Unlike most college campus presidents, Robert Peterson doesn’t have a background in academia. He’s spent more than 30 years in the private sector working for Squire Sanders, EY, Park Corp. and I-X Center Corp. When Corporate College, a division of Cuyahoga Community College, went looking for a new president in 2012, however, that’s exactly the kind of experience it was looking for.
“The college had decided to recruit somebody with business experience,” says Peterson, who assumed the role of president and CEO of Corporate College in October 2012. “That was a great decision, because we are effectively a consulting practice dealing with businesses and providing solutions.”
Corporate College offers training and solutions in areas such as organizational effectiveness — leadership training, team building, change management, supervisor training and executive coaching — quality and continuous improvement programs — Lean Six Sigma, ISO 9000 and OSHA — and IT training.
“When it comes to curriculum, we have to look at the needs of the business community and make sure we have curriculum that addresses those needs,” Peterson says. “There is no need for a course that’s not in demand.”
While Corporate College has been a world-class provider of these services for some time now, it hasn’t put much effort into marketing itself and leveraging the successes it has had. But all that’s changing.
Here’s how Peterson has been using his business experience in the world of academia to further Corporate College’s aspirations.
Utilize your background
While Corporate College is affiliated with Cuyahoga Community College and offers training courses, the college acts more like a consultancy than an academic institution. Having a business background has helped Peterson grow Corporate College and better understand its customers.
“When you’re working across diverse industries, you learn a lot about business,” Peterson says. “That perspective is very helpful in dealing with the business community in Northeast Ohio. Secondly, I’m from the business community. I walked the walk and talked the talk. I understand the situations that they’re in.
“Thirdly, I understand that businesses need to move at the speed of light and that they need a solution that works well.”
That mentality is different than the typical academic environment where fall semester starts Aug. 28 and that’s when everyone starts working.
“When you’re dealing with a business, you have to be quick, nimble and responsive,” he says. “You also have to be a good listener. You can’t act like you’re the expert and you know everything. Businesses don’t want someone who is going to tell them how much they know. They want somebody who is going to listen and provide a solution, and that’s the dimension that I bring.”
In Peterson’s first nine months at Corporate College, he had the opportunity to recruit people to his team. He did so by filling openings with people that had private sector experience.
“That allowed me to assemble my own team,” he says. “We’ve got a good blend of college professionals, but bringing in private sector people adds to the ability to understand the needs of the business and respond quickly.”
Develop a strategy
Peterson’s strategy since arriving has been to make Corporate College the No. 1 provider of corporate training services and solutions in Northeast Ohio. To achieve this, his first step was to increase Corporate College’s visibility throughout the region.
“When I came in, Corporate College had not been very good at marketing itself,” Peterson says. “Brand awareness and brand identification really weren’t there. The accolades and the reviews of what we do are off the Richter scale. However, colleges aren’t used to marketing themselves to businesses. They are used to marketing themselves to teenagers.”
Peterson and his team developed a strategic marketing plan and looked at everything Corporate College had done historically. They also needed to identify where to take the college in order to create a road map for the future.
“Historically, Corporate College divorced itself from Cuyahoga Community College,” he says. “Nobody knew they were affiliated. I however, feel that Cuyahoga Community College is our strongest asset that helps us sell Corporate College.
“I can call any CEO in town and tell them I’m from Corporate College, and I have a hard time getting through. If I call and say I’m from Cuyahoga Community College, I get a return phone call. Cuyahoga Community College has a stellar reputation in Northeast Ohio.”
Due to that reputation, Peterson decided co-branding Corporate College and Cuyahoga Community College was the right solution.
“I’m proud to say I’m a part of Cuyahoga Community College,” he says. “If I relate myself to Cuyahoga Community College, it’s a much easier sell than if I distance myself from it.”
Leverage your strengths
Now that Peterson has built a strong team around him and put more emphasis on marketing Corporate College’s offerings to businesses, he can focus on the most important aspect — the training curriculum.
“As a college, we’re not necessarily profit-motivated, not that we want to lose money doing what we’re doing, but it’s more important for us to do the right thing and make sure that our solution is the right one,” Peterson says. “I’d rather not sell training to you if it’s not going to fix your problem. We’re there to design and sell a solution that specifically addresses your needs in the workplace.”
Corporate College does that through two means — one is traditional open enrollment through a course catalog, and the other is to deliver a customized training program.
“When it comes to curriculum, we can either design it ourselves, or we can go to a third party curriculum content provider, and we can license it from them,” he says. “If we do a lot of training in a certain area, it’s more cost effective for us to make the upfront investment, design the curriculum and own it so we don’t have to license it each time.
