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 email@example.com.
Sean Saari, CPA/ABV, CVA, MBA, is a principal at Skoda Minotti. Reach him at (440) 449-6800 or firstname.lastname@example.org.
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 email@example.com.
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 firstname.lastname@example.org.
Insights Customer Service is brought to you by Today’s Business Products
Auto insurance premiums are based on several factors relating to risk. Companies with strong fleet safety programs reduce their risk level, resulting in lower insurance rates.
“Depending on what steps you take, the savings could be substantial,” says Derek M. Hoch, president of Leverity Insurance Group.
Smart Business spoke with Hoch about what companies can do to improve the safety of employees who drive while working.
How are auto insurance rates calculated?
They are based on several factors, including frequency and severity of crashes, auto repair costs, medical and hospital costs, lawsuits and court judgments, insurance fraud, vehicle type and deductibles.
One of the best things you can do to reduce insurance premiums is to decrease the frequency of accidents. A U.S. Department of Transportation study indicated that 90 percent of collisions were because of driver action, attitude and behavior. Keeping your drivers safe will lead to fewer and less severe accidents.
Some steps to implement are:
- Buying newer model vehicles that are in better condition.
- Hiring drivers that have good motor vehicle records.
- Providing driver safety programs that include incentives for positive performance.
All of these factors can have an impact on lowering your insurance premiums.
How can you determine if drivers are being safe?
Constantly supervise and monitor drivers’ motor vehicle records. Many companies have implemented GPS tracking that shows how fast drivers are going, where they are going — if it’s the best route, and if fuel is being used efficiently.
Maintenance of the vehicle also can produce telltale signs someone is driving too fast. For example, there will be more wear on tires, brakes and other equipment than there would be for someone operating it in a safe or proper manner.
Companies that are really dedicated to safety have installed electronic onboard recorders to monitor how drivers are doing.
What should be done about cellphone use?
Almost everyone talks on the phone while driving at some point — a nationwide poll found 81 percent of cellphone owners admitted to talking while driving. Distracted driving also resulted in about 3,000 fatal traffic accidents in 2012, according to the National Highway Traffic Safety Administration.
If employees are driving on company time, you need to establish a policy with clear-cut rules restricting cellphone use while driving, and offering suggestions such as pulling over to either place or answer an important call.
Even with a comprehensive cellphone use policy that employees sign off on, courts may still hold employers responsible for harm caused by employees while conducting company business; so it’s important that your policy is upheld and enforced.
What are essential elements of a good fleet safety program?
There are five main components:
- Management support and ongoing supervision.
- Driver prequalification.
- Driver training and ongoing education.
- Vehicle maintenance.
- Accident investigation.
Safety starts with the culture of the business owner and the management team; they need to create a solid plan and hire the right people. Next comes driver selection and qualification. That involves checking motor vehicle reports, conducting criminal background checks and contacting former employers about work history.
Once a program is in place, continuously remind employees about safety and provide ongoing training courses. Even seasoned drivers can get complacent as it becomes routine; don’t let them forget their training.
Fleet safety programs aren’t just for companies that employ drivers, they are for any company with employees driving anything from a private passenger vehicle to an extra-heavy truck while on the job.
A true insurance professional or adviser can help your company develop a comprehensive driver safety program. That way you can create a safer culture that not only enhances the well-being of employees but also decreases insurance premiums.
Derek M. Hoch is the president of Leverity Insurance Group. Reach him at (216) 861-2727 or email@example.com.
Insights Business Insurance is brought to you by Leverity Insurance Group
Are you “results-oriented?” Do you have a “proven track record?” Would you consider yourself a “problem solver?” According to LinkedIn, these are some of the most overused buzzwords on profiles across the popular professional social network.
A problem in today’s saturated marketplace is finding your unique place as a professional. Whether you are a self-employed entrepreneur or an executive at a large corporation, you are in charge of your own career. A successful brand relies on its unique positioning in the marketplace. Likewise, a successful businessperson must understand the importance of crafting a personal brand. Your unique identity sets you apart from the competition and contributes to the overall success of your company, says Jenna Drenten, Ph.D., assistant professor of marketing, Department of Management, Marketing and Logistics, Boler School of Business, John Carroll University.
“We choose one product over another because it offers something special. The same is true for today’s professionals,” says Drenten. “In today’s competitive marketplace, business professionals must perfect the art of what I call personal branding — developing a unique personal brand and actively promoting that brand to others. Personal branding is not only beneficial for your own career, it also benefits your company’s brand image.”
