Dell Kubler, vice president of Swerdlin Benefits Co., has 29 years of experience as a career professional in employee benefit consulting and group insurance. The majority of his experience is serving as lead consultant by managing the cost and plan design of a wide array of benefits for large employer groups. Kubler’s background includes work with an international insurance company as well as direct work with employee-benefit-related Internet technology.
Q. Are plans with higher employee-paid deductibles a long-term solution to rising health care costs?
No. The primary goal of consumer-driven health care is to educate the consumer on the true cost of health benefits and have them get involved in the process. The higher deductibles with no co-pays tend to shock consumers into better awareness of the costs of their health benefits. However, higher deductibles are not lowering health care premiums as was originally anticipated. Employer promotion of health is a better solution.
Q. What can employers do to take an active role in the process?
Promoting good health effectively should lead to happier, more productive employees if not lower health care costs. The best place to begin an initiative in this direction is to make sure you are fully utilizing the wellness tools and services provided by the current health care provider. Wellness services are promoted aggressively during the sales process, but the employer must provide education and guidance on this program to enjoy the full benefits.
Q. Are there any areas of health care that are being overlooked today that might produce some savings to the employer?
We see two areas that can produce significant savings for the employer and employees.
Employers need to understand how to manage their risk, which creates tremendous opportunities for cost savings. The key is to design the risk sharing among the employer, the employee and the insurance carrier, based on the employer’s risk tolerance. New market tools provide the opportunity to substantially lower health insurance premiums and greatly reduce an employer’s overall health care budget. Also, focus on your pharmacy expenses. These expenses make up a significant portion of the total cost of your health plan.
When several people at a company are working with the same client, information can get lost and opportunities can be missed.
But with a customer relationship management (CRM) program, all of your data are in one place, keeping everyone who works with that client on the same page.
“When you have a lot of people interacting with customers, those people aren’t necessarily talking to each other every day and not everyone knows everything about the customer,” says Eric Stoll, director of technology at Arke Systems. “CRM brings it all together and makes all that information available to everyone who needs to look up that
Smart Business spoke with Stoll about how CRM can help you grow your business and the first steps to getting started.
What is the benefit of CRM?
CRM is software that allows businesses to manage their entire operation with a more customer-centric approach by employing a central database. The database tracks all of their customers’ information that’s relative to their business and also helps manage the business processes to interact with those customers.
A lot of people use it to focus in on sales and marketing and servicing those customers. Once you have your business focused on a CRM platform, you can go back and start analyzing how your business is doing and how effective you are at each of those stages and with your interactions with customers.
Can CRM work for a business of any size?
It is effective at all levels. Smaller
companies really gain a benefit in their sales because their resources are limited, and following up with every one of those leads and opportunities that they come across can be difficult. CRM keeps you honest and makes you accountable for following up with everyone. That makes a quick impact on increasing your revenue.
Larger organizations can really benefit from keeping track of everything in one place and having a more 360-degree view of the customer.
What is the first step to get started using CRM?
You can’t implement the entire thing in one step. First, you need to figure out where CRM is going to make the biggest impact in your business. A lot of people start in the sales area, building out and automating some of their sales processes.
Many companies already have a sales process and different stages in that process that define how they’ll follow up with each of those customers. Analyzing these processes will also help them project their sales pipeline.
You need to figure out which area is going to bring the most bang for your buck. To start, you want to collect that data and start using it to make sure you’re following up with customers and actually doing what you’re supposed to be doing in the business.
Is it time-consuming and expensive to get a system up and running?
It depends on how well the process has already been defined within the business. Some companies have a very well-defined sales process and they just happen to manage it on spreadsheets or a whiteboard. Moving something like that into a CRM doesn’t necessarily have to be expensive or time-consuming.
If a company lacks these front-end processes, it will need to invest time and money into developing them before the company will be able to implement them through CRM. The first 90 days of using CRM is the critical period. With everyone on board and using CRM, a company should be able to start to see the benefits of using CRM at about the 90-day mark. In the first 90 days, CRM may not affect every part and angle of business, but you should be able to see where it will have the most impact. You should re-evaluate how you are leveraging CRM to get more information out of it for your business.
How does CRM software help salespeople better target potential customers?