“If it’s training that we only do from time to time, it’s more cost-effective to go to a quality third party. That brings credibility to Corporate College and provides world-class training for our customers. I’m always looking for opportunities to partner with first-class content providers to bring best-in-class solutions to Corporate College.”
At the end of the day, what’s important to Peterson is to continue to find ways to make Corporate College a better solutions provider to Northeast Ohio businesses.
“If businesses don’t have trained employees, one of two things is going to happen: They’re either going to fail and go under, or relocate and move to where the skilled workforce is,” he says. “We’re part of the business retention efforts of Northeast Ohio. Our sole purpose in life is to make businesses successful.” ●
How to reach: Corporate College, (216) 987-2800 or www.corporatecollege.com
Corporate acquisition activity is seeing a resurgence, signaling optimism for an uptick in the M&A market. Year-to-date, aggregate deal value exceeded the comparable period last year by more than 40 percent, supported by a solid flow of large cap deals, with September reining in Verizon-Vodafone and marking the second largest M&A deal on record.
The month saw several billion-dollar-plus transactions across diverse sectors, most notably Koch Industries-Molex in electronics; Jarden-Yankee Candle in consumer products; Packaging Corp. of America-Boise in paper and packaging; Stryker-MAKO Surgical in health care; and SKF-Kaydon in industrials. With acquisitions a primary means to return growth to shareholders, we can expect large corporates to continue to chip away at the cash stockpile on balance sheets.
The middle market is seeing steady deal flow where strong niche players continue to be attractive targets. Ohio corporates also are flexing their muscle with deal announcements in September:
RPM International Inc. of Medina acquired Exton, Pa.-based Expanko Inc. for its Performance Coatings Group. Expanko is a producer of terrazzo tile under the FritzTile brand, as well as cork, rubber and rubber/cork floor tiles serving the education, health care, hospitality and sports/entertainment markets. The company has annual sales of more than $12 million. Expanko will benefit from RPM’s marketing and distribution strength to expand beyond its strong east coast presence.
Nordson Corp. completed the acquisition of the Kreyenborg GmbH and BKG Bruckmann & Kreyenborg Granuliertechnik GmbH companies from Kreyenborg Group. The Münster, Germany-based businesses will add to Nordson’s portfolio of engineered melt stream components and enhance its ability to serve OEM machine builder customers in plastic extrusion markets, as well as bring product solutions in plastic compounding, recycling and related applications.
Akron-based A. Schulman Inc. acquired Perrite Group, a thermoplastics manufacturing business serving the electronics, appliance and niche automotive markets. With operations in Malaysia, the U.K. and France, the acquisition is expected to increase Schulman’s Asia Pacific revenues by 35 percent, and will double the size of the company's existing Engineered Plastics business in the region.
Akron Brass Co. acquired Reach Engineering LLC, a provider of specialized electronics to the emergency and industrial vehicle markets. The Wooster-based fire industry manufacturer expands its product offering with Reach, which has expertise in emergency vehicle products and services, and is recognized as an innovator of solutions specifically addressing the needs of the fire service.
Angelo Petitti grew Petitti Garden Centers by staying ahead of the trends and focusing on the customerWritten by Gregory Jones
With no money and little experience in horticulture, Angelo Petitti founded Petitti Garden Centers in 1966 out of an oversized garage — for pretty much no other reason than he enjoyed working outdoors. It wasn’t long before Petitti’s gardening knowledge grew, and he began driving the growth of his business based on the belief that he would one day have a sizeable company in the marketplace.
Fast forward nearly 50 years and Petitti’s love for the outdoors and his attention to quality and customers has allowed Petitti Garden Centers to dominate the Cleveland marketplace.
“The business has evolved from being a very small operation to 800 employees,” Petitti says. “In Northeast Ohio we are pretty well situated with nine stores — and there is definitely a lot more involved today in terms of planning and managing.”
From that oversized garage, Petitti’s grew to multiple locations in the 1980s and launched growing operations to become self-sufficient in all aspects of plants, trees and shrubs for quality, delivery and consistency purposes.
In the early 1990s, Petitti’s opened its first greenhouse, a 32-acre operation near Columbia Station, and a nursery in Lake County that today boasts 1,300 acres for growing. Petitti didn’t stop there. In 2000 he started updating the company’s garden centers.
“Throughout the ’90s we operated with older garden centers, but in 2000 we built the first state-of-the-art garden center in Strongsville that was one of the largest in the United States and had an assortment of products from home, garden, furniture and lifestyle,” Petitti says.
Since then, Petitti’s has built state-of-the-art facilities in Avon, Mentor and Bainbridge.
“There are really no other cities that have that many high-end, state-of-the-art facilities in one area,” Petitti says.
With 270 full-time employees and annual revenue of $45 million, Petitti continues to look for ways he can improve his impressive operation and give customers exactly what they are looking for in terms of their home and garden needs.
