Gordy Opitz had to find a way to keep ComDoc’s employees focused after they lost what took 21 years to accomplishWritten by Adam Burroughs
When Gordy Opitz talks about ComDoc Inc., he starts at the beginning, explaining matter-of-factly that Walter G. Griffith founded the business equipment sales and service company in Akron in 1955. He traces its financial growth into the millions of dollars and outlines its industry’s evolution.
But the part of the story that elicits the most enthusiasm from Opitz involves the ComDoc employee stock ownership plan, which took 21 years to make its 615 employees 100 percent owners.
“We took an unbelievable amount of pride in being able to say to people that when you are working with ComDoc, you are working with people who own the company,” says Opitz, the company’s president and CEO. “That was an incredibly exciting time for us.”
Those exciting times, however, would come under threat. ComDoc was facing two serious obstacles in 2008: The great financial chill that had befallen the economy, and the loss of its largest product supplier, Ricoh, which was acquired by ComDoc’s biggest competitor, ostensibly pitting the former partners against each other.
Here’s how Optiz lead ComDoc through a turbulent period by ignoring the noise that could have silenced the company.
As ComDoc was moving toward 100 percent employee ownership, it was keeping its eye on Xerox, the industry leader, benchmarking with it to determine a fair share price for its own stock.
“As long as we could stay within 5 to 7 percent of that share price, we were going to keep it as an employee-owned company, which we were able to accomplish,” Opitz says.
ComDoc, at the time, was generating about $125 million in annual revenue. It had a great 2007 and was having a great 2008 when mid-year, Xerox inquired about ComDoc’s interest in being acquired.
Xerox’s midmarket customers had been a target for ComDoc. According to Opitz, “We built our business by going after Xerox placements.” But Xerox adjusted its strategy.
“Xerox recognized that the independent dealers, the ComDocs of the world, were closer to the street, closer to the customer, more effective, more efficient, had better billing processes and better service to their clients — all the things that we had done in building ComDoc,” Opitz says.
Simultaneously, the economy was cooling and ComDoc’s primary product supplier decided to sell direct to the customer. It was then that Xerox made its offer.
“Xerox put something in front of us and we knew it was our fiduciary responsibility to do the right thing for all of our shareholders,” Opitz says. “And we sincerely believed, given the circumstances in front of us, that making sure that our people who had been a part of this organization for many, many years were going to be secure. And that’s exactly what happened.”
ComDoc agreed to be acquired by Xerox, and the deal was finalized in February 2009.
It was a difficult decision to let go of the ESOP the company had worked so long to achieve, Opitz says, but the acquisition had a strong appeal.
“Our employees never had to worry about whether that stock price was going to decrease by 15 or 20 percent in one year, and how long it would take to recoup that drop,” he says.
Xerox was going to allow ComDoc to operate within the culture it had developed over the years, though it was under the new corporate ownership. The move, however, wasn’t without some turbulence.
“As we made the transition, I would say for the leadership group, there was angst involved because we had built succession plans moving forward for the future. Many of us on the leadership team had worked together for 20-plus years. We had been excited about what the future held for ComDoc,” he says.
For the most part, the company was able to retain its key people. Though there was some loss.
“I could probably count on one hand how many people ended up leaving ComDoc because of the transition,” Opitz says.
The hardest transition
While it was able to retain most employees as it transitioned from ESOP to corporate ownership, ComDoc was still facing the loss of its No. 1 product supplier, Ricoh, which, at the time represented about 80 percent of ComDoc’s business.
IKON Office Solutions, a multibillion-dollar company, and ComDoc’s biggest competitor bought Ricoh. Having lost its primary supplier, ComDoc got to work learning the product line of its new corporate owner, Xerox.
Technicians on the service side of ComDoc’s business were somewhat accustomed to servicing different products because there had been many iterations to the company’s product line, which foundationally was 3M, transitioning through Harris 3M, Lanier and Ricoh.
“So we had been used to selling and servicing different products. It was always at our speed, though. In this case, the race came to a quick halt in February 2009, and we could no longer sell Ricoh, so we immediately had to switch to the Xerox product line,” Opitz says. “That was the hardest transition, and I’m going to call it the learning phase — learning the product and then training all our service technicians in being able to service it.”
