Evergreen Trading: Who we are and what we do

Evergreen Trading: Who we are and what we do

We recently updated our video that illustrates the financial and marketing services of Evergreen Trading. For many, media trading is a service that is difficult to understand–its often a challenge to grasp the benefits for a company holding undervalued assets like excess inventory or unused real estate leases. This video provides a short, clear explanation of the mechanics and the benefits of trade with Evergreen Trading.

Reducing the innovation cost risk for restaurants

Reducing the innovation cost risk for restaurants

Drones serving meals ordered through a table-top digital waiter like the Siri or Amazon Echo’s Alexis. Reusable soda cups imbedded with an RFID code monitoring credits for refills. A Microsoft outlook plugin that identifies that chain’s nearby location convenient for meetings.

The restaurant industry is hard at work innovating new ways to accommodate their customer’s desires and as a result, increase sales.

The above types of digital innovations carry their own financial risks should they miss the mark, but what of physical innovations that carry steeper startup costs and subsequent risk should they fail? New menu items, new packaging, new locations and new store concepts all carry substantial cost risks that can halt their introduction.

Would you take more of a risk on a new idea if you knew for certain that your costs could be reimbursed if the concept fell short of expectations? Without such a safety net, many restaurant chains are naturally more hesitant to try new ideas that carry the potential to grow sales and market share. Evergreen Trading was founded specifically to provide a safety net for precisely these types of innovations.

Innovations need not be a complete remake of the entire dining concept. Perhaps your broilers have become much less efficient than new models, but swapping them out involves not only the cost of the new broilers but the time and expense of disposing of the old ones. What if you could sell those old broilers for your full original cost and have a simple ready-made distribution strategy for them? Rather than testing a new menu item just in a very limited number of locations, you might get better market intelligence by introducing it to a broader customer base. That comes with higher costs and more risk should that menu item not take off as projected, but what if you could sell all the unsold product at your full cost quickly and efficiently.

These are all solutions that can be provided through Evergreen Trading. In return for our purchase, you would place a relative portion of your broadcast, digital, out of home or print advertising plan through our world-class media division. It will be the same advertising you and/or your agency will place. Same rates and commercial terms. In fact, we work with your agency and buy at net to allow them their normal compensation. It’s as if your agency was willing to pay you full cost for your surplus just for the privilege of continuing to place your advertising with them. You wouldn’t expect your agency to offer that because it’s not their business, but it is ours.

Perhaps reconsider that innovative new concept that’s been proposed but tabled because of the financial risk. You can lower that risk to the point of it now being feasible to improve your restaurant’s customer experience and your bottom line.

How can I verify the value we receive from media trading?

How can I verify the value we receive from media trading?

1-plus-1-on-blackboardYou’re used to buying and selling for cash, so trading your surplus assets for advertising may seem somewhat abstract and therefore, its value difficult to measure.  You may have heard that media trading is something that looks good on the books but you’re not sure there’ is an objective way to verify the value you receive.

In fact, the value you can gain from media trading is abundant and very simple to verify. It comes from the cash you save through that portion of advertising placed by the trading company.

Your advertising agency plans out your media by establishing your media buying guidelines and the cost to you. The media trading company uses that plan to execute your media and you use an advertising credit to pay for a pre-determined portion of the otherwise 100% cash buy. If you want additional validation of the buy, utilize a third- party media audit firm and establish your KPI’s  to confirm that the media buys are in strict accordance with your cash buys.

As an example, say you have sold Evergreen Trading an excess inventory for $1MM that is worth only $300,000 in cash. You have a $5MM fourth quarter cable buy yet to be placed. Your agency can place it for you at a cost of $5MM in cash, but using trade, Evergreen Trading can place that same buy for $4MM in cash plus the excess inventory that you sold for $1MM. You know the value of the asset since the best offer you received for the inventory was $300,000. You know the value of the cable buy since your agency gave you a plan for which you would have paid $5MM. 

The math is simple. You paid Evergreen Trading $4.3MM ($4MM for the media and $300,000 worth of inventory) to buy $5MM of advertising. The incremental value you received was $700,000, or more than a 230% ROI on the inventory. Pretty good for merely letting a trading company work with your agency to place a portion of your overall media.

Unsure of the final value of the asset sold to the trading company? Evergreen Trading is happy to share proof of funds received from the sale. Unsure of the final value of the media? Your agency will evaluate the post buy report, and as mentioned earlier, you’re free to utilize a third party auditor.