Here’s how Petitti has listened to customers to grow Petitti Garden Centers into a state-of-the-art operation.
Believe in your business
While Petitti didn’t enter the horticulture industry with a wealth of knowledge or years of prior experience, he believed he had what it would take to be successful. And in the early years of the business, that’s all it took to get started.
“When you look back at my beginnings, I started with no money and I really didn’t have any experience,” Petitti says. “I really took it day-by-day to learn the horticulture industry. What drove the growth was my belief in having a sizable business in the marketplace and having dominance in the category. That was always the goal from day one. I wanted to keep pushing the envelope.”
Petitti had what many entrepreneurs have when they start a business: commitment and belief.
“Those are the two ingredients you have to have,” he says. “It’s generally not an easy road.”
With all the ups and downs most entrepreneurs face in a new company, especially one like Petitti’s, you have to surround yourself with the best people.
“It’s helpful to have some kind of an advisory board, or a sounding board, where you can discuss your ideas, because that is a big help, especially before making big decisions,” Petitti says. “Through the years I have had a lot of friends who were very successful in the business and being able to talk to them and bounce ideas off them has been instrumental.”
Another matter that is very important is to be part of associations and groups within your industry to help you gain more knowledge and stimulate your creativity.
“Getting to know those people is another big part of how you can inspire yourself to create. It helps you make contacts with people you may want to get ideas from or bounce ideas off of,” he says. “That really helps a lot to see how other people run their business.”
Setting up relationships is really a key part of running a business. It’s not the only thing that will make your business successful, but it’s a big part of growth and navigating the different areas of your industry.
The other instrumental aspect of growth has to do with the people you hire to work in your business. Petitti says this is still one of the most important aspects of his business.
“When you go to hire people, most people hire people that reflect their personalities,” he says. “When you’re building a business from nothing, your gut becomes your No. 1 gauge of what’s right and what’s wrong. Your gut is going to be right 99 percent of the time. That’s been my biggest gauge, and after a while as you get the experience, you get the feel for what is right and what doesn’t feel right.
“Hiring is one area that you really want to put the effort in so you have people that will represent your company and have passion for the industry that you’re in.”
Focus on the customer
Aside from believing in himself and putting in the necessary work to gain knowledge in the industry, Petitti also knew that having a customer-heavy focus in this business would get him far.
“Being independent, we’re in a very, very competitive arena,” Petitti says. “The way we differentiate ourselves is through very high-quality plant material and high-quality service to our customers. That’s something where we have to make sure we pick and train the best employees who share and believe in the same philosophy that we believe in.”
Petitti says he has always been very customer-oriented and treats his customers the way he wants to be treated.
“I always tell our employees to put yourself in the customer’s position and do what you would want someone else to do if you were the customer,” he says. “That’s the philosophy we use. They are empowered to take action and take care of the customer, but we rely on that philosophy.”
Treating the customer well is one thing, but it’s another thing to make sure you’re delivering on what the customer wants from a product perspective.
“We’re very focused on product diversity and making sure we deliver products that our customers are looking for,” he says. “We are also very focused on the plants, which is the core of our business, and bringing the latest innovation in terms of new varieties of plants.
“The focus has been on easier-to-grow plants and longer blooming plants so the consumer doesn’t have to be a plant scientist to grow them. Everything is shifting toward less maintenance, more hardiness and less spraying.”
Lifestyle is another segment of business now receiving Petitti Garden Centers’ focus because customers are looking for it.
“Today, homeowners are trying to tie the outside in with the inside by having nice decks or patios and connecting those rooms to the inside,” Petitti says. “That’s become a very popular thing to do and something people enjoy the most about their homes. So there’s a lot being done in that part of the business.”
It’s not too difficult to ask customers what they are looking for and then deliver on those demands. It’s much tougher to actually be out in front of consumer demand and offer customers things they don’t even know they want.
“You have to have very engaging people on the retail sales force so that they provide what the people are looking for, but they also try to find out the trends,” he says. “We travel to Europe and Asia to look for new trends. We go to all kinds of different shows to pick up on what is coming down the road.”
No matter what industry you are in, connecting with the customer takes work. You can’t expect to manage your business from behind a computer in your office.
“You have to be involved,” Petitti says. “I go on the radio to tell people what is new at the stores. I’m in the stores all the time talking with people and being very engaged with our employees. It’s something that never ends.”
In Petitti’s world, everything that was good this year may be out the window next year. You have to stay on top of it.
“You can’t assume that things are going to be the same next year, and you have to be very engaged,” he says. “It’s a never-ending evolution. It doesn’t matter what product it is, it will get better — more customer-friendly — the following year. Everybody is looking to make things easier for the customer, whether it’s plants or furniture, so that people have fewer issues to deal with.”
