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Caterpillar Earnings Better Than Forecast

January 28, 2013 by Leave a Comment

MINNEAPOLIS (AP) — Caterpillar’s fourth-quarter profit was cut in half by a deal in China that went bad and by slower growth around most of the world. It said results for this year depend on how the global economy behaves in the second half.

Caterpillar Inc. makes construction and mining equipment as well as power generators, so its performance rises and falls with the world’s economy. Predicting where that’s headed is a tricky business at the moment.

Doug Oberhelman, chairman and CEO, said in a prepared statement Monday that if a recent improvement in economic indicators continues, 2013 could be a record year for Caterpillar. But if this year is a replay of the last two, where growth and confidence declined in the second half, “2013 could be a tough year,” he said.

Caterpillar dialed back production in the second half of 2012, which hurt fourth-quarter revenue and profits. Caterpillar and its dealers have both been trying to sell off inventory. Reduced production will continue at least through the first quarter, the company said.

Still, adjusted fourth-quarter profit and revenue were better than analysts expected. Caterpillar earned $697 million, or $1.04 per share. That was down from a profit of $1.55 billion, or $2.32 per share a year earlier.

The most recent quarter included a non-cash charge of 87 cents per share to write down the purchase of Zhengzhou Siwei. Not counting that, analysts surveyed by FactSet had been expecting a profit of $1.70 per share.

Caterpillar’s $653 million purchase of Siwei last year gave it a new business — roofing supports for mines — in a country where mining is growing quickly. But on Jan. 18, Caterpillar said it had found “deliberate, multi-year, coordinated accounting misconduct” in the accounting at Siwei, and said it will write down its investment in the company by $580 million. It also said it dismissed several senior managers at the company.

Revenue fell 7 percent to $16.08 billion as dealers reduced inventory. Sales fell everywhere except Latin America.

Revenue from construction equipment fell 25 percent. But sales of mining gear — now Caterpillar’s single largest category by revenue — grew 14 percent on improvements everywhere in the world except in North America, where coal mining is in decline.

For this year, Caterpillar expects revenue of $60 billion to $68 billion, with a profit of $7 to $9 per share. Analysts had been expecting a profit of $8.54 per share on revenue of $64.58 billion.

Caterpillar said there’s a wide range in its outlook because of the high level of uncertainty in the world. It expects relatively weak growth in the U.S. economy. Growth in China will improve, but not back to the levels seen in 2010 or 2011, Caterpillar said. It expects Europe to continue to struggle.

For all of 2012, the company’s profits rose 15 percent to $5.68 billion, or $8.48 per share, up from $4.93 billion, or $7.40 per share, in 2011. Revenue rose 10 percent to $65.88 billion, from $60.14 billion.

Shares of the Peoria, Ill.-based company rose $1.44 to $97.02 in morning trading.

Article source: http://www.nytimes.com/aponline/2013/01/28/business/ap-us-earns-caterpillar.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

You’re the Boss Blog: Don’t Forget the Clients You Already Have

November 16, 2011 by Leave a Comment

Branded

An insider’s guide to small-business marketing.

At Door Number 3, we spend a lot of time and energy focused on growth. Our 15-person shop has a full-time person dedicated to bringing in new business, leading the response to requests for proposals, getting out there networking, building and working databases. But we don’t always give as much attention to the customers we already have. As 2011 rolls to an end, I am reminding myself that it’s time to set in motion something I began last year.

Late in 2010, I did an in-depth review of the agency’s new business activity with our team. At that time, our new business guy, Tim, had been in the job for 12 months or so and was bringing in some nice, smaller accounts when we realized that something wasn’t quite right. While Tim is the point person for new business, it becomes a team effort once we start talking with a potential client. We were winning some, and we were losing some. Interestingly, a few staffers concentrated more on the losses than the wins, and those outside of the management team were concerned that we weren’t doing enough to bring in new business.

Given the recession and the fact that many businesses had slashed their advertising budgets, we decided to conduct an analysis and shared it with the team. It showed that our new business wins for the previous 12-month period were down from the previous two years, but respectable. It also showed that most of our longer-term clients were cutting back on what they had been spending with us.

As a result, our total sales — and our morale — were flat. In an agency, new business is not only embraced for the financial health it brings but also for the emotional lift. Creative and media-buying groups salivate over new challenges and use them as currency when talking to colleagues at other agencies.

