Deciding on a name was the easy part.
After Paul Vincent, the owner of Vincent Lighting Systems, nailed down the domain name, he faced the challenge of making his e-commerce plans a reality. He assembled a small team of employees to help work on the project and, less than two months later, www.virtualightstore.com was open for business and customer orders were being filled.
"We simply felt this was another way in which customers could do business with us," explains Vincent. "In order to be successful, it had to be backed up by a strong bricks-and-mortar business."
Vincent was able to get his Web idea from paper to cyberspace quickly and, more important, do it without letting it dominate the time and attention he needed to keep his long-standing physical business on the right track. Here's how he did it.
Make a financial commitment
Talk is cheap, especially when it comes to launching an e-commerce site. Researching a name and discussing a Web strategy are undoubtedly the first steps, but Vincent says real progress toward his goal was made only after he earmarked money for Web development.
"We had been talking about it before and had been researching names," he explains. "But it wasn't until the first part of February that I decided we were going to commit $10,000 seed money in order to get this off the ground."
Use in-house talent
Consultants, designers and IT firms can quickly whittle away any sort of budget, so Vincent made sure to outsource only what could not be handled by someone already on the company's payroll. In the end, he needed only to outsource the graphic design work. He tabbed one of his employees to handle all photography for the site, while another was chosen to work on the layout of the company's online store.
"Doing a lot of blood and guts work, so to speak, in house certainly saved us time and money," says Vincent. "It also gave us control over the final look of the site."
Limit your online catalog
Vincent knew there was no way he could offer all of the 12,000 products in the VLS catalog on the Web site. Instead, he at first limited the product offerings to expendables like light bulbs, paint and lighting gels that were sure to be in stock at all times.
"We made a conscious decision that we wanted to make sure that if a customer ordered something the night before, we could ship the next day -- period," says Vincent. "It had to be items we would have in our control and items we stock in our warehouse."
Although some companies offer special deals on products purchased through their online stores, Vincent was skeptical about such a strategy. He decided that if he wanted the e-commerce site to truly complement Vincent Lighting's long-standing brick-and-mortar business, there would have to be no special deals offered to online shoppers.
"The pricing structure is the same in our catalog as it is on our Web site," he says. "If I'm a regular customer and decide to one day buy over the Web, and all of a sudden the prices much lower than what I've been charged, I'm not going to be very happy." How to reach: Vincent Lighting, (216) 475-7600; www.virtualightstore.com
Jim Vickers (email@example.com) is an associate editor at SBN.
Eighty percent of a leader's time is spent communicating (approximately 2,000 hours per year).
According to a study by the University of Minnesota, 60 percent of all mistakes are due to poor listening skills. These mistakes lead to countless hours spent repairing the damage of poor communications. To lead a company, department or team, strong communication skills are required.
So how do we build ourselves to effective communicators? It's a three-step process.
1. Build a foundation of trust.
2. Design and build a bold and open floor plan.
3. Make sure there are no roofs.
In this month's column, we'll tackle step one, next month, steps two and three.
Without a foundation of trust, we cannot lead people and transform companies. Unfortunately, trust is a one block at a time process that can evaporate with one act of deception or a misunderstanding. Have you ever held a grudge against someone you believe wronged you only one time? So how can we build this foundation?
Trust is not a group process, it is created in one-to-one connections. Building these connections requires:
Using multiple media. Find out the medium the other person prefers for communication. Some love the flexibility of answering e-mails. Others want a five-minute telephone call once a week to stay in touch. For others, a face-to-face meeting is necessary.
Getting personal. People don't care how much we know until they know how much we care. Ask about the goals and aspirations of those we lead. A leader's role is to serve followers and promote their potential. Ask team members how they're doing, find out their interests and goals and look out for their well being.
Appreciating, appreciating, appreciating. Hand-written thank you notes are the most powerful tools for team building. Identify what specifically the person did that was exemplary and how he or she contributed to the larger project or vision.
Our foundation has no "Buzz-ers"
How often do we communicate directly? Do we use long words, buzzwords and political politeness? To build a foundation of trust, this has got to stop. How?
