Another year of EY’s Entrepreneur Of The Year Awards has come and gone, but the stories told and the lessons learned are far from over. Each year EY’s entrepreneurial programs get bigger and better and the entrepreneurs involved are getting more creative and leading more impressive companies than in prior years.
For instance, Hamdi Ulukaya, the founder and CEO of Chobani Inc., was named Entrepreneur Of The Year 2012 U.S. He went on to win 2013 World Entrepreneur Of The Year, making him only the second entrepreneur from the U.S. to win the world award.
This summer Smart Business caught up with a few of EY’s leaders, Herb Engert, Americas Strategic Growth Markets Leader, and Bryan Pearce, Americas Director of the Entrepreneur Of The Year Program, to discuss how these programs have evolved and talk about some new ones that are being developed.
It should be noted that EY itself is going through a leadership transition with the retirement of Jim Turley, global chairman and CEO. Smart Business spoke with him as well to understand the future direction of the company.
Here’s what we learned.
How are you effectively developing a seamless global leadership transition?
Turley: We announced Mark Weinberger was going to be my successor well over a year ago, probably 14 or 15 months ago. It was interesting because unlike many of our competitors who do this very quickly, we realize this is a really important transition.
The reason we gave ourselves 15 months of transition is because we’ve got 170,000-plus people around the world. So we take our time; we do this well.
How do you see your legacy?
Turley: If there is a legacy it’s our people culture. We’re a special place. More experienced folks join EY from our competitors than ever leave us to join the competitors. They come and they say it’s because of the culture we have.
What is one of the greatest marketing challenges moving forward?
Turley: Everybody has realized now, much later than we realized some 34 years ago, that the growth driver in the world is coming from entrepreneurs. They are the ones driving economic growth. They are the ones driving job growth.
I think we have to keep investing in and keep recognizing their strengths. But we don’t do this for our own marketing. We do this because of the impact entrepreneurs are having in the communities where they live, and they weren’t getting the attention in the press when we started the program some 27 years ago. Increasingly they are getting the visibility they need.
How did the issues discussed at the WEOY program relate to what’s going on in the U.S.?
Engert: They’re directly correlated. Everybody is talking around the issues and challenges in the world economy, which is growth, jobs, investment and innovation.
When I think about innovators and some of the companies that have come through the EY programs, they are companies that are disrupting, or said in another way, addressing a need, demand or service. In some cases in emerging markets they are replicating what might have already been met in another developed market.
That whole concept of replication and foreign direct investment, at the root of it, is what entrepreneurs are all about and it’s going to bring parody to the global world. A stage like WEOY puts it in perspective and how it’s all tied together.
Pearce: The companies that are here have been successful in growing their companies perhaps in their domestic or regional markets and this gives them a great opportunity to meet counterparts that are operating in other parts of the world. At a minimum, they may learn a little bit more about those markets. Ideally, they may meet people who are potential partners, strategic relationship candidates or people who could help them in some way to expand their own business into expanding foreign markets.
How do you plan to apply the information gained in the WEOY program into the Strategic Growth Forum this fall?
Pearce: The WEOY and the series of strategic growth forums that we do around the world are definitely part of getting knowledge to entrepreneurs as well as networks to entrepreneurs. When you bring those two things together, they learn more about how they can grow their business, run a better business, access capital and develop their people.
It’s a focus on the five important pillars around customers and growth: people, operating effectively, capital and managing risk. You get insights into that here and you’ll get insights into them at strategic growth forums.
How has the program content developed with WEOY?
Pearce: We have added a lot of content to what has historically been a program only focused on awards. That knowledge and greater focus on networking with each other obviously has been well received by the entrepreneurs. They came to WEOY to meet their colleagues, but also to learn and so we had people coming in as keynote speakers and panelists.
We have also created a series we are calling E exchanges, which are groups of 10 to 15 people sitting around the table with common issues. These E exchanges will be very helpful for people to get to know each other and to really get into some of the down and dirty, nitty-gritty of what they are doing to tackle problems in their own business.
