Cleveland (5895)

Businesses and individuals managing employee retirement plans need to understand their Employee Retirement Income Security Act of 1974 (ERISA) obligations and the liabilities associated with plan mismanagement.

“Plan fiduciaries must act prudently. They must do things such as diversifying investments to minimize risk, and they must always act in accordance with plan documents, as long as those plan documents comply with ERISA,” says Kerri L. Keller, a partner at Brouse McDowell.

“There are certain actions that plan fiduciaries must never do. These include using plan assets for personal gain or for business purposes,” she says.

Smart Business spoke with Keller about the role of a plan fiduciary and how to comply with ERISA requirements.

Who is a plan fiduciary?

A plan fiduciary can be any business or individual who exercises discretion, control or authority with respect to plan management. It can also be any business or individual who manages plan assets or exercises discretion or control with respect to the disposition of plan assets. An ERISA fiduciary also can be those businesses or individuals who provide investment advice to a plan, or are responsible for plan administration.

Examples of plan fiduciaries are the named fiduciary or plan administrator, such as the employer or plan sponsor. But sometimes third-party service providers, investment managers and advisers, insurance brokers, and officers of the employer or plan sponsor can be deemed plan fiduciaries.

What are the responsibilities of a fiduciary?

Every plan fiduciary has a duty of loyalty, a duty of prudence, a duty to diversify and a duty to act in accordance with the plan documents. Plan fiduciaries should know that they could incur personal liability for breaching any of their ERISA-imposed responsibilities, obligations or duties.

This personal liability can require a plan fiduciary to pay back to the plan any losses that result from a breach of fiduciary duties, and to give back any profits that the fiduciary may have made from using plan assets. Fiduciaries must act solely in the interest of the plan participants, and for the exclusive purpose of providing plan benefits and defraying reasonable plan expenses.

Are all employer actions considered fiduciary actions?

No. Certain business actions are not considered fiduciary actions, such as the employer’s decision to establish a plan, what features to include, and the decision to amend or terminate a plan. In other words, when an employer acts on behalf of its business, it is generally not acting in its capacity as a plan fiduciary.

However, actions taken to implement these decisions can transform a business or individual into a plan fiduciary. Fiduciary actions generally include exercising discretionary functions over the management of a plan and its assets.

What are the obligations and liabilities associated with plan mismanagement?

For starters, ERISA fiduciaries can be liable — even personally — for breaching any of the responsibilities, obligations or duties imposed by ERISA. If a fiduciary breaches a duty to the plan, he or she may be required to personally pay back any losses to the plan and restore any profits made by the use of plan assets. A court also can order any other relief that it deems appropriate.

What would be an example of a breach?

A breach would occur if a business owner used plan assets to finance a purchase of equipment to open a new division. The business — and the owner in his or her personal capacity — would likely be required to pay the plan back and disgorge any profits that were made by the improper use of the plan’s assets. As previously stated, a plan fiduciary must act in the best interest of the plan and its participants — not in the best interest of the employer or owner.

The IRS, the Department of Labor, and the Department of Justice all have a role in ERISA oversight. These are the agencies that will generally perform compliance investigations and enforce penalties against the plan or plan fiduciaries.

Kerri L. Keller is a partner at Brouse McDowell. Reach her at (330) 535-5711, ext. 257 or

Insights Legal Affairs is brought to you by Brouse McDowell

One of the toughest challenges facing managers is how to plan for profitable growth in an uncertain future. 

Look back ten years at your customers and their needs, your employees, market structures, delivery systems, regulatory policies, social systems, the economy and technology, and it’s clear how much things have changed. It’s a safe bet that at least that much change can be expected in the next ten years, but what kind of change will occur?

Compounding the uncertainty is the necessity to keep managing current activities for efficiency and growth while planning for a future that may call for different activities altogether.

Smart Business spoke with Dr. Jaume Franquesa, visiting assistant professor of strategic management, and Dr. James Martin, associate dean and professor of marketing, both at the Boler School of Business at John Carroll University, about ways businesses can position themselves to take advantage of tomorrow’s opportunities.