Today, few businesses dare to remain stagnant and unchanged. If you believe in keeping the status quo, you’re likely to fall by the wayside. Petitti has tried to do an exceptional job of keeping pace with his industry, and in many cases, leading the pack when it comes to diversifying his business.
“Up until about six or seven years ago, our company was about 75 percent green-oriented, and by that I mean trees, shrubs and plant material,” Petitti says. “We had very little in the lifestyle segment. As the industry has evolved and seasonality has become more important, we recognized that we had to take the seasonality out of the business and get into other areas.”
When Petitti opened the company’s Strongsville location in 2000, the company began selling lifestyle merchandise such as outdoor furniture and grills.
In the past, Petitti’s would sell plants until the end of June and then the rest of the year the company’s stores saw minimal traffic.
“The motivator was to make the business a year-round business versus just a seasonal business,” he says. “Seven years ago there was very little of that kind of merchandise. Today, it represents almost 50 percent of our business.
“Every business really has to look at diversity. If you just have one focus in business, you’re very vulnerable to whatever market changes can come. That diversity gave us a year-round business, allowed us to keep employment for our people year-round and was a big key to the expansion of the business.”
Having recently diversified the company’s offerings to make the business year-round and having updated many of the company’s operations around Northeast Ohio, Petitti says he is excited to see more growth in the business.
“Moving forward, we are going to keep looking at growth, but be much more cautionary and not be quite as aggressive as we were in the past,” he says. “At this point we don’t have any plans to expand beyond Northeast Ohio, but we’re looking to invest more in our stores, our customers and our workforce.” ●
How to reach: Petitti Garden Centers, (440) 439-8636 or www.petittigardencenter.com
Company executives are always seeking ways to grow their businesses and increase profitability. Sometimes, brand-new products and services are needed to drive growth. Looking at improving existing products or services, however, is often the best approach.
Redesigning them, even with a minor change in materials, process or labor, can lower costs and improve quality, which can drive additional growth. It is desirable and often possible to find a win-win of enhanced product quality and higher profitability.
Cost reduction is a major goal
Product cost reduction by redesign means that a manufacturer changes one or more aspects of the product without changing its functionality — in a way that reduces production cost and hopefully offers other benefits. Most manufacturers should have an ongoing, formal cost reduction process in place, but they also need to be flexible to address new ideas as they arise.
For example, Adidas is currently redesigning a shoe to produce 50 percent less waste, reduce the number of parts by 50 percent and make greater use of recycled materials. The company’s level of technical innovation is considered exemplary, and the rest of us can learn a lot from Adidas’ experiences.
Companies such as Clark-Reliance are also striving to innovate, reduce costs and redesign products to lower costs and improve quality. The first steps are to infuse design improvement thinking into your company and build a product design culture that involves the appropriate employees from across the organization.
Neglecting to act can hurt
Often overlooked is the importance of understanding the costs of doing nothing, which can result in being priced out of the market, obsolescence and not being able to meet customer specifications.
Ideas should always be encouraged. We recommend making the process as visual as possible by including preliminary sketches and eventually a 3-D drawing. The hope is that even people outside the core team will have ideas to contribute.
If employees feel they are free to act on their ideas, you will cultivate an innovative, continuous-improvement culture in which change is not feared or delayed, but greeted with enthusiasm and optimism.
While exciting, redesign can be taxing in terms of time and resources to fully evaluate the options and make change happen. Before you start a redesign, be sure you have the resources, talent and commitment to see the process through to resolution.
We have identified four specific triggers for pursuing product redesign:
1. The cost of the product’s raw materials has increased significantly, so the product is losing some or all of its probability.
2. The competition has made improvements in technology or product performance.
3. There is so much competition that, if you are not continuously redesigning, you will fall behind.
4. Your market niche or market segment has changed.
It is a good idea to routinely review product offerings and look at the cost of material, labor and overhead. We pick a couple of products every quarter and keep looking at what we can do better or differently. Make it a common practice to look for cost-saving ideas through product redesign. ●
Matthew P. Figgie is chairman of Clark-Reliance, a global, multi-divisional manufacturing company with sales in over 80 countries, serving the power generation petroleum, refining and chemical processing industries. He is also chairman of Figgie Capital and the Figgie Foundation, a member of the University Hospitals Board of Directors, corporate co-chairman for the 2013 Five Star Sensation, and chairman of the National Kidney Walk.
Rick Solon is president and CEO of Clark-Reliance and has more than 35 years of experience in manufacturing and operating companies. He is also the chairman of the National Kidney Foundation Golf Outing.
Small Business Administration (SBA) financing has been around for a long time, but these loans are available to more business owners than ever due to recent program enhancements.