Are there any particular countries where you see big opportunity?
Engert: I have been tracking where I see money going. Where is the most foreign direct investment happening? Africa is clearly one. In South America, Colombia has been coming much more into its own, as have Indonesia and parts of Southeast Asia. Those are some of the markets you’ll start to see. Mexico is another one you have to watch because it’s close to the U.S. and its leaders have had change in their political landscape to be more pro-business. It’s the No. 7 GDP nation in the world.
What does the Entrepreneurial Winning Women Program mean to EY and how is it developing?
Engert: The Winning Women Program is a recognition program, but it is so much more. It really is a development program. We really focus on recognizing the women and giving them an award, but we’re putting them into an EY incubator where we give them the opportunity to participate in a lot of different aspects of thinking about the strategy of their business, their financial plans, how they approach media, branding, PR and investors.
We’ve learned a lot in the last five years of this program, and I’m proud to say we are expanding that around the globe.
Pearce: One of the recognitions that we had was that women are 48 percent of business owners in the world. They’re starting up businesses at a rate more rapid than men right now. But part of the challenge is scaling. You don’t tend to see the women-led businesses scaling as rapidly as others do.
What I think has really been the strength of the program is that there is more than just an award. There is ongoing education. They are recognized through the awards program, but also get mentoring and other skills to help them build better businesses. And then we bring them to events like WEOY.
We will have virtually all of them at the Palm Springs event in November. So they have that opportunity to get integrated in with our EOY award winners and other great entrepreneurs and find partnerships and boards of advisors and directors and various other things that can help them to scale their business.
So we began that in the U.S. We are now rolling that out to Canada and Brazil this year and looking at more rapid rollout into other countries because it is certainly a great opportunity to help support these women as they grow these businesses around the world.
What about the addition of a family business component?
Engert: The Family Business Award was put in place because family businesses are the bedrock of communities. They’re the unsung heroes.
Most private companies are family-owned businesses and a lot of public companies are actually family-owned businesses as well. A significant amount of them are multi-generation family businesses and it creates a focus on that market segment.
It’s a totally different class of business with different needs and attentions. So we are trying to celebrate family business, which will provide a lot of great learning and perspective for us.
Pearce: Our definition is that families are those at least in the second generation or beyond. Not only do you have all the same challenges that another company, private or public, would have in growing the business, but now you have this added dimension wrapped around it of family dynamics.
We try to bring them together with each other so they can learn from other families how they are handling those same kinds of challenges around family integration, succession, fundraising, liquidity, and all of those kinds of things, and then we are able to provide services to them as we look at managing through those same issues.
Across the 25 programs regionally in the U.S. we had more than 200 nominees this year that want to be considered for the family business award, which was a great start.
Can you explain a little bit about Endeavor?
Engert: We have a partnership with Endeavor. They are focused on building a better working world themselves and investing in and promoting entrepreneurs in emerging markets around the globe. The Endeavor model is wonderful because it’s entrepreneurs who are opening a local chapter, but have strong ties to the global connections of Endeavor that help bring entrepreneurs and perspectives to bear.
Endeavor is a great program and we’re proud to be partners with them. I look forward to Endeavor expanding further around the globe because they are a key difference in some of those emerging markets.
Pearce: In many of the countries that they operate in, particularly in the Americas and in Latin America, we’ve got strong relationships with our EOY program.
For example, this year is the first year that we’ve had EOY in Uruguay, and that really began as a partnership between Endeavor Uruguay and one of our former partners who is on the board. We were able to team together and the initial EOY gala was combined with the Endeavor gala. We had more than 800 people attend in year one. So it shows you the power of entrepreneurship and certainly the power of the partnership between Endeavor and EY.
Nothing is more frustrating than missed opportunities — except when those missed opportunities were completely avoidable. For example, you and your organization put in the time and effort to drive prospects through the marketing funnel toward conversion. And then, when the prospect is engaged and reaches out to you, you’re not equipped to provide a timely follow-up response.
