Roger Vozar

Expiration of the Bush-era tax cuts raised the top individual income tax rate to 39.6 percent, prompting owners of pass-through entities to consider switching to C corporation status to avoid higher individual taxes.

“Now that the tax rate for pass-through entities like S corporations and partnerships is effectively going up because individual tax rates are going from 35 to 39.6 percent, people are wondering if it still makes sense to be a pass-through entity,” says Alan Villanueva, a tax partner at Moss Adams. “In California, a proposition passed in November increased the maximum state individual rate from 10.3 to 13.3 percent, so a California resident with a pass-through entity is looking at a combined rate of almost 53 percent.”

Smart Business spoke with Villanueva about the advantages and shortcomings of the different corporate formats and whether businesses should switch.

What are the tax differences between pass-through entities and C corporations?

For many years, the top C corporation rate and the top individual rate were the same — 35 percent; whether it was a C-corp or S-corp, the current tax paid was the same. That’s still the rate for C-corps. Now taxpayers are upset about higher tax rates for pass-through entities and want to know if it makes sense to become a C-corp.

Does it make sense to switch?

Some businesses may benefit, but if it made sense to be a S-corp before, the difference in the rates will likely not change things dramatically. Any significant business expecting a liquidity event down the road would not want to become a C-corp, even if tax rates are lower for the present, because it would be subject to corporate and individual taxes at sale. The detriment of the double tax can far outweigh the benefit of the lower rate now — it could result in 20 to 25 percent less in after-tax proceeds.

For example, a sale resulting in a $1 million capital gain would leave about $600,000 after the first level of tax, assuming a 40 percent combined federal and state tax rate. Then, the remaining proceeds would be taxed at the shareholder level, which could be another 33 percent — assuming a federal dividend/capital gain rate of 20 percent and state rate of 13 percent — or $200,000, leaving $400,000. If the business were a S-corp or partnership, there’s one level of taxation and the after-tax proceeds would be approximately $667,000.

Are there businesses that would benefit from a conversion to a C-corp?

Business owners have to weigh everything, including long-term plans. A S-corp business making $1 million a year that had paid $350,000 in taxes at 35 percent would now pay a 39.6 percent rate, and in some cases another 3.8 percent Medicare tax as part of the Patient Protection and Affordable Care Act. That 8.4 percent increase definitely makes an impact on a current basis every year. But does it make sense long-term to switch? If it’s a small business that’s never going to generate a large exit liquidity event or pay dividends, it may make sense to switch.

Other than avoiding the tax hike, would there be other reasons to change from a S-corp to C-corp?

One reason would be if the company decided to go public. Typically, any business remains a S-corp or a partnership right up until they go public. It’s expensive to switch back to being a S-corp, so it’s done only when everything is certain. When a C-corp is converted to a S-corp or partnership, there’s potentially a gain that’s taxed, if there are appreciated assets. Sometimes the tax cost is so great that businesses can’t switch and have to stay in a structure that is not optimal and/or desired.

That’s why businesses should be cautious about converting; it’s not something that is easily undone. There are also compelling reasons to be a S-corp in spite of the higher current rates. The 4.6 percent increase is just one factor, and it might not be the most significant one.

Alan Villanueva is a partner, Tax, at Moss Adams. Reach him at (949) 221-4046 or

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As part of the planning and investment process — and pretty much anything in life — goals are fundamental to thinking about the future. However, very few people take time to set and write down specific goals. And, without a clear plan, you’re more likely to get absorbed in the day-to-day, losing sight of what’s truly important.

“For me, that’s the essence of financial planning. Too often people think about financial planning as just being investments or a calculation to see how much money they need to retire,” says Norman M. Boone, founder and president of Mosaic Financial Partners Inc. “Those are all important, but the greater value of financial planning is making sure you’re on track for the things that are important to you, not just things that you think you should be thinking about.”

