In many sectors, the need to establish a physical real estate presence overseas has never been greater. Improved technologies and efficiencies have made the world a bazaar of economic activity and those without an international presence may be missing out on valuable opportunities.
“If you are in certain businesses such as communications, financial services, or the technology industry, you either have a global presence or your competition is passing you by,” says Ken Murawski, managing director of CB Richard Ellis.
Smart Business spoke with Murawski about the importance of establishing an international presence, how to decide between owning and leasing commercial real estate overseas and what types of services a quality real estate professional can bring to the table.
Why is establishing an international presence so important in today’s marketplace?
As we all know, the world has gotten much smaller over the past several decades as technology has progressed. Many companies today feel that in order to service their clients as they expand internationally, they too need to establish or expand their physical presence overseas. In the commercial real estate business, having people on the ground in such areas as India, China and Europe has allowed us to service our clients appropriately in those marketplaces as well as increase our own profitability.
Many of our clients have recognized the vast opportunities that exist for them in emerging marketplaces and want to participate in the expected growth, which is anticipated to be much greater than their existing market. I don't think this trend will slow down for quite some time, if ever.
What factors should be considered when deciding between owning and leasing commercial real estate overseas?
The answer to this varies from market to market. In some countries, the decision to lease versus own is a similar decision process to leasing or owning in the United States, meaning it is, in most instances, based upon a company's cost of capital. However, in China where the government owns the land, owning in the traditional sense is not an option. Doing business can vary greatly from market to market due to cross-cultural differences so it is very important to have local expertise and local influencers on your team if you are looking to enter a new market.
How should a company proceed when purchasing real estate internationally?
I think that anyone working to lease, build or buy commercial real-estate internationally absolutely needs to engage the services of qualified professionals in the specific marketplace they want to be in. If it is a United States company that doesn't have a qualified real estate service partner, they need to start locally by contacting a commercial real estate services firm with true international capabilities. This allows the U.S.-based real estate professionals to get a clear understanding of the company's needs and make the proper introduction to their foreign partner to ensure the client is in good hands and that any cross cultural differences are addressed.
What type of services does a quality international real estate professional bring to the table?
A quality professional representing a company that is looking at going international will always connect with local associates in specific foreign markets to ensure that they have accurate, current data as well as an understanding of such things as political climate, cultural differences, taxes, incentives, etc. The professional would bring high level analytical and financial capabilities, as well as a team of other professionals with expertise in such areas as project management, facilities management, transaction management, all with experience in the target market. It all depends on the nature of the assignment, but having all these service capabilities can be critical.
What does the current environment look like for international real estate?
It varies greatly by country and region. We are seeing many U.S.-based companies, particularly manufacturing companies, looking to the Asia Pacific area to establish an operating presence. With the political climate changing in China, it is an "untapped" market in many respects and given the vast population there, it offers huge growth potential for US companies.
KEN MURAWSKI is managing director of CB Richard Ellis Cincinnati. Reach him at (513) 369-1349 or Ken.Murawski@cbre.com.
Disasters, both man-made and natural, can occur at any place, any time. If unprepared, a business could be faced with devastating consequences.
John E. Watson, executive director, higher education practice group for Arthur J. Gallagher & Co., says creating a disaster plan is essential to ensuring a company’s well-being in the wake of a catastrophe. “A disaster preparedness plan, or a crisis management plan, is intended to establish policies, procedures and an organizational structure for an effective response to emergencies,” he explains.
Smart Business spoke with Watson about how to craft a disaster preparedness plan, the importance of business interruption insurance and what other types of coverage should be in place.
How should a business go about creating a disaster preparedness plan?
A well-designed plan will describe the roles and responsibilities of each of an organization’s operating units during exigent situations. This includes natural and man-made perils, as well as domestic and overseas situations. A plan should define actions that target a safe, effective and timely response and recovery. The overar-ching focus of the plan should be to protect lives (the primary goal) and other assets of the firm.
What are the potential consequences of not being prepared for a disaster?
The absence of a response plan increases the losses from every angle and extends the length of a business interruption considerably. If employees are well-educated in response scenarios and feel that they are a vital part of saving the business and their livelihoods in the event of a crisis, the responses are much more effective. This can lead to improved shareholder value, community standing, brand image, customer satisfaction and employee confidence.
