If a buy-sell agreement has not been drawn, you may not have planned sufficiently for the future. The agreement decrees how a business, or a share of a business, will be transferred upon death, disability or retirement.
It can be between partners, a business entity and its stockholders, or an owner and a key employee, and it determines who will receive a business or its share and how the sale or transfer will be funded, and provides a means for paying personal estate taxes after the transfer.
There are three types of buy-sell agreements -- a stock redemption plan, which is an agreement between a corporation and its shareholders; a cross-purchase plan, which is an agreement usually among shareholders or partners; and a wait-and-see buy-sell plan, which offers flexibility and tax and economic advantages that take the best from the first two options. In the third scenario, a corporation can exercise its buy option or waive its right, thus triggering the cross-purchase option.
Regardless of which buy-sell plan you choose, consult with a professional to help avoid tricky tax and procedural pitfalls. Equally important, a financial professional can present appropriate funding options.
Nearly 25 percent of all business successions don't go as planned because of a lack of adequate funding to carry out the plan. The number is even higher among family businesses because, while many family business owners spell out transfer arrangements, they don't plan how to fund the transfer.
When a business owner is disabled or opts out of the business for other reasons, other owners get first crack at that share of the business. Of course, they need the money to acquire those shares. When a business or its shares becomes available because of the death of an owner or shareholder, surviving owners again get the first option to buy, even though the business interest is usually willed to a family estate.
Most buy-sell plans include the stipulation that surviving family members, if not previously involved in the day-to-day business operations, sell their interest to surviving owners. Cash received for this interest helps meet family estate tax obligations. It also ensures the business is in the hands of the people best qualified to run it.
Self-funding, borrowing and insuring a buyout are the three basic ways most plans are funded.
With self-funding, surviving owners or shareholders can pay for the business interest outright or through an installment plan. Buyout funds can also be accumulated through the establishment of a sinking fund, a savings plan in which business owners put aside money on a regular basis for the sole purpose of buying shares when they become available.
This funding arrangement helps money accumulate for the future, while at the same time earning interest. Borrowing provides the money up front, with interest payments figured into future payments.
But what if death or disability happens before enough funds have accumulated to meet the buying price? Or what if borrowing becomes tight because the departure has an adverse affect on business? And, can a deceased owner's estate afford to wait for an installment plan?
That's where insurance comes in.
Bought by either the company or by partners on each other's lives, insurance is the surest method of providing cash when it's needed. Through a variety of insurance programs such as split-dollar, in which an insured owner and other partners split the cost, tax-advantaged savings can be accomplished now while future payout is guaranteed.
Whole life insurance, which builds cash value, can also provide funds when events other than death trigger a buyout clause. Many companies sell disability insurance to specifically meet buy-sell needs.
The existence of a buy-sell plan ensures the orderly transition of a business. A proper funding vehicle ensures the money will be there when the time comes.
Plan for the future now. Your business depends on it.
Jan Bell is the owner of Bell & Associates Planning in Atlanta, an affiliate of National Financial Services Group (www.nationalfinancialservicesgroup.com). Her planning strategies focus on the conservation of assets for present and future generations through business and estate planning. Reach her at (770) 399-0417 or Bell_Jan@nlvmail.com. Securities and Investment advisory services are offered solely by Equity Service, Inc., a Registered Broker/Dealer and Investment Adviser, 1050 Crown Pointe Parkway, Suite 1000, Atlanta GA 30338. National Financial Services Group is independent of Equity Services Inc.
Now that the one-year anniversary is here for all employers with less than $5 million in health care expenses, you should remember what it takes to continue to be in compliance. If you are your company's privacy officer, this responsibility sits squarely on your shoulders.
For those ostriches with your heads in the sand, let me remind you that the penalties are stiff -- including jail time -- for individuals who intentionally violate HIPAA. Getting into HIPAA compliance is not hard, but it does require properly executed documents and procedures. Maintaining compliance is even easier.
* Retrain your entire HIPAA work force annually.
Every year, you must retrain your HIPAA work force. This can be accomplished in about an hour if your training materials are complete. Many times, employers are more puzzled with who is considered a member of the work force than in the training that must occur.
Your HIPAA work force generally includes several departments. Human resources is the primary group and includes anyone who touches an enrollment form or is the primary source for employees to seek assistance with benefit problems.. Certain members of the finance department can be included because finance handles payroll, and payroll deductions are related to plan selection.
The last department that most people forget is members of the IT group. When HR or finance needs assistance with their systems, IT members have access to that information.
* Train your new members of your HIPAA work force within 30 days.
Thirty days is not much time to get a new employee trained on HIPAA, let alone all the other aspects of a new job, but it must be done. Training a new employee doesn't have to be any more time-consuming than retraining.
* Maintain your training log.
HIPAA states that the employer must maintain a log. This log should include:
* The name of the employee and his or her department
* Date the member was initially notified that he or she was a member of the HIPAA work force
* Date the member was initially trained (required within 30 days of notification date)
* Date member was retrained (at least once a year)
* Date member was terminated as a member of HIPAA work force
Your log must be stored for six years, along with all of your other HIPAA-required documents.
* Audit your business associates for HIPAA compliance.
Most employers believe that having a business associate agreement with your agent or vendors provides protection from liability. The law is very clear that the employer should audit its business associates for compliance. Although the audit does not eliminate liability, it does comply with the requirements, which may result in penalties being less severe.