You can watch where your marketing is more effective, what verticals and industries you are getting more sales from, but you can also look from a service point of view and find out where the most repeat business is coming from. You can then make sure you’re focusing your sales toward the areas you’re better at servicing.
You can also look at where sales have traditionally been made faster or where you’ve had bigger sales and focus it on those areas.
Eric Stoll is the director of technology at Arke Systems. Reach him at (404) 812-3123 x130 or firstname.lastname@example.org.
It is not unusual for companies to do business in multiple states with a wide variety of operations. In addition to providing facilities for employees, companies may provide delivery services, installation and maintenance services, operate distribution facilities, sell merchandise over the internet and provide miscellaneous customer service offerings. As companies expand and grow into new markets and new businesses, state and local tax planning is critical.
Smart Business talked to John Corn, director of Habif, Arogeti & Wynne, LLP’s state and local tax service practice, about some of the tax planning considerations necessary for companies currently operating in and expanding into multiple states.
What are the different types of taxes that states can assess?
Different states assess different taxes, using various methods and rates. How many tax challenges the company will actually face depends on varying state rules. Examples of tax on interstate commerce include:
? Business income tax based on allocation of sales, in-state facilities a company owns and maintains, activities and offices of sales representatives, and even independent contractors operating on a company’s behalf
? Nonbusiness income tax on rents, dividends and interest
? Franchise tax on a company’s net worth and net income generated from business activities conducted within a state
? Sales tax on goods delivered in the state and sales of related product warranties or services, including drop shipping of merchandise to customers
Potential liabilities for tax on interstate commerce may require adjustment of pricing strategies to cover the company’s tax liability and remain profitable. It may actually be cost prohibitive to operate in certain states.
When is business significant enough for a company to become a taxpayer?
One of the first steps in multi-state tax planning is determining ‘nexus’ or connection with a state. Whether or not a company has nexus with a jurisdiction establishes if it is a taxpayer and required to meet certain obligations, including the payment or collection of state taxes such as income, franchise, or sales and use taxes. Most states have a ‘bright line’ test used to determine nexus. In effect, states specify the minimum physical presence required before a state can justify levying state income taxes against those companies operating in its jurisdiction.
In many cases even minimal business activity can trigger a filing requirement. In general, the standard for doing business encompasses the location of real or personal property, location of employees, where and how sales are solicited, and where revenue is sourced. If a business has nexus then it must comply with all state statutes and regulations, including registration, collecting and remitting taxes due to the state.
Often the frequency with which certain business activities occur will determine if nexus is established. Clear documentation of the company’s operations and an understanding of the company’s accounting system are very helpful when evaluating the level of tax exposure.
What are the various factors states evaluate when determining nexus for tax purposes?
Business situs. This includes states where you maintain company property (such as offices, data centers, wholesale store outlets, storage warehouses and distribution facilities), employ staff or work with other business representatives.
Physical presence. Even without an office or other facilities in a state, temporary presence of your employees, agents or property may subject you to a state’s taxing jurisdiction — for example, the use of company vehicles or personnel to deliver products and services into the state.
Commercial domicile. This is the state where your business is headquartered. You’re liable for taxes in your commercial domicile, when applicable, only on the business you conduct in that state and, if state law provides, on all of the nonbusiness income of the company (such as dividends and interest).
Corporate domicile. This is the state in which your company was incorporated or chartered, which may differ from your commercial domicile. You may be liable for all business taxes levied in your corporate domicile.
Economic presence. Even if you have no physical presence, some states may levy taxes based on ‘economic’ benefit or activity, such as on income-generating trademarks your company owns, business transacted through the Internet, or products shipped into the state, even if delivered by common carrier. Ohio’s commercial activities tax is a good example, imposing a low tax rate on ‘gross receipts’ from Ohio sources.
What else should businesses know?
Prepare for increased scrutiny. Be aware that simply qualifying the company to conduct business in a state may trigger tax obligations within that state.
To increase revenue, state governments are working to increase tax rates and dedicating more resources to collect taxes from businesses engaging in interstate commerce. To this end, states may employ staff to conduct Internet searches and use field auditors to discover noncompliant companies doing business in their states.
