Daily Deal Site Offers, A Merchant’s Perspective

Daily Deal sites offer merchants quick access to cash with the potential to attract new customers. On the surface the offer seems too good to turn down, as combining marketing with convenient working capital is an ideal situation for the typical small business. Unfortunately, many find that the end result is less than ideal.

A typical Daily Deal offer is fairly straight forward. A merchant agrees the site selling number of coupons which provide a deep discount, 50% or more, for goods and services. Usually the deal site will keep one half of the proceeds from the sales with the merchant receiving the other half.

Negative Profit Margin
As many businesses find it very difficult to absorb the costs of doing this type of promotion. If your product or service does not have a large profit margin, you can find that each of these transactions comes at a significant loss. If there are no additional sales made to the customer, it is hard to justify the deep discount, as the business is unable to recoup the loss from the deeply discounted coupon. The simplest solution to overcome these cash shortfalls is often engaging in another Daily Deal offering, continuing the cycle.

Low Customer Retention
The goal of doing a daily deal coupon is to influence first time customers to try the business’ product or service. Many businesses also do not see the repeat business they anticipated, as a large portion of the Daily Deal customer base simply moves from discount to discount, rarely returning without another coupon. Many small businesses note there is an uptick in business when the coupon is first issued and another when the coupon nears expiration. Otherwise, volume remains consistent.

Loss of Value
Existing customers are put off to find that other customers are paying significantly less, and are less likely to continue to feel paying the established price is a good value. While Daily Deal site users tend to drive activity and increase discussion of a business, a recent study found that they are more likely to leave a public review, and on average, will rate a business 10% lower than a traditional customer. As a result, many businesses see their rating scores on sites like Yelp! drop noticeably.

Decrease Product or Service Quality
Businesses have found that more coupons are sold than they can realistically manage. Unless the deal is properly structured, businesses have often found that the number of sales exceeds their capacity. In one instance a flight school had to end sales on a deal early because 2,600 lessons had been sold and their capacity for all lessons over the prescribed time frame was only 2,000. Another merchant found themselves forced to bake 102,000 cupcakes, at a loss of $3 per dozen, as a result of a “successful” offering.

Employee Dissatisfaction
In service industries, there can also be increase in job dissatisfaction among employees, particularly those whose income relies on tips. Customers will frequently base tips not on what the cost of the food would have been without the discount, but on what they actually paid. In many cases, customers used only the value of the coupon with, ordering no extra additions, and left no tips. If they did, they were well below what is appropriate for the service provided. In essence, employees find themselves also forced to offer their labor at a discount.

The important thing for merchants to consider before accepting an offer from a Daily Deal site is to view the whole picture and determine if it fits with the image, business model, and financial reality of the business. If the sales are going to come at a loss, the question becomes, can the business absorb that loss? Do the benefits outweigh the cost? While the information and analysis provided by the site may be impressive, a merchant is strongly advised to do their own research, in regards particularly to how similar businesses have fared. While there is a place for these kinds of offerings, they are not something to be taken lightly.

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5 Risks Haunting Your Small Business

 

 

 

 

 

 

Optimism is something small business owners have in spades. It’s what got you where you are today. However, you should keep a wary eye on the horizon and be prepared for the five biggest risks lying in wait for every small business.

Nasty rumors and even nastier reviews

In our connected world, opinions can go viral before you have the time to respond. Negative reviews and opinions, whether spread by a competitor or a disgruntled customer, will always make it to the front page faster than a positive one. Once nasty rumors or reviews find their way to the top of your Google search results, you need to act swiftly and calmly before they permanently damage your reputation. The key is to have a crisis management plan in place. A good plan looks similar to a flow chart with “if this, then…” scenarios mapped out. For example, if the competition rants to a blogger about a supposedly unethical practice occurring at your small business, you should be able to quickly identify what the appropriate response is and what channels should be used. It’s the same for disgruntled customers. Sit down with your staff and management team and brainstorm possible scenarios and responses for your crisis management flowchart.

