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What Is Operating Revenue?

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Revenue is the primary focus of many business owners and with good reason. Getting money flowing into your business is the first step toward success and profitability. In fact, without revenue, you don’t have a business.

Since revenue is so important, it must be easy to understand, right? Isn’t any money coming into the business revenue?

Actually, not all money coming into your business is considered revenue. And the inflow that is revenue takes several different forms. It’s important to understand how each type of revenue impacts your business accounting and financial statements.

When you think about your business’s revenue, you are probably thinking about a very specific type of revenue: operating revenue. Both operating revenue and non-operating revenue have a positive impact on your business’s finances, but they are not created equal—nor are they reported in the same way on your financial statements.

So, what is operating revenue, and how does it differ from non-operating revenue? How can you tell the two types of revenue apart, and why is it important to do so? Let’s start with a brief operating revenue definition and several examples.

Operating revenue definition

Operating revenue comes from your business’s primary income-generating activity or activities. You might already be familiar with operating revenue, but just know it by a simpler name: sales.

When you first start your business, you will probably only have one or two income-generating activities. These activities are usually directly related to the sale of your product or the delivery of your service. As your business grows, though, you will likely develop other income-generating activities in your business. Not all of these income-generating activities produce operating revenue, though.

Let’s clarify what operating revenue is—and what it is not—with a series of examples.

Operating revenue examples

Let’s say a business produces income in three different ways:

  • Sales of merchandise

  • Contributions from donors

  • Providing services to customers

Which of these three income-generating activities represent operating revenue?

It depends on the business. Here are three examples of how these three types of income-generating activities impact three different types of businesses.

Example 1:

A retail business typically will produce operating revenue from the sale of merchandise. However, that same business might occasionally bring in an outside expert to provide a workshop (service) for customers; this is common in craft and home improvement stores. Additionally, whenever the business is considering launching a new product, they might do some crowdfunding (where they solicit contributions from donors).

This retail business has three types of income, but only one—the sale of merchandise—is operating revenue.

Example 2:

A nonprofit organization, on the other hand, often produces its operating revenue through contributions from donors. But they might also sell merchandise (like T-shirts, window decals, and tote bags) to raise awareness for the organization. Sometimes, a nonprofit will even provide a service—like a community fair—at a reduced cost.

Like the retail business, the nonprofit organization has three types of income, but only the contributions from donors are considered operating revenue.

Example 3:

A service-based business—like a preschool—sells services to their customers, and the customers pay for those services through tuition. Like the nonprofit organization, the preschool might also sell merchandise, either to raise awareness or promote community spirit. Once a year, the preschool might do a fundraising campaign to encourage past customers and other members of the community to contribute to the preschool’s capital fund.

In this example, the preschool—like the retail business and the nonprofit organization—has three types of income. But only the tuition from the service provided to their customers is considered operating revenue.

As you can see from these three examples, what is operating revenue for one business might be non-operating revenue for another. To further complicate things, different businesses within the same business type might have different primary income-generating activities. In the example of the retail business, workshops and classes could be offered on a regular basis, and so they would be considered operating revenue.

If you aren’t sure how to classify your various income-generating activities to properly identify your operating revenue, your business accountant or bookkeeper can help.

Operating income vs. revenue

So far, we’ve been very careful to use the word “revenue” when referring to the cash inflow from your primary income-generating activity. The words “income” and “revenue” are often used interchangeably, though. There aren’t any problems with this, as long as you are certain you understand the meaning of the words as they pertain to your financial statements. Let’s take a closer look at operating income vs. revenue.

Typically, “revenue” means operating revenue, or “top-line” revenue (“top line” because it is the first number on your income statement). In other words, revenue is the total amount of money coming into your business from your primary business activity, less any refunds or returns. The financial statements produced by many modern accounting software packages refer to revenue as “total income.”

On the other hand, operating income is your income after subtracting the operating expenses in your business from your gross profit. Your cost of sales—or cost of goods sold (COGS)—is deducted from your revenue (total income) to calculate your gross profit. Operating expenses are the expenses that go into running your business: rent, administrative costs, supplies, etc.

Operating income is like net income—or your bottom line—except operating income doesn’t include interest, taxes, or non-operating income.