If a state determines that your company has failed to properly comply with registration requirements and proper payment of tax liabilities, your company may be assessed back taxes with costly penalties and interest. Companies should seek the help of experienced tax specialists who understand state and local tax policies, especially since state tax law is so complex and lacking in uniformity.
John Corn is the director of Habif, Arogeti & Wynne, LLP’s state and local tax (SALT) service practice. He provides tax consulting services to a variety of clients on SALT matters with regard to income/franchise tax as well as sales and use tax. He has served clients throughout the U.S. working with companies in various industries, including the manufacturing, technology, distribution, retail, tourism and financial services sectors. Reach him at (770) 353-5344 or email@example.com.
Even in a difficult economy, Jonathan D. Rosen says you can still steer with a steady hand if you’re always honest with your customers and employees.
“Sometimes that involves tough choices,” says Rosen, co-founder, chairman and CEO of Entaire Global Cos. Inc. “But if you have an honest dialogue … even if you’re delivering bad news, they’ll respect your perspective.”
Involving employees in every aspect of Entaire’s business, from vision planning to financial review sessions, has been a vital key to the company’s success. Since co-founding Entaire in 1997, Rosen has grown the company’s revenue to $16 million in 2008. The company, which works with business owners, medical practitioners and legal professionals to find solutions for their financial and retirement planning problems, has 33 full-time employees and 3,500 independent contractors.
Smart Business spoke with Rosen about how to create a plan that will allow your company to reach its goals and why you need to buy more lunches as your company grows.
Work backward toward your goal. The first step is dreaming about where you want the thing to be. If you look out five or 10 years into the future, what do you want that landscape to look like for your business? You draw on your internal resources and your external resources and your advisers, and you say, ‘If I were painting a picture, what would I want that picture to be?’
Then, you back up and you build pathing between where you are today and the end goal.
Along the way, you check and make sure you haven’t deviated from your course.
It’s a lot like navigation — you know where you are and you know where you want to go. It is a lot easier to make simple course corrections along the way than to get three-quarters of the way there and then realize you need to make a huge course correction.
You try to get more information sooner. Then you can create more landmarks, find more landmarks and get a real feel for where you are. So if it turns out that a course correction is essential, you can go ahead and make it now rather than later.
Get the data. The first way to make sure you’re maintaining your course is by looking toward actual data. Once you find that data, then you try to validate what the data tells you through anecdotal evidence. Then, you see what others tell you. It’s amazing the wisdom you can get when you walk around the office.
If you want to know what’s really going on, you walk out into the workspace. You would be amazed at what you hear and see and what it can teach you about your business. You’ll be looking around and you will discover, ‘Gee, we’ve got a huge opportunity,’ or ‘Uh oh, we have a major problem.’ You can discover those things merely by listening to what others have to say.
It’s tough to maintain that kind of an open-door policy as a business grows. So you have to create forums for dialogue.
As we’ve grown, it has become harder and harder to do that. One thing we’re doing this year is I’m buying a lot more lunches. Somebody on the staff came up with the idea that we would have team lunches with the CEO. It is simply three or four people, and we all go out to lunch. I’ve found that with a couple lunches a week, you can get there. It gives people a chance to actually ask their questions.
Let your employees participate. Another thing we do that I’ve found effective is to have financial review meetings. We have a sign-up sheet once a quarter for these.
People who want to come look at the financials of the business can sit down in the conference room with us and we’ll go through the statements and answer questions. We talk about what we did right and wrong and why we are where we are. It’s participation — you need to let them in.
Employees believe that management and leadership operations occur in this giant amorphous black box. One of the things I encourage them to do is say, ‘How’d you make that decision? What were you thinking when you did that?’
Then I give them an honest answer. You say, ‘Well, I struggled with this; I considered that.’ And if it was the right decision, you say, ‘And it looks like it benefited us.’ If it was the wrong one, you say, ‘I got that one wrong.’
Encourage your employees to speak up. At first they are reluctant to share. Then you find through their questioning you get an enormous amount of wisdom. What happens is, people will start to connect the dots and say, ‘Oh, that’s why we do that that way.’ Yes, it is.