This happens entirely too often. But basic prep work on the front-end can help you avoid becoming one of those organizations whose well-planned marketing strategy is wasted.
Conversion means different things to different people. In retail, it may mean going to find a product — either online or in person. But in a different industry, it may mean that someone just wants to talk to you about helping to solve a specific problem.
Regardless of your conversion definition, the singular commonality is your ability to immediately follow up and act on the potential conversion. This is because when someone reaches out to buy a product or for help with a service, it is an emotional decision. He or she is claiming that they either need something (a product) or help with an area they do not have the expertise in.
The importance of this step in the marketing funnel is critical. Like it or not, we live in a world of instant gratification — both personally and professionally — and you must tailor your marketing efforts to accommodate it. When someone winds their way through that funnel by becoming aware of your services, having interest, and then being willing to engage and dig deeper to learn who you are, nothing kills those marketing efforts faster than failure to respond to that person.
Too often, we see conversion points that consist of a basic “email us” link on a website. It sends a note to a general email address that nobody regularly checks. Or, the company lists a phone number that reaches a general voice mail account that is rarely checked. In both scenarios, all the work required to lead a prospect to conversion is rendered moot.
Take steps to ensure conversion
So what can you do to reverse the trend and build systems that allow for more immediate conversion? Among the easiest to implement are
■ A phone number that connects with somebody who is dedicated to following up.
■ Online chat capabilities in real time
■ Marketing, through a website or other sales materials, that guarantee a 15-minute response time.
■ A well-designed form on your website that asks for four components: name, email, phone number and reason for the inquiry (any more information than that may cause prospects not to convert).
Keep it simple and swift
Many organizations simply fail to take the direct route, and as a result, they swing and miss.
Initiatives such as putting a map that points to your location as your prominent website “contact us” looks great, but how many people will actually get in their vehicle and drive over to see you?
Also, don’t underestimate the importance of offering multiple ways for people to reach you for a swift response. When it comes to today’s marketing funnel, there is no effective one-size-fits-all approach.
For example, let’s say you’re looking to refinance your house or buy a new one. This is an emotional decision. You do your research and find a company that you believe will offer the best possible rates. You reach out to them. And then, you don’t hear back for days. What happens? You lose interest.
But now, consider the result when you reach out to a company and get a return response within 10 to 15 minutes.
First, you get the information you need to make a decision. More importantly, though, that company has forged an emotional connection with you because they were responsive to your needs.
It is this emotional connection that can be highly effective in closing the final piece of the marketing funnel — conversion. And, if your organization’s marketing strategy includes optimizing your marketing spend, why would you ever overtly waste money by failing to have an effective — and immediate — follow-up process in place?
David Fazekas is vice president of digital marketing for Smart Business Network. Reach him at email@example.com or (440) 250-7056.
Calm down … those two letters in the headline are not what you might be thinking. However, it got your attention, for this leads to an important subject.
When you, or those with whom you work, don’t follow the principles of these two letters, problems occur. Not doing what these initials represent can be the difference between success and failure, cost big money, create disappointment and actually ruin relationships.
Hopefully by now you’ve figured out that F.U. stands for Follow Up. This skill is central to achieving objectives, supporting your people or customers, and maintaining your credibility. Too many people just don’t get it and consistently fail to make F.U. a part of their business regimen.
Words are cheap, but it’s action that makes the difference. Many promises are made every day such as: “I’ll get the answer and return your call soon,” or “My person will call your person so that we can get together.” Good intentions aside, if one does not make note of it, the call just might never happen.
Fortunately, only a relatively few get hit by locomotives because trains are big and people see them coming, but many are stung by bees. That’s the same with following up. Virtually no one would forget to pick up the big order, or neglect to attend a huge meeting, but too many let the smaller, yet important, matters slip through the cracks. This not only affects the person who didn’t receive what was promised, but also could significantly impede productivity.