Transparency is a hallmark of Evergreen Trading, and as such, we eagerly share with our clients the important numbers and educate them on as much of the transaction mechanics as they wish to know. Anyone claiming the value of a trade is complicated to calculate and is unwilling to share the financials of the trade may not have your interest closest at heart.

 

How is a media trading company different from your advertising agency?

How is a media trading company different from your advertising agency?

Fish apples and orangesYour advertising agency places your planned media on your behalf. So does a media trading company. You pay your agency for the cost of that media. You pay the trading company for the media they place. So, is there a fundamental difference between your advertising agency and a media trading company?

The answer is relevant to you for three reasons:

  1. You’ll know how to appropriately compare your agency to a trading company
  2. You can better evaluate the capability of a trading company
  3. You’ll find it easier and more effective to properly evaluate the work of a trading company

The main difference between the two entities is: advertising agencies spend their client’s money and trading companies invest their own.

As a trading company, Evergreen Trading risks our own capital by making investments with the media vendors. In consideration for these investments, we receive payment in the form of media futures at a greater value than our initial investment. This investment activity allows us to maintain a cost basis that is lower than the largest non-trade media buying companies.

Agencies, on the other hand, perform a valuable function that is different from a trading company. They pay the media vendors with their client’s money, buying media at negotiated retail cash rates.

Why should you care?

Your agency is in a fundamentally different business, so don’t expect them to buy your media at a cost comparable to the trading company and receive your excess inventory or surplus real estate as partial payment to cover some of that cost. The trading company is no more competing with your agency than a title company is with your broker.

The trading company needs to have pricing benchmarks in order to charge you the same rate at which your agency buys your media. To properly evaluate a prospective trade transaction, the trading company will charge you the same $5 CPM that your agency pays (as an example). Through trade, you’re able to pay part of that CMP with inventory, real estate or some other asset.

Your agency plays an important role in your evaluation and implementation of trade by providing the trading company with those benchmarks. Sharing that media information is not a breach of your confidential rates. Rather it is an assurance that the financial benefit of the trade will conform to your expectations. Without knowing your media rates, the trading company cannot properly structure a transaction that pays you the price you desire for your excess inventory or other asset.

Your agency and trading company are distinctly different businesses. The clearer you are about those differences, the more effective you’ll be in evaluating and managing the trading process so that you gain the greatest possible value from your trade.

A client’s perspective on how to successfully introduce trade throughout an organization

A client’s perspective on how to successfully introduce trade throughout an organization

Bharat KakarWe recently had the pleasure of sitting down with Bharat Kakar, Senior Vice President of Marketing for LasikPlus. LasikPlus, a client of Evergreen Trading, is the country’s leading provider of LASIK eye surgery and other vision correction procedures with over 50 centers across the country. Our relationship began with our funding of some of their unwanted lease obligations.

As the head of Marketing for LasikPlus, Bharat has a keen perspective on media trading and on how it can work well for a client. One of the questions we asked Bharat helped uncover how the concept of trade made its way through LasikPlus and how their management determined the allocation of the financial benefit throughout the company. We think this insight could be valuable to other companies who are looking to evaluate media trading as a solution for real estate or other corporate assets.

Bharat, what advice would you offer your fellow marketing leaders who may be skeptical of evaluating media trading, and why were you and LasikPlus open to it?

First of all, it truly was a partnership between our CFO and myself that allowed the trade to happen. The CFO was holding distressed assets but did not know how to evaluate media, while I was managing media but did not know I could consider unwanted real estate as distressed asset, let alone valuate it. By partnering together, we realized the potential benefit our company could gain by trading unwanted real estate for media. I suspect, like myself, there are other CMOs who may not be in a position to make comments surrounding distressed assets. CMOs need to have conversations with CFOs and other department heads who may be holding those distressed assets and what the value of those distressed assets can be through trade.

Next, since this was a new concept for us, my CFO and I partnered on conducing our due diligence. We wanted to make sure that none of our media placements were compromised. We also wanted the trading company to work well with our media planning agency. Lastly – when we began trading, we were a public company – we wanted to make sure we knew how to record the transactions; for this, the CFO, Controller and I worked together so we could accurately report the actions on our books.

Once we were comfortable with our due diligence process, we chose to test our way into trade – initially we selected two properties. As we worked through the processes, we expanded the trade to include additional properties. Once we began seeing gain in our media-spend savings, we had a choice to move the savings back into the company or to reinvest it into advertising. The CFO and I chose to reinvest it into advertising to gain more customers and grow our business.