And as you’re going through that dialogue with them, you’ll get snippets of information like, ‘Oh, now that I understand that is the objective; in customer calls, we get a lot of calls that look like this. How would you answer that question of the customer?’ Then you’d say, ‘Interesting. Didn’t know we were getting those calls. Here’s an answer I might give.’
Two or three weeks later, you’re walking down the hall and someone says, ‘I tried that explanation you gave us the other day. The customer really got it, and as a result, they referred a client.’
How to reach: Entaire Global Cos. Inc., (800) 871-4442 or www.entaireglobal.com
When you hire employees, you want to assume they are protecting your intellectual property and not sharing confidential information with competitors or creating items for other companies while employed by you. But that’s not always the case. Intellectual property is a significant asset, so it’s important to protect it from employees who might be looking to cash in on your trade secrets, patents or copyrights.
“Make sure to clarify in writing that anything your employees create while working for you is vested with your company,” says Clint Crosby, shareholder at Baker, Donelson, Bearman, Caldwell & Berkowitz PC. “Should there be a valuable invention, there might be battles with employees who contend that an idea or invention belongs to them. At the end of the day, you may be victorious, but litigation can last multiple years and costs hundreds of thousands of dollars.”
Smart Business spoke with Crosby about how written agreements can help in protecting your IP, what to do if an employee breaches that agreement and recent lawsuits that have involved IP issues.
How can businesses protect their IP?
The most important thing is to have written agreements with employees. You should have a clear, concise and easily understood written document that both sides can agree to at the inception of the relationship. This will allow both sides to know what the intellectual property is and also define that any invention or idea developed by the employee while working for the company will be company property.
Presuming that the employee will leave your company at some point, you want to have a document that they can refer back to, so that when they decide to go, they understand their obligations concerning IP.
What information should be included in an agreement?
? Define that the IP and confidential information provided to employees when they are hired belongs to the company. You expect them to keep that information in confidence and use it only for work
? Have employees disclose any IP they already own, including patents, copyrights and trademarks. You can better protect yourself and resolve later confusion if the employee defines any IP they own in advance.
? Prohibit employees from using any confidential information or IP they know about from a former employer at your company. This will prevent a later claim that any IP created at the company is derived from another company’s IP or confidential information.
? Employees need to agree to assist the company in registering and protecting any newly created IP.
? Have employees accurately track what they’re creating and what they’re using existing IP for and disclose that information to you.
What should you do if an employee breaches that agreement?
You may need to seek an injunction to get some relief from the court to prevent the employee from continuing to share that information. You also might want to pursue litigation if there are damages that could be awarded to compensate for that loss of information or secret.
You want to define in the employment agreement what the company can do if there is a breach. Both sides then know what can occur, and it will discourage employees from doing something that may violate the agreement.
How can you make sure your trade secrets are protected?
Trade secrets are generally defined as some type of information, product or process that’s not readily known or easily accessible to the public and brings value to the company. You need to demonstrate that it is indeed a secret and that you’re making some effort to keep it confidential — it’s kept under lock and key, there’s some password protection or encryption — in order for it to be protected as a trade secret. You also need to show that it’s not something commonly disclosed throughout the company, just to limited personnel as needed for their work.
Have there been any major cases involving IP issues?
There was a case in 2008 where inventor Carter Bryant came up with the Bratz doll concept while at Mattel Inc. and then moved to competitor MGA Entertainment Inc. MGA developed the product and made a significant amount of revenue from it. The question was: When was this concept invented, and did it fall under Mattel’s IP rights or MGA’s IP rights?
Ultimately, the court found in Mattel’s favor, that Bryant had created Bratz while at Mattel, and awarded Mattel $100 million for the copyright infringement and breach of contract. Mattel also filed a permanent injunction against MGA to stop them from making and selling Bratz and to dispose of all Bratz-related marketing material. The injunction was granted, but enforcement of it has been held until at least the end of 2009 while MGA appeals the decision.
The case highlights the importance of having an agreement in place and having employees clearly document their work. If they’re coming up with new concepts and ideas, you want them maintaining records that show the ideas and dates of creation. If a question comes up down the road, you can hopefully clearly define the date of creation and eliminate the long-term, expensive litigation.
Clint Crosby is a shareholder with Baker, Donelson, Bearman, Caldwell & Berkowitz, PC. Reach him at (678) 406-8702 or firstname.lastname@example.org.
