from Barrons: Bonds are Back

Monday, April 21, 2008


FEATURES MAIN




Bonds Are Back in the Game
By ANDREW BARY

FOR THE FIRST TIME SINCE THE credit scare of 2002, most taxable bonds offer a compelling alternative to stocks.

With the stock market's rebound tentative at best, and money-market mutual funds paying just 2%, down from 5% a year ago, that's good news for yield-hungry individual investors. Junk bonds, convertible securities and mortgage-backed debt provide attractive yields with varying amounts of appreciation potential, and all fit particularly well in tax-deferred accounts like IRAs.


High-yield, or junk, debt, now yielding an average of more than 10%, could generate 15%-plus returns in the next 12 months if the economy bottoms later in 2008, while equity-sensitive convertibles could rise 20% or more. The convertible market has seen heavy new issuance lately as financial companies, including Citigroup (ticker: C), Bank of America (BAC) and Wachovia (WB), have sought to bolster their depleted capital by selling billions of dollars of convertible-preferred stock. These NYSE-listed issues are yielding 6% to 7%, some of them more than the common shares.

Mortgage securities issued by the three government-sponsored agencies, Ginnie Mae, Freddie Mac (FRE) and Fannie Mae (FNM), now yield about 5.5%, and could show high single-digit returns in the next year. Depressed non-agency securities backed by prime and so-called Alt-A loans could produce mid-teens returns.

The safest market is the most unappealing: U.S. Treasuries. With Treasury yields ranging from 2.2% on a two-year note to 4.6% on a 30-year bond, investors are getting negative real yields after taxes and inflation, now running at 4%. Given low Treasury yields, its possible total returns (yield plus bond-price change) could be negative in the next year.




Junky No More: Junk bonds now yield nearly eight percentage points above Treasuries, while investment-grade bonds yield three points more.
Barron's Roundtable member Bill Gross recently called Treasuries "the most overvalued asset in the world, bar none." In a CNBC interview, Gross, who manages the country's largest bond fund, Pimco Total Return1 (PTTRX), added that Treasury yields "don't make any sense relative to inflationary expectations down the road." Pimco Total Return has been tilting away from Treasuries and into mortgage securities, which Gross says "represent some of the most compelling values" in the bond market.

Larry Fink, the chief executive of BlackRock, a big bond manager, said on the company's earnings conference call last week that he has been telling clients "it is time to take more risk, and...start looking to move away from Treasury-oriented strategies to more credit-oriented and mortgage-oriented strategies."

Municipal bonds look appealing relative to Treasuries, but their absolute yields aren't great. The muni market has rallied in the past month with yields on top-rated long-term issues now in the 4.5% to 4.75% range, down from a peak of 5.5% or more. Munis yield more than Treasuries, which is rare because of the tax benefits of munis, but Treasury yields are extremely low. A five-year muni yielding 3.25% might look good relative to a Treasury at 3%, but even a tax-free 3.25% yield doesn't look great relative to inflation.

THERE ARE MANY WAYS TO INVEST in the bond market, including individual debt issues, open-ended mutual funds, closed-end funds and, more recently, exchange-traded funds. In the tables on the next page, we've listed a range of attractive bond-investment choices, including mutual funds and individual convertible and junk issues. Mutual funds are a particularly good idea for mortgage securities, given the hassle of trading individual mortgage issues and the difficulty of reinvesting periodic principal payments.

The direction of the U.S. economy, the global financial backdrop and the health of the housing market will be critical to bond returns over the next year. Treasuries and, to a lesser extent, munis would be helped by a weak economy, while most other sectors would be hurt.

Here's a closer look at the individual market sectors:

Junk

Many junk-bond mavens agree the market looks enticing, with the average issue yielding 10.5%, and bonds from distressed concerns like Charter Communications, Tribune and Realogy yielding more than 20%. The issue is timing. Some investors think the market will get worse before it gets better, particularly if the economy sputters for the rest of '08 and defaults spike, as expected.

"This is about the only cycle when spreads have widened so much before a rise in defaults," says Marty Fridson, chief executive of FridsonVision, in New York.


