Tuesday, September 04, 2007

Soprano Security

One of my favorite TV shows is the Sopranos because the characters are so well developed. That's not to say they are normal, but in their world they make sense. We get to see more about what makes them tick than Scorsese or Copola have shown us.

We embrace Tony because he's enlightened. He goes to therapy, is getting in touch with his feelings, and even becomes an avenging angel for some of the defenseless creatures he encounters, especially animals. I can just imagine Tony Soprano after his daughter has graduated college and become his financial adviser talking a business owner into an entirely new approach to paying protection.

"I've always felt that making small business owners pay protection under the table was not the smartest way to go. These days the biggest crooks are the legitimate ones. So my financial adviser has come up with a better way. As the new owner of this business you are financing it through the local savings and loan. We've made special arrangements with them to allow you to include your protection payments in your loan package. This way you get many benefits normally denied to you by the system.

By paying your protection up front as mortgage points paid at closing we give you a very special price. While we normally charge 1% a month on the current value of your business when paid out of pocket, we are prepared to let you pay a one-time price in advance on the initial value of your business that will lock in your cost for the next 30 years, at least on a test basis. Once this becomes popular we may have to make an adjustment every ten years or so, but for our early clients we'll take all the risk of inflation.

By paying in advance, we give you all the benefit of compound interest so you only pay the present value of that fixed amount. Let's say the amount is $100,000 so one payment, 1/360th of that would be $278, but the present value of that future amount is only $95. The rest is interest you pay over time like you do on everything else. By borrowing the money from a legitimate lender you pay reasonable rates, not our weekly double digit rates. Plus, you get to deduct all that money from your business income before paying your taxes. With accelerated cost recover depreciation, you'll get over 1/3 of your protection money back from the IRS in the first five years and all of it within 20 years.

Taxes and insurance don't do that and they go up every year. Imagine your neighboring business owner complaining about his higher insurance and protection money rates. At least you'll know your protection rate is fixed because you had the foresight to pay it in advance.

Of course, doing it this ways causes us some problems. First, the money shows up as taxable income to the bank that they give us under the table, so we had to promise them to invest the money with them for ten years and that means we and the bank must pay taxes on our gain every year. That's the money the govt. give you back in depreciation (like insurance companies, the govt. never loses).

You may wonder why we're willing to do all this when we could just extort the money from you as we've always done. Look downtown and then look up. We want those big office buildings to become our next clients. By offering them a legitimate way to account for the expense, they are much more likely to go along. It's not easy trying to twist a corporation's arm. We can make far more money adding deductible security services, similar to environmental services (automated HVAC systems) to the cost of their building than by picking the pockets of 50 guys like you every month.

We even include an electronic security system that notifies us directly when an alarm goes off. For small businesses the monitoring services are all included in the price. We'll respond promptly and unlike the police have a very good chance at recovering your money or merchandise. Even if we don't, the perpetrator won't get away and you can be certain they'll never be back. We also spread the word that your business is protected by us. That carries a lot more weight on this street than an ADT alarm sign.

I hope you can see how we're trying our best to give hard working guys like you a break and shift more protection costs to those who can better afford it. That's why American is the greatest county in the world."

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