How do you get started?

Success in the long run is all about marshaling the right capabilities and resources and using them to create sustainable competitive advantage for the future.  Start by identifying and assessing your current capabilities. Generally, there are two categories of capabilities that allow you to do both the day-to-day activities and plan for an uncertain future. 

The first category is operational capabilities, which are the things you currently do that give you a competitive advantage in your current markets. That is, the skills, competencies and resources that you use to try to satisfy your current customers’ needs better than competitors or at a lesser comparative cost, leading to higher profit. 

The second category is dynamic capabilities, which are the capabilities that will help you to plan for the future. There are generally three types of dynamic capabilities.

The first is the ability to do environmental scanning and sensing. Being able to identify and track trends, and understand how they might be important to your business is a critical competency to develop.

The second dynamic capability is being able to turn the trends that you identified as important to your business into opportunities that can be pursued further. Innovative thinking is the cornerstone of this capability.

The third dynamic capability is being able to quickly re-configure your internal resource base in a way that creates a sustained competitive advantage for pursuing the opportunity. Understanding which resources are valuable, along with adaptive resilience and flexibility in your organization are key ingredients for this capability.

The stronger you are at each of the dynamic capabilities, the better your strategy and its implementation.

How can a manager foster adaptation and flexibility with regard to long term strategic direction?

As you think longer term, the uncertainties about investments in strategic direction can cause significant anxiety. This is really tough, but it is at the heart of building an organization for the future.

One useful approach to navigate this uncertainty is to apply ‘real options’ logic to investments for the future. Instead of making early choices under uncertainty and committing significant resources to a particular strategic direction, consider engaging in multiple directions that will keep several windows of opportunity open. In this way, you can delay commitment to any of them until more information is available and some of the uncertainty is resolved.

To do this, you must design the program of investment in each strategic initiative as a series of sequential experiments, with a continue/discontinue evaluation point at the end of each experiment. That is to say, at the end of the period you have the option of continuing to invest as planned, narrowing the scope of the project, or abandoning the project.

The goal is to create and manage a portfolio of alternative strategic options. You do this by investing in multiple stage-gated projects designed to seed the development of new capabilities or to explore potential new markets. The keys to the management of this portfolio of strategic options are:

  • Project selection.
  • Design of investment stages in a way that maximizes learning while minimizing the cost of each strategic option.
  • Portfolio diversification. 

The dynamic capabilities that you develop give you the foundation for creating this portfolio of
strategic options.

Dr. James Martin is an associate dean, professor of marketing at the Boler School of Business at John Carroll University. Reach him at

Dr. Jaume Franquesa is a visiting assistant professor of strategic management at the Boler School of Business at John Carroll University. Reach him at

Insights Executive Education is brought to you by John Carroll University

The use of cloud computing is surging in the business world. Against such a backdrop it only makes sense that companies would want to emulate this model with their phone services — that is, make themselves available no matter their location. While traditional phone services have been slow to respond to the requests, VoIP providers are jumping at the opportunity.

“Telecommunications is a 100-year-old technology,” says Alex Desberg, sales and marketing director at “Things have changed, and now it’s more important than ever for customers to get through to businesses quickly and effectively.”

Smart Business spoke with Desberg about how innovation is reshaping the telecommunications landscape and why it’s so important to always be available to customers.

How is innovation changing the telecommunications landscape?

Businesses are looking for different characteristics associated with their phone system that will help set themselves apart from their competitors. This goes beyond just having a business phone system designed to answer calls or put people in voice mail. In terms of innovation, these can be simple changes or complex changes — it depends on what the business is looking for.

How are companies integrating their telecommunication features into their business model?

Cloud computing is becoming very popular. People are pushing their data away from their facility so it is available anywhere. However, they haven’t done this with their phone system because of traditional phone service capabilities. This is starting to change. Now, instead of being subject to the capabilities of a phone system, businesses are dictating how they want to communicate with their customers.

Why is it so important to be readily accessible to customers?

Customers have short attention spans, and they want to be served quickly. They don’t have the time to leave a voice mail message and wait for someone to respond a half-day later or the next business day.