An example of a success is Wal-Mart; following Hurricane Katrina they were able to bring 70 percent of their stores back into operations within 48 hours. This wasn’t the result of having a crystal ball and being able to anticipate a Category 5 hurricane. It was because they had a well-defined crisis response and recovery plan in place.
Why should a crisis communication plan be implemented?
Employees are critical to the success of a crisis response and business continuity plan. Therefore, having alternatives to the traditional communication methods such as e-mail and other data systems is important, especially if those systems are taken out as a result of a disaster. Without clear direction from senior management and the crisis management team, it is impossible for employees to know exactly what direction they should be taking.
How important is it for companies to back up their computer data frequently?
The more frequent the backups are, the less likely that you’ll be presented with a loss of critical data. Not only should you make frequent backups, but you should also store them appropriately so they do not become damaged during the crisis situation. If a company is located in an earthquake zone in Southern California and they store their backups at a site that happens to be on the same earthquake fault, then they haven’t created the security they need for that data. They need to find a way to locate the backups off the same earthquake fault.
What is business interruption insurance and why is it so important in the event of a disaster?
Business interruption insurance is a time-element coverage that pays for loss of earnings and extra expenses that a business incurs due to a disaster. It is a property insurance form so there must be damage that would be covered under the property insurance policy. An extension to that coverage is off-site time-element coverage. Let’s say a firm relies heavily upon electricity for the operations of their infrastructure and doesn’t have an on-site generator. If their off-site power grid goes down, and stays down for the required length of time for the deductible, then they are eligible to collect from their property insurance the resulting income loss from not being able to provide their services. The extra expense provision would allow them to bring in portable generators or other equipment to help reduce the size of their overall financial loss.
As related to disaster preparedness, what other types of insurance coverage should a company have in place?
To some extent that is dependent on the type of operation. If a firm has overseas operations or has employees traveling extended distances, executive assistance programs can help them be repatriated if they are impacted by a civil disturbance in a foreign country. Similarly, kidnap and ransom coverage can help firms with overseas operations. Obviously, anywhere in Southern California there is the potential need for earthquake coverage or other financial models to prevent a loss from earthquake damage. Flood insurance is also something that should be considered.
JOHN E. WATSON is executive director, Higher Education Practice Group for Arthur J. Gallagher & Co. Reach him at (818) 539-1445 or John_Watson@ajg.com.
Companies that renew their real estate lease agreements often pay a premium for the convenience of not relocating.
After all, lease renewals are not conducted on an entirely level playing field; the landlord is in the business of real estate and the tenant is not. With a well-thought-out strategy in place, however, it is possible for tenants to negotiate a discount.
“The tenant that understands lease expiration and relocation can capture savings, which otherwise would be a major windfall for the landlord,” explains Scott Yards, senior associate, office properties for CB Richard Ellis.
Smart Business spoke with Yards about the office lease renewal process, common mistakes that companies make and how to go about getting an optimal lease renewal.
How does the office lease renewal process typically work?
Before the process begins, the first reality that the tenant must accept is that achieving maximum value from a lease renewal is not necessarily quicker or easier than finding, negotiating and moving into a new space. The methodology for companies to strategically work through the lease renewal process can be divided into three phases: phase one is situational analysis, phase two is option development, and phase three is project implementation.
The first phase is for the tenant and its-broker to collectively discuss and understand the tenant’s current and future corporate goals, as well as existing and pending real estate requirements. Secondly, in the option development phase, the tenant must develop building/site alternatives and make the landlord aware they are pursuing them. An aggressive search by a credible real estate professional from outside the company hierarchy is strong evidence that the threat to move is real. In the final phase, project implementation, the objective is to bind both parties to the agreed-upon transaction and to arrange and manage all work necessary for the tenant’s space.
What are some common mistakes that companies make during the process?
Tenants think that because there is no operational need to relocate, the lease renewal is essentially just a straightforward administrative matter. Relieved not to have to address all the operational, logistical and cost issues associated with moving, tenants typically feel they come out ahead. More often than not, however tenants should be getting a discount that reflects the savings the landlord realizes from their decision to stay.