Smart Business spoke with Drenten about the importance of branding yourself and key strategies for managing a successful personal brand.
What does it mean to brand yourself?
Branding yourself means to develop a unique professional identity and coherent message that sets you apart from others either in your company or in your industry. If you are a CEO or an entrepreneur, you may say, ‘I have enough on my plate by building and managing my company’s brand, much less my own.’ But branding yourself is just as important, if not more so. Think of business leaders like Steve Jobs and Oprah Winfrey. Their personal brand images are synonymous with their companies. Regardless of your career status, you must commit to being the brand manager of your own personal brand.
What is your unique selling proposition?
In branding yourself, the goal is to differentiation from others but consistently within your message. What specific characteristics and field-related expertise do you have that others may not? Try to develop a personal positioning statement. It should be a concise, one- to two-sentence statement that reflects your unique value as a business professional. Consider creating a short tagline for yourself that captures who you are and what sets you apart.
What is your personal brand management strategy?
Once you have pinpointed your unique brand, you need to communicate it to others. Your goal is to actively promote and manage your personal brand. Branding yourself involves creating a unified message across all outlets. Consistency is crucial, especially in today’s digital age. If someone were to search your name on the Web today, what would they find? Take control of your online brand image by creating a personal website outlining your achievements or by starting a blog that allows you to share your distinct industry-related ideas. Your personal brand management strategy should be proactive and should reflect your natural capabilities. For instance, if you excel at face-to-face communication, attend networking events and schedule coffee meetings.
How does branding yourself benefit your company?
In marketing, a phenomenon called the ‘halo effect’ suggests consumers make more favorable judgments of a particular product because of positive biases toward associated brands or people. For instance, consumers are biased toward brands endorsed by their favorite celebrities. The same is true for personal branding. If you develop a unique personal brand, your company gets included in the positive halo of your success. The connections that you make and the network that you develop can be transferred to your company.
How does branding yourself benefit your career?
You are the product and your employer is the customer. Branding yourself allows you to market your skills to meet the customer’s needs. Regardless of the stage at which you are in your career, it is important to stay marketable by creating a unique brand for yourself, separate from your identity within your company. This gives you more opportunities for mobility both within and outside of your organization. As your personal brand awareness increases, you may be invited to speak at industry events, contribute to industry related stories, and so on not because of your status within a company, but because of your branded expertise within the wider industry.
Jenna Drenten, Ph.D., is an assistant professor of Marketing in the Department of Management, Marketing, and Logistics in the Boler School of Business at John Carroll University. Reach her at firstname.lastname@example.org.
New lease accounting rules will require all leases to be on corporate balance sheets, even though the Financial Accounting Standards Board (FASB) has yet to circulate the final FASB Exposure Draft, which details the changes.
“Until the dust settles, it’s very difficult to make any kind of strategic decision,” says R. Timothy Evans, president of Equipment Finance at FirstMerit Bank. “Yes, it will have a negative impact on some segments of the leasing business for both lessees and lessors, but it’s not going to signal the end of the equipment leasing industry by any stretch.”
Smart Business spoke with Evans about who will be impacted and how operating leases will function when the new rules take effect.
Where does everything stand right now?
Companies currently report operating leases in the footnotes, while incorporating capital leases on the corporate balance sheet. To create more transparency, the FASB wants all leases on the balance sheet.
In the current draft, only operating leases of less than 12 months are allowed off-balance sheet. However, many organizations are lobbying to have more exceptions included, creating further delays.
The current expectation is an implementation date of late 2016 or early 2017, but that could get pushed back.
What distinguishes an operating lease?
An operating lease has to meet four main criteria, as defined by FASB:
- Rentals and all guaranteed rents discounted back at the customer’s borrowing rate cannot exceed 90 percent of the equipment cost.
- Term cannot exceed 75 percent of the economic life of the lease property.
- Cannot transfer ownership of the property at the end of the lease term.
- Cannot contain an option to purchase the property at a bargain price.
If your lease violates any of the criteria, you must characterize it as a capital lease.
Why do companies favor operating leases?
An operating lease offers an extremely low ‘cost of use’ for a company that is capital intensive. As an example, if a company has net operating losses, it cannot utilize depreciation. With a true lease structured as an ‘operating lease,’ the lessor takes the depreciation and prices a residual into the deal, giving the lessee a lower rate.
