Sue Ostrowski

When Frontier Communications recently made an acquisition, it was left with a dilemma.

The lease on a regional office it had inherited was expiring at the end of 2011, and it needed to move that facility, which housed nearly 500 employees in Dallas. Second, the company requires that 100 percent of its calls are answered in the U.S., mostly by employees, and it wanted to hire another 150 people to answer calls in house, says Cecilia McKenney, executive vice president, human resources and call centers, with Frontier Communications.

“We needed to find another location to scale up to be ready to in-source these calls,” says McKenney. “We looked at many centers in multiple states. And in looking at the dual objectives of finding another location for our Dallas office and the expanded call center needs, the Allen Economic Development Board team convinced us that we could start a call center in Allen with the right work force availability, the talent in the workplace and their support, which led us to the decision to choose Allen.”

Smart Business spoke with McKenney about how an economic development board can play a role in your company’s relocation and the factors to consider when making a move.

How can an economic development board factor into a company’s decision to relocate?

I have met with many economic development boards over many years of looking at real estate options. Many boards say they are going to do this and this and this, but when you ask them the third and fourth questions, it begins to fall apart. Ask for examples. Ask, ‘How are you going to do this? Give me details on how you’re going to help us do that. What are terms with which we will get this incentive?’

When you do that and peel back the onion, you find that some economic development teams really stand out above the rest.

For us, the Allen Economic Development team really stood out and played a key role in our decision to select Allen. They convinced Frontier that they were the real deal and that they would deliver on the commitments they were making. They outlined incentives for us to bring jobs to Allen, then created a timeline and a definition of those jobs. We had a great deal of confidence that, once we brought jobs to Allen and submitted the applications for training grants and other incentives, they would deliver on their commitment.

Allen and the Greater Allen area have absolutely delivered on what the economic development team said we would experience, both in terms of the quality of candidates for jobs and availability. Those are the two things that you worry about: Can you scale up to the needs of your hiring, and are you going to be able to hire quality candidates, because generally, higher quality leads to lower turnover.

How can an economic development board help a company transition into a community?

A top-notch board can help with recruiting and also help get your name out in the community. For example, since we started recruiting in June, the board has been with us side by side, helping the community understand who we are and giving us the opportunity to get our name out. A quality board can also provide guidance as to where you should be in the community so that people will know who you are and, when they are considering employment opportunities, will put your company at the top.

In our case, the economic development board members have been terrific. Early on, they introduced us to the mayor and have been key to introducing us to critical leaders in the community, and to those at the state and federal level, as well. And even after we signed the lease, the board has not forgotten who we are and continues to offer assistance.

What advice would you give to a business considering relocating?

Take advantage of all that the economic development board and the chamber of commerce have to offer.

Employers tend to not realize that these resources are there to help their move be successful. Sometimes employers take the approach of having to do everything themselves. They have a lot invested and need to make sure that the start-up in a new location goes well, and they don’t necessarily ask for help.

For example, when we decided to make the move, we had an issue with training space. We needed to hire 80 call center representatives before our building was ready to be occupied. We needed three training classrooms that had power so that all the participants could use PCs. And if we didn’t have that, it would have been a major barrier to having people ready for the systems cutover we accomplished on Oct. 1.

The economic development helped us get in touch with the right community leaders, and we were able to use Allen High School for our employees to be trained. If we hadn’t asked if there was some way for them to help us solve this problem, we might have been delayed in getting people hired and trained. But we asked, and Allen delivered, and we were ready to take calls by Oct. 1.

A company also needs to find a community that is a good match. There is a bit of a marriage that goes on with who the leaders are and the way the community is run. Those things need to be consistent from the perspective of the employer, and we have definitely found that in Allen.

Cecilia McKenney is executive vice president, human resources and call centers, with Frontier Communications. Reach her at (203) 614-5047.

Insights Economic Development is brought to you by the Allen Economic Development Corporation, strategically positioned in the Dallas/Fort Worth metro.

Your business is growing, and you need to find a new location. You may think it’s just a matter of driving around and finding a place for lease or sale. But trying to do it on your own without a real estate broker could prove costly to your business, says Eliot Kijewski, a sales associate with CRESCO Real Estate.

“The average business owner doesn’t have that market knowledge,” says Kijewski. “He or she is focused on their business, not on the availability of space and on what deals can be had in the market. A broker not only has knowledge of the market but can help you with things such as tax abatement and economic assistance programs.”

Smart Business spoke with Kijewski about how having the right representation in the real estate market can save you both time and money.

Why can’t business owners simply identify a new space on their own?

Business owners are focused on their business, not on the real estate market. It’s a broker’s job to know the market.

If you are a small manufacturer, you’re going to be focused on that. And when your business gets so large that it has to expand, you don’t have the time or the knowledge to go out and find an alternative location, or to look on the Internet, because you are so busy working with a lean staff, trying to hire more bodies to produce more product and focusing on increased profitability.

If you contact a broker and have a 20-minute conversation about what geography works for you and what kind of space you need, the broker can put that search in motion while you continue to work on your business.

How can a broker help you identify the right space?