As an example, an associate is to provide needed information first thing in the morning. Breakfast comes and goes and as the lunch hour approaches people along the line are sitting on their hands waiting. Do the math; count up what that could cost your business day in and day out. Frantically, and with a high degree of disgust, you track down the tardy offender and are appalled by the response, “Oh, sorry, it just slipped my mind. I forgot to write it down.” Sure, this can happen once but by the second or third time it becomes a pattern and the credibility of the perpetrator can be lost.
Following up is a reflection of respect. When people don’t have the courtesy of doing what they say, you begin to wonder if they can ever do it. In my companies, all those with whom I work quickly become aware of my sacrosanct F.U. policy.
Essentially after every meeting, whether a one-on-one or with a group, I assign a date for my own purposes of when what was discussed is to take place. If it was a task of significance, the date would be agreed upon with those who had to do the work.
When new employees receive a memo from me, with the unexpected “F.U.” initials in the bottom left-hand corner, many are initially stunned, thinking I’m giving them a crude ultimatum or don’t think much of their work. Fortunately, those with a modicum of common sense quickly realize that these two letters are not a pejorative as they are always followed by a numeric string that even a newbie can figure out represents a date.
I remind my team that I do not want to be their father or their baby sitter. Instead, when I ask that something be done by a certain date, and everyone involved agrees, it must happen.
Alternatively, the person assigned the task could always come back and say he or she can’t meet the deadline, don’t know how to do what was being asked, need help with the issue, or had figured out a better alternative. What could not happen is for the person assigned the task to pretend that no follow-up was required, or worse, that the covenant was never agreed upon.
Because so few follow up as promised, this presents your business with an outstanding opportunity to rise above others and create a rock-solid reputation for saying what you’ll do and then doing what you say. All it takes is a little discipline and respect for those with whom you work. It’s better to carry around a little string for your finger than run the risk of finding the proverbial rope around your neck as a result of errors of omission.
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. “The Benevolent Dictator,” a book by Feuer that chronicles his step-by-step strategy to build business and create wealth, published by John Wiley & Sons, is now available. Reach him with comments at firstname.lastname@example.org.
Thinkers solve problems.
Mark Zuckerberg found a better way to connect people with friends and family through Facebook. Larry Page and Sergey Brin invented a better way to search the Internet by creating Google. Steve Jobs showed us a better way to obtain and listen to music through the invention of the iPod.
None of these examples happened by luck. Each of these great thinkers spent a lot of time working to perfect their ideas. Great thinkers are not born, they are made.
To create great products and services, you have to develop the habit of expanding your thought processes and critical thinking skills. Why? Because the human mind tends to be lazy. It tends to repeat the same thoughts unless it’s trained to explore new ideas. Great thinkers put in the effort to analyze things in new ways and not accept the norm.
We live in a negative society where bad news trumps good news and the potential downsides of an idea outshine the potential rewards. It takes a lot of effort to retrain our minds to focus on the positives and the solutions rather than the ramifications of a failed idea.
Becoming a great thinker requires an investment of time; there are no shortcuts. You have to be organized and plan for it. Take time to think about the problems unique to your business or industry. Work through the pros and cons of any idea, looking for a way to make it work. Study competing companies and leaders and gain an understanding of how they think. It’s also helpful if you always do your heavy thinking in the same location, and it doesn’t have to be anything fancy. Some people do their best thinking in the shower or over a cup of coffee at a cafe.
But there is one major pitfall to avoid: Don’t equate change with new thinking. Just because you are changing something does not mean you are being a creative thinker. There might be several “accepted” ways of doing something within your industry, and changing from one of the accepted ways to the other isn’t doing anything different. The goal is to identify new ways of thinking and as a result, find a new solution to a problem that no one has thought of before.
Finding these unique solutions won’t be easy, but success never is.
There are many Voice over Internet Protocol (VoIP) providers out there, some large and some small. In the case of telecommunications, bigger is not necessarily better. Small providers tend to be more nimble and are able to customize and innovate in order to help their clients grow.