Kill the buzz. Stop using terms and phrases like downsizing, paradigm shifts and "we need to get more eyeballs and increase the stickiness of our site." Speak in plain English. The goal is to be understood, not to impress.
Don't patch over problems. Use assertive communications. Most people communicate passively. If we have a problem with someone, we complain to someone else, which further erodes trust. How can we communicate assertively?
- State the problem using only the facts.
- Describe how these actions make you feel.
- Explain the negative consequences of these actions and describe your reaction.
- Describe what specific actions you want the other person to take in the future and the consequences if they fail to take the actions you have defined.
Increase the foundation's size
Trusted communications result when we understand people and situations better. We need to increase our foundation or our perspective to make this happen. As Steven Covey says, "Seek first to understand, then to be understood." Intellectually, this makes sense. Practically, it's a bit more difficult. Here are some suggestions:
Read, read, and read. Leaders are learners. Their offices have large bookshelves with books they have actually read. Consider one area of specialization and devour books, magazines and tapes focusing on it. Or, build generalist skills -- The New York Times, The Economist and Fast Company are sources to build a wider range of perspective.
Keep eyes and ears open on the job site. Listening is hard work but can be improved.
Concentrate. Remove distractions when possible. Focus on the person you are talking to instead of your cell phone and pagers.
Make eye contact. One powerful way to communicate interest is with our eyes. When we lock onto another person's eyes, this speaks loudly about our interest.
Now that we've begun to develop our rock-solid foundation of trust, the question becomes, how do we design and build a floor plan that really works? Find out next month. Mike Foti (firstname.lastname@example.org) is CEO/chief visionary officer of Cleveland Glass Block and president of Leadership Builders. Foti works with organizations to influence and motivate their people and help their businesses grow. He can be reached at (216) 531-6085.
For the past nine months Solon-based Keithley Instruments has been riding a tidal wave of investor confidence, strong revenue and industry buzz.
But the rise to public prominence that some might classify as an overnight sensation was, in reality, more a result of some sure-footed planning.
Soon after he took over the top office in 1993, President and CEO Joseph Keithley began steering the company his father founded in 1949 toward the high-growth telecommunications and semiconductor markets. That change meant a move away from the analog measuring devices synonymous with the company's past.
In their place, Keithley instituted a focus on software-based applications, which have turned out to be far more powerful and versatile when it comes to doing business in the ultraconnected 21st century.
Part of the challenge of being successful in these markets is the ability to create products that can keep up with the speed of miniaturization. Keithley has gladly taken on this role as an industry innovator and created a culture in which new products are expected to solve problems that customers are experiencing.
"Our strategy at one level is our ability to focus on companies in specific industries and let their problems flow through us and bring a set of products back to that customer," he explains. "In fact, when we introduce the product, we're pretty sure it does what the customer wants, because he's been an integral part of the whole development process."
Keithley Instruments also casts itself not only as a developer and supplier of high-tech measuring devices, but as a consultant, too. The relationships forged between Keithley Instruments and its customers not only provide a thorough understanding of where a specific market is going, but also give Keithley an advantage over those who may be competing for the same clients.
However, it is not just a focus on research and development that has powered Keithley Instruments' rise within the industry. There are fierce, not to mention deep pocketed, rivals in the measuring device arena, a reality that has forced Keithley to realize the promise of high growth niche markets and the power of recasting existing products to meet customers' specific measuring needs.
"As opposed to say, a biomedical company, who is really creating from basic research something that didn't exist before, we're taking advantage of things that are in the marketplace," he says. "We're incorporating them into our offering."
As far as staying on the innovative edge, Keithley is always hard at work. The company recently unveiled a new Internet strategy that promises to better serve clients, as well as attract new global customers. At the company's Web site (www.keithley.com), visitors can get 24-hour-a-day access to Keithley's database of test application knowledge, as well as view online product demonstrations.
The site also serves as an opportunity for Keithley to target prospects likely to benefit from the company's product offerings.
"We're actually able to demonstrate a very sophisticated piece of equipment with an application engineer here in Cleveland and have the customer be anywhere in the world," explains Keithley, who has a rough time containing his enthusiasm about the power of his new Web application. "We did the first demonstration of this with customers in Holland.