Getting slapped with a mega lawsuit

There are few words more chilling to small business owners than “lawsuit.” Litigation can come in the form of many internal and external issues such as wrongful termination, libel, sexual harassment and accidents. Make sure your business, your staff and your assets are protected with business liability insurance that covers legal fees and any resulting damages. It’s also a best practice to get a referral from another business owner that your trust for an attorney who specializes in legal issues common to small businesses.

Theft of sensitive customer data

Many small business owners have unwittingly becomes security scofflaws. The advent of PCI compliance has cost many small business owners countless hours, dollars and headaches to get their data transmission and storage devices (credit card terminals, POS systems and online processing systems) up to snuff. Unfortunately, many small businesses have also tried to fly under the radar to avoid the hassle, erroneously thinking that their business isn’t a target for hackers or identity thieves. These small business owners are putting themselves at a massive risk for identity theft, lawsuits and crippling fines that have historically shuttered businesses within one year of a single security breach. Consult with your credit card processor to find out what it would take to make your business PCI compliant. Many offer discounts, training and programs to help simplify the process. Afterward, you should check in regularly to make sure your firewalls and anti-virus programs are fortified against the latest hacker devices and attacks.

Acts of God

Hurricane Sandy was an ominous reminder that the unthinkable can and will happen. If you do business in an area that is prone to natural disasters, you should take measures to make sure your inventory, storage facilities, storefront and any other physical or human assets are covered. Your standard business liability policy is likely to cover various weather-related disasters, but check in with your agent to make sure there aren’t any exclusions for which you need to buy a rider or separate policy. Also consult with your agent about purchasing business-interruption insurance, which provides supplementary income in the event that you’re forced to shut your doors for reasons beyond your control.

Illness, disability, or death

If you, a key partner or a key employee becomes ill, disabled, or dies unexpectedly, it can put a major strain on operations and jeopardize the company. Make sure that you have life, health, and disability insurance that covers you and your business partners, and consider taking out key employee insurance on anyone who your business couldn’t do without.

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Should You Hire a Bookkeeper or an Accountant?

The choice between a bookkeeper and an accountant may seem obvious, but there are subtle differences that small business owners need to consider. Understanding the differences between the two can help you save money by paying for only the services you need.

To a certain degree, the titles ‘bookkeeper’ and ‘accountant’ can be used interchangeably. The distinction lies in the individual’s training and their job roles. Most bookkeepers begin their careers as data entry clerks or in another entry-level position, working their way through the ranks, eventually moving into a full-fledged accountant role. Their primary function is to literally “keep the books” and manage all of the documentation for transactions. A bookkeeper is involved with your business on a regular basis, either daily or weekly. Bookkeepers often have to qualify their credentials through various state accounting boards that manage certifications.

On the other hand, accountants delve deeper into the finances of a small business’s financials, providing reporting, business analysis and processes, as well as advice. It’s not unusual for an accountant to work closely with the bookkeeper. Think of the bookkeeper as someone who has a finger on the pulse of your business’s cash flow, and the accountant as the person who provides insights on how to best manage the money coming in.

While both bookkeepers and accountants can obtain certification through professional organizations such as the AIPB (American Institute of Professional Bookkeepers) or the AICPA (American Institute of Certified Public Accountants), it is not required. It’s critical for small business owners to perform their due diligence and qualify the credentials of any bookkeeper or accountant before handing over the keys to the castle. Don’t be shy about asking for client references, and always check for proof of purchase of E&O (errors and omissions) insurance.

Figuring out which financial professional you need depends on your industry, fixed assets, inventory levels, and the number of employees you have, plus other key factors. Generally, the larger or more complex your business is, the more you want to consider both a bookkeeper and an accountant. This ensures that your data will be current and you can be quick to respond to financial issues as they arise. When considering the cost of hiring either a bookkeeper or a CPA, bookkeepers do tend to be cheaper. Bookkeepers are also a great place to start if you’re just now thinking about taking the day-to-day financial tasks off your plate. Since a CPA would act as more of a partner in your business by offering financial advice, it’s wise to shop local accounting or CPA firms, as well as consult with other business owners about the CPAs they use. Bookkeepers are generally found via word-of-mouth referrals, while CPAs require more due diligence. If you’ve settled on a bookkeeper, make sure you start looking well in advance, as their client rosters tend to fill out quickly.