Also, independent VoIP providers can lend a personal touch, says Alex Desberg, sales and marketing director at Ohio.net.
“Most small and medium-sized businesses want to work with a local company. Companies don’t want offshore support,” he says. “They want someone who is in their backyard. Someone who is in the same time zone and easy to relate to.”
Smart Business spoke with Desberg about changes in the VoIP landscape, the differences between providers, and the importance of customer service and support.
How has the VoIP landscape changed in recent years?
In recent years, the marketplace has changed. AT&T and some of the other big players are now offering VoIP services. While the corporate giants have marketing dollars behind them to push their products, it is the smaller, more flexible companies who are pioneering new technologies.
Companies looking for an apples-to-apples replacement for traditional phone systems might be satisfied with a traditional provider.
However, business leaders that want to make a change to VoIP typically prefer working with agile companies that are trailblazers and provide service at the local level.
What are some of the differences between VoIP providers?
Companies interested in VoIP services have two options: They can either choose a big provider with pre-set packages or work with a small, innovative company that is willing to invent solutions from scratch.
For example, many organizations want to integrate their customer relationship management system with their phone system. Unless you work with a provider willing to break the mold and try new technology, it’s likely that you’ll receive a one-size-fits-all model that might or might not be a good fit.
How important is customer service and support?
The service standpoint is what truly makes VoIP providers stand out. Either they are readily available, hands-on and willing to help navigate technological challenges, or they take the stance of expecting a business to be the one that makes accommodations, fitting the company’s telecommunications needs into inflexible packages.
The majority of small and midsize businesses have a telephone system that they set up years ago and haven’t made any changes to since. Such a system might work fine and it serves their purposes — they don’t need anything special.
However, there are other organizations that want to streamline their data and communications in order to be more efficient. That’s when it’s important to have a more dynamic provider that is pushing the envelope and striving to offer new services.
How should a business go about evaluating its telecommunication needs?
Businesses tend to have an IT manager or communications director put together an annual plan for servers, software, licensing, etc., but telecommunications companies will often wait until the contract is set to expire or there are budget cuts.
Under this scenario there is not enough time to investigate what services are out there that might be beneficial. Businesses tend to shoehorn themselves into what they find at the last minute within the budget, rather than figuring out what makes the most sense from an operational perspective, which may not be the best way to approach your telecommunication needs.
Alex Desberg is sales and marketing director at Ohio.net. Reach him at email@example.com.
To find out more about Ohio.net’s VoIP solutions, visit www.ohio.net.
Insights Telecommunications is brought to you by Ohio.net
If your company has 500 employees or less, you want to be in a group rating program to get better workers’ compensation rates. However, some court rulings have decreased the amount of group credits and increased rates for group rated employers.
“It’s still the best thing going for the small to medium-size employer,” says Richard B. Hite, CEO at SeibertKeck Insurance Agency. “The group is a fantastic idea, and an employer can receive much lower workers’ compensation premiums.”
Smart Business spoke with Hite about the advantages of a group rating program and how the landscape has changed.
How does group rating save money?
The Ohio Bureau of Workers’ Compensation (BWC) allows employers with better than average claim histories to join together through a sponsoring organization for the purpose of being rated as a large group. As a standalone business with no losses, you might only develop an experience modification of a 5 to 7 percent credit off your rates. However, when combined with thousands of other companies in a group, your company can earn up to a 53 percent credit to your base rates. The credits can vary for individual businesses, depending on your type of business, whom you are grouped with, final loss figures, total enrollment and reported payroll.
What are other benefits of enrolling?
A third-party administrator (TPA) will manage your claims cost-effectively and aggressively, as well as representing you at Industrial Commission hearings for contested claims. You also have real-time access to claims information rather than trying to obtain it directly from the BWC.
The TPA physically reviews your rates and classifications assigned to your company. Many times the company classifications are wrong because of a change in operations or they were incorrect from the beginning. All of this can result in higher premiums.
The TPA also provides training, education, bulletins, seminars, newsletters, etc. It will help you receive various other credits for safety or a drug-free environment, too.
