Curt Harler

Wednesday, 28 February 2007 19:00

Working with your banker

Like most other relationships, the relationship between a business and a banker is an ongoing affair…a process.

“A small business should use a banker like any other part of the team,” says Ron Hongosh, Business Banking Division manager/senior vice president at FirstMerit Bank in Cleveland. “They should work with their banker the same way they would work with their CPA or attorney.”

Smart Business asked Hongosh about the process of working with a banker.

What’s the most efficient way to work with a banker?

If customers engage their banker in four areas, they will have a successful relationship.


  • Have a plan and discuss it with your banker.



  • Anticipate your needs in general.



  • Use your banker for financial representation.



  • Use your banker as a trusted adviser.


What advice do you have on planning?

Every customer needs to have a plan and to discuss it with his or her banker. I know it sounds simple, but often businesses don’t do that. They are reactive rather than proactive. A plan does not have to be elaborate or amazing but needs some foresight.

A good plan has to be transparent. A business can’t half-tell its story. A banker cannot work with a business if management is not being open. A good plan can not be created in a vacuum. Use your banker as a sounding board. Share ideas and work with your banker.

What sorts of benchmarks are important?

To anticipate its future needs, a business should establish benchmarks. Every business should have a three-month (short-term), a nine-month (mid-term) and a two-year (long-term) outlook. Anything past two years is dicey, unless you are anticipating a major project.

Be honest with yourself and your banker. Know the plan’s pitfalls. Sometimes you need to see the glass as half full, and sometimes you need to know it is half empty.

Lastly, have a rainy-day fund or a plan that will let you raise money against a rainy day. Too many business owners live without a reserve.

What do you mean by financial representation?

A good business is represented by three legs: the owner, the banker and the CPA. The idea is to get all three legs working together.

Financials need to be prepared well. But be sure the statements are representative of the business reality and not tinted by tax concerns or other considerations. Good CPAs are worth their weight in gold.

Most owners are tied up in their business or their craft, but you need to know if you are meeting month-to-month goals. Sometimes business owners are surprised with what they are making month to month. A CPA or banker can help quantify revenue and earnings. It sounds trite, but if you don’t know where you are going, you will not know when you get there.

What kind of advice, beyond things like loans or checking accounts, can a banker offer?

As an adviser, a banker is a great resource for exploring alternative investment avenues, learning ways to manage cash or talking about retirement plans.

Whether it is with FirstMerit or any other bank, your banker should be your confidant. He or she should know more about your business than anyone else in the world except you.

Bankers have the experience and the access to measurements that can determine whether your business condition is typical or normal. It’s like going to the doctor when your arm hurts: If you do not know if a sore arm is normal, how are you going to be able to take care of it properly? Financial metrics are similar, so you need expert advice.

Finally, bankers often have links to other resources, like the SBA [Small Business Administration] that can provide additional assistance. Banks like ours should be service-driven organizations, so use their resources.

RON HONGOSH is Business Banking Division manager and senior vice president at FirstMerit Bank in Cleveland. Reach him at (216) 694-5686 or

Wednesday, 31 January 2007 19:00

Saving time and hassle

Buying or leasing a premium automobile and choosing a dealership for that automobile can be quite a challenge in today's market. There are many choices. The perceived differences between makes, and the agencies that sell or lease them, can be confusing.

“Customers really just want to be taken care of,” says Carlos Dague, new care sales manager for Ganley BMW in Middleburg Heights, “and the successful dealership recognizes this fact.”

Smart Business asked Dague what else to expect at a luxury dealership.

Why is doing business with a luxury dealership different than dealing with an ordinary sales floor?

A prospective customer’s expectations and perceptions of a luxury agency are elevated by the marketing of the manufacturer and perhaps his or her own peer group, many of whom may already drive luxury-segment vehicles.

The atmosphere at a luxury dealership is usually more relaxed and the sales people are more facilitators than salespeople, providing the information the customer desires in a factual and nonpressured manner. The customer is usually well-informed already via the Internet and really just wants to see if the car will fit his or her needs and wants. There can be also facility differences, predicated by the manufacturer, that seek to create a more luxurious showroom — and, of course, amenities like Starbucks coffee, leather seating in the customer lounge and large-screen TVs.

How does it pay to build a continuing relationship with one salesperson or dealership?

Customers of luxury dealerships place a lot of emphasis on saving time and hassle. By offering such things as free service during the warranty period, free valet pickup and delivery for service and free service loaners, the dealer is building the relationship for future business.