Smart Business spoke with Boone about how asking the right questions can help you understand what you want and how to get there.

What is important when setting goals?

When you financially plan, the essence is: Where are you now, where do you want to be and how do you get there? You may have general ideas of your direction, but by writing down and sharing specific goals you are more likely to be successful.

For goals to be effective, they need to be SMART:

• Specific, as opposed to general.

• Measurable. Clear to all as to exactly what is to be accomplished, which usually means you’re able to measure the results or outcomes.

• Achievable, not unrealistic.

• Relevant to your overall role or purpose.

• Time bound. You need to be clear when you are going to finish.

How do you figure out your priorities to start goal setting?

You can use George Kinder’s three questions of life planning to find out what’s important to you.

• If you had enough money, how would you live your life? Would you do anything differently?

• If you go to the doctor and find out you only have five years to live, how would you live your life?

• If the doctor tells you that you have one more day to live, what would you think about? What things do you wish you had done, or said? What are your regrets?

These questions give you the incentive to think about your goals in the context of family, career, education, community involvement, friends, loved ones, personal accomplishments, etc. It’s rarely just about money. You find out what you really want in order to see how you go about making it happen.

How does an outside consultant help with seeing priorities and setting goals?

A consultant can help set up a plan that puts you on track toward accomplishing your priorities. Just like someone on a diet or an athlete in training, it’s hard to push yourself without outside help. You need someone to ask pointed questions, and just as importantly, wait and listen as you contemplate and struggle with the answers.

Almost everyone is too close to his or her own issues, problems and experiences, which blinds him or her to the possibilities. You get locked into what is, and have a hard time imaging what could be. You need that arm's length, 30,000-foot perspective.

Is there a certain time when you should set goals?

At minimum, you need to think about and get help with these kinds of questions at the major turning points in your life — when you finish school, when you get married and start having kids, etc. However, if you do it more frequently, such as once a year, it can be healthy. Maybe you come up with the same thing that you came up with last year and the year before, but maybe you don’t. When you get caught up in the day-to-day, you easily forget the things you’ve said all along were important.

Norman M. Boone, founder and president, Mosaic Financial Partners Inc. Reach him at (415) 788-1952 or

Insights Wealth Management & Finance is brought to you by Mosaic Financial Partners Inc.


Commercial banking today isn’t just about loans, it involves a partnership with a bank that helps build a business.

“Probably the most overused word in banking right now is relationship; everyone talks about it,” says Paul Duren, senior vice president at Bridge Bank. “Several data collection agencies even changed their terminology from ‘standard commercial loans’ to ‘relationship loans.’ But what exactly does that mean?”

Smart Business spoke with Duren about what relationship banking means and how it can translate into improved customer service as well as increased profits for your company.

What makes for a good banking relationship?

A good relationship involves a banker bringing value beyond providing access to capital. Businesses need a banker who understands their business — one who takes the time to learn about your vision so he or she can fully understand your goals. A proactive banker can anticipate your needs and bring information and services to help you grow or run your business.

In a good banking relationship, the banker acts as your advocate within the bank. However, much of the banking industry utilizes centralized credit processing and call centers, so there isn’t always the personal touch that a good banker will provide.

Can you provide an example of how this relationship works?

There was a drink manufacturer that saw a need to take its product from powder form to liquid for store shelves, and needed additional capital to do so. The banker saw the vision and understood the potential market for the product. That extra capital turned the company from a small manufacturer to a major player in the sports nutrition industry, and it started with an injection of capital from a loan made possible because a banker understood the vision.

Has banking changed since the recent recession?

It definitely has. There’s been growth in lending, but there’s also been a shift to more small and medium business sector loans coming from small and medium-sized banks. According to the Small Business Administration, big banks controlled 31 percent of the small business loan market in 2005, and that grew to 39 percent in 2009. That trend has reversed and small banks are gaining more share of that market. A Federal Reserve Bank of Boston study showed that smaller institutions continued to lend to small businesses at a stable rate during the recession, whereas big banks cut back.