What happens if you have a large loss?
With a group rating, if you have a shock loss, a death claim or a large medical claim, you can be asked to leave at the end of the policy year. Typically that precludes you from any group for two or three years, as all groups look at your current year and the previous three years of claim history. After you’ve been relatively loss free for two or three years, many groups allow you to re-enroll.
The problem is you might have been enjoying 45 percent credit, but now have a 35 percent debit — an 80-percentage point rate swing. For a lot of small businesses, that creates a financial strain since premiums can double the next year. Extra dollars in premiums could result in a workforce reduction.
If asked to leave, you still can sign a contract with the TPA to help you limit and possibly prevent other losses with the goal of returning to a group plan.
How are recent court rulings impacting workers’ compensation?
Some recent rulings in favor of plaintiffs in Cuyahoga County have hurt the rating structure of group plans. The argument was that if Company A has a bad claims history and pays a $20 rate per hundred, but Company B is in a group rating paying $5 per hundred, that creates an unfair advantage in a public bid situation because of the lower workers’ compensation costs.
As a result, the BWC decreased the maximum group credit to 53 percent and raised classification rates as much as 21 percentage points versus nongroup rates. This action seeks to equalize the playing field, in the court’s opinion.
In addition, on May 3 the governor authorized the release of $1 billion of ‘overpaid premiums’ to private employers and public taxing groups for the 2011 rating year as a result of another court ruling. Employers are receiving rebate checks for 56 percent of premiums paid in 2011.
With the increase in rates for groups and the decrease in the credits, many companies have to decide whether to stay in the group. While it may no longer be as cost-effective, you get extra services — aggressive claims management, hearing representation, rate analysis, etc. — and service means everything to your experience and rates.
Richard B. Hite is CEO of SeibertKeck Insurance Agency. Reach him at (330) 865-6573 or firstname.lastname@example.org.
To keep up with the latest insurance news and how your company could be impacted, sign up to receive our newsletter at www.seibertkeck.com.
Insights Business Insurance is brought to you by SeibertKeck
With so many provisions and mandates under the Affordable Care Act (ACA), it is not surprising some things have changed or been delayed along the way.
In fact, on July 5 the Obama administration released a 606-page document with final regulations on some of the ACA’s key provisions and mandates. In addition to providing new details about how the health insurance marketplaces will operate beginning Oct. 1, the document included changes that will impact the way employers shop for insurance.
Separately, on July 2, the U.S. Treasury issued guidance delaying the penalties to be imposed on large employers that fail to provide coverage to full-time workers and also reporting requirements applicable to insurers and self-insured businesses.
“When you are looking at changes impacting the health care delivery system in this country — including the way health insurance companies do business — delays and changes are expected,” says Marty Hauser, CEO of SummaCare, Inc. “The best thing employers and individuals can do is to stay informed and make the best decisions possible when it comes time to shop for a benefit plan.”
Smart Business spoke to Hauser about some of these changes and delays and what they mean for employers.
What are some ACA mandates that have been delayed that directly affect employers?
Components of the employer mandate have been delayed until 2015 to give employers more time to prepare for changes and requirements. The mandate, often referred to as ‘pay or play,’ requires employers with 51 or more employees to offer health insurance or risk paying a penalty. The delay of the mandate’s penalty portion gives employers an additional year to consider their options for offering insurance.
While some people argue that the delay in penalties effectively delays the entire mandate, it’s important to note that the mandate for large group employers to offer insurance still exists, but with no penalty for not complying. It is in the employer’s best interest to work with their broker, benefits consultant or insurer in an effort to comply with the law and figure out the best solution next year and in preparation for 2015.
At the time of this printing, this delay in the employer mandate does not change the individual mandate, effective Jan. 1, 2014.
A delay impacting small employers (with up to 50 employees) has also occurred related to the Small Business Health Options Program (SHOP). The functionality enabling employers to offer employees a variety of qualified health plans (QHPs) from different carriers has been delayed until 2015. This means that in 2014, small group employers may only offer one QHP to their employees shopping through the marketplace in an effort to give the exchange additional time to prepare.