Your banker should be able to take you through the programs and eligibility requirements to see if an SBA loan fits your needs, says Tim Dixon, SBA program manager and senior vice president at FirstMerit Bank. And if you work with a preferred lender who has the authority to make decisions on behalf of the SBA, the SBA lending process can be straightforward.
“We do the heavy lifting for the client and try to make the SBA loan process look very much like any conventional business loan,” Dixon says.
Smart Business spoke with Dixon about SBA lending changes.
What traditionally has been covered by SBA lending?
The core SBA 7(a) lending programs can help when your company:
- Has been in business for a short time.
- Is tight on collateral or is leveraged.
- Has some particular industry risk.
- Cannot meet standard down payments.
- Needs extended amortization to better fit with cash flow.
The two main SBA loan programs are 7(a) and 504, which is done with an area Certified Development Company. The 7(a) loans have a broad range of eligible uses and can serve a variety of purposes — real estate, equipment, working capital, refinancing debt, financing a change in ownership, etc.
The 504 program, which typically has slightly larger loan amounts, focuses on economic development and expansion, and the job retention and creation that come along with it. There are just a handful of eligible purposes, such as real estate purchase and expansion, or purchasing heavy equipment that has a useful life of at least 10 years. And certain types of projects may be eligible for special consideration, including energy efficient projects or projects located in targeted economic development areas.
What SBA program changes are enabling more companies to receive larger loans?
Several years ago, the SBA expanded its role by increasing the size of loans that can be extended. The maximum aggregate exposure of SBA-guaranteed loans for standard SBA programs is $5 million. However, under the 504 loan program, you can go even higher in terms of total project amount. Say you’re buying real estate or doing a significant expansion, your total project could be as high as $12 million when you leverage all your dollars together. The bank could do a first mortgage loan, and the SBA would do a second mortgage financing with a long-term fixed rate, while the borrower puts some equity into the project.
At the same time, the SBA increased the size of businesses that can qualify for lending. What might have been considered a midsize company now qualifies for these ‘small business’ loans.
Another change became effective Oct. 1. The SBA authorized a waiver of the SBA guarantee fee on 7(a) loans of $150,000 or less. The waiver is very broad, just based on the loan’s dollar size. It can be used for any number of purposes, such as working capital, equipment, refinancing, etc. It’s really targeted at benefitting traditional small business owners at those loan amounts — helping grow Main Street. It runs through this fiscal year, or until Sept. 30, 2014.
What has been the impact of these enhancements on lending?
Some of the changes have been in place for a few years, and have really had an impact on increasing the number of loans.
In addition, the SBA has been busy since some of its major program changes, providing continued enhancements. The SBA is always looking at the underlying eligibility requirements to try to provide simplicity for banks and businesses.
Have any SBA loan programs been reduced?
Yes. There was a temporary program that expired Sept. 30, 2012. It allowed banks to use the 504 program to refinance eligible projects and debt. It locked in a good portion of the deal at low 10- or 20-year fixed-rate financing. The banking industry has been lobbying to have that program resurrected again. The program might return later this year or in 2014. ●
All opinions expressed herein are those of the authors/sources and do not necessarily reflect the views of FirstMerit Corporation.
Insights Banking & Finance is brought to you by FirstMerit Bank
Even with the proper insurance coverage, recovering from a disaster can be difficult for businesses that have not thoroughly prepared for the rebuilding process. Disaster plans and insurance money may not be enough to save a company that hasn’t tested its ability to address a crisis.
“Yes, there’s insurance to protect against a disaster, but what happens after the catastrophe occurs? It’s great to have a written plan in place, but if you don’t do a trial run or an audit of the plan, how do you know it’s going to work?” says Derek M. Hoch, president of Leverity Insurance Group.
Smart Business spoke with Hoch about the basics of disaster recovery and how insurance supplements the planning process.
What is often overlooked in terms of disaster planning?
Both business owners and key employees can become complacent because there is a plan in writing; they assume it will automatically work. Employees read the plan, understand their role, then over time there is no refresher about what they specifically need to do in that job function if a disaster were to occur.
From an insurance aspect, it’s easy enough to get monetary relief and rebuild if you insure the building structure and business personal property. What often gets overlooked is business interruption, or business income coverage. This is a major component in any businesses risk management program. It represents the economic loss, the potential loss of key employees, ongoing payroll and utility expenses, as well as any extra expenses that you normally wouldn’t have if the disaster didn’t occur. There are a lot of variables that business owners do not think about until after a disaster, and those costs are often overlooked and underinsured.
The problem with business interruption insurance is that it’s a difficult number to determine. There are business income worksheets and calculations that can be made, but it’s not a static number like replacing a building, which has a specific dollar amount.
