No one likes deductibles and premiums going up, but the Blue Cross Blue Shield model is flat out wrong.

Before I get to the stunt BCBS is pulling, let me say that I have defended insurance companies in the past just to be fair; therefore, check out “Why This Health Care Video Is Wrong“- as much of the hype presented in the video debate is doesn’t hold water.

Now, back to BCBS. We (policyholders at work) new changes would be coming September 1, so no big deal. We make adjustments to what we want to include, discontinue or change in our plan once per year and then the changes a happen later.

What happens is the plan will change, but benefits are on a calendar year – January 1 through December 31 – as stated by the specialist for our company’s policy. BTW, the company is a huge customer of BCBS, so many people are affected. The difference this time in deductibles is that BDBC is only honoring the deductibles for nine months – not the whole year.

Here’s how the deductible works for 2010 and 2011, and their practice is outrageous.

The deductible for 2010 for me is $1,000 per person in my plan and will change to $2,000 for the next year. However, I was told by the Blue Cross Blue Shield specialist that BCBS is no longer using the $1,000 deductible and an extra $1,000 is required for the remainder of the year. Okay, I’m not real happy with this, so I asked if the extra $1,000 goes towards the 2011 policy and now we are on a fiscal year. Here’s the kicker…

Effective January 1, all new deductibles go into effect; therefore, a new $2,000 deductible starts again.

Having described the events, here’s what can happen to me.

In August, I had knee surgery which cost me an out of pocket amount of $1,000 cumulative. However, I may still need a follow up surgery that could happen by the end of the year, costing me another $1,000 when it shouldn’t. As a result my, $1,000 surgery would be $2,000 and if I wait until January, then the surgery would cost $3,000. In addition, right now my therapy is no longer under the fully paid deductible and I am out money for the rehab as well, when I shouldn’t be. Worst case, I could be out as much as $4,000 in just a few months depending on what transpires this fall and early next year.

Even if you do not have BCBS, check your company. If so, check it out. They will be hearing more from me and the State may too.

A friend of mine who is not a banker, yet has been involved in the financial world and is an educator made this comment to me. I think it’s great and worth sharing.

The quote has to do with predatory practices, and with the financial reform taking place, predatory lending is a focal point.

‘I hate the word “predatory” with anything related to economics, as it sort of absolves the “victimized individual” of responsibility for being stupid…’ MW

Predatory lending has a hype factor built into it as well. Lack of knowledge though is the real culprit; that’s why I’ve written “Barking With The Big Dogs”.

Marketing is pretty simple. Sales. Well, not exactly.

I have spoken with many people, from business owners to HR personnel, about the subject of marketing. Many of the people in our conversations have a narrow view of marketing and generally relate marketing to sales.

Now, I would have to say marketing ranks at the top of any subject; and yes, nothing happens without sales.

Without sales, businesses do not need inventory, computers, delivery drivers, stockers and cashiers, computers, engineers, IT departments, accountants, etc. Yet the service of professionals and workers is not limited to business, nor is sales.

Sales must happen in non-profit business, schools and government institutions. These entities must solicit services or products to generate income. To give an example, the University of Texas at the Permian Basin offers a free, four-year education. Dillards, Best Buy and other retailers offer free services too. The idea is to get customers. Customers (students or the public) will spend money.

Other ways to solicit money is to ask for donations, investment money or get a loan. Even getting a loan requires pitching one’s self to the banker by showing personal financial statements or business plans in order for the banker “buy” your idea or needs. If you have ever been on a date or made a marriage proposal, you dressed up (or to the occasion) to promote yourself and asked the other person to go with or marry you.

As you can see, sales is in everything and eventually to close the deal, you must ask for the business, so-to-speak.

Going beyond sales, customer service and promotions, marketing includes more. Obviously, promotion includes sales and advertising, but also give-a-ways, rebates, etc. In order to know what amount of money or items can be given away or discounted, pricing is part of marketing and includes accounting functions.

The accounting side will take into consideration all costs, such as product costs, freight, commissions, rent, cost per mile (for delivery), utilities, depreciation, etc. in order to project the necessary amount of sales in relation to the changing margins from discounts and markup in order to break even or meet a desired financial goal. Therefore, to understand marketing, you must also understand accounting.