"Now, imagine that opposed to having the salesman go and show the product, the customer is actually able to make the instrument work from his PC in Holland. That's innovation." How to reach: Keithley Instruments, (440) 248-0400
Jim Vickers (email@example.com) is an associate editor at SBN.
Fiber optic technology had its first commercial application in the telecommunication industry in 1977; since then, it has grown to become the industry standard for terrestrial transmission of all telecommunication information, including telephones, computers, cable television and industrial instrumentation.
Because of the technology's significant advantages, most experts agree that today, any communication system that does not use fiber optics is essentially obsolete.
By far, fiber optic's greatest application to date has been within the telephone industry. Telephone companies began replacing their old copper wire systems with optical fiber lines early in the technology's history. Now, fiber optics comprise the backbone of all competitive phone companies' architectures, as well as provide the long distance connection between city phone systems.
Unlike the old telecommunication technology, which used electronic pulses to transmit information down copper wire lines, fiber optic networks use light waves to carry information over fiber lines. Each fiber line consists of a bundle of very thin tubes of either glass or plastic, called optical fibers. Each fiber is thinner than a human hair and acts as a one-way channel for transmitting information; therefore, two optical fibers are needed for two-way communication.
The light-pulse method of transmitting information or data has many advantages over traditional copper-conductor systems, including:
- The ability to send signals over greater distances. Because light signals encounter very little resistance during their journey over fiber lines, they can be sent over longer distances without the continuous boosting necessary to send and maintain electrical signals the same distance over copper line.
- A wider bandwidth. Fiber optics have an information-carrying capacity, or bandwidth, that is thousands of times greater than that of copper circuits. This means that fiber optic technology can handle the tremendous amount of data generated by our Information Superhighway society and move it fast enough to meet its requirements.
- Immunity to electrical noises, radio frequency interference, voltage surges and water, all of which can cause service interruptions in electronic pulse systems. Fiber optic networks are also immune to eavesdropping.
- Much higher transmission speeds with very few errors.
- Less attenuation. Electrical pulses suffer greater attenuation, or signal loss, on their journey down copper lines than light pulses do down fiber lines.
- Cost effectiveness. Fiber optic technology is easy to upgrade to higher levels of speed and performance. In fact, many networks already consist of much greater bandwidth than customers currently require, making the initial investment in fiber optics a cost-effective strategy for telecommunications companies.
All of these advantages are part of a system that uses smaller and lighter cables than copper conductor systems at a price that is competitive with the old technology -- and continually declining with increasing demand.
The future of fiber optic technology is definitely bright. Recent changes in laws regulating the telecommunications industry, such as the Telecommunications Act of 1996, have opened competition in the telephone and television marketplaces, spurring tremendous growth in both industries and driving the expansion of fiber optic networks. In addition, companies that employ fiber optic technology are able to offer customers more services, greater reliability and faster and clearer communications than those which do not, ensuring them the competitive edge in a tight market.
New products, such as two-way television and videophones, too expensive to develop using the old technology, are now practical thanks to fiber optics and loom just over the horizon. As the Information Superhighway continues to expand at a phenomenal rate, the bandwidth and high-speed capabilities of fiber optic technology become not just a luxury but a necessity. Paul Allen is general manager of Adelphia Business Solutions' Northeast Ohio office. Allen has extensive experience in the telecommunications industry, having held senior management and sales positions with MCI WorldCom and British Telecom.
For most of the 20th century, the telephone industry was dominated by one company, the Bell System, also known as AT&T.
Designated as a natural monopoly by the federal government, Ma Bell enjoyed control over local and long distance telephone operations, as well as the manufacture and sale of all telephone-related equipment and technology. Naturally, the company thrived without even the threat of competition from outside sources.
But the Golden Era ended for the Bell System in 1982, when the Department of Justice decided to break up the monopoly by filing an antitrust lawsuit against the telecommunications giant. The resulting settlement saw the divestiture of the Bell System into a long distance entity (AT&T) and seven Regional Bell Operating Companies (RBOCs) which served the local market.