Small to medium-sized banks are more invested in the community and more invested in the small business owner. For that reason, they are more likely to provide financing. Bigger banks focus on large companies in order to move their numbers. A smaller bank can get the same percentage growth through smaller loans. In one of its papers, the Federal Reserve Bank of Boston talks about how community banks are better at the soft skills — understanding the vision of the business owner, how he or she operates. Small banks take the time to listen.

What are the benefits of a good banking relationship beyond access to capital?

When people talk about relationships, they focus on the loan. What gets neglected is the deposit, or treasury management, side of the relationship.

During the downturn, businesses were looking for ways to get more out of their existing systems. Banks can help them do that with data feeds and other ways that save significant time and money. A good relationship banker also reviews the customer’s systems.

An experienced relationship banker has a toolbox filled with solutions to help his or her clients. This business is still about people, and banks need to be in touch with their customers and the community.

Paul Duren is senior vice president at Bridge Bank. Reach him at (408) 556-8688 or

Insights Banking & Finance is brought to you by Bridge Bank



Knowing the right questions to ask is the key to developing strategies to improve a business.

“Simple questions can have a big impact. They help you see the wood for the trees. One is, ‘What is the main constraint, i.e., the bottleneck, I face in my business?’ Sometimes the answer is obvious, and it’s money or time. Once you identify it, then you can put energy into devising a strategy to alleviate it,” says Guillaume Roels, assistant professor at the UCLA Anderson School of Management.

Smart Business spoke with Roels, who teaches a core course on operations and technology management for the Executive MBA program, about the class and takeaways students have incorporated in the workplace.

What subject material does the course cover?

It’s mostly process management. The key is learning to view organizations as processes and streamlining those processes. You start by defining a strategy, and operations management delivers that strategy. If your goal is to be price competitive, operations will enable reduced costs. If the strategy is to achieve high quality, that will be the focus.

The analogy I use is the engine of a car; operations are the engine of the company and deliver value to customers.

Are students already familiar with operations management?

Students come from a broad variety of backgrounds — some are entrepreneurs, some work at big corporations like Cisco, Walt Disney and Amgen. To a certain extent, all have been in a process. But they may not have thought about this notion of process. Typically, people see the work they do, but they don’t see the bigger picture. An attorney in the legal department in the gaming industry may not realize he or she is part of a process of product development and what he or she does impacts product design or a release date. Looking at an organization from a global perspective can have a large impact on efficiency and quality.

Starting from strategy, the class looks at operations and tries to eliminate waste and identify improvement opportunities. It’s a very practical course; students can apply tools they learn right away. It also helps them think more strategically on how to turn operations into a competitive advantage.

Can you provide examples of students applying these concepts?

One tool is a process flowchart, which helps visualize how work is done in an organization. A student from a Saturday afternoon class said he went back to his organization on Monday and started drawing a process flowchart.

For many students, time is their main constraint. They all have families, school and high-level positions, so they have limited time. For them, operations management is time management. So they can self-apply the operations lessons to make the most efficient use of their time.

Entrepreneurs, in particular, are known for under-delegating — the classic example is the owner who signs off on every bill the company pays. When you realize the value of your time, it can be better spent meeting with prospective clients and trying to raise funds.

What’s different about taking this course at UCLA compared to another Executive MBA program?

The East Coast is much more corporate. There’s a different way of doing business on the West Coast, particularly in Southern California. It’s part of the culture and the high-tech industries here — aeronautics, biotechnology — very specific types typically not found on the East Coast. That’s reflected in the classroom; it’s very diverse, much more than a traditional school. They’re from a broad set of small and large companies, and it makes the discussion very rich.

Students develop lifelong relationships, and there’s a great feeling of community. Often, former students call and want to talk about a problem they’re experiencing at work. That problem usually doesn’t require any in-depth consultation; it’s a matter of making sure they’re asking the right questions and adopting a holistic perspective on the problem they’re trying to solve. ?