If you’re trying to do this on your own, you may not know if a city has tax abatements or an economic assistance program to help with things as small as providing funds toward landscaping, or as large as providing funds to upgrade equipment or improve the physical structure. Tapping into these programs can add money to your bottom line.

A broker will also know about items such as day care and public transportation options. If you have to hire a work force, where are those people coming from? If you’re hiring new people at modest wages, you probably need to be close to public transportation.

A broker can also make you aware of things you may overlook, such as a perk in another building that you were unaware of as well as market trends that affect pricing.

How can business owners identify the right broker for their needs?

The first question to ask is whether that person has a specialty: office, retail or industrial. Second, ask to see a resume of the type of transactions that person has completed, and ask whether you can talk to the people involved in those deals. Also ask what extra ingredient that person can bring to the table to assist you.

Look for a broker who is loyal, who will stick with you until you’ve found the right location for your needs. It’s not just market knowledge; it’s the ability to find not just what you need but really finding the right fit. That ties in to the honesty of the broker, the ability to say, ‘This is not the right location for you, let’s not stop looking until we find the right location,’ instead of just trying to shoe horn you into a space.

Another issue is perseverance. Once a broker closes a deal, that shouldn’t mean closure of the relationship. Too many brokers, once they close the deal, move on. Or, if it’s a lease, they reappear four years into a five-year lease to discuss renewal. Your broker should be in touch at least quarterly to check on how the space is working out and to see if you have any other needs that he or she can meet.

What questions should your broker ask to help identify the right space for your needs?

The broker should ask about employees. How are you going to grow and what are your projections? One of the most important things a broker should determine is if you want just enough space for now, or enough space to grow. That means a conversation about the direction you feel the business is going.

Brokers should ask about the requirements for your business. If it’s an office space, is it a more open format, or a closed office format? If it’s an industrial space, the broker should ask about power requirements, loading, ceiling heights, etc.

Once a broker identifies potential spaces, how does the process proceed?

A good broker will come back with a list of recommendations, but a great broker will go one step further, providing commentary on each and every space. That can help a business owner see something he or she hadn’t acknowledged before.

If a company says it needs two docks and a drive-in door, the broker should look beyond that. If a space only has one dock, you could probably add a second one. Or if you’re looking for an industrial space and there’s too much office space, you can take out office space. If you’re looking for office space and there’s only 1,000 feet available and you’ll need more in the future, you may pass it by. But a broker will know that the lease on the adjacent space is coming up in a year, something that the general market may not know.

Your broker should give you every option and then explain each item on the list.

Eliot Kijewski is a sales associate with CRESCO Real Estate. Reach him at (216) 525-1487 or ekijewski@crescorealestate.com.

Typically when businesses think of their bank, they think only about loans and access to credit. But there is much more your bank can be doing for you, says Emily Ruvalcaba, executive vice president, division manager for corporate banking, at Bridge Bank.

“Of equal importance is working with your bank to focus on the cash management side of your business,” says Ruvalcaba. “Do you have the right deposit accounts, and are your cash balances working for you to the best extent that they can? Are payments being made and receivables being collected through electronic means? If your business transacts internationally, are you able to negotiate in multiple foreign currencies?  Businesses need a banking partner that will advise them on the right products that will help to improve cash-flow and their bottom line.”

Smart Business spoke with Ruvalcaba about how to find the right banking partner and how to make the most of that relationship.

If a business is looking for a new banking partner, where should it start?

Look to your trusted advisers, such as your attorney, insurance agent or CPA, to refer you to a bank with the expertise that your business requires. Professionals such as CPAs have relationships with many banks, and they’re likely to refer you to those that can provide your business with the best service possible. When you share common professional relationships with your bank, you become part of a business community that is focused on referring only the best service providers.

Plus, someone such as your CPA knows your business, and will be familiar with your company’s banking needs. That person knows the products and services you have with your existing bank and is in a position to refer you to the business bank — and the banker — that can better meet your needs.

Finally, don’t choose a bank just because it may be located near your office. In today’s virtual world, you can do your banking from anywhere: make deposits from your office using remote deposit capture, transfer funds, make payments, send wires, approve payroll — all can be done using online banking. Choosing the right bank and the right banker is too important a decision to be based solely on physical proximity.

Once a bank has been identified as a potential partner, what questions should a business owner ask to make sure it’s the right choice?

Ask how well that bank and its bankers get to know clients. Do they visit their clients to understand how their business operates? The business owner should also ask if the bank has experience working with similar types of companies. Ask who will be handling your account on a day-to-day basis. Will you have a banker or a team of bankers that is going to be consistent, or are you going to be calling an unfamiliar representative through an 800 number?

Ask how often they expect to meet with you, because a bank that gets to know its clients is going to be able to provide a higher level of service. More important, if challenges arise within the company, the bank is less likely to overreact and it will be more willing to work with you, but that can only happen if a solid relationship has been built. For example, if a company that has borrowed from the bank is growing rapidly and its leverage increases to a level higher than was set through the loan covenants, the bank will be in a better position to show flexibility and a willingness to work through such issues.

By building a strong relationship and understanding your company’s operations, your banker will be better equipped to find ways to accommodate unforeseen circumstances.

Should business owners share the potential for bad times with their banker?

