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Scaling back profit-sharing plans; importing headaches.
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Q Profit Sharing
I recently created an overly generous profit-sharing plan for an employee. How do I change it without upsetting my staffer?

Jay Steinmetz
CEO, Barcoding Inc.
Baltimore

It's natural to be generous with those we love--and who is more lovable than a star employee or sizzling hot prospect? But when capital gets tight or the employee's role changes, you may discover you've been generous to a fault. Fortunately most profit-sharing plans--whether paid out in cash or funneled directly into an employee's 401(k) account--include clauses allowing annual revisions. Just don't expect the news to be met with a slap on the back.

Your employee probably won't like your decision, but it helps if he or she understands it. Seth Hishmeh suggests opening the books when you break the news. Hishmeh, co-founder of USAS Technologies, an IT consulting firm in New York City, has adjusted the compensation packages of several employees. For example, when USAS expanded overseas a few years ago, Hishmeh realized his profit margins on some international accounts were slimmer because of higher overhead. It made sense to base commissions for staffers dealing with those accounts on profits rather than sales. So, armed with a spreadsheet outlining the pertinent numbers, Hishmeh met with each staffer to explain why the change was necessary for the business and how the employee could possibly earn more under the new arrangement. No one bailed. "It doesn't have to end in someone quitting," Hishmeh says.

There are other ways to soften the blow. Sometimes it helps to change the point of comparison, says Lanny Goodman, a veteran business consultant and CEO of Albuquerque's Management Technologies. Instead of focusing on how much worse off the employee will be after the change, Goodman suggests demonstrating how his or her compensation stacks up against that of peers in the industry. (Of course, if it stacks poorly you might want to forgo this.)

Then you know what they say about medicine and sugar. To prevent your employee from sliding into apathy, outline a course for future pay increases and promotions. A few extra vacation days can also be an effective spoonful of sweet.

Q Importing
Do I need a license to import home décor from India and sell it here?

Sara Singh
Youngstown, Ohio

Rugs and lamps pose less of a threat than do alcohol or firearms, and so the U.S. Customs Service does not require an import license for home décor. That said, clearing Customs can be time-consuming and complicated. "The process has definitely slowed down since 9/11," says Phil Patterson, owner of an eponymous Customs brokerage in Omaha.

There's paperwork aplenty, so start filling in those blanks as soon as you place an order. First, determine whether your shipment is a "formal" or an "informal" entry. Formal entries--shipments valued at more than $2,000--require a surety bond, which ensures the payment of duties. Base the value on how much you paid for the merchandise. The bonds are payable to Customs; you can get one from any insurance company authorized by the Treasury Department.

Next, download entry forms from the Customs website. Fill them out, including your importer number, which can be either your IRS business registration number or your Social Security number, and the value of the merchandise. You'll also be asked for a classification number for your products; you'll find that on the Harmonized Tariff Schedule, available on the International Trade Commission website. The schedule lists duties and processing fees for a variety of products. For home goods such as table cloths, expect to pay between 7 and 36 percent of their value, depending on quality.

When your order ships, hand-deliver the forms to one of the country's 317 Customs offices. (The closest one to you is in Ashtabula, Ohio.) If the goods are coming by plane, you can file up to four hours before their arrival. If they're coming by ship, file up to five days before the arrival.

Your shipping company will tell you when the shipment arrives. Expect to wait three to five days for Customs to release it, assuming the paperwork is in order. If it's not, Customs will dispatch the goods to a warehouse after 15 days (and charge you for storage fees). If the whole rigamarole sounds exhausting, consider hiring a Customs broker to manage the process electronically. Patterson charges between $100 and $300 to process shipments valued at a few thousand dollars. And he doesn't charge extra for Tylenol.

Resources

Check out the Profit Sharing 401(k) Council of America's website for research, statistics, and articles about profit-sharing plans. For more information about importing goods, visit the U.S. Customs website.

Looking for answers? Stumped by a thorny business problem? Let Inc. help. Send your questions to askinc@inc.com.

Last updated: Sep 1, 2006




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