Judge Harold Green split the country into 160 local access and transport areas and decreed that local companies could not provide long distance services and long distance companies could not provide local services. While the settlement opened up competition in the long distance market, it allowed the RBOCs to maintain monopolies in their local markets.
It wasn't until the Telecommunications Act of 1996 that the Baby Bell companies lost their monopolies over local services. The law not only enabled long distance providers to enter the local market (and vice versa), but also struck down barriers that had previously kept new companies from entering the RBOCs' territory. The newcomers, called Competitive Local Exchange Carriers (CLECs) have helped create, for the first time, a free and open local telecommunications market, driving the development of new technology and services and giving local customers a choice.
But how do customers choose between a continually growing number of local telephone service providers? Today, consumers rely on local networks not only for making local voice calls but also for a vast array of data exchange needs, such as Internet access, faxing, local area networks and more. Speed, capacity and reliability are of particular importance to businesses, and thus among the key marketing points stressed by local providers.
Other factors that differentiate competition include:
B>Technology. Fiber optic networks are by far superior to the old, copper wire telecommunications systems they are rapidly replacing. Local dial tone companies which utilize fiber optics can provide greater clarity, capacity and speed than their copper-bound competitors and are better able to expand with the growing telecommunications needs of their customers. Consumers will also experience less signal interference or loss and fewer transmission errors on fiber optic networks, enabling business to continue as usual, without interruption.
B>Customer service. When there is a problem with the phone lines or just questions that need quick answers, customers need to know they can depend on the accessibility and responsiveness of their local provider.
Calling features. To meet the needs of growing businesses and organizations -- and even busy residences -- phone companies offer a vast array of calling features, including call waiting, call forwarding, voice mail, caller ID, repeat dialing, conference calling, automatic callback and speed dialing.
Convenience. Telephone companies that can provide both local and long distance services, as well as advanced data services or access needs a business or organization may require, promote the convenience of having all your telecommunication needs met by a single provider. One company to deal with, one bill to pay.
Cost. The best result of the competition spurred by the Telecommunications Act of 1996 has been the reduction in price of local phone services. By bundling local with long distance and advanced data services, some phone companies are able to offer consumers lower-than-average costs to fill all their telecommunications needs. Or, consumers can buy certain pieces here and certain pieces there, allowing them to shop around for the price and service options that best meet their individual needs. Source:Adelphia Business Solutions
When more than 700 Playhouse Square supporters jammed the lobby of the State Theater last year for the annual Jump Back Ball, more than $40,000 was raised to benefit the Playhouse Square Foundation.
Don Pushinsky, owner of All The Rage Unlimited, developed and designed a Hollywood theme for the evening, complete with movie star look-a-likes and a glitzy celluloid feel.
Many companies donate money to charity and the communities that support them, but far fewer make an effort to provide hands-on aid to benefit those who need it most. All The Rage, however, strives to help the nonprofit sector in as many ways as possible. Pushinsky says that by leveraging the company's expertise, it's possible to give more back than ordinary donations would allow a company of its size.
All The Rage is a 10-employee special events production company that works with companies and organizations to design and execute event planning, from conceptualization through production.
Here's how Pushinsky uses his business to make a difference in the community.
Give expert advice
With the resources and expertise that his company boasts, Pushinsky makes a dedicated commitment to community. His favorite way to help charities is to have All The Rage sit on boards to aid in planning benefits. Among the groups he's done this for are the Playhouse Square Partners, the Cancer Society, Cleveland Indians Charities, the Rock & Roll Hall of Fame and Museum, the Beechbrook Home For Children and The Multiple Sclerosis Women's Committee.
"Since we do this for a living, we'd like to go onto boards and advise them how to make the most with their money and how to market their event well and we do that all complimentary," Pushinsky says. "We just try to raise the bar for these guys -- it's our favorite thing to do because it's what we do best."
Such was the case with the Playhouse Square events that he helps with each year. While having a large bash is nothing new, the idea of creating related themes that partygoers can step into character for adds an entirely new dimension to the fund-raising process.
Get employees involved
Besides being directly involved himself, Pushinsky routinely tells employees to take time off. Of course, when he gives them time off, it is with a good cause in mind -- employees are encouraged sit on the boards of local nonprofit organizations and provide advice, similar to what Pushinsky does.