Absolutely. For example, if you know that your business is going to have a challenging quarter and may have trouble meeting loan covenants, it’s a great idea to pick up the phone and talk to your banker.

Bankers don’t like to be surprised with negative news. You’re going to have to deal with the issue eventually, and the more proactive you can be, the better that relationship will be and the more that bank is going to work to be your advocate.

How can your banker help your business in other ways?

Sometimes business owners are so focused on growing their business that they don’t realize the full extent of banking products that their bank can offer. Sit down with your banker and say, ‘This is how I run my business; are there any other banking services that my company can benefit from?’

It’s also a good idea to bring in your banker when you’re doing tax planning with your CPA at year-end, especially if the company is projecting growth. As you’re planning for the next period, your CPA and banker can work together to ensure that adequate financing will be available to support your goals.

Emily Ruvalcaba is executive vice president, division manager for corporate banking, at Bridge Bank. Reach her at (408) 556-8327 or Emily.Ruvalcaba@bridgebank.com.

Participants in 401(k) plans have always paid fees, but many don’t realize they are doing so.

While quarterly statements contain information about net gains and losses, they don’t currently break out how fees impact those figures. However, that is changing with second-quarter statements in 2012. Employers need to understand those fees and begin educating employees about them now, says Gene Craciun, a financial planner at Skylight Financial Group.

“With 401(k)s, the biggest item is disclosure, not only at the plan sponsor/employer level but at the employee level,” says Craciun. “The employer has a fiduciary responsibility to understand the fees of the plan and communicate that information to the plan participants.

That needs to start now, because I think people will be surprised when they see additional information on their statements that shows how the stated earnings were calculated and that there are fees involved.”

Smart Business spoke with Craciun about how to understand and manage the costs associated with your company’s retirement plan, and how to prepare for the coming change.

How are statements going to change?

Statements will begin to break out fees. There has always been information about the beginning balance, what you’ve contributed and what you’ve earned or lost for that quarter as a net number. But many people have the perception that there is no cost involved with that investment.

The new statements will be broken out into gross performance, the investment level fee, if there was any plan level fee taken out and then the net number. It’s going to expand that calculation and show the participant how it arrived at that net number, rather than just showing the net number you see today.

What steps should employers take to prepare for the change?

Employers need to begin communicating these changes to employees so that when they see those fees on their statements, they won’t panic. You need to have a plan of attack to help participants understand the fees. You also need to make sure the fees are reasonable.

If your employees see transactions on their statements that they’ve never seen before, they are going to be confused. Your plan adviser can present a formal session to educate employees and physically walk them through the statement, showing them what it will look like, what each section means and how to read it. Take a preemptive approach so your employees are not surprised when they see something new on their account and question why money is being taken out.

Why should an employer be concerned about fees?

As the fiduciary, the employer has an obligation to make sure that fees are adequate and reasonable, and have supporting documentation that shows those fees are regularly being reviewed. Just because one plan might be more expensive than another does not mean it’s a poor choice, but you have to ensure the fees are reasonable for the level of service.

The fiduciary may not be aware that there is an additional asset fee in addition to the cost of the mutual fund. It may not know the share class of mutual funds the plan is using, and that it may be able to qualify for a less expensive class.

Even if you are satisfied with your plan vendor, you should be doing an overall cost analysis/benchmark cost analysis every three to five years to assess fees.

Who should an employer work with to perform a cost analysis?

You need to work with someone who is not just an investment specialist but a retirement specialist. The market has become a niche specialty, so if you’re using someone who is not specifically working in the retirement plan marketplace, you could be left behind.

Too many companies use someone such as a stockbroker to handle their 401(k) because that person handles their portfolio. But has that person talked to you about how to educate your employees to make sure you are meeting your fiduciary obligations? Is that person reviewing your plan not only for performance but for fee and cost structure? Those are the items that need to be tapped into, and while investment advisers know the basics of 401(k)s, they don’t know all the details. You can hurt yourself financially as a company if you don’t do this the right way.

How can a specialized adviser help lower plan fees?

The investment vehicles for 401(k)s are usually mutual funds, which pay subtransfer fees for revenue sharing back to the 401(k) provider. For example, if the mutual fund charges a fee of 1.25 percent, it will pay a portion to the company managing the plan as an offset.

With the asset fee, vendors base the fee on plan size. If your plan is new, with a small amount of assets, the vendor won’t make much money, so it charges an additional asset fee. That could be a fraction of a percent or a percent on top of the published investment costs, and participants incur that cost to help pay for the plan.

In theory, as the plan grows, that asset charge should drop. If you started with 100 employees and have $1 million in the plan, and now you have 125 employees with $5 million, the plan should become less expensive. But often, the plan sponsor and the adviser aren’t aware they can go back to the vendor to negotiate a lower fee.

Every couple of years, as your plan grows, go back to negotiate that fee. That’s why benchmarking cost analysis makes sense; it gives you leverage to ask for lower fees.