What is necessary, once the written plan is in place?
Companies will put the plan in writing and explain it to employees, but never conduct a test because they don’t want the disruption to their business for a half or full day. A catastrophic event could occur at any moment. You may need to shut the business down in order to:
- Test the facilities.
- Make sure employees relay the proper information to the correct people or authorities.
- Confirm anything done off-site to back up systems is in place, and you’re not losing valuable information and data that would compromise the sustainability of the operation.
Companies don’t want to disrupt their businesses. What they don’t realize is that one day off to test their plan could potentially save them thousands or even millions of dollars.
Why is it vital to reopen quickly, and what can businesses do to speed up the process?
Unless you’re in a niche industry, planning for a disaster is vital because you will have competitors able to come in and supply your customers when you are shut down. This is the equivalent of business death, because the longer it takes, the more customers and employees will go elsewhere.
Your insurance broker/risk manager should sit down with you and — just as you do regarding the physical structure and assuring adequate coverage — walk you through the potential disasters that could happen and help formulate what necessary steps to take to ensure sustainability. It’s really a team approach, asking open-ended questions and letting the business owner talk about their business, so a plan can be instituted. This plan will complement the other forms of insurance coverage you purchase to protect the rest of your business.
You can try to prepare for everything, but having a plan in place and practicing it at least annually can help get you back up and running earlier in the event of a disaster. ●
Insights Business Insurance is brought to you by Leverity Insurance Group
As we emerge from the worst recession in memory, employers are cautiously rebuilding their workforces. Many long-term unemployed are starting to get interviews and offers, and some are seeing a new wrinkle: credit background checks.
Those checks might unearth financial problems that would cause an employer to reject a candidate. But beware of the Fair Credit Reporting Act (FCRA), the Consumer Credit Reporting Reform Act and additional state laws.
It is important to protect the company’s bank account by ensuring that access is limited to those who can be trusted. So how can you tell for sure? While there is no fail-safe guarantee, credit background checks can raise red flags early in the process.
“The wisest course for employers is to make the best hires they can, using all of the legitimate, nondiscriminatory information accessible to them within the law,” says Karen C. Lefton, a partner in the Labor & Employment group at Brouse McDowell.
Smart Business spoke with Lefton about her recommendations on conducting credit background checks.
What steps should a company take as it makes hiring decisions?
1) Get the candidate’s consent for the credit check in advance and in writing. Work with your attorney to create a clear consent form. It should state that the candidate acknowledges and agrees that the consumer-reporting agency will furnish a report to the employer, and that the employer intends to use the information for employment purposes.
2) Engage a reputable consumer-reporting agency, one well versed in the limitations of the FCRA, to conduct the review.
3) Provide the agency with reasonable criteria for its review, such as verification of the applicant’s Social Security number, balances totaling $2,000 or more that are at least 60 days past due, lack of credit, current garnishments on earnings, overdue child support or other outstanding collections of $2,000 or more.
4) Make sure the report is limited to the criteria sought. If the search turns up information that the employer should not know about — the candidate’s disabled child, for example — that information should be withheld to insulate the employer from any allegation of discrimination in the hiring process.
5) Before taking adverse action, provide the candidate with written notice that a copy of the report is available, as is a summary of his or her rights under the FCRA.
Keep in mind that errors occur. The ‘John Smith’ applying for a job may not be the same ‘John Smith’ with a horrendous credit history. Fairness requires that all candidates be given the opportunity to contest black marks. Only then can you ensure that hiring decisions are based on bona fide qualifications, or the lack there of. The hiring decision should be based largely on whether there is increased company risk, whether that risk is outweighed by the benefit of the candidate’s other credentials and the specific access his or her new position gives him or her to company funds.
Can credit checks be used as a basis to not hire or promote someone?
Yes, if you have followed the steps outlined. You are not required to hire a CFO mired in debt to collect your receivables or to pay your bills. Further, the FCRA does not distinguish between job candidates and current employees, meaning that consumer reports may be used to evaluate a person for promotion, reassignment or retention. But, again, employees must give conspicuous consent to the performance of credit checks.
What should be part of a background check, and does it vary by position?
Good credit and sound financial history are absolutely essential when an employee has access to money, whether yours or a customer’s. And don’t be lax because the sums aren’t huge. A local library employee, fired after $350,000 was discovered missing, goes on trial for aggravated theft later this month, accused of stealing nickels and dimes regularly over six years. Criminal background and driving records also might be relevant. A history of violence or criminal behavior are disqualifying for employees working in secluded areas with customers or in the customers’ homes. A bad driving record can knock out a delivery position candidate. Employers must be vigilant to avoid putting customers, co-workers or the public in peril due to bad hiring decisions. ●
Find out more about Brouse McDowell’s Labor & Employment law services.