Reviewing the analysis, I was reminded of our very first client 17 years ago, Kendle International, a contract research organization. I recalled that Candace Kendle, the company founder, made it part of her job to get on a plane and visit with every one of her pharmaceutical clients at least once a year, to get a pulse on how her company was performing. Inspired by that example, I decided to schedule a first-of-the-year check-in with each of our clients. Some of them I knew well, while I had had only occasional contact with others. Some were a little puzzled about the call — aren’t we current on our invoices? — but they all made time.

Setting up the meetings also caused some nervousness among our staffers. They are experienced, passionate and dedicated, and they sort of understood what I was doing but they found it unsettling. I reassured them that this wasn’t about a lack of confidence in them; it was, instead, an opportunity to listen to clients and figure out if there was anything we were missing.

Some of the visits were short and sweet. Others lasted much longer than I would have thought a client would have time for.

One began the meeting by saying this: “I appreciate your being here. And, if I was in your shoes, I would want my client to be perfectly candid with me, so I’m going to do that with you.” At that point, I readied myself to take the criticism and to dive into client-salvage mode — but what came next was a tribute to our account team.

Another client talked about how the politics within his organization had made it tough for him to manage his advertising program. The head of a tourism destination talked about how she had gotten so much response to an ad campaign that her biggest headache was dealing with the increased workload.

All in all, I did what every small-business owner should do when interacting with clients — I listened and took notes, which I later shared with our team. I uncovered a few areas that needed improvement, but, moreover, came away with a sense that we were making clients happy. Asking for feedback, being fully present, and listening makes people feel valued. This is nothing new, but it can get overlooked.

Around the time I was writing this post, I got a call from a fast-growing bank that was looking for a new agency. The bank had been referred to us by another client, who we were told “was singing our praises.” Which was interesting because I distinctly remember a very rough lunch I had had with that client a few years ago.

He had called me one day to say, “We need to talk.” From the tone of his voice, I knew it wasn’t going to be pretty. We met for lunch, and I said, “Lay it on me.” And he did. I listened, took notes, and promised him a response that day. He and I soon discovered that his marketing person had been throwing Door Number 3 under the bus for things she had failed to do.

But listening, acknowledging, giving him a response with solutions and not pointing fingers made a difference. He and I now go to lunch twice a year or so — an unexpected, but sweet, bonus of working on those existing relationships. Sometimes, they lead to new ones, too.

MP Mueller is the founder of Door Number 3, a boutique advertising agency in Austin, Tex. Follow Door Number 3 on Facebook.

Article source: http://feeds.nytimes.com/click.phdo?i=8ca1bd051ef45d9f8ca22b0d17e3b085

Filed Under: Small Business Tagged With: , ,

Coffee and Power Site Aims to Get Jobs Done, Bit by Bit

November 7, 2011 by Leave a Comment

Now he wants to change the nature of work.

While Second Life is still around, it never lived up to its hype. But Mr. Rosedale, 43, is back with a new business called Coffee and Power, where people buy and sell most any kind of task, like making Halloween costumes or writing sophisticated software.

To prove his point that a work exchange could function, Mr. Rosedale built the software for his new company by hiring programmers from around the world and dividing up the work into about 1,600 individual tasks, from setting up databases to fixing bugs.

“We think it’s the new model for how software will be written,” he said. “It worked so well that we decided to extend it to all sorts of work.”

Coffee and Power has storefront space in a nondescript part of San Francisco’s Market Street where people can drop in and offer to do jobs or hire people for tasks. They can even start working together on the spot. Mr. Rosedale works upstairs, along with a handful of full-time staff members.

On a recent day, the public space had three groups of people making use of the human and laptop fuels behind the company name. The groups were working on software projects, business planning and tutorials.

As with Second Life, the business has a virtual currency for buying, selling or bestowing tasks as gifts. Coffee and Power takes a 15 percent fee for moving the money back into real dollars.

The site has been active since spring with little fanfare. It attracted fewer than 700 transactions, but is now starting to actively solicit buyers and sellers.

“About 25 percent of our site is needs, and the rest is offers,” Mr. Rosedale said. “We’ll need about 10,000 jobs before we know what the final balance is like.”

Other online services have similar ideas — Task Rabbit, Freelancer.com and Amazon’s Mechanical Turk among them. One of the striking things about these services is how inexpensive it is to get something done.

Translation services on Coffee and Power currently sell for $10 a job, and a bike messenger can be had for $15. Much of the time, the people involved are already in these professions and are looking to make a few extra dollars on the side.

Besides putting downward pressure on what people can charge, the low prices also raise questions about the quality of the services. That is one reason that Mr. Rosedale is publicizing that he used cheap labor to build his own site.