Guillaume Roels is an assistant professor at UCLA Anderson School of Management. Reach him at (310) 825-6749 or

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Saturday, 01 December 2012 14:42

How Experian found a place to grow in Allen

When Experian arrived in Allen, Texas in 1993, the city was “at the end of U.S. 75 and just starting as a community,” says Russell Tieman, vice president of facilities and administration.

The consumer credit services company has grown along with the city, and last year signed a lease extension to stay through 2025. That came on the heels of a 2010 agreement with the Allen Economic Development Corporation to invest $30 million in facilities in return for incentives totaling $1.5 million over 10 years. As part of the agreement, Experian plans to add 300 employees to boost its workforce in Allen to 1,000, with most being part of the national assistance call center or global technology services team.

“We have a great relationship with the city, and there’s a great, highly educated labor force here,” says Tieman.

Smart Business spoke with Tieman about Experian’s investment and what makes Allen a good location for its business.

What makes Allen a good location?

When Experian originally moved to Allen, there was nothing here. Since then, there’s been so much commercial and retail growth, as well as new housing. It’s been an up and growing suburban community, and Experian tends to be in locations outside of central business districts. For example, the company headquarters is in Costa Mesa, Calif., as opposed to a downtown area. Allen and the surrounding communities have good, safe neighborhoods and an excellent labor force. Quality of life is important and you want to limit commutes.

Did Experian consider other locations before renewing its lease?

Yes, but we conducted an analysis and it made more sense to stay. It was challenging to remodel an occupied space instead of building new. But, although we tested the local real estate market, we never considered looking outside of Allen. In the end, we chose to stay because of our long-standing relationship with the city of Allen and the deal we negotiated with our landlord.

What impact did the Allen Economic Development Corporation have on that decision?

They assisted as much with their customer service as the incentives that they offered. It’s very competitive among local economic development groups in Texas, and Allen works hard to keep and attract companies. They are really great to work with — the whole city, not just the economic development team.

What was involved in the $30 million investment made by Experian?

About $20 million has been put into remodeling in the past few years, with at least $10 million more going toward equipment and other assets. The space was originally built in 1993 with cubicles that had very high walls, and it was very dark and chopped up. The work plan is more colorful and energetic, and builds collaboration. There is a lot of meeting space, video conferencing, game rooms, TV rooms, quiet rooms and amenities that would not have been thought of in 1993. We had been working in a space based on 1993 technology and it was time to invest in the property.

There was surplus space, and the space that was being used is far more efficient with the remodel. The final phase of the second floor was recently finished and received all sorts of accolades. Employees who had worked in the old design have been saying, ‘This is fantastic.’

Would you recommend Allen to companies looking to relocate?

Absolutely, it’s a great community. The Allen Economic Development Corporation is a great group to work with and very helpful. That help would probably be even more beneficial to a company that didn’t already have experience in Allen. Any company should look at the North Dallas metroplex area, particularly Allen.

Russell Tieman is a vice president of facilities and administration at Experian. Reach him at (714) 612-0597 or

Reach the Allen Economic Development Corporation at or call (972) 727-0250.

Insights Economic Development is brought to you by Allen Economic Development Corporation



Employers are scrambling to figure out the impact of the Patient Protection and Affordable Care Act (PPACA) on their business and whether it makes sense to “pay or play” when it comes to providing health insurance coverage for employees.

“Pay or play regulations were released Dec. 28, so we’re all trying to digest this. Employers want to know what the rules mean for them,” says Dwight Seeley, vice president of Employee Benefit Programs at Sequent. “I have several meetings scheduled to review the math of the penalty phase with companies so they know where they stand.”

Smart Business spoke with Seeley about the pay or play provisions under PPACA and what employers need to do in preparation for the Jan. 1, 2014, start of health care exchanges.