Another mistake that tenants make is entering the renewal process without a clear strategy. Tenants sometimes do not see the renewal as an opportunity to gain a competitive cost advantage, and subsequently do not commit adequate resources to the transaction. Finally, tenants often fail to understand the economics of the renewal situation from the landlord’s perspective.
What specific strategies should be utilized to get an optimal lease renewal?
Time: Landlords know how much time it takes companies to make decisions and how such decisions can be readily delayed. The window must open early enough to convince the landlord that there is time enough to make both the decision and the move. For projects of significance, the process should begin at least two years prior to lease expiration and for very large projects where build-to-suits may be an option, even more time is required.
Objectives: Tenants need to clearly define their objectives to convey a focused approach on the landlord's income stream.
Understanding of landlord: Tenants need to understand the landlord’s position and objectives. Landlords vary by types of investments, portfolios, and financial and risk profiles. An entrepreneurial developer has different objectives than institutional owners.
Credible motivation: The landlord must be convinced that the tenant can find an alternative that meets and exceeds its objective(s).
Credible market search: The landlord needs to be aware of the tenant’s alternatives. An aggressive market search by a leading real estate firm from outside the company is proof the threat to move is real.
How much value can be extracted during the renewal?
It depends on the market, the landlord and the team on the tenant’s side. Tenants who negotiate their own renewals seldom fail entirely. They usually gain some concessions, although they may have little idea what they are worth or what they have received. The landlord will give up only enough to make the tenant happy.
How can a company benefit from engaging a real estate professional to help out with the renewal process?
The importance of strong outside support to plan and execute a renewal strategy cannot be overstated. A real estate professional will have sophisticated knowledge of the market, will be well-versed with the current economics of leases in and around the subject building, and will be familiar with landlord tactics and vulnerabilities.
SCOTT YARDS is senior associate, office properties for CB Richard Ellis. Reach him at (513) 369-1313 or email@example.com.
Since opening in 2005, the Mindful Awareness Research Center (MARC) at UCLA has focused on identifying, evaluating and disseminating the most effective mind awareness practices to assist individuals in both clinical and non-clinical settings.
“The center’s mission is to foster mindful awareness in daily living using research and education,” says Dr. Susan Smalley, founder and director of MARC and professor of psychiatry at UCLA.
Smart Business spoke with Smalley about mindful awareness, how it has influenced her work with ADHD and why self-help tools could ultimately lead to treatment models based on prevention.
What is mindful awareness?
Mindful awareness is a moment-by-moment awareness of one’s experiences as they occur. This means paying attention to where your are at the present moment.
That can include things like what you’re feeling, what you’re thinking, your body sensations, and so on. Many of these practices are drawn from Eastern traditions like Tai Chi, yoga and meditation. Some people use the term ‘mindfulness,’ which can be used synonymously with mindful awareness.
How has this practice influenced your work with ADHD?
As an awareness training methodology, mindful awareness practices centered in meditation seem to help individuals regulate their attention. You take something that is automatic like watching your breath and you give it your full attention. Through this process of meditating and learning how to regulate your attention to your present experience, you start to discover a lot about how your mind works. For example, it is easy to lose interest in the process of paying attention to your breath and your mind wanders off. In the process of becoming aware that your mind has wandered and attempting to bring it back, there is a training of attention that occurs.
A colleague (Lidia Zylowska, M.D.) and I conducted a study using mindful awareness to work with individuals who had attention disorders. The pilot study we conducted looked at attention deficit disorders among teenagers and adults and found promising changes in attention as measured by computerized tasks of attention and other objective measures. This pilot study suggests that these tasks will lead to attention regulation and may be very useful as a complementary tool in working with individuals who have attention disorders.
You founded the Mindful Awareness Research Center. What challenges have you faced with this project?
The biggest obstacle has been getting scientists to appreciate ‘looking within’ as a tool of discovery. Mindful awareness can be studied using objective tools of Western science, but trying to get scientists to actually have the experience themselves (a subjective experience) as well as investigate it has been a challenge.
In order to understand mindful awareness, it really requires a first-person experience, which means you have to do it. As scientists are trained to look outside themselves and objectify experiences for study, it’s challenging to introduce subjective experience as an alternative method of discovery into the culture of science.
What does initial research reveal about the possibilities of using mindful awareness to help treat behavioral and psychiatric disorders?