After hiring a bookkeeper, it’s considered a best practice to also schedule periodic meetings with a CPA, just to have another set of eyes on the books. Not only does this help deter fraud and theft, it encourages more accurate data collection and gives you the opportunity to gain from the business insights a CPA may be able to offer you. And of course, make sure you choose a financial professional who can explain things in layman’s terms, and not a bunch of financial jargon. If you feel like something is going over your head, don’t be afraid to ask for a simplified explanation. After all, it’s your money!

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5 Perfectly Legal Ways to Snoop On the Competition

In business, ignorance isn’t bliss, it’s a killer. You may have your finger firmly on the pulse of your small business, but what about your competitors’? Do you know what promotions they’re planning and have you considered how that may help or hinder you? Here are 5 simple and totally legal ways you can get the scoop on what your competition is up to.

Have a casual conversation with your vendors.

It’s more than likely that the vendors you use also serve your competition. If you’re on good terms with a key vendor, start a casual conversation with them about their business and any best practices they may have observed in the marketplace. Chances are they’ll spill the beans on a few juicy details about what your competitors are up to in the process.

Shop the competition.

This is an old, but effective means of gathering intel on best practices and innovations your competition may be employing. If you’re easily recognized, send a trusted employee with the mission of evaluating all of the aspects of their business. Take a hard look at their employees, their customer service, their promotional collateral, inventory levels and displays. If they have a website or phone order line, order something and grade their service. If they are doing something that blows you away, consider how you can incorporate it into your own business model. And if they come up short, brainstorm ways you can make your business better at making up for their shortcomings and messaging this point of difference to the public.

Google the competition’s website.

You can reveal hidden pages by doing Google searches such as: “filetype: doc site: companyname”. Change the file type to .pdf, .xls, or .ppt to turn up data or presentations. You’ll be surprised at how many businesses will have this information readily available on the internet, thinking that if they don’t link to it, no one will be able to see it. You can also see what keywords they’re using on their site by right clicking on the site’s homepage and selecting “view source code.” The source code reveals the keywords and meta tags they’re using to optimize their position in Google searches. To make it even easier, the keywords are clearly labeled “keywords.” Compare theirs to the keywords your site is using and consider making adjustments.

Stalk them on social media.

These days it’s incredibly easy to find out exactly what the competition is up to by cruising their social media profiles and pages. Follow them on LinkedIn and you’ll get notices and updates as soon as they are posted. Like their Facebook page and you’ll get updates on their promotions and deals deposited directly into your news feed. Finally, follow them on Twitter, as well as a few of their key employees (find this out from LinkedIn). Twitter is a much more impulsive social network than LinkedIn or Facebook, so employees are more likely to share important tidbits in a fit of excitement than they are on other platforms.

Troll them on Slideshare.

Besides being a hub for informative presentations on just about anything your heart desires, Slideshare is a popular place for businesses to share their marketing and strategy presentations. Even major corporations and giant brands leave their presentations on Slideshare long after the presentation has concluded. Not only is this a great place to find out what your local competitors may be up to, it’s a fantastic source for peeking into the world of massive brands in your industry and learning about how they are marketing their products. These presentations tend to include a wealth of market research data that you can bootstrap and apply to your own small business.

A word to the wise.

Understand that the same methods you use to ‘spy’ on your competitors are methods they can use to also spy on you in return. You can’t stop someone from secret shopping your storefront or liking you on Facebook, but you can control your preparedness and the thoughtfulness of your promotions or strategies. If you must make something public, consider the reaction strategy your small business will have if a competitor decides to hijack your idea or one-up you. And finally, never store anything online that you wouldn’t want your competition to see, unless it’s available only via a password-protected download.

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The Calm Before the Storm: 4 Steps to Achieve the Perfect Morning

Mornings are a great time for getting things done. You’re less likely to be interrupted than you are later in the day. You’re refreshed after a good night’s sleep which makes it possible to turn personal priorities into reality. If you’ve got big goals and a crazy morning schedule, here are 4 simple ways to transform your morning routine.

Document your morning routine.