Successful salespeople also will keep in touch periodically with the customer, further enhancing the ownership/leasing period. Because of these actions, when it comes time to buy/lease a new car, the comfort level is already there if the dealer has done a good job after the first sale by taking care of the customer. Dealers also reward their repeat customers many times with special vehicle pricing and discounts on accessories.

Would you follow a trusted salesperson to a new luxury car dealership?

Yes. I’ve had it happen personally. Typically, there will be a comfort level with the relationship that has been built over time with a good sales person. As long as the new dealership has a good reputation, I’d say it is a good idea. That sales person knows what you expect and what it takes to keep you happy.

Does the sales staff tend to remain more consistent at luxury dealerships than others?

The average turnover in automobile sales is about 50 percent per year. Many salespeople try to stay with the hot products or, because of little or poor training, just quit the business. However, if salespeople are trained properly and understand that repeat and referral business will continue to build the longer they stay with one dealership, they’ll be successful.

Luxury manufacturers and dealers invest considerable money into training and rewarding outstanding performance.

Is a luxury car dealer likely to let a prospective customer take an extended test drive?

Most luxury dealerships will extend the courtesy if the customer is interested in a specific model and wants a longer test drive. Typically, they’ll allow the customer a drive from an afternoon to overnight, in some instances. This lets the customer explore the many features and comfort options that cannot be enjoyed during a short drive. It also lets the customer run the car over familiar roads so he or she can get a better comparison.

How safe is it to rely on a friend’s recommendation about a dealership or sales person?

The majority of our customers — at least half — are referral or repeat customers. If a person has credibility and has driven that brand, by all means listen to his or her advice. Remember, this is likely the second largest purchase of your life. Dealerships always appreciate referrals and will do extra for a referral. We want the person who made the referral to look good, too.

CARLOS DAGUE is new car sales manager at Ganley BMW, Middleburg Heights. He has been selling BMWs since 1982. Reach him at (440) 843-3552 or

Sunday, 31 December 2006 19:00

What is luxury?

The term “luxury” is ever changing, according to car dealers who know.

“It is not easily defined in auto sales, especially when there are so many choices in the premium segment,” says Carlos Dague, new care sales manager at Ganley BMW in Middleburg Heights. “A Cadillac or Lexus driver defines luxury differently than a BMW buyer.

“Luxury-car buyers — and lessees — expect more than ‘all the toys,’ because virtually every car or SUV can be either factory-equipped or dealer-installed with everything from 22-inch chrome wheels and custom leather to multiple DVD screens. Luxury is defined more by the experience the buyer/lessee has with the dealership before, during and after delivery of the new car.”

Smart Business asked Dague how the market is responding to the demands of the luxury-oriented client.

What is luxury?

Traditionally, luxury in an automobile meant power everything, leather, whitewall tires, an isolated, cushy ride, and cars the size of an aircraft carrier.

In today’s market, luxury is more defined by the wants and needs of the driver, usually as it relates to the driver’s self-image and his or her peer group. The marketing term for these variables is ‘psychographics,’ which we spoke about in a previous article.

How do dealerships accommodate buyer expectations?

Buying or leasing a new car in this segment is more of a courtship followed by a marriage, as opposed to the idea that you buy the same day you visit and the new-car delivery is the end of a short-term relationship. Given this long-term view, dealerships have invested enormous amounts of money in their facilities and in training and keeping quality salespeople.

Most customers in this market are looking for a dealership that offers more than a cramped showroom, stale coffee and a portable TV with no remote. Many dealerships now have remodeled or new showrooms that are well-lit, high-ceilinged and very spacious. The service waiting areas have leather furniture, large TVs and wireless Internet access.

The sales professional who facilitates the transaction is a great listener who shows customers features and benefits that are relevant to their individual needs and wants, rather than a ‘one-size-fits-all’ presentation. Various financing and leasing options are presented in a no-pressure, multi-choice format that allows the customer to make an informed decision, rather than an impulsive one.

How have these expectations affected this segment of the market?

Customers of this market segment have really benefited, primarily because of the keen competition to earn and keep market share among manufacturers. Dealerships have become nicer places to go to and do business, and the whole experience has become more professional and hassle-free.

Manufacturers want the transaction price (selling price) to be close to the factory MSRP so they have narrowed the profit margin that dealers have to negotiate. This strategy eliminates much of the time spent dealing on a car, and customers don’t have to be professional negotiators to get a fair price.

The premium segment considers customer time to be more valuable than other segments do, and the dealership that can save its customers time and hassle while providing a great experience will be very successful.