Most of the research has been done with adults, and a lot of it has been conducted in a clinical population individuals with depression and anxiety disorders. Those studies are very promising in that there are clear improvements in mood and reductions in anxiety. Also, new studies are investigating biological and physiological correlates. These findings will be of vital importance in helping people self-regulate their own emotions and their own attention.
How can self-help tools like mindful awareness ultimately lead to a treatment model of prevention rather than intervention?
In the past, research has focused on intervention rather than prevention. But this will shift because we’ll be able to identify individuals who carry susceptibility genes for different kinds of traits, such as a predisposition toward anxiety and depression.
Mindful awareness practices will increase in importance as early detection of predisposition occurs. This is what we’re seeing with genetic knowledge around chronic physical illnesses like diabetes and heart disease. Even though genes play an important role, preventive steps like diet and exercise will play a very important role in preventing mental health illnesses in the future.
To avoid fraud, it is important to institute an anti-fraud program that creates a culture of honesty and high ethics. Such a program, says Linda Saddlemire, partner at Vicenti, Lloyd & Stutzman LLP, should be spearheaded by the management team. “Management is responsible for developing an effective anti-fraud program and should be heavily involved in assuring the proper measures are in place,” she explains.
Smart Business spoke with Saddlemire about fraud, how anti-fraud programs should be structured and what course of actions should be taken if fraud allegations occur.
What type of fraud risks do companies face?
The most common type of fraud is mis-appropriation of assets, which is any scheme that involves the theft or misuse of a company’s assets. The Association of Certified Fraud Examiners (ACFE) reported that over 90 percent of frauds reported in its 2006 ‘Report to the Nation on Occupational Fraud’ were in this category. Less frequently, companies may be subject to corruption and fraudulent financial statement frauds. Corruption involves a person using his or her influence in a business transaction to obtain an unauthorized benefit, such as accepting a bribe or engaging in a transaction where there is an undis-closed conflict of interest. Fraudulent financial statements are when a company falsifies its financial statements to make it appear more or less profitable.
What is the typical loss for a company that has been defrauded?
As reported in the 2006 study by the ACFE, which includes reported frauds from 1,134 companies, the median loss caused by occupational fraud was $159,000 and it is estimated that U.S. businesses lose 5 percent of annual revenues to fraud. Nearly 25 percent of the cases reported lost over $1 million or more and there were nine reported cases causing losses of at least $1 billion.
How should an effective anti-fraud program be structured?
Major elements of an anti-fraud program include (1) creating a culture of honesty and high ethics, (2) having proper internal controls and procedures in place and evaluating the effectiveness of these programs, and (3) having proper oversight in place.
Creating a culture is accomplished by having clear codes of conduct, conflict of interest policies and ethics policies. It also includes creating a positive work environment by having recognition and reward systems, equal employment opportunities and quality professional training. Hiring practices should include thorough background checks, and promotions and evaluations should emphasize the importance of high ethics and values.
Proper internal controls include having good segregation of duties, internal audit checks and clear authorization policies for expenses. A measure commonly taken, and required for public companies by the Sarbanes-Oxley Act, is to have an anonymous reporting mechanism in place for reporting wrongdoing.
Tips are the most common means of fraud being detected.
The oversight process may include an audit committee or board of directors. Oversight roles should include evaluating management’s identification of fraud risks, implementation of anti-fraud measures and the creation of setting the ‘tone at the top.’
What considerations should be taken into account when implementing an anti-fraud program?
The first thing to consider is to identify the acceptable level of risk. Costs versus benefits of controls always need to be considered and attention should be given to those areas in which the risk of fraud is greater. Computer security is often a critical element and experts should be consulted. Knowing your business and where the risks of fraud exist is the first step.
If a business suspects a case of fraud, what course of action should be taken?
When allegations of fraud exist, it is critical to take immediate actions. Developing a team should be the first step, which should include legal counsel, trained fraud investigators, such as a Certified Fraud Examiner, and human resources. A plan of action should be developed and agreed to by all parties. In some instances, you may want to include local law enforcement at the onset of the investigation. Assuring that a thorough and fair investigation takes place is critical due to the fact that these matters are highly sensitive and litigious. Taking the proper steps is imperative in protecting the integrity and reputation of your company.
LINDA SADDLEMIRE is partner at Vicenti, Lloyd & Stutzman LLP. Reach her at (626) 857-7300 x256 or firstname.lastname@example.org.