Moving from accounting and the pricing side of marketing, the next is place or distribution. The place is not just at the corner of 1st and Main, selling locally, but also includes the distribution of the products. Will you sell locally or regionally? Where does the supply come from? Imports, manufacturers, distributors, etc. Even manufactures must find their sources of materials, just as a bank has a pipeline for money and distributes throughout a channel. Speaking of distribution, will the products come by rail, LTL (less than truck load), ground or air service, etc. Do you buy by the box, case, or truckload. What are the dimensions of the container to know how the shipping will be priced so you can figure your costs? Service companies also distribute their products – fax, phone, e-mail, Fed Ex, online, etc. Can you download it? To sum it up, the place is a physical location but also a distribution method.

From distribution, pricing and promotion, the obvious thing to sell is the product itself. Is the product physical or a service. What makes one product better than another? Does the product satisfy a need or want and/or create a solution to a problem? Is there a demand for the product?

All products have life cycles…the initial or starting point, growth, maturity and decline. As a buyer once told me, “it’s not a sale unless it’s a saleable item” and a supplier stated, “don’t make my close-outs your close-outs”. Good points.

Ultimately though nothing happens without sales, but sales is just one aspect of marketing.

I was listening to a buyer ask the saleman, “Do I get a special non-profit rate?” to which the salesman replied yes.

That question has always been intriguing for a couple of reasons.

First, if I’m in line behind the customer getting the special rate for the same exact thing, why should he get a discount and not me?

We but the same things; we buy the same quantities, etc.

Just because a company says they are non-profit does not mean they do not make money. Non-profit companies have to make a profit in order to survive.  Without a profit on their products and services, payroll can’t be met and the utilities can’t be paid.

I’ve done business plans for non-profit companies and they buy products and resell them at higher prices, which is the gross profit.  Service prices are figured on the amount of people they serve and breakeven points on expenses too.

In reality, a big difference between the two business structures is a non-profit cannot pay shareholders; therefore, a solution is to pay more in salaries, which which is an expense, to disburse the profits.

Next, non-profits do not like to pay taxes.  Thus, the reason to be a non-profit is for tax status, not a goal for losing money.  The irony is for-profit companies pay taxes and can be a financial source for non-profit companies grant money, or subsidies.

Ironic maybe, funny – no.

The non-profit company wants lower costs and tax exemptions, but who doesn’t?  What struggling business wouldn’t want subsidies?  (The ones who realize their taxes pay them, I guess.)  Receiving lower prices and taxes exemptions can allow the non-profit company to stifle or eliminate competition – the very companies paying taxes in the first place.

The next time I see something like this happen, I’ll be seeing the manager of the company for the last time because taxes subsidize many things and people, and so do my purchases.

I tell clients all the time when starting a business, find the money first before signing any contracts. As much of a “no-brainer” as the previous statement seems, it happens.

I know people who paid rent for six months before getting the funding for their business. Fortunately, the time was only six months. Could you imagine being in a contract for three years at $1,500 per month without a business? You would be out $54,000!

Before getting the keys to the property, first do a business plan so see the feasibility of the project. Next, find the money.

When finding the money, where do you look?

As I’ve stated before in my article, “Why Small Businesses Can’t Get Loans”, only about 4% of money for start up business comes from banks. Some of the big banks (such as Bank of America as I am told) have blanket policies not to lend to start up business. Wells Fargo had an advertisement talking about new business owners having friends around in the beginning, but now the people are gone and Wells Fargo is there to help. Is this a way of Wells Fargo saying they don’t lend to start up businesses?

Some banks won’t make a commercial loan for under $200,000 as well.

When a bank doesn’t lend to start up businesses, this practice may be their policy; however, if the project is good enough, the bank can seek the backing of the SBA and still do the loan.

The SBA (partially) guarantees loans to bank. The idea is when a loan falls outside the banks normal lending practices and/or the client cannot get money elsewhere, the SBA comes in to help businesses get the funding. The SBA has been called “the lender of last resort”. Businesses do not deal directly with the SBA. However, the ultimate decision still rests upon the bank.

So where does the money come from?

55% – your savings

10% – relatives

7% – partners

6% – charge cards

4% – venture capitalist

3% – friends

3% – Angel investors

3% – mortgage property

5% – other

Now consider grant money.

Grant is money that does not have to be repaid.

Most grants however require matching funds meaning the recipient also has to come up with funds in addition to the grant money they are receiving.

Grants are usually available through public or private community foundations primarily granting monies to not-for-profit agencies and rarely, if ever, grant money to for-profit businesses. The grant money for small business may come in the form of assisting you with help and education, not direct funds.

WATCH OUT FOR GRANTS – some grant wording changes throughout the conditions to terms such as – grant – to loan – to equity position. In addition, to satisfy the conditions of a grant, you may have to spend the money received to do so, thus netting you no additional funds to operate.