What does the future hold for this segment?

Manufacturers know that as long as people want more than basic point A to point B transportation, this segment will always be fertile and profitable. The bar is constantly being raised, however, and value for dollar is purely subjective, especially when it comes to the marketing of this segment. What would happen if we couldn’t use computer-generated effects for our commercials?

The one constant that seems to add value is for the manufacturer to create a niche that is unique and for the dealership that provides more value in service after the sale.

How does a dealership create value in this segment?

A successful premium dealership will take a long-term view of its relationship with its customers. It’s much easier and profitable to keep current customers and their referrals than constantly trying to find new ones.

We concentrate on the things that add immediate and lasting value: no-charge pickup and delivery of cars for service with free BMW loaner cars; showing cars and test drives at the customer’s home or office; consistent follow-up during the ownership/lease period to assure we are giving our customers a premium experience; and making sure that each visit is customer-focused, before, during and after the sale.

CARLOS DAGUE is the new car sales manager at Ganley BMW, Middleburg Heights. He has been selling BMWs since 1982. Reach him at (440) 843-3552 or

Sunday, 31 December 2006 19:00

Financial salaries on the upswing

Salaries for accounting and financial professionals are on the rise, with a national average increase in base compensation of 3.8 percent projected for 2007, according to the 2007 Salary Guide from Robert Half International.

“To attract and retain top performers, it’s critical for firms in the Chicago market to adjust salaries for in-demand positions,” says Toby Coffey, Chicago division director of Robert Half Finance & Accounting. “In addition, employers are more commonly offering signing and performance bonuses and enhancing benefits packages. Options like flexible scheduling, part-time work and telecommuting are becoming increasingly popular.”

Smart Business asked Coffey more about hiring and compensation trends — both in the local market and for specific areas of the financial landscape.

You’ve just published the 2007 Salary Guide. What are the trends?

Financial hiring in Chicago is booming. The market is very competitive and prospects for highly skilled accounting and finance professionals remain bright. We’re seeing salary increases nearly across the board. Business expansion is fueling hiring activity and driving the demand for skilled professionals. Employers are also hiring more professionals to assist with compliance initiatives.

Compensation levels have been on the upswing since 2004. In 2007, financial salaries are projected to increase 3.4 percent to 3.8 percent for individuals staying in the same role. For individuals changing jobs, that figure may be closer to a 10 percent to 15 percent increase. Positions that will see notable increases in 2007 include compliance specialists, internal auditors, financial analysts and public accountants.

What are examples of salary levels for accounting and finance professionals in the Chicago area?

In 2007, average starting salaries for senior manager and director positions at mid-size public accounting firms ($25 million to $250 million in sales) in Chicago are projected to climb 7.6 percent, to between $100,860 and $147,600 annually. Entry-level professionals at small firms (up to $25 million in sales) can anticipate a 5.1 percent increase in average starting salaries, to the range of $46,740 to $54,120 per year.

Chief compliance officers with large companies (more than $250 million in sales) can expect the largest percentage increase in base compensation of any position in 2007, with average starting salaries forecast to rise 14.4 percent, to between $162,975 and $222,938 in Chicago.

Internal audit managers at large Chicago-area companies may see base compensation in the range of $95,325 to $124,845, up 5.8 percent from 2006.

What do you expect in terms of job growth in 2007?

Nationwide, demand for accounting and finance professionals will be particularly strong in the financial services, manufacturing and commercial real estate sectors. In Chicago, some of the fastest-growing industries include manufacturing, commercial real estate and retail. Positions in demand include cost accountants, staff and senior accountants, and financial analysts.

Businesses — public companies in particular — need professionals with knowledge of U.S. Securities and Exchange Commission reporting requirements to help maintain compliance with the Sarbanes-Oxley Act and other regulatory requirements.

Also, there is huge demand for specialized financial positions in Chicago. The needs of a large, publicly traded organization are different than those of a small, privately held firm. For instance, large companies are in great need of employees who have knowledge of how to work with 10K and 10Q reports.

Where are the shortages?

A year ago, I would have said shortages exist among ‘specialized’ employees. While that still holds true, today there is demand for a broad matrix of applicants — from entry-level to controller and CFO. There is simply a shortage of qualified individuals at all levels.

What will be the biggest recruitment challenges in 2007?

Firms are having difficulty finding skilled candidates, particularly for in-demand positions such as staff accountant and internal auditor. As a result, the hiring process is moving more swiftly than ever. It’s truly a job-seeker’s market right now, so employers need to staff strategically and act quickly to hire the ideal candidate.