That’s where commercial real estate appraisers come into play, says Steven Hodge, vice president of CB Richard Ellis’ Valuation and Advisory Services in Cincinnati. “Appraisers play a vital role by providing an unbiased opinion of value on a multitude of real estate components,” he says.
Smart Business spoke with Hodge about the services that commercial real estate appraisers provide.
What services can a commercial appraiser provide?
The common perception of the commercial appraiser is that of an individual or company providing valuation for financial institutions in regard to a buy/sell transaction. In addition to providing financial institutions with an analysis of the underlying asset used for collateral, a qualified appraiser can assist attorneys, corporations, government agencies and individuals. Appraisals may be required for a multitude of properties, including single-family homes, apartment buildings, condominiums, office buildings, shopping centers, hotels, industrial sites and farms, whenever real estate is sold, mortgaged, taxed, insured or developed.
An appraiser can provide a vital role in just about every aspect of real estate. An appraiser can analyze the feasibility of a project by underwriting a development prior to committing capital, provide expert testimony about real estate in litigation proceedings, perform business or partial interest valuations, assist in estate planning or provide assessment for tax implications.
When is it necessary to engage an appraiser?
The reasons for performing a real property appraisal are varied. Clients typically seek out a professional appraiser for an opinion on the current value of property being bought or sold, future value of property being built, value for mortgage or lending purposes, feasibility analysis on proposed projects, value to assist in investment decisions, value to measure property tax assessments and other taxes. They also will seek an opinion on the value of property to determine compensation where property is to be taken, value of property involved in litigation or divorce, value of private property for estate planning purposes, value of property as it affects pending business mergers or dissolution, value of a partial interest in real estate, and value of real estate as a charitable contribution.
In addition, there is increasing demand for consultative services offered by valuation professionals. In recent years, the real estate industry has experienced significant and ongoing changes as predicated by the Sarbanes-Oxley Act. This legislation requires changes in accounting conventions in the United States and Canada from depreciated historical cost to market value reporting of assets and is important to public, domestic and international investors, regulators and reporting entities. Today’s professional appraisers are highly qualified and able to fulfill this need and a wide range of value-added real property advisory and consulting services.
How should one determine if an appraiser is properly qualified?
An appraiser needs to be able to make prudent judgments and independent decisions. He or she must be skilled in gathering and evaluating facts, and should understand how to access the variety of data sources that are needed for comparisons and analysis.
As a minimum requirement, an appraiser should be state certified. Being state certified requires a commitment by the appraiser to complete specific education and testing requirements by the licensing state. A better option is a designated appraiser. An appraiser who has obtained a professional designation, such as the MAI designation from the Appraisal Institute, has exceeded the minimum requirements set by the state legislature. This distinction denotes a level of competence attained only by the most accomplished appraisers and is recognized throughout the business community.
What are clients seeking from appraisal service providers?
Today’s global economy has forced both financial institutions and corporations to seek more strategic real estate solutions, increasing the need for valuation services. Clients are looking for efficient delivery systems from their service provider. Whether it’s a single, local transaction or a national portfolio, many institutions and corporations require a single point of coordination, uniformity of product and local expertise on a national platform.
STEVEN HODGE, MAI, is vice president and leads CB Richard Ellis’ Valuation and Advisory Services in Cincinnati. Reach him at email@example.com or (513) 369-1368.
The environment in which officers and directors operate has changed considerably since the stunning collapse of Enron, WorldCom and Tyco. The Sarbanes-Oxley Act, which was signed into law in 2002, expanded the responsibilities as well as the potential liabilities of corporate officers and directors.
In order to protect against claims that can cost millions of dollars to defend, it is important to have directors and officers (D&O) liability insurance in place.
“D&O liability insurance protects the capital base of the corporation from catastrophic loss,” explains Jerry Henderson, area executive vice president for Arthur J. Gallagher & Co. “It also protects the personal wealth of directors and officers, who have unlimited liability for their actions.”
Smart Business spoke with Henderson about what D&O liability insurance policies entail, who should be covered and what factors should be considered when selecting coverage.
How does D&O liability insurance work?
D&O insurance policies usually have three basic insuring agreements.
