Steve Trusty

Wednesday, 26 December 2007 19:00

Making the SAN decision

As companies grow, so do their requirements for technology. As they outgrow servers and disk space, they must look for the best alternatives to assist their growth with the least disruption to their current business.

According to Richard Florence, director of professional services for Orange County-based Agile360, “The utilization of storage area networks (SANs) is becoming the solution of choice for many growing companies. A SAN combines the IT structures already in place with what is needed to accommodate current and future growth in a way that optimizes the entire IT operation.

Smart Business talked with Florence about the benefits of SANs.

What is a SAN?

A storage area network is essentially a separate computer network that connects storage devices to a heterogeneous set of servers on a many-to-many basis. SANs are typically comprised of network switches, disk arrays and some form of physical interconnect, such as fibre channel, SCSI or iSCSI.

What is the primary reason that a company might begin to look at using a SAN?

The main reason most companies introduce a SAN into their IT environment is that SANs provide IT managers the ability to manage their universal storage requirements from a central platform. When an IT organization purchases a server, the amount of disk space available for any application running on that server is limited by the size of the server and the size of hard disks available to that model of server. In many cases, disk space intensive servers, such as databases and file servers, face unpredictable growth due to company mergers or other changes in the business. As a result, the company must purchase a new server with greater storage capabilities once the available disk space of that server is exhausted. Often, the other computing resources on the server, such as memory and processors, are still capable of fulfilling their intended purpose. In the case of SANs, an increase in disk space requirements of an individual server can be addressed by simply adding additional hard disks to the SAN.

How else can the use of SANs enhance IT functions?

SANs can provide advanced functionality that usually isn’t available on servers without the use of third-party applications. Features such as data replication, mirroring and snapshots provide higher reliability to an organization’s critical data. Another popular advanced feature is the ability to move data across different levels of tiered storage based on factors such as frequency of use and file types. For example, there may be an accounting spreadsheet stored on a file server that has not been accessed in more than year. That spreadsheet would be automatically moved into a lower-performance, lower-cost disk array within the SAN infrastructure to ensure that the maximum amount of space is available for frequently accessed files on the portion of the SAN containing the faster, more expensive disk drives. Features such as this ensure that companies maximize their investment in storage.

What are some of the key considerations in the evaluation of a SAN?

Some of the critical elements of the SAN buying decision are high availability, performance and software capabilities. Since a SAN acts as a central data storage facility for multiple servers, it becomes a single point of failure for many of a company’s core business files and applications, so high availability of the SAN becomes the most critical concern in its selection. Features such as multipathing, which provides multiple data paths from the SAN to a server, and the use of multiple switching fabrics help to ensure reliability.

The performance capability of a SAN should also be examined using a ‘best-fit’ approach, whereby the speed and performance of the SAN should match its intended purpose. For example, a SAN that will be used to provide data storage for an e-mail archive system does not require the performance levels guaranteed by a fibre-channel, SCSI disk-based SAN. For that application, a SATA disk-based SAN usually meets the performance requirements and would be a less expensive solution. One must also look at the range of software available for use with the SAN to provide advanced features, such as data replication, mirroring and tiered storage functionality.

Are SANs suitable for small- to mediumsized businesses?

Yes, there has recently been a major push to create relatively affordable SAN solutions to accommodate the small- to medium-sized business. By utilizing newer technologies, such as SATA-based drives and iSCSI connectivity, some manufacturers have been able to offer SAN solutions in the sub-$10,000 price range. Many SAN manufacturers have also started to simplify the management of SANs to enable IT administration generalists to manage their environments without specialized training.

RICHARD FLORENCE is the director of professional services at Agile360. Reach him at or (949) 278-9532.

Sunday, 25 November 2007 19:00

Saving green by going green

In today’s environmentally conscious economy, many companies have adopted numerous “green” initiatives. Whether it’s organizing carpools to reduce greenhouse gas emissions or recycling bottles, cans and paper goods, conservation has become a growing concern for many organizations.

“Information technology holds the keys to new conservation opportunities that leverage technologies to increase computing resource efficiencies within the data center,” according to Kelly M. Chinen, virtualization practice manager for Agile360.

Smart Business talked with Chinen for more insight into going green with your IT infrastructure.

Why should a company be concerned with making its data center more efficient?

As business reliance on computer resources continues to increase, many companies are faced with challenges around where those systems will reside and how to provide the required electrical power and cooling to keep those systems up and running. A more efficient data center provides increased computing capacity while reducing electrical power consumption and physical space requirements.