He paid about $200,000 to build Coffee and Power, he said, using an earlier version of the service called Worklist. Every step in the development process is visible on the site, including the amount people have been paid for their work. An Australian working under the name Lithium has earned $46,523 since January, for example.

Another test project, called Hudat, is an iPhone application that converts pictures of Facebook and LinkedIn friends into online flashcards. The idea is that a person can review images before attending a party. It cost $2,600 to build, a fraction of what work like this normally costs, and was built in two weeks. The process is open for anyone to see.

“We work on total transparency,” Mr. Rosedale said. “If you don’t want anyone to see what you are working on, this is not for you.”

Second Life, in its heyday, held similar promise. While it became notorious for sexual chatter, it has over the years attracted a Reuters news bureau, now defunct, as well as emporiums of several companies like American Apparel and Starwood Hotels. Cisco Systems also held meetings there. Second Life still exists, but is much quieter now, offering virtual currency, meetings and digital real estate, among other services.

While he is still chairman of Linden Lab, the company that created Second life, Mr. Rosedale talks about that venture in the past tense.

“The problem with creating an immersive 3-D experience is that it is just too involved, and so it’s hard to get people to engage,” he said. “Smart people in rural areas, the handicapped, people looking for companionship, they love it. But you have to be highly motivated to get on and learn to use it.”

Mr. Rosedale, who raised about $1 million for Coffee and Power from investors including Jeff Bezos, Catamount Ventures and Greylock Partners, sees the trend of breaking work into smaller pieces — both in software and for physical tasks — as one that will continue to gain traction.

“I would rather hire a kid in Brazil who is hungry for work for a project than hire a Stanford graduate,” he said.

Article source: http://feeds.nytimes.com/click.phdo?i=269317411a0d65b0f7c3784347acc27e

Filed Under: Business News Tagged With: , ,

Staying Alive: My Struggle With Pricing

September 22, 2011 by Leave a Comment

Staying Alive

The struggles of a business trying to survive.

We had plenty of inquiries, but no sales in the last week of August and the first two weeks of September. Frankly, I’m a little bit nervous. Dry patches are not unheard of in this business, but three weeks is about as long as I have gone without a new order. Maybe it was just the end of summer, and decision makers weren’t around to make decisions. We could well get a clump of new business soon — we have lots of proposals sitting out there, the clients swear that the jobs are still alive, but still. Why don’t they pull the trigger? Is it fear of a recession? Or could it be our pricing? At the beginning of August, after months of good sales, I made a very slight adjustment to our pricing, adding in an extra 2 percent for the salesmen. Did that slight hike make a difference?

Back in Economics 101 we learned that there’s a direct relationship between sales (cleverly called “demand”) and pricing (cleverly called “pricing”). If you want more buyers, the theory goes, lower your price. If you raise your price, you get fewer sales. Unfortunately, this theory is pretty much useless in real life. It doesn’t take into account the idea that you should be selling your goods for more than they cost you, which sets a floor on your pricing.

Nor does it tell you what exactly will happen when you raise prices. How many clients will you lose? Lots of them or just a few? Will the increased revenue make up for the fewer transactions? It doesn’t incorporate the idea of a tipping point, the price where interest in your product entirely disappears. And it doesn’t take into account the idea that pricing that may seem reasonable in good times might be excessive when clients are scared. In my situation, where sales have been strong all year, and then suddenly stop, it tells me neither what is happening nor what to do about it.

Let’s back up a step. How do I set my prices? When I first started out, I had no particular system. I would literally make up a number that seemed reasonable. This may sound incredible, but that’s what happens when you are young, dumb, and have no access to information on competitor prices and no system for tabulating costs. After a few years I settled on a different but still dysfunctional system. I would check to see what my competitors were charging for items similar to ours and try to sell for 10 to 15 percent less. I had been in business for 10 years before I started tracking the number of hours it took us to make our products, and another 10 before I even tried to figure out what the material costs would be for each project. I know this sounds unbelievable, but that’s what I did. Now, I never made a profit in any of those years. As I have recounted in other posts, steadily growing sales volume made up for losses in day-to-day operations. Usually.

On the occasions when I tried to figure out costs for each design we made, I was stymied by the variable number of hours that different workers took to make each piece. Joe might be able to make a chair in six hours, Jane in four. What should I charge? Which number was correct? Add to that the variation that Joe and Jane both experienced, depending on their energy level and the availability of machines they needed. It was impossible to achieve consistent times, even on pieces we made over and over. Tracking the material costs wasn’t much easier. Wood comes to us in chunks that vary widely in size, and contain knots and other imperfections that greatly affect yield. The number of parts we could get out of our wood orders was not predictable. I was never able to come up with actual costs for our residential designs, so I just set prices based on my perception of their value.