Insuring Agreement 1, or Insuring Agreement A, depending on the policy form, covers individual directors and officers when indemnification from the company is not available or provided. Insuring Agreement 2, or B, covers the corporation for its indemnification obligation to the directors and officers.
Every company has in its bylaws and Articles of Incorporation a certain provision that says ‘we will indemnify, or be responsible for, taking care of any liabilities that arise against our directors and officers.’
Insuring Agreement 2 is the transfer of risk from the company to the insurance company for that indemnification obligation. Insuring Agreement 3, or C, covers the entity itself.
For public companies, the entity coverage is limited to securities-related claims. For private companies, the entity coverage is for all claims. A D&O policy covers claims brought by third parties alleging that a company’s directors or officers did something to harm them under the provisions of these three insurance agreements.
What risks can be mitigated by having a D&O policy in place?
A claim can be catastrophic to the balance sheet of a company in terms of providing defense costs. The largest and most expensive area of D&O claims for public companies are securities-related claims claims arising out of an offer to purchase or sell securities of a company.
If you have a claim and you don’t have D&O coverage, you could incur millions of dollars worth of defense costs alone not to mention the impact of a multi-million dollar settlement.
Who should be covered by such a policy?
There is a lot of debate about this. It really depends on your risk appetite and how you want to use the coverage. Historically, D&O policies only covered a company’s directors and officers; it didn’t cover the entity and it didn’t cover employees. But now they are also used to cover the corporation, and in some cases the employees, either directly or on a co-defendant basis with the directors and officers.
What considerations should be taken into account when selecting coverage?
Each carrier writes its own forms and, while terms and conditions are similar, every D&O policy is different.
You definitely need to take a close look at the terms and conditions. For example, you have to understand the difference between one type of fraud exclusion and another type of fraud exclusion and understand the severability clause in one policy versus another.
Secondly, you need to look at the quality of the carrier: What’s its longevity? What’s its financial wherewithal? How much of this type of business does it write? Does it outsource or does it have internal claims people? All of these are factors that should be taken into consideration. Finally, you should look at price.
How has the Sarbanes-Oxley Act expanded potential liabilities of corporate officers and directors?
The Sarbanes-Oxley Act has had a lot of different effects in the D&O arena. Claims are trending downward: 2006 was the lowest frequency level of claims since 1995. A lot of people attribute the drop in claims to Sarbanes-Oxley because it has given people a road map for disclosure and how to set up internal controls. On the other hand, it has given more responsibility to the independent directors, specifically the chairman of the audit committee. In the past, these directors may have been only nominal defendants in an action while the CEO and CFO would have really been on the frontline.
JERRY HENDERSON is area executive vice president for Arthur J. Gallagher & Co. Reach him at Jerry_Henderson@ajg.com or (818) 539-1328.
Like the wrinkles that furrow one’s brow, varicose veins, for many, are an inescapable part of aging. Varicose veins are veins that become swollen and large, usually due to defective valves in the vein. The enlarged veins, often with a dark purple or blue coloration, protrude from the surface of the skin and frequently have a worm-like appearance. Although females are more likely to develop varicose veins, both sexes are susceptible to developing symptoms.
“Varicose veins are very common,” says Dr. Cheryl Hoffman, director of interventional radiology at the UCLA-Santa Monica Medical Center. “Greater than 20 percent of women and 7 percent of men suffer from venous disease in the United States.”
While varicose veins don’t signify a life-threatening condition, they can cause discomfort. Common symptoms of varicose veins include aching pain, swelling and itching in the legs. In the past, the removal of varicose veins required invasive surgery. New minimally invasive procedures, however, have provided a breakthrough in how venous diseases are treated.
Smart Business spoke with Hoffman about when a doctor should be consulted about varicose veins, how varicose veins are treated and what types of minimally invasive therapies are now available.
What causes varicose veins?
There is usually an incompetency to the valves of the veins that causes reflux. Gravitational forces then overcome the veins and blood pools, causing a distension to the vein. This can lead to a dilation of the vein, worsening valve function and retrograde, or reversal of flow, within that vein all of which can lead to venous stasis, varicose veins and ulceration.
How can people reduce their chances of getting varicose veins?