To make the offer more attractive, he invites employees to make use of the company's resources and expertise, and they can aid any cause they choose.
"We encourage them to help at least three different causes each year," says Pushinsky. "And when they get on boards, we become a corporate sponsor to back them, to give them support."
Don't forget about traditional donations
On a corporate level, All The Rage makes donations each year to nonprofit organizations. Thirty percent of the company's total revenue is earmarked to aid charity, Pushinsky says. And, all charities and nonprofits benefit with a 50 to 70 percent discount on All The Rage's services above and beyond consulting-type work.
Pushinsky can't hide his selflessness when asked to explain why community service is so important to him.
"It's just a great way to give back to the community," he says. "It's a way for employees to take pride in a company, and it shows that it's more than just about business for us; it shows our personality."
But he recognizes the limitations with a small staff. So each year, employees meet to determine which charities will receive All The Rage's assistance.
"We pick and choose each year," he says. "There are some favorites of ours -- for instance, we're always on Cancer, but the rest we vote on." How to reach: All The Rage Unlimited, (800) 745-8256
Courie Weston (firstname.lastname@example.org) is a reporter at SBN.
Gonzalez Funeral Home has opened, offering Hispanic families in Cuyahoga and Lorain counties care designed specifically for their culture. The home is located at 4334 Pearl Road.
Gateway Title Agency received the EDI 2000 Innovation Award at a dinner given by Enterprise Development Inc.
In a Bind Bookstore has opened at 13347 Madison Ave. in Lakewood.
The Cleveland Neighborhood Development Corp. has awarded Thermagon Inc. the George S. Dively Award for Leadership in Neighborhood Development.
Hilty Moore & Associates will direct a marketing strategy campaign for Graphic Laminating Inc.
Lyons Insurance Group has announced the acquisition of the property and casualty insurance business of Phoenix Circle Insurance Agency Inc.
Grant Thornton LLP has relocated to The Halle Building, Suite 800, 1228 Euclid Ave.
KeyCorp and its online banking Web site, Key.com, ranked among the top five financial services companies doing business on the Internet, according to a survey conducted by Speer & Associates Inc., based in Atlanta.
Cuyahoga Community College received a Commitment to Excellence award from the Ohio Award of Excellence Inc.
Ira Thomas Associates Inc. and Marcus Advertising have merged to form Marcus Thomas LLC.
The Nock Refractories Co. has announced new cast refractory shapes that can be custom-made for a variety of applications.
Garick Division of Fairmount Minerals will test eWinWin's Demand Aggregation Software.
Medical Mutual of Ohio has unveiled a new Internet-based application that allows hospitals to submit patient information and receive authorization electronically.
The James J. Roop Co. won a Bronze Anvil Certificate of Commendation from the Public Relations Society of America and three Vision Awards from the Cleveland Chapter of the International Association of Business Communicators.
The Ohio Award for Excellence Inc. has named Applewood Centers Inc. a Tier 3 winner of Achievement in Excellence for 1999-2000.
HTG Thermal Treatment Center, a HI TecMetal Group facility, maintained QS-9000 registration by NSF International.
The Convention & Visitors Bureau of Greater Cleveland has been honored with Successful Meetings magazine's Pinnacle Award for outstanding meeting destination support.
Nagy Service Co. now offers "Nagy Total Plumbing Service," on-call plumbing services 24 hours a day, seven days a week.
Mark Freeman Associates garnered six Tower Awards in the recent Business Marketing Association competition.
Duke-Weeks Realty Corp. has announced three lease agreements, along with plans to develop a 162,000-square-foot industrial building at its Park 82 business park.
Manpower Inc. has relocated to a new office at 20220 Center Ridge Road in Rocky River.
Western Reserve Internet Services Inc. has relocated to 23550 Commerce Park in Beachwood.
Market.al has acquired Wireless Internet Solutions Providers Inc. as a client.
The Rogers Co. will develop a display for the International Mass Retailers Association show in Nashville, Tenn.
BeanDance.com has unveiled the comprehensive "e-Learning Information Center."