Companies that provide strong compensation packages and have a history of success are at an advantage in the hiring market. Those that may not have the budget to offer premium salaries should highlight other qualities that distinguish their firms — such as strength of their management team and potential advancement opportunities. Use every option available, including working with recruiting services and internal referrals, to secure top candidates.

TOBY COFFEY is Chicago division director of Robert Half Finance & Accounting. Reach him at Robert Half International has 350 locations throughout North America, Europe, Asia, Australia and New Zealand. For a free copy of the 2007 Salary Guide, visit or phone (800) 474-4253.

Saturday, 28 October 2006 20:00

Meeting compliance standards

Anyone who makes or receives telemarketing calls must assure they do business in compliance with state and federal telemarketing regulations.

“In the broad spectrum, that means abiding by laws and regulations set forth by the Federal Communications Commission (FCC) and the Federal Trade Commission (FTC) in the Telemarketing Sales Rule (TSR) and the Telephone Consumer Protection Act (TCPA),” says Steve Brubaker, senior vice president at InfoCision Management Corp. in Akron.

“That includes the national Do-Not-Call List. In addition, there are legal requirements dictated by the 50 state legislatures and enforced by state attorneys general. The nature of the client for whom we are making the calls determines the specific regulations with which we must comply. Calls made on behalf of corporate clients are subject to the most scrutiny. Our nonprofit and political clients do receive certain exemptions based on their First Amendment protections.”

Smart Business talked to Brubaker about other factors governing legal compliance process and procedures.

Who is responsible to be sure an enterprise is in compliance?
All telemarketing firms should have a compliance officer to make sure the organization is in line with all federal and state laws. I fill that role at my company. It is my job to work with our attorneys to understand and interpret the laws and regulations for the telemarketing industry as they pertain to our firm, our clients and the types of campaigns they require.

Once you understand the law, you need to create requirements and apply them to your business processes, and ultimately build them into your technical software and into your corporate culture.

Once the plan is in place, how does a firm remain compliant?
To ensure compliance, telemarketing firms must constantly auditing their business and IT processes to search for any potential problems. They should have have a highly trained and experienced compliance staff that monitors all levels of their business, and state and federal regulations. Legal counsel should keep managers updated concerning regulation changes, and the firm should receive regular updates from industry associations like the American Teleservices Association (ATA) and the Direct Marketing Association (DMA).

What is the telemarketing firm’s role in customer compliance?
It should work with clients to ensure that all programs are compliant with the myriad of federal and state regulations. But at the end of the day, it is responsible for compliance. This is what clients expect.

What is the financial cost of compliance?
There is a significant commitment of resources for ensuring compliance. There are ongoing costs for staff and legal expertise, in addition to federal, state and even international fees.

For instance, in order to call into British Columbia, a fee must be paid to the province. I would say that the cost of compliance is whatever it takes to stay compliant and avoid potential lawsuits and negative press. The costs of noncompliance could put your company out of business and have a negative impact on the reputations of your clients.

How do you get stakeholders within an organization to understand and support compliance efforts?
A commitment to compliance must come from the top down. Corporate leadership needs to set a positive example for all employees about how to stay in line with laws and be ethically responsible. If a firm’s CEO does not place a high value on staying compliant, those feelings will trickle down throughout the company, and that firm is headed for disaster.

It is helpful to build compliance into technical applications, which removes some of the ethical dilemmas an employee might face. This creates an environment where employees do not unknowingly commit a violation.

Is there new or emerging technology that will help an enterprise be in compliance?
An ‘application processes interface’ saves a great deal of time in making changes to software when a new or changing law or regulation must be applied to the IT process of a particular telemarketing program. This platform is modular, and is designed to anticipate change and make it as easy as possible to find the code that needs to be updated.

STEVE BRUBAKER is senior vice president - corporate affairs at InfoCision Management Corp., Akron. Reach him at or (330) 668-1400. InfoCision is a privately held teleservice company and a leading provider of inbound and outbound marketing for nonprofit, commercial, religious and political organizations.

Wednesday, 20 September 2006 20:00

Multimedia outreach

Everyone is different. That’s what makes the world an exciting place. It also presents a marketing challenge.

“These days, you need to tailor your message and the delivery of your message to your intended audience,” says Michael White, senior vice president of information technology infrastructure at Akron’s InfoCision Management Corp.

Different folks simply prefer to interact via different media. To help business marketers reach these various audiences, Smart Business asked White to explain how today’s multimedia campaigns work.