The important thing to keep in mind here is that operating income is not the same as operating revenue/top-line income/total income. Operating revenue or total income is the total cash inflow from your primary income-generating activity. Operating income is the income you have after subtracting the costs of doing business. When you are discussing your financial statements with your accountant or bookkeeper, make sure you are clear about the terms he or she is using.

Operating revenue in your financial statements

Operating revenue appears on your income—or profit and loss (P&L)—statement. As mentioned above, it is the top line—or total income—on the income statement. If you issued refunds in your business, they are subtracted from the total sales to arrive at operating revenue (sometimes also called “net sales”).

Why operating revenue is important

Understanding your operating revenue—what it includes and what it doesn’t—allows you to make year-over-year comparisons of your income statement. At a glance, you can assess the health of your business using the metric of revenue.

If operating revenue and non-operating revenue were combined on your profit and loss statement, unusual activity—like the sale of a piece of equipment—could lead you to make an incorrect assessment of your business’s revenue trend. This, in turn, could cause you to make potentially devastating decisions about your business’s direction.

Other types of revenue besides operating revenue

As we stated earlier, not all money coming into your business is considered revenue. And revenue itself can take many forms, not just operating revenue. Here’s a look at some other types of business revenue and non-revenue.

Non-operating revenue

Not all revenue that comes into your business is from your primary business activity. Therefore, not all revenue can be considered operating revenue. Revenue that is not considered operating revenue is instead classified as non-operating revenue. In the examples earlier:

  • Contributions from donors and sales of services were non-operating revenue for the retail business.

  • Sales of merchandise and sales of services were non-operating revenue for the nonprofit organization.

  • Contributions from donors and sales of merchandise were non-operating revenue for the preschool.

There are other types of non-operating revenue that can impact your profit and loss statement:

  • Sale of assets (buildings, vehicles, equipment, etc.)

  • Interest income

  • Investment income

  • Income from the settlement of lawsuits

All these examples of non-operating revenue have two things in common:

  1. They are not produced from the primary business activity of the company.

  2. They are sporadic and not expected as part of your business’s income on a regular basis.

Non-operating revenue in your financial statements

Non-operating revenue is typically found toward the end of your profit and loss statement, below operating income and above net income/profit (the “bottom line”). This allows you to clearly see your business’s financial position from operating activities, prior to the impact of non-operating revenue.

Non-revenue cash inflows

Not all cash that comes into your business is from operating revenue or non-operating revenue. Investments from shareholders, contributions of cash from owners, and loan proceeds are all examples of non-revenue cash inflows.

You can find all your operating and non-operating expenses on your profit and loss statement. Non-revenue cash inflows, on the other hand, are found on the balance sheet. And the impact all the different cash inflows—operating revenue, non-operating revenue, and non-revenue—has on your business’s cash balances is found on the statement of cash flows.

Operating revenue: The bottom line

Revenue is the lifeblood of your business. Without revenue, you don’t really have a business at all. And although any money coming into your business is a good thing, in order to accurately gauge your business’s health you need to be able to quickly determine your operating revenue.

Operating revenue is what your business makes from its primary income-generating activity. Because all businesses are different, what is operating revenue for your business might be non-operating revenue for the business in the office next to yours.

You can easily find your operating revenue on your profit and loss, or income, statement. It might go by another name like “total income,” but regardless of what it’s called by your accounting software package, it is the top line of your P&L after refunds are deducted.

As your business grows, non-operating revenue will likely impact the cash inflows in your business. It’s important to separate this revenue from your operating revenue in order to maintain a clear understanding of how your business’s primary income-generating activity is performing.

Operating revenue isn’t the only important metric in your business. Gross profit, operating income, and net income all tell you slightly different things about the health of your business. Your accountant or bookkeeper can help you track trends in these metrics, as well as provide guidance on the ones which are most important for you to focus on at your stage of business.

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Guide to Starting a Transportation Business: Key Steps and Strategies

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Did you know that the transportation industry relies heavily on the trucking sector for 72.5% of its freight transportation? That’s a lot of goods being moved around the world on the back of trucks!