How is it possible to reduce the number of computing resources if business requirements continue to grow?

Although computing resource requests continue to increase in most organizations, it is common to find that existing resources are heavily underutilized. In fact, many computing resources are running at 5 to 10 percent of their full capacity. This means that up to 95 percent of the physical computing resources are sitting idle. Imagine a single person driving to work each day in a 10-passenger van. It’s pretty obvious that leaving nine empty seats is not an efficient use of the van’s available capacity, but this is what many organizations are facing today.

Server virtualization is the technology that allows for greater physical computing resource efficiency and reduces the amount of physical computing resources required to meet ongoing business requirements.

What is server virtualization, and how does it help to reduce the number of physical computing resources?

Server virtualization allows multiple operating systems along with their applications to reside on the same physical computing resource, which increases both its utilization and efficiency. Although multiple systems are running on the same physical computing resource, each system remains isolated and does not affect the stability of its neighbors. Server virtualization provides the means to reduce the number of physical computing resources in the data center through server consolidation, which is the process of migrating existing or new systems onto the same physical computing resource.

How do I prevent server consolidation from affecting service level agreements?

Proper planning and preparation is essential for the successful implementation of a server consolidation effort. In situations where existing physical resources are to be migrated into a virtual infrastructure, ‘capacity planning’ tools are available to monitor utilization levels over a period of time. Typically, utilization levels are captured over a period of one month to properly identify average and peak loads. Following the collection period, the data is analyzed to determine the amount of physical computing resources necessary to provide the required service levels.

How does going green reduce server computing costs?

By reducing the number of physical computing resources in the data center, electrical power and cooling costs may be significantly reduced. Reducing the number of existing physical computing resources also provides spare data center capacity for future growth, delaying or eliminating the need for future data center expansion.

Are there other programs that increase the ROI of going green with server virtualization?

Some local power companies are offering rebates to businesses that reduce their power consumption through the removal of physical computing systems from their data centers. Each power company has a specific process that must be followed in order to obtain these rebates. It is important to stay on top of this process to ensure maximum savings.

This sounds great for large companies, but can small companies have an impact on green initiatives?

Yes, small companies may also see an impact on green initiatives. Many smaller companies have been able to reduce server power and cooling requirements through server virtualization. One company had a requirement for 10 new servers. Instead of purchasing 10 physical servers, it was able to consolidate those 10 servers onto two host machines. This not only resulted in an 80 percent reduction of physical servers, but it also significantly reduced the amount of power, cooling and rack space required to support this new initiative. The IT staff was able to allocate the time that would have been spent supporting the additional hardware to supporting the business.

KELLY M. CHINEN is the virtualization practice manager at Agile360. Reach him at or (949) 253-4106.

Tuesday, 25 September 2007 20:00

Giving something back

Many times, as business men and women in the community, we are offered opportunities to serve on executive boards for our local churches and nonprofit organizations. These are excellent opportunities to participate in community outreach and offer a chance to give back to the community.

“Before accepting a position on these boards, a person should be aware of the possibility of lawsuits against these organizations and how these legal proceedings can impact the individual board members,” says Dale Zellmer, regional director — Gallagher Religious & Non-Profit Practices Group at Arthur J. Gallagher Risk Management Services Inc. “Determine your exposure and how best to mitigate any potential liability.”

Smart Business talked with Zellmer for more insight into things you should consider as you prepare to serve on nonprofit boards.

Are nonprofit board members individually responsible for board actions?

They can be, especially if an employee or stakeholder feels that the actions of any or all of the individual board members harmed them.

Are lawsuits against nonprofits a common occurrence?

One of the myths associated with nonprofit organizations is that there are few sources of claims since nonprofits don't have shareholders. While it is true that the vast majority of lawsuits filed against nonprofit boards are filed by current or former employees alleging wrongful employment practices, nonprofits serve large and varied constituencies to which their boards owe specific fiduciary duties similar to duties owed by corporate boards. These constituencies are potential plaintiffs in legal actions brought against nonprofit boards.

Who are the potential claimants?