Every customer, every employee, every day.
That simple six-word phrase has proven quite successful for Pete Sinisgalli over the years.
“I’ve generally always believed that wherever I’ve worked,” Sinisgalli says. “It’s a rather straightforward formula. … You have to emphasize different parts of that depending on the specific business, but focusing on customers ruthlessly and focusing on employees passionately will always lead to a good outcome.”
This mantra helped him succeed at Dun & Bradstreet Corp., CheckFree Corp. and also NewRoads Inc. before arriving in the executive suite at Manhattan Associates Inc. in 2004. When he arrived, Manhattan had done $196.8 million in revenue the previous year and things were going well for the supply chain optimization provider.
So what do you do when you’ve already got a good thing going on? Sinisgalli wanted to keep growing and make it even better.
“The key challenge has been how do we continue to grow the company and drive improvements in customer satisfaction,” the president and CEO says.
He looked out at the good organization he already had and knew that his every customer, every employee, every day approach to business would also lead to success at Manhattan, so he decided to focus his efforts on taking care of customers and creating a great place for employees to work.
“It’s overly childish my ‘every customer, every employee, every day’ phrase, but I think if you do that and make incremental progress every day, if you look back a year later, it will look a lot more impressive,” Sinisgalli says.
Focus on customers
When it comes to focusing on every customer, Sinisgalli says it all comes down to one thing: frequent contact.
“We have a number of different prospective opportunities to touch our customers,” Sinisgalli says. “It’s important you take advantage of those opportunities. Too often, companies will suggest that the only time they hear from a company is when they’re sending them a bill. You certainly want to avoid that. … The more frequent and the more open the environment for customer feedback, the better.”
You need to have multiple ways to get feedback, and you can start with customer calls. Whenever customers call for help, make sure they not only have their question answered, but that they also rank their experience. Manhattan sends customers who interacted with the company in some way a link to an online survey where they rate the experience on a scale of 1 to 5 in a few keys areas, such as timeliness, quality and professionalism.
“That instant feedback is very valuable,” he says. “It gives you a firsthand feel for what customers think, and if there is an issue, before it becomes a big issue, you have an opportunity to respond to it.”
If the ranking is less than a 4, then a manager follows up with that customer by calling so he or she can better understand the situation and what needed to happen to improve the customer’s experience.
“The management will penetrate to better understand what didn’t go as well as the customer would have liked under ideal circumstances and then work with the people who provided the support to improve that going forward,” Sinisgalli says.
Last year, Manhattan averaged a 4.6 on these calls, so Sinisgalli is satisfied in his team’s ability to solve customer problems.
Besides taking customer calls, he also has found product councils as a way to get feedback from customers to help dictate the direction Manhattan should go.
“Developing a product council that has real power is a good way to encourage your customers to come forward with their thoughts,” he says.
Manhattan has a small council of about 12 customers for each of its products.
“Any more than that, it’s too hard, and any less than that, you don’t have enough input, but with a dozen on each council, it works out well,” Sinisgalli says.
Each smaller council has a president, and those council presidents — about 20 in all — participate in larger, overall product council meetings three to four times a year.
Lastly, provide a large-scale event for your customers to meet with you each year. Manhattan has an annual meeting with its customers. The last one brought 1,000 people to Orlando to gain more insight into the marketplace and get detailed information about Manhattan’s solutions and products. They have a couple of larger sessions for everyone and then smaller breakout sessions organized by products so people can ask questions and provide thoughts about how the products can better meet their needs. These sessions also help them gauge how prevalent issues are.
“Is this one customer request or were the majority of people in the audience making a similar request?” Sinisgalli says. “It’s a pretty easy way to assess the majority needs of the customer base in these meetings.”
The user conference is also helpful because when customers get around other people that they’re not necessarily doing business with, they’re more willing to speak up and bounce feedback off of each other.
“The most important thing to do is provide an environment that customers are comfortable sharing direct feedback,” Sinisgalli says. “A customer conference is a great mechanism when you have a dozen or more customers using the same product sitting around the table, they’ll tend to get more and more comfortable and feed off each other with suggestions of where to help move our products, so create that environment.”
Focus on employees
If you want to be successful on the people side of the business, you have to start by looking at your hiring process.