Many times, your benefits agent is your primary business associate. How do you audit your agent? The recommended format is to pay a visit to its office and review each HIPAA process to see if it is in compliance. Use your business associate agreement as your roadmap to your audit. A properly written agreement will list all those processes.
Most canned agreements include a right to correct. Employers who find a violation may be bound to allow 30 days to 90 days for the associate to correct the violation.
Violations on behalf of your agent may be your greatest exposure. As the privacy officer, your selection of your benefits agent goes beyond getting quotes from the same old carriers and HMOs. Your agent should be an extension of your HR department and, in turn, should be managed as a member of your team.
Bruce Bishop (firstname.lastname@example.org) is director of marketing and managing partner of KYBA Benefits. KYBA Benefits provides consulting and administrative services to more than 400 corporate accounts, ranging in size from 20 employees to more than 7,000. Reach Bishop at (770) 425-6700 or (800) 874-2244, ext. 205.
For more than 90 years, the American Cancer Society has worked to find a cure. And, since 1913, ACS has sought the best way to mix its local and national resources to create a very local, community-level organization to serve patients, their families and others concerned about the issue.
As CEO of ACS' South Atlantic division, Jack Shipkoski does his best to mix the agency's regional and national resources to serve the public. Shipkoski's division, ACS' largest, was created in 2003 with the merger of the Southeast and Mid-Atlantic divisions. It was an arduous process that required both the assistance and they buy-in of many people.
"When you look at for-profit mergers, probably half of them don't work," says Shipkoski, who spearheaded the initiative. "A lot of it is cultural. That's why involvement is so important (instead of) just (directive) from the top down. You're getting people from all parts of the organization involved, and it's an understanding. It gets back to 'How are we communicating?'"
At one time, there were 58 divisions of ACS -- the national office, one in each state and several in large metropolitan areas. About seven years ago, a merger shrunk that number to 17.
That merger, says Shipkoski, was a learning experience.
"It gave us an opportunity to make sure we didn't make some of the same mistakes again," Shipkoski says. "By merging, you are more effective; you're able to put resources where they're needed."
Shipkoski previously served as head of the Georgia and Southeast divisions. His new entity covers seven states -- including Georgia -- and Washington D.C. One of the most important messages he had to communicate before, during and after the merger was that, despite the concentration of power, there would be no loss of control for the 500 communities that make up the new, larger division.
'The bigger you get, the further away you are from your constituents," he says. "We said we want to get closer to our constituents, closer to our donors. We did that by concentrating on community."
The newly formed South Atlantic division has four strategic points -- state-of-the-art in-mission delivery, concentration on volunteerism and community, renewed commitment to income development and getting connected.
"I've been able to drive that with our board members and with our staff," says Shipkoski. "And if you ask any staff member the four key strategic points in your division, I think they'd be able to tell you what they are."
But none of it would have been possible if Shipkoski had been unable to bring together the divisions and overcome the naysayers. Smart Business spoke with him about what it took to consummate the merger and how he overcame the cultural and structural issues that led to the largest merger in ACS history.
What prompted this latest merger?
It's basically efficiencies. How can we save money on a lot of these support items, and can we have a better product as we move forward?
Our key officers and key staff got together, and the major reason for merging was we can do a better job and be more efficient in mission delivery and cancer control. When I say cancer control and mission delivery, I'm talking about prevention, detection, quality of life for cancer patients. That was our major objective: Can we be better than we are today in mission delivery?
What was the problem?
We had ownership and cultural situations where the state was the corporation and everything revolved around the state. We found we couldn't do anything around (state) borders because we were running into somebody else's territory.
We didn't work together that well. You'd think we would; we're the same organization. But everyone had staff working for a different corporation.
When we merged [the first time] we formed regions put together by media markets and we also overlapped state lines. We did that on purpose in order to bring the divisions together and so we wouldn't have those border issues. That served well for seven or eight years.
With this new merger, what we found out is that there are a lot of issues that are state-based -- health departments, advocacy with governments -- so we put together this new organization based upon states .
Why did you insist on following business principles in the merger?
I also belong to a group called TEC -- The Executive Committee. It's 16 CEOs here in Atlanta. We get together on a monthly basis.
Fourteen of them are for-profit companies and two of them are not-for-profit. We talk business and we talk business principles. Moving ahead in a business manner when you talk about planning and organizing, teams, leadership and all those principles are the same whether you're not-for-profit or for profit. It was a major help to me putting together the merger because the one thing I knew I had to do right from the beginning was put together a leadership board.
My next challenge was I had to put together my executive team. We wanted to keep thing simple, mainly because people would ask me, 'Jack, how are you going to do this? It's so big. How are you going to make this happen?'
I try to keep it simple with these four key points, which I think most people know by now and can recite. The other thing was, let's put together the teams that are going to make this happen -- the volunteer team and the staff team.
The first thing we did was put that together and get buy-in from them as to the direction we were moving in. I believe we did that very successfully. We have a great executive team.
What benefits has the merger had?
I have a phrase, 'Start less and finish more.' Really, it's another name for focus. We have all these programs going on. Some divisions are doing the same and some are doing (things) differently.
We wanted to start less and finish more and focus and say, these are the programs and the fund-raising programs and the other programs that we're going to do, and just focus in on those so that we can be successful in it.