Why doesn’t a simple, one-shot message to a customer work anymore?
Not everyone can be reached or will respond the same way. Some prefer to have a piece of paper in their hand, some prefer a voice conversation and to be able to ask questions and hold a dialogue, while others may opt for a more self-service approach of going to a Web site or using an IVR (interactive voice response) application.

What does a multimedia campaign entail?
Multimedia campaigns provide multiple ways for a customer to interact with your organization. They start with a well-planned marketing idea or call to action. Once that has been determined, you should evaluate the demographic of the intended audience to determine two things.

  • What is the best method to get your message to them?


  • What are the easiest and most likely methods to allow them to respond to you?

Multimedia campaigns are simply a means to provide multiple ways for a customer to interact with your organization.

What are the types of multimedia one can deploy?
There are many ways to reach an intended audience. The first is the basic phone call with a live communicator, either inbound (from the customer to the business) or outbound (from the business to the customer). Others include e-mail, live chat, IVR, fax, Web collaboration, video, traditional mailings and automated messages.

You’ve mentioned fax, IVR, Web collaboration and Web chat. Where does each work?
The use of specific types of media varies, based on intended audience. For example, we’ve found that when trying to contact business people there is typically a receptionist or administrative assistant screening and directing phone calls.

Likewise, targeted rich e-mail campaigns allow us to instantly reach large numbers of people inexpensively. They also allow for almost immediate feedback because the recipient can simply hit reply.

A phone call with a live communicator is typically used to get one-on-one contact with an organization, to introduce a new concept, to explain complicated offers, or to up-sell or cross-sell an individual.

IVR campaigns can be effective in handling large numbers of callers who have a very specific reason for calling, like for free or promotional offers, to check order status, surveys and American-Idol-style voting.

Web collaboration and chat allow a customer to go to a Web site to get assistance. Via chat, a Web site, forms or a presentation, Web collaboration offers many options to facilitate the need for immediate assistance when someone is surfing a Web site.

How much setup time is required?
The additional training time required to handle a multimedia campaign consists of training communicators to use the interfaces for the chosen medium. Sometimes there is additional training on e-mail, chat, fax or Web interfaces. These training details should be covered during standard campaign training.

The setup of mailing, broadcast fax, automated messages and the other outbound forms of contact can typically happen in conjunction with the normal inbound or outbound program setup timeframe.

How good is the ROI (return on investment) from a multimedia campaign versus an ordinary one?
The most successful campaigns need to give the customer options to communicate in the method that’s most comfortable for them. Typically, for a few additional cents per transaction, other channels for communication can be added that can add several percentage points to the overall response rate of a traditional phone- or mail-only campaign.

Is there a particular demographic that responds better to multimedia than to a traditional campaign?
Business professionals, doctors and attorneys typically view and respond to faxes and e-mail depending on the content. We’ve found that regardless of the demographic e-mails or faxes can be used as informational updates or to provide more details on a phone conversation.

The younger generation is much more likely to choose self-service mediums such as IVR, chat or e-mail. The older generation may prefer traditional conversation with a live communicator.

MICHAEL WHITE is senior vice president of information technology infrastructure at InfoCision Management Corp., which is located in Akron, Ohio. A teleservices company, InfoCision offers marketing expertise in most industry fields. Reach White at (330) 670-1711 or

Wednesday, 30 August 2006 03:06

Make yourself understood

It is hardly a shock that managers spend 75 percent of their time communicating with staff. While approximately 75 percent of manager/staff communication is face-to-face, unfortunately, misinterpretation and miscommunication are rampant.

Inflections are misinterpreted. The differences between male and female listening patterns are well documented but still vexing. “Harmless little jokes” result in lawsuits when one party feels slighted.

We can edit memos or e-mail before they are sent — but the words in conversations are real-time and done.

How can a corporate executive reduce the chances of being misunderstood (or misunderstanding what is said) in conversations with employees? Smart Business asked Robert Serum, vice president of Academics and International Programs at Northwood University, Midland, Mich., for some tips.

What is the difference between misinterpretation and miscommunication?
Suggesting a fundamental difference would be contrived at best. Some would suggest that miscommunication is a form of misinterpretation that falls into one or more of several defined categories, such as bypassing or polarization. Even in the field of art, many critics would say no interpretation is really wrong, and that, once published, the artist has no more interpretation authority than the critic. Humans have a unique ability to communicate across time and great distance.