1) Current Employees — a current employee or former staff member of a nonprofit may bring actions alleging a host of wrongful acts, including wrongful termination, discrimination, sexual harassment and Americans with Disabilities Act violations. 2) Outsiders — Third parties that have a relationship with the nonprofit may allege harm caused by the nonprofit and/or its directors, officers or employees. Outside sources can be vendors, funders or another nonprofit. 3) Clients/church members — The people you are trying to help — your service recipients — may bring claims against directors and officers alleging wrongdoing. 4) Donors — A nonprofit's contributors may sue directors and officers alleging misuse of a restricted gift.

What can be done to protect the individual board members?

Many state laws protect us from suits against directors and officers of charitable organizations. However, these laws provide limited immunity for certain volunteers, not nonprofits, under certain circumstances. The federal Volunteer Protection Act (VPA) preempts state laws except when they specifically provide greater protection. The VPA and its state-based counterparts do not prohibit suits. Even if one of these laws allows your volunteers to escape liability, substantial funds are required to defend even a frivolous claim. The best option for most nonprofits and their individual board members is to carry directors’ and officers’ (D&O) insurance.

What should we know about D&O insurance?

There are a wide variety of policies available. Each organization and board needs to evaluate both the organization’s and the individual’s needs. Desirable characteristics include: broad definition of insured, advancement of defense costs and broad coverage for employment practices liability.

For nonprofits, a broad definition of insured includes ‘any natural person who was, is or becomes a director, trustee, officer, employee, committee member or volunteer,’ as well as the nonprofit itself.

Obviously, a policy that advances defense costs is very beneficial. Funds needed for the nonprofit’s mission won’t be tied up if there is legal action that requires defense. Reimbursement language in a policy may require the nonprofit to pay all costs and attorney fees out of pocket and wait for repayment by the insurer. This could seriously stretch the nonprofits resources as D&O cases are often expensive and lengthy.

On employment practices liability, make sure what is and isn’t covered is clear and meets your needs.

DALE ZELLMER is regional director — Gallagher Religious & Non-Profit Practices Group at Arthur J. Gallagher Risk Management Services Inc. Reach him at (281) 655-6720 or at

Sunday, 26 August 2007 20:00

Keeping good people

With multiple generations in the work force, ease of travel, global competition, and a relatively sound economy, companies are facing challenges in attracting and retaining top talented employees.

“Employers today are realizing that they must invest in sound hiring and retention practices to include programs that meet the needs and wants of employees,” says Michael Garcia, work force services manager at Tampa Bay WorkForce Alliance. “Those employers that best understand their employees’ behaviors, values and goals fare better in the competition for the brightest.”

Smart Business talked to Garcia, who said that many companies are employing strategies that break away from traditional culture.

What is the employment situation in the Tampa area?

The Tampa-St. Petersburg-Clearwater metropolitan statistical area (MSA) has been going through a period of growth. For example, in 2006, on average 1.2 million people were employed in our MSA each month. From 2001 through 2006, the average monthly employment levels in the Tampa-St. Petersburg MSA experienced approximately seven percent growth, an increase of more than 73,000 employed workers. Hillsborough County’s average monthly employment levels rose approximately 60 percent of overall estimated employment growth for the MSA. For the same period the average weekly wages increased by 20 percent. Among the highest average wages are finance and insurance.

Unemployment rates, on the other hand, hover around three percent with minor fluctuations. There was a slight increase for the month of June, which is fairly common given the number of graduates entering the workforce at that time.

What does this mean for the employers?

It means that it is going to take more preparation and effort to secure the best employees. The lower the unemployment rate, the more challenging it is to find qualified individuals. Management needs to be fully aware of employees’ needs and wants to offer competitive packages that are compatible with the values and goals of job seekers they wish to recruit. Companies should strive to be the employer of choice in the area and within their industry.

What are some things companies can do to obtain and retain the best people?

Companies are creating work environments that are as conducive to employees’ needs as they are to customers’ needs. When employees are satisfied, they work toward making the customer satisfied. If flexible schedules, fitness programs or dress codes are important items on the overall compensation and benefits scales, employers are working toward incorporating those items into the corporate culture. Job candidates search for those companies that share their philosophies for financial responsibility, environmentally friendly practices, a family first environment or work-life balance. A new-hire will put in long hours and time and energy into a project as long as they feel they are contributing or making a difference (not just to the bottom line, but their community as well). Adopting flex schedules that allow a parent to attend their little leaguer’s game or school play or allowing employees the freedom to express creativity by decorating the work station are not costly initiatives and can garner positive morale and productivity if your environment can accommodate it.

What about going outside this area to find the right talent?