Eugen Craciun is a financial planner at Skylight Financial Group. Reach him at (440) 397-5770 or gcraciun@financialguide.com. Eugen Craciun is a registered representative of and offers securities, investment advisory and financial planning services through MML Investors Services, LLC. Member SIPC. OSJ: 1660 W. 2nd St., Ste. 850, Cleveland, OH, 44113, (216) 621-5680. CRN201310-153299

As a family business owner, you may dream of one day handing your company over to the next generation. But have you considered the role that your management team will play in the transition?

“There can be no successful transition if the success of the business is not maintained,” says Ricci M. Victorio, CSP, managing partner at Mosaic Family Business Center. “A key element is making sure that you have secured the talent that has made your business thrive. It’s not just the family that is vital to an organization’s success. You have to retain your key managers, the talented people who really make your business work.”

Smart Business spoke with Victorio about how to involve your management team in the transition of leadership.

What role should the management team play in a successful transition?

Your management team needs to be able to run your business if you are no longer there, for whatever reason, while the next generation is maturing and learning about the business. You have to consider the gap that exists between the current owners and the next generation.

The first step in the process of passing the business along is to lock in a vision of what you see for the business’s future, then communicate that to the executive managers so that everyone who makes that business successful can be enrolled in the vision. The managers then see that, yes, ownership is thinking about their future and that there is a place for them. This is a significant step toward retaining the key managers that are such an important asset to your business’s success. You don’t want them departing at your retirement, leaving the next generation starting from scratch.

What challenges does senior management face when a leader departs?

Many owners are hierarchical in the way they manage, in which case senior managers learn to respond to the owner telling them what to do. But then what happens when the owner is no longer there? Managers won’t feel comfortable turning to the 30-year-old son, who’s never been in charge of the business, to now make those decisions.

You have to create a learning curve and find ways to develop the management team so that the company won’t be crippled when the owner is to longer there to make those key decisions, and the next generation is not completely ready to take the reigns. With the proper planning, key managers will know their expanded roles and who should be making the decisions once the owner departs, letting everyone feel reassured that the company can keep going.

How can a coach help facilitate the process?

A coach can spend time with the management team while the owner is still there, and alongside the next generation that is being groomed, to teach them to work together as a leadership team. This process also gives everyone the opportunity to clarify the core values of the organization and get comfortable in the kinds of decisions they’ll need to make based on those values.

In many companies, managers have a close working relationship with the owner, but may not have that relationship with one another. A coach can help unbind them so tightly from the owner and get them to start working together as a collaborative team.

The coach also works with the owner and managers to develop a charter. Here, the owner can define the vision of the succession plan, the agenda for regular team meetings and the objectives of what everyone is going to hold each other accountable for during the process. Part of this process involves identifying areas that managers will be taking over, but where they may be struggling. Some examples include communication, problem-solving, mentoring, how to deal with controlling personalities, conflict resolution and how to better conduct employee review sessions to create a dialogue between the manager and direct reports.

By addressing these issues before management takes on new roles and responsibilities, a coach can make a difference in the quality of the business environment, morale and, ultimately, bottom line profitability.

What are the dangers of failing to plan for a transition?

A drop in productivity is inevitable if you haven’t planned for that transition. If the person at the helm isn’t prepared for his or her new role, employees will become confused about who is really in charge. When people aren’t sure about whom to talk to about the important decisions, soon, someone with a higher pay grade will take over to tell them what to do. But employees won’t necessarily trust that person.

In this kind of confusion and unclear leadership structure, it’s inevitable that conflict will ensue and key people will leave the company. To avoid that, you have to identify and prepare new leadership, and get everyone used to the transition before it happens.

By empowering your leadership team as a group, you’re not putting all of your hopes on one person, because that could create resentment throughout the rest of the group, as well as stress for that one person. Instead, you’re enlisting a collaborative team that can check on each other and hold each other accountable. That way, if one person gets sick or leaves the company, the business will not fall apart. And generally, you won’t have to worry as much about people leaving when you enroll them at this level of leadership.

Who doesn’t want to be acknowledged and empowered and really feel that they are making a difference at work? That is really what this process is about.

Ricci M. Victorio, CSP, is managing partner at Mosaic Family Business Center. Reach her at (415) 788-1952.

When you sign contracts, how closely do you read them? And how much attention are you paying to the insurance and indemnification clauses that you are agreeing to?

Mike Cremeans, vice president at Neace Lukens, says that too many business leaders don’t take the time to truly understand what comprehensive risks they are committing to when they sign a contract.

“Too often, the details are ignored,” says Cremeans. “C-level people may not have the time or the expertise to look too closely at the insurance and indemnification terms. And, unfortunately, many times, those sections of a contract are viewed as a commodity purchase. However, investing up front to have a contract attorney review the agreement can help you avoid substantial problems on the back end.”

Smart Business spoke with Cremeans about how to make sure you have the insurance required by your licensing agreements and that the agreement adequately constrains your risk to avoid getting burned in a lawsuit.

Before signing a contract, what does a business leader need to consider?

Make sure you understand what the licensor is concerned about. Many times, they include phrases in the agreement that are not defined but that they believe will somehow protect them. So begin by making sure there is a clear understanding among all parties as to what the terms in the indemnity and insurance sections of the contract mean.