Operating leases require no down payment and give the flexibility to return the equipment at the end of the term. Companies can upgrade to state-of-the-art equipment without large down payments.
A point to clarify is that for accounting purposes, a lease is either operating or capital. For tax purposes, it’s either true or capital. There are components of an operating lease that are also components of a true lease — the two aren’t synonymous. Operating leases are off-balance sheet, but not all true leases are operating leases.
How are companies preparing?
Right now, there’s not enough clarity to develop a strategy. A company with many leases must search through every contract, identify the operating leases and then reconstruct the rent stream in order to report it on-balance sheet. Many may decide to outsource this to accounting firms.
What’s the anticipated impact?
Companies that just lease to have off-balance sheet treatment will see a major impact. But this change does nothing to modify a lessor’s ability to take depreciation, price residuals and offer creative structuring for the standard equipment financing.
Eight out of 10 companies have some kind of equipment lease, but that doesn’t mean all are operating leases. For most lessors, the operating lease piece of their business generally is less than 20 percent. Some lessors specialize in operating leases.
Almost every bank monitors and restricts the amount of leverage on a balance sheet through covenants. With the accounting change, some businesses’ balance sheets will have too much debt, so covenants and lending agreements will need to be restructured. However, many lenders already look at the operating leases in the footnotes, so there could be other ‘work arounds’ to deal with the new requirements. It’s expected there will be at least 12 months to complete the transition to the new requirements.
R. Timothy Evans is president of Equipment Finance at FirstMerit Bank. Reach him at (330) 384-7429 or email@example.com.
All opinions expressed herein are those of the authors/sources and do not necessarily reflect the views of FirstMerit Corporation. FirstMerit is not offering tax or accounting advice. We recommend you consult with your tax or accounting adviser.
Insights Banking & Finance is brought to you by FirstMerit Bank
Traditionally, businesses protect their intellectual property (IP) with patents and trademarks. These patents are generally utility patents, which protect the function or use of a product. Trademarks protect the name or logo under which a product or service is sold.
A more meaningful protection for businesses could include design patents and trade dress, says Barry A. Winkler, an attorney in the Intellectual Property Group at Brouse McDowell.
“These protections are issued much more quickly and with far less expense than utility patent applications. Design patents protect the decorative appearance of a product. Trade dress can protect the product packaging or product configuration,” Winkler says.
“For example, Volkswagen protected the shape of the Beetle and Apple protected the shape of the iPod by using both a design patent and trade dress. While using either a design patent or trade dress alone will provide some protection for the appearance of a product, using both provides even broader protection.”
Smart Business spoke with Winkler and Jennifer L. Hanzlicek, an attorney in the Intellectual Property Group at Brouse McDowell, about how design patents and trade dress can address areas of IP that are often overlooked.
What are the key differences between design patents and trade dress?
Although there is some overlap between design patents and trade dress, there are differences in the scope, timing and duration of the protection provided. A design patent protects a product’s appearance no matter what the product does, whereas trade dress protects the appearance only for the specific goods and services represented by the product.
As for timing, a design patent can be filed and issued before the product is used or even manufactured. Trade dress cannot be registered until the product is in use. Currently, a design patent is in force for 14 years after it is granted, but trade dress can last indefinitely as long as it continues to be used with its specific goods and services.
Design patents and trade dress can also protect virtual designs that exist in cyberspace, including the color scheme. Design patents protect Google’s teardrop-shaped marker icon on its maps, Samsung’s app icons and Nike’s animated user interface. Apple’s graphical user interface for the iPhone is protected by both a design patent and trade dress registration.
Should you seek both design patents and trade dress protection?
The benefits of using both design patents and trade dress can be demonstrated in the life cycle of a product.
When the design of a new product is complete, you can apply for a design patent to protect the ornamental design before you launch your product. The design patent protects your design for several years as you begin to manufacture and sell your product. Simultaneously, you can apply for trade dress protection for a product’s unique product configuration or product packaging. The trade dress protection then extends beyond the life of the design patent and continues until you cease selling the product.
The number of design patent applications continues to rise as businesses realize the benefit of protecting their product designs. In recent years, design patents have been more aggressively asserted by manufacturers in place of or alongside trade dress claims, including the recent Apple v. Samsung disputes.
