Every company seeks top talent to help grow its business and succeed, but not every company knows how to find it.
Too often, businesses settle for job candidates who meet some of the criteria for a position because they tire of interviewing, or simply don’t know where to find more qualified candidates. But a specialized recruiting firm can help you find those candidates after you have carefully evaluated your needs for a position, says Danny Spitz, president of EverStaff.
“Companies often go into the recruitment process with high expectations when hiring new individuals, and working with a specialized recruiting firm can help you meet and fulfill those expectations instead of falling short,” says Spitz.
Smart Business spoke with Spitz about how to evaluate your company’s staffing needs and how a specialized recruiting firm can help find individuals to meet your expectations.
How can a company begin to identify its staffing needs?
Start by evaluating your current staff to identify strengths and weaknesses within each department or within individual positions. Develop a current job description and evaluate it to make sure that is what is actually being done on a day-to-day basis. Update those descriptions annually, because in this economy, companies must be flexible and job responsibilities change to meet requirements. This process will allow you to make sure you are maximizing the position for your company’s requirements.
Once you’ve done evaluations, a specialized recruiting firm can do a full analysis of the department, or the individual positions, to understand how the recruitment process can enhance performance by identifying the right talent.
Should a company evaluate only open positions?
No. Meeting a company’s high expectations doesn’t necessarily mean that there is a current job opening. The best time to start looking for talent and raise expectations is actually when you have someone currently in the position but know you could hire someone with better talent that will enhance the company’s performance.
A lot of times, companies have someone they like, who is a good worker, but that person is not able to keep up with the growth of the company or take on additional responsibilities because he or she has hit the ceiling. Every year, a company should analyze every position and every function within that responsibility to make sure that the person is meeting or exceeding standards. And if he or she is not meeting or exceeding standards, that’s an opportunity to evaluate whether there is someone in the market that you can bring in to enhance that position.
This applies to upper management, as well. It is critical that you have the right managers in place, because if your management team is not exceeding expectations, it’s very likely that their teams are not meeting expectations, either.
Companies should continually try to upgrade positions if they believe there is better talent out there. Sometimes that means moving the person currently in that position to one more suited to his or her skill set, and sometimes it means letting that person go. Those are critical decisions that every company is faced with to make sure it has the right people to take it to the next level. Every company should be looking for those people who are constantly going to add value and help you get to the next level.
What would you say to a business leader who is reluctant to let someone go or move someone to another position?
It’s tough to recognize that the company has outgrown the skill set of someone you like. It’s difficult because you’re not evaluating someone on a personal level as much as if his or her talents are a good fit for the company. If the company is hesitating to make that transition, it is suffering as a result.
The management team needs to look at where the company needs to be in the next year, or next five years, and come up with a plan that will ensure it has the right staff in place to allow it to continue to hit those levels of success.
How can a specialized recruiting firm help identify the right people for a company’s needs?
While a company should do the evaluation process on its own, when looking to make improvements, partnering with a specialized recruiting firm is critical.
The recruiting firm will analyze a company’s expectations and determine if they are reasonable and, if so, how it can meet those expectations. The recruiting team will do customized searches based on where it thinks the company’s weaknesses are, where the position stands in terms of weaknesses and where improvement needs to be, and focus on identifying individuals who have the strengths to offset the weaknesses the company is facing.
It’s a very in-depth process, as the specialized recruiting firm not only takes individuals through the interview process but tests their skills, evaluates computer and personal skills, identifies where their strengths are and matches those to the company’s weaknesses. That’s what needs to happen to meet the company’s high expectations, because it’s looking for improvement out of that position.
The specialized recruiting firm will then narrow the pool of candidates based on the specific criteria developed between it and the company. It’s a very time-consuming process, but taking the time to recruit and attract the best talent will allow a company to save money by having the right individual in place or make more money by having better talent.
Danny Spitz is president of EverStaff. Reach him at (216) 674-0788 or email@example.com.
When Victor Toledo and his partner, Chad Lacerte, were looking for a location for their new wake board park, they approached nearly a dozen cities looking for the right spot.
But once they met with members of the Allen Economic Development Corp. and spoke with representatives of the city of Allen, Texas, they knew they had found the perfect location, says Toledo.
“We talked to several north Texas cities at the same time, and they were all very receptive to the concept,” says Toledo. “But what Allen did differently is that they really stepped up and said, ‘Not only do we like it and want it, we’ve even got a place for it, and we can help you through the approval process.’”
The pair presented the concept rendering for Hydrous Wake Park to the city in January 2011, began construction in April and opened in September. Although there are 230 cable parks around the work, Hydrous is one of only 13 in the U.S., and the only one in America with three cable systems. And after just four months of operation, it was named 2011 Cable Park of the Year by Unleashed magazine, an international wake boarding publication based in France.
“Looking at the success of these parks around world, we thought bringing the concept to a healthy, vibrant market like Allen, especially because it’s in the Sunbelt, would be a good match, as the city is very youth oriented and very sports oriented,” says Toledo. “We really drew on the European parks in our design and strategy to create a ski resort type atmosphere in the middle of the city.”