Once you have an agreement regarding definitions, you can determine if the licensee has the corresponding insurance coverage and can make an intelligent decision on how to comply with a particular insurance requirement.

How can doing so help in the event of a lawsuit?

Contracts should consider all eventualities. Likewise, insurance and indemnification language should be very clear, in a way that almost settles a claim before it happens. If everyone understands up front the intent and purpose of the indemnity and insurance clauses, that will help prevent a serious error or misunderstanding in the event of a claim.

Too often, leaders don’t have a full, nuanced understanding of their insurance coverages, so when faced with a claim, they say, ‘That’s OK. We have insurance for that.’ Then they realize that the details of their insurance policies don’t align entirely with the language in the license agreement. For example, indemnification sections sometimes do not make an exception for the sole negligence of the licensor. However, many policies provide coverage for contractual liability except for the sole negligence of the other party. It is better to have a clear understanding up front as to what the terms mean and what the policy will cover, resulting in a smoother process.

What language should a licensee watch for in insurance requirements?

Terms such as ‘reasonable and customary,’ ‘adequate,’ ‘sufficient to support the indemnification section,’ etc., are red flags. All they do  is open up problems. This is dangerous, especially if you do not purchase high enough insurance limits. In the event of a large claim, if your limits are inadequate, the licensor can accuse you of not having enough insurance and of being in breach of the agreement. You then have the original insurance claim, along with a potential lawsuit from the licensor.

Unreasonably high insurance limits are another requirement to be mindful of. Many times, the licensor does not understand what insurance limits should apply based on exposure. If you are selling wallets, what kind of bodily injury or property damage could a wallet cause? But if you are selling pharmaceuticals, that carries a different set of potential risks. So if a licensor asks for the same limits of liability on each, that doesn’t make sense.

Also, be aware of indemnification sections that require you to indemnify the licensor for any and all claims, liabilities, costs, etc. No insurance policy covers ‘any and all’ claims because of inherent exclusions and conditions. So the licensee will have a higher obligation under the indemnification section than will be covered by its insurance. Work with an insurance professional who understands how to identify these detailed potential risks and then makes recommendations to help you with the best possible portfolio of insurance products to protect both you and the licensor if you are required to indemnify it.

What should a company look for in an insurance broker?

It is vital to work with a broker who specializes in your industry. A true insurance professional will ask questions, listen intently, and understand exactly what your needs and your risk tolerance are. Then he or she will be in the best position to make good, sound recommendations that won’t break the bank.

Trust, but verify. If you ask, ‘Is everything covered?’ and the broker says, ‘Don’t worry, it’s all covered,’ run the other direction to find another broker. You need to have someone who will force you to think about these issues. Dig into the issues that could potentially put you out of business. Engage your insurance professional and address your concerns and what you are going to do about them.

How should the broker work with other professionals to provide the best coverage?

It is very helpful to have a conference call with the licensor and its attorney, the licensee and its attorney, and perhaps both parties’ insurance brokers. That way you can all discuss the contract language and make certain everyone understands and agrees to the intent, terminology and definitions. We find that qualified insurance brokers bridge multiple disciplines and can oftentimes help translate jargon and facilitate understanding among all parties. Both sides can then decide what terms and conditions are acceptable and come up with a compromise.

A satisfying outcome can be achieved for all when all parties communicate effectively and thoroughly understand the other’s perspective and constraints.

Mike Cremeans is vice president at Neace Lukens. Reach him at (216) 446-3354 or mike.cremeans@neacelukens.com.

The America Invents Act, passed on Sept. 16, 2011, will significantly impact the way companies do business in the United States, says David Cupar, member, McDonald Hopkins LLC.

“The act helps standardize U.S. rules with those that the rest of the world adheres to regarding patents,” says Cupar. “It will create consistency both for U.S. companies doing business internationally and for international companies and individuals seeking to do business in the U.S.”

Smart Business spoke with Cupar about how the rules have changed and what that means for U.S. companies protecting their technologies through patents.

How will the act change the way rightful patent owners are determined?

The act addresses one of the biggest discrepancies between U.S. patent law and that in other industrialized countries. The U.S. has always had a first-to-invent system: if you invent first, then you would be entitled to patent protection even if someone who invents second files a patent application before you. This is different from the law in the rest of the world where the first to file a patent application becomes the rightful patent owner.

The new act changes the U.S. rules from a first-to-invent to a first-to-file system like the rest of the world. From a business perspective, this will help remove unwanted inconsistency. For example, in the past, if a Dutch company invented second but first filed a patent application in Europe and in the U.S., a U.S. company that invented first could argue that it is entitled to the U.S. patent. That puts the Dutch company in the anomalous position of owning the patent right in Europe but not in the U.S. based on the different rule.

How will this change the way U.S. businesses operate?

Companies will need to become more dedicated to filing patent applications as quickly as possible to minimize the chance of a competitor filing first on a similar invention.

Determining who invented something first is time-consuming and costly. The first-to-file system has a date of application and a government document, so there is no ambiguity.

Does this system give an advantage to bigger companies?

Inventors argue that the first-to-file system gives big companies an advantage because they understand the patent system and how to protect their inventions. However, patents are so prevalent in business, it is almost impossible to imagine why individuals and smaller companies would be at a disadvantage.