The other thing we wanted to do is increase our income and control expenses. We did that the first year. We had a $10 million increase in income and we decreased our expenses by $4 million. That gave us a differential of $14 million that we could use in the fight against cancer as we started out this fiscal year. So we're in pretty good shape, in fact, very good shape from a stewardship perspective and from a business perspective moving forward.
How challenging was it to meld the cultures of the two divisions?
Culture is an issue. For example, if Mid-Atlantic were to merge with Ohio, I think it would be a lot more difficult. It's a lot more difficult going north than it would be going south because there are a lot of differences.
One issue we have is tobacco. We have a lot of tobacco-growing states in the same culture. We have a lot of the Appalachia-type issues in the same culture.
There are (other) differences -- state-to-state you have differences. Advocacy, from the perspective of a state being more engaged in anti-cancer, anti-tobacco situations. For example, Delaware is a lot more prominent than some of the other states in making some things happen as far as dedicated insurance for health care reasons.
There are a lot of differences state-to-state, which is why we organized on a state basis for a lot of these advocacy reasons. We have people that work within the state (borders) vs. working across the division lines.
What was the reaction of your many volunteers?
From their perspective, there was some anxiety. The anxiety was you're going to forget about us down here in Macon, Ga. When Georgia was its own division, Macon was a big player. Now, all of a sudden, Macon is part of seven states, so you're going to forget about us.
The answer is no. In fact, we're going to put more emphasis on Macon so that we don't forget about you, so that we do involve you. We're going to communicate with you; we're going to have you involved.
We put together a great communications department. It's in the objectives of our key executive team and staff members that we go in that direction. It's in their performance reviews. If you measure it, you're going to receive action from it. We've been saying that to everybody. We want to walk the talk.
How did the merger affect the ACS's Relay for Life program?
Our bread and butter for fund-raising is Relay for Life. It's our 24-hour event. We're in the 20th anniversary of Relay for Life. If Relay for Life were a not-for-profit organization, it would be in the top five of all not-for-profits. That's how large it is.
This year, we'll raise about $300 million in Relay, and the South Atlantic division -- we're the No. 1 division. We'll raise $60 million in Relay for Life. This year, we'll have 600 events with the goal of $65 million. It's more than an event. Really, its mantra is about a community taking up the fight.
You have individuals coming together, an average of 4,000 to 5,000 people that come together at an event, and we have 600 of those within our division.
Here in Gwinnett County, it's the largest Relay in the country. In the 24-hour event, they raise about $2 million, and they'll have about 15,000 or 16,000 people there -- 20 percent of those are cancer survivors. We're bringing together cancer survivors.
It's really a community event. We bring together youth. In Gwinnett County, every school district is involved. You bring together adults and they pitch their tents and they have contests -- who has the most innovative tent, the best-looking tent and all that, but it's really about people coming together in the fight against cancer at the community level.
HOW TO REACH: American Cancer Society (404) 315-1123 or www.cancer.org
Enter the 1980s. Government began to strangle defined benefit plans, while defined contribution plans, such as 401(k)s, exploded onto the retirement benefits scene. They were easier to understand, slightly less expensive to administer and employee-driven. And, unlike defined benefit plans, the onus of saving for retirement fell on employees' shoulders. Defined benefit plans were terminated at a record pace.
Now, three factors are renewing interest in defined benefit plans -- less-than-expected retirement benefits, a higher tax rate structure and an increasingly older population.
Recent studies show that Americans, particularly higher-income workers and business owners, may face a retirement income shortfall. Higher taxes on Social Security benefits, more active retirement lifestyles (and resulting expenses) and a lack of savings discipline are a few of the factors that may contribute to this shortfall.
The latter may be exacerbated by defined contribution plans. When employees lack the discipline to save or the savvy to make their investment choices pay, it is their retirement savings that suffer. Contrast the differences between defined benefit plans and defined contribution plans using the help of a theoretical bucket.
With some defined contributions, such as 401(k) plans, employees have individual buckets with their names on them. Each employee contributes -- or doesn't contribute -- to his or her bucket and, depending on the performance of the investment, the employee takes from that individual bucket at retirement.
With defined benefit plans, everybody's share comes from the same bucket. The plan has a built-in discipline and a benefit -- typically 60 percent to 75 percent of the average of an employee's last three years' salary -- that are dependable. This bucket is filled as needed to cover retirement liabilities. Defined benefit plans are fully paid by the employer.
While defined benefit plans may be attractive to employees who have a hard time saving on their own, they are also more attractive to employers these days. First, contributions to the plan and administrative expenses are tax-deductible. Second, defined benefit plans offer advantages for older owners and key employees.
Annual contributions to a defined contribution plan are limited by law to $40,000. Not so with defined benefit plans -- you can pay what is needed for retirement. For older owners and employees, this element is key because they've had less time to save than younger individuals.
This also is particularly effective for higher-paid individuals, who can occupy an effective tax rate tier as high as 50 percent during their working years. If these people expect a lower tax rate during retirement, today's tax-sheltered savings can equal added retirement dollars tomorrow.
Defined benefit plans aren't for everyone. Candidates typically are companies with owners at least in their 40s, with a stable profit history and the ability to meet plan contributions that can vary from year to year. Additionally, restrictions and regulations for these plans still exist.
Overfunding and termination of these plans present special challenges, but a qualified financial adviser can suggest flexible options in these instances -- more flexible than you might think.
And, contrary to popular belief, defined benefit plans are not only for the largest companies. When business owners need to contribute more to a pension than defined contribution plans allow or they want an alternative vehicle to lessen today's increased tax burden, defined benefit plans are increasingly attractive.
