than answers, till the next time – to raising questions

Steve Jobs as head of Apple helped changed the world as we know it – the computer, music, movie, and telecommunications industries all have changed because of Apple and visionary founder Steve Jobs. In the book Innovation Secrets of Steve Jobs by Carmine Gallo,  McGraw Hill, NY,2011, the author points out what Mr. Jobs did and the 7 principles to follow. The seven principles are Do What You Love; Put a Dent in the Universe; Kick-Start Your Brain; Sell Dreams, not Products; Say No to 1,000 Things; Create Insanely Great Experiences; and Master the Message. The 7 principles will not bring you to the billionaire status, but it may bring you a better life. A better life for you, your company and your customers and in the end that is what we all try to do.

The first thing to know about innovation is it is extremely rare to get it correct the first time. In Innovation the key is failure and learning from it. If you are not failing you are not trying. One of the reasons there is failure is because you are trying to change something that may have been put in for what was a good reason. It may mean changing different partners; it may seem simple, but if you can see the positive changes that results from the change, you are on the right path.

The 7 principles are:

Do What You Love – follow your heart, your passions, connect the dots along the way and you should be okay.

Put a Dent in the Universe – attract like-minded people to share the vision and turn the ideas into reality.

Kick-Start Your Brain – innovation does not exist without creativity and creativity is connecting the dots.  Expose yourself to a broad set of experiences and that will help connect the dots.

Sell Dreams, not Products – think about what people can do with your product?

Say No to 1,000 Things – simplicity is the ultimate sophistication – eliminate the unnecessary for the necessary to speak.

Create Insanely Great Experiences – if you go into an Apple store what makes it better than the other stores?

Master the Message – tell your story so people can get excited about your innovation.

Linking to dividend producing stocks, the above is why it is incredible that some companies can continue to produce dividends year after year. Steve Jobs and Apple affected 4 industries which all the other companies had to adapt to Apple or radically change. Innovation often does that to dividend paying companies because they often want less innovation – they make money by not innovating. However the public will vote with their wallets one way or another which makes asking the President how they handle innovation and what innovations the company embraced important questions to be asked.

There are more questions than answers, till the next time – to raising questions

The New York Stock Exchange ended higher in 2013 and that is a reason to celebrate the end of the year. Happy New Year’s!!!. With higher stock prices many pension funds are better funded and that helps millions of people. Higher stock prices means companies can go into the market to issue shares to grow their businesses. Next year, you never know, but most people will not predict the markets will not rise as much as the past two years when the S&P 500 was up 45%. For months, the Federal Reserve Bank has been inching towards less tapering of its stimulus program and with stronger evidence of the housing market stabilizing and even growing, there are more voices for  the tapering to begin. When that action happens, there should be a rise in interest rates which is great news for savers.

Linking to dividend paying stocks, it is highly likely the strongest capital gains have been made or there are fewer undervalued stocks – those stocks that are trading at multiples lower than peers. At the moment, the S&P 500 is trading at 17.4 times earnings, versus 14.2 times a year ago. If you own stocks, you always have a variety of choices – buy, sell and hold. It is an easier decision if the company pays a dividend, then you can ask how secure is the dividend? knowing if the stock price falls, the yield on the dividend goes up. Then your problem is do you have the dividend go into your account or reinvest it to buy more shares? If the buzz world of the 2014 is to be defensive, one of the best defensive (and offensive) moves is to always try to buy quality companies which pay a dividend and you will be ready to play on both sides of the field,

There are more questions than answers, till the next time – to raising questions.

If you look at the formal robes of royal families, the colour purple often appears and John Schwinghamer has written a book called Purple Chips, John Wiley & Sons, 2012.

The author believes all stock prices go up and down, including the best ones – if you look at the past you will see a trading range for them, which means there is an opportunity to make money through concentrating on the purple chips or the best companies. To qualify as a purple chip the company must meet 3 criteria: 1) a minimum of 7 years of positive and growing EPS or earnings per share; 2) smooth and predictable growth in EPS; and 3) a minimum market capitalization of $ 1 billion.

One of the most popular method of analysis is called a ratio analysis which involves income and balance sheet numbers. For example Return on Equity is a net income divided by shareholders’ equity; Return on Assets is (net income + interest expense- interest tax savings) divide by average total assets. The idea is to calculate the ratios and compare them to other companies. Then you can make a decision which should be better to invest in. The advantage of the Purple Chips method is it is graphic or seeing how the EPS is doing relative to the stock price and making decisions. Both methods deliver the same results – a good company is a good company, to make comparison between good companies both methods should be used.