"It might be a little early. Our sense is that the economy will remain weak for the next three to six months and corporate earnings will be ugly," says Mark Vaselkiv, manager of the T. Rowe Price High-Yield Fund2 (PRHYX). Vaselkiv says the high-yield spread above Treasuries, now about 7.75 percentage points, could top 8 percentage points again later this year. The spread hit 8.5 points in March and was as wide as 10 points in 2002. Last spring, it stood at just 2.5 points.

While the $1 trillion junk market could hit another rough patch later this year, Vaselkiv finds plenty of bonds to buy, including those of General Motors Acceptance Corp., Sprint and Harrah's Entertainment. GMAC has been hurt by losses at its mortgage unit, but its core auto-finance business still is reasonably healthy.

"Senior management continues to emphasize it will capitalize GMAC appropriately, and there's no way GM survives without GMAC," Vaselkiv says. GMAC's one-year debt now yields 11%, while long-term issues, like the NYSE-listed 7.25% bond due in 2033 (ticker: GKM), yields 11.50%. This issue has a face value of $25 and trades around 16, or about 64 cents on the dollar. Most corporate bonds are sold with a face value of $1,000.

SPRINT APPEALS TO VASELKIV because its debt yields about 9.5%, yet it still has investment-grade credit ratings. Sprint's profits have disappointed and the company has been losing market share. Wall Street worries about Sprint's $22 billion of debt, but the company's ratio of debt to annual cash flow is around 3, versus a ratio of 10 for heavily leveraged companies. And, Sprint (S) still has a stock-market value of $20 billion.

Berkshire Hathaway CEO Warren Buffett also has been attracted to the junk market, buying debt issued by TXU, the Texas utility that was subject of an $43 billion leveraged buyout last year. TXU bonds, like the 10.25% issue due 2015, yield a shade under 10%. It's a good bet Berkshire bought more junk in the first quarter.

Harrah's went private in a $27 billion LBO earlier this year, just as the supposedly recession-proof casino industry hit a downturn. Reflecting concerns about Harrah's debt load, the company's senior unsecured bonds, like the 10.75% bonds due in 2016, trade for 84 cents on the dollar and yield 14%. The junior debt yields as much as 20%.




While junk funds generally have had negative returns in the low single digits in the past year, the situation could change in the next 12 months given high yields and depressed prices throughout the market.

The yield gap of high-grade bonds relative to U.S. Treasuries also has gotten wide, hitting 3 percentage points in late March, compared with less than a point a year ago, according to Merrill Lynch.

Reflecting this trend, GE Capital, which has a triple-A credit rating, last week issued 10-year debt at 5.66% and 30-year bonds at 6.45%, both about two points more than Treasuries. Intermediate-term debt from the major brokers yields 5% to 6%. With the Federal Reserve essentially throwing a safety net under the brokerage industry, it's unlikely companies like Lehman Brothers (LEH), Merrill Lynch (MER) and Morgan Stanley (MS) will default on their bonds.

Convertible Bonds

Convertibles combine two attributes: bond yields and the appreciation potential of stocks. Investors eyeing the depressed financial sector have plenty of convertible choices because Citigroup, Lehman Brothers, Bank of America, Wachovia, Washington Mutual (WM), MGIC (MTG) and SLM (SLM) all have tapped the market this year. "Boomlets in issuance often coincide with a sector that has gotten cheap," says David King, manager of the Putnam Convertible Income Growth Fund3 (PCONX) and the closed-end Putnam High-Income Securities Fund (PCF). King, a long-time convertible investor, has bought the Citigroup, Bank of America, Wachovia and Lehman issues.

The new convertible preferred issues generally yield 6% to 7%, offer more secure dividends than common shares, and, quite important, give investors plenty of time to benefit from stock appreciation thanks to five years of call protection. Some converts, like the Citigroup issue, were sold originally at $50 a share, while others, like the Bank of America and Wachovia deals, have a face value of $1,000.