The U.S. Small Business Administration has announced six new online courses to help small businesses enter or expand into the e-commerce market.
Today's Business Products Inc. has announced a plan to open its 40,000-square-foot corporate headquarters at 12985 Snow Road this fall.
Ohio EPA has launched a new online system to enable citizens and businesses to find information about permit applications under review for sources of air pollution at www.epa.state.oh.us/dapc/pti/ptimain.html.
The Gordian Organization has formed an alliance with Key Consulting.
Ampersand International Inc. has joined the partner program of Dialogic, an Intel company.
St. Ives Cleveland is the first commercial printer in Ohio to achieve ISO 9002 registration.
Medical Mutual of Ohio Charitable Foundation has donated a total of $50,543 to be divided between the American Sickle Cell Anemia Association Inc. and the Kidney Foundation of Ohio Inc.
Expert System Applications Inc. has created the Practice Partner Clinical Benchmarking service, which provides quality-of-care indicators for individual physicians and group practices benchmarked against a national database.
Unicorn Corp. has acquired Reliance Mechanical Corp.
HyperText Communication Inc. has become Dataworx Technologies, now offering networking, cabling, help desk support, enterprise and PC hardware solutions, and Web site design and development.
"Woody Guthrie -- Hard Travelin'," a radio documentary produced by WCPN 90.3 and The Rock and Roll Hall of Fame, received a Gabriel Award.
Media II has acquired WeldersMall.com as a client.
If you're like most business owners, the notion of financing extends only in three or four different directions -- cash flow, bank loans, investors/partners and public or private stock offerings.
But what happens when your company taps out its credit line at the bank, the investors say make do with what you have and it's simply not feasible for your privately held, $20 million manufacturing operation to go public?
Waiting on the sidelines of the funding game are numerous alternative-financing solutions. Which one to consider depends on your company's maturity level, its asset position and your existing client base.
Here are three options worth investigating.
Mezzanine financing is just what it sounds like -- financing that fits on a company's balance sheet somewhere between traditional commercial bank debt and shareholder's equity. It's considered a form of debt, though it's often referred to as an investment, and is used during transitional periods of a company's life.
Typically, a business owner seeks mezzanine financing for things such as equipment purchases, management buy-outs and strategic acquisitions, and only when the company's regular commercial bank is unable to loan it further money and the owners don't want to sell equity in the company to raise more cash. Because they're riskier than traditional bank loans, mezzanine financing loans normally carry an interest rate of between 3 and 5 percent over prime.
"It is a more cost effective and flexible sort of financing," explains Greg Ferrence, managing director of the Ohio Mezzanine Fund Ltd. "It's an option available rather than bringing a partner in and giving up equity."
Mezzanine funds like Ferrence's raise money from institutional investors. In Ohio Mezzanine Fund's case, $9.4 million was secured from such traditional players as Bank One, Charter One Bank, FirstMerit Bank, Huntington National Bank, KeyBank and National City Bank.
The fund's managers then administer the money to businesses in amounts smaller than most traditional loans -- from $100,000 to $750,000. Often, that money is combined with a loan from a larger lending institution.
Purchase order financing
It's not uncommon for a growing business to find itself generating sales faster than the company's coffers can keep up with. And, in the early stages of a company's growth, few lending institutions will extend bottomless credit lines to cover that type of growth.
Worse, even if you can show a stack of purchase orders to substantiate your company's assertion that it needs more cash to meet orders, unless you have an invoice that shows you've already billed customers for delivered products or services, simple purchase orders aren't considered collectible nor lendable by traditional financiers.
That's where purchase order financing comes in.
"We find someone willing to take the commercial risk for holding that order," explains Lee Tenenbaum, president of Chagrin Financial Services Inc. "They put up the money or credit to allow the business owner to complete the transaction, whether it's buying extra raw materials or supplies or having enough money to cover a temporarily larger payroll."
It's a riskier proposition, Tenenbaum says, because the confirmed purchase order becomes collateral for the money. In essence, the lender banks on the notion that the products are presold to customers who will follow through and pay the invoices in a timely manner.
And, as with mezzanine financing, purchase order financing transactions are completed at a higher level of interest than traditional financing. But, says Tenenbaum, it's worth it, considering that in the long run, purchase order financing is done to conduct business that otherwise wouldn't have been possible.