Much like the traditional way of finding a business in the Yellow Pages, if the first company didn’t answer, you’d simply call another one. A lot of consumers are doing that now because time is money. If they can’t immediately reach the person that they want to talk to, they will move on. You don’t want that to happen to your business.

How is VoIP helping incubated businesses that are not as moveable as they might think?

Business incubators are starting to crop up all over the place. Such entities support the development of entrepreneurial companies through an array of business support resources and services. When the companies grow and need to move out of the incubator, they realize that they can’t easily take the phone number that they’ve been using to conduct their business transactions.

Now VoIP providers are working with incubators to provide VoIP services that can be moved quickly and easily with a business when it’s ready to graduate from an incubator and expand its footprint.

Why is reducing system duplication becoming such a big trend?

Reducing system duplication is particularly popular with businesses that have multiple locations. When such businesses start pushing data out to the cloud and they are remotely accessing the information, they realize that every facility they own doesn’t need a server or duplication of other resources like phone systems.

It makes sense for these businesses to have centralized communications. Everyone accessing the phone system can share centralized voice mail and four-digit dialing between locations. Not only does this make sense economically, but also from a unity standpoint in terms of a single telecommunications presence.

Alex Desberg is sales and marketing director at Reach him at

Insights Telecommunications is brought to you by

Technologies such as smartphone apps offer quick access to information, which leads to better decision-making. But technological improvements are only part of a solution to any given problem.

“You don’t start by simply adopting technology. You start by seeking a solution to a problem,” says Keith Stump, vice president of sales at Blue Technologies.

For example, the cost of labor is a business’s most significant expense. The more a company can influence what its employees do, how they do it and the time it takes, the more productive and cost-effective the business becomes, he says. And often technology can help achieve that goal.

Smart Business spoke with Stump about coupling technology and processes to create efficiency.

How do process improvements and technological upgrades intertwine?

Consider the problem you’re trying to fix, and then examine all aspects of the surrounding process to understand it. You should start to see how everything fits together, and if there’s a better solution. For instance, you may have excellent hardware for copying, printing and faxing, but the software managing the information and devices is in need of an upgrade.

Attack the problem piece by piece. Determine your outcome and develop a strategy to work toward that goal. There must be milestones along the way, as well as consistent, structured reviews.

How might technology boost productivity?

It’s common for some technology to be well structured within the business. For example, a company has specific IT help desk procedures, remote monitoring and data backup. However, the print management could be unstructured. Employees may be buying printer supplies from several stores. There’s no typical process for toner delivery. Support comes in a variety of fashions.

Nationally, on average, 19 percent of service calls to internal help desks are related to printers. If your IT department is supporting printers, it means high-paid people are doing a low-paid activity, which isn’t cost-effective. With the right service provider, software can automate your print management with supply alerts and service triggers. Now, toner is automatically shipped. If there’s a problem, the machine notifies the provider to send a repairperson.

How can companies better integrate mobile devices?

Today, there’s a greater proliferation of tablets and other mobile devices in the workplace, especially for employees operating in the field or at multiple locations. However, it’s still necessary to print and scan documents. There are free, downloadable apps that enable mobile devices to automatically sync with the multi-functional scanner/printer as soon as the device is brought into the facility.

What can be done to improve document management?

There are software applications that allow users to search for business documents, similar to how information from the Web can be pulled up through a search engine.

The information is housed within an infrastructure, and a software application allows you to easily access business documents, such as contracts, packing lists, invoices, copies of checks, etc. It’s a huge advantage in terms of speed and efficiency.

Also, when scanning, it’s important that everything ends up in the right place, accessible to the right people. With auto-capture software on multi-functional devices, an employee hits a speed dial button and the machine routes the scan to the appropriate storage place. Documents are more accessible and secure with fewer errors.

What is key to successful change?

Business technology — and the processes it improves — touches many areas. All employees must embrace changes that are implemented to enhance productivity, whether in the IT infrastructure and support, hardware or software applications. Designate champions within your staff to help employees understand why change is necessary. Having C-level support and a well-designed rollout is critical.

