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The BBB Is Obsolete

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Twenty years ago, the Yellow Pages was the number one lead generator for most HVAC contractors. Our Verizon Yellow Pages sales rep recently told us that the very last Verizon Yellow Pages book has already been printed.

I heard on the radio the other day that the number one and number two retailers from 40 years ago, Kmart and Sears, will most likely be unable to acquire the cash required to keep their doors open.

So, how long before the Better Business Bureau (BBB) is irrelevant?

To answer that we need to understand what the BBB is and what they do.

When founded in 1912, the BBB occupied a niche as a refuge for consumers to voice frustration and resolve grievances, real or imagined. According to the BBB website, “BBB’s mission is to be the leader in advancing marketplace trust.”

There are 112 independently incorporated BBB franchises in North America. Each franchise is an independently owned and operated “not for profit” business.

What does “not for profit” in the context of the BBB actually mean?

In the eyes of some consumers, it might mean that the BBB is above reproach, because they don’t seek profits.

In reality, it means that the organizations disperse all of their income, after rent and utilities are paid, in the form of large salaries and bonuses for the officers and employees of the franchise. The result being that the franchise has little to no reportable income at the end of any given year.

For example; let’s take a look at some data from the 2014 IRS form 990 for The Better Business Bureau of Metropolitan New York, Inc. (IRS form 990 is the tax return of an organization exempt from income tax).

In 2014 The Better Business Bureau of Metropolitan New York, Inc. had an income of $3.38 million dollars.

The salaries, bonuses, benefits, and payroll taxes for their officers and employees were $2.56 million dollars or 75.7% of their gross revenue with the president earning $198,275 for working a reported 42 hours a week.

It appears that once the rent and utilities are paid, almost everything else is distributed as wages and bonuses.

How long can any entity survive that relies on 76% of its gross revenue to pay salaries?

Each franchise varies on its level of activism. Some are known to be vicious, arbitrary, and capricious. Franchisees have been known to rely on threats and intimidation in order to coerce businesses into bending to the local franchisee’s will.

According to a 20/20 report one franchise went so far as to give a blogger posing as the terror group Hamas accreditation and an A- rating after receiving a dues payment of $425.

These tactics and documented pay-to-play allegations have damaged the BBB in the eyes of consumers. My gut says that no consistency or communication between the franchisees is further damaging their brand.

I posted a poll to a web group I belong to. A group of older people in the 40+ age bracket. (possibly the ONLY demographic that knows what the BBB is.)

The question was “Do you use the BBB when vetting businesses?”

The results were:
“I always use the BBB” 0%
“I use the BBB occasionally” 12%
“I never use the BBB” 82%
“What is the BBB” 6%

There were many comments:

“No. Has no bearing on my selection of a business.”

“I’ll check the BBB right after I look up your phone number in the paper yellow pages and get my ice and milk delivery put away…”

“I think that the BBB is a business if you pay that will say how great you are. They are worthless.”

“All the BBB said was that the dealer probably had good reasons for what they did, and that they were a good BBB member. Since then, I don’t put any credence in the BBB.”

“You don’t need the BBB to vet businesses anymore. All you need is “Google””

“In my opinion, BBB is absolutely worthless. I never base any decision about a business by whether or not they take part in BBB’s shakedown.

So while anecdotal and not a large enough sample size to be scientific or definitive; 88% of the respondents either “NEVER” use the BBB or don’t even know what the BBB is.

Much like Amazon with their “next day” delivery is rendering the “brick and mortar” store obsolete, the internet search engines are forcing the Yellow Pages to realize their own extinction, and disruptive technology making easy access to online reviews with unfiltered and better information for the consumer is rendering the BBB obsolete.

Again, evidence would seem to indicate that it’s happening and simply a matter of time, so; “how long before the BBB is irrelevant?”

Steve Miles
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Posted In: ACCA Now, Opinion

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