When we switched to making conference tables, we were finally able to set up a system that worked better. Although our tables vary greatly in size and shape, they are composed of a limited number of types of parts. We wrote spreadsheets that took into account factors like estimated design time, size, number of top segments, woods used, number of base pedestals, type of finish, and special hardware requirements. We used factors to make predictions of the number of hours allocated to building, finishing, and packing the table. The amount of materials used was estimated by a formula that assumed certain waste factors, and we could easily choose among different types of wood. Simply amassing the pricing of every kind of material we used was a task that took months, and, frankly, we haven’t updated those costs since 2007. There hasn’t been anyone with the extra hours available to do it. We mark up the estimated materials by 48 percent, and the labor hours get charged at a shop rate of $80 per hour and then marked up an additional 9 percent. And if it’s a rush job, or I suspect we can get the client to pay more than the estimate asks for, we mark it up some more. How much extra is a straight judgment call that I make.

The best thing about our system is: it’s an actual system. Compared with the idiocy I lived with for years, it’s a dream of precision. Because the spreadsheets are detailed, we can give logical answers when our clients ask us what it costs to make a table 16 feet long, or 18 feet long, or what’s the price difference between cherry and ebony. I can look into an estimate written by either of my salesmen and see exactly how he came up with the numbers quoted to the client. I can compare the estimates with the actual build data and see whether the assumptions we made were reasonable.

How well does this system work? On the macro level, it has been generating prices that a reasonable number of clients find acceptable, which generates sufficient cash to run the shop and leave some profit. In aggregate for this year, the number of hours that we have actually used to make our products is running 6 percent over the estimated number of hours. We were doing worse at the beginning of the year, but now that we have our splicer and sander going, we are running ahead of the estimates. Look closer, however, and the model doesn’t work so well.

On some projects we beat our estimate by a little, on some by a lot, and on some we miss by a little. And then there’s the occasional bloodbath where our hours are way, way over. There are lots of reasons for this: mistakes in the estimate, mistakes in the drawings, mistakes on the shop floor, machine failures, material defects, you name it. We do better with the materials. The big markup means that we rarely spend more for them than we charge, but we still are bedeviled by the varying yields we get from a given amount of wood. So all that I really know about the accuracy of our estimates is that the current system is not causing me to go broke. Which, in custom work, is something of a triumph.

Are my prices reasonable? Who knows? It’s very difficult for me to find out what my competitors charge. The shops that come up in Google searches do not list their pricing on the Web. As far as I can tell, we are the only shop that does this, and even so we don’t have a price on every table on our site — many of the tables have special features, invisible in photographs, that can make for shocking numbers.

We ask our clients to send us other proposals that they receive, but I have actually laid eyes on only two, and in both of those it was hard to tell whether the product was comparable to ours in build quality. I have heard that we are somewhat less expensive than one of our competitors that works primarily with architects. In reality, the product we make is extremely custom, and direct apples-to-apples comparison is not feasible. I leave that to our clients. They presumably gather a variety of proposals before they make their decisions, or maybe they don’t. Most of the people we deal with have other jobs, and buying a conference table is a very once-in-a-while thing. We do our best to make our proposals so good, and our communications so clear, and our integrity so apparent, that choosing us is the easiest thing to do. We close about 25 percent of the proposals we write. Clearly there are other choices out there, either close competitors, or much cheaper mass-produced alternatives, or doing nothing.

We ask for a client’s budget with every project, and we try to design to that number (if we get one). Even when people give me a number, I don’t know the thought process that led to it. Sometimes the requested budget is reasonable, but clients often confess that they have no idea what they expect to spend. Other clients request impossibly low numbers, and then we have to decide whether to even bother with a proposal. Once we submit a number for a particular design, we are stuck with it. If a client rejects a design/price combination, I have found, there is no good way to back down the price. For some reason this simply doesn’t work. I guess it’s because Americans are not natural hagglers. Offering a discount after trying for a higher number seems shady, I guess. If we need to retreat, we do it by simplifying the design. It is very, very rare that a client even tries to beat me down in price. More often, the transaction is simply abandoned.

We are also hampered by the small number of transactions we do and the wide variety of sizes and configurations we offer. Because we do custom work, we almost never offer the same item at different prices to different people. So we don’t have a good way to experiment with our prices to see what effect raising or lowering them might have.