Employers can no longer think locally as they seek the best talent. They need to look globally. Candidates around the country are interested in positions in areas showing significant growth. Tampa Bay is one of those growth areas, creating jobs in the professional service, technology and creative industries.

Do you have any other thoughts on securing the right people for the job?

Knowing what is going on in the market, using available resources to assist you in the recruitment and training process and taking the steps to create an employer of choice for your type of business is key. Job seekers today align themselves with companies that offer not just competitive salaries, but that also have a high standard of ethics, share values for community empowerment, and have environmentally sound policies.

MICHAEL GARCIA is work force services manager with Tampa Bay WorkForce Alliance. Reach him at (813) 740-4680 ext. 259 or by e-mail at

Thursday, 26 July 2007 20:00

What next?

It’s business as usual, but you are starting to think about retirement. There is much to consider so it is important to think things through and prepare yourself and your business to maximize value and retire in the way that best suits you.

“Privately or family-owned businesses are typically run to maximize the benefits to the current owner(s),” says Vincent Della Rocca, director at SunTrust Robinson Humphrey in Tampa. “When considering the valuation and sale of a business, it is important to look at the business through the eyes of a potential buyer. Preparing a business for sale is a process that begins well in advance of the engagement of a financial adviser.”

Smart Business talked with Della Rocca for more insight on what owners should consider as they prepare the business for their retirement.

What are the first steps an owner should take in preparing for retirement and the sale of the business?

This space last month addressed the continuation of a business beyond immediate ownership over the long term. In any circumstances, a business owner should be working on the positioning of the business and be cognizant of the company’s market valuation continually throughout its operation. Make sure that your financial information is correct, up to date and accurately reflects the true underlying business and its ability to generate growth and profits. Expenses and income distributions that are set up for the combination of family and business benefit should be easily identified and explainable. Look at the financials through the eyes of a potential buyer. Make sure that a potential buyer can see the true business potential if they were running that business for their own benefit. Audited financials will provide the most assurance to potential buyers. If you don’t want to go to that expense, at least have an experienced third party look over the financials.

Is there a ‘right time’ to sell?

That is a personal decision, but you need to be realistic in your valuation assumptions given the prevailing market conditions at the time of your decision. You need to consider your age, your health and your family situation, as well as the attractiveness of your company to the market at that point. You will want to reflect on what you want to do in retirement and when you want to start doing it. Are there family members active or interested in the business? How might that affect your retirement plans? Once you have made the decision to start the sale process, you need to determine the best route to follow and do it as expeditiously as possible.

While it is impossible to predict the future, the current mergers and acquisitions market has been very active and valuations have been at all-time highs.

Is retaining an adviser the best route to follow to sell my company?

Yes. Your adviser will assist you in a number of areas, including insulating you, advising you on the best route to take, and executing and completing the sale. Besides knowing the ins and outs of mergers and acquisitions, your adviser will know how to identify and approach potential buyers. Some of the best potential buyers may be competitors, friends, colleagues or someone unknown to you. Your adviser will be able to determine a list of potential acquirers to maximize interest in, and value of, the company. A third-party adviser also insulates you from direct contact with potential buyers and the negotiating processes and the issues that could arise from those processes. Negotiating a sale with a friend or a competitor could have negative ramifications on the terms or pricing of the sale, the ongoing company operations or your personal life. Although your adviser will provide you advice, it is your decision on how closed or open you would like the process to be. Another area for assistance is determining and ranking your objectives. These could include: speed of execution, confidentiality, employee or customer relations, and maximizing price. Remember, you are only going to sell this business once, and you want to do it right.

What should I consider when evaluating prospective buyers?

Your adviser will perform due-diligence on all interested buyers in order to qualify each one. Your adviser should evaluate each buyer’s financial situation, ability and ‘track-record’ of closing as indicated under the original agreed-upon terms. You don’t want a buyer to walk away from the transaction at the last minute or have the transaction fail due to a buyer’s inability to procure financing. Surety of closing is the No. 1 qualifier for any potential buyer.

VINCENT DELLA ROCCA is director at SunTrust Robinson Humphrey in Tampa. SunTrust Robison Humphrey is a service mark of SunTrust Capital Markets Inc. Reach him at (813) 224-2397 or

Thursday, 26 July 2007 20:00

Increased risks

Businesses in Southern California are at increased risks for disaster. Is your company prepared in the event of a disaster or pandemic? How much are you depending on technology? How much are you depending on your employees? Certainly, your day-to-day operations require the best of both. How are you prepared to operate if employees can’t get to the office or if computers aren’t accessible?