James L. Cook Jr. is president of National Financial Services Group. Reach him through the company's Web site, www.nationalfinancialservicesgroup.com. Securities and Investment advisory services are offered solely by Equity Services Inc., a Registered Broker/Dealer and Investment Adviser, 1050 Crown Pointe Parkway, Suite 1000, Atlanta, GA 30338. National Financial Services Group is independent of Equity Services Inc.
The old clich "cash is king" has never been more true. Cash, or liquidity, is the lifeblood of any business. Having a clear understanding of your cash needs and your business's cash cycle is critical to any success.
A cash flow forecast projects operating cash inflow and outflow. As a tool, it allows business owners to determine if there is enough cash generated from operations to meet ongoing obligations. Used properly, it will alert management if and when the business is in need of additional cash infusions.
The surprise factor is something every management team wants to avoid, especially when it comes to liquidity. Realizing one day that your company is about to run out of cash creates a significant challenge.
Business cycles -- and the related timing of cash inflow/outflow -- can and do differ by business and industry. As such, the key to managing cash shortfalls is recognizing the problem as soon as it becomes apparent. Nobody likes surprises, especially if your lending source is a financial institution. Relationships with your bank, or even critical vendors, during cash shortage periods can become strained. The more time your business has to arrange additional financing, the more likely you'll be able to negotiate more favorable arrangements.
Because the actual cash receipts of a business do not necessarily coincide with revenue recognition or profit recognition, a business can experience cash shortages while, at the same time, be showing ongoing accounting profits. Converting sales into cash and making vendor payments and payroll before cash is received can be a delicate balancing act for businesses that face periods of cash shortfalls.
And while not all of these situations have the potential of being business-killers, if a pattern of continually needing cash infusions develops, it can be a warning sign that you need to take alternative measures to resolve the ongoing problems.
When determining your cash flow forecast, ground the assumptions in reality and document them. It is advisable, although not always practical, that the person preparing the forecast be familiar with the operations of the business, including the timing of capital expenditures. Additionally, a critical review should be performed by a second person who has knowledge of the company's business cycle and other factors unique to the company.
There are numerous software programs available to assist in your cash flow forecasts. And once your initial model is built, you can simply build on it for the future. Once the model is constructed, actual results should be compared to the projected amounts.
Variances will exist, and it is incumbent upon management to understand the reasons for them. Not all variations are negative, but it is important to determine if the underlying assumptions need to be modified as your business environment changes.
Some common pitfalls to avoid in your preparations include:
* Excessive optimism as it relates to the top line
* Understated expenses
* Lack of understanding of the timing issues of inflow and outflow
* Failure to consider capital expenditures and debt repayment requirements
* No margin for error
Many companies will prepare a best-case and worst-case scenario of the cash flow projections. This type of forward planning will not go unrewarded, as the company will be in a much stronger position to react to the changing environment.
The lack of liquidity or timely cash flow can result in the business failing regardless of the company's reported profits or losses. The fundamentals are the same in the preparation and use of cash flow forecasting regardless of a company's size.
Obviously, the larger the organization, the more complex the process is likely to be. However, every company can use the forecast in the same way. By implementing the proper disciplines and using cash flow projections as a planning tool, your business will be in a better position to assess and react to the changing business climate and needs of your company.
Sheldon Zimmerman (email@example.com) is a principal with Tauber & Balser PC in the Forensic Accounting & Litigation Services Group. With more than 30 years of professional experience, he advises companies on matters relating to mergers and acquisitions, due diligence reviews, accounting irregularities and bankruptcy matters. Reach him at (404) 814-4958.
With health care costs continuing to rise at near double-digit levels every year, businesses are looking for new solutions to this age-old problem. One of the answers may be to put health benefits decision-making in the hands of those most affected -- the health care consumer.
One option is the introduction of Health Savings Accounts, new to the health care toolkit. There is no use it or lose it rule with HSA funds.
They can be rolled over from year to year, allowing consumers to build a tax-free nest egg for future health care needs. Consumers can use HSA funds to pay for their insurance plan's deductible, as well as qualified medical expenses their health plan may not cover, such as acupuncture.
How HSAs work
To qualify for an HSA, consumers must purchase a high-deductible health plan policy with annual deductibles of at least $1,000 for an individual or $2,000 for a family. This policy must be the consumer's only health insurance.
Here are a few other key elements of HSAs.
* Consumers can contribute funds to their HSA year after year, building on unspent money. Consumers can't make contributions to their HSA once they become enrolled in Medicare, but they can withdraw the accrued funds to pay for approved medical expenses and Medicare Part B premiums.
* Money contributed to the account can be deducted from tax returns, whether or not deductions are itemized.
* Employers can contribute pretax dollars to the HSA, just as they do for 401(k) plans.
* Earnings in an HSA grow tax-free, and consumers can dip into an HSA at any age -- again, tax-free -- to pay for medical expenses. Those expenses include deductibles and co-payments, as well as many charges that typically aren't covered by health insurance, such as over-the-counter drugs, vision care, dental care and long-term care insurance premiums.
* Money in an HSA doesn't have to be used for health care expenses, but consumers must pay income tax on earnings if funds are withdrawn for other purposes. A 10 percent penalty will be imposed on any nonqualified withdrawal before age 65. After 65, funds withdrawn from HSAs can be used to pay for certain insurance premiums, such as Medicare Part A & B, Medicare HMO and the employee's share of retiree medical insurance premiums.