Factoring is the practice of selling a company's accounts receivable. A business owner makes a sale and issues an invoice to the customer.
Since most invoices run on 30-, 60- or 90-day payment terms, there's a lot of legroom for a small growing company to run into cash flow problems in the interim.
With factoring, a business owner could sell that invoice to a factor -- essentially an investor looking to make a not-so-high risk investment at a substantial profitable gain -- who advances the business owner cash against the invoice's face value, typically 70 percent or more within 24 hours, explains Tenenbaum.
The factor handles the collection process and the customer remits payment directly to the factor. Factoring fees are negotiated on a case-by-case basis, but because they're generally considered lower risk investments -- there's an invoice issued that's legally collectible -- the fees typically are not as high as for other alternative financing methods.
Size of the invoice, number of customers, total volume of business activity, collection period terms and the credit worthiness of the receivables are all taken into consideration in determining the factoring expense rate. How to reach: Chagrin Financial Services, (216) 292-2802; Ohio Mezzanine Fund Ltd., (216) 573-3738
Dustin Klein (email@example.com) is editor of SBN.
People are often confused by her car's license plate, ESCHEAT, through which they mistakenly believe she is announcing her infidelity. But the reference is to a much more mundane law, and relatively speaking, more recent than the biblical rules of adultery.
Escheat finds its roots in English Common Law, dating back to medieval times. When the head of a family died without heirs, the land reverted back to the king. Today, when property goes unclaimed, businesses are required to report it and transfer the funds to the state, which holds it in trust until the owner or the heirs claim it.
Owners claim only about 20 percent; the remainder is kept by the state. Escheat laws have been on the books since the 1950s, but were generally enforced only for banks and insurance companies.
However, they apply to all businesses, says Lane, who heads the escheat division in the Cleveland regional office of Ernst & Young LLP. Any enterprise -- from a sole proprietorship to an international conglomerate -- with an accounts payable department where checks are being cut has potential unclaimed funds.
"It's hard to believe, but people don't cash checks or they get lost," Lane says. "The more business you do, the more checks you cut. And, the more possible it is that over a period of time, you actually have checks that are not cashed. Those checks accumulate and that money's still sitting on the books."
Lane says it has become common practice for business owners to write to income unclaimed checks.
"Most companies don't know there's a law that says you can't take it as income," she says. "The businesses shouldn't feel foolish or stupid. What they've been doing is very common. It's illegal and they don't know it."
So what accounts are beholden to escheat laws? Many, says Lane. They include vendor checks, payroll checks, accounts receivable credit balances, pension benefits, unredeemed whole life policies, CDs, deposit accounts, safe deposit box contents, stocks, health benefits, jewelry left in a store and debit and credit differences for transportation companies.
State governments are aware of the huge windfall unclaimed funds generate and are now eagerly searching companies' books for the missing money.
"The states have embarked on a fairly aggressive audit program," Lane says. "What the states have done is to hire third party audit firms. For the most part, most of the states pay these bounty hunters a percentage fee based on what they find. They are extremely motivated to go out and really be aggressive and make an assessment.
"Under the unclaimed property laws, the burden is on the holder to disprove what the auditor says."
Most businesses are unaware of the unclaimed property laws and could have years of funds written off to income. If an auditor examines a company's books and finds money that should have been reported, interest and penalties can be tacked on. Fines of $100 a day may be assessed as far back as there are records. Lane recommends companies review their books for at least the last 10 years.
The news is not all bad, however.
Ohio has instituted an amnesty program, through which companies can voluntarily report their unclaimed property and avoid those extra fees. The amnesty program runs through the end of October 2000.
"The auditors are alive and well and working as we speak," Lane says. "If you get a notice of audit in the meantime, the states will not allow you to participate in the amnesty program. The auditors aren't waiting; they're out there.
"What the states are saying is, 'You've escaped the auditors piercing veil; if you've escaped that, you should come forward now before the auditor comes to you, because then it will be too late.'"
The good news
When it comes to unclaimed property, Ohio is really business friendly, Lane says.