According to Kevin Burton, Disaster Recovery Specialist with Agile360, “Disaster recovery needs, data protection and business continuity plans that include the end user are at an all-time high. There is the increased regulatory pressure. There are employee safety concerns. There is an overall feeling that Disaster Recovery and Business Continuity planning are part of the overall risk-mitigation picture.”

Smart Business talked with Burton for his insights on how these risks can be mitigated.

Why is Southern California different than any other part of the country?

For one thing, the United States Geological Survey (USGS) has predicted that an earthquake of 7.0 or greater magnitude will hit the area within five years. For another, there is a high concentration of technology companies and those that depend on technology centered in this area. But perhaps more alarming is the notion that terrorists are prone to target areas with the largest concentration of people and businesses they can damage. Those are the areas that are going to be hurt the most by terrorists’ actions. The areas that are at higher risk for a terror attack (and according to Homeland Security officials, Southern California is in the top five) need to consider employee responsiveness and inclusion more than others.

Why is more or better technology not the only answer?

Businesses depend on computers and people to run them. What are your plans in the event of a major disaster? Do you have evacuation plans? You are going to need people to continue the business. You are going to need paper backup and human IQ that can move that paper forward. You must have processes in place to recover information and use it to spring forth from adversity with speed and determination. Employee safety is extremely important. Employees are key to a company’s survival; Sept. 11 certainly taught us that.

But why focus on the human side of the equation if computers run today’s businesses?

Chief executive officers and CFOs are saying to the CIOs, ‘Show me the case study to justify the expense of fully duplicating our current data center.’ The CIO and the IT department require input from business unit managers and other stake-holders to prioritize business processes and then the applications that support them.

Using this data, the CIO can then map the technology to the human-driven processes that run the business. The resulting set of ‘tiers’ or levels of criticality can indicate the right-sized solution and appropriately address the risk. The bottom line is that we have to get better at tracking business value against application performance or automation.

How do you differentiate between cost and value when it comes to Disaster Recovery and Business Continuity?

Cost is just that — cost. For example, you go to the store and come home and show your wife a receipt for $900. You’re simply showing her the cost. If you come back from the store and say that you got a new washer and dryer for $900, then you have shown the value of your purchases. If there is not a value, a cost should not be incurred. In short, by aligning processes to applications, you can build a better shopping list for IT when it comes to risk mitigation. In the Risk Business, this is called a Business Impact Analysis. Leading organizations parlay these findings into Application Impact analyses that then lead to appropriate technical solutions that mitigate risk.

What should be the roles of the CEO, CFO and CIO?

They need to communicate with each other and work together to determine everything that is needed and what the long-term effects are. Rank, based on criticality, everything the business does. Mitigate risk and spend money accordingly. In some cases, High-Availability Solutions and advanced technologies such as VMW are perfect solutions — especially for high-value applications. In other cases, old-fashioned tape backup methods will do. Make individual business cases based on business value as opposed to relying on the input of vendors and flashy new technologies to fix the risk problem. Go with trusted advisers who understand your needs, have a fixed view of how your business operates and offer cost-considerate solutions on a case-by-case basis.

How can you save money while lowering the risks?

One example is the opportunity to re-purpose old hardware. Another is to spend less money on the least important things on the criticality list to be more cost effective. By increasing the dialog between the CEO, CFO and CIO and engaging a facilitator who respects your needs as a business and purveyor of technologies, you can be better assured of knowing what steps need to be taken and having the right solutions with the best value to move your company forward no matter what disaster strikes.

KEVIN BURTON is a Disaster Recovery Specialist with Agile360. Reach him at or (949) 253-4106.

Monday, 25 June 2007 20:00

Plan way ahead

Are you involved in any type of construction? Chances are good that you are, since there is a considerable amount of construction going on in the Houston area. Retail stores, warehouses, office buildings, factories, hotels, multi-use facilities, townhouses, apartments or single-family homes are going up all over the area.

With any construction there is risk. Have you thought about that? Have you done anything about it?

“Even though risk management can be a big line item on any project’s budget, it is too frequently a last-minute consideration for project managers,” says Jackie Whiting, account manager at Arthur J. Gallagher Risk Management Services, Inc.

“Owners, developers, managers and builders need to identify their exposure,” adds Jim Braniff, IV, senior vice president at Gallagher. “They need to determine how to mitigate their risks and transfer all the risk that they can.”