Which is more prevalent and why?
If you accept the slight limitation above, then misinterpretation is more prevalent and miscommunication might be seen as a subset.

Is this because people miss inflections or body language?
Those are factors, but there are many examples of miscommunication that don’t depend on either. For example, you and I work together, and I invite you to lunch at the Holiday Inn tomorrow. You ask the time, and I say, ‘Let’s meet in the parking lot at 11:45.’ The next day, you are waiting in the company lot and I’m waiting in the Holiday Inn parking lot at 11:45. Nobody’s wrong, but nobody asked, ‘Which parking lot?’ We have completely ‘bypassed’ as sender and receiver.

What are the main ways communications go wrong?
Communication tends to go wrong because of unexamined assumptions. Both parties assume understanding was perfect and perhaps neither has asked, ‘What is going on here?’

Every form of miscommunication is exacerbated by data overload and the increasingly complex environments in which we live and work.

Are there really big differences between male and female listening patterns?
Every evaluation I have examined indicates that women are generally superior communicators. For example, women make better eye contact, and making good eye contact helps the receiver pick up on nuances. People don’t always say what they mean in words, as you suggest with the question on body language and inflection. Women are more likely to give noncompetitive feedback, which also helps clarify.

As a communicator, how do you avoid these pitfalls?
It simply can’t be done impeccably. Cultivating a discipline for clarification is very important. Undertaking some study of how communication patterns go wrong can be helpful. But you can also help by encouraging healthy communication, which might take the form of an employee feeling comfortable about telling you when things aren’t going right. Without that feedback, you are at a disadvantage. For that to happen, though, your employee must learn to trust you-and that won’t be likely to happen unless you trust your employee and demonstrate your trust.

How about when I’m the listener? What can I do to be more receptive?
Again, ask questions out loud ... and ask yourself follow-up questions. If you don’t know the answers, check back. And don’t forget eye contact.

How do you handle a case where it becomes obvious your worker did not really understand what you meant in a conversation?
Always take responsibility yourself, because you are one-half of every miscommunication. Your employee will be encouraged that you are comfortable commenting on your faults and will probably also take responsibility. Then ask the employee, ‘How could we have prevented this.’ If you don’t get a good answer, suggest one.

We mentioned e-mail. Does the Internet make it easier or more difficult for a supervisor to communicate clearly with employees?
Both. E-mail is a written record that you and others can re-examine when there is uncertainty. E-mail also adds dramatically to the numbers of direct communications most of us have every day — some of them to the other side of the globe. So the magnitude adds to both the better and the worse.

On balance, I come down on the side of ‘better,’ but I worry that it can replace too much necessary face-to-face communication. Face-to-face communication almost always tells us more.

ROBERT SERUM is vice president of Academics and International Programs at Northwood University, Midland, Mich. He earned an AB in Business Administration from Hope College, Holland, Mich., and his Master’s and Ph.D. in English from the University of Alabama. Reach him at (989) 837-4327.

Tuesday, 23 May 2006 20:00

Noncompete agreements

One of the most effective ways for a business to prevent loss of valuable intellectual property is through confidentiality agreements and post-employment restrictive covenants.

Although restraint-of-trade concerns may be raised and generally are disfavored, the courts will enforce a reasonable covenant not to compete if the employer can establish a legitimate “protectable interest,” according to Patricia Diulus-Myers, partner at the law firm of Jackson Lewis.

The question is what is a protectable interest and how do the various types of agreements differ from situation to situation. Smart Business asked Diulus-Myers to sort it out for us.

What type of protectable interests must a company demonstrate to support requiring employees to sign restrictive covenants?
Some examples of legitimate protectable interests in many states are trade secrets, confidential information and business relationships, i.e., goodwill. Also, some courts have recognized specialized training and unique employee services as legitimate bases for enforcement of a covenant not to compete.

Thousands and even millions of dollars are spent to develop goodwill with customers, vendors, suppliers and referral sources. Therefore, courts often recognize such relationships as a basis to enforce a covenant not to compete.

Are covenants not to compete, nonsolicitation agreements and nondisclosure agreements basically the same thing, or should they be approached differently?
These covenants are different and usually are found as separate covenants within one agreement. The covenant not to compete is generally more restrictive and more of a restraint on trade than a nonsolicitation agreement, which can address nonsolicitation of customers and/or employees.

Often, we recommend the use of nonsolicitation agreements when a covenant not to compete would be too restrictive or in states which are strict on enforcing the noncompetes.