Usually it is genetic. However, wearing compression stockings, especially when engaging in standing activities, can help to decrease the effects of gravitational forces on superficial venous valves. Typically, though, it is something that just develops over time. In addition to advanced age, other factors that increase a person’s chance of developing varicose veins include having family members with vein problems, obesity, pregnancy and hormonal changes, which can be spurred by taking birth control or other medicines containing estrogen.
Can varicose veins lead to serious medical problems?
There is no life-threatening danger; unlike the deep veins, which can have blood clots that eventually go to the lungs. But there is severe pain and disability that can result from varicose venous disease, what we call superficial venous abnormality. Patients can have serious disability from superficial valvular incompetence and varicose veins.
When should a doctor be consulted about varicose veins?
When a patient has phlebitis, an inflammation of one of the superficial veins, typically he or she goes to a physician because there is pain associated with this condition.
Also, when edema, skin changes and ulceration occur, patients are directed toward medical care. However, prior to that point, before these changes become severe, it is a good idea to seek medical attention because now we have minimally invasive therapies that can prevent the serious complications of varicose veins. Therefore, I would advocate for a patient to seek evaluation once a dominant varicose vein is identified.
How are varicose veins treated?
Currently, our technologies allow us to close these veins using very small stab-like entry points. No longer are large incisions needed. Therefore, the cosmetic results are outstanding.
Endovenous laser therapy and radio frequency ablation therapy are two forms of therapy that are used to close varicose veins. Basically, when we go up through the veins we can use either a laser or a radio frequency probe to close the veins. Old fashioned surgery with large incisions is no longer needed to successfully treat chronic venous superficial vein disease. Minimally invasive therapies can now be used through very small 2- to 3-millimeter incisions.
Can varicose veins return even after treatment?
Yes, because it is a long-term chronic disease. Veins that are not a problem when the first veins are treated can become a problem over time. However, by getting therapy to some of the large dominant outflow veins, the chances of having further problems to other veins, which are currently not a problem, are minimized.
DR. CHERYL HOFFMAN is director of interventional radiology at the UCLA-Santa Monica Medical Center. Reach her at firstname.lastname@example.org or (310) 319-4033.
Every business owner knows that he or she will eventually exit the business. However, they often fail to properly plan their exit strategy, and that can have major repercussions.
One specific issue that should be addressed as part of any exit plan is how business income should be taxed upon the owner’s departure. After all, the form of tax entity that is chosen will have a major impact on future outlays to Uncle Sam.
“The structure of the ultimate sale of the business will determine to a great extent how much tax you pay,” points out Carl Pon, co-managing partner of Vicenti, Lloyd & Stutzman LLP. “Failing to plan could actually double the amount of income taxes that you pay upon the sale of your business.”
Smart Business spoke with Pon about the importance of exit planning, what factors to consider when choosing a tax entity and the consequences of operating under the wrong tax entity.
From an income tax perspective, why is it so important for business owners to plan for their eventual departure?
We see many clients who spend their adult lives building a business and building wealth inside that business. Then, when it is time to sell that business, they are surprised to see how much the tax burden reduces what is left to invest to provide for their financial security and that of their families. With proper planning, you can reduce the share of the take that goes to the taxing authorities.
What factors should be considered when choosing a tax entity?
Some of the factors that should be considered include: Who will own the business will it be individuals, trusts or other corporations? Will there be any non-United States taxpayers? How important is it to have the current benefit of lower tax brackets? What kind of fringe benefit plans will be offered to owner-employees?
What are the consequences of operating under the wrong tax entity?
The most obvious one would be paying too much in income taxes. But another consequence is that you will have to wait longer to accumulate the wealth that you need to achieve your personal goals. In fact, it is conceivable that operating under the wrong tax entity could double the amount of time that it would take to achieve these goals.
How do the tax structures of C Corporations and S Corporations differ?
A C Corporation is a taxpayer all unto itself and it has its own set of tax brackets, some of which are lower than personal income tax brackets. An S Corporation doesn’t pay any income tax itself; rather, its shareholders pay taxes on their personal tax returns on the S Corporation income.
The biggest tax advantage with an S Corporation is that you avoid taxes at the corporate level, depending on when you made the election to become an S Corporation.
What type of entity is most effective when transferring a business to family members or key employees?
They are all just about the same except the S Corporation, which is a little more difficult to use. This is because an S Corporation is not allowed to have more than a single class of stock or ownership interest.