It’s also important to mention that the SHOP is available to employers with up to 50 employees in 2014 and 2015, and expands to include employers with up to 100 employees in 2016.
What should employers keep in mind as they see marketing campaigns about the changes that become effective next year?
First and foremost, employers should work with their broker, benefits consultant, or insurer to help determine what mandates and provisions of the ACA apply in 2014 and beyond, in order to make the best benefits decisions for their employees and budget. They should also be prepared to receive and answer questions from employees regarding coverage in the coming year.
Additionally, since marketplaces open Oct. 1, 2013, for 2014 effective dates and employers are required to notify employees of the availability of the health insurance marketplace by the same date (Oct. 1), employees will likely be looking to their employer for guidance on coverage options and want to know what their employer plans to do by way of offering benefits. Employers should be ready to educate their employees on how the new laws will or will not affect them and their benefits.
It’s also important to remember that although the penalty portion of the employer mandate has been delayed, there are ACA requirements employers must still meet, including reporting and payments, marketplace notification, distribution of Summary Benefits and Coverage documents upon renewal or enrollment, and distribution of rebates, when applicable.
Marty Hauser is CEO at SummaCare, Inc. Reach him at email@example.com.
Insights Health Care is brought to you by SummaCare, Inc.
Taxes are complicated, confusing and sometimes intimidating. Even though you might want to put everything on the shelf after getting through another filing season, a checkup could be in order.
“If your car is running fine, you shouldn’t wait until it breaks down to get it tuned up or have routine maintenance,” says Michelle Mahle, CPA, director of tax at SS&G.
There are valuable tax opportunities you may be missing. Certain tax positions or reporting could help your business mitigate risk.
“You have an opportunity to have somebody independent of what’s been done historically to come in with a fresh set of eyes,” she says.
Frank Taylor, CPA, director of tax at SS&G, says it comes down to how you feel about your current tax situation.
“If nothing else, you can get peace of mind that everything is being handled correctly,” Taylor says.
Smart Business spoke with Mahle and Taylor about how a third-party checkup of your tax filings might uncover new opportunities and tax savings strategies.
How do you know whether your tax returns need a second glance?
First, this goes beyond the scope of just federal tax returns. It could include international, state and municipal tax compliance, as well as personal property and sales and use tax filings. An independent party can look at your business and say, ‘We should see this, and that’s a concern because it’s generally required with the business you’re operating.’ A third-party checkup can help you mitigate risk and exposure to audit, provide insight on tax strategies, and avail opportunities to secure tax credits and incentives unique to your industry.
It comes down to whether you feel comfortable. Maybe you’re unhappy about the taxes that you just paid, feel like you may be missing opportunities or just hope your next filing season will be different. A second glance or opinion may provide the peace of mind you need to stay focused on growing your business.
What are some examples of opportunities businesses could be missing?
Just looking at the restaurant industry, for example, there are organizations overlooking routine benefits available to them. They might be missing out on FICA (Federal Insurance Contributions Act) tip and work opportunity tax credits. Owners, previously paying alternative minimum tax (AMT), have found that their AMT credit carry forwards were handled improperly and when corrected resulted in substantial refunds. Many companies continue to improperly capitalize assets, not taking full advantage of accelerated depreciation deductions.
Business owners in general tend to be intimidated by the Internal Revenue Service (IRS). When they are under audit or receive a notice, they just assume the IRS is right. The number of IRS audits taking place is increasing steadily. Always consult with your service provider to find out how much experience they have handling these types of matters so that you can be poised with good information and tax strategies to mitigate your risk and exposure.
What should you look for when going to an independent party for a tax filing review?
You want someone with experience, particularly in specialty tax niche areas. There are a lot of service providers who perform very good basic federal tax compliance services. If you are feeling like your business is no longer vanilla, however, basic service may not be enough for you. The way people do business today is very different than the way business was done five years ago. Even small companies have international exposure, and almost every business crosses state lines.
You want an independent party to have the depth and experience in both specialized areas of taxation and industries. You also want tax experts who stay on the cutting edge of legislative changes and developments, and who can identify tax saving strategies and refund opportunities. The right third party can provide a well-rounded second glance to any industry, for any circumstances, and could bring you real money in the form of refunds or credits as a result.
Michelle Mahle, CPA, is a director in Tax at SS&G. Reach her at (440) 248-8787 or MMahle@SSandG.com.
Frank Taylor, CPA, is a director in Tax at SS&G. Reach him at (440) 248-8787 or FTaylor@SSandG.com.
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If your business has a loan, your lender might classify it as “troubled” without your knowledge.
“You may still be dealing with a credit officer, but that person is being coached by a workout specialist while you remain unaware,” says Suzana K. Koch, a partner at Brouse McDowell.
Smart Business spoke with Koch and Alan M. Koschik, a partner at Brouse McDowell, about how the business/lender relationship has changed.
How did lenders previously handle missed payments or other problems, and what has changed?
Prior to the Great Recession, lenders would contact borrowers that experienced trouble, such as missing a payment, being out of formula on covenants or experiencing decreased sales, to schedule a meeting to discuss the default. At that time, banks typically referred troubled loans to the special assets or workout department. The bank would assign a workout officer to maximize value by liquidating collateral or other means. The borrower might not always work out troubled loans to its satisfaction, but at least it knew that its banking relationship had changed.
This clear transition to workout is no longer as common. Traditional lenders now assign workout officers to shadow credit personnel on loans classified as troubled without the borrower’s knowledge. Participants in this process, such as accountants and bankers, report that they are frequently avoiding the borrower’s attorneys.
The borrower often is unaware that the banking relationship has changed. Previously, borrowers received a default letter and a workout officer was assigned to them when they were transferred to special assets. Now, borrowers find themselves talking to their original loan officers, who may cajole them by saying, ‘You’re a little out of formula, so let’s see what we can do to revise the loan documents.’ In this common scenario, the borrower negotiates without representation, unaware that the ground rules of the relationship have changed.
Why is this occurring?
Lenders prefer that borrowers not have counsel advising them of their rights. It is much cheaper for the bank, and it receives much better workout terms if the process does not involve the borrower’s legal counsel. A sophisticated attorney representing the borrower would know about the various options that are available and when the lender is asking for more than it should.
Frequently, lenders ask borrowers to waive rights, offer additional collateral and provide personal guaranties. In exchange for these concessions, borrowers often receive meager benefits such as short-term extensions of maturity or standstill periods. With counsel, borrowers would often be able to obtain more favorable terms in these workout negotiations.
Is this practice widespread?
This pattern appears to be happening with most of the region’s banks as a result of the Great Recession. In shoring up workout departments, banks enlisted bankers from other areas to help with troubled loans. As a result, more bankers are now familiar with the workout process. With the easing of the recession, workout departments are shrinking and those bankers are returning to their traditional jobs. However, the effect of this temporary reassignment is that front-end bankers are more comfortable doing the workouts themselves.
What can you do to protect your business?
Borrowers should be cognizant of their loan terms, including their loans’ financial covenants and reporting requirements, and any possible defaults of these provisions. Despite this vigilance, a default may become inevitable, even if they are only technical defaults.
If you are concerned that you are out of compliance on your covenants, or if you miss a loan payment, contact a workout attorney immediately. Communication with your bank is also important. However, if you are negotiating with your lender, you need representation, preferably from the beginning of the process.
Suzana K. Koch is a partner at Brouse McDowell. Reach her at (330) 434-4632 or firstname.lastname@example.org.
Alan M. Koschik is a partner at Brouse McDowell. Reach him at (216) 830-6804 or email@example.com.
Follow up: For more information on lender negotiations, contact Suzana K. Koch or Alan M. Koschik.
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