We have found trade as a means to stretch our marketing spend and gain more customers. For a marketing leader to bring trade into the organization, he/she should engage with finance and other departments – to catalogue, valuate and to maximize on the distressed assets’ values. Also, determine up front how to treat the savings; in our case, we reinvested into the advertising and gained more customers for the same media dollars. Lastly, know how to record the information on the books. It is understandable to try into this venture first, as we did, to become comfortable with the concept before launching into it full force. This is, by no means, one person doing it all or making all of the decisions. Fortunately, I am close to our CFO so we could work together to make the trade arrangement work well for us.

Our experience with trade? Initially we asked ourselves, “why would we do this?” After it proved out for our business, the question became, “why wouldn’t we want to keep doing it?”

The simple way to calculate your media trade ROI

The simple way to calculate your media trade ROI

Barter-calculator-full-imageThe benefits of media trading are substantial. You can sell off a slow-moving product, eliminate an obsolete piece of equipment or sell off a dark retail location and rid yourself of a big headache. But once the inventory, equipment or real estate is out of your possession, it’s time to turn to the transaction’s financial benefits.

First, some media trade 101:

The financial benefit of a media trade arises from your placement of media through the trading company. Your inventory, equipment or real estate – priced well higher than its fair market value – is used to pay for a portion of the cost of the advertising placed by the trading company.

So, for example, if the trading company paid you $1MM in the form of an advertising credit for an excess inventory worth only $300,000, you will be expecting a $700,000 benefit from the deal. Unlike the immediate gain of a $1MM cash payment, however, the benefit of the advertising credit payment arises through your placement of advertising through the trading company. You will gain that benefit through paying for say, $5MM in advertising with $4MM in cash and using the inventory valued at $1MM to pay the balance (the advertising credit).

So, how do you calculate the transaction’s ROI?

In the above example, your original investment was the cash value of the asset you traded to the trading company – or $300,000. You traded that $300,000 asset for a $1MM advertising credit. At the conclusion of the transaction after having placed the full $5MM of media, your asset paid for a full $1MM of that expense ($4MM in cash paid for the rest). Without the trade, you would have paid $5MM for that portion of your advertising.

So, the full gain is $1MM and the investment is the $300,000 value of the inventory which results in a 186% return on investment, or about a 49% annual rate of return.

Actually a pretty simple calculation, but how many investments can you think of that can produce that high a rate of return?

Corporate trade isn’t just about inventory

Corporate trade isn’t just about inventory

cash (1)If you’re like many, when you think about corporate trade, you associate it with getting rid of last season’s unsold widgets, short coded salad dressing or returned consumer electronics. And while corporate trade works very well getting rid of those types of inventories, you are probably missing out on an even more important benefit of this powerful financial service.

Media trading is at the heart of the corporate trade process. Evergreen Trading, through the in-house trading division of Horizon Media, acquires advertising time and space by trading goods and services to the media vendors instead of paying full price in cash. Because of those trades, our cost for that media is lower. The difference between our client’s normal cost of media for which we bill them and our lower trade cost provides us with a source of cash. What do we do with that cash? Yes, we can buy back inventories from you at a much greater price, but we can help you do much more.

What problem would you solve or what opportunity would you embrace if you had additional cash beyond your current budget? Would you buy a sponsorship for which you lacked funds this year? Would you invest in a loyalty program that was previously too costly? Would you buy more digital media to gain a wider promotion of your brand?

You see, any of these investments can now be made because you have a new source of cash. And unlike any other source of cash, this one has no hard cost.

As an example, say you want to acquire a sponsorship at this season’s Superbowl that costs $100,000. Ask Evergreen Trading to place $600,000 of your broadcast or digital media and we may be able to write you a check for $100,000. It all depends on your media plans and specifications. We will do a quick review of your upcoming media and get back to you with the exact amount of your media we’ll need to place in order to generate the $100,000 in cash.

As long as your media is placed just as you or your agency would directly place it, a newfound source cash has been created for you. You now have a Superbowl sponsorship without having to touch your marketing budget.

Your best return on investment for the new year

Your best return on investment for the new year

ROI ImageWelcome to the new year!

As you consider both personal and professional things you can do to make 2014 better than 2013, improving your return on investment on corporate assets may be on that list.

An annualized ROI of 20 percent is usually considered very good, but using the GAAP-approved principles of Corporate Trade, you can increase that return to 100 percent or more. Here’s how.

As an example, say you have a $1MM wholesale value excess inventory of a discontinued product with a cost of goods of $300,000. Your customers are willing to take it for about $250,000. You have also tested out the liquidation market and received offers of about $150,000. Given the prospect of receiving less than cost for what is still good product, the inventory sits in your stores and warehouse.