How do companies prepare?

They need to determine answers to these questions:

  • Do they have a general understanding of pay or play?

  • Are they considered a large employer?

  • Will any employees receive federally subsidized exchange coverage?

  • Does the company plan offer minimum essential coverage?

  • Does the plan provide minimum value?

  • Is the plan affordable?

  • What penalties could apply and what is the potential cost?

First off, pay or play applies to employers with at least 50 full-time or full-time equivalent (FTE) employees, so you have to determine if that applies to you. PPACA rules are different from those of the IRS. Under PPACA, a full-time equivalent is considered 120 hours per month, 30 hours per week. There’s a fairly detailed structure for measuring FTEs based on employees with variable hours, seasonal employees, etc. Companies that have variable schedule employees, part-timers or a lot of seasonal employees are going to be challenged to determine how many FTEs they have.

If you have 50 or more FTEs, what do you need to do to avoid penalties?

Businesses can avoid penalties by providing minimum essential coverage with a plan that offers at least minimum value and is affordable. No guidance has been given on minimal essential coverage but there’s a general idea of what it’s going to look like based on industry standards.

Once you’ve established that a plan provides minimal essential coverage, you then look at whether it meets the minimum value requirement and if it’s affordable. It’s considered poor if it pays less than 60 percent of total benefits under the plan. To be affordable, it has to cost less than 9.5 percent of an employee’s household income.

What are the potential penalties?

If you do not offer coverage and at least one full-time employee receives a federal subsidy, the tax is $2,000 per the number of full-time employees minus the first 30. An employee can get a subsidy if their income is between 100 to 400 percent of the federal poverty level — about $92,000 for a family of four.

If you offer coverage that’s considered unaffordable and at least one full-time employee receives a federal subsidy, the annual tax is the lesser of $3,000 per subsidized full-time employee or $2,000 for all full-time employees.

Should some employers drop health care coverage and pay the penalties?

Studies corroborate the fact that a lot of employers feel they still need to offer health insurance as a differentiator and as a recruitment and retention strategy. What they want is to get the numbers straight in order to make an informed decision. That means going through the penalty scenarios and working out the math. Any penalties will not be deductible or tax favored, whereas the health insurance you’re providing is tax favored, so you have to calculate the impact from pre-tax and post-tax perspectives.

One other challenge that’s not being talked about is the cost companies are going to incur to implement the administrative changes required by the law. They’re going to have to put in new processes to allow easy access to data the way it is defined by the PPACA, such as an ongoing way to monitor the number of FTEs.

The published regulations contain many detailed examples so there has been an attempt to provide direction. Still, the sheer volume and complexity make it a lot to absorb.

Dwight Seeley is a vice president, Employee Benefit Programs, at Sequent. Reach him at (614) 839-4059 or


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If you haven’t been paying use tax, your business probably owes the state money.

Most business owners think Internet purchases are all that use tax covers, says Chad A. Bice, CPA, principal and director of Tax Services at Rea & Associates, which means many people are unsure or don’t think they have a problem with use tax.

“However, when we review their fixed asset purchases and expenditures, it’s a real eye-opener for them. We show them where problems are commonly found and they come to understand on what purchases use tax is paid. In many instances, they discover that they do in fact owe use tax,” he says.

Fortunately, Ohio has an amnesty period that began on Oct. 1, 2011, and ends on May 1, 2013, which allows businesses owing use tax a once in a lifetime opportunity to avoid interest and penalties on their unpaid tax. For businesses with sufficient tax due, an interest-free payment plan is available for up to seven years.

Smart Business spoke with Bice about the amnesty program and the types of transactions that are likely to incur use tax liability for businesses.

What types of transactions are subject to use tax?