Part of spending your time better is realizing how you spend it now. Document your morning routine for a week. The solution to morning time-wasters often lies in how you spend your time during the day. You may be too tired because you’re staying up late. But if you look at how you’re spending your nights, you’ll notice that you’re not doing anything necessary, and going to bed early or taking time to unwind can make you more productive tomorrow.

Visualize the perfect morning and make it a goal to achieve.

We’ve all seen the movies where people with seemingly limitless time and energy are getting an incomprehensible amount of things accomplished before the day as we know it has officially begun. How do they manage to fit in a run, a monologue, a cheery, sunlit breakfast with the family and five minutes of poignant discussion before 9 am? It can seem mind-boggling.  The truth is these casual mornings are within your grasp. After you’ve documented your current morning routine and evaluated how you’re spending your time, ask yourself what a great morning would look like. Is it a run to clear your head and think about the priorities for the day? Is it a leisurely breakfast, watching the news and catching up on the events of the day?

Map out the logistics of your perfect morning.

Once you’ve settled on the ideal morning, analyze the logistics of how you can accomplish it. What time would you have to get up and what time do you need to go to bed to get enough sleep to wake up and enjoy this kind of morning routine? What would make this new ritual easier? Come up with a plan and assemble what you need, but whatever you do, don’t label your vision as impossible

Make it a habit.

It takes three weeks of doing something consistently to make it a habit.  Start slowly. Try going to bed and waking up fifteen minutes earlier for a few days until your new schedule seems doable. Monitor your energy. Eat right, eat enough and make sure your spouse and family are supporting the idea so that you have the physical and emotional support to make it stick.

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Sunny Day Funds and Rainy Day Funds: Why You Need Both

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If there’s one lesson that came out of the Great Recession, it’s to keep a cash cushion so your business can ride out disaster or – conversely – pounce on opportunity. How much you put in your sunny day fund and/or your rainy day fund will determine if your business has what it needs to navigate bumps in the road, whether it’s turns and twists in the economy; large, unexpected expenses; or felicitous opportunities.

Rainy Day Funds

Consider your long-term goals and your business’s culture and reputation that you would want to maintain when determining the amount. Experts advise having on hand six months’ worth of cash to keep operating business as usual. You may want to extend your emergency fund beyond employees’ salaries to cover 401(k) matches, bonuses and profit sharing. The actual size of your rainy day fund depends on your industry. If there is a higher risk of being sued by a customer, or if you’re in an industry that is heavily regulated by the government you’ll probably need to err on the side of caution, even if it means paying yourself less to free cash for an emergency. However, if you’re in a relatively low-risk business, you might be able to get by with a little less. Some businesses may be fine with three to six months of cash.

Sunny Day Funds

Consider also having cash on hand to cover unexpected growth opportunities. While the additional money may not be specifically set aside for emergencies, it allows your small business to quickly move on new opportunities. In other words, build a “sunny day fund” to complement your rainy day fund.

 Stashing Your Cash Wisely

Either fund won’t do you much good if you have to wait until the stock market recovers from a dip to get to the money. However, a standard business bank account may not be the best place to stash your cash if you want to get some kind of return on your investment. Consult with your financial adviser before you start socking it away.

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How Your Small Business Can Help Others This Holiday Season Through Charitable Giving

Charitable giving is your business’s opportunity to share your success and give something back to the community that supports you and your employees, and what a more perfect time than the holidays! Helping others feels great, and setting aside time for you and your employees to give back to the community can be a great bonding experience for you and your staff.

Donating Time

Giving isn’t all about money. Volunteers are the backbone of many charitable organizations. The time that you and your team give can make a huge difference in the lives of others. If your business has been struggling and you can’t afford to give bonuses, time off or throw a holiday party for your staff, volunteering at a non-profit can still be a ‘gift’ that you and your staff give together that is a reminder of the blessings you already have.

Adopt-a-Family

One of the sweetest ways to give back is through the Salvation Army’s “Adopt-a-Family” program, which collaborates with local social workers to provide families who need a little extra help during the holiday season with food and gifts. The Salvation Army will give your small business a wish list of items the family would like to have, then your team can divide it up and pitch in to purchase the items.