Financial companies also have been issuing tens of billions of dollars of fixed-rate nonconvertible preferred stock this year. The converts probably are a better deal, as the straight preferred issues yield around 8% but have limited upside potential. It's a different story with converts. If the underlying stocks gain 25% over the next year, converts could rally 10% to 15%, producing total returns of around 20%.




The Fidelity Convertible Securities Fund4 (FCVSX) has increased its exposure to financials lately from a near-zero weighting. The fund, managed by Tom Soviero, has scored with investments in commodities and energy, including Freeport McMoRan Copper and Gold (FCX). It's up 15% a year in the past three years, almost double the average return on convert funds.

General Motors (GM) and Ford Motor (F) converts are excellent alternatives to the companies' common shares because they're debt, not preferred, and thus have added security. GM has issued a series of converts, including the 6.25% issue (GPM) that trades near 17, below its face value of 25. It can be redeemed at the holder's option in 2018 at 25, resulting in an 11.9% yield. Given the low price, downside risk may be limited, short of a GM bankruptcy. If GM stock doubles from its current price of 20, the convert could be up 50%. The GM converts look good relative to the common shares and the company's nonconvertible debt, which yields 11% to 12%.

Mortgage Securities

Investors can play it safe and purchase funds like the low-fee Vanguard GNMA5 (VFIIX), which has more than 95% of its assets in government-backed Ginnie Maes, or take a little more risk with funds like the TCW Total Return Bond6 (TGLMX).

Given the complexity of mortgage issues, it pays to stick with managers who have demonstrated they understand that market. The managers of the TCW fund, Jeff Gundlach and Phil Barach, have been together more than 20 years and have put together a strong record for institutional and retail investors.

Their $1.4 billion fund has added significantly to its non-agency mortgage debt in recent months because prices got as low as 60 cents on the dollar. Gundlach says these issues carry current yields of 8% and could generate annual total returns well above 10%. Gundlach sticks with the top-rated tranches of prime and Alt-A mortgage securities. The closed-end TCW Strategic Income Fund (TSI) has about half its assets in mortgage securities. It trades at about $3.70 a share, a 13% discount to its net asset value.

The giant Pimco Total Return fund, with $127 billion in assets, roams the world in search of opportunity. It now has almost two-thirds of its assets in mortgage securities, and has bested its major rivals and its benchmark, the Lehman U.S. Aggregate bond index, in the past year, with a total return of 11%. TCW Total Return is up about 6%.

Municipal Bonds

Given strong gains in recent weeks, munis have become less appealing. Open-ended long-term muni funds are yielding about 4%, while closed-end funds can yield 5% or more.

The Legg Mason Partners Managed Municipals7 fund (SHMMX), run by veterans Joe Deane and Dave Fare, has a great long-term record. It also has done well in the past year, rising 5%, about four points better than the average long-term muni fund. The fund was defensively positioned for much of 2007 but grew more aggressive after munis tanked earlier this year.

FINANCIAL PLANNERS AND BROKERS typically advise investors to put some of their money in bonds. Now is a good time to diversify, given ample yields in many sectors of the market.


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from Smart Money - 10 Things Your Hospital Wont Tell You

10 things your hospital won't tell you

Treatment errors are common, finding someone in charge can seem impossible, and patients sometimes wind up sicker than when they arrived. And here's a tip: Try to avoid hospitals late at night and in July.

By SmartMoney
"Oops, wrong kidney."

In recent years, errors in treatment have become a serious problem for hospitals, ranging from operations on wrong body parts to medication mix-ups.

At least 1.5 million patients are harmed every year from being given the wrong drugs, according to the Institute of Medicine of the National Academy of Sciences. That's an average of one person per U.S. hospital per day.

One reason these mistakes persist: Only 10% of hospitals are fully computerized and have a central database to track allergies and diagnoses, says Robert Wachter, the chief of medical service at UC San Francisco Medical Center.

But signs of change are emerging. More than 3,000 U.S. hospitals, or 75% of the country's beds, have signed on for a campaign by the not-for-profit Institute for Healthcare Improvement to implement prevention measures such as multiple checks on drugs.