Smart Business spoke with Toledo about the new business, and how the Allen Economic Development Corp. has been key to its early success.
What part did the Allen Economic Development Corp. and its members play in your decision to locate in Allen?
They have been very accommodating. They have really been a true partner throughout the whole process. Hydrous is located in a city park, nestled between a skate board park and the high school, which has 5,200 students, just opened a $30 million performing arts center and is completing a $60 million high school football stadium. Allen is a city that really cares about culture, sports, recreation and education, and it has done a tremendous job.
We approached several cities at the same time, and Allen was one of them. They saw an opportunity, they saw the presentation, and they immediately set up a meeting for us with the Parks Department and the city manager’s office, and they really helped us expedite the process.
Once things were set in motion, how did the city and the economic development corporation continue to assist you?
We have an ongoing relationship with the city because they are our landlord; we rent space from them. The Allen Economic Development Corp. was our liaison with the city, and they helped us secure a long-term lease on the property at a nominal cost. The fact that we didn’t have to invest any capital up front for the land made Allen a very attractive option for us, allowing us to focus our investment on the building, digging the lakes, digging the well and building a pro shop. We didn’t have to invest anything for the land, and without that incentive, we probably wouldn’t be here.
The city and the economic development corporation are also our marketing partners. One thing that’s attractive about this venue is that it’s a regional draw, and we get a number of visitors from foreign countries. We estimate that less than 10 percent of the people who wakeboard here actually live in Allen.
How has the city assisted you with water concerns?
There was a drought last summer, so as we were digging the two lakes, the city also allowed us to dig a 1,200-foot well so that we would have our own dedicated water source that was not subject to drought restrictions. That’s a big up-front cost, but we now don’t have a water bill.
The city didn’t want us to compete with its existing water resources and was able to accommodate us. And quite frankly, we couldn’t have competed with the existing water resources because of the drought restrictions.
How did your fall opening help you get up and running?
We really would have much rather opened in March at the start of the busy season, but the way it worked out, we signed the lease in January, got engineering approval in March, broke ground and finished by September, which was a pretty ambitious timetable.
So rather than wait until March to open, we decided we wouldn’t open the restaurant until then but we would at least get our feet wet and get some experience under our belts. That way, in March, we are ready to really show our best because we already have five months’ experience running the park.
We had time to make sure we had made good personnel decisions and marketing decisions, rather than just opening in a whirlwind with a brand new staff. And we’re feeling pretty good about our decisions right now.
Would you recommend that other businesses consider locating in Allen?
Absolutely. The economic development council and the city have been tremendous partners. They have a very pro-business attitude and they care about their city. They are very aggressive about attracting the right type of businesses and diversifying their tax base. And in our case, they also provided an amenity that Allen’s residents previously didn’t have — a lake. There was no boating culture here at all, and now Allen has become the wake boarding go-to spot in the country with wakeboarding videos regularly shown around the world.
Victor Toledo is co-owner of Hydrous Wake Park in Allen, Texas. Reach him at (214) 755-9905 or firstname.lastname@example.org. Reach the Allen Economic Development Corp. at (972) 727-0250 or www.allentx.com.
Insights Economic Development is brought to you by the Allen Economic Development Corporation, strategically positioned in the Dallas/Fort Worth metro.
Investing in real estate may seem like a simple proposition. You find a property, buy it, make improvements and then lease or sell it for a profit.
But going about it the wrong way greatly increases your chances of owning a property that costs you far more time and money than you planned on, says Joseph V. Barna, SIOR, principal, CRESCO Real Estate.
“The key is to start with a good investment model and an understanding of what you can do, what you can afford, what is realistic and what you’re capable of accomplishing,” says Barna. “Then you find something that fits. Once you think you have it, go back and make sure your research is correct as it relates to the specific investment. What do you think you can rent it for? What do you think the property can sell for? What are the trends and needs in that particular market? You have to anticipate the worst and plan for it, and if your numbers still come out, you’re probably going to be OK.”
Smart Business spoke with Barna about how to avoid rookie mistakes when investing in real estate.
Where do you begin when looking to invest in real estate?
First, you need to have a well-thought-out plan. In most cases, a poor plan, or lack of a plan, is the biggest mistake first-time investors make. The key is to choose an investment model that works for your financial position and comfort level, then identify a property that is well aligned with your model.
Most people do the opposite. Rookie investors will find what they think is a good deal and then try to develop an investment plan to make that work. But that’s where the trouble starts. You need to put together a business plan and then find something that suits that plan, not just stumble into what you think is a good deal and then grab at straws to put it together.
What are some mistakes first-time investors make?
A common mistake is failing to have an exit strategy, which is just as important as having a plan when you go into an investment. Rookie investors will have one investment strategy, perhaps even a pro forma, then assume that investment is going to perform as it’s laid out based on what they think is going to happen.
An experienced investor, however, will have an investment pro forma and run the worst-case scenario and look at the downside, then run the best-case scenario and look at the upside. You have to plan an exit strategy for multiple situations or you can get burned.