* If consumers currently use a Flexible Spending Account, they can combine it with an HSA, but it can only be used for permitted coverage, such as dental care, vision care and long-term care. An FSA can be wrapped around an HSA for medical expenses covered under the plan only after the member satisfies the minimum deductible.
Considerations for employers
When designing health benefits, employers can include one spending account or combine spending options. For example, an employee can enroll in both a Health Savings Account and a Flexible Spending Account.
In designing a plan, employers should consider the amount of flexibility they need and whether they will fund an account entirely, share funding with the employee or offer an account with employee-only contributions.
Other considerations include:
* How pharmacy benefits fit in
* The impact of a fund on FICA savings
* The impact of spending accounts on employees ages 55 or older
* Whether the spending account supports employee retention
Alan Guzzino is the president of Humana's Atlanta, North Carolina and South Carolina market health plan operations and is responsible for the management, strategic planning and growth of those markets. Guzzino, an eight-year veteran of Humana, serves on the board of the Georgia Association of Health Plans. Reach him at firstname.lastname@example.org.
Flash forward to the present day: Sobh, owner of Lou Sobh Automotive, with dealerships in four states, was recently back at the White House. This time, however, it was at the personal request of President George W. Bush.
"It was an incredible thing," Sobh says. "When I came to this country, it took me 60 hours to get here on a Greyhound bus. When you think about someone migrating to this country, coming from the background that I came from, and being able to walk into the Oval Office and having President Bush call you by name, it is pretty awesome. It's definitely one of the highlights of my life."
Monir "Lou" Sobh's story reads like a Horatio Alger rags-to-riches tale. He was born in Torreon, Coahulia, Mexico, to a poor but hard-working family. In 1960, when he was 16 years old, his parents emigrated to the United States, taking him and his brothers to Gary, Ind.
With only the benefit of a high school education attained in Mexico, Sobh learned the business world from his father, who owned a grocery store, and through on-the-job training. Through a series of low-paying jobs and a stint in the Army National Guard, Sobh acquired the business and leadership skills he needed to build a nearly $500 million enterprise in Conyers -- Lou Sobh Automotive.
In 2003, Sobh's company posted $497 million in revenue, the most by any minority-owned business in Georgia. That's nearly twice what Sobh's enterprises generated in 2001, when the company posted $257 million in sales, and Sobh expects the books for 2004 to reflect numbers comparable to 2003's.
So how did a wide-eyed youth from Mexico become one of the top-ranked Hispanic business owners in America -- 10th on the 2003 Hispanic Business 500 -- and a Georgia success story?
By managing his opportunities the way he manages his business -- with an old-fashioned work ethic and a nose-to-the-grindstone attitude. And, Sobh refuses to forget about his humble roots.
Starting from the bottom
"I didn't know I was poor, really," Sobh says. "That is all I had ever been. It taught me the value of money. We migrated from Mexico. I started down at the bottom. To me, it was an improvement because I was making money. I wasn't making any money in Mexico. I almost felt like I was rich."
Sobh was once told to go to America and work his butt off. That advice came from his father and uncles, men who lived what they preached.
"My father had a great work ethic," Sobh say. "He had a grocery store. He used to work 16-hour days, seven days a week. We always knew that if you worked your butt off, the rewards were there.
"It's unlike so many other countries. If you have some merits, if you have some ability, you can progress here. In some of the other countries, you have to have some connections along the way in order to succeed. It's not easy."
Sobh's career as an American businessman began as a janitor in a Shoppers World department store, where he earned 90 cents an hour. His seven-member family lived in a two-bedroom apartment. Sobh taught himself English, and within six months was promoted to a department manager at Shoppers World.
"My father, even though he wasn't a wealthy man, never worked for anyone in his life," Sobh says. "He always taught me there was nothing like running your own business. He used to say, 'If you're going to sell pencils on a corner, make sure the cup is yours.'"
That simple but instrumental lesson stuck with Sobh. In 1967, he began selling automobiles for McAnary Ford in Gary. He was quickly promoted to general sales manager and later was made a partner.
"When I started selling automobiles, I said the day I started I was going to own my own car dealership one day," Sobh says. "All the guys laughed at me. They thought I was nuts. I could hardly speak English. They didn't know I was serious about it."
But Sobh was serious. And he also realized his future did not lie in Gary. Sobh wanted more from McAnary Ford, but he wasn't going to get it. So he sold his interest and planned on opening a store in Texas. That deal fell through, so Sobh made a difficult decision.
"I told my wife, 'While we're waiting, let's go to Mexico,'" he says. "Well, the wait turned into a five-year sabbatical. I did open up a furniture store in Mexico and did some business there."
Returning to Mexico wasn't as prosperous a move as Sobh had hoped it would be.
"We had some hard times there with the peso devaluation," he says. "I realized that wasn't the way I wanted to live the rest of my life. I got so used to growing up in the United States with the freedom and the guarantees ... that the last thing I ever expected in the world was a devaluation in Mexico, especially when we had a president that kept saying, 'It's not going to happen, it's not going to happen.'
"So, when it happened, I became very disheartened. My wife and I decided to come back to the United States."
After a return to Indiana, where he re-entered the auto business and formed a relationship with a Buick and Mercedes dealership, Sobh began seeking better opportunities and wouldn't take no for an answer.