Use tax is owed on the storage, use or consumption of tangible personal property and certain services. When a business or individual buys something and there is no Ohio sales tax on it when there should have been, then you owe use tax. That applies whether it’s purchased through the Internet, mail order or in person. It doesn’t matter if it’s from an Ohio business or an out-of-state business. The Ohio use tax rate is the same as the sales tax rate and the same exemptions that shield some purchases from sales tax also apply to use tax.

Transactions from out-of-state vendors are probably the biggest area where use tax is due. Many out-of-state vendors do not have Ohio sales tax nexus and, therefore, do not have an Ohio vendor’s license. They are under no legal obligation to charge an Ohio business sales tax. Many businesses purchase goods out of state in order to save 6 to 8 percent and many haven’t been paying the use tax.

From an in-state perspective, a lot of use tax is incurred through taxable services — building maintenance and janitorial, electronic data processing and temporary employment services, just to name a few. Many times these are services offered by smaller businesses that don’t know they should be charging you sales tax. If they’re not charging sales tax, it is the consumer’s responsibility to pay use tax.

In-state purchases of taxable tangible personal property are also an exposure item that many businesses overlook. This could range from the local hardware store to the large safety equipment supplier.

What penalties do businesses face if they don’t remit use taxes?

The initial maximum penalty upon audit is 15 percent and interest is between 3 to 4 percent annually, which can really add up. The state is taking an educational approach with the amnesty program. In addition to being interest and penalty free, the program has a seven-year interest-free payment plan available and a limited look-back only to Jan. 1, 2009. If you don’t file for amnesty before the end of the program, the state can go back further in an audit.

How likely is it that the state will come after you if you don’t pay?

The state is aware of more than 300,000 businesses that owe use tax in part because it has linked computer software programs. They know who is registered with the Department of Job and Family Services, who has payroll tax accounts, the businesses that have been filling sales tax returns, who has use tax accounts, etc. It’s very easy for the state to find the businesses that have many of these accounts, yet don’t have a use tax account.

Why not forgo amnesty, register and pay moving forward? 

Those companies that have been in business for 10 or 20 years and suddenly register for an account are going to raise some eyebrows. You might as well go back to 2009 now, pay what you owe, and benefit from the waiver of interest and penalties and the favorable payment plan.

Businesses considering amnesty should not register for a use tax account until they’re ready to submit their application.

Chad A. Bice, CPA is a principal, director of Tax Services at Rea & Associates. Reach him at (740) 454-3198 or


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Legal requirements, along with small businesses themselves, change constantly. Annual checkups with an attorney could reveal potential problems before they prove to be very costly for your business.

“There are a lot of small business owners out there who use a customer contract form they had a lawyer review 10 years ago and think they’re good to go,” said Erin Cleary, an associate with Kegler, Brown, Hill & Ritter. “We see owners who try to sell after a long, successful career of building their business, but the transaction proves costly and stressful as a result of neglecting certain legal compliance issues over the years.”

Smart Business spoke with Cleary about why it’s important to meet annually with an attorney and how it benefits your business.

What are examples of problems discovered during checkups?

Some small businesses are organized and taxed as C Corporations for no good reason. Those owners could save significant tax dollars by converting their structure to a pass-through entity. In the current environment of constantly shifting tax laws, it helps to check for such opportunities to improve tax structure or capitalize on other tax credits or incentives. These changes lead to real money in your pocket.

Another issue that can arise during a sale transaction concerns commercial contracts with customers or vendors. Contracts might include prohibitions on assignment, unusual indemnification clauses or warranty provisions that might be disadvantageous to the company. It can pose significant liability to hand out a template contract that’s outdated, for example, one that doesn’t take into account the unique risks and liabilities imposed by e-commerce and social media. Updating contracts that are regularly signed cuts down on future liabilities, especially in the context of a sale transaction where a buyer will inevitably ask the seller/owner to stay ‘on the hook’ for the contractual liabilities the business has accumulated.