Smart Business talked with Braniff and Whiting for more insight into insuring property under construction.

At what stage in a project should the owner/developer consider insurance coverage?

They really should start to think about it at the very beginning of the initial project planning. That way they can make sure they are considering the right kind of coverage and have the right number in their budget for the project. It should be part of the due-diligence effort as a project is considered.

When they get into the project, they need to read and understand all contractual language before anything is signed. They need to, at a very minimum, have their experienced insurance broker review contracts and coverage offered by the builder to make sure the owner’s needs are met. They need to understand the significance of the risk management piece of their part of the project. Who is responsible under what situations? Who might be at fault? Where might there be gray areas? What about soft costs? What happens if the building contractor needs to be replaced? What happens if the builder doesn’t pay the subcon-tractors? The owner also needs to get his or her own insurance quote as a comparison before making a decision on accepting what the contractor offers.

Why not just let the builder take care of the insurance and include it in the bid?

There are a number of reasons. It should be up to the owner to protect his or her own interests. Owners have more control over the project and risks if they consider all of the ramifications of their own insurance. They have more control if something happens. They have their own broker working for them in the event of a claim. If, for any reason, the builder on the project has to be replaced, the owner isn’t exposed with no insurance because the builder’s insurance was the only coverage. They have another set of eyes going over the contracts to see that all risks are transferred. Soft costs are usually not covered by the contractor’s insurance. If the owners rely on the contractor’s insurance, they will be sharing the limits of the master policy and be subject to the deductible set by the contractor, whether it fits their needs or not.

What do you mean by ‘soft costs’?

Soft costs include additional taxes, additional interest, professional fees, permits, lost rental income and additional insurance. Any of these costs can come up if the building burns down or is damaged in some other way during construction. New plans may have to be drawn so additional architect fees may be needed. New permits may be required or expired ones renewed. Soft costs are not usually covered by the builder’s policy.

Any other thoughts?

The owners/developers should obtain some idea of what property and liability insurance rates might be on an ongoing basis after the project is completed. This adds important information to the feasibility study at the start of the project.

Also, there can be many differences between insurers and policies, so the options presented should be compared and key points analyzed to make sure coverage is spelled out and not just assumed. There are also many different needs depending on circumstances. Insurance coverage is a process of negotiation. It is imperative that your coverage is negotiated by an insurance broker experienced in your business area and placed with an underwriter that understands the coverage.

JIM BRANIFF, IV, is senior vice president at Arthur J. Gallagher Risk Management Services, Inc. Reach him at

JACKIE WHITING is account manager at Gallagher. Reach her at Reach either at (713) 623-2330.

Saturday, 26 May 2007 20:00

Controlling insurance costs

Not only is it good business to provide a safe workplace, it is a legal responsibility. Accidents do happen, no matter how many reasonable safety measures have been taken. To protect themselves from lawsuits, businesses must purchase, as a separate policy, insurance that provides medical care and compensation for lost income to employees hurt on the job. This applies whether they’re hurt on the workplace premises or elsewhere, or in auto accidents while on business. It also covers work-related illnesses.

“In many cases, worker’s compensation (WC) is the third largest expense in the budget after payroll and employee benefits,” says George L. Moody, licensed risk manager at Arthur J. Gallagher Risk Management Services Inc. “While many business owners feel they have no control over that cost, it is actually an area over which they can have the most control.”

Smart Business talked with Moody for more insight on how to save on WC insurance.

What are some ways to reduce the cost of WC?

There are four primary areas that should be monitored to assure business owners that they are paying no more than they should for WC. These areas are: experience modifiers, payroll audits, hiring and claims management/return to work.

How can hiring practices affect WC costs?

It is vitally important to make sure that you are hiring people who can do the job. Of course you must follow ADA guidelines, but provide a conditional offer of employment when you think you have the right person. The offer is contingent on them passing whatever physical and medical tests are necessary to determine if they can do the job. Have a detailed job description that outlines the requirements. Make sure that all your forms are reviewed by an experienced attorney to assure that they meet all legal requirements.

What should be included in payroll audits?

Monitor the premium audit closely, since most errors favor the insurance company. Make sure the premiums are accurate. Look closely for any clerical errors. Verify that payrolls are correct and that you are only including the correct amounts. The insurance company is entitled to a premium based on the actual work the employee is doing. Bonuses for ideas should not be included. In Texas, safety bonuses should not be included in salary figures used for the premium.