Insights Legal Affairs is brought to you by Brouse McDowell
A few simple steps you can take now will pay dividends when tax time rolls around next April, says Steve Gross, CPA, a partner at Skoda Minotti.
“Start now as opposed to waiting until late December and rushing to accomplish your goals. There are some very simple strategies you can follow now to reap the benefits when tax time arrives,” Gross says.
Smart Business spoke with Gross about tax tips, including a credit that is scheduled to expire this year.
What are some basic things to consider to reduce tax liability?
A few things you might want to look at are:
- Charitable contributions. Make any donations before the end of the year — you can put the donation on a credit card, even if the card payment isn’t due until January 2014, and still list the deduction in 2013. If you aren’t an itemized taxpayer, you may consider accelerating your 2014 pledges, whether that is one or several, to reach the totals needed to itemize and take advantage of the deduction. This also applies to pass-through entities; if you’re an owner of a partnership or shareholder in an S corporation, donations are deducted as a separate line item.
Another opportunity to realize charitable contributions is to donate unused or unwanted — but still in usable condition — household items and clothing to a qualified charitable organization. By doing so, you’ll get a deduction for the fair market value.
- Estimated tax payments. While fourth quarter estimated federal and state taxes are not due until Jan. 15, you could pay the state estimate by Dec. 31 and get the deduction this year.
You may also consider accelerating payment for your real estate taxes. Some taxpayers who don’t itemize every year because they don’t have enough in deductions can pay the entire real estate tax bill for one full year in January, and then again in full in December of the same year. This may help you reach the limit to itemize.
- Capital gains and losses. If you’ve sold stocks and had capital gains, it might make sense to look at your portfolio for any loss positions you might want to sell to offset the gains. The capital gains tax increased from 15 to 20 percent in 2013, and gains may be subject to the 3.8 percent additional Medicare tax on excess passive income.
- Energy credits. The residential energy credit, which technically expired at the end of 2011, was reinstated through 2013 and provides up to 10 percent of qualified expenses, up to a $500 lifetime limit, for the installation of energy-saving exterior doors, windows or air conditioners.
- Business property. Under Section 179 of the tax code, you may elect to deduct the cost of qualified business property purchased and placed in service during the year. The maximum deduction allowed for 2012 was $500,000, subject to a phase-out for acquisitions above $2 million.
Under the American Taxpayer Relief Act of 2012 (ATRA), these limits are extended through 2013. Absent new legislation by Congress, the maximum allowance will plummet to $25,000 in 2014. The ATRA also preserves 50 percent bonus depreciation on any remaining cost of qualified property your business places in service this year.
The bonus depreciation tax break is generally scheduled to expire after 2013.
Are these things you should be reviewing every year?
Yes. In addition, pay careful attention to the fair market value of the non-cash charitable contributions. Many organizations provide guidelines for establishing the fair market value of used property.
Tax rates are not changing in 2014, but when there is a major change in rates, depending on which way they’re going, that might influence what you do in a particular year. Your tax adviser should be in-step with the changes in tax law and if they will affect you. It would be impossible for any taxpayer to fully understand the variety of scenarios, given the complexity of ‘if/then’ situations surrounding deductions. ●
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Businesses in certain industries frequently overlook the Interest-Charge Domestic International Sales Corporation (IC-DISC) provisions of the tax code, which encourage U.S. manufacturing and exporting. The incentive essentially reduces the top federal tax rate on income from certain qualified goods and services from 39.6 percent to 20 percent.
“Because it is thought of as only a manufacturer’s incentive, many companies in certain eligible industries have never heard of the IC-DISC, or have summarily dismissed the incentive,” says Amit Mathur, CPA, director at WTP Advisors.
Rob MacKinlay, president of Cohen & Company, says, “Distributors, as well as industries that produce certain products and services, repeatedly overlook the IC-DISC. We have helped many of these companies realize that they are indeed eligible for the significant and easy-to-implement savings from this federal incentive that does not disrupt business operations whatsoever.”
Smart Business spoke with Mathur and some of the top accounting firms in the region about the IC-DISC and some of the industries that frequently miss, or underutilize, the valuable incentive.
Can distributors, brokers use an IC-DISC?
Distributors of U.S.-made products are eligible for IC-DISC benefits on those goods that are exported. Since many distributors have been told that they do not qualify for the ‘Domestic Production Activities’ deduction, which does indeed require manufacture by the taxpayer claiming the deduction, they have assumed that they aren’t eligible to use an IC-DISC.
“While the exported goods must be finished in the U.S., both the final manufacturer as well as the distributor that does the actual exporting are eligible to use the IC-DISC. Unfortunately, both parties often miss out on the opportunity,” says Jim Bowen, tax partner at Bober Markey Fedorovich.