“You’ve got to hire correctly,” Sinisgalli says. “When you’re out going on campus or hiring people for midlevel roles, you have to do it with a profile in mind that’s consistent with your culture.”
Sinisgalli looks for someone who’s not only talented but also customer-focused, and he asks a lot of questions to see if candidates have both traits.
“If it’s a college student, it’s a little harder,” he says. “It’s somebody who’s not had work experience before, but then you can ask them questions about what they do in their spare time, how they spend their summer breaks, how engaged they are in outside educational activities, to get a sense for how they prioritize, how they spend their energy.”
If someone has work experience already, it’s a little easier to drive down into his or her core.
“Ask them about what things they were successful at, what wasn’t successful, and then penetrate those areas, and it will come across pretty quickly if they’re focused on customer success or focused on something else,” he says.
Sinisgalli says it’s also crucial to discover whether someone is more focused on personal success or company success.
“Most people are pretty polished and sophisticated,” Sinisgalli says. “It would not come across blatantly. You’d have to ferret that out. … It’s hard to fake more than five or six questions. You penetrate any one line of questioning, and you ultimately get to the core of any person you’re speaking with.”
Lastly, he typically does at least three to five interviews each time he’s hiring someone and also mixes up the location.
“Find more opportunities for the person to behave as they would normally behave,” he says. “Do an office interview, perhaps a lunch interview, a dinner interview, a sporting event. Go to a baseball game or play a round of golf. It’s a good opportunity to better penetrate someone’s true culture.”
Once you have the right people on board, then you have to focus on them.
“Having the right development programs in place is critically important,” he says.
Manhattan has technical training and general manager training, but it also has more elite programs to really hone the cream of the crop. Through the Manhattan Academy, the best of the best spend a week with Sinisgalli and other senior executives in a mini MBA program.
With about 2,200 employees though, it can be hard to figure out whom to invest time and money into, so Sinisgalli relies on his direct reports to help him. Through the semiannual review process, leaders identify team members that have exceptional potential.
“We define that as the ability to do their current job extremely well and the ability to move at least two levels further than where they are today,” he says. “Identify those folks that have exceptional capacity.”
To objectively identify people, he has a matrix with four quadrants on it. One axis is the ability to execute in the current role and the other axis is potential. Ideally, employees want to be in the upper right quadrant. If someone falls into that golden quadrant, then Sinisgalli puts more efforts toward training and developing him or her and ensures his or her compensation plan is strong to keep that person interested in growing with Manhattan.
Lastly, you have to make sure you stay attuned to your employees’ needs and desires.
“Keep an eye out to what’s important to the employees,” Sinisgalli says. “If you’re doing the things that make the employees feel good about working in your company, they’ll do great work.”
For example, if employees are interested in working in China, India, France or another Manhattan location abroad, Sinisgalli makes it happen. If people are interested in working in another department, he gives them the opportunity to try it, and if it doesn’t work out, they can go back to their former role.
“We prioritize that by the top, top folks get the first crack at those transfers, but we try to make that available to anyone who’s in our business,” he says. “It’s one way to expand their knowledge but also keep them excited about working here.”
If you really want to know how your employees feel and what they need though, you have to make them comfortable speaking to you.
For example, about twice a month, Sinisgalli has breakfast with 10 randomly selected associates. He provides doughnuts, juice and coffee and talks for about 15 minutes about the status of the company, and then he opens it up for questions and dialogue. He learns a lot about where he needs to focus his efforts just by listening to their thoughts and ideas.
Another way he connects with employees is by having casual events. During football season, they had a barbecue in the parking deck and encouraged employees to wear their favorite college gear. Sinisgalli sported his Cornell University apparel while grilling burgers and hot dogs and enjoying conversations with employees.
“Create that open environment, and talk to the folks in a relaxed way that will make them comfortable raising ideas and concerns,” he says.
The combination of doing all of these things helps create a strong company culture that encourages your employees to grow with you.
By combining his every employee efforts with his every customer efforts, Sinisgalli has succeeded in taking what was already a good company at $196.8 million when he arrived and growing it to $337 million the past two years. But despite the company’s success, he’ll continue his every customer, every employee, every day approach to ensure Manhattan continues to thrive.