Gift Employees with Charitable Contributions

Allot a certain amount of money to each employee to donate to their favorite charity. Allowing them to give something back to the community by donating money to a special organization on their behalf will stay with them much longer than a generic holiday gift.

Food Drive

Partner with a local food bank to help stock its shelves for the holiday season. Ask the food bank what items they need, then create a shopping list for employees. Encourage each member of your staff to bring in a couple of items and before you know it, you’ll have enough food to ensure that a few local families in need are able to have a nice holiday dinner this year.

Meals on Wheels

Your small business can help feed senior citizens in your community this holiday season by volunteering at Meals on Wheels. There are a few different volunteer opportunities, including donating money to sponsor the meals and even delivering them. You and your staff can work together to help those less fortunate to receive a hearty meal, which is a fantastic way to spread holiday cheer.

Toys for Tots

Hold a toy drive at your small business to benefit this annual holiday program from the U.S Marine Corps Reserve. Ask each employee to bring at least one unwrapped toy to donate to a child in need. If your small business is open to customers, take this charitable giving project a step further and encourage them to donate as well. Place the donation box in a high-traffic area so everyone can get excited by monitoring the number of donations.

It’s easy for people to get caught up in the stress and chaos of the holidays, but participating in charitable giving can be a humbling experience to remind your employees of what is truly important this season.

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7 Ways to Supercharge Your Online Holiday Sales

According to Chicago research company, ShopperTrak, US retail sales will increase 3.3% during the upcoming holiday shopping season compared with 2011. It’s likely a good percentage of that increase will come in online retail. ComScore reported that last year’s internet holiday sales were at a record $37.2 billion last year, up 15% from 2010. Holiday deals and discounts, especially free shipping offers, proved especially attractive in 2011. Below are 7 tips for how you can take advantage of this healthy forecast and sell more online this holiday season.

1. Get festive. Include special holiday banners or a holiday bestsellers section on the front page of your website. Incorporating a holiday countdown clock on your home page instills a sense of urgency.

2. Think promos. “Free” will always be an incentive for any shopper. Think about what you can give your customers for placing orders. Ideas include keepsake packaging, promotional discount codes, and limited edition holiday products. It’s not too late to take advantage of Free Shipping Day on December 17th, which brought in sales of over $1 billion in 2011.

3. Make it easy. Let your customers know all of the ways they can contact you, whether by phone, email, online chat, in person, or snail mail. Your website should place this information front and center so shoppers don’t have to hunt through layers of navigation to find it. Also consider extending holiday hours for shoppers who may need to order later than your typical business hours.

4. Tell your story. Engage your customers with what makes your products different from the competitors in a story-driven way that will pique their interest. This could be as simple as telling the story behind how you source your products, who makes them, or how they’re made.

5. Get faster. Websites lose 10% of their audience for every second it takes them to load. A 3-second loading time is ideal. Achieve this by reducing image sizes, remove tracking codes, and tweaking front-end code to speed up your site.

6. Go mobile. Make sure your site is visible and functional on mobile phones and tablets. Highlight your contact information on your mobile site so shoppers looking you up can find your location quickly.

7. Remove barriers. More than 65% of online shoppers abandon purchases before checkout. Look at your analytics and figure out where you are losing people. One major stumbling block is an account registration page. If you have one, remove it—or at least give buyers the option to make guest purchases.

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Tips for Managing Your Employee Holiday Expectations

The end of the year brings not only festivities and time to spend with family and friends, but two very important things to consider for your small business: end-of-year bonuses and holiday parties.  While smaller shops may be strapped for cash, employee satisfaction still matters, and it’s crucial to show your appreciation for those who are in the trenches with you every day. As you enter the last few weeks of 2012, prepare your holiday season approach so you can effectively manage your employees’ expectations while still showing how much you care.

End-of-year bonuses and gifts

When you consider the amount for employee bonuses, remember that what you give sets the benchmark for what you give in the future. You don’t want to set yourself up to look like a Scrooge next holiday season. If you have some extra cash to spare on this year’s bonus, couch it in the terms of their hard work for the year so they understand the additional amount was earned by them. This sets a precedent for expectations next year for both you and them. If this seems too tricky to navigate, the safer route is to show your gratitude in less expensive ways, such as a gift or time off.