The task of servicing a brand new product line in a very short time was daunting. Coupled with the company’s sagging morale and the challenge was even more difficult. To get his company headed in the right direction, Opitz had to help his employees manage the problems individually and keep the lines of communication open.
“If you think about communication, it isn’t about all the times when things are going right, it’s also about finding out how people are feeling, what they’re thinking, being able to listen to them and help them understand and provide perspective,” Opitz says.
By having those conversations, he found that what was an issue to some people was irrelevant to others.
“But you’d never know unless you really stopped and asked the question,” Optiz says.
The next step was to reduce all the challenges the company faced into manageable tasks.
“You can’t allow it to become so overbearing that it consumes your thought process,” Opitz says. “We’ve always approached business that way — break it down into its simplest form and take these factors as they’re given to you. What are the pluses? What are the minuses? How do we sort through it? What are the strategies and tactics to push through it? And when you really break a task down, it sure becomes a lot easier to get after it.”
Learning to walk again
That philosophy was applied to training. Service technicians learned the product line at ComDoc’s service training center where they’d work on the product for three to five days to become proficient, and then follow up on their training in the field.
To train its sales force, the company utilized training webinars and developed matrixes of e-learning for each product.
“We would set matrixes up for each of our people with the products. They could do e-learning two hours a night from 5 to 7 p.m. So there was a lot of personal pride, there was a lot of time commitment by our people to get that accomplished.
“We had more than 200 technicians who had fully trained on certain products. I believe the first year we had more than 12,000 hours of training,” he says, which includes both the sales and service sides of the business.
“We had a big vision of what to do and we continued to break that down into small tasks, small focus areas, and we just made our mind up that we weren’t going to let external things influence our company,” Opitz says.
Though it’s a simple philosophy, it was still a very difficult transition. The year the company was acquired was flat compared to the prior one. But once the company started to understand Xerox and its product line, it started to expand, seeing its managed print business grow exponentially during that period.
ComDoc increased its revenues and profitability every year between 2009 and 2013. It grew from $125 million to $155 million in revenue during that time frame and its employee count has increased to 675 employees. ComDoc’s customer base continued to renew and grow year-over-year.
“And every year we just continue to challenge ourselves to continue to get bigger and stronger,” Opitz says.
A tough lesson
Once a company suddenly has the odds stacked against it, there are some simple steps to take to address the issue.
“Communicate early and often with your people,” Opitz says. “Make sure you have shared buy-in for what you’re trying to accomplish, and help people break down their challenges or tasks into small pieces and work hard at getting a resolution to them.
“Don’t let people become overwhelmed with what they believe might happen or what they believe might change.”
Opitz says he just tried to do the best he could every day and tried not to make the circumstances out to be an alarming issue so his colleagues didn’t become overly concerned.
“In my mind, at that time, ComDoc had more than 20,000 customers that had been great, loyal, ComDoc customers who knew our people personally,” Opitz says. “And if we were doing all the right things by our customers while in a product change, I just truly believed in my heart of hearts, that our people would find a way to work through it.” ●
- Communicate early and often.
- Breakdown challenges into manageable tasks.
- Do what’s best for the company and its employees no matter how difficult.
The Gordy Opitz File:
Name: Gordy Opitz
Title: President and CEO
Company: ComDoc Inc.
Birthplace: Meadville, Pa.
Education: He received a bachelor of arts in education from Westminster College.
What did you learn from your days as the assistant general manager for the Atlanta Braves AA team? It’s very simple. Be willing to do anything. I was a shortstop and third baseman for the Westminster Titans. The front offices for minor league teams 30 years ago were small, so, when I say be willing to do anything, I mean there were some days where we did all the marketing for the club. There were days we helped sell tickets. There were days that if it rained we helped cover the field. It was a ton of fun. I realized it doesn’t matter what your title is. If the job needs to be done, you’ve got to figure out a way to go accomplish it.
Who has done the most to inform your perspective on business? Retired ComDoc Chairman Riley Lochridge and former ComDoc President and CEO Larry Frank. They taught us the business, and all the things I’ve talked about before — let’s make sure we continue to do things the right way, make sure we continue to attract and retain the right people in the organization. And ask, ‘Are we building a culture that is going to allow us to grow and sustain our growth?’