“By making incremental progress on driving up customer satisfaction and making this a better place for employees to work, I believe it will continue to allow us to become an even better company than we are today,” he says.
How to reach: Manhattan Associates Inc., (770) 955-7070 or www.manh.com
In the havoc of the economic downturn, many business owners, like many private investors, have seen their retirement savings decline by 40 to 50 percent in value. Jim Caswell is a founding partner and vice president with Peachtree Planning Corporation. He is a certified financial planner and has been providing sound financial advice to his clients since 1984.
“If you go back to 1926 the average annual return of the Dow Jones was 10.5 percent,” he says. “If you suffered a loss of 40 to 50 percent last year, it will take almost 10 years of 10 percent annual returns just to recoup your 2008 losses. What this means is that, if your retirement goal was two to five years, even 10 years, you’re probably going to work longer than you thought or you are going to have to start saving at a higher rate than you were.” Caswell says your financial planning should reflect this new reality.
“Everyone needs to be taking stock of their financial health and have a clear understanding of how these market declines will affect their ability to achieve future goals.”
Smart Business spoke to Caswell about how to make sure your plan has what it takes to keep your business protected.
What are the key concepts to personal planning for business owners?
Business owners understand business cycles and anyone who has a successful business has operated in both good and bad times. They understand an old slogan: ‘Tough times don’t last, tough people do.’
Their business is their most important personal asset. Their business and personal financial planning are almost synonymous. The important thing is to help the client differentiate between business and personal goals and to understand how the risks assumed in business affect the ability to achieve personal goals. There are many advantages to owning your own business especially when it comes to saving on taxes. With a proper structure, you can utilize those advantages to enhance both your business and personal planning.
What can business owners do to make sure their business is protected?
During a recession, if a business begins to suffer problems from reduced cash flows, business owners will sometimes neglect their personal planning. I try to help these clients understand how important it is to pay attention to cash flow in this type of business environment.
Properly understanding and forecasting both your business and personal cash flows may be the most important way to ensure your business survives. This can require some tough decisions and people don’t like doing that kind of planning. It is absolutely critical that you plan with realistic numbers for what you expect to happen for the balance of 2009 in both your business and personal life.
How can business owners ensure their plan is financially strong?
It doesn’t happen by coincidence, it happens by design. First, seek out a professional. Get another pair of eyes to look at what you’re doing. Maybe two or three pairs. Find someone who can work with you and probably your CPA to make sure you are getting good timely information. Then perform what I call a financial physical. You go to your doctor for an annual physical to get a professional to tell you if something is wrong. The same thing is true with your finances. Your financial physical should look at everything that affects your financial life. Insurance protections: home, auto, health, life, disability, long-term care. Legacy planning: wills, trust, future giving. And retirement, tax and investment planning. All these things need to be analyzed and coordinated into an effective plan. If something is wrong with your financial plan, when would you want to know about it? Now, or 10 years from now?
How has the economy affected personal planning?
Back in the ’90s, everybody thought they could get 18 to 24 percent on their 401(k) every year. They thought that was the norm. They didn’t need to worry about cash, interest rates were relatively low; a great deal of wealth was created. Those days may be over for everybody. People are now very concerned about their world and they are naturally gravitating toward more and better financial planning.
It’s critical to make sure your mentality and mindset is correct for this economy; you need to remain positive. These are tough times but with good planning and quality leadership we will come through. You have to demand timely and quality information and you have to be realistic and flexible with your planning. Investors can continue to learn more from us in the months to come about how to thrive in uncertain economic times.
JAMES M. CASWELL III, CFP , is vice president of Peachtree Planning Corporation. Reach him at (404) 260-1600 or email@example.com.
According to a survey from the Ethics Resource Center, some of the top ethical challenges facing businesses today include individual rights and values in the business, operations, competition, product, shareholders and government. Not establishing a code of ethics for employees to follow can make your company more open to some of these challenges.
“If an executive knows or has knowledge of something that’s going on in their company that’s wrong, it should be addressed,” says Frederick Jones, business law and ethics lecturer at Kennesaw State University Coles College of Business. “If they turn their head and it’s found out later that the issue was ignored and they knew it was there, that’s where possible criminal liability comes into play.”