Buying hardware, software or managed services is a part of doing business. But the best companies ensure each purchase decision starts with an effort to improve processes and create cost efficiencies.

Keith Stump is vice president of sales at Blue Technologies. Reach him at (216) 271-4800 or

Insights Technology is brought to you by Blue Technologies

Sunday, 22 September 2013 07:02

Travel tips: How to spend smarter on overseas travel

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Today’s technology is making it easier for consumers to plan a trip overseas. With just a few mouse clicks, you can book the best flight deals, find accommodations, scope out the local attractions and even map out a detailed travel itinerary.

But even with so many resources to consult for travel advice, consumers may overlook important financial considerations in the trip planning process, says Art Rice, the VP and Manager of International Operations and Product Development for FirstMerit Bank.  For anyone planning a trip overseas, Rice offers the following financial tips:

Do your homework

Rice counsels first-time travelers to first do as much research as possible in advance of an overseas trip. Take time to learn about the country you’re visiting, including the differences in the culture and financial marketplace. Where is it safe or wise to use a credit card? How much pocket change should you carry?

"It’s just being aware of the culture, who you are with and how you account for transactions,” Rice says.  Doing research up front is useful in identifying unforeseen costs and fees. How much will you need to pay for courier and insurance expenses or premiums on credit card purchases?  You may also find ways to save. Are there opportunities to barter in the country? Factor this into the overall trip cost to anticipate how much money you’ll actually be spending.

Monitor exchange rates

Exchange rates for foreign currency change daily, so travelers should recheck every few days to get the most updated figures. But it’s also important to understand where you’re getting the exchange rates, Rice says. Many people will check the newspaper or Internet to monitor exchange rates for hard currency; however, these numbers can be off as much as 10 percent in either direction.

The rates seen in The Wall Street Journal are meant for multi-million dollar electronic transfers, and most website quotes are averages of current buy and sell rates. Instead, consumers should ask their bank to get the most accurate exchange rates.

Hit the bank

An easy way to save money on overseas travel is to order foreign currency before departure. Some banks, such as FirstMerit, supply popular foreign currencies to their local branches at no charge to the customer and on short notice.  Exchange money at one of these banks to avoid service fees and ensure that you have some pocket money to spend when you reach your destination.

Credit cards are definitely convenient for overseas purchases, but make sure you find out what fees you may be charged in addition to the exchange rate.

Fill in your credit card company

While consumers should never be without an international credit card overseas, carrying one makes you more vulnerable to identity theft and fraud. That’s why some credit card companies turn off the ability for cards to work outside of the cardholder’s local area. To ensure any overseas transactions are approved without a hitch, it’s critical that travelers keep their credit card companies in the loop about their travel plans, especially extended trips. 

“You don’t need to clear your trip with your credit card company, but to make things go smoothly when you’re out of the country, it is nice to alert them that you’re going to have non-traditional transactions posting to your account,” Rice says.  When making any purchases, you’ll also want to keep track of receipts as well as the name and number of the vendors. This information will help you refute any illegitimate charges on your statement after you return.

How to reach: FirstMerit Bank, or, (330) 384-7178

The United States Supreme Court’s decision in the case of The United States v. Windsor essentially ruled the federal Defense of Marriage Act (DOMA) unconstitutional and allows for same-sex couples who are validly married under state law to be treated as married for federal purposes. While this case is viewed as a huge civil rights win, it could potentially be a huge financial win for same-sex couples, but the ruling has raised as many questions as it has answered particularly in states such as Ohio that do not currently recognize same-sex marriage. Here is what the recent ruling on DOMA means from a financial standpoint.  

Tax advantages of being married for federal purposes

From a purely tax perspective and especially for couples with a primary breadwinner, the tax advantages of being married for federal purposes generally trump filing separate returns. In the wake of Windsor, legally married same sex couples may actually now be required to file joint Federal returns just as their different sexed counterparts do or face the negative impact of married filing separately status. For those same sex couples legally married for state purposes, the following Federal tax benefits should now be available:

  • Joint filing of income tax returns
  • Spousal inherited IRAs & required minimum distributions
  • Tax-free employer benefits
  • Income, estate & gift tax relief for spousal transfers
  • Deductible alimony
  • Favorable divorce tax treatment
  • Adoption tax credit

Additionally, a host of other Federal benefits including Social Security, Medicare, Medicaid, family medical leave, and military benefits may now be available for legally married same-sex couples. 