How will patent infringement disputes change?

The act will change patent litigation strategies significantly. If a party is concerned it might be accused of infringing, it will have more tools to oppose an issued patent outside of the classic federal district court litigation model. In the past, if you believed that my product infringed your patent, you would sue me, and I would assert a defense and counterclaim of invalidity against your patent in federal court. The downside of this approach is the length of time, cost and uncertainty in the process. For example, it can cost $2 million to $3 million to defend yourself in federal court.

To help reduce litigation costs and timing, the act introduces a post-grant review and inter partes review of patents. With a post-grant review, a party can file a petition with the U.S. Patent and Trademark Office to reopen the patent to determine whether the subject matter is patentable. If the USPTO determines it is not, or requires the patent owner to narrow the patent scope, the accused infringer can obtain favorable dispute resolution in this manner. Also, nine months after the patent is issued, an accused infringer can request an inter partes review, challenging whether the patent should have been granted in the first place. Thus, inter partes and post-grant reviews will provide a mechanism for accused infringers to have claims heard regarding the validity of a patent without being involved in full-blown federal district court litigation.

Another advantage in seeking a post-grant review or inter partes review of the patent is that you can request the district court in which you were sued to stay that suit until the USPTO review is completed. If you have a strong basis to seek invalidation of the patent and you prevail, the lawsuit goes away, and that $2 million price might only be $200,000.

How will the act change (1) joinder and (2) false patent marking claims?

Previously, ‘patent trolls’ — nonpracticing entities that own patents — could sue a number of companies, or an entire industry, for infringement in one lawsuit. The act makes the joinder of multiple defendants in a patent suit more difficult. Under the new act, a patent owner can join two or more parties to accuse them of infringement in the same suit only if those defendants are involved in the same transaction. This new rule will stop the practice of the patent trolls suing a number of companies in a related industry in one suit because those companies typically are not involved in the same transaction (e.g., GM and Ford sell different cars in different transactions). Now, patent trolls must sue each company individually in separate lawsuits, making it more difficult to sue an entire industry.

The act also changes the way parties may litigate false patent marking claims. The prior false patent marking statute prohibited parties from falsely marking products with expired patents or patents that did not cover that product with the intent to deceive the public. The problem with the statute was that anyone could sue anyone else. People would set up LLCs for the sole purpose of filing false patent marking suits against large companies to force them to settle out of court for substantial amounts of money. These LLCs did not suffer any competitive injury but still sued under the statute to earn settlement money.

Under the new rules, only the government or a party who has suffered a competitive injury may sue for false marking. Moreover, expired patents marked on products no longer constitute false marking.

David Cupar is a member and co-chair, Intellectual Property practice with McDonald Hopkins LLC. Reach him at (216) 430-2036 or dcupar@mcdonaldhopkins.com.

Three in 10 Americans entering the work force today will become disabled before they retire. And 43 percent of those ages 40 and older in the work force will have a disability event prior to age 65.

Employers should be asking themselves if they are doing enough to protect their employees if they become disabled.

“Disability insurance can help keep your employees part of your active work force,” says JP Pressley, vice president at USI. “Employees who have a disability plan are four times more likely to return to work following a disability than are employees without insurance. The cost of recruiting, training and getting a new employee up to speed is significant. Just being a good corporate citizen is one thing, but when you see the value of how it impacts the bottom line, that’s when employers really start putting a value on the benefits of disability insurance.”

Smart Business spoke with Pressley about how short-term and long-term disability insurance can financially protect employees and how it can directly impact a company’s bottom line.

Why are so many employers unaware of the need for disability insurance?

When companies are buying employee benefits, their primary concern is to get medical costs under control. When it comes to discussing disability, there is little to no time left at the end of the conversation to discuss this extremely valuable benefit.

That conversation needs to be moved to the forefront, because the dollar value of this benefit is 10 times the dollar value of medical benefits.

How does disability insurance work?

With short-term disability, the disabled employee is paid weekly between 40 and 70 percent of pre-disability earnings. Depending on coverage, that lasts 11 to 52 weeks. After that, the employee transitions into a long-term disability program, in which payments are made monthly.

Those payments can continue until employees reach age 65, if they are no longer unable to perform the material duties of their occupation, or if they are unable to return to work making more than 80 percent of pre-disability income.

If someone becomes disabled at age 35, gets a disability payment of $7,000 a month and remains disabled until age 65, that person will receive well in excess of $2.5 million of benefits. There’s a real financial incentive to have this coverage.

Where should an employer start?

The key is to design a plan that allows all employees, regardless of your budget, to participate in a plan that gives them access to this insurance, either through a plan subsidized by the employer or by buying the entire package themselves.

Work with a financial professional to help you understand this insurance so that you can easily communicate it to your work force. Once you start having those conversations, it’s eye-opening to both the employee group and the employer that there’s a liability they are facing without the safety net of both short-term and long-term disability insurance.

What would you say to business leaders who say they cannot afford to offer this benefit?

We are seeing more employers go to full voluntary programs, in which employees pay their full premium. However, if an employer pays even a small amount, say 10 percent of premium, employees see more value in it because they see that the employer has made a financial commitment to it. Typically, your insurance broker can find other areas in the company’s overall benefits spending to offset the minor cost for a percentage of disability insurance, so there’s no net increase in benefits cost to the employer. And if you can’t afford to cover all your employees’ wages, you can still set up a plan that allows them to participate in bridging the gap between your financial ability and their financial needs.

Won’t the government take care of employees who become disabled?

The perception is that the government will take care of you. In California, and in four other states, there is state disability insurance, and some employers don’t purchase disability as an employee benefit because they think state-mandated benefits will cover their employees’ needs. But those benefits don’t provide full coverage for all of your employees, and they are significantly underinsuring your most highly compensated employees.

Many also believe that Social Security will take care of employees who become disabled. However, Social Security benefits for the long-term disability are really difficult to qualify for, and it is estimated that less than 13 percent of the work force that is currently disabled is receiving benefits from Social Security.

With disability insurance, employers have a really big opportunity to provide a low-cost, well-received benefit that employees appreciate because their employers are looking after their financial well being.

How can having disability insurance get employees back on the job more quickly?

There are a huge number of local resources that insurance companies have access to, and they have a financial interest in getting employees back to work.

Most insurance companies, during the first 24 months of a disability, will assign an outreach counselor to work with the disabled individual to access physical and vocational training. And they will work with the employer to set up a part-time disability program in which the disabled employee can at least get back to work on a part-time basis. Because once they’re back part time, that really paves the road for them to return on a full-time basis, saving the employer the time and expense of hiring and training someone new.

JP Pressley is vice president at USI in Walnut Creek. Reach him at (925) 472-6770 or jp.pressley@usi.biz.

If you own real estate, a cost segregation study is one of the best tools to help you reduce taxes and improve cash flow.  Although a cost segregation study will not provide additional tax deductions, it will enable the taxpayer to accelerate a portion of the depreciation on the building, says David R. Walter, CPA, MBA, tax manager at Skoda Minotti.

“Cost segregation is the process of breaking out a portion of a building’s cost that can be depreciated quicker than the standard life of 39 years,” Walter says.

Smart Business spoke with Walter about the benefits of performing a cost segregation study and how doing so can help keep money in your business.

Where should a property owner start when considering a cost segregation study?

The purchase or construction of a building is the starting point for any cost segregation study. Any building is eligible, but the owner must determine if it is cost beneficial to perform a study. Any cost segregation study should start with a cost-free estimate to quantify the potential tax savings from doing the study. These estimates usually do not take a large investment of time, as only a few items of basic information are needed.

How can an owner determine if a cost segregation study is worth the investment?

Most firms that provide cost segregation studies provide a cost-free analysis of the potential tax savings. This analysis gives you a conservative estimate of how much could be saved, the net present value of those savings, and the fee for conducting the study. This allows you to compare the net present value of what you could save, versus what you’re going to pay for the study, allowing you to make an educated decision.

At worst, you’ve invested half an hour to pull together information to get an estimate and see whether it makes sense.

What is the minimum building value at which a study is worth the investment?

There is no true value that answers this question. It depends on the size and type of building. If you’re talking about a traditional warehouse, which is essentially just four walls, $500,000 would be a general rule of thumb. But if you have a specialized facility, that rule of thumb could drop down to $200,000 or $300,000.  I tell clients that while these may be general guidelines, because an estimate is free, any building owner should get an estimate to determine if a cost segregation study makes sense.

When should a study be performed?

Ideally in your first year of ownership. The sooner you break down the costs and depreciate them over those shorter depreciation periods, the sooner that you’re going to reap those benefits.

However, it is still worth doing a study even if the building was purchased/constructed in a prior year. With a cost segregation study, you can go back and determine the amount of depreciation that should have been deducted if a study was done at the beginning, and compare that to what actually was deducted. The current IRS rules allow you to deduct, in the year of the study, the difference in depreciation up through that year, thus getting the taxpayer caught up all in one year.

The value of a study is based on the time value of money saved. If you buy a building today, the sooner you get the study completed, the more beneficial it will be.

Are there benefits of performing a study beyond accelerating depreciation?

There may be some potential benefit on the insurance side. With a cost segregation study, you’re detailing the cost basis of the building. With this detailed cost basis, the replacement cost of the property may be better determined, which could lower the insurance premiums on the building.

Is this something building owners can do on their own?

No. The IRS has stated that an engineering-based approach must be used to substantiate the cost breakdown. If the segregation of costs is not supported by an engineer’s report, it will not stand up under audit of the IRS.  Although that means investing in a professional, the cost is typically worthwhile when compared to the savings you will realize.

Why should owners pay for a study when they still get those deductions over time without one?

It’s all about timing and the ability to push those deductions into earlier years. From a time value of money standpoint, the sooner a deduction can be taken, the more valuable it is.

If you look at a $1 million building, either way, you’re going to deduct that cost over 39 years, but by moving 25 percent of that million-dollar depreciation into earlier years, for example, you are decreasing your taxes in earlier years and getting that money back in your business sooner.

Everyone needs cash, and one of the best ways to get it is to reduce taxes in earlier years. Most tax planning strategies are based on the deferral of taxes, and that’s what you’re getting here. You’re deferring the taxes for a number of years and using that cash to grow the business.