How important is doing research on a potential real estate purchase?
It is extremely important. Real estate is local and each submarket within a specific market is different. It’s crucial to understand local market conditions, the specific submarkets within a market as well as the cycles and trends within those sub-markets, because what was a hot area two years ago could be cooling off today.
What role does due diligence play in determining whether to make an investment?
When people think of due diligence, they commonly focus on the physical structure, the condition of the roof, the mechanical systems and the environment condition of the property, but it goes far beyond that.
For example, if you buy a multi-tenant building in a healthy market in which the rents are at the extreme high end, you’ll get a great return, so you may think that’s well and good. But that property may have a tax abatement in place that will end in three years, and when it does, increased property taxes are going to kick in. That can add considerably to your operating expenses. All of a sudden what you thought was a good return isn’t, and because tenants don’t want to pay an above-market rate, you start losing them when you attempt to pass through the increase.
Zoning is another consideration. Meet with the city before the purchase, because your intended use may not be quite in line with the zoning requirements. If you don’t, you’re going to spend extra time and money trying to get variances, and the cost of that may offset the logic of buying that property.
How can bad math cause problems?
Inexperienced buyers may think it’s easy to buy a property, improve it and either lease or sell it. But they often underestimate the time and money it takes to improve the property as well as the time it takes to find a buyer or tenant. If you think you’ll have to hold it for six months and it’s actually 12, then you’re paying a mortgage with no cash flow coming in.
If you think you are going to buy a building, then flip it for a profit or lease it, double the amount you think it’s going to take to improve it, double the carrying costs as well as the time you think it’s going to take to sell or lease, and if the numbers still make sense, you might have a good deal.
Another mistake regarding money is overleveraging a property and failing to leave enough room to carry the property. If you can’t lease it or sell it, you still have to pay the mortgage, insure it, pay property taxes, heat the property and market it. All of a sudden, that great deal is not so great because you didn’t compensate for the downside.
How important is having advisers?
You need to surround yourself with trusted advisers, including a real estate broker, banker, real estate attorney, accountant, contractor and perhaps a mentor. If you do that and do your homework, you’re much better off than going in with your eyes shut and you increase your chances of success.
Joseph V. Barna, SIOR, is a principal at CRESCO Real Estate. Reach him at (216) 525-1464 or email@example.com.
Becoming an employer of choice can help a company attract and retain the brightest employees, best its competitors and build a reputation as an excellent employer.
But it takes more than just saying it. Instead, employers have to prove every day that they value their employees, says Brendan Prebo, executive director at ASG Renaissance.
“An employer of choice is a company that has practices in place that promote a healthy, forward-looking and encouraging environment for its employees,” says Prebo. “Employees are looking for employers that allow them to think outside the box, that present a clear vision of where they want to take the company and provide employees with proper training for the job to hire and retain the best people. As a result, workers choose that employer when presented with other choices of employment, self-employment or retirement.”
Smart Business spoke with Prebo about how to become an employer of choice.
How can a company begin to develop its brand to become an employer of choice?
First, it’s important to realize that becoming an employer of choice is a strategy, not a tactic, and it needs to be a strategic imperative. The traditional view of HR is that it is a support function. But really good, really progressive companies — the ones that highly skilled, talented workers want to work for — have taken a new view of HR. At these companies, the head of HR sits at the table and is part of developing the strategic direction for the company.
Becoming recognized as an employer of choice requires a companywide effort, and companies must start internally. This means recognizing that their employees are their most valuable resources. Therefore, employers should take a close look at what is not working within their company before beginning to do any external marketing. At the same time, employers can’t be all things to all people, so it’s important to focus on the things that are important to your top performers.
It’s also important to communicate to employees the company’s goal of becoming recognized as an employer of choice so they understand the importance of this designation to the overall success of the company, and they can support the company in its efforts.
Employers also need to be consistent in their message and how they present it. Potential employees will be looking at an employer’s website, and its Facebook and LinkedIn pages. They perform online searches, so if you have a statement on your website that says you value diversity, you need to make sure that is represented in your brand.
What kinds of things help an employer attract and retain the best employees?
Employees are looking for exciting and challenging work; career growth, learning and development; great people to work with; a good relationship with their supervisors and peers; and a company that values its employees. Compensation is an important factor, as well, but money as a motivator only creates short-term results. You may be able to attract a great employee by offering that person a large salary, or keep an employee who might otherwise leave by offering that person a raise. But money is a short-term solution.
For lasting results, you need to look elsewhere. That means providing employees with meaningful work, encouraging them to take risks and think outside the box, having a clear vision of where the company is headed, providing employees with proper training for their jobs and setting and clearly communicating performance expectations that align with the company’s goals. It also means encouraging employees to continue to learn and develop their job skills, providing good leadership at every level and taking the personal needs of employees into account by offering flexible work schedules.
What are the benefits of doing these things to become an employer of choice?
Companies that are recognized as being employers of choice have an advantage in attracting and retaining the best talent. They have a more productive, motivated and committed work force, which directly benefits their customers and their brand, enhancing their competitive position and helping to build a sustainable business.
Highly skilled talent is very much in demand, and jobs in areas such as engineering, software development and project management are tough to fill. Employers need to become an employer of choice to attract that highly skilled talent, not just someone to fill a seat.
What would you say to employers who say they don’t need to worry about this, and their employees should just be happy to have a job?
The days of command and control are over. If you have an aging work force, you may still be able to function that way, but younger workers are not going to stay with that kind of employer. Also, employers can’t afford to have unhappy employees anymore. In today’s world of social media, word travels fast, and potential employees are more knowledgeable than ever about which companies are the best ones to work for.
In addition to the loss of benefits the companies can realize by becoming an employer of choice, companies can also harm themselves by letting dysfunctional work environments go unchecked. Uncooperative, unmotivated and unresponsive employees harm companies in two ways. First is the poor performance that results, but more important is the fact that they affect everyone around them, causing your best employees to leave for better-run and better-managed companies.
By becoming an employer of choice, you will create an environment where your best employees will thrive and that will attract the best and brightest in the market.
Brendan Prebo is executive director at ASG Renaissance. Reach him at (313) 565-4700 or firstname.lastname@example.org.
Caring for a loved one is an activity that takes place outside the workplace, but its impact inside the workplace can be significant, if often overlooked. The majority of those caring for a loved one are employed, and the impact of their care commitment on their workplace productivity is usually underestimated.
MetLife, in a 2010 study in conjunction with AARP and the National Alliance for Caregiving, estimates that lost productivity in the workplace as a result of caregiving costs businesses approximately $33 billion a year. Lost productivity can come in the form of tardiness, leaving early from work, or even in the case of some employees, rejecting promotions that would force a caregiver to move far away from elderly parents.
“Providing care for a family member is an act of kindness and love,” said Annette Kolski-Andreaco, manager of account services for LifeSolutions, an employee assistance program (EAP) that is part of the UPMC Insurance Services Division. “And with increased life expectancies due to medical advances, the need for caregivers will continue to rise.”
Smart Business spoke with Kolski-Andreaco about the impact caregiving has on the workplace and on employees, as well as what employers should know about it.
What is the extent of the impact of caregiving in the workplace?
There is a hidden cost for employers when it comes to caregiving. An employer has to understand that employees are managing difficult life challenges at different stages in their lives. Employers tend to be more aware of some of these challenges, such as marriage, childbirth, day care and the responsibility of school-age children. But employers don’t think as much about the challenges their employees face later in life. And, yet, these are challenges that employers should focus on because the working population is getting older as people continue to live longer and also want to stay in the workplace longer.
What does this mean? For employers, there is likely to be a large cohort of their employees who have increased caregiving responsibilities for elderly parents and other elderly loved ones. In today’s workplace environment, we have an older working population caring for an even older age group, and that is a significant hidden cost.
How extensive is the issue for employers?
An estimated 17 percent of full-time workers are also caregivers, and nearly one-third of all working caregivers are in a professional position. According to a Caregiving in America study, more than 73 percent of caregivers were employed at some time during their caregiving.
That is significant because the study also showed that 66 percent of employed caregivers have gone in to work late, left early or taken off time during the day to deal with caregiving issues. Also, 20 percent of employed caregivers have reported taking leaves of absence as a result of their duties.
In general, it is estimated that caregivers miss an average of 6.6 workdays per year as a result of caregiving activities. A majority of caregivers believe that caregiving has some impact on their work performance.
Is there a physical toll on caregivers?
Surveys conducted by the Centers for Disease Control and Prevention and the National Alliance for Caregiving showed that 17 percent of women over the age of 50 who are caregivers reported fair or poor health, about double the rate for other women in that age group. Similar results were evident among younger male and female caregivers, ages 40 to 49, who also reported poorer health.
The medical conditions for which caregivers are at increased risk include diabetes, high cholesterol, hypertension, pulmonary disease, heart disease, kidney disease and depression.
Caregivers are under a great deal of stress, which can cause a number of physical problems such as muscle tension, impaired immune system function, increased blood pressure, sleep difficulties and a lack of exercise. Essentially, the caregiver is at extreme risk healthwise. To compound the issue, when the caregiver’s health is compromised, the care receiver is put at increased risk.
What other impact is there on the workplace?
The stress felt by caregivers can adversely affect their job performance. Employees who are also caregivers are tired, distracted by worries and have less mental energy at times. This is an issue that employers need to recognize and address.
What can an employer do to help employees deal with caregiving issues?
In general, employees who are caregivers need some flexibility, if it is possible for the employer to grant it. Offering flexibility in terms of schedules, leave time, etc., and support from the workplace can help them deal with these difficult issues.
There also needs to be increased awareness of the caregiving issue and its potential impact on a work force. A company’s human resources department could provide information about helpful community resources, for example. Remember, for most employees, caregiving is a new experience and they need help in knowing where to turn for assistance.
If an employer has an EAP, it should be promoted as a source of support, information and referral to resources. EAPs also provide emotional and practical solutions to problems and can be a source of information about the legal implications and financial repercussions of caregiving.
ANNETTE KOLSKI-ANDREACO is manager of account services for LifeSolutions, part of the UPMC Insurance Services Division. Reach her at email@example.com or at (412) 647-8728.
Insights Health Care is brought to you by UPMC Health Plan
When employees hear the term “consumer-driven health plan,” they may panic. The thought of a high-deductible plan that only covers preventive care until that deductible is met can sound scary to employees used to a system of co-pays and co-insurance.
So if you are moving to this type of health plan, you need to start explaining it early and include a tax expert to show employees how they may actually benefit, says Randy Ressel, vice president in Missouri for HealthLink.
“You need to make this decision well in advance of open enrollment and then help employees understand why you are making this change,” says Ressel. “This is the time for a frank talk from the CEO, because if employees don’t get that, they will suspect the change is something they are not going to like, that is going to cost them and that it’s going to benefit the company. But that is not necessarily the case, so you have to tell them, and tell them again, because it’s different from what they’re used to.”
Smart Business spoke with Ressel about consumer-driven health plans and the steps you can take to ease the transition for your employees.
What is a consumer-driven health plan?
It is a high-deductible health plan that meets IRS codes for having a health savings account attached to it. Nothing is covered with the exception of preventive care until you hit a high deductible, generally $2,500.
The plan is accompanied by a health savings account. Similar to a 401(k) plan, tax-deferred money goes into the account. But unlike a 401(k), in which taxes are paid when money is withdrawn, funds in an HSA are withdrawn and used tax free on approved expenses.
That can be a huge benefit. For example, if you are taking a prescription drug for $100 a month, under a consumer-directed health plan, you are not going to have drug coverage. So if you pay cash, you pay $100 of after-tax income. But if you are in the 25 percent tax bracket and pay out of your HSA, you effectively save $25 because you are paying with pre-tax dollars.
How can a company get started on the transition?
Timing is everything. This is not so much a benefit change as a cultural change. Instead of insurance companies driving care, consumers are the ones making the decisions and driving outcomes, which is a very big change.
Talk early and often about that culture change and make decision-making tools available to employees. Employees can input personal information, along with their health care expenses last year, to help quantify the cost of going to an HSA. Education sessions should begin at least 90 days before the effective date, and attendance must be mandatory. Otherwise, employees will arrive at open enrollment and hurry through the process without understanding their choices. And that is the worst possible situation to be in.
How should a CEO present the plan to increase the chances of employee buy-in?
The CEO should say, ‘We’ve all heard how much health insurance costs are going up. You may not see it because we pay for the majority, so while you may think you are paying the full amount of the increase, that is not the case.’ This presents an opportunity to tell employees exactly how much the company has paid for benefits. Tell employees that you foresee issues down the road with the cost of employee benefits, and because you want to continue providing these benefits, you need their help in using health care dollars wisely.
How can employees help keep costs down under a consumer-driven health plan?
First, use generics. There is a huge variance in drug costs, and generics allow you to retain a larger amount of money in your HSA, so if a big expense arises, it won’t wipe out your fund.
Second, patients should ask their doctors questions. If a doctor recommends an MRI and surgery, ask if there are other options. If he or she says no, then ask about the least expensive place to get an MRI. The cost in some cities can range from $600 to $2,300, so if you are paying out of pocket, it pays to find the least expensive option.
How can employers encourage employees to participate?
One of best ways is to take the employer cost savings from the plan and allocate it into the HSA of anyone who elects that coverage. You can also offer incentives. For example, if someone has asthma and is contacted by a health coach, and the employee agrees to participate in a program, the employer could deposit additional funds. Or if an employee agrees to quit smoking, the employer could contribute funds. That’s a real incentive to get people to be healthy.
Also, the culture of change must begin with management. If there are three plans to choose from and the CEO chooses something other than the consumer-driven health plan, employees won’t buy in. You have to lead by example.
The same is true with weight loss, health risk assessments and other things you want people to do. If you’re not doing them, too, it’s less likely that employees will participate. Establishing weight loss or walking competitions can also have a positive impact on health, and offering rewards for the winning team will encourage employees to participate.
Finally, give employees regular feedback about how the plan is performing. That is key. In your original CEO talk, you said you are doing this because you’re afraid that if you don’t do a better job managing health care dollars and improving health, you won’t be able to provide this benefit down the road.
So how’s it going? Quarterly, or at least semi-annually, tell employees what the budget is, what you’ve done so far and whether you are doing well, or need to do more work. This gives them a vested interest in continuing to buy in to the program.
Randy Ressel is vice president of sales in Missouri for HealthLink. Reach him at (573) 651-4940 or Randy.Ressel@wellpoint.com.
Business valuations are a critical tool in any business owners’ arsenal, and should be considered from the day the business concept originates through the life cycle of the business. Many business owners only consider a valuation when they are thinking about selling, and this is a mistake that owners can be deluded into believing.
“Business owners are visionaries — and have in mind from day one an idea of where they want to take the business and their goals for an exit strategy. Having a valuation in place a few years before that goal end date is something every savvy business owner should do,” says Kevin Strain, audit partner at Sensiba San Filippo LLP, a San Francisco Bay area CPA and Business Consulting firm.
Smart Business spoke with Strain about the importance of business valuations as well as best practices and critical decision factors in selecting the right adviser to support your business.
How can doing a valuation not at the time of a sale, but years before, benefit a business?
According to the ASCPA, merger and acquisition activity is expected to rise in 2012. In addition, in Accounting Today’s Top 100 Firms of 2011 issue, more than 75 percent of the firms represented in the survey offering business valuation services reported significant growth within this area, making it the fastest-growing professional service niche.
A business valuation can have many uses and should be considered in the early stages of a business’s lifecycle —not just when you are thinking of selling. Having an accurate and timely valuation of your business three to four years prior to a forecasted exit plan date is one of the many tools a savvy business owner should have in their tool belt. This proactive strategy can benefit a business in many ways, including gaining an evaluation of the strengthens and weaknesses of the business and, in certain scenarios, providing a ‘roadmap’ for increasing the value of the firm.
If you think you can improve the value of the company by driving revenue, that may not always be the case. You may need to look at different aspects of the business to drive that selling price. Having that long-term strategy helps you assess the different roles and aspects of the business and can help define what will add the greatest value, whether that is based on human capital, whether it’s product related, or something else.
How can an adviser help you through the valuation process?
Having a trusted adviser to work with you through the valuation, who can provide guidance on factors that will impact the valuation and the valuation techniques that are used through the process, is priceless. I work with many clients as they are proceeding through a valuation process, and serve as a trusted adviser with whom the business owner can rely on for open and honest guidance.
As business owners are considering having a valuation performed, they should ensure they have a business adviser — that may be their audit firm or an independent adviser — work alongside them through the process.
The role of an independent adviser is to work with clients and clearly explain the valuation process, including the time and the techniques that will be used to determine the value of the business. There are many different circumstances that must be taken into consideration when having a valuation done, and the adviser should help clients to maneuver through what can often be a highly detailed and, at times, technical process.
Once the valuation process has been completed an adviser will review the draft document, and may make edits to the document. Once reviewed, the final draft is sent back to the valuations firm to finalize and present the final document to the business owner.
What questions should a company ask to identify the right valuation firm for its needs?
A part of my role with working with my clients, is to help guide them through this process. This is one of the key differentiators of how both I and Sensiba San Filippo serve our clients. We will guide our clients through this process, provide insight and explanation and also review the valuations reports with the client for accuracy. Because valuations are so subjective, the most important factor is to select someone who is deeply familiar with your industry. When the valuation firm attempts to value a business in an area it is not familiar with, if it isn’t aware of seasonal trends or what impact the economy is having on that industry, it can be a problem, because all of those things are factors that go into how you value a company.
Next, look at credentials. What is their history? How many valuations have they done? That experience can be critical to an accurate valuation.
Asking the right questions and working with experienced professionals will ensure that your valuation is on target and may help you identify areas going forward in which you can improve business value.
Kevin Strain is an audit partner at Sensiba San Filippo LLP. Reach him at firstname.lastname@example.org.
Oftentimes, when people find themselves with a “sudden money” event, they’re overwhelmed with the new demands and new decisions they need to make. Whether that money comes through an inheritance, insurance settlement, divorce, stock options or a lottery win, it is going to make a significant difference in your life. If you don’t give yourself some time to figure out how to deal with your new level of wealth, you are likely to make a number of mistakes you’ll regret later, says Norman Boone, founder and president of Mosaic Financial Partners Inc. in San Francisco.
“Suddenly having money that you’ve never had to deal with before can be very difficult,” says Boone. “While you may be tempted to jump in and buy that new Porsche or home in Tahoe you’ve always wanted, taking your time will ensure that the money is used in a way that is right for you.”
Smart Business spoke with Boone about the three steps to making sure unexpected funds are used in an intentional way.
Isn’t suddenly having a lot of money a good thing?
Most of the time, yes. But, it’s important to recognize that most of us have emotions surrounding money. In addition, the issues that can lead to a significant jump in our level of wealth — inheritance, divorce, loss of a spouse, retirement — are themselves emotional events. Put the emotions you have about money on top of the feelings arising from those events, and it can become overwhelming.
What should happen first after coming into sudden money?
The first step is one of adjustment and planning. You need to get used to the idea of having this new money and it’s critical that you do some planning. What do you want out of life? Who do you want your friends to be? Where do you want to live? What things do you want to be involved in? Do you want to continue to work, volunteer, or just play golf? There are a lot of choices about how you want to live your life and how you’re going to share the wealth. What would you end up feeling good about, or what would you feel guilty about? If you make spending decisions too soon, you’re almost certainly going to make mistakes and do things you’ll regret later, as well as limit the choices you’ll have later on.
We advise our clients to take a year to think about these things and prepare. Find an adviser who has helped clients through these issues before. Don’t be afraid to discuss what seem to be ‘stupid questions.’ This is a new experience and so there are going to be new complications in your life. Begin to set goals, see how those feel to you and figure out the things you want for yourself and your family.
The biggest mistake people with new wealth make is that they quickly spend it on things that seem appealing. They are easy targets for friends and family who want something from them. While buying some new things is natural, defer the really major decisions until you have a clearer view of how to deal with the wealth. Those who spend too quickly almost always wish they had done it differently.
Family, friends and oftentimes strangers don’t always have your best interests at heart. Friends will expect you to pick up the dinner tab. Most people who have publicly received new wealth are inundated with investment ideas or requests for gifts or loans. We suggest that ‘no’ be the answer until you have a well developed policy to help you decide how to deal with those requests.
The first phase also involves finding the right advisers. You want people who answer your questions respectfully and in ways that you understand. They should be well qualified and have experience working with others who have enjoyed sudden wealth. They should be well regarded by other advisers and should be willing to commit to always making recommendations to you that are solely in your best interests.
What is the second phase?
Phase two is the action phase, in which you start to implement the plans you’ve developed in phase one with your attorney, accountant and financial adviser. This will typically involve making investment choices and developing a whole new estate plan. It may include setting up charitable strategies, perhaps deciding if and how you might share some of that money with family.
Having good plans will allow you to make good decisions. It’s important that those decisions reflect your wishes and not what anyone else wants from you, including your advisers, family members and friends (all of whom will want to offer you advice).
What else needs to be considered?
The third phase is the monitoring and adjustment phase. When you discover that early decisions were not optimal, it’s OK to change your strategy. When your money is at work, the right planning has been done and you’ve begun taking the right steps, you can also start to think about larger projects. Are you going to get involved in charities? Depending on how much money you have, charitable work can be a gratifying way to share your wealth. It’s also a way to get family involved in enjoying the benefits of the wealth and help them learn to deal with money that may eventually be theirs.
You should see your advisers regularly to ensure you stay on track. We recommend you meet with your advisers at least once a year, and more often if you have larger amounts, because questions come up and things change. Do not be afraid to ask questions or use the expertise of your advisers. This is your ‘wisdom team,’ and if you’re not taking full advantage of them, you don’t have the right advisers.
Sudden money is everyone’s dream, but the reality is more complicated. If you do it right, the new wealth can add significantly to the quality of your life. Instead of impulsively squandering your opportunity, take your time and be thoughtful with it so that you can fully enjoy it.
Norman M. Boone is founder and president of Mosaic Financial Partners Inc. Reach him at (415) 788-1951 or email@example.com.
Any business that uses computers and connects to the Internet is at risk for a security breach. And if your business stores sensitive or personal information, your risk is even greater, says John Peckham, executive vice president/information systems at Bridge Bank.
“Information and systems can be the lifeblood of an organization, and one security event could put you out of business,” says Peckham. “It behooves every business owner to be aware of that.”
Smart Business spoke with Peckham about how to keep your proprietary information and data secure, and how to test the integrity of your information systems.
What should businesses be doing to keep their proprietary information and data secure?
Start with a risk assessment, which will help you understand where your risks are and where you need to focus your attention and resources. A company should focus on its critical assets first. If a company has a lot of intellectual property, that might be the place to start. If it maintains a lot of customer information, particularly confidential customer information, start there.
A business owner may be able to do this internally, but unless it’s a small company, it is wise to get multiple people or departments involved. Owners can gain a lot of insight by speaking with other people in the organization.
Stick to the basics, make sure your policies and procedures are in place and effective, know where your data is and who has access to it, keep things up to date and test your backups — these are all tried and true basics of information security.
How are personal devices posing a security challenge to the IT departments of mid-sized companies?
Companies are seeing an influx of consumer devices in corporate IT, and use of mobile devices is on the rise. Organizations need to think about how these devices fit into their IT strategy. Is it something that you are concerned about, or is it something you want to find ways to embrace?
You have to think about how personal devices play into your security structure, particularly when employees use their own devices to access corporate resources, e-mail, applications and file sharing, especially when sensitive information is involved.
What happens if one of those devices is lost or stolen, or an employee leaves the organization? Every organization needs to look at how it uses technology within the business and make decisions about what is going to be permitted and what is not. It goes back to the risk assessment, and developing policies and procedures around that. If employees are using their iPhones to connect to the corporate Exchange (e-mail) service, a business might want to install security policies on that device that causes data to be wiped from it when the wrong access codes are entered too many times, or when the device is reported lost or stolen.
Employee awareness around this issue is crucial. It is incumbent upon a business to educate employees and make them aware of concerns about the use of technology from a security perspective. It sounds basic, but simple things like reminding employees not to click on links in e-mails that they were not expecting can have a huge impact on your organization’s security.
How should companies test the integrity of their information systems?
Organizations are best served by using an independent third party that specializes in that type of work. There is no substitute for that independence and expertise in terms of doing true testing.
To find the right firm for your needs, start with the key platforms and the policies and procedures that you want to test, and look for a service provider with experience in those areas. Or identify a service provider that has expertise and experience in your industry. In any case, be sure to check the service providers’ references.
What are the common missteps that businesses make when building their information networks?