One of the most serious liabilities can be the failure to properly pay, collect and report taxes, particularly sales taxes and payroll taxes. Generally, there is no statute of limitations for tax evasion, fraud or the failure to file a return, so those liabilities exist forever. In addition, it’s not possible to pass this liability on to the buyer of a business — a tax authority can always go after either the ongoing business or the original owner who failed to comply. In sale transactions with this kind of liability, the seller always ends up fully indemnifying the buyer for any future penalties, audits or investigations that might occur after closing the transaction.

Are there businesses for which legal checkups are particularly vital?

It’s probably more important among less regulated industries. Businesses that are highly regulated have closer relationships with attorneys and are more attuned to legal compliance. But legal oversight is not just about compliance. It’s also about best practices, like making sure employees sign contracts to protect the business’s intellectual property.

Checkups are worthwhile if you’re anticipating an exit from the business, whether it’s a sale, taking on a major investor, going public or transitioning the business to a family member. Even a sale to someone with whom you have a close relationship might undergo the same scrutiny as if you had a completely unrelated buyer. Many businesses, particularly professional practices, do not plan for succession. Periodic conversations with counsel might encourage you to take the time to think this through. If a professional practitioner passes away, a valuable business could quickly become worthless. Having a succession plan might mean the owner’s estate receives compensation for the business when it otherwise would not.

Some owners might like to hire different lawyers for specific needs. These owners should be careful to make sure that at least one of their lawyers is taking time to look at the overall picture to make sure nothing is falling through the cracks.

Unlike accountants, whom you’re naturally going to see annually to file taxes, there is no periodic event that requires you to update your attorney about your business. But keeping up with best practices would nevertheless make an ultimate transaction less expensive and stressful, and reduce post-closing liability.

Erin Cleary is an associate at Kegler, Brown, Hill & Ritter. Reach her at (614) 462-5420 or


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Thursday, 28 February 2013 20:39

Why your business needs a website

The Internet is the first place most people go to look for a business, yet 72 percent of small businesses in Ohio do not have their own website, says Ryan Niddel, CEO of Brain Host.

“It’s surprising because having a website seems so commonplace,” says Niddel. “But if you find businesses in the Yellow Pages or the state business registry and try to pull up their domains, you see they don’t have a Web presence.”

Smart Business spoke with Niddel about the reasons businesses need websites and the costs and options of building and maintaining an online presence.

Why do so many businesses not have websites?

People think it’s more difficult, expensive or time consuming than it is. Small businesses don’t understand that someone can operate the site for them and it’s not going to cost thousands of dollars.

Businesses can get a website for free as part of a Web hosting contract costing as little as $15 a month. That way they can test the marketplace and see if their ROI increases and they’re making more money before expanding the site or getting involved in a social media marketing program.

Is a website a necessary tool for every business, no matter the product or service?

Yes, based on the number of people who search for businesses from a smartphone, tablet or computer. People look for restaurants and small businesses online before becoming customers. They want to see a website that shows products and services offered, price points and testimonials.

E-commerce stores, businesses that actually sell products online, are a small piece of the marketplace. Most websites are informational; it’s giving a consumer peace of mind about what they’re getting into before doing business with a company. Websites can benefit service industries, nonprofits, specialty shops and everything in between.

What is the advantage of a website compared to a free Facebook page?

Websites give additional validity to businesses because everyone knows Facebook is complimentary. When someone sees you’re willing to invest in your brand, it gives an additional level of comfort. Also, Facebook is a couple of pictures and quotes about your company, whereas a website can be much more in-depth.

What is essential to having a good website?

A good website not only provides insights into your business, but also enables you to capture and consistently follow up with visitors. You should leave any visitor with a hook that allows you to stay in touch periodically and keep them engaged with your brand. A company selling golf equipment — and that golf equipment doesn’t have to be sold online — might have a free download or brochure about how to take five strokes off of your game. Potential customers give an email address, and you send them specials or information about clinics or new locations.