What role should your CPA play in the process?

As much as this is an engineering approach, there is also a tax side. Your cost segregation study may produce a deduction, but you want to make sure you are working with a knowledgeable CPA to figure out how those tax deductions are going to play into your tax situation.

You don’t want to be in a position where you have paid for the study and then later find out that because of your situation, the deduction didn’t quite work out.

David R. Walter, CPA, MBA, is a tax manager at Skoda Minotti. Reach him at (440) 449-6800 or dwalter@skodaminotti.com

Nearly 26 million Americans suffer from diabetes, costing employers billions of dollars a year in direct and indirect costs. But many employers continue to ignore the problem, hoping that employees are dealing with it on their own.

“Diabetes costs employers an estimated $174 billion a year in unemployment, absenteeism and presenteeism,” says Julie Sich, health promotions coordinator for SummaCare Inc.

“Fifteen million work days are lost each year as a result of diabetes, with 120 million days of reduced performance and another 107 million days lost to unemployment disability.”

Smart Business spoke with Sich about how employers can help employees control their diabetes and reduce costs not only for the employee but for the employer, as well.

What is diabetes, and what are its consequences?

Diabetes is a disease that causes the elevation of glucose levels in the blood. This is a result of the body failing to produce enough insulin or of cells failing to respond correctly to insulin that the pancreas produces. Because of that, glucose builds up in the blood, and the cells do not get the glucose they need.

With Type 1 diabetes, the body produces no insulin at all. With Type 2, the body fails to produce enough, or what it does produce does not work properly.

While diabetes is treatable, it is not curable. And if not properly controlled, it can lead to an increased risk of cardiovascular disease, retinal damage, chronic kidney failure, nerve damage, blindness and gangrene on the feet, which can lead to amputation.

Symptoms include frequent urination, disproportionate thirst, unexplained weight gain or loss, blurred vision, swollen gums and numbness in the extremities.

Who should be tested for diabetes?

It is recommended that adults ages 45 years and older without symptoms be screened for diabetes every three years. Diabetes can be diagnosed through a simple urine test, which can detect the presence of excess glucose. A follow-up blood test can confirm glucose levels. Early detection is critical, as the resulting treatment may reduce complications of diabetes.

Once someone has been diagnosed, what are the recommended tests?

The HbA1c test measures the amount of glycated hemoglobin in the blood. It measures blood sugar levels over several months. Abnormal results indicate that blood glucose levels have been above normal for weeks or months and are a good indication of how well the disease is being managed.

High blood pressure and high glucose levels can damage the kidneys’ filters, so a yearly kidney screening is also recommended. When the kidneys are damaged, proteins leak into the urine, and the urinary albumin test can detect leakage. The second test is a blood test to measure creatinine, a waste product. The results will indicate how well the kidneys are removing wastes from the blood.

LDL C cholesterol levels should also be measured to ensure they are being kept in check. A person with diabetes who is able to lower these levels can reduce cardiovascular complications 20 to 50 percent. Blood pressure should also be checked, as increased levels increase the risk of heart attack, stroke, eye problems and kidney disease.

Finally, vision should be screened every two years — more often if vision is abnormal — as diabetes can result in the tissue being pulled away from the eye lens. This can lead to blurred vision and, in severe cases, to blindness, but can be treated if diagnosed early.

Why should employers be concerned about employees suffering from diabetes?

With the number of people suffering from diabetes expected to reach 40 million by 2015, few employers will not be impacted.

Data show that those who control the disease and keep their blood sugar levels at a healthy level cost employers an average of $24 a month, while those who do not control their levels cost their employers $115 a month. In addition, men with diabetes miss an average of 11 days more per year than their healthy counterparts, while women miss an average of 8.7 additional days.

The cost savings and the increased productivity make it worth an employer’s efforts to help employees prevent and control diabetes.

How can employers encourage employees to be screened?

Employers can start by educating employees. Diabetes doesn’t just affect older workers; employees in their 20s and 30s are suffering from diabetes, as well. However, many of them don’t realize it; of the nearly 26 million Americans with the disease, about 7 million are undiagnosed. By educating employees about the risks of diabetes and the steps they can take to stay healthy, employers can improve productivity and lower health costs.

For example, those at risk for Type 2 diabetes can prevent or delay the onset of the disease by losing weight, eating healthier and exercising for 30 minutes a day, five days a week. Through wellness programs and education, employees can learn to take these small steps that can lead to long-term rewards.

How can employers help those who have been diagnosed?

Once an employee is diagnosed, employers should encourage him or her to maintain a healthy lifestyle. Nearly 90 percent of those suffering from diabetes are also overweight. By offering wellness programs that encourage healthy diet and exercise, employers can help employees better manage their illness.

Employers can also reduce or eliminate the copay on diabetes medication, discount health care premiums in exchange for enrollment in diabetes management programs and offer free testing supplies. By helping your employees stay healthy and productive, you are helping your company do the same.

Julie Sich is health promotions coordinator for SummaCare Inc. Reach her at (330) 996-8779 or sichj@summacare.com.