And guess what? The future looks even brighter for this industry. Experts predict the global transportation industry will experience a compound annual growth rate (CAGR) of 38.5% until 2027.

With such promising statistics, it’s no wonder that starting a transportation business can be a smart decision. Whether you dream of running a taxi service, delivering packages to people’s doorsteps, or even managing a logistics company, the opportunities are endless.

photo credit: Tima Miroshnichenko / Pexels

Whatever business option you may select, in this article, we’ll walk you through the key steps and strategies to help you kick-start your transportation business. So, let’s begin!

Conduct Market Research

Before diving into the transportation business, it’s crucial to conduct market research to understand the demand, competition, and potential opportunities in your target market. It’ll help you make informed decisions and tailor your services to meet customer needs effectively. Let’s explore this step further by asking three important questions:

1. Who are your potential customers?

To identify your potential customers, consider demographics such as age, gender, location, and income levels.

For example, if you plan to start a rideshare service in a college town, your target customers might be students looking for affordable transportation options.

2. What is the level of demand for transportation services in your area?

Assess the existing transportation options in your area and determine if there’s a demand gap.

For instance, if you discover that there’s a high demand for medical transport services for the elderly population, you could explore starting a specialized medical transportation business.

3. Who are your competitors, and what sets you apart?

Learn about the leading service providers in your area and how they operate their business. Analyze their strengths and weaknesses and determine what unique value you can bring to the table.

For instance, if you’re starting a courier service, you could differentiate yourself by offering faster delivery times or specialized handling for fragile items.

This way, you can gain valuable insights into your target market, understand customer preferences, and develop a competitive edge.

Create a Business Plan

Needless to say, every successful business starts with a well-crafted business plan. It serves as a roadmap, outlining goals, strategies, and financial projections. Ultimately, it helps one stay focused, secure funding, and make informed decisions.

So, to kick-start your business, you must take time and create a robust business plan. Make sure to include details such as your target market, competitive analysis, marketing strategies, operational procedures, and financial forecasts.

Also, be realistic and thorough in your projections, such as considering expenses like vehicle acquisition, maintenance, fuel, insurance, and marketing costs. Agree or not, it will come in quite handy when pitching the investors.

Obtain the Necessary Permits and Licenses

It doesn’t matter what industry you are a part of; complying with legal requirements is a must for the smooth functioning of the business. So, contact your local government or transportation authority to understand the permits and licenses necessary for your specific transportation service.

This may include commercial driver’s licenses, vehicle permits, insurance coverage, and business registrations. You must meet all these legal obligations before launching your business.

It will not only help avoid any legal issues down the road but will also demonstrate your commitment to operating a legitimate and compliant transportation business. It also builds trust with your customers, who expect an honest and reliable transportation service.

Business vans

Acquire Vehicles and Equipment

The backbone of your transportation business will be the vehicles and equipment you’ll use. Not only do you need reliable vehicles to transport passengers or cargo, but you also need to ensure that they are well-maintained to avoid service disruptions.

According to professionals at Auto Glass Zone, one crucial aspect of vehicle maintenance is taking care of the glass components, such as windshields and windows. It’s because these provide visibility and safety for both drivers and passengers.

But, continuous exposure to road conditions and weather elements can damage chips, cracks, or other glass. That’s why it is essential to promptly repair or replace any damaged glass to maintain the safety and integrity of your acquired vehicles.

In addition to this, consider factors such as fuel efficiency, maintenance costs, and cargo capacity when acquiring vehicles and equipment for your business. Continuing the example above, if you’re providing courier service, you may also need equipment like hand trucks, dollies, or refrigeration units.

Build a Strong Network

Apparently, networking plays a vital role in the transportation industry. It involves establishing relationships with suppliers, clients, and other businesses in related industries. It opens doors to collaboration, referrals, and valuable partnerships.

For example, connecting with a local delivery service can lead to partnership opportunities where you can combine forces to provide comprehensive logistics solutions. Additionally, maintaining a strong online presence through a professional website and social media platforms allows you to showcase your services, attract customers, and engage with your audience.

Even so, keep in mind that networking is a two-way street. So, be proactive in reaching out, be a reliable and helpful partner, and nurture your connections.