A confidentiality, or nondisclosure, agreement should be used broadly, even if a company does not employ the use of the other restrictive covenants. This latter agreement demonstrates, at a minimum, a company’s affirmative steps at protecting its confidential information.

What constitutes reasonable restraint?
The following factors typically are used to evaluate reasonableness of a restrictive covenant: length of time of the restriction; geographical area covered; scope of business covered; fairness of and business need for the protection accorded the employer; extent of the restraint on the employee’s opportunity to pursue a trade; and extent of interference with public interests.

What should be included to enhance the enforceability pf noncompete agreements?
Each of the factors of reasonableness must be met in a covenant or there is a risk that it will not be enforced. On the other hand, time, geographical and business restrictions are intertwined in determining the reasonableness of a covenant.

For example, restrictions covering a large territory or scope of business might be reasonable if in effect for a short time, while restrictions covering a small territory or scope of business might be reasonable for a longer time. What is reasonable for one industry may not be reasonable for another. It is important to note that enforcement of a noncompete is a matter of state law.

The timing of signing the noncompete covenant may be significant in one state but not in another state. For example, in Pennsylvania, if the noncompete is not signed at the inception of employment, then additional consideration must be given to the employee who is asked to sign a noncompete during the course of employment.

Are there other measures, besides requiring the signing of restrictive covenants, that the employer should take to enhance the ability to enforce those covenants?
First, all employees with access to confidential information of the company should be required to sign restrictive covenants, including nondisclosure agreements. Then, establish a climate of confidentiality within the workplace. This includes developing a practical policy of maintaining confidentiality and procedures which consistently implement that policy.

The policy should include physical security issues, information security issues, communication with employees concerning the policy and contractual protection of information (nondisclosure agreements). A practice for marking documentary information as confidential should be established as well as documenting compliance with the procedures established. This will provide evidence to the court that the information at issue is valuable and that the employees are aware that the information is considered to be valuable.

PATRICIA DIULUS-MYERS is a partner in the Pittsburgh office of Jackson Lewis LLP. Reach her at (412) 232-0180.

Tuesday, 16 May 2006 06:00

Leasing exit strategies

Signing a lease without considering end-of-life ramifications is like spontaneous cliff diving. You might as well tie yourself to a boulder and plunge into the sea.

To be sure a lease does not become a suicide pact, it is important to set up a solid exit strategy. Look at the implications of a lease, consider whether it meets your goals, know how you will end the lease, and then execute the documents.

Smart Business asked Conrad B. Andersen, senior vice president with CRESA Partners, where a company should start when developing an exit strategy. His answer was to be flexible.

How can a new lease give you flexibility for ending it? What can a firm can do to cut losses if the need arises?
Whether you own your space or lease it, it is critical that you have a plan for reducing or terminating your use of that space right from the start. That plan is your exit strategy. We recommend working with top-drawer attorneys. One I often partner with, and who provided insight for this interview, is Martin E. Steere, a partner in the Los Angeles office of Manatt, Phelps & Phillips LLP. Whoever you work with, be sure they bring the requisite expertise to the table.

What are the key lease considerations for a corporate user?
There are three primary issues that concern the corporate user: supply, demand and other features in the real estate market in which your space is located. This is called your ‘submarket.’ Second, the design and use of your space. And third, your lease obligations and your rights as a tenant.

As a lessor, where is my leverage to get out?
Understanding the real estate market may help you find some leverage to use in discussions with your landlord. Some things in business can be controlled and some cannot, such as an economic cycle.

For example, if your submarket has declining vacancies and rental rates are significantly above your lease rate, it may be easy to negotiate an early termination. Your landlord can find a new tenant who will pay more rent — although you may end up paying your landlord something.

Even when market rents are higher than your contract rent, your landlord may not want to extinguish your lease, especially if you have excellent credit and have been a good tenant, or if the landlord’s property has a lender who will not consent to your leaving.

What happens if I can’t get out of my lease?
Rather than terminate your lease, try to sublease your surplus space to others. You remain responsible to your landlord for your lease. You enter into a new lease (the sublease) with a new tenant for your excess space. They pay rent to you at the market rate — you pay rent to your landlord as called for in your lease. Leases generally allow subleasing, but you may need landlord approval for your subtenant’s use if it is different from your own.

Other leases, including some California leases, require you to obtain landlord approval. You may be required to share a portion of rent you receive with your landlord. You may be restricted as to what kinds of subtenants you can have. You may have to first offer the space back to your landlord — creating a situation where you can terminate your lease.