Several of the techniques for transferring wealth most tax efficiently involve creating two types of ownership interests for the same business. You can do that with C Corporations or LLCs, but it is much more difficult to achieve the same effect with S Corporations.
How far in advance of an anticipated departure should exit planning occur?
I would say five years to get the largest benefit from the planning process and to implement what the plan identifies as the things you want to accomplish. If you’re looking at a conversion from a C Corporation to an S Corporation, then 10 years is the best timeline to work with.
What should be discussed with advisers when planning for an exit?
Early in the process, you should focus on setting your personal goals and identifying strategy changes to increase the value of your business. Also, you should develop a contingency plan for the business and assemble a team of advisers. The team should include an attorney, CPA, exit planning specialist and financial planner.
CARL PON is co-managing partner of Vicenti, Lloyd & Stutzman LLP. Reach him at CPon@VLSLLP.com.
Health care costs continue to rise substantially faster than inflation and wages. In fact, they now account for 16 percent of the nation’s economic output. There are a number of factors behind the soaring costs, but so far, few solutions.
As a result, many businesses have struggled to maintain the level of health care benefits that they’ve provided in the past. While the increased premiums are hard to avoid, steps can be taken to mitigate health insurance costs.
Perhaps the best strategy, says Stephen J. Peck, president of Kapnick Insurance Group’s Benefits Division, is educating employees about how they can best use their programs. “Employee communication and education is critical,” he explains.
Smart Business spoke with Peck about why health care costs have risen, steps to help control mounting insurance costs and the importance of open communication and employee education.
What are some of the factors behind the rising costs of health care?
The obvious factor is that we’re all getting older, and the older we get, the greater the need for health care. These needs are being filled with wonderful new advancements in medical technology and pharmaceuticals, but each of these advancements, generally speaking, is more expensive than what it replaced.
Other factors that contribute to the rising costs of health care are the impact of the uninsured and underinsured, the cost of malpractice insurance, hospitals and physicians practicing medicine defensively, and inefficiencies in the health care system. The lifestyle choices that we make like sedentary lifestyles, poor diets, smoking, not wearing seatbelts and drinking too much also play a large role in the escalating costs.
What strategies can be implemented by businesses to help control health insurance costs?
Businesses have to start looking beyond just cost shifting to employees and downsizing benefits. They have to start addressing and, more importantly, impacting how their employees use health care programs. If an employer can decrease the utilization of its health care program, then costs will ultimately fall.
A number of employers are addressing employee lifestyle choices through education, implementing health risk appraisals, wellness programs and disease management programs.
How should an employer communicate with employees about health care plans?
First and foremost, if an employer is making any plan design changes, it needs to be open and honest in its communication. This is crucial for a change to be successful and for employees to embrace the change. Employees are very adept at seeing through any type of smoke and mirrors that an employer might be putting out there.
Beyond that, employees need to understand what benefits they do have in order for them to effectively use the resources available. To achieve this familiarity, many employers are looking beyond employee communication at open enrollment and implementing a multi-pronged education program that touches employees throughout the year. Some of the methods include ‘lunch-and-learns,’ employee newsletters, spousal meetings (as opposed to just employee meetings), posters and payroll stuffers.
Why is it important to provide employee education so they know how to best use their programs?
Most employees get their benefit information at open enrollment. But that’s the last time they really look at that information. It sits in their inbox or in a folder somewhere. There needs to be ongoing education and ongoing information distributed to employees. A great example is providing employees with the information of the generic equivalents available to substitute for brand-name prescription drugs. It is important that employees are aware of what their benefits are so they can use and access their plans in the most efficient way possible.
What is your forecast for health care costs?
All indications are that there will be no significant decreases in health care costs in the next couple of years. I wish I had a crystal ball to answer this question more completely, but that is about as far as anyone can really look into the future.
If employers and employees can work together to positively impact utilization through lifestyle choices, disease management and health management programs, then hopefully this strategy will work to create a downward trend in costs. Employers need to properly motivate and incentivize employees to make healthy choices, and employees have to realize the impact both positive and negative of their lifestyle choices.
STEPHEN J. PECK is president of Kapnick Benefit Services. Reach him at Steve.Peck@kapnick.com or (888) 263-4656 ext. 1147.