Not conducting adequate due diligence. With technology, there’s a tendency to ‘focus on the shiny object,’ something that looks really cool. They think, ‘This is the latest and greatest thing. I see everyone else doing it, so now we’re going to get it.’ But how does it really fit into your organization? Is it something that you really need? Is it something that’s going to integrate with everything else that you have? Or is it going to be a disparate system that sits on an island by itself?
You need to spend a lot of time in the due diligence phase when you’re looking at new technologies, new systems, or new service providers. Look at things like how long the provider has been in business. Do they have the financial and operational wherewithal to stay in business long term? Is the new technology going to fit well into your existing infrastructure? Is it something you can integrate, and can you do it in a secure and efficient manner? You need to look at those things, or you may end up with a system that is implemented but never utilized because it really wasn’t thought all the way through.
Another mistake is failing to train sufficiently. New things are just that — new — and it’s not uncommon for a business to implement something and just give it to employees and expect them to pick it up. And that can be a long and frustrating process for both the business owner and the employees. A good training program that’s part of the implementation can go a long way in reducing the learning curve and the amount of time it takes for that technology to become a useful and meaningful part of the organization.
John Peckham is executive vice president/information systems at Bridge Bank. Reach him at John.Peckham@bridgebank.com or (408) 556-8309.
As the economy slowly begins to improve, many companies are seeing their business doing the same. However, they may be reluctant to hire additional workers to handle the workload, fearing that it may drop off again and they will be stuck with employees they don’t need, says Danny Spitz, founder and president of EverStaff.
“The solution is temporary staffing,” says Spitz. “Businesses are more comfortable bringing on staff on a temporary basis until they make sure that the workload is going to continue. Although they are cautiously optimistic, they are skittish about hiring permanent workers. First, they want to see the skill sets and want to know that the work is going to last. So they continue to favor temporary staffing.”
Smart Business spoke with Spitz about how a recruiting and staffing firm can supply the right temporary workers to help you control your work force on an as-needed basis.
How can temporary staffing help a company control its work force?
It allows a company to staff for peak needs, with the flexibility of letting those people go when they no longer need them. When some companies have an increase in workflow, they are afraid to hire. So they ask their existing employees to do extra work and sometimes work overtime.
Partnering with a staffing agency to bring in temporary workers can help avoid burnout among your employees, improving their overall productivity and allowing them to continue to focus on their main job tasks. When companies are looking to cut costs, often the first place they look is payroll. And when a company downsizes, it will ask its staff to go into overdrive and handle responsibilities that they are not used to handling. Temporary staffing can help keep your current employees happy and allows you to bring in specialized talent for certain tasks, which, in the end, results in better service and better products for your clients or customers.
Temporary staffing can also help you control your work force because if the workload does continue, you have already trained that individual and you have the option of hiring him or her as a full-time employee. This arrangement allows you to try before you buy, evaluating whether they will fit in the corporate culture and with other employees, see what their work habits are and identify any weaknesses that might not be evident in the interview process before you hire them full time. It allows you to give someone the opportunity to work for your company but say that that person has to earn the right to be a full-time employee.
How can temporary staffing help cut costs?
Because the recruiting and staffing firm — not your company — is the physical employer of the temporary staffing people, you don’t have to worry about them filing for unemployment when they are no longer needed. This can reduce the overall operating costs for a business because it does not affect what the employer pays for unemployment insurance.
It can also keep costs in check because the business is not responsible for paying for benefits. In addition, the staffing firm handles all employer-employee responsibilities, such as workers’ compensation, and the employer doesn’t have to provide sick time and vacation time or contribute to a 401(k) plan.
Temporary workers can also cut costs by stepping in to handle overflow work instead of the company paying overtime to your existing workers.
How can a staffing firm help a company with the interview process?
With unemployment at an all-time high, the number of applicants for an open position is also at an all-time high. If you have one position and 300 people apply, where do you start? How much time and energy are you willing to put into that? An HR person could spend days going through hundreds of unqualified resumes just to identify a handful of appropriate applicants to prescreen for an interview.
A specialized staffing firm like EverStaff will take on that role and mirror the company’s procedures as an extension of the HR department and management team. The firm conducts a thorough screening and very specific skill testing to find a candidate with the right skill set, as well as a candidate who truly wants to work. The firm will mirror exactly how a company does its internal hiring. If it’s two interviews, a background check, drug testing and skill evaluation, the staffing firm will do the same things, so someone who comes in on a temporary basis and then is hired full time has been through the same process as everyone else.
What would you say to an executive who says his or her company doesn’t have a need for temporary workers?
If you don’t have a need now, that is the perfect time to meet with a staffing and recruiting firm. The last thing you want to do is to try to determine the right partner to meet your needs when your need for help is now. Take a proactive approach and take the time to develop a relationship with a staffing firm to identify potential needs.
That way, when someone resigns with little or no notice, or if something in your business changes, the staffing firm already has someone in the pipeline to step in when needed without affecting your productivity.
Danny Spitz is founder and president of EverStaff. Reach him at (216) 674-0788 or firstname.lastname@example.org.