What if I only want to reduce my leasehold?
When you have excess space, it is probably because the entire regional or global economy is weak. Many other tenants have a similar problem. Your submarket in this case is awash in vacant space. Vacancies rise. Rents fall. Your lease rate may be above market. In this situation, your landlord will probably do everything in his power to keep you paying rent, especially if you have strong credit and have been a good tenant.

Even in a recessionary environment, you may be able to sublease your surplus space. This is especially true if the lease, the property, its location and local zoning support alternative uses. If your space is used as a general administrative office, it could be oriented to another type of use such as medical, financial services, showrooms or even retail. This is especially true if your location has good parking, visibility, street orientation, high automobile or pedestrian traffic, or is on the ground floor.

In summary, your steps are to:

  • Understand the current economic climate.

  • Find leverage.

  • Understand your contractual rights and obligations under the lease.

  • Determine whether sublease or early termination is best, and if subleasing is possible.

  • Consider alternative uses for your space that may create additional demand.

CONRAD B. ANDERSEN is senior vice president with CRESA Partners, Newport Beach. The company offers an end-to-end solution that reduces process inefficiencies and increases savings opportunities. Reach Andersen at (949) 706-6600.

Sunday, 26 October 2008 20:00

Cutting customer churn

Unless you are in the butter industry, churn is not a good word. Most business leaders know, instinctively, that it is cheaper and more effective to retain an existing customer than it is to invest the time and resources required to find a new one, but a few companies are taking it one step further by having very focused customer retention programs strictly for those they fear might churn.

“All too often companies spend enormous marketing and sales budgets trying to build new business,” says Steve Boyazis, the executive vice president of InfoCision Management Corp. “A great adjunct to this sales strategy is built around customer retention. But to make it work, you need to identify those customers that are going to churn and attack them with a proactive program.”

Boyazis recently completed an in-depth study that showed how to identify customers on the bubble and how to keep them in the family. It can return $10 for every dollar spent.

Smart Business spoke to Boyazis about customer churn and how to identify and prevent it.

How do you know who will churn?

It can be just as expensive to offer a ‘retention special’ to everyone as it would be to acquire a new customer from scratch. The companies that are doing it well are focused and specific. The beauty of this type of marketing is that you actually have real data to test and build models for — you don’t have to rely on focus groups and feelings.

So, the first step is looking at all of your existing customers, their average spends, their purchases, etc., and determine who churns from this group. You then can build a statistical model to identify indicators of churn.

Once you’ve got a quality internal model, you can even take it a step further and overlay national psychodemo-graphic data to help identify populations who may churn if you were to sell to them in the future.

There is no prescriptive answer as to what might be in the model, but red flags could be things like if a customer does not contact you within a month’s time, if normal sales patterns drop, if the customer pays its bill late, if your industry typically offers a suite of products but a customer regularly buys only one thing from you. This is why it is important to mine psychodemographic data and buying data for patterns. The real art here is to have a good model of who is likely to churn and be able to reach out to them in a very specific fashion.

What is the next step?

This is where doing business intelligence comes into play. Build a model that takes into account the number of customers who are likely to churn and figure out what will attract them to stay. It could be a special offer. It could be some personalized or customized sales effort. That will vary by industry. Keep in mind that to sell more to your existing customers, you have to be proactive. You might want to extend them a special offer, one available only to those who are slipping away from you.

The churn-reduction effort can be done with direct mail, telephone, e-mail, face to face, whatever you prefer. It depends on the industry, customer demographics and what customers expect. A combination of two or more programs will be the most effective answer. A layered approach builds awareness, explains the offer and follows up with any questions the customer might have.

What’s the cost of doing something like this?

Think about all of the work involved in selling a new product: research to find a target audience, running focus groups, finding lists that meet the target demographics, etc. It can cost $50 or $70 or more to drive a single order. Any good client management strategy will also take some portion of this budget to identify offerings that make customers stick.

When the offers or messages are well focused, the returns speak for themselves — 10-to-1 or better. But, by the same token, spreading offers to everyone is just a waste of money.

STEVE BOYAZIS is the executive vice president of InfoCision Management Corp. Reach him at or (330) 670-5877. In business for 25 years, InfoCision Management Corporation is the second largest privately held teleservices company and a leading provider of customer care services, commercial sales and marketing for a variety of Fortune 100 companies and smaller businesses. InfoCision is also a leader of inbound and outbound marketing for nonprofit, religious and political organizations. InfoCision operates 32 call centers at 13 locations throughout Ohio, Pennsylvania and West Virginia. For more information, visit