"I fought with General Motors," Sobh says. "They didn't want to open the point (of considering letting him open his own dealership). I thought it was a good, viable point, so I kept arguing with them. Finally, it took about eight months to put it together."
So with $200,000 of his own money and a $3.5 million loan from GM, Sobh packed up his family and moved south to open his own dealership in Conyers.
"My persistence and track record (paid off)," he says. "I had run GM stores and done a pretty good job. Once they met me, they thought, 'This guy might have something here.' There were a couple other stores in Conyers, and they were not failing, so I figured, if they can do it, why can't we? It turned out to be lucky for me. You've got to be in the right place at the right time."
Sobh rejects the notion that he is the Hispanic Jackie Robinson, clearing a path for future members of the community to follow in his business footsteps. But he has worked to provide others with opportunities and he founded the National Association of Hispanic Automobile Dealerships.
"We are the largest minority in this country," he says. "It's an upcoming force. I think there should be some opportunity for Hispanics to acquire some of the foreign franchises. I'd like to see a Hispanic own a Mercedes Benz store here one day or a Lexus store or a Toyota store or a Honda store, for that matter, here in Georgia. We don't have any of that.
"I'm trying to help facilitate for the people that want to get into the business because, as much as I have done and as good credentials that I have, it's very difficult for me to get my foot in the door. So the people behind me, the new and upcoming wannabe dealers, if I can't do it with my network and my savvy, how the heck are those guys going to do it?"
Sobh may be looking for the next generation of Hispanic entrepreneurs, but he has no intention of stepping aside just yet.
"Honestly, I think my best years are ahead of me," he says.
And Sobh is by no means limited to the auto business.
"I believe to have a full life, you've got to continue to work and improve," he says. "There's a difference between existing and living. One of my biggest hobbies is the automobile business or any business, for that matter. I get involved in a couple of other things. I'm a partner in a Hispanic-owned bank here in Atlanta, United America's Bank. We opened that up, and I'm a board member and one of the owners.
"We opened a Hispanic and Korean strip mall over in Chamblee. I'm also involved with a partner to bring Hispanic concerts. I just do stuff to keep busy. I went from one store to two, to three, to four, to five; I never thought I would get to 15. And we're still working."
Sobh was recently awarded the newest point in Jacksonville, Fla., and will be opening a Honda dealership there.
"We just want to continue to grow," he says. "If there are opportunities, we want to continue to look at them."
It's been quite a ride for the man who once stood in the rain to see the White House.
"Success is a journey, not a destination," Sobh says. "To me, life is a journey. You continue to live it. You continue to acquire new challenges. I get a kick out of being able to open something new. And in most of my stores, I get one of the managers and I give him the opportunity to become part owner of the store.
"I like to see them grow as I grow. It gives me satisfaction just to be able to do that. And I think life is about me being the best I can be. I don't know how good I can be or how much I can do. There will be a point where I say, 'Enough is enough. I can't do this anymore.' But as long as I enjoy it and I get a kick out of it, I'm going to try to continue to do as much of it as I can."
HOW TO REACH: Lou Sobh Automotive, www.lousobh.com or (770) 929-8777
Employees are your most valuable assets, and the cost of replacing a worker can sometimes exceed the employee's salary by one-and-a-half times. Therefore, fostering a workplace environment that's conducive to employee loyalty can only help your business.
A national survey conducted by RoperASW for Randstad North America uncovered the following seven steps that bosses can take to improve employee morale, loyalty and productivity in the coming year.
1. Communicate with workers. The survey found that 83 percent of employees who rank their bosses as excellent communicators say morale is excellent or good where they work.
2. Tell the truth. Instead of wondering if the boss is capable, workers today wonder if the boss is honest. And while 71 percent of supervisors say most people in business are honest, only 53 percent of employees agree with that assessment. Expect employees to ask the tough questions. Be prepared to tell them the truth.
3. Deliver the news clearly and simply. Employees want clear and easy-to-understand information about what's happening. Clarity is critical. During periods of change, half of employees say things at work seem unorganized. Don't try to spin bad news into innocuous twaddle.
4. Provide a road map. Give workers an idea of where the company is headed. While 83 percent of employers say they give workers that kind of information, only 68 percent of employees report receiving it.
5. Say something good once in awhile. Sixty-seven percent of employees say management communicates the good news as well as the bad. Workers need to hear the good news from the boss as much as they need to take the bad.
6. Get personal. Whatever the news is that you're providing, employees want to know what it means to them personally. That means you'll have to tailor the information in such a way that it is in context to their jobs and roles within the company.
7. Listen. Last but by no means least, take the time to gather input from your people. Employees want to be heard. Sometimes they actually have good ideas. In companies that take action on employee feedback resulting in positive change, 78 percent of employees say morale is excellent or good.
As Randstad North America's managing director of human resources, Gail Auerbach is responsible for recruitment and retention of the company's more than 2,000 employees in more than 500 locations in the U.S. and Canada. Reach her at email@example.com. For more information about Randstad's Employee Review, visit the company's Web site at www.us.randstad.com.
It was Sept. 13, 2001, just two days after the terrorist attacks in New York, Washington D.C., and Pennsylvania, and Buckman had assumed the role two weeks ahead of schedule. It also happened to be a zero revenue day.