Smart Business spoke with Jones about how to maintain a culture of ethical standards within your company, what to do if there has been a breach of ethics and how maintaining high standards can create a more positive work environment.
Where do ethical standards begin?
Management must set an example and model the behavior they would like to see throughout that company. Set up a code of conduct, a business code of ethics, and make sure that employees and management know the law. If an employee sees that he or she is violating a rule, he or she will know to stop. Ignorance of the law is no defense or excuse.
Help employees evaluate their values. Establish policies that encourage employees to ask themselves, ‘Am I looking for a loophole or am I trying to follow the letter of the law when it relates to internal policies?’ Encourage employees to follow their conscience and be aware. If you feel guilty about something they’re doing, it’s probably not good. Would you want that decision you’re about to make to be published? If you wouldn’t, it’s probably not a good idea.
Encourage employees to keep their promises. Everybody wants to know that he or she can deal with somebody who has integrity. If every business is based on trust, your customers will feel better about dealing with you.
Encourage employees and management to ask themselves, ‘What would my hero say about this decision I’m about to make?’ If it’s something that your hero wouldn’t feel good about, you shouldn’t do it. If companies incorporate this into their policies, procedures and training, it would be a big help.
How can you create guidelines for ethical practices?
Sit down with corporate counsel and line up some of the main issues that your company deals with on a regular basis. Itemize that list, coordinate that information with human resources and make it a part of every new employee’s hire package, making certain that all of the established employees are aware of it, as well. Organize training sessions, and annually, quarterly or biannually review those guidelines and procedures.
What happens if there is a breach of ethics?
Take each situation case by case and evaluate the facts, because some ethical breaches or violations are more severe than others. If an individual broke one of those rules, management would have no other choice, if notice has been given, to terminate the employee. It will send a message to the rest of the team and the company that this type of behavior will not be tolerated. If management merely turns its head concerning unethical behavior, management is by default approving that behavior. So something must be done once unethical behavior has been exposed or made known.
What consequences might businesses see if they do not maintain ethical standards?
- We live in a litigious society; many
are looking to file a lawsuit. Unethical
behavior is a breeding ground for litigation.
- A company can expect long-term
profits to be minimized. The company
can lose profits from lawsuits, litigation
expenses and fees, negative public relations, and loss of company morale. All
those things will have a negative impact
if unethical behavior leads to a lawsuit.
- There is the possibility of prison time, heavy corporate fines and penalties, or loss of license.
What are the benefits of maintaining and creating a culture of ethical standards and practices?
Employees will not view work as work, because the culture will be positive and uplifting. Companies can expect higher profits. There will also be long-term success of the company. Lawsuits and legal issues will be minimized.
FREDERICK D. JONES is a business law and ethics lecturer at Kennesaw State University, Coles College of Business. Reach him at (770) 499-3627 or firstname.lastname@example.org.
Born: Starkville, Miss.
Where did you attend college?
Mississippi State University. My parents went there, [so did] my grandparents. My mom suggested to all of us — there were six children in our family — to go see the world, and she was going to live vicariously through us. But when you grew up, there was such a strong tradition; it was sort of in your blood.
As a child, what did you want to be when you grew up?
By junior high, I thought I wanted to do something in the accounting world. I really don’t remember before that. I did at one point want to be a writer. Is that ironic? It was that one poetry contest that I won in about the sixth grade.
What was your first job ever?
Baby-sitting. My first real job was I helped start a refreshment stand at my brother’s T-ball games. But before that, I was baby-sitting. I worked in the nursery at church. Actually way before that, it was digging dandelions in my grandmother’s yard. She would pay us to dig the weeds — and we were really young then.
What did you learn from your childhood jobs that still helps you today?
That hard work is rewarding. The way I got into the client service business is really all the things I did focused on helping people either solve a problem — like bookkeeping or having refreshments at the ballpark when there wasn’t a refreshment stand. It’s that client service is important, if that’s what you choose to do.
What’s your favorite board game?
I love Scrabble. I love words. I love keeping score. Definitely Scrabble.
Whom do you admire most and why?
There’s so many. It’s one of those you pick and choose the attributes and not any single person. There’s so many people in my family and public figures that I admire and respect.
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