Though the system is improving, it still has a long way to go. Patients should always have a friend, relative or patient advocate from the hospital staff at their side to take notes and make sure the right medications are being dispensed.

Infections and the chain of command
"You may leave sicker than when you came in."

A week after Leandra Wiese had surgery to remove a benign tumor, the high school senior felt well enough to host a sleepover. But later that weekend she was vomiting and running a fever. Thinking it was the flu, her parents took her back to the hospital. Wiese never came home. It wasn't the flu but a deadly surgical infection.

About 2 million people a year contract hospital-related infections, and about 90,000 die, according to the national Centers for Disease Control and Prevention. The recent increase in antibiotic-resistant bugs and the mounting cost of health care -- to which infections add about $4.5 billion annually -- have mobilized the medical community to implement processes designed to decrease infections. These include using clippers rather than a razor to shave surgical sites and administering antibiotics before surgery but stopping them soon after to prevent drug resistance.

For all of modern medicine's advances, the best way to minimize infection risk is low-tech: Make sure any hospital staffers who touch you have washed their hands. Tubes and catheters are also a source of bugs, and patients should ask daily if they are necessary.

"Good luck finding the person in charge."

Helen Haskell repeatedly told nurses something didn't seem right with her son Lewis, who was recovering from surgery to repair a defect in his chest wall. For nearly two days she kept asking for a veteran, or "attending," doctor when the first-year resident's assessment seemed off. But Haskell couldn't convince the right people that her son was deteriorating.

"It was like an alternate reality," she says. "I had no idea where to go."

Thirty hours after her son first complained of intense pain, the South Carolina teen died of a perforated ulcer.

In a sea of blue scrubs, getting the attention of the right person can be difficult. Who's in charge? Nurses don't report to doctors but rather to a nurse supervisor. And your personal doctor has little say over radiology or the labs running your tests, which are managed by the hospital.

Video: 10 best hospitals for kids
Some facilities employ "hospitalists" -- doctors who act as point people to conduct flows of information. Haskell urges patients to know the hospital hierarchy, read name tags, get the attending physician's phone number and, if all else fails, demand a nurse supervisor, likely the highest-ranking person who is accessible quickly.

"Everything is negotiable, even your hospital bill."

When it comes to getting paid, hospitals have their work cut out for them. Medical bills are a major cause of bankruptcy in the U.S., and when collectors are put on the case, they take up to 25% of what is reclaimed, according to Mark Friedman, the founder of billing consultant Premium HealthCare Services. That leaves room for some bargaining.

Take Logan Roberts. The 26-year-old had started work as a business analyst near Atlanta but had no insurance when he was rushed to an emergency room for an appendectomy. The uninsured can pay three times more for procedures, says Nora Johnson, the senior director of Medical Billing Advocates of America.

Roberts was billed $21,000. "I was like, holy cow!" he says. "That's four times my net worth."

After advice from advocacy group The Access Project, Roberts spoke with hospital administrators, telling them he couldn't pay in full. Hospitals frequently work with patients, offering payment plans or discounts. But to get it, you have to knock on the right door: Look for the office of patient accounts or the financial-assistance office. It paid off for Roberts, whose bill was sliced to $4,100, 20% of the original.

Be smart about bills
"Yes, we take your insurance, but we're not sure about the anesthesiologist."

The last thing on your mind before surgery is making sure every doctor involved is in your network. But since the answer is often no for anesthesiologists, pathologists and radiologists, what's a patient to do?

Los Angeles entertainment lawyer and patient advocate Michael A. Weiss repeatedly turned away out-of-network pain-management doctors on a recent visit to a hospital.

You don't necessarily need to go as far as Weiss did, but do ask for someone in your network if you're alert enough. If it's an emergency and you're stuck with an out-of-network doctor, call your insurance company to help resolve the issue. If it's elective surgery, ask a scheduling nurse in the surgeon's office to find specialists in your plan, says South Bend, Ind., billing sleuth Mary Jane Stull.