Circle back with Twitter and Facebook accounts by sending an email that offers a 5 percent discount coupon if they ‘like’ your Facebook page or follow you on Twitter. Then, potential customers get an automatic update every time you post something to Facebook or Twitter; you’re getting an entire marketing package at no cost.

Websites have been referred to as a modern equivalent of an ad in a telephone directory. Is that accurate?

That’s correct. Catalog-size paper telephone directories are a thing of the past. About 95 percent of consumers will do some sort of online research before setting foot in your establishment. If they do an Internet search on a small business and all they see are sites with reviews or contact information, that doesn’t make them very comfortable about the business.

If you have a competitor nearby that has an Internet presence and they come up right away on a Web search, consumers are twice as likely to go to that storefront because they will not feel as engaged with your brand.

In today’s market of Internet savvy consumers, it’s imperative for small businesses to maintain a solid web presence or risk becoming obsolete.

Ryan Niddel is the CEO of Brain Host. Reach him at (419) 631-1270 or

Insights Internet is brought to you by Brain Host


Thursday, 28 February 2013 21:06

How to manage risk and control insurance costs

Every business experiences risk, but determining the true cost of risk can be difficult.

“It’s much harder to calculate the impact that negative publicity has on your revenue versus lost productivity due to equipment downtime,” says Derek M. Hoch, president of Leverity.

“To develop the most appropriate risk management program for your organization, business owners should approach insurance through a variety of cost control strategies. These include identifying exposures, implementing control measures, transferring risk and managing your exposures,” Hoch says.

Smart Business spoke with Hoch about developing a strategic action plan to effectively monitor and manage risk, ultimately resulting in reduced costs.

How do you identify exposures?

Exposures are both qualitative and quantitative. Partnering with an insurance agent who understands these aspects of your business will provide important details that help to solidify a game plan. What keeps you up at night? If your biggest concern were to occur, would you be prepared to keep your business viable? How would your income or cash flow be affected if there were unforeseen depletions of capital or a shutdown in the plant? Is the company in a financial position to take on risk or would you rather transfer that risk to an insurance carrier? It’s also important to consider your industry, market position and competition in developing a risk management solution that fits the changing needs of your business.

Quantitative analysis supports the qualitative interview. Look at the hard numbers and review losses to identify:

• Average incurred costs per loss.

• Top loss drivers and trends.

• Fraud behaviors.

• Reporting lag time.

• Frequency and severity ratios.

• Occupational Safety and Health Administration (OSHA) recordable performance.

Both qualitative and quantitative analysis is important, as they help identify your total costs of risk and lead to the price of your risk management program.

What control measures can be implemented to reduce risk?

Once you’ve identified exposures, focus on control measures — an estimated 75 percent of commercial insurance expenses are claims-driven. A business can control and reduce this percentage through pre- and post-loss control measures. This process should help to establish a safety program that will deliver a comprehensive employee safety education campaign to address your exposures.

How do you decide what risk to transfer?

A trusted insurance adviser can help you balance how much risk you’re willing to take versus the cost of transferring that risk. Important questions to ask are:

• How much risk can I afford to assume in-house?

• How can a business insurance provider assist with contractually transferring that risk to a third party?

• What portion of the exposures do I want to finance through an insurance policy?

Answers to these questions provide direction on how to approach the proper placement of insurance policies. You also need to consider current cash flow needs. If you have a mature loss control program and financial reserves to cover shock losses that occur, self-insurance retentions are also a consideration.

How do you manage exposures?

Roughly 25 percent of businesses that sustain a major catastrophe go out of business within a year. You have to be prepared to respond if there is an interruption in your operations. Planning ahead and developing a comprehensive business continuity plan is vital to achieve this goal and keep your business viable.

Implementing risk management strategies will reduce costs, because the total cost of risk is synonymous with price.

Derek M. Hoch is president at Leverity. Reach him at (216) 861-2727, ext. 517 or

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