Focus on Customer Service

Last but not least, when running a successful transportation business, one of the most critical aspects is providing excellent customer service.

Why is customer service so crucial? Well, imagine you’re a passenger in a taxi or waiting for a package delivery. How would you feel if the driver or delivery person was rude, unhelpful, or unresponsive? It would certainly leave a negative impression and make you think twice about using that service again, right?

Focusing on customer service can set your business apart from the competition and build a loyal customer base. So, train your staff and promptly address customer inquiries and concerns. You can also consider implementing technology solutions like GPS tracking systems or mobile apps to improve efficiency and communication with your customers.

Fleet tracking device in a company car

Final Words

Starting a business requires dedication, perseverance, and adaptability. So, stay informed about industry trends, continuously evaluate and improve your operations, and be open to learning from your experiences.

With the right strategies and a passion for providing reliable transportation services, you can navigate the road to success in the transportation industry.

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Want to Start a Business in France? Four Key Tips for American Entrepreneurs

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For many Americans, the prospect of France is a romantic one, with hugely popular films and TV series like Amelie, Chocolat and Emily in Paris cementing France’s reputation for glamour, charm and indulgence. But while the appeal of France’s lifestyle and culture is undeniable, the country also offers something that’s less well known – a swath of business opportunities ready to be seized by internationally-minded American entrepreneurs.

With an estimated 4,500 American companies already operating in France, it’s clear that the country is an attractive prospect to American business people, and there is the potential for great success in La République française. However, if you want to start a business in France (or expand there) as a US citizen, it always pays to know as much as possible beforehand in order to plan thoroughly, avoid common pitfalls and give your business the best chance of thriving.

photo credit: Andrea Piacquadio / Pexels

Why France?

As the third-largest economy in Europe (and seventh in the world), there is a long list of reasons why France is so appealing to business people, some of which include:

  • France is a vibrant and diverse nation that boasts a skilled workforce, a large consumer population and access to the world’s largest trading bloc through its membership of the European Union.
  • It is also welcoming and business-friendly, with the French government offering financial incentives to both new and established businesses and investing heavily in research and development.
  • France has a strategically useful location buttressed by a highly developed transport infrastructure, greatly contributing to ease of travel and transit both within and outside of the country. London, for example, can be reached in under 2 and a half hours by Eurostar from Paris.
  • France isn’t only large in terms of its economy – by surface area, France is the largest country in Europe and is made up of thirteen regions that all represent unique opportunities for entrepreneurs. It also borders eight countries and has a Channel, Atlantic and Mediterranean coast.
  • An international centre of business, the Paris region enjoys global status as a major business hub, and is the number one region in Europe for hosting the world’s top 500 corporate headquarters.

Five Tips For Starting Your Business in France

One: Be prepared to navigate bureaucracy 

For foreign company founders from outside the EU, the EEA or Switzerland, there are predictably some i’s to dot and t’s to cross when setting up a company in France, and the process can take some time. That being said, however, France is welcoming enough to entrepreneurs that you may find there are fewer hoops to jump through than you first expect, and there are many resources you can access to ease the process.

Anyone can establish a business in France by taking steps such as registering a business address and opening a bank account in the country, but if you would like to move to France to embark on your new venture you should apply for a long-stay visa known as the “Entrepreneur/Self-Employed” (VLS-TS) temporary residence permit.

Eligibility is determined via factors such as your ability to provide evidence that you will be engaging in an economically viable activity during your stay, and when it has been approved, the visa authorises residence for 12 months. During this time, you are allowed to live in France and engage in the commercial activity that you have outlined in your application.

This will involve a trip to the French consulate, of which there are ten across major cities in the USA. Once established, you will have to register your French business according to the correct category of your enterprise. It is also important to bear in mind that France has particular regulations across various business sectors and employment practices, and that corporate banks in France require minimum capital investments.

Learning a second language

Two: Start learning the language

With a population that has originated in every corner of the globe, multilingualism is not unusual in the USA – one in five US adults speak a language other than English at home, (of which Spanish is the most common). But while the USA has no official language, it’s fair to say that English is the de-facto, and most particularly in the business world.