If you know your procedure will be out of network, call the hospital billing department to negotiate. It will likely point you to a patient representative or the director of billing. Once you've dealt with the hospital, then try the surgeon or other specialists involved -- some hospitals will back you in those discussions, Friedman says.

Continued: Sometimes we bill you twice

"Sometimes we bill you twice."

Crack the code of medical bills and you may find a few surprises: charges for services you never received or charges for routine items such as gowns and gloves that should not have been billed separately. Clerical errors are often the reason for mistakes. One transposed number in a billing code can result in a charge for placing a catheter in an artery versus a vein, a difference of more than $3,900, Stull says.

So how do you figure out if your bill has incorrect codes or duplicate charges? Start by asking for an itemized bill with "miscellaneous" items clearly defined. Some telltale mistakes: charging for three days when you stayed in a hospital overnight, a circumcision for your newborn girl or for drugs you never received.

Ask the hospital's billing office for a key to decipher the charges or hire an expert to spot problems and deal with the insurance company and doctors (you can find one at the Medical Billing Advocates of America). Their expertise typically will cost up to $65 an hour, a percentage of the savings or some combination of the two.

If you want to be your own billing sleuth, talk to the highest-ranking administrator you can find in the hospital finance or accounts office to begin untangling any mistaken codes.

"All hospitals are not created equal."

How do you tell a good hospital from a bad one? For one thing, nurses. When it comes to their own families, medical workers favor institutions that attract nurses. But they're harder to find as the country's nursing shortage intensifies; by 2020, 44 states could be facing a serious deficit. Low nurse staffing directly affected patient outcomes, resulting in more problems such as urinary-tract infections, shock and gastrointestinal bleeding, according to a 2001 study by Harvard and Vanderbilt university professors.

Another thing to consider: Your local hospital may have been great for welcoming your child into the world, but that doesn't mean it's the best place to undergo open-heart surgery. Find the medical center with the longest track record, best survival rate and highest volume in the procedure. You don't want to be the team's third hip replacement, says Samantha Collier, the vice president of medical affairs at HealthGrades, which rates hospitals.

The American Nurses Association's Web site lists "magnet" hospitals -- those most attractive to nurses -- and a call to a hospital's nurse supervisor should yield the nurse-to-patient ratio, says Gail Van Kanegan, a registered nurse and a co-author of "How to Survive Your Hospital Stay." She also suggests calling the hospital's quality-control or risk-management office to get infection statistics and asking your doctor how frequently the hospital has done a certain procedure. Though reporting these statistics is still voluntary, more hospitals are doing so on sites like one of the U.S. Department of Health and Human Services, which compares hospitals against national averages in certain areas, including how well they follow recommended steps to treat common conditions, says Carmela Coyle, the senior vice president for policy at the American Hospital Association.

How to improve your odds
"Most ERs are in need of some urgent care themselves."

A new study from the Institute of Medicine found that hospital emergency departments are overburdened, underfunded and ill-prepared to handle disasters as the number of people turning to ERs for primary care keeps rising.

An ambulance is turned away from an ER once every minute due to overcrowding, according to the study; the situation is exacerbated by shortages in many of the "on call" backup services for cardiologists, orthopedists and neurosurgeons. And it's getting worse. Currently, 73% of ER directors report inadequate coverage by on-call specialists, versus 67% in 2004, according to a survey conducted by the American College of Emergency Physicians.

Video: 10 best hospitals for kids
If you can, avoid the ER between 3 p.m. and 1 a.m., the busiest shift. For the shortest wait, early morning -- anywhere from 4 a.m. to 9 a.m. -- is your best bet. If you are having severe symptoms, such as the worst headache of your life or chest pains, alert the triage nurse manager, not just the person checking you in, so that you get seen sooner, says David Sherer, an anesthesiologist and author of "Dr. David Sherer's Hospital Survival Guide." Triage nurses are the traffic cops of the ER and your ticket to getting seen as quickly as possible.

"Avoid hospitals in July like the plague."

If you can, stay out of the hospital during the summer, especially July. That's the month when medical students become interns, interns become residents, and residents become fellows and full-fledged doctors. In other words, a good portion of the staff at any given teaching hospital is new on the job.