When getting help from the government, there’s one thing you need to know right up front about getting money from the government…

They don’t have a single dime to directly lend to you for the start-up of a small business.

You may believe this statement to be untrue because of the way the term “government loan” is thrown around, and we hear about government loans all the time. (Refer back the the SBA. The bank is the SBA’s client, not the business.)

The bottom line is there is no direct money. But that’s okay…

If the government had to give money to any American who wanted to start a business, just imagine how much money they would have to collect in taxes to fund such a program.

Besides, a capitalist system works best when the government uses a hands-off approach with regards to the competitive market system. Having the government choose who gets funded and who doesn’t is socialism not capitalism.

Finally, getting a funding may not be as difficult as it sounds because money is out there. If you have a good plan, collateral, credit scores, etc., you can find money. However, be prepared to face rejection and get creative if you decide to follow your dream.

Getting money for a small business is not easy for many reasons.

First of all, owners and prospective owners need to cut through the sales hype.

Advertising my say the President has ordered banks to loan money to those who qualify, but in reality, the President can’t simply do such actions.

Banks have internal business practices and structures just as any other business operates. Did you know some banks won’t loan on start up businesses or until a business has operated for two years? Some banks won’t make commercial loans under $200,000. Not all banks or credit unions do commercial lending.

Not lending is not always a bad thing. When we put money in a savings account, for example, we want our money protected. In order for our money to be protected and safe, we should want to bank to make prudent lending decisions, not risky loans. Risk is more for investors and with the added risk, investors should reap the rewards knowing the potential losses could be great.

In addition, a bank or credit union has regulations to meet before a loan can be approved on top of their standard operating procedures. If a loan falls outside the lender’s normal business practices, or parameters, but wants to do the loan, the bank can seek the assistance of the SBA. The SBA has guidelines determining lending activities too.

Next, take secondary market issues. Many loans are sold on the secondary market. What may make lending difficult in the future, as we have seen in the past couple of years , is obviously related to people making money on investments. The market has been in the tank starting in 2007; therefore, no one wants to investing losing propositions.

Moving right along, consider taxes. In 2011, tax laws revert back to pre-2003 levels. Dividend rates will go back up to 39%! Higher taxes and less profits on investments may lead to lower values on investments due to lack of demand, thus people once again losing money.

Investments and dividends are not just for the wealthy or Wall Street execs, but also the average Joe’s IRA and 401k accounts, mutual funds, exchange traded funds, etc. (Check out my article, “Kissing retirement money goodbye“.)

So when looking for money, according information derived from the Small Business Development Center, only about 4% of the money for start up business comes from the bank – approximately 55%-65% comes from personal finances or relatives.

Other forms of money comes from selling assets, home equity loans, partners, investors, etc.

Grant money is for another topic, but basically there is not any grant money “for profit” businesses and the government isn’t a direct source of funding (or cash) for business, which is not a bad thing either; but I’ll go into this at a later time. In the meantime, consider what our taxes would be if the government provided loans to everyone.

In summary, the business idea and creating a business plan may take the least amount of time, but finding money could take months so be prepared and possibly be creative.

Cutting through the smoke and mirrors and political talking points, ultimately the health care reform bill will hurt small business and investment which leads to growth. Imagine that!

To summarize, Obamacare will not only affect small businesses with 50 or more employees, it will hurt business right down to a few employees.

First the medium size businesses, 50-199 employees, will have higher taxes. Higher taxes will lead to either eliminating jobs or increasing prices to offset the additional costs.

Everyone pays for taxes, not the business.

And to think health care is free?

Businesses with fewer than 50 employees may drop coverage.

Next, the tax credit for small business doesn’t really do much. For business with few than 25 employees, say down to 10, with low income, many of these employees will qualify for state health care, thus making this part of the bill useless to small business.

Small business will have increased regulation, as if more is needed, thus creating higher costs for small business. These higher costs may be in hiring someone to keep up with the paper work or additional accounting and office cost. Maybe this is the job creation Obama talks about – in addition to federal jobs. (See 600,000 new jobs – get one.)

Finally on just the short list of reason Obama’s radical health care bill is not good has to do with Medicare and investment taxes. Medicare will increase PLUS a new tax on non-payroll investment money, passive income. With Medicare payroll not being indexed for inflation, more taxes.

With small business being at the heart of America as Obama stated, sounds like we need a new heart surgeon to get business going, not simply a JP signing a DOA statement – aka OBAMACARE.