How would you like to be remembered at ComDoc after you retire? I’d like to be remembered as somebody who helped make a difference and helped make ComDoc become a better place; somebody who helped fulfill our vision of being a great place to work and a great place to be a customer.
Learn more about ComDoc at:
Richard Carpenter, professional surveyor and president of Accurate Technologies Inc., can’t understand why 3-D laser scanner technology, used in industrial surveying to create accurate 3-D models of objects or environments, isn’t more prevalent in the U.S. — but he has a few ideas.
“We don’t jump on new technology,” he says. “Some of the people who come out of college in mechanical engineering are lucky if they even took one 3-D CAD class. Some of the architects coming out of school haven’t had a full semester of 3-D CAD. So we’re a little bit slow to get on this, but it’s an incredible technology.”
Carpenter should know. He has been running his own industrial surveying business since 1987, having worked in The Timken Co.’s steel mill engineering facility for 10 years, where he learned the mechanical aspects of surveying.
“Years ago, most industrial firms had their own engineering departments and they provided most of their own services. They really didn’t go to outside people,” he says. When Timken, and other industrial companies, reduced staff in their engineering departments, the mechanical surveying that had once been provided in-house wasn’t available. “It went from a market where 90 percent of the work was done in-house to probably 90 percent of the work now is subcontracted.”
That’s when Carpenter started getting calls to do mechanical surveying work.
“I started getting enough part-time work that within a few months I was busy full time,” Carpenter says.
Finding a niche
When Accurate Technologies first got started it mainly helped install equipment to achieve the higher accuracies that the industrial firms were demanding. The company would work with mechanical equipment installers to put in mill equipment. The contractor would get the equipment within 1/16 of an inch, and then call Accurate Technologies to get the final alignment.
“When you’re dealing with moving parts, heavy equipment and high horsepower motors and gearboxes, misalignment creates problems,” Carpenter says. Misalignment could damage product as it comes off the machines, which means a company could be scrapping product because the equipment is not aligned right.
“And that’s the No. 1 reason people call us,” Carpenter says. “For us a good project is when someone says they’re scrapping 6 to 7 percent of what they run, and we get done and they’re scrapping 0.5 percent or 1 percent. That happens to us quite often with steel mill equipment or any industrial equipment.”
Matching people with technology
In order for the company to grow with the work that was available, it had to train employees to do industrial surveying from within because people with those skills weren’t prevalent in the market.
Land surveyors, those who have the closest skills to industrial, are taught to make ground measurements that are accurate to 1/8 of an inch, far from the 1/1,000 of an inch accuracy needed in industrial work. In addition, much of the equipment and processes used by land surveyors isn’t suited for industrial survey work. Now, with laser trackers and scanners, it’s especially true — the equipment is very different.
The 3-D laser trackers employed by industrial surveyors use laser systems to “draw” surfaces it comes in contact with. It provides 3-D coordinates that translate to 3-D positions in space.
In addition to the tracker, industrial surveyors also have 3-D laser scanners. The equipment can shoot 900,000 points per second for every 1/16 or 1/8 of an inch, and each point has an XYZ position. This results in a point cloud — billions of points interpreted by software that analyzes common features in the points. These commonalities could translate into cylinders, flat surfaces, piping, etc. The result is a 3-D drawing of all the elements of the space being shot.
“Jobs that used to take me one month I’m doing in two days with this scanner, and giving 100 times the information I had before, if not 1,000 times,” Carpenter says.
In the past it took a high-precision surveyor to do industrial work because everything was done with optics. Optics means using traditional instruments — a surveyor’s transit — and relying on a surveyor’s ability to read a scale to 1/64 of an inch.
“But maintaining accuracy with the optics is very difficult,” he says. “When you deal with optics you have to have two instruments, you have to have a transit to shoot a straight line and an optical level to get the elevations. So whenever you’re using optics you’re really not in a 3-D world.
“Probably 90 percent of industrial work is still done with optics. But the laser tracker can far exceed the work you can do with optics. The speed and the ability to 3-D document what you’re shooting versus handwriting things in field books is quite a difference.”
Seeing into the future
The largely digital technology is allowing Accurate Technologies to undertake projects for engineering firms in Canada and Germany. One of its projects, a steel mill, was scanned entirely so it can be designed on three different continents.
“They’re going to have different engineering people all over the world looking at that information and designing it in unison,” says Carpenter.