Summer hospital horror stories aren't just medical lore: The adjusted mortality rate rises 4% in July and August for the average major teaching hospital, according to the National Bureau of Economic Research. That means eight to 14 more deaths occur at major teaching hospitals than would normally without the turnover.

Another scheduling tip: Try to book surgeries first thing in the morning and preferably early in the week, when doctors are at their best and before schedules get backed up, Sherer says.

"Sometimes we don't keep our mouths zipped."

Contrary to what you might think, sharing patient information with a third party is often perfectly legal. In certain cases, the law allows your medical records to be disclosed without asking or even notifying you. For example, hospitals will hand over information regarding your treatment to other doctors, and it will readily share those details with insurance companies for payment purposes.

That means roughly 600,000 entities that are loosely involved in the health-care system have access to that information. These parties may even pass on the data to their business partners, says Deborah Peel, the founder of the Patient Privacy Rights Foundation in Austin, Texas.

If you want to access your medical records, you don't have to steal them like Elaine did on "Seinfeld" after she learned a doctor had marked her as a difficult patient. You are legally entitled to see, copy and ask for corrections to your medical records.

This article was reported and written by Reshma Kapadia for SmartMoney.

Published Feb. 23, 2007

Preparing for a Layoff (or other Cash Squeeze) from the WSJ

Take Seven Steps So You Survive A Cash Crunch

By BRETT ARENDSApril 12, 2008; Page B1

No one wants to get caught in a cash crunch. Look at what happened to Bear Stearns.
Investors can't go running to the Fed.
Sometimes all it can take is a surprise bill, or a sudden loss of a job, to put your family's liquidity in peril. And these are treacherous times. The economy is rocky. Employers are cutting jobs. And some investments -- including home values -- are turning wobbly just when you may need them most.
The Federal Reserve, alas, isn't going to bail you out if you get hit by a liquidity crisis.
So where can you turn? If you're worried, check out your emergency lines of credit now, before there's a crisis.
Here are the seven habits of highly liquid people.

1. Refinance your mortgage over 30 years. Just switching your remaining debt from, say, a 20-year schedule will slash your monthly outflows by nearly a fifth. Borrowing against your home is the cheapest form of consumer debt.

2. Set up a home-equity line of credit. They're usually cheap to arrange, and you can draw on it when you need it. Right now, rates are as low as 5.25%.

3. Get a free float from a new credit card. Some still offer zero-percent interest on balances transferred from your current card. As always with the credit-card sharks: Watch out or they'll find a way to sock you with fees anyway.

4. Get your money back early from the IRS. Most Americans prepay too much tax, and the average refund is nearly $2,500. File a new W-4 with your employer to cut your monthly withholding. You have to estimate your likely bill in good faith. If you end up prepaying too little, you can make it up by Dec. 31. If you don't, you will have to pay 7% or so in penalties. The rate fluctuates, but it's a lot cheaper than an unsecured loan.

5. Set up unsecured financing sources now, while you don't need them. Ask your bank for an overdraft facility, of course. And apply for some emergency credit cards. Yes, the rates are usurious, so don't use them unless you have to. But someday you may have to.

6. Check out how to borrow from your 401(k) retirement plan. Most plans allow this, though the rules vary. The limits are often 50% of your balance, up to $50,000. It can take anywhere from a few days to a few weeks to get the money. Note: You may end up paying taxes, plus a 10% penalty, if you don't repay the money when you leave your employer, or within a specified period. It is usually five years. Check the rules ahead of time.