Are architects and engineers entitled to claim savings under this provision?
Architectural and engineering services furnished in connection with foreign construction projects and facility expansions can qualify for IC-DISC benefits.
“Regardless where the architectural and engineering services are performed, and even if the project never comes to fruition, such services are eligible,” says Pete Chudyk, senior tax shareholder at Maloney + Novotny.
Can software firms save with the IC-DISC?
Licenses and sales of software programs used abroad, as well as in Canada and Mexico, may be eligible for IC-DISC benefits.
Mike Luxeder, tax director at Libman Goldstine Kopperman & Wolf says, “Software companies should examine where their products are ultimately used. The IRS recently clarified its position that software sales, licenses and royalties can indeed qualify for the IC-DISC.”
How might recyclers use the IC-DISC?
Recycled products, as long as they undergo the requisite amount of U.S. manufacturing and are ultimately exported, can be eligible for the IC-DISC. The IC-DISC tax regulations consider any product to be manufactured in the U.S. if at least 20 percent of the costs to produce the product are related to U.S. labor and factory burden. This includes labor related to destroying, cleaning and treating scrap or waste materials such as metals.
How can food producers and growers get the benefits of this tax provision?
Products that are ‘manufactured, produced, grown or extracted’ in the U.S., and are ultimately exported, are eligible for the IC-DISC. Ohio’s chief agricultural exports, such as soy and corn, are often missed. Raw, processed and semi-processed foods, livestock, pelts, etc., are also eligible.
Many farmers and ranchers, particularly those selling through certain cooperatives, are just now starting to realize the opportunity to participate in the tax savings from the IC-DISC.
If you’ve passed over the IC-DISC before because you’ve bought into the notion that this incentive is only for manufacturers and exporters, you may be losing money. There are many industries that can draw a benefit. However, it’s advisable that you contact a specialist to help your business navigate the complex rules. ●
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Your property manager offers not only convenience, but also cost stabilization and a link to finding creative ways to save money without sacrificing quality of service.
“A qualified property manager should be able to distinguish the needs of both the tenants and landlord to protect the asset — whether it’s office, industrial, retail or multi-family,” says Eliot Kijewski, SIOR, senior vice president at CRESCO.
Another benefit of having a professional property manager is that he or she serves as a singular point of contact for both the tenant and landlord, which allows the property owner to invest his or her time elsewhere.
“Our property management philosophy is to think like an owner to maximize asset value,” says Judy L. Simon, CPM, assistant vice president at Continental Realty.
Smart Business spoke with Kijewski and Simon about how to best utilize property management.
What services does a property manager typically provide?
Traditionally, a property manager’s duties fall under the categories of building operations, financial management and tenant relations. He or she helps keep costs consistent, using his or her contacts to shop out needed services, whether it’s snow removal, landscaping or cleaning services, to get the best price per square foot. The manager uses those same contacts to reach out to contractors and have them bid for tenant improvement work.
At the same time, the manager is a liaison between the tenant and landlord. Many tenants decide to move because poorly managed building issues interfere with their daily operations. An experienced property manager stops potential issues from becoming large problems, which helps with tenant retention. The property manager may be working for the landlord, but he or she must maintain a good relationship with the tenants.
Property owners should have at least 50,000 square feet of space for property management to be cost-effective. Then, you can tailor the services you want your property manager to deliver.
Beyond hiring contractors and dealing with tenants, how else can the property manager assist?
A quality property manager will help maximize how your dollars are spent by providing cost savings without losing quality. For example, a manager can help you decide where, or if, you should offer an extra service or two to make the property more attractive to tenants, such as move-in assistance or security. The manager also can find savings through energy management or sustainability programs, which benefit both the landlord and tenants.
He or she can help establish contracts with vendors, whether that’s purchasing carpet, salt, landscaping material, etc., as well as assist with capital budgeting. For instance, beyond getting three quotes for a roof repair, the manager can help you decide if you want a total replacement, patching, or to replace different sections each year, in which case you can allocate funds for each stage of the project rather than write one large check.
Does a property manager have a role in lease negotiations?
Not really, although property managers can assist with lease administration and reporting. However, it’s important to remember if a property is not managed well, it drives off prospective tenants. If they pull into a parking lot full of chuckholes that hasn’t recently been seal coated or stripped, they will assume their space is going to get the same poor attention.
The saying goes: The first impression is the only impression you get. Your property manager helps with that first impression. The manager may not have a direct impact on pricing and lease negotiations, but many times the property manager will hear about expansion/renewal needs during routine tenant visits. Their experience with and understanding of the building will also help you during negotiations. ●
CRESCO and Continental Realty have joined to offer full-service property management in the Cleveland market.
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