Not long after, airplanes returned to the skies. But all wasn't fine in the corporate air travel business. The terrorist attacks hit just as people were realizing the economy had entered a recession. Corporate travel budgets were slashed, meetings were cancelled or sparsely attended, and the airlines faced some of the worst financial woes in their histories.
All of which made Buckman's first few months on the job challenging, to say the least.
"My planned start date was Oct. 1," Buckman says. "But knowing the whole world was going to change and that we had to change with it, I thought it was time to get started right away."
But rather than react swiftly to the uncertain marketplace, Buckman held off, waiting until the situation became clearer.
"One of the decisions we made early on was to overcome the urge to act right away," he says. "Perhaps one of the biggest mistakes we could (have made) was making a quick reaction that, in hindsight, we would find to be very wrong."
Instead, Buckman chose to bear numerous hard costs that he believed the company would need to reduce later.
"We felt like that was going to be a more prudent decision than to immediately start cutting back, then finding it wasn't really a necessary action to take," he says.
And, because the company's Dutch owner, BCD Holdings, was financially sound and preferred viewing its business holdings with a more long-range perspective, Buckman was given the latitude to use a methodical approach to analyzing and dealing with the new industry landscape.
That, he says, was one of the keys to his success.
"We sat down the first week after 9/11 and said, 'It's going to take a little while to take inventory and really understand what the implications are.'"
That strategy benefited WorldTravel on several fronts. It allowed Buckman, who previously served as CEO of Worldspan and held senior positions at American Airlines and Homestore.com, to reassure customers that the company would work with them to handle ongoing travel needs and gave him the time he needed to deal internally with the effects of the sudden economic impact on his company's operations.
"It helped us make better decisions," he says. "(And) it helped us have better credibility with our employees. We did have to go through a number of reductions and cutbacks, but we tried to do it in a prudent fashion. We were going to do it once; we weren't going to have the water torture of six or seven different cuts."
Because of the drop in revenue, Buckman was forced to cut his staff by 25 percent. At the same time, he looked to counter the loss in business by pursuing new revenue streams through other means.
"We immediately began looking at potential acquisitions so that we could maintain our level of activity and volume," he says. "We had some good people we knew we could apply to these things, so it was early in the following year that we acquired McCord Travel. That brought us back to the same level of activity or actually a little bigger than we were going into Sept. 11. It helped balance a lot of things out."
With the immediate issues of the company under control, Buckman turned his attention to its long-term needs, which had changed drastically.
"Our industry, post 9/11, is a lot different than it was before Sept. 11," Buckman says, adding that it wasn't until the beginning of 2004 that corporate travel returned to its pre-9/11 levels. "It's very competitive, and a business that's gone through a lot of consolidation. It probably will go through a good bit more. In 2000, there were close to 33,000 travel agencies in the United States. Today, if we're lucky, there are half that.
"A lot of people have left the business. A lot of people like us have continued to acquire and grow. You've got bigger, stronger competitors today. The online (competitors) have come into the business (by starting ) on the leisure side. Expedia, Orbitz, Travelocity, they've all set their sights on the corporate market."
And that means Buckman's brave, new world includes several well-funded players that see WorldTravel as a market they'd like to take over. Each of them represents a threat.
"It's a business that has very thin margins," Buckman says. "We know we've got to stay very close to the customers. We've got to try to anticipate the changes in the business and what tools and technology we're going to need. It's certainly one that we think is very competitive."
Staying competitive against the coming players means staying innovative and providing customers with new options. In Buckman's case, he viewed the new threats as an opportunity. To keep its customers engaged, WorldTravel developed a software package that allows corporate customers to maintain and track their travelers.
"Prior to 9/11, most of the profiles and information we kept on travelers didn't include cell phones," he says. "Now, it's in just about all the records because you want to make sure that you have a way to get ahold of them. Prior to 9/11, when we would have our negotiations or bids on getting new business, corporate security was rarely a participant in those meetings. Today, it's common to see the head of security be part of those meetings because they have a greater concern about how we are going to protect and make them aware of what is happening to their travelers."
Buckman has also expanded WorldTravel's offerings in other areas.
"We felt like we needed to put more emphasis and resources behind them," he says. "The meetings business has been very successful; it's the fifth-largest business (of its type) in the country. Technology has always been one of our company's strengths, and I think it's one of the differentiators.
"In the meeting area, we've got some very good software called Plan to Attend that helps customers who want to consolidate a lot of their meeting activity. We think we can bring them significant savings as a result of using these tools, usually in the 15 to 20 percent range."
Balance sheet manager
Spending money on technology and acquisition is one way to grow, but Buckman insists the company is also prudent at the other end of the balance sheet.
"Managing costs -- we're 25 percent smaller in terms of size of people (than we were pre-9/11), even though we're a bigger business today," he says. "Looking for new revenues and new services, we've invested a lot more in the meetings incentive business. We've been able to grow that so it's a good place where we can grow.
"We've been involved in building technology to provide our customers with hotel merchant inventory, not only to give them better prices on some of their hotel bookings but (also to) provide a new revenue stream for us. We've expanded our travel procurement solutions, our consulting business. We're looking for other revenue streams to offset some of those declines from the traditional travel business."
Technology has always played a huge role in the industry, and Buckman expects another two to three years of turmoil and change, which will drive an increased reliance on technology.
"If you aren't comfortable with change, you don't want to be around this business," he says. "We're going to continue to see a significant portion of our transaction activity go online. Three years from now, my feeling is that more than half of it will be online. We're going to have to continue to find new and better ways to efficiently support and assist in that effort.
