Friday, March 20, 2009

Petty and Hateful

I know this post will come off as being petty and hateful, but I have to say, when a company lays you off you expect them to rein in the extravagant spending in an effort to be more in the black and less in the red, right? Because that would sort-of-but-not-quite justify the fact that they made a mistake, and are back on track now.

That has not been my experience. Why? Because the company that laid me off in September announced a contest to their sales force. The prize? A cruise to the Bahamas, including airfare.

I will say, yes, I understand that the company is a multi-level marketing company, and they play by different rules than a traditional corporation. Yes, I understand that their sales force is not made up of employees, but of independent business owners. And yes, I understand that it's not like the sales force gets annual performance reviews or can get fired if they don't sell enough product. Yes, the company needs to offer incentives to get the sales force "fired up" and productive.

But (with my inside experience) I also know that this company has never managed to offer an incentive or annual event that has broken even, much less made them money. They have ALWAYS lost money on these things.

In theory, and the way other multi-level marketing companies do it (at a profit), the company calculates how much the cruise will cost per person, then take into account the profit margin on each product sold, and they know how much product a single member of the sales force has to move in order to pay their own way on board the boat. Then the general wishful thinking is that the sales force wants the cruise so badly they do everything they can to sell enough product to win that cruise, thereby exceeding those goals. Plus there is an expectation that not everyone who tries to make the goal will accomplish it, but will have generated more sales than they would otherwise have done in the same period of time. Thus the incentive has worked, and has gained the company money over and above what the actual incentive winners have brought in. Not to mention the good press about the company awarding cruises to top-achievers. And the winners themselves bragging to everyone and anyone about how they won a cruise, and bringing in more money in sales, ad nauseum.

Except.

Except I know the president of this company. His thinking has less to do with stopping the hemorrhaging of money out of the company and becoming profitable, and more to do with being able to take his girlfriend and his two teenage daughters on a vacation, and then writing it off as a "business expense" paid for by they company on the backs of the sales force. Because of course the president has to attend and lead sales strategy meetings, and glad-hand and network, and in general act like a slimy car salesman. Of course he has to go on the cruise. And if he's going, he can't deprive his girls of the chance to attend either, so the company has to pay for them too. And anyway, it's cheaper to have double or triple occupancy than to pay the single rate ... etc, etc, blah, blah, I'm going to do what I want anyway, typical screw-the-company-I'm-the-president bull$hit.

I will admit stupidity is not limited to the executive level; the president is not the only one who does not know how to run an event at a profit. The last event I staffed was in March of last year, and during the debriefing session it came out that the T-shirts sold at the event were sold at a loss. Apparently the person in charge of that aspect based the sale price of the shirts on how much it cost to produce the shirts, and didn't add in how much it cost to ship the shirts to us so we could sell them. Thus the company lost something like fifty cents per shirt.

Stupid stuff like that, repeated over sixteen years in business, maybe you would think it's time to hire new staff, or replace the dumba$$ in charge?

No, this company, or at least the president (who owns the company outright), likes to send good money chasing after bad. Anyway, the President just takes a loss on his personal income taxes for the company while enjoying "executive perks" like a Mercedes sedan, an iPhone, and a Macbook he charges to the company because he uses them occasionally for company business.

Crap like this, in a small business that employs (currently) 14 people? It's no wonder large corporations ran our economy into the ground if our small businesses act this way and get away with it.

Thursday, March 5, 2009

Renting

Husband splorp! and I are renters. We don't want to be. We want to own our own home with our own free-standing walls, and space between us and the neighbors.

  1. We want to not hear the lead-foot upstairs thumping around at 11:30 at night while we're drifting off.
  2. We want to not hear people on the other side of that wall blow-drying their hair.
  3. We want to not have the water in the shower suddenly become freezing cold or boiling hot when the neighbor flushes a toilet or turns on their own shower.
  4. And most of all we want to not smell the cigarette smoke from our upstairs neighbor, and we want to escape their tendency to flick the butts in our garden area (so gross).

We have been in our current apartment for a year and four months, roughly. We just got a notice that the apartment complex wants us to sign a new one year lease at the same rate, or if we want to go month-to-month we can pay $140 more each month.

I am happy our rent has not increased this time. For the last several years we have watched rent increase dramatically in our area, and it has not been fun. When we moved into our current unit it was because our last apartment's rent had become so astronomical: over $1,600 for a two bed, two bath, with under a thousand square feet. At that point we decided to downgrade to where we are now and pay less, with the thought that as rent continued to increase we could stay here for quite a while and ride out rent increases.

The plan has worked reasonably well. We have been saving for a down payment on a house, and we have accrued quite a tidy sum in a bit less than a year, even with me being laid off last year. Still, it is not enough for us to go out and begin the process of home ownership. Close, but not yet.

So the question becomes, do we sign the 12 month lease knowing that if we buy a home in the next year we would pay one month's rent as a penalty for breaking the lease? Or do we pay the higher month-to-month rate, and stretch our budget to its max to afford a place of our own?

Ultimately our decision came down to simple math, and economics. We looked at what type of house we could get (and the condition it would be in) in the areas we wanted to live, and would we be happy. Short answer: no.

The economics: Housing prices have not dropped to where we want them (wish them?) to be. We went out to see what our money could get us, and even at the max of our current budget we would be looking at an old house with its original kitchen appliances (from the 1960s), tiny bedrooms, small square footage, no upgrades to the windows, bare landscaping, and situated next to a busy street where the road noise would keep me up all night.

The math: Our current rent is $1,430 per month. The month-to-month rate is $1,570. If we take the 12 month lease and then break it early we pay an extra month's rent in penalties (not to mention cleaning deposit, etc). If we pay month to month, it's an increase of $140 each month. So if we go month-to-month, after 10 months we will have paid an extra $1,400, or almost another month's rent at the lease rate.

Ick, that's a lot of extra money going out and doing nothing for us. So we determined that since our current savings is not enough to buy a house we would enjoy at a price we can afford, we're going to sign the lease and increase our savings so we can meet our down payment goal in the next year.

Hopefully.

If taxes don't kill us.

We're still keeping our options open, so if housing prices in our area suddenly drop to meet our needs we have agreed that we can bite the bullet and pay the penalty to break our lease.

More math: if we break the lease at seven months and then pay the penalty, for a total of 8 months worth of rent ($1,430 x 8 = $11,440) we will actually come out paying less than what we would have paid month-to-month and stayed 8 months ($1,570 x 8 = $12,560).