Seem too good to be true?

Possibly, at least for now for same-sex couples residing in Ohio. The couple in the Windsor case resided in New York which currently is among the 13 states that recognize same-sex marriage. It seems clear that legally married couples residing in states that recognize same sex marriage will be treated as married for federal purposes. However, further guidance is still needed for residents of states such as Ohio which currently has a constitutional amendment banning recognition of same sex marriage. It remains unclear whether the state in which the marriage took place or the state of domicile controls for federal purposes. 

Guidance may be forthcoming. In a recent case from the Southern District of Ohio, Obergefell v. Kasich, the plaintiffs are challenging the constitutionality of the Ohio laws forbidding recognition of legal same sex marriages from other states. The judge overseeing the case issued a temporary restraining order barring the local Ohio registrar of death certificates from accepting a death certificate which did not recognize a legal same sex marriage solemnized outside of Ohio. The judge’s order points out that “throughout Ohio’s history, Ohio law has been clear: a marriage solemnized outside of Ohio is valid in Ohio if it is valid where solemnized.” [1]  Ultimately, it remains to be seen how state law will be decided in Obergefell and similar cases, but the discussion has already begun on whether a same-sex marriage from another state will be valid under Ohio law. 

What steps should you take following Windsor?

The resolution of the various state issues and your individual circumstances will be major factors in helping you decide your financial options. Are you currently married? Considering marriage? How much do you and your partner earn? Is your spouse already included in your estate plan? Have you made lifetime transfers to your partner? Legally married same sex couples may want to consider filing amended individual income, gift, and/or estate tax returns for years still open under statute or filing protective claims for refunds depending upon their answers to the above questions. Other planning items to consider include reviewing your health plan options given that many plans will now cover same-sex spouses, reviewing your estate plan and beneficiary designations, and filing for federal benefits such as social security. Non-married same-sex couples who have long desired to marry may find new financial incentive to move forward.

The Internal Revenue Service responded to Windsor by issuing a statement that additional guidance will be forthcoming. In the meantime, the professionals at Zinner & Co. LLP can help you analyze the tax and financial impact of these recent changes and advise on an appropriate course of action, so you are well positioned to take advantage of these new benefits as the situation evolves.

Andrew L. Whitehair, CPA, is a Tax Manager at Zinner & Co. LLP. Reach him at (216) 831-0733 or 


[1]Obergefell v. Kasich United State District Court Southern District of Ohio Western Division. Case No. 1:13-cv-501. Judge Timothy S. Black. July 22, 2013.

Even well-established companies can inadvertently trigger litigation through a violation of the law made through their Web practices, which include how they employ their website and social media strategies.

“Companies don’t get into trouble just while constructing their initial website. The troubles evolve as companies, both big and small, and their products evolve,” says Bob Jefferis, an associate at Fay Sharpe LLP.

Smart Business spoke with Jefferis about the legal issues companies can encounter when employing their Web strategy.

What common legal problems do companies face when building a website?

Companies get into trouble when they start copying images, articles or videos from the Web and putting them on their sites for information or to enhance the appearance of the website. Shortly after, the company gets a cease and desist notice from the copyright holder requiring it to remove the infringing property and pay money. Even though a website may say something downloaded can be used free of charge, that’s not always the case.

As companies evolve from a primarily informational website to one that facilitates product ordering or other customer-oriented features, they can run into problems with patents. If you integrate mechanisms for conducting transactions without securing the proper rights, you may get a notice that you’ve infringed someone’s patent. Then, you can’t just take the infringing mechanism down or stop using it. Though that may mitigate damages, it doesn’t make the repercussions go away. The statue of limitations on patent infringement damages in the U.S. goes back six years.

What issues can arise when marketing a business in several countries?

Every country has its own system of protection and use. If, to use a simplified example, you get a patent or trademark in the U.S., it doesn’t carry legal weight in China. You need to protect your intellectual property (IP) by obtaining rights in each country that you do business.

The other concern is how you use the personal information of your foreign customers. In some foreign regions you can only use customer information for the purpose under which you obtained it. You can’t just take client information, and use it or sell it for other purposes.

Further, it’s important to be cautious because, in some cases, if someone in another country uses your website, you could be subject to its laws. Some countries look for a contact or transaction, as evidenced by shipping, which can be electronic or physical. A customer paying to download an item from your site is a transaction, which may be enough to become subjected to that country’s laws.

What’s important to keep in mind when working with Web designers?

It’s amazing how many companies hire a Web designer on a verbal contract. Then it’s not clear who holds title to the designed product, which introduces issues of work product for hire. If the designer is an independent contractor, you may find you only have a license to use the materials as delivered and can’t sell what’s been created. The designer may have rights to modifications that a company makes to the designed product.

Let’s say, you start using what the designer produced on your website and find out the designer didn’t have clear title. You can get pulled into court. That’s why companies should at least put an indemnification in the contract to have recourse against the designer who put them into the position to get sued.

How might using social media channels for commercial purposes create trouble?

Social media sites offer access to many people, which intrigues many companies. However, before diving into social media, read the terms of use.

Facebook’s rights statement says that when sharing content and information you give Facebook a non-exclusive, transferable, sub-licensable, royalty-free worldwide license to any IP content you post — you upload it and Facebook can do whatever it wants with it. They’re also careful to protect their own rights; you cannot use their copyrights, trademarks or similar marks except under their brand usage guidelines or prior written permission. Further, if anyone brings a claim against Facebook related to your actions, by agreeing to the terms and conditions you’ve indemnified Facebook. It’s not the bargain many companies expect.

Companies are learning that just because you can, doesn’t mean you should. Not to say you shouldn’t utilize social media, but be careful. It’s not a passive pipeline to customers.

Bob Jefferis is an associate at Fay Sharpe LLP. Reach him at (216) 363-9000, ext. 116, or

Insights Legal Affairs is brought to you by Fay Sharpe, LLP

Monday, 02 September 2013 17:31

Why all business values are not created equal

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How can a business be worth both $1 million and $700,000? It depends on what type of value is being determined.

“A business owner may think that if a business has a value of $1 million, it means that he would have $1 million in his pocket upon a sale. One must look deeper, however, and determine what type of value the $1 million represents. A number alone isn’t enough, you need to define what value you are trying to determine because there are different definitions of value,” says Robert A. Ranallo, CPA/ABV, JD, CVA, CFF, a partner at Skoda Minotti.

Smart Business spoke with Ranallo and Sean Saari, CPA/ABV, CVA, MBA, a principal at Skoda Minotti, about the various ways of determining the value of a business.

What different types of value are there?

The value most commonly determined is equity value, which represents someone’s equity ownership interest in a company, whether it’s 1 or 100 percent.

Another value that may be determined is enterprise value, which is equal to the equity value plus debt, minus cash. Alternatively, an enterprise value can be converted into an equity value by subtracting debt and adding cash. Investment bankers often discuss enterprise value because they’re concerned about the company’s total value, regardless of how it is financed (debt vs. equity).

Let’s assume in the example that the $1 million represents enterprise value and the company has $400,000 in debt and $100,000 in cash. An investment banker would likely say that the company’s value is $1 million, but the owner’s equity value (the net amount that the owner would receive before taxes) is only $700,000 ($1 million enterprise value - $400,000 debt + $100,000 cash).

Misunderstandings result because people often talk about values in terms of multiples — ‘A company in my industry sold for five times EBITDA (earnings before interest, taxes, depreciation and amortization).’ Because EBITDA is before interest, it doesn’t take into account the impact of debt, so the resulting value is an enterprise value (which includes debt), not an equity value.

What are standards of value?

There are several. The most frequently used is ‘fair market value,’ which is required for valuations prepared for the IRS, divorce courts or other situations where the parties need to determine the value at which an ownership interest would transfer between a willing buyer and a willing seller.

Another standard of value is ‘fair value’ for financial reporting purposes. Fair value is often synonymous with fair market value, although there are some definitional differences.

There is actually another fair value standard that arises in a legal context in cases involving dissenting shareholders. The difference between legal fair value and financial reporting fair value is that legal fair value typically does not include adjustments for factors such as lack of control and marketability, although this can vary by state.

There also is a strategic, or investment, value. This standard of value is typically used in connection with transactions when a buyer is purchasing a company in its industry. Under this standard, adjustments are made in the analysis that is specific to the particular buyer, such as the elimination of duplicative expenses after the transaction.

What does ‘level of value’ mean?

Level of value relates to the control and marketability characteristics of an ownership interest. Controlling interests in privately held businesses are more valuable than minority interests. A controlling owner can unilaterally dictate the operation of the business, sometimes to their benefit and the detriment of the minority shareholders, including controlling the sale of the business and distributions of cash flow. Absent agreements with minority owner protections, a non-controlling owner is just along for the ride, which makes these ownership interests less valuable.

As for marketability, privately held businesses do not have a ready market for sale like publicly traded ones, so certain discounts are applied to reflect this impairment on value.

With different valuation considerations, remember that when you talk about valuing a business, all parties need a clear understanding of the value they are seeking. This will eliminate misunderstandings and hard feelings down the road. 

Robert A. Ranallo, CPA/ABV, JD, CVA, CFF, is a partner at Skoda Minotti. Reach him at (440) 449-6800 or

Sean Saari, CPA/ABV, CVA, MBA, is a principal at Skoda Minotti. Reach him at (440) 449-6800 or

Insights Accounting & Consulting is brought to you by Skoda Minotti


With a stagnant economy and cautious investors, Simon Caplan, SIOR, a principal at CRESCO Real Estate, says he’s been hearing about deals suddenly falling apart in many industries. However, if commercial real estate buyers and sellers watch for ‘deal-killing’ issues, it’s less likely to happen to them.

“Sellers have to take care of certain issues with their buildings, and buyers may need to do a little more homework before entering into contracts,” he says.

Smart Business spoke with Caplan about how to mitigate real estate problems.

When buying commercial real estate, what if a building has structural or roof issues?

For roofs, get multiple contractor quotes because you’ll get differing opinions. Also, don’t be afraid to climb on the roof yourself and inspect it with your broker.

Structural issues aren’t as obvious. Ask the seller about the building’s history; they must disclose structural issues and prior repairs. Current or former tenants and previous owners are full of good information on the condition of the structure, roof, if there are flooding or drainage problems, etc. It’s your broker’s job to get the most information possible so you can make an educated decision.

How often do environmental issues come up? What do you do about them?

They were a big deal from around 1998 to 2005, then people learned how to handle them. Recently, they are starting to come up more.

When you buy a building today, your lender requires a Phase I environmental site assessment, which is basically research and a walk through. If that’s clean, you’re fine. Otherwise, you’ll need a Phase II report, which includes physical testing.

Sellers should clean up obvious environmental concerns, such as barrels or oil, to avoid buyer concern. If there are problems, the buyer and seller, and their brokers and the environmental company, need to figure out how to address them. Usually the seller pays for cleanup, which can be costly.

If it’s too expensive to clean up, but the buyer really wants the building and the property doesn’t require Environmental Protection Agency cleanup, consider a long-term lease. The buyer/tenant gets use of the property, while the seller puts off the cleanup.

What about boundaries and access issues?

When you buy commercial real estate, get an American Land Title Association survey, which shows just about everything, including property lines, the building, sidewalks, curbs, driveways, big trees, parking spaces, fences, encroachments, easements, etc. It also identifies all neighboring properties.

One problem may be a building that’s on a lot that’s too small. If trucks need to turn around in someone else’s parking lot, for example, you can try to secure easements from neighbors.