I often hear the advice that if we get busy we should raise our prices. Conversely, it’s accepted wisdom that lowering prices would lead to more transactions. I am afraid to do either. The system is, broadly speaking, working. I don’t want to lower prices because I have no evidence that it would actually increase sales, and it would certainly decrease revenue. I don’t want to raise prices because I can’t tell what percentage of my clients are already at the limits of their tolerance. So I am constantly looking for more profits in other places, particularly on the shop floor. Raising productivity increases profits as effectively as raising prices.

Now that I’m no longer selling eight hours a day, I plan to start a close examination of our pricing spreadsheets and to, at the very least, update the material cost database. But pricing highly custom work is inherently complex, and I’m not sure I’ll ever be confident that my system is perfect.

How about you? Do you have trouble setting prices?

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside of Philadelphia.

Article source: http://feeds.nytimes.com/click.phdo?i=69a99e3445cf7d4d97474e92dcb16052

Filed Under: Small Business Tagged With: , ,

Governments Clearing the Way for Small Business Creation, Report Says

March 29, 2011 by Leave a Comment

PARIS — Governments have responded to the financial crisis by making it easier for entrepreneurs to start new businesses, paving the way for employment growth amid an uncertain economic outlook, according to a World Bank report released late Wednesday.

The study, Doing Business 2011, found that governments in 117 of the 183 economies it surveyed had carried out 216 regulatory overhauls “making it easier to start and operate a business, strengthening transparency and property rights and improving the efficiency of commercial dispute resolution and bankruptcy procedures.”

“It’s been a strong year of reform around the world,” Neil Gregory, director of indicators and analysis at the World Bank and one of the authors of the report, said, adding: “Over all, we’re seeing a move toward making regulation more efficient.”

With public finances under pressure, and the number of unemployed people reaching 212 million around the world last year — 34 million more than at the onset of the financial crisis in 2007 — the report said it was “vital” to unleash “the job creation potential of small private enterprises.”

Singapore remains the world’s easiest place to start and run a company, followed by Hong Kong, New Zealand, Britain and the United States, but developing countries are working to catch up, the report found.

Kazakhstan improved the most of any country on the list, rising to No.78 from the No.88 spot in 2009. The Central Asian country has set the minimum capital requirement for establishing a new business at about 70 cents and smoothed construction and trade regulations.

Rwanda, Peru and Vietnam also improved markedly, as did the island republic of Cape Verde. Over five years, the greatest improvement has been in Rwanda, Belarus, Burkina Faso, Saudi Arabia and the former Soviet republic of Georgia, the report found.

Amr bin Abdullah al-Dabbagh, governor of the Saudi Arabian General Investment Authority, attributed his country’s rise in the rankings to “major reforms, including the elimination of the minimum capital requirement for starting a business, streamlining processes for starting a business and creating the foundations of a competitive internal credit market.”

Saudi Arabia rose to No.11 in the latest rankings from No.67 in 2005, he said in a statement.

Sub-Saharan Africa and South Asian countries continued to score the lowest in the study.

While harder economic times led governments in Eastern Europe and elsewhere to quickly improve rules dealing with business insolvency, Mr. Gregory said, a range of reforms in East Asia — where many economies have held out better than elsewhere — suggest that “these aren’t just crisis measures.”

The World Bank report, which analyzes data collected from June 2009 to May 2010, ranks countries based on nine areas: the ease of starting a business, paying taxes, trading across borders, registering property, dealing with construction permits, getting credit, closing a business, enforcing contracts and protecting investors. It focuses on companies of about 50 employees.

Mr. Gregory said that one of the most striking trends was governments’ increasing use of the Internet to reduce paperwork, a development that makes life easier for start-ups and helps governments to capture taxes more efficiently.

In Singapore, for example, “almost everything is online,” he said, while Mexico has made great strides in helping small businesses use software to file taxes with minimum hassle.

China, the largest developing economy, ranked 79 on the list, little changed from 78 last year. But Mr. Gregory said Beijing’s concern about employment was leading it, too, to take overhauls aimed at small businesses seriously.

“They’re trying to develop the domestic interior,” he said, “and these are the types of business they’re targeting.”

Mr. Gregory pointed to the area of credit history, noting that in 2006 there were essentially no credit history data on Chinese adults, while today 64 percent of the population was covered.

The authors of the study do not claim that such reforms lead to a measurable improvement in gross domestic product, but Mr. Gregory said small-business creation did correlate positively with employment growth.

“Making changes in these areas really does make a difference,” he said.

Article source: http://feeds.nytimes.com/click.phdo?i=7190641b7fc8ca2ee382e7fe9d3e49ee

Filed Under: Small Business Tagged With: , ,