If you choose to give a gift, make sure you know the people who work for you well enough to give something that they’d actually appreciate, and give the gift accordingly. Selecting the same universally enjoyable item for everyone is the best way to go.

Giving time off can be tricky for a small business, where every role is vital and resources are strapped to provide coverage. Sit down and talk with your staff about their time off needs. Some may have demands for the holidays, while others may be content to take extra time off in the coming year in return for covering for those who need time off in December. Your team is already adept at working together, and this exercise in teamwork will not only make your staff happy, but brings them closer as well, all while highlighting your generosity.

Holiday parties

Employees look forward to work-sponsored holiday parties because it gives them a chance to bond with each other off the clock and out of uniform. It also gives you and your employees as chance to learn more about each other’s personalities, which only enhances productivity and communication. Holiday parties can also be done very inexpensively, so you really should build this into your end of year planning.

You don’t need to go all-out, you just need to do something that’s in line with your office culture. This could mean a happy hour, cocktails in the break room or a catered lunch with an open bar. You shouldn’t feel pressure to do too much or pay for too much, but it should be well planned. Asking employees for their input or help with planning is also a great way to make sure you deliver a great party that they are sure to enjoy.

The most important thing to keep in mind with both is to be inclusive of all of your employees, whether you’re giving bonuses, gifts, time off or throwing a holiday party. Make sure you keep it about them, the success you have all enjoyed and built together, and celebrate the year without turning it into a corporate rally for 2013.

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How Long Can Your Business Survive in the Red?

Knowing how long your business can run in the red is crucial when it comes to making decisions about when to take risks and when to lay low. Also called “operating cash flow margin” or “margin ratio”, your cash flow margin measures how well your daily operations transform sales into cash. Relating cash flow from operations to net sales provides a powerful insight into the inner workings of a small business. If you’re generating a negative cash flow, you’re losing money even as you generate sales, which is unsustainable. A negative cash flow leads a small business to begin exhausting cash reserves or taking on more debt just to keep the doors open.

Calculating your ‘cash runway’ is the process of defining the fine line between keeping up appearances and bouncing checks. However, calculating your business’s runway is more nuanced than most small business owners realize.  You must have an intimate knowledge of not only your personal cash runway, but also of how the dynamics of employee and founder cash runways can affect that calculation as well. Understanding all three of these components and how they are intertwined is key to navigating the inevitable financial ups and downs of running a small business.

The most common reason for businesses to exceed their cash runway is flat-out poor cash management. It’s easy to get caught up in the euphoria of initial or seemingly-steady success and feel bolder about moving forward with costlier investments. Don’t take your eye off the ball. Experts recommend that you calculate your cash runway at twice what you need, especially if you are turning comfortable profits for the first time.

A crucial and often overlooked component is the cash runway of your employees. It’s common for small business owners to believe that their employees carry the same passion for the company as they do, meaning that they are just as willing to weather the storm as you are. More often than not, employees will cut and run at the first sign of trouble. How the challenges your business faces affects their own personal finances could mean bigger problems in the form of employee attrition, which ultimately affects your cash runway by depleting your resources to get the job done. The loss of employees means the loss of customers, sometimes rendering your careful math null and void. If you find yourself approaching this point, consider options such as other non-cash compensation to counteract turbulence and keep employees invested in the company’s long-term success.

Concerns over the final factor – founder cash – tend to become front and center after employees have already started leaving, once their paychecks have started bouncing. This runway belongs to the people who bought into your dream, who initially invested the cash to get your small business off the ground, whether it was a bank, a private investor, or even trickier – family. At this point, the goal is to convince them to either keep investing, or freeze their return on investment until you can get back to a profitable place. Understanding their cash runway in advance gives you the ability to factor in their financial expectations and keep them supportive and engaged during lean times.

Cash is what a company needs to generate to pay its expenses and purchase assets, and how well a company can convert sales into cash is crucial. Knowing that a company is continually improving its cash flow margin is a key indicator of performance. Treat your small business’s cash flow margin as a real barrier, not something than be extended. That’s a recipe for disaster, both personally and professionally.

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