Each state has different rules, so make sure that you and your insurance adviser are up to date on your state’s laws. Contractors that are doing government work and must pay prevailing wages should look at that closely. There are ways to set aside the difference between normal wages and prevailing wages and only pay the premium on your normal wage. Severance pay is another item that should not be included in the premium calculation.

What are some experience modification strategies?

The experience modifier is calculated by comparing expected losses against actual claims. As long as actual claims are lower than the expected losses, the modifier will be less than 1.00. Check for any mistakes in the calculations, and when identified, bring them to the insurance company’s attention. In most states, large claims are capped and anything over that cap should not be included in the experience modifier rating. Again, it is vital that you work with someone who knows the state rules. Since claims are included in the calculation for a three-year period, any savings found are three-year savings.

What are some claims management/return to work strategies?

Have a package of information available so if an injury occurs the employee understands what to expect and how the company will help him or her. Set up a team of individuals to make sure an injured employee is getting the care he or she needs and making progress they should to get him or her back on the job ASAP. Communicate with physicians what the job entails so they understand and can help get the injured employee back on the job without undo delay. This reduces care costs and replacement worker costs, which translate into premium savings. This is important since, as a general rule, every claims dollar costs the employer about two dollars in additional premium. Continue to provide good communication so the employee knows you care, feels important and will do all he or she can to get back on the job.

Finally, take a risk management approach. Don’t just find a policy and pay the premium. Work with an experienced person who can help assure that you are getting the coverage and service for you and your employees without paying more than you should.

GEORGE L. MOODY, CIC, CWCA, CWCP is a licensed risk manager with Arthur J. Gallagher Risk Management Services Inc.

Reach him at (281) 655-6824 or

Saturday, 26 May 2007 20:00

SBA loans

Whether a start-up or established, businesses often need to borrow funds to operate. One lending option that has been around since 1953 is sometimes overlooked due to lack of knowledge or misunderstandings. The Small Business Administration (SBA) loan program is not for everyone, but has some definite benefits for companies and owners that are in a position to take advantage of them.

“There are only about 50,000 to 60,000 SBA loans approved nationally each year and most lenders only do 10 or 12 per year,” says Edward H. Holmes, president of Centinel Financial Corporation in Plano. Centinel is the SBA consultant ViewPoint Bank uses to package its SBA loans. “As with most governmental programs, it’s hard for most people to justify the time and expense to keep up with the constant changes in policies and forms. Individuals who specialize in working with these kinds of programs can help provide a win-win situation for the borrower and the lender.”

Smart Business talked with Holmes for more insight on SBA loans.

How are SBA loans different?

An SBA loan is actually a commercial loan granted by a lending institution that is partially guaranteed by the SBA. The SBA was created to assist small businesses in a variety of ways. One of the ways is to help businesses start, grow and expand by making funds available that wouldn’t be available in other ways. The idea is that as businesses grow so does the economy, and the government is provided an increased tax base.

Advantages of SBA loans include longer repayment terms, more flexible terms, lower down payments or capital injection and competitive interest rates. It can also be easier to qualify for these loans.

Who should consider an SBA loan?

New businesses are especially suited, as it is easier to obtain an SBA guaranteed loan than a conventional one when there is not enough collateral or past history to go on. It is possible to start a business with 30 percent owner-infused cash and 70 percent loan funds. SBA loans are also well suited to growing companies that have most of their assets in accounts receivable or inventory. Banks classify these as ‘soft assets’ which have less collateral value to the bank than hard assets such as real estate and equipment.

SBA loans are available to for-profit businesses that are owner-operated. Businesses formed for investment purposes, newspapers, speculative ventures, churches and some other types of industries are not eligible, however, most types of businesses qualify for SBA assistance.

What are the potential drawbacks?

They are paperwork intensive, at least in the application process. They may be a little more expensive upfront, but these fees can generally be financed in the loan. They can take a little longer to process. While conventional loans usually can be processed within 30 days, most SBA loans require up to 60 days.

Some people may feel that an SBA loan can open the business up to more government scrutiny. That is a false assumption. Once the loan is approved, the company only deals with the bank.

What can an SBA loan be used for?

Loans can be used for almost any business purpose. Uses could include real estate acquisition or construction, permanent real estate financing, capital improvements, equipment purchases, business purchases, working capital and business startups.