Evergreen Trading will buy the inventory in this example for $750,000. The actual amount we can pay you is determined by several factors including the market value for the product and your company’s marketing objectives, but for this example where the product can be sold for about $250,000, we can probably pay you $750,000.

Before you think that this is too good to be true, understand that there is an exchange to be made, hence the “trade” in Corporate Trade. In return for our high payment to you, we will ask that you place a small portion of your normal advertising through us – just as your advertising agency would place it. No compormises. To learn more about how we place your advertising, watch our short video on what we do and how we do it.

Consider the basic return on investment you’ve received for this inventory. In this case, the prospect of selling inventory for less than your cost makes any price over cost attractive, but look at the result of a sale to Evergreen Trading. We’ve ammortized the return over two years because it would be normal in this case for you to place the necessary portion of your advertising over a two year period. Realize, however, that we would pay you the $750,000 at the outset of our relationship.

 

As you contemplate the fate of your corporate assets – product, real estate, or equipment – consider Corporate Trade with Evergreen Trading as an alternative that provides you with the highest return on your investment. One that is scaleable, repeatable and measurable.

 

Airlines and Hotel Chains: Capitalize more than ever on your rewards points

Airlines and Hotel Chains: Capitalize more than ever on your rewards points

Rewards CardAs an airline or hotel chain, your loyalty programs benefit you by keeping customers returning to your brand as they work to build their point totals for a free flight or stay. You also sell points to banks, retailers and restaurants for use in their own loyalty programs.  But there’s another way to directly benefit from your loyalty programs and the points you generate based on purchases.

Evergreen Trading has a program for turning those points into advertising – broadcast, print, out-of-home, and digital. While we are well-known for accepting inventory or commercial real estate as payment for media, we are unique in also accepting loyalty points as a currency that pays for the advertising you are planning to place and fund with cash.

Why should your airline or hotel sell points to Evergreen Trading?

  • We have the ability to buy a large quantity – several million dollars worth.
  • We will pay more for the points than the normal market will pay. It’s not uncommon for us to pay twice the market value for assets.
  • The points will be traded to our proprietary network of media vendors along with our large friends and family network.
  • The media you will be acquiring with those points will be placed by New York’s Horizon Media.

Horizon is an award-winning independent $4 billion media firm that places advertising for some of the world’s most sell-known brands – companies like United Airlines, Capital One and Geico. Horizon’s extraordinary capabilities are important because, like the points you sell to us needing to provide first quality flights and rooms, you’re going to want the media you receive in exchange to be on a par with the media your agency places for you. And it will be.

What will we do with the points you sell us? We will work closely with you to sell them into channels that integrate with your current market and distribution. We have a large friends and family network with a huge appetite for points, we will trade them with our media vendor community, and sell them to corporate partners with large corporate intranets.

Call John Floto, Senior Vice President, at 212.652.0680 to discuss how we can purchase a large quantity of your rewards points in exchange for first quality broadcast, print, out-of-home, and digital advertising.

 

How your hotel can sell more rooms using corporate trade

How your hotel can sell more rooms using corporate trade

Like any other business, your hotel chain can benefit from corporate trade by selling closed locations for above market, selling excess inventories of furniture and other supplies for more, and by reducing their bottom line cost of advertising.

But there’s another benefit your hotel can reap that ties to your core business: Filling rooms. Corporate trade can be utilized to place people in otherwise unoccupied rooms, and do so at your normal rate.

Like any corporate trade transaction, capital is created through the placement of your normal advertising. This is the same advertising that will be placed by your advertising people or your advertising agency. The difference is that Evergreen Trading is placing a pre-determined portion of it. The capital created by our placement of your advertising is then used to buy room nights at your normal rate.

As an example, say Evergreen Trading places $6MM of your upcoming broadcast media plan. That media will be placed by our in-house media trading division, Eden Road Trading which is owned by and housed within our partner Horizon Media, a $4 billion award-winning media placement agency. To insure that the media we place is the same media you would have bought without us, the details of the media plan are shared with us including buying parameters, rates and other commercial terms detailed by your advertising plan.

In return, Evergreen Trading will purchase a credit for $1MM of room nights at an agreed upon room rate. The exact amount of this credit will depend on a review of your media as well as an understanding of your financial objectives. Just like your marketing people will want to make sure there are no restrictions on the media we place for you, our agreement with you will stipulate that there are no restrictions on the use of the room credit.

In the end, your hotel chain has put more people in the rooms without it costing you anything out-of-pocket for the added benefit of more people in your restaurants, shops, and future cash reservations from repeat customers.

Hotel deal flow diagram2