It is also the case that English is the most widely understood language in the EU, and a significant proportion of Europeans speak English as their second language (with an impressive 25% able to hold a conversation in two additional languages to their mother tongue). What’s more, 39% of French people report they are able to speak English, and many ex-pats move to the country without being able to speak French.

Despite this, it would be wrong to assume that you can easily default to English and thrive while running a business in France. The population of France primarily speaks French in both personal and professional contexts, and the French people have considerable language pride.

English might be widely spoken in business circles, but demonstrating your willingness to learn and use French phrases of greeting will be greatly appreciated, and you should bear in mind that proficiency in English is not a given. Over time, many ex-pats discover that shaping up their French language skills is key to taking advantage of everything the country has to offer.

You should also account for the fact that French is the only accepted language for official documents and contracts, and as 61% of French people don’t speak English, you will need a plan for smoothing over language incompatibilities in your business operations.

Three: Consider your new audience

In many important ways, France is not vastly different from the US, but it is still important not to underestimate cultural differences when setting up or expanding a business here. While certainly smaller than the US, it’s also important to remember that France is far from small by European standards, and like the differences between US states, there is significant regional variability across the country.

Whether it’s something simple such as the greater prevalence of smoking amongst French adults (around 33% versus 12% in the US) and the lack of a widespread tipping culture, or more complex subtleties in language, politics and history, there are many things that may be surprising about France as an American. This is why we would suggest seeking the advice of those who know the country well in many points of your business to understand how it may land with a French customer base.

There are also differences in laws and regulations which may affect your business, so it’s always worth doing thorough research as you draw up your French business plan to identify and account for factors which may not apply in the USA.

Business workshop

Four: Understand France’s working culture

American working culture is rather set apart from its European friends, with US citizens generally working longer hours, having less vacation time, and eating lunch (if they don’t skip it) at their desks. It also isn’t unusual for people to take calls and answer emails outside of work hours, and employers tend to have more flexibility when it comes to hiring and firing.

The French, on the other hand, tend to have a more leisurely pace of life which is facilitated by both government-mandated workers’ protections and the expectations of their working population at every point of the pay scale. This may take some adjustment when running a business and is something you’ll need to plan around – but the upside is, if you have chosen to live in France, you’ll get to enjoy this slower pace of life too!

Some things to take into account regarding French working culture are:

  • The French will take their lunch break away from their desk, so unless you organise a specific lunch trip, this is a bad time for calls, meetings and emails (if you need an immediate response).
  • They don’t only have significantly more holiday entitlement than Americans usually enjoy, they actually take it (whereas the average US employee who receives paid vacation only actually takes 54% of the allotted time each year.) This is usually most evident in July and August, when business slows down considerably, and as many employees will book more time off around public holidays, it pays to plan around these times of year.
  • Since 2017, managers and employees of companies with more than 50 staff have not been required to answer emails outside working hours, and employees in smaller companies are likely to follow suit.
  • French corporate operations are, for the most part, very hierarchical. When doing business with another company, take the time to understand the chain of command to ensure you are talking to the right people in order to get results.
  • Hiring in France is an expensive proposition. Employers must account for high individual taxes when determining employee wages and the slate of employment benefits they are expected to provide. While these costs are high, however, people doing business in France tend to be repaid with a skilled and secure workforce.
  • Networking is often key to success in the French business world, with personal recommendations often meaning more than accolades and titles. Forging business relationships in France can be more difficult than in America (although the collaborative nature of American business may give you a ready-made advantage), but they tend to last for a long time, making them well worth the effort.

There is a world of opportunity to be discovered by American entrepreneurs who take the plunge and start a business in France, and with proper research, a comprehensive business plan, and that famous American work ethic, success à la française can be well within your grasp.

This post was written by Katya Puyraud, a company formation expert at EuroStart Entreprises, who help entrepreneurs start a business in France and take the headache out of opening a company abroad.

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11 Tips You Won’t Want to Forget When Setting Up Your Online Store

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Whether they’re using a streamlined platform like Shopify or are building their site from scratch, what’s one tip new entrepreneurs won’t want to forget when setting up their online store? Why?