How would one apply for an SBA loan?

An SBA lender like ViewPoint Bank can help fill out the application. When the application comes in for packaging, we would make sure all the forms are filled out in accordance with current regulations and evaluate your needs along with those of the bank and the SBA.

Information needed includes business and personal financial statements, a business plan, owner’s personal tax returns, and historical and background information about the business. A personal résumé and background information is especially important for new businesses. The decision-makers need to know if you have the experience and background to start and run the proposed business. They are also going to look at the industry and its risk potential.

After all the paperwork is complete, it first goes to the bank for approval and then to the SBA. Once the loan is approved by the SBA, the bank will work with the business owner to close and fund the loan.

To learn more about SBA loans, go to’s business banking section or call (972) 801-5775.

EDWARD H. HOLMES is president of Centinel Financial Corporation. Reach him at (972) 985-3225 ext. 201 or at

Wednesday, 25 April 2007 20:00

Give a little, take a little

Every day that you interact with other people, you are involved in some type of negotiation. You negotiate with other employees, with clients, customers and/or suppliers. If you are a buyer, you must negotiate with a seller. If you are a seller, you negotiate with a potential buyer.

Are you a good negotiator? Are you doing the best job of negotiating for yourself or your company? How might you improve your negotiation skills?

“Great negotiators are not born,” says Elizabeth Umphress, an assistant professor of management and Mays Research Fellow at Texas A&M University, “they become great through a combination of training and practice. They prepare and they know ‘the best deal’ and work to get it.”

Smart Business talked with Umphress for more insight on business negotiations.

What are the key points of negotiation?

Take time to prepare. Determine what you have and what you want. Do some serious thinking about it before you start negotiating. Determine your best alternative to a negotiated agreement (BATNA), which is your fallback option if the negotiation is not successful. Decide on your target or goal in the negotiation. Make sure you are dealing with the right person, one who has the power to negotiate with you and can make decisions.

Tell us more about BATNA.

You need to know what your alternatives are to the negotiated agreement in order to help determine your target. You should have a fallback if you can’t come to an agreement. After you look at all the alternatives, pick the best one, keeping it in mind at all times. The better BATNA you have, the better the potential outcome.

How do I set my target?

This will take a combination of knowledge and research. The target should be specific, difficult and realistic. It shouldn’t be easily attained. If you are selling, you want the price as high as possible without it being unrealistic or beyond the market. Too many people set their sights too low, try to make the sale too easy, and don’t gain nearly as much from the sale as they might have.

Besides too low a target, what are some other potential pitfalls in negotiation?

Negotiation should not be viewed as a sparring match. Your job is not to belittle or demean the other person. The best negotiated deal is going to satisfy some or all of the needs of both parties. Good business relationships become long-term relationships. If you only think of yourself and not the other person, they are not going to feel good about dealing with you in the future and you will have missed the opportunity for repeat business.

Don’t have a ‘satisfying’ target. If you have a mid-point and a higher target, you’re more likely to focus on the mid-point and miss out on the real target.

Do not allow the other party to change your BATNA or your target. If you have done your research, you know that your target is reasonable.

Never start negotiating with your target; leave room to negotiate.

Don’t negotiate with yourself. Once you have placed an offer on the table wait in patience and silence to allow the other person to counter or accept. You can clarify why your offer is fair, but if you counter your own offer, you make the other person’s job too easy.

What are some terms that should be avoided in negotiation?

‘Take it or leave it’ or ‘That’s my final offer’ — unless you unequivocally mean it. If you say that and then accept something less, you lose your credibility.

Be wary to accept or offer to ‘split it down the middle.’ Your target and their offer may be too far apart and splitting it down the middle would not be fair to one of the parties.

What is the best way to negotiate?

Face-to-face is always the best. You can tell a lot about a person and how things are progressing by observing his or her body language. If things appear to be going in the wrong direction, you can make clarifications. Telephone is the next best option. While you can’t see the body language, you can receive signals by voice inflections.

E-mail negotiations should be avoided unless the parties know each other well and have an unwavering trust built in. Preparation is the key. You’ll win or lose based on how well you are prepared. You are prepared when you know what you want, have a good idea of what the other party wants, and do your best to negotiate an outcome that comes closest to satisfying both parties.

ELIZABETH UMPHRESS is an assistant professor of management and Mays Research Fellow for Texas A&M University’s Mays Business School in College Station. Reach her at (979) 845-4801 or