Using the Purple Chip method, you can determine when to buy and when to sell. If you believe in the normal or bell curve. The theory states that most of the time or 68.2% stocks trade near their fair market value. If the stock trade outside their fair value, it will  tend to go towards fair value. The how and why are the tricky parts but if the stock is trading at higher EPS valuation than it should be, eventually the stock will fall; if the stock is trading lower than it should be, eventually the price will increase.

Due to the long term profitability of the companies, Purple Chip stocks are well covered by Wall Street analysts. This means the analysts will forecast the earnings of the shares before the official announcement. If the stock market is paying i.e. 15 times earnings, and the expectation is for earnings to increase, when the company announces their earnings, the stock price should go up because of the higher earnings. If earnings are decreasing, the stock should be sold as the price should go down.

There are many elements to the theory and as long as you have access to the charts, you can use it. The basic elements are every stock is not stable or there is movement both up and down. If you pay attention to the EPS multiple then you determine when to sell and when to buy, for the market is correct. You can take profits and move to another quality company which the market is valuing less than the one you own. When the market begins to value your old company higher, you can move back. Stick to quality, receive a dividend while you wait for the market to catch up to your thinking.

There are more questions than answers, till the next time – to raising questions

you look at the formal robes of royal families, the colour purple often appears and John Schwinghamer has written a book called Purple Chips, John Wiley & Sons, 2012.

The author believes all stock prices go up and down, including the best ones – if you look at the past you will see a trading range for them, which means there is an opportunity to make money through concentrating on the purple chips or the best companies. To qualify as a purple chip the company must meet 3 criteria: 1) a minimum of 7 years of positive and growing EPS or earnings per share; 2) smooth and predictable growth in EPS; and 3) a minimum market capitalization of $ 1 billion.

The reasons for the 7 years the idea is to invest for the long term and the best companies outperform the competition in the long term. The 7 year helps to ensure companies that are making up their numbers are found out before the 7 years, and the 7 years tends to reflect business cycles which go both up and down.

The smooth and predictable earnings history is needed because earnings are the primary driver of stock prices. When earnings go up, stocks prices go up; when they go down, stock prices go down. Stocks typically trade as a multiple of their earnings ie 10 times earnings or 15 times earnings. Questions then can be made what multiple are similar stocks are trading at and the one that you are looking at – is higher or lower and why?

The reason for the $ 1 billion in capitalization (stock price x number of shares outstanding) is size matters. The ride may not be as thrilling as being in a speedboat but they produce steady and predictable earnings that yield a predicable price from which you can profit from,

The trick is buy, hold, sell, and buy again and stay within the purple chips. Purple chips are often companies that pay dividends for the companies are the same ones that have predictable cash flow and superior track records. As you wait for the share price to increase, you get paid to wait.

The criteria showed 250 companies on the US exchange meeting, adding the criteria of smoothness of the EPS line brings the number to 25. Had you own an equal weighting in 2008 the group was up 15% while the S&P 500 index was negative 14%. The top 25 companies are Hewlett Packard, EMC, McCormick, SJ Smucker, Flower Foods, Fresenius, Express Scripts, Ecolab, Church & Dwight, Teva, McDonald’s. Oracle, Medco Health Solutions, Davita, Mednax, AFLAC, IBM, DST Systems, Medtronic, Becton Dickinson, CR Bard, Johnson & Johnson, Abbott Labs, Wal-mart, Factset

Note a number of the above companies are in healthcare which is expect to get even bigger now the first group of baby boomers is retiring.

More in the next column.

There are more questions than answers, till the next time – to raising questions

The western world runs on electricity and the companies that deliver it are a mixture of public and private companies or invest owned. For the public companies as ensuring the delivery of electricity is a very capital business, all utilities must go to bond market for financing. In terms of investor owned, the beauty of the business is thousands of people owing bills every month and if you do not pay, the company can turn off the lights. If things are reasonably normal, the investor owned utilities should provide a consistent dividend year after year. What which one is the good one to buy?

Michael Bowman from Wickham Investment Counsel helps you to start he first narrowed the field to companies larger than $ 1 billion in market capitalization (share price x number of shares outstanding). He can up with 23 companies.

Mr. Bowman’s article was in the Globe and Mail, December 18, 2013