7. And, most obvious: Start saving. Most middle-class families can save thousands a year just by paring back on discretionary bills. This is a good time to slash those bills to the bone.
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From Entrepreneur.com - 7 Ways to Make Your Business Stand Out

Small Business Solutions

Seven Ways to Make Your Business Stand Out
Entrepreneur.com

03/03/08 - 09:37 AM ESTWritten by Brad Sugars

Some of the most successful businesses in the world have made their mark by articulating their unique capabilities. FedExFDX put itself on the map by guaranteeing packages would reach their destinations overnight. Domino's PizzaDPZ once promised to deliver hot pizza in 30 minutes or less. Burger KingBKC let you "have it your way."
Businesses also need this kind of unique selling proposition (USP) to stand out from the crowd. It's a way to lure prospective customers in your door and away from competitors. It's also a tool to help you avoid the slippery slope of competing on price alone and thereby eating into the margins you need to earn more than a subsistence wage.
Consider the example of my dentist. His challenge was not just to set himself apart but to sell a service that people associate with pain. He did that by creating an office with an exclusive country club atmosphere, reinventing the dental experience.
The foyer has a $5,000 coffee machine, 18 different teas served in fine bone china from a silver tray and an oven baking sugarless muffins to mask the medicinal smell. Patients are greeted by their "personal care nurse," ushered into treatment rooms with their name and photo on the door, offered a choice of DVDs to watch on an overhead TV with headphones and given a buzzer to press if they experience pain.
Defining Your USP
Think of a USP as your secret sauce -- the special ingredient your business uses to prevent becoming a "me too" company. It's something that's truly unique. It grabs people's attention. It can't be easily copied. And it offers a clear-cut, marketable benefit to your customer.
Some USPs practically jump out at you. The fizzy herbal cold and flu fighter Airborne, for example, declares on the package label that it was invented by a second-grade teacher. That's a claim that no other company can make, and it sends a feel-good message that instantly distinguishes the product from other herbal remedies.
Most USPs are harder to come by. If you're a locksmith, mattress store or corporate training company, what makes you different from anyone else in your space? Here are some suggestions for helping you answer that question.

1. Analyze the competition. What do they do well? Where do they fall short? What don't they offer that you do? Where are they geographically located in comparison to you? Look for holes in the market that will help you define your niche.

2. Determine what sets you apart. Maybe you're the only local jewelry store with a designer on the premises. Or a florist that employs a professional writer to craft customers' messages. Or a pastry school that offers an unusual 24-week certificate program. Or a management consultant whose principals have worked with Fortune 100 companies. If you can make claims like these, you have an easy USP to hang your hat on.

3. If you have no differentiator (and many start-ups don't), invent one. That's what my dentist did. And don't be afraid to change the message as your business evolves. I know of one Web site design firm that started out promoting the fact that it also provides Internet marketing services like search engine optimization. Over time, it carved out a position as an expert in Web content management and adapted its USP accordingly.

4. Identify consumer pain points. When all else fails, list the main frustrations of consumers in your industry and devise a USP to blunt them. If you're a carpet cleaner, for example, you might offer an emergency service or a do-it-yourself fabric care kit to address the fear of stains between visits and build your message around those services.

5. Offer a guarantee. Again, focus on offering a cure for common customer frustrations. I once helped a plumbing contractor write a guarantee promising that plumbers would turn up within 15 minutes of the scheduled time or provide the first hour of work free, leave the house cleaner than when they arrived and show up in uniforms with belts. The goal: Conquer plumbers' reputation for lateness, messiness and embarrassing rear views.

6. Be specific and concrete. Baskin-Robbins once touted its 31 flavors, even incorporating "31" into its logo. Wonder Bread used to "help build strong bones 12 ways." You might be a heating company that's on call 24 hours a day, a manufacturer that offers 142 different widgets or a gym with 56 machines. If you've got it, flaunt it.

7. Never make a claim you can't fulfill. The plumbing contractor I just mentioned established a series of systems to make good on its guarantee, including equipping employees with handheld vacuums, booties and belted uniforms. Be sure you can deliver what you promise or your USP will be useless.
Once you've established your USP, your job is to condense it into a few words and then communicate it at every touchpoint -- from your Yellow Pages ads, letterhead and marketing collateral to your Web site, signage, sales calls and beyond.

Think of it this way: What makes you choose one clothing store, builder or moving company over another? Chances are it's their success in defining their USP and broadcasting that message to the marketplace. Take a page from their book. You'll get noticed -- and the cash flowing -- a lot faster.