These answers are provided by Young Entrepreneur Council (YEC), an invite-only organization comprised of the world’s most successful young entrepreneurs. YEC members represent nearly every industry, generate billions of dollars in revenue each year, and have created tens of thousands of jobs. Learn more at yec.co.

1. Prioritize Your Site’s Performance

When setting up an online store from scratch or by using platforms like Shopify, always prioritize your website’s performance. This means getting the basics right for your site and looking into matters like your load time, navigation, broken links, unoptimized images, code density, content delivery network (CDN) concerns and caching issues. A website with a clunky user experience won’t get you anywhere.

Jared Atchison, WPForms

2. Consider Sales Tax Implications

One thing that new entrepreneurs overlook when setting up their first online store is the sales tax implications of selling online. Depending on your products and your customers’ locations, you may be required to collect and remit sales tax. Meet with your CPA to make sure you understand the sales tax laws and nexus rules before starting your online store. It will save you a world of headache.

Shaun Conrad, Number2 CPA Exam Resources

3. Think About the User Experience

Prioritize the user experience to ensure success. A well-designed UX fosters customer satisfaction and boosts sales by making it easy for shoppers to navigate, find products and complete transactions. Focus on a clean layout, intuitive navigation, responsive design for mobile and fast load times. This can help convert visitors into loyal customers and they can grow their businesses more effectively.

Jinny Hyojin Oh, WANDR

Improving website security

4. Ensure You’re Up to Date on Security and Browser Trends

Be up to date on security and browser trends. If a customer is getting a warning by just accessing your website, you’ve already lost a customer. To make sure your online store is secure, you can take several steps, such as updating your site and plugins on a regular schedule, choosing a reliable hosting provider and implementing an SSL certificate. Once you have a secure site, the sky’s the limit!

Shu Saito, SpiroPure

5. Include Detailed Product Landing Pages

If you’re in the process of starting your first online store, don’t forget to create detailed product landing pages. On each landing page, include a list of features and benefits. Users need to know how your product or service will improve their lives before they make a purchase, and product pages are by far the easiest way to relay this information.

John Turner, SeedProd LLC

6. Build an Email List as Soon as Possible

One thing to remember when setting up your online store is that it’s never too early to start building your email list. Create a “coming soon” page as a placeholder on your site until it’s finished. Promote your new brand on social media and ask people to subscribe for the latest updates. You’re far more likely to see sales on day one if you have an email list packed with prospects.

Chris Christoff, MonsterInsights

7. Focus on Search Engine Optimization

One tip new entrepreneurs should remember when setting up their online store is prioritizing search engine optimization (SEO) from the beginning. This includes conducting thorough keyword research, optimizing on-page elements such as title tags and meta descriptions and building quality backlinks to the site. Properly optimizing the site for SEO can help increase brand awareness and sales.

Miles Jennings, Recruiter.com

Data privacy

8. Implement Practices to Guarantee User Privacy

One crucial aspect to consider when setting up your online store is user privacy. This is because protecting your customers’ personal information is becoming increasingly essential for building trust and maintaining a strong brand reputation. To ensure user privacy, you must implement strong encryption protocols, use a secure payment gateway and have a clear and transparent privacy policy.

Kelly Richardson, Infobrandz

9. Keep It Simple

Keep things simple, and don’t get carried away with all the bells and whistles at your disposal. Early on, it’s best to focus on getting a functional site live that makes it easy for visitors to find and purchase whatever you’re selling. A simple approach helps eliminate distractions from your site and helps ensure a frictionless shopping experience.

Ian Blair, BuildFire

10. Pay Attention to Your ‘Checkout Flow’

When setting up your online store, pay attention to your checkout flow. Most people will leave a website with items in their cart if the checkout process is clunky or missing key features. I suggest including an “always on” shopping cart, a minimal payment form, a progress bar and multiple ways to pay to maximize your conversion rate.

Daman Jeet Singh, FunnelKit

11. Optimize for Mobile

Optimizing for mobile is crucial when setting up an online store. With more and more customers using their mobile devices to browse and shop, it’s important to ensure your website is mobile-friendly and offers a seamless user experience. Failing to do so could lead to a significant loss in potential sales and customers due to frustrations during shopping.

Andrew Saladino, Kitchen Cabinet Kings

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