"There's a lot of consumer protection underlying the unclaimed property laws," she says. "Where you run into an issue with businesses, it's when businesses owe other businesses unclaimed money. Business owners in Ohio have waged a very successful battle to exempt in Ohio business-to-business unclaimed property from reporting."
This, explains Lane, is a critical development. Members of the state chamber of commerce got together and argued that companies should know what money they're owed. The argument was that they understand it's consumer protection and they may walk away from a gift certificate, but when they are dealing with a business itself, it should be another story.
"Business owners are smart," Lane says. "They know where their money is. They were surprisingly successful in getting that legislation passed. What it basically means is that if you're an Ohio business and you've got property payable to another Ohio business, you don't have to pay it over to the state."
As far as Lane is concerned, the issue is very simple.
"The state should only get it if you can't find the owner," she says. "And that's if they've moved or died and you have no way to reach their heirs." How to reach: Ernst & Young LLP, (216) 861-5000
Daniel G. Jacobs (firstname.lastname@example.org) is senior editor of SBN.
You may have no intention of selling your business in the next 20 years, but start planning for the inevitable now.
"Every seller wants the same things: the highest price, the least amount of effort in the quickest timeframe," says Chad Simmons, author of the "Business Valuation Bluebook." "There are steps you need to take to make this occur, and you can't start thinking about it this week if you want to sell next week. The time to start thinking about it is the day after you start the business or the day after you buy the business.
"You need to be looking at least a year ahead to prepare. There are things you can do that will result in a dramatic improvement in value."
Secure your good location. "No lender will offer a five-year business loan to a business with only three years left on its lease," says Simmons. "Go in and renegotiate with an extended term with some options to renew. It will help ensure to the potential buyer that the location is going to be there."
Develop your Web address. "A Web site is becoming like a telephone -- you have to have one," says Simmons. "Those who put one up are more viable than those that don't, even if there is no direct increase in sales. It's just one more thing a buyer won't have to do."
Preview your business. Clean up your business, both literally and figuratively. Get rid of old inventory and eliminate positions that are no longer needed.
Prepare your numbers. "You're going to have to make some disclosures to any potential buyers," says Simmons. "It's a good idea to know what they are going to be and prepare them ahead of time. Also, get a nondisclosure agreement for the parties to sign. When someone asks to see three to five years' worth of financials, respond positively and hand them the statements you've already prepared. This eliminates a lot of the running around."
Reduce uncertainty. Don't tell your employees you're going to sell. You don't want to scare valuable employees off, and you don't want to give the buyer a reason to say no.
Don't cheat. If you're skimming from the business, stop now. It's illegal and will greatly complicate matters when others start looking at your financial statements.
Prepare to transfer knowledge on how to run the business successfully. "Be prepared with a training program," says Simmons. "Prepare a written outline on how you will help the buyer fit into the business, teach them about the product or service and introduce them to customers." Find a way to convert your skills into the business itself so the best assets aren't walking out the door when you leave.
Protect your brands. Use copyrights, service marks and trademarks to protect your brands if you haven't already done so.
Solidify your customer base. If possible, put your customers under contract, even if just for a year. It gives a potential buyer confidence that the client base will still be around when he or she arrives.
Increase your visibility. "A great time to hire a PR firm is one year before you sell," says Simmons. "The more people that see you, the more that will want you. It will make your business more attractive."
Take your own look. Hire a broker, accountant or attorney to take a look at your business as if you were going to buy it. See how it looks from an objective point of view. This will help you anticipate problems and give you an idea of how any deal will be structured -- and don't expect a suitcase full of $100 bills.
"The most important thing may be to be realistic," says Simmons. "I've seen so many who have had wonderful businesses, but they have an overinflated estimate of what it is worth. It's damaging and sad. They could put it on the market for the right price and sell it quickly and be on to whatever they have in mind next. But they think it's worth so much more, that it sits on the market for a year or more with all the associated holding costs.
"Their attitude really turns sour, the employees see that and revenue goes down. It's important to do a valuation and know what your business is worth." How to reach: Chad Simmons, www.priceaspower.com
Todd Shryock (email@example.com) is SBN's special reports editor.