With encroachments and easements, be aware of the situation. Let’s say you find the building is over the property line — legally it’s a problem, but physically it’s not. Then, you’d just need special title insurance. I have revamped easements to make properties more usable to finalize a deal.

How can you deal with inadequate utilities?

It’s usually a case of not enough electrical power, no gas or a gas line that’s too small. It’s also vital to calculate your future needs, so you only address this once.

Electrical issues are problematic, and expensive to upgrade. In Cuyahoga County, even discovering the cost is complicated, and takes time and persistence. A new transformer and wire may cost $50,000 to $300,000, or more.

Gas is cheaper to upgrade and more straightforward. After you identify your gas needs, the gas company will determine where it’s best to upgrade the system and what it will take to do it.

What do you tell a seller who’s building is in rough condition?

You only get one chance to make a first impression on a buyer. Clean and fix issues that are immediate turnoffs. A well maintained building adds value. Your broker should make suggestions to improve value that will provide a positive return.

Simon Caplan, SIOR, is a principal at CRESCO Real Estate. Reach him at (216) 525-1472 or

Insights Real Estate is brought to you by CRESCO

Customers can tell when an employee doesn’t like his or her job.

“Even if it’s over the phone, you can sense if the person is smiling and the energy they have,” says Rick Voigt, president of Today’s Business Products. “Morale is what it’s all about. You can have the greatest company and greatest product, but employees will not be happy and will not stay if morale is low.”

Smart Business spoke with Voigt about ways to improve morale and how happy employees help businesses grow.

Can you quantify the effect morale has on customer service?

Morale goes hand-in-hand with the success of a company and its growth. People can sense if the customer service person on the other end of the phone is smiling; they pick up on that energy and want to talk.

There’s nothing worse than calling a company and the person answering doesn’t have any energy and doesn’t want to talk — you feel like you’re interrupting what they’re doing and you’re a second-class citizen. That attitude has a direct impact on sales. Customers will look for another company to do business with when they have contact with employees who are disinterested.

Customer service is what differentiates companies. There are other businesses that sell office furniture and office products, for example. When you don’t make the product and it can be bought anywhere, it all boils down to customer service.

If you go to a restaurant and the waiter doesn’t treat you well, you will not go back, even if they have great food.

Does customer service extend to all areas of a business?

Absolutely. Drivers are the face of the company when the product is delivered. They need to have a positive attitude when entering a business. Salespeople are the ones engaging customers and bringing them on as accounts. Customer service representatives also engage customers, answering questions with smiles on their faces so that people want to call back and do business with the company.

How do you ensure that employees are happy?

It starts at the top by making sure everyone feels included and part of the team. It’s important for upper management to listen to employees’ opinions. And when they have opinions, you need to be willing to implement their ideas or explain why their idea wasn’t adopted: ‘That’s a great idea, we tried it and it didn’t work. But it’s good that you thought of it.’ When someone comes up with a good idea that is used, make sure that employee gets the recognition.

Are there training sessions or programs that help boost morale and/or customer service?

You should have fun at work. We had a six-month promotion called ‘Get your A game on.’ When employees took an extra step to help a co-worker, they were given an ‘A game dollar’ for a Chinese auction with thousands of dollars worth of prizes. For instance, a driver could earn a dollar for taking a few stops from another driver who was busier, or a salesperson could earn a dollar for turning a lead over to a colleague. People were coming to the management team to make them aware of what co-workers did for them. That promotion worked extremely well. You can tell it was successful because employees are still exhibiting behaviors to receive dollars, even though the dollars no longer exist.

The difference between that and other recognition programs is that it encouraged a team atmosphere instead of competition. It’s good to recognize employees with individual awards, but there could be employees wondering why someone else was picked instead of them.

What else can be done to improve morale?

When a customer sends an email or tells you about a positive interaction with an employee, mention it at a company meeting. People appreciate that recognition and try their best to treat customers in a way that would compel them to write a thank you note.

It’s also important to give employees a nice, clean and safe work environment. Give employees a nice place with a pleasant atmosphere, and they will work harder for you and be much happier.

Rick Voigt is the president of Today’s Business Products. Reach him at (216) 898-4242 or

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