"The global thing is going to continue to be driven; we're going to have to end up being more places, own more places and continue to invest in technology so we can provide that consistency throughout the network."
Buckman believes there will be fewer suppliers moving forward, which will make WorldTravel an even stronger player than it is today. And WorldTravel is already a force to be reckoned with.
"We're one of the bigger players, depending on how you measure it," he says. "American Express is the largest. The next three (including WorldTravel) are all relatively about the same size. In today's world, our revenues don't come from commissions.
"To say what our sales volume is 'in air' or other things doesn't really mean too much, but we will do in the U.S. about $3.8 billion in air travel sales (in 2004). Then you can add hotel and car and all the other things on top of that."
To keep growing, Buckman is tasked with ensuring the company stays focused on its goals.
"Acquisition is clearly one," he says. "You want to be able to grow, but if you can't grow organically, we found ways to do it through acquiring others. You want both."
Another way to grow is to sell new business to WorldTravel's existing customer base while pursuing new customers.
"We try very hard and set high goals for ourselves in terms of retaining the existing business," Buckman says. "I'm sure from the economic side it's cheaper to retain new business than it is to sell new business. We want to grow, so we've got to be able to do both.
"Our retention rates have been in the high 90 percents year after year. It's not that we don't want new business, but we take a lot of pride in the companies we've served for a long time. Frankly, that's our best judge. Our success is just the names of companies that we can list as our customers."
That list includes such Fortune 500 companies as Siemens, Turner Broadcasting Systems, The Gillette Co., EMI Music North America, Textron, Weyerhaeuser, the American Cancer Society and Harris Corp.
"It's not rocket science," Buckman says. "We spend a lot of time asking them what's important to them, what we can do better. We survey our customers every year. It's not the only form of feedback we get, but it's the benchmark.
"We're pleased that we've seen those survey scores go up every year, year after year, even after 9/11. We then go back to each customer and build an improvement plan based on feedback so we can do a better job for each and every one."
And for that, Buckman gets to sit in first class.
HOW TO REACH: WorldTravel BTI, www.worldtravel.com or (800) 342-3234
Although not a major talking point in this election, health care may be President Bush's largest and most ambitious campaign during his next term. The price tag on his future health care programs could make the war in Iraq look like a minimal expense.
Many people believe the health care problem is too big to correct or that any action will have to be implemented slowly to ease the pain of a transition. That's true when you have time, but health care does not have that much time.
In another four years, health care will be the most debated item in the presidential debate. The Republicans will be vulnerable with a transition of leadership, and Hillary Rodham Clinton is preparing now for the next campaign, which will begin in three years or sooner.
The Republicans know they could have a distinct advantage if they have a plan underway and not just a promise. If that's the case, something needs to happen next year.
President Bush has the secret ingredient in this complicated problem -- government funding. No matter how you slice it, the government is going to pay more.
With the groundwork already established in his Health Savings Account programs, Bush is promising the following.
* Expanded Health Savings Accounts (HSAs). President Bush will propose a tax credit for low-income families and individuals to purchase health insurance. Families will receive up to $2,000 for their premiums and $1,000 cash to put in their HSAs to help meet the deductible. Individuals will receive up to $700 for their premiums and $300 for their HSAs.
* An above-the-line deduction for health insurance premiums. Individuals who purchase low-premium, high-deductible insurances policies can deduct the premiums.
* An HSA tax credit to help small business employees. Small businesses and their employees who set up an HSA will get a tax rebate for contributions of up to $500 per worker with family coverage and $200 per worker with individual coverage.
Although we have been telling clients that HSA plans are the real solution, the story becomes more believable when the government gives you money only if you have an HSA plan.
* Affordable health care for children. The president will launch a nationwide, billion-dollar Cover the Kids campaign to sign up more children for quality health care coverage. The campaign will combine the resources of the federal government, states and community organizations, including faith-based organizations, with the goal of covering all State Children's Health Insurance Program-eligible children within the next two years.
* A tax deduction for long-term care. This is a new above-the-line tax deduction that individuals could claim for long-term care insurance premiums.
In addition to throwing money in the pot, Bush is proposing the following regulatory changes.
* Allow small businesses to establish Association Health Plans (AHPs). To give small employers and their workers more purchasing power, the president has proposed allowing small businesses to band together and negotiate on behalf of employees and their families.
* Allow shopping for health coverage across state lines. It's easy to use the Internet or toll-free numbers to shop for products. But different rules apply to health insurance. Consumers can only purchase health insurance in the state in which they live. The president proposes giving people the freedom to shop across state lines to find the best rates for their health coverage.
* Promote health information technology (IT). The president has undertaken a new initiative to make electronic health records universally available within the next decade. This will improve health care quality, reduce its cost and improve access to affordable care by applying to health care the same information technology that has transformed so many other industries. Health IT will also help eliminate medical mistakes, leading to increased quality and safety for patients.
With the Republicans in control, they have an opportunity they may not get again. Political scholars and economists have predicted that health care will dominate the next election. One way or another, health care is going to change.
Bruce Bishop (firstname.lastname@example.org) is director of marketing and managing partner of KYBA Benefits. KYBA Benefits provides consulting and administrative services to more than 400 corporate accounts, ranging in size from 20 employees to more than 7,000. Reach Bishop at (770) 425-6700 or (800) 874-2244, ext. 205.