Business owners could be foregoing meaningful protection by failing to pursue design patents and trade dress registrations. Taking these measures can offer increased IP protection, keeping competitors from copying the design and appearance of your products and product packaging. When used together, this powerful combination can provide armor for your product, from the finished design through manufacturing and launch, and continuing with sales until the product is no longer in demand.
Barry A. Winkler is an attorney at Brouse McDowell. Reach him at (330) 535-5711, ext. 358 or firstname.lastname@example.org.
Jennifer L. Hanzlicek is an attorney at Brouse McDowell. Reach her at (330) 535-5711, ext. 364 or email@example.com.
Insights Legal Affairs is brought to you by Brouse McDowell
More and more business professionals are exploring the do-it-yourself (DIY) model when it comes to their telephone communications. In many cases, however, a hosted model — where a Voice over Internet Protocol (VoIP) provider manages your system at a data center location — might make the most sense.
Having a hosted solution may free your business from bearing the responsibility of installing, maintaining and repairing telephony software. In the long run, this could add up to large savings.
When searching for a VoIP provider, Alex Desberg, sales and marketing director at Ohio.net, says you must make sure you are able to find the proper fit.
“It’s important to find a company that works the way that you want to work,” he says. “If service and support is important to you, find a VoIP provider that will support your needs and expectations.”
Smart Business spoke with Desberg about VoIP, the flexibility of a supported, DIY model and the benefits of a hosted model.
How can a good VoIP provider help with the transition to a cloud-based telephone system?
There has been a shift in the VoIP industry toward implementing open-source voice applications. The supported, DIY VoIP approach has gained traction because it can save money by limiting the amount of outsourcing while working with an experienced provider. For example, IT consultants and VoIP companies frequently install solutions such as Asterisk, an open-source telephony software system, and then the company manages the applications internally. However, this DIY approach can present challenges when it’s not well supported by your dial tone provider.
In order to fully realize the benefits of new technologies, it’s best to combine the new software environment with a VoIP provider that is well versed in hosting, hardware and integration to the traditional world of telephony. If the telephone is your primary way to communicate with your customers, it is too important of a matter to leave to chance.
How much control can a company have over the VoIP system?
There are three options. The first is a hosted model where the VoIP provider handles all of the changes, including managing the software. This is a service-based model, so if the business needs support, it can contact the VoIP provider that helps provide solutions to any problems that may be encountered.
With new cloud-based systems, some companies prefer to support their own changes. The supported DIY or Virtual PBX solution provides a stable environment to host the software-based phone system. This would be ideal for a business with capable IT personnel, where executives want to keep control of their technology reins but still have a fall back for technical support.
The final option is to have the end-user handle everything, from setup to tech support in a secure environment with dial tone and trunking available. Essentially, the business may bring its existing software-based phone system into a data center that is focused on VoIP services.
What is the advantage of divvying up responsibility when it comes to phone systems?
In the traditional telephone world, every time a phone system breaks down or there is a need for an upgrade, a call is made to an outside consultant who specializes in that specific phone system.
It stands to reason that the same might ring true in the cloud-based world if you dive in unprepared. Working with an experienced VoIP provider will help future proof your telecommunications by distributing responsibility and having a good support structure. In fact, a solid VoIP provider will have built-in redundancy to protect against downtime.
With a traditional or even VoIP premise-based model, if a system goes down, you’re down until it gets fixed. With a virtual — or host-based model — the system simply doesn’t go down because there is redundancy already in place.
Alex Desberg is sales and marketing director at Ohio.net. Reach him at firstname.lastname@example.org.
Insights Telecommunications is brought to you by Ohio.net
Statistics from the National Council on Compensation Insurance show that 38 to 50 percent of all workers’ compensation claims are related to the use of alcohol or drugs in the workplace. According to the U.S. Small Business Association, on average, employees with inappropriate substance use cost their employers $7,000 annually. Many Ohio businesses are turning to the Bureau of Workers’ Compensation’s (BWC) Drug Free Safety Program (DFSP) for assistance to address this issue and reduce their annual premium.
“A well-designed DFSP will help an employer deter substance use on the job, create a safer workplace and impact the bottom line by providing a discount to the employer’s premium,” says Cassy Taylor, senior risk services analyst at CompManagement, Inc.
Smart Business spoke with Taylor about the main components of Ohio’s DFSP.
What discount levels are available and when are enrollment deadlines?