“I know this is the future,” he says. However, he says not enough people are being trained properly to enter the field.
“We’re going to be in a 3-D CAD world,” Carpenter says. In the bigger picture, he expects the floor plan of a building and its utilities will get interpreted through geographic information systems, or active 3-D models.
Architects and engineers of the future may walk though a 3-D model of a building and see it in its entirety as it exists. It also allows the user to attach databases, drawings and spreadsheets so he or she can access any information about a facility.
“And there’s already software out there that makes that happen in 3-D. If you had a 3-D model of your facility you could have the ability to look up, down and around and see everything in a model. I think we’re really going to get to that 3-D world fast.” ●
Having a job or a career can be central to a person’s self-confidence. Coleman Professional Services Inc., a nonprofit provider of behavioral health and rehabilitation programs, works to find jobs for those who may have more trouble finding a job than most — those who are mentally challenged or physically disabled.
CPS offers job placement, training and temporary work for those with barriers to employment while helping employers connect to this segment of the workforce through recruiting and outplacement. When successful, it means getting people off entitlements and helping them become more productive members of the community.
Smart Business spoke with CPS’s President and CEO Nelson W. Burns to learn more about the organization and the impact it has on those it serves.
SB: Where is CPS headquartered and what geographic areas does it serve?
NB: Coleman is headquartered in Kent, and serves individuals in seven Ohio counties that include Trumbull, Portage, Stark, Summit, Allen, Hardin and Auglaize.
SB: Whom in the community does CPS seek to help with its employment services?
NB: Coleman’s employment services are designed to serve any adult more than 17 years of age who has a disability.
SB: What services do you offer these individuals and what do you hope is the end result of their involvement?
NB: Our employment services work to support a final outcome of employment. However, Coleman might provide a wide variety of services to help facilitate employment. These services might include skill training, job experience, education support and employment aides such as clothes or transportation vouchers. Coleman operates businesses that actually hire people with disabilities. Coleman employs more than 80 people with disabilities in its Coleman Data Solutions business, a document management service.
SB: How would individuals with barriers to employment be affected if these CPS services suddenly vanished?
NB: These individuals with employment barriers would rarely be able to find employment or keep employment. Without employment, individuals with disabilities would remain on entitlement funds and less likely to contribute to their families and the community.
SB: What misconceptions does the organization spend much of its time overcoming?
NB: Many people think that people with disabilities are lazy or ignorant. The truth is that many of these individuals are very reliable and loyal employees.
SB: How do you quantify the benefits a community (business and social) experiences when these individuals are able to get jobs?
NB: The key benefits from employment are reduction of entitlements, active participation in the community without idle activities, proper model behavior for their families and more discretionary money to participate in the economy.
SB: What does it mean to someone who otherwise might have trouble getting a job to be employed?
NB: Employment is an important factor of our self-concept. With a job, people feel more confident about themselves and their contribution to the community. In a recent testimonial, a woman of 40 years of age commented to me how her unemployment resulted in deep depression and hospitalization. These conditions can lead to broken families, mental illness, addictive behavior and expensive health care.
SB: Other than funding, what is CPS’s most critical need?
NB: CPS continues to have challenges in helping people navigate through complicated systems of public aide, Medicaid and a complex system of governments and fellow nonprofit organizations.
SB: Why should a company consider employing individuals with the disposition(s) you serve?
NB: Companies can hire a reliable individual who will remain in employment. Our clients have a history of loyal and focused work experience. A company can win in business as well as helping a person and helping the community.
SB: How can companies get involved with CPS?
NB: Companies can call on CPS’s employment services for their special needs in their business. ●
How to reach: Coleman Professional Services, (800) 673-1347 or www.coleman-professional.com
On a daily basis, I see how the work of the private sector and the work of the nonprofit sector are inextricably intertwined — all a part of the same big picture. The more we understand that fact as a community, the more we can align our investments and leverage our strengths.
The GAR Foundation is a private foundation created in the late 1960s by Galen Roush, the co-founder of Roadway Express Inc. Roush was a standout leader in the industry who had grown the small local trucking firm he launched during the Great Depression into a national powerhouse.
When he and his wife Ruth set up the GAR Foundation to fund nonprofit organizations, they did so with the understanding that a high-functioning nonprofit sector supports the success of a business like Roadway.
As businesses grow and innovate, they need a well-educated workforce. The nonprofit sector’s many investments in education help to ensure that Greater Akron’s businesses have a ready supply of world-class, “homegrown” talent.
As businesses work to attract great talent to their teams from other places, they need the kind of cultural vibrancy that makes Akron a distinctive, quality place. The nonprofit sector’s investments in arts and culture support community vibrancy and quality of life. Businesses seek to locate and grow in high-functioning, healthy communities where citizens’ basic needs are met and all people have an opportunity to have a productive life.
The nonprofit sector supports the basic needs of Akron’s citizenry, helping to make this a community we can all be proud to call home.
One hand washes the other
We can see some ways in which a high-functioning nonprofit sector supports a healthy private sector. And yet the benefits run at least as strongly in the other direction — from business to nonprofits.
Businesses provide leadership talent to nonprofits through board service and volunteer hours. Every successful business person in Greater Akron can support the well-being of the community by volunteering his or her time and talents to nonprofits.
Moreover, as funding for nonprofit work contracts and its needs expand, cutting edge business practices become increasingly important to the operation of successful nonprofit enterprises. Practices long favored in the private sector — from the strategic use of data for performance management to rigorous outcome-based budgeting — are becoming commonplace in nonprofits.
So while many see the private sector and the nonprofit sector as “two different worlds,” they in fact have a close, symbiotic relationship. Nonprofits help to support the community conditions in which businesses can thrive and grow; thriving businesses in turn create prosperity and opportunity for the entire community. ●
Christine Amer Mayer is president of the GAR Foundation, which awards grants to 501(c)(3) nonprofit organizations in Summit and adjacent counties in the areas of education, arts and arts education, health and social services, and civic and nonprofit enhancement. She can be reached at (330) 576-2911 or email@example.com. For more information, visit www.garfoundation.org.
Have you ever wondered why simple projects often fail during execution? It could be because project planning strategies were not implemented. You might not think this is important, but many organizations have found that adhering to basic project management principles saves time and energy.
To create a strong project plan, start with the end in mind by defining the deliverables that will be provided to the customer. Once this has been established, the project manager can determine and outline the steps needed to attain the deliverables.
While these steps might initially be easy to identify, assigning a realistic timeline and the associated tasks can be difficult for the project manager alone, so he or she must depend on stakeholders to help assess these tasks.
Making key assignments
It is important to identify the appropriate stakeholders to fill these roles. The project manager, along with the stakeholders, should be able to identify hurdles and potential problems before the project starts. These should be factored into the project plan as well as potential ways to manage these problems on the front end.
The role of the stakeholders does not stop with the development of the project plan and input related to timelines. Both are dynamic documents and changes are expected as the plan is implemented.
When problems arise
A detailed project plan developed by a project manager and key team members can help identify potential problem areas. It can also aid the project manager and sponsor in making quick, confident decisions. To facilitate project plan implementation and processes:
- Identify hurdles early, consider what to assess and when further assessments should occur.
- Begin parallel activity (key team members working on activities within their area of expertise at the same time).
- Implement a method that applies advanced work, utilizing templates to complete as much pre-work as possible that will be integrated into the final product.
- Determine what the critical activities are, which if delayed will delay the entire project.
- Maintain the project plan in a highly visible area to serve as a road map for the project manager and all key team members.
- Use previous project plans and timelines to identify inefficiencies, wasted time and poorly matched tasks.
Tips for project managers:
- Trust in your team and respect its members.
- Ensure that there is evidence of constant management and participation without being restrictive.
- Go into the project identifying the objectives and deliverables and be able to communicate these to the team.
- Maintain a highly visible project plan.
- Clearly define expectations and relevant work processes.
- When problems arise, meet briefly with key team members, identify problems and potential bottlenecks and deliver customer solutions.
- Facilitate team member/customer communication.
- Remove obstacles and manage conflict constructively.
- Understand that not all teams are created equal.
- Understand that adding more manpower does not always solve the problem.
- Recognize and reward achievement.
To be effective, a project manager must be able to assess the project needs and respond with an effective plan. When everyone moves in the same direction, decisions are made quickly and with confidence, ensuring quality deliverables. ●
Victoria Tifft is founder and CEO of Clinical Research Management Inc., a full-service contract research organization that offers early to late-stage clinical research services to the biotechnology and pharmaceutical industries. She can be reached at firstname.lastname@example.org. For more information, visit www.clinicalrm.com.
Still fresh in our minds is Paula Deen’s fall from grace, Janet Jackson’s wardrobe malfunction (whether intentional or accidental), News Corp.’s O.J. Simpson book deal, KFC’s Oprah Winfrey chicken coupon debacle, and of course, the Carnival Cruise disasters. All were major crises in the past decade that prompted a “we better be prepared” attitude among industries, businesses and institutions.
Before a disaster strikes, your survival strategy and blueprint for crisis communications must already exist.
The same is true for a mom-and-pop store as well as a Fortune 500 company. Every business is vulnerable; in these uncertain times, we are probably more vulnerable than we thought for a variety of reasons. The important concept to grasp is that a crisis can happen to any of us.
The current economic climate is enough reason to develop a crisis-management plan (and we won’t make you nervous by mentioning strikes, layoffs, closings, tainted products, activist threats, sexual harassment and workplace injuries). Are you ready to handle media queries when your back is against the wall? Failure to comply with legalities and industry regulations also poses potential predicaments.
Here are several suggestions to prepare for various scenarios:
1. Assess your assets and obstacles. Where are your company’s vulnerabilities? Who would be affected if a crisis occurred? Staff? Customers? How would those affected be informed and reassured?
2. Assemble a crisis team — the fewer members, the better. Clearly define each member’s responsibilities in advance so the team is “at the ready.”
3. Put a plan in writing. Keep it simple, well organized and easy to understand.
4. Prepare background data. Include company and facility information, product lists, fact sheets and applicable data.
5. Set up an internal notification procedure. Designate a single spokesperson and an alternate. Decide who does what and when.
6. Establish external contacts. Compile (and update) lists of emergency response teams, media contacts, key customers and suppliers, major investors, elected officials and industry experts. Make certain the lists are updated as addresses/contacts/phone numbers/emails change.
7. Practice your PR plan. Train spokespeople how to communicate with assertive reporters, concerned investors, frightened employees, nervous clients and others who may be affected by a crisis.
8. Establish a command center. Determine where the crisis team will convene and operate from during a crisis. The space must be centralized and secure, with adequate computer and telecommunications capabilities.
9. Test the plan. Initially — and periodically — rehearse the procedure, discuss the possible scenarios and identify any weaknesses the crisis communications plan may have. Make appropriate tweaks.
Ride out the storm
Remember, time heals. Accidents and mistakes can be forgiven, even forgotten over time, if handled properly and with integrity. The way your company handles the crisis will dictate the shape of your reputation once you emerge. Your goal should be to manage crises from a point of strength and resolve. That’s probably the bottom line.
Your company will do much better in keeping your good reputation and business relationships if it has a good PR program in place before any issue happens. If your firm already has established credibility, it will serve as a foundation to weather the storm. ●
Rod A. Covey is president of Covey-Odell Advertising Ltd. of North Canton. He launched Covey-Odell Advertising in 2008, and the North Canton Area Chamber of Commerce named the company the 2009 business of the year. For more information, visit www.covey-odell.com.
Overseas sales and exports can really help business owners grow their companies. But, when the company gets its first international inquiry, an owner might say, “I always deal cash in advance. Send me a check. I’ll send you the product.”
That’s not how the world works, says Art Rice, vice president and manager of International Operations and Product Management at FirstMerit Bank.
“The world rarely operates on cash in advance anymore. So, it may be days, weeks or months between the actual sale of the merchandise or service and the resolution of the accounts receivable,” he says.
This extended sales cycle can strain your working capital, but the U.S. government has several programs to help, Rice says, including the Export-Import Bank of the United States (Eximbank) and the Small Business Administration (SBA).
And your banker can be very helpful as you get into international sales or expand into new markets, says Frank Pak, vice president, International Division, at FirstMerit.
“We can serve as a great referral source to other professionals involved in supporting exporters, and also referring them to government assistance centers like the U.S. Export Assistance Centers or the SBA, an international lawyer, a freight forwarder, export insurance broker, etc.,” he says.
Smart Business spoke with Rice and Pak about available export support programs.
What are some export support programs?
The Export Working Capital Programs of the Eximbank and the SBA provide an exporter with funds for things like materials and payroll while producing the product. Banks receive a 90 percent guarantee on the loan’s principal and interest, because the government wants to encourage U.S. job creation. Also, the work in process can be included in the advance funding calculations.
It’s better to work with a bank that has Delegated Lending Authority from the Eximbank or Preferred Lender designation from the SBA for this program as it can expedite the process and assures that you’re working with an experienced lender.
Credit Insurance on foreign receivables is when an exporter purchases protection against non-payment of its foreign receivables from Eximbank or a private insurance company. Normally, banks don’t allow the foreign accounts receivable to be included in a company’s borrowing base because of the perceived heightened risk when buyers are located in a foreign country.
With insurance, an exporter has the opportunity to offer longer repayment terms. For example, a company, that typically offers no more than 60-day terms to its customers, sees its competitors in foreign markets offering 120-day terms. With export credit insurance, the exporter is able to take the risk of longer terms that will enable it to be more competitive. Also, if it assigns the insurance policy to its bank, the bank can advance against those receivables, improving cash flow.
For larger export sales, buyers in higher interest rate countries often look for some form of extended payment terms. Typically referred to as buyer financing, the exporter can decline and lose the sale, offer unprotected terms or use a form of insurance to protect its medium term receivable. The U.S. government supports such sales with programs called Medium Term Loan Guarantees. A bank is willing to participate because repayment is guaranteed by the U.S. government. The exporter benefits because it satisfies what the buyer needs and receives payment from the bank almost immediately after shipping its product. While there are restrictions, successful exporters have used such programs for 70 years.
What’s important to know about using export programs like these?
You don’t have to go it alone. Your banker is an advocate who can help you find the right resources as you set up your export program and understand the advantages and disadvantages of available payment methods.
Contacting your banker early in the process, as you’re developing your business plan and researching markets, will shorten your learning curve and help you become successful sooner. Banks can also direct you to government resources, which have additional tools available to support exporters as they expand into new markets. Reach out to your bank now, even if you’re just thinking about exporting overseas, because your banker will be happy to share his or her expertise. ●
Art Rice is vice president and manager of International Operations and Product Management at FirstMerit Bank. Reach him at (330) 384-7178 or email@example.com.
Frank Pak is vice president, International Division at FirstMerit Bank. Reach him at (216) 317-7399 or firstname.lastname@example.org.
Insights Banking & Finance is brought to you by FirstMerit Bank
Overhauling an office phone system is often a necessary part of growing, improving and updating an organization’s technology. Voice over Internet Protocol (VoIP) is a common upgrade that offers a variety of options to fit a business’ needs, whether it has a small, medium or large employee base.
Each VoIP system can be custom built to fit the specific requirements of a company, says Alex Desberg, sales and marketing director of Ohio.net. A specific VoIP product is chosen based on the company’s specific needs, and its implementation is ramped up in a way that’s manageable.
“When you’re talking about your phone system, it can be pretty painful when you don’t know what to expect,” Desberg says. This is why companies have the option of switching everything over at once, or taking a step-by-step approach when switching to VoIP.
Smart Business spoke with Desberg to examine the ways companies can integrate VoIP.
When converting to VoIP, is there one best way to transition or are there options?
Each VoIP-based phone system is meant to work uniquely. Some companies don’t know what’s available out there, and really aren’t ready to jump in with both feet to a brand new phone system and service provider. If a company knows that over the next few years they’re going to grow, they’re going to change, or they’re going to move, then there are specific opportunities that arise.
When does it make sense to use a step-by-step approach?
Unlike traditional telephone service, a step-by-step approach can be used as opposed to transitioning everything when improving communications using VoIP. In many situations, dial tone from traditional telephone providers can be duplicated and moved to the VoIP realm. It’s then offered back in a cost-effective way.
If a company is planning to move to a new facility it is a great opportunity to start down the path of new technology. The organization can take the phone numbers that it currently has and move them to VoIP services. Then in the new location, deploy what looks like traditional phones. When the company is ready, it can retire its old phone system and slowly step completely into VoIP. It eases the process for the company and its employees.
Remote workers or remote offices that are using separate phone systems raise more opportunity to investigate VoIP options. Those multiple environments can be brought together so that they look and operate like a single phone service. It can be a mix-and-match environment, offices and workers can be spread out across the country, deploy individual phones and systems for them while the main office is still working off of the traditional phone configuration.
In what circumstances is it better to switch all at once?
When a company is growing, often its phone system is something that’s an afterthought. Either the current phone system can’t handle more employees, the voicemail is always full or the technology is in need of updating. A good option at that point is to move to a platform that doesn’t have those limitations. Hosted VoIP, where all services and all phones are provided, has basically unlimited growth potential. So there is a great opportunity for a company to avoid continuously reinvesting in old technology.
How can a company determine what’s best for its situation?
The best and most important part of the process is planning. It’s based on what a company needs going forward. Not only is the company preparing for new hardware, but also new expectations on the IT staff and the network itself. It’s important to make sure that the VoIP provider offers training as part of its service. And financially, a company has to make sure that it is a good way to go and a good investment. ●
Alex Desberg is sales and marketing director at Ohio.net. Reach him at email@example.com.
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The JOBS Act, passed in 2012, changed rules to make it easier for small businesses to secure funding from investors.
“The Securities and Exchange Commission actually has three initiatives related to the JOBS Act. Crowdfunding has received most of the attention, but the SEC also amended Regulation D to allow small businesses to use general advertising and offers the Regulation A option, which is sort of a mini registration,” says James S. Hogg, a partner at Brouse McDowell.
Smart Business spoke with Hogg about how these JOBS Act options work and what they offer small businesses looking to raise funds.
What has changed with the amendment to Regulation D?
In the past, a private placement had to be done without general advertising, so you would either use a broker to find wealthy investors or you would find them; it was more or less word of mouth. Once you found investors, you would do a conventional private placement.
According to the SEC, $900 billion was raised that way in 2012. Of that, about $8 billion was raised in offerings of less than $5 million each. The amended regulations are intended to allow more small businesses to participate by expanding the pool of investors they can reach. But when you use general solicitation — Internet, newspapers, radio — you can only sell to accredited investors and there are more rigorous procedures to follow to ensure buyers are accredited.
To be accredited, an investor must have a net worth of $1 million or annual income of $200,000. You can still raise funds the old way under Regulation D, which allows for up to 35 non-accredited investors and an unlimited number of accredited investors. But if you use general solicitation, all investors must be accredited.
How can small businesses use crowdfunding?
Nothing is set until the SEC adopts final rules, but based on the proposal, companies are limited to raising $1 million in a 12-month period.
Crowdfunding has hit a couple of snags. One involves regulation; the proposal doesn’t allow for state regulation and some regulators would like to see more safeguards, while other people want to get money to small businesses as quickly as possible.
The SEC proposal requires use of a funding portal such as Kickstarter or Indiegogo and limits purchasers — a person with net worth of less than $100,000 can’t spend more than $2,000 or 5 percent of their net worth a year, and someone with a net worth of more than $100,000 is restricted to 10 percent of their net worth.
Crowdfunding would also require annual reports, although they would be basic — including financial statements that may have to be reviewed by a CPA firm, and if the amount raised was more than $500,000, you would also need an audit. As proposed, the rules might make crowdfunding unattractive. I’m sure that’s part of the comments the SEC is wrestling with.
What is happening with Regulation A offerings?
Historically, if you did a Regulation A offering, which is like a mini registration, it would not be given an exemption from state registration. As a result, only 0.2 percent of offerings under $5 million used Regulation A.
The SEC has made it a two-tier system by adding a new rule that allows an exemption from state securities law registration. You can still raise money the old way, but if you elect to do so under the new rule, there are reporting requirements in return for the state law exemption. The maximum amount that can be raised would also increase from $5 million to $50 million.
This is still in the proposal stage, and comments are being accepted through March 24.
How do businesses decide what route to take?
If you’re really small and raising funds entirely in Ohio, you can sell to up to 10 investors without any filings, but make sure you meet the requirements for this exemption. Most companies with larger offerings will probably continue to opt for Regulation D, but when the regulations are finalized they may consider crowdfunding or Regulation A if those are exempt from state securities registration. ●
James S. Hogg is a partner at Brouse McDowell. Reach him at (330) 434-4106 or firstname.lastname@example.org.
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