DFSP offers basic and advanced discount levels that provide a 4 and 7 percent discount, respectively. Public employers wishing to participate may start their program Jan. 1 of each year. However, private employers have the opportunity to begin on either Jan. 1 or July 1. Applications for programs beginning Jan. 1 are due to the BWC by the last business day of October while those starting July 1 must submit their applications by the last business day of April.
What components does a DFSP require?
Basic and advanced levels of DFSP require:
- Annual reporting.
- Annual online safety assessment.
- Accident analysis training for supervisors.
- Use of online accident analysis on the BWC website for each accident/claim.
- A written policy in place.
- A minimum of one hour annual employee training.
- A minimum of two hours first year and one hour refresher supervisor training.
- Pre-employment, post-accident, reasonable suspicion and return to duty follow-up drug/alcohol testing.
- A cut off level of .04 blood alcohol content.
- Zero tolerance (basic level only).
- List of referrals for employee assistance.
In addition, the advanced level program also requires 15 percent random drug and alcohol testing, a second chance agreement for employees, a substance assessment for employee assistance and an annual safety action plan.
How does Ohio’s rebuttable presumption law factor in?
The rebuttable presumption law puts the burden on employees to prove that alcohol or drugs found in their system were not the proximate cause of a workplace injury. It also allows employers to ask for a disallowance of a workers’ compensation claim for an employee who tests positive on a qualifying chemical test. The law also is applied if an injured employee refuses a test. For a workers’ compensation claim to be allowed the injured employee must prove that being intoxicated by alcohol or under the influence of any controlled substance not prescribed by the employee’s physician was not a factor in the accident that caused the injury. Employers must post a written notice provided by the BWC to alert employees that they may not be eligible for workers’ compensation benefits if they are injured while intoxicated or under the influence of a controlled substance.
What impact would the DFSP have on a midsize company’s premium?
Assuming the eligibility and program participation requirements are met, a midsize service company could expect the following in annual premium savings by implementing the advanced level program, assuming the employer is participating in no other alternative rating programs:
- Payroll — $3,990,000.
- Individual discount — 16 percent.
- Individual premium — $14,683.
- 7 percent advanced level DFSP discount — $700*.
*Based on pure premium, which does not include assessments for DWRF and administrative costs for operation of BWC/IC.
Savings reflected above do not include the additional savings that can be realized by also participating in programs compatible with DFSP such as Group Rating, Destination Excellence, Small Deductible, and Safety Council to name a few. Always have your third-party administrator conduct a feasibility study to evaluate the best savings options available for your organization.
Cassy Taylor is senior risk services analyst at CompManagement, Inc. Reach her at (800) 825-6755, ext. 65434 or email@example.com.
Insights Workers’ Compensation is brought to you by CompManagement, Inc.
The 2013 Innovation in Business honorees demonstrate vision, perseverance and the power of follow-through
There are those who would argue that innovation arises out of necessity — a result of such things as sagging sales, increased competition or challenging economic times. But the honorees of this year’s Smart Business Innovation in Business Conference demonstrate that the impetus for innovation does not need to be a reactive one.
This year’s class is dominated by manufacturers — eight of the 10 2013 honorees. Rounding out the group are a higher education institution and a venture capital/commercialization firm.
Of the honorees, several have developed dedicated innovation teams that are devoted to rooting out ideas wherever they originate. Most have designed detailed processes to test new ideas and bring them to market. Others have devoted themselves to research and discovering breakthrough technologies in the health care industry. One of this year’s honorees manufactures interactive science and nature products for kids. And yet another developed the next generation of LED lighting fixtures for the U.S. Navy.
We’ll be recognizing this impressive group of organizations and individuals on Sept. 24 at the 2013 Innovation in Business Conference, where they’ll be honored for their commitment to continuous improvement and refusal to rely on past success.
As part of the celebration, the theme for this year’s panel discussion is “Turnarounds & Transformations,” and we’ll present an insightful conversation with three executives who have been catalysts of change.
■ Steven Demetriou, chairman and CEO, Aleris International Inc.
■ Robert Lee, principal, BLee Capital LLC and former CEO, Swiger Coil
■ Bob Cohen, founder and president, Centrus Group Inc.
We’ll discuss how to rediscover your true north, and why change is imminent no matter what industry you’re in or how much market share your company owns.
You’ll walk away from this event energized — not just by hearing the stories of our winners and speakers, but by also recognizing how and why innovation can be a powerful tool for any organization, no matter the industry or size. ●
Here are this years honorees: