Troy Sympson

Douglas Kolker, the president of Summit Selling Systems, Inc. and the owner of the Sandler Training Center, discusses three key areas of your business's sales efforts that you may need to address in order to increase profitability.

To do so, you need to ask yourself three questions:

1.   Do you have the right salespeople?

2.   Do they have the right skills?

3.   Are your sales team and their efforts well structured?

Douglas Kolker is the president of Summit Selling Systems, Inc. and the owner of the Sandler Training Center. Reach him at (818) 995-7197 or info@sumsell.com.

Douglas Kolker, the president of Summit Selling Systems, Inc. and the owner of the Sandler Training Center, discusses three key areas of your business's sales efforts that you may need to address in order to increase profitability.

To do so, you need to ask yourself three questions:

1.   Do you have the right salespeople?

2.   Do they have the right skills?

3.   Are your sales team and their efforts well structured?

Douglas Kolker is the president of Summit Selling Systems, Inc. and the owner of the Sandler Training Center. Reach him at (818) 995-7197 or info@sumsell.com.

It’s still early in the current Missouri legislative session (which started Jan. 5 and runs through May 13), and those in the business world are closely following the activities in Jefferson City. This is shaping up to be an interesting year, and many pieces of legislation, if enacted, could redefine how companies and consumers approach business.

And if businesses aren’t aware of what’s happening at the state capital, they may miss some significant changes.

“There’s a lot to watch in 2011, both in Missouri and across the U.S.,” says Dale E. Hermeling, an attorney with The Stolar Partnership LLP. “With a significant Republican majority in both the House and the Senate in Jefferson City, the Republican agenda supporting business and smaller government will be pushed forward. It will be interesting to see how it all plays out.”

Smart Business learned more from Hermeling about possible legislative actions in Missouri and how they could affect businesses.

What is happening with tax credits in Missouri?

Last year, Gov. Jay Nixon commissioned a group of 25 business, community and legislative leaders to study the various tax credits that exist in Missouri. This Tax Credit Review Committee held public hearings and generated a report with various recommendations relative to the efficiency and effectiveness of the state’s 61 tax credit programs.

There has been a lot of concern over the budget in Missouri and the impact that the tax credits have on state revenue. A number of bills have been introduced in the Senate to restructure or eliminate some of the tax credit programs. Other bills call for establishing annual caps or requirements for legislative appropriation on the amount of the tax credit.

The most significant focus has been the challenges to the historic tax credit program and low-income housing tax credits that have been used so effectively on local projects here in St. Louis.

What other issues should employers be watching?

The first bill filed in the Senate this year involves an effort to establish Missouri as a right-to-work state. Right-to-work laws prohibit agreements between labor unions and employers that make membership or payment of union dues or fees a condition of employment, either before or after hiring.

Proponents of right-to-work feel that it would increase business opportunities in Missouri and make Missouri more competitive relative to some of our neighboring states. Opponents of right-to-work feel that these laws weaken unions, thus creating lower wages and endangering worker safety and health. They also argue that establishing Missouri as a right-to-work state would reduce the quality of the local work force.

If the bill passed, it likely would force a showdown with the governor, who opposes the measure.

There are also efforts to try to amend portions of the workers’ compensation law to eliminate what were likely unintended consequences of certain reforms passed in 2005. For example, courts have interpreted some of these changes to allow a worker who suffers a work-related injury to sue a fellow employee for negligence in a civil action. This exposure presents risk to supervisors, who may then look more and more to their employers to provide indemnity or some other protection.

In addition, there is a proposal to eliminate the state income tax and replace it with an expanded sales tax. No one knows how much revenue will be gained or lost if a sales tax is used instead of an income tax, and the sales tax will likely impose a greater burden on lower-income taxpayers than higher-income taxpayers. Businesses should be concerned that consumers could just avoid the sales tax altogether by shopping out of state.

Another concern is that the sales tax could be imposed on services that are not currently taxed, such as professional services and insurance premiums. I am not sure this kind of reform will gain a lot of traction. Proponents argue that replacing the income tax with a sales tax would help create jobs, promote economic development and make state revenue less volatile. Opponents feel that it could hurt the middle class and force cuts to government services.

What other legislation should be monitored?

Another item to watch in Missouri is whether the legislature will return control of police departments to the cities of St. Louis and Kansas City.  There is a bill that has passed through the House and is currently in the Senate that would return control of the police departments back to the cities. Currently, police boards, whose members are appointed by the governor, control the operation of these police departments. This is a big issue if the city of St. Louis is ever to be reinserted into St. Louis County.

How will the makeup of the House and Senate impact pending legislation?

We all recognize the majority that Republicans have in both houses of the legislature, but one thing that isn’t talked about much is the level of experience that these legislators have. With the term limits that have been put into place in Missouri, there are a lot of legislators in both the House and the Senate who haven’t been there before and need to learn the ropes.

It’s a Catch 22: No one wants career politicians, but, at the same time, everyone wants politicians with experience. The bottom line is that we need cooperation among all of the legislators if any progress is going to be made.

Dale E. Hermeling is an attorney with The Stolar Partnership LLP. Reach him at  (314) 641-5135 or deh@stolarlaw.com.

Business operations are subject to a number of risks from both internal and external factors. In addition, ownership interests in businesses are subject to risks, including market factors.  How organizations and their owners address these risks can have a significant impact on the value of businesses and interests therein.

An enterprise risk management (ERM) process involves identifying risks relative to an organization’s objectives, assessing them for likelihood and impact, developing a response strategy and monitoring progress. A well-defined ERM framework can protect and create value for the organization and its owners.

“How a business addresses risk can have a significant impact on the value of a business,” says John T. Alfonsi, CPA, ABV, CFF, CVA, CFE, a managing director of Cendrowski Corporate Advisors LLC.

Smart Business spoke with Alfonsi about business risks and how they impact valuation.

Where is risk addressed in a business valuation?

The most common method of valuing a business is the ‘income approach,’ which requires a valuation analyst to project a business’s future cash flows, then calculate the present value of the sum of these cash flows by employing an appropriate discount rate.

When using the income approach, a valuation analyst must address risk in two primary areas: projected future cash flows and the discount rate. Effective ERM processes can help businesses increase value by affecting the estimates for these quantities.

How does risk impact projected future cash flow?

Projections contain risk: There exists a risk that the organization will not achieve the projected figures. As such, the process by which management projects future cash flows can impact a valuation analyst’s assessment of the business. A key risk in the process is information integrity, the quality of information generated through monitoring and data assimilation. Information integrity allows management to make well-informed decisions and should provide a valuation analyst with greater confidence in a business’s projections.

Valuation analysts can analyze information integrity by examining historical projections and assessing elements of the internal control environment. In analyzing historical projections, a valuation analyst should examine the variance between historical projections and a business’s actual performance. If a strong correlation exists, a valuation analyst can be highly confident in current projections, if the process employed by the organization in making projections remains constant. If a strong correlation does not exist, the analyst must examine the variance between past projections and actual performance to discern whether bias existed in past estimates and may exist in current projections. While valuation analysts are not experts in assessing internal controls, they can question management regarding how information integrity is maintained and business risks are assessed.

What about risks in the discount rate?

The discount rate is the yield necessary to attract capital to a particular investment, given the risks associated with that investment. A project with relatively high risk will require a relatively high yield to compensate an investor for bearing these risks. In determining the discount rate, there are two sources of risk to be quantified: systematic and unsystematic. Systematic risk is the risk one must bear for taking on a risky investment in the market, which encompasses all available risky investments, including public and private equities, real estate, foreign currencies, etc. However, systematic risk is estimated by calculating the return to public equities due to availability of data. The ERM process has little impact on systematic risk unless the business’s performance is heavily tied to market performance, as was the case with Lehman Brothers and Bear Stearns in their final days.

Unsystematic risk is sometimes broken down into two components, industry risk and company-specific risk. Industry risk reflects the risks identified with the industry in which a business operates. Company-specific risk encompasses all other risks, including (but not limited to) size, depth of management, geography of operations, customer and/or vendor concentration, competition and financial health. This last component of the discount rate is one that businesses can impact, and commensurately increase or decrease their valuation. Identifying and minimizing company-specific risks through an ERM process can positively impact the value of a business, as a company subject to less risk is more valuable than one subject to greater risks.

Are there risks that businesses can manage and some they cannot?

Yes. Businesses cannot generally control systematic risk. They can, however, control company-specific risks. Successful identification, analysis and mitigation of company-specific risks through effective ERM processes can commensurately bolster a business’s valuation.

How can ERM processes mitigate company-specific risks and increase value?

An ERM process should quickly gather and assimilate high-quality information for use in the organization’s decision-making process, allowing the organization to rapidly assess the impact and likelihood of risks associated with changes in its internal and external environments. Early assessment and mitigation can help preserve value and capitalize on risky events when competitors do not react as swiftly to environmental changes. By capitalizing on risky events, businesses increase the chance of improving market share or maintaining an industry-leading position. ERM processes can also provide resilience to events including the loss of a leader or key customer. The ability to successfully mitigate risky events should be recognized by a valuation analyst through lower estimates for company-specific risks, leading to higher valuation estimates.

John T. Alfonsi, CPA, ABV, CFF, CFE, CVA, is a managing director of Cendrowski Corporate Advisors LLC. Reach him at (866) 717-1607 or jta@cendsel.com.

Taxes are a significant cost for any profitable organization. When business professionals discuss managing the risks associated with taxes, they are frequently referring to the tax implications of unfavorable audit opinions, improper recording of tax assets and liabilities on a firm’s balance sheet, or noncompliance with tax laws. Tax Risk Management (TaxRM), however, is much more than the sum of these elements.

TaxRM is an enterprisewide process that is affected by a company’s board of directors, management and/or other personnel, and is designed to minimize tax liabilities and maximize compliance, each within the guidelines of tax laws. TaxRM processes enumerate, analyze and mitigate tax-related risks associated with an organization’s strategy, operations and processes, says Walter M. McGrail, JD, CPA, a senior manager at Cendrowski Corporate Advisors LLC.

“Effective TaxRM can help an organization minimize its overall risk exposure, and it should be integrated into an organization’s enterprise risk management process,” says McGrail. “It is necessary for nonprofit and for-profit organizations.”

Three stakeholders can claim rights to the cash flow of any organization: debt holders, equity holders and the government. Besides minimizing risk exposure, TaxRM maximizes the amount of cash flow available to debt and equity holders.

Smart Business spoke with McGrail about TaxRM and how it can benefit organizations.

Who should be responsible for TaxRM?

Senior level tax managers, CFOs, audit committees, chief risk officers and heads of internal audit functions should manage TaxRM. As such, TaxRM processes holistically manage tax-related risks throughout the organization. These risks pertain not only to financial reporting and tax law compliance but also to the methods by which the organization generates profits for stakeholders. Wherever there are profits, there are most likely taxes, or at least compliance reporting requirements.

What are the foundational elements of an effective TaxRM process?

TaxRM is most effective when it is treated as a component of the organization’s overall enterprise risk management (ERM) process. Many ERM processes focus on the risk exposure associated with a company’s core services and operations. TaxRM, however, is infrequently integrated into an ERM process, in spite of the fact that the government can receive a significant portion of a company’s profits — in some cases upward of 40 percent of profits. Integration of TaxRM into an ERM process begins with the integration of the tax function in the organization as a whole. In many companies, the tax function is treated as an area of specialized expertise whose primary focus is tax compliance; day-to-day accounting and reporting functions are often carried out by personnel before being ‘thrown over the wall’ to the tax department.

For example, many companies make investment decisions using a net present value (NPV) based criterion: A project is accepted if its NPV is greater than zero when the company’s hurdle rate is employed. In calculating the NPV of a project, however, a flat, marginal tax rate of about 40 percent is often used. This rate may be significantly different from both the company’s effective tax rate and from the tax department’s best estimates regarding the net tax rate for the project, and could lead to suboptimal decision-making by organizational managers. A culture of tax awareness is also a necessary, foundational element of an effective TaxRM process. Cultures are not ‘implemented,’ per se; they are affected by the actions of an organization’s board of directors and senior management. A culture of tax awareness, then, is an element that must be fostered by these high-level individuals through their actions and through an emphasis on tax analysis. In the absence of a tax-focused culture, a TaxRM process will achieve suboptimal results.

Aside from a tax-focused culture, what are other foundational elements of a TaxRM process?

Another foundational element of a TaxRM process is a documented tax philosophy for the organization. This philosophy articulates the manner in which the organization will manage tax liabilities through acquisitions and dispositions, operations, accounting policies and financial reporting. There is a great deal of risk exposure surrounding each of these issues and, hence, a large amount of tax uncertainty. TaxRM processes are, therefore, focused on managing the variables associated with these issues and the requisite tax liabilities they generate.

A tax philosophy is more than an articulated statement, which relates that the organization will seek to minimize its tax liabilities. In fact, in properly structured environments, taxes can help companies minimize risks associated with their investments. For example, if a company experiences losses, it may receive refundable tax credits associated with this loss. These credits serve to minimize the firm’s risk exposure as the government has now borne a portion of the firm’s risk by providing for refunds of taxes previously paid or serve as credits against future tax liabilities.

Once a tax philosophy has been established, an organization can begin to implement working elements of a formal TaxRM process.

How can nonprofits also benefit from TaxRM?

Although nonprofits do not pay taxes on their core operations, a portion of their operations may be subject to unrelated business income tax (UBIT). For instance, although a hospital is a nonprofit organization, hospitals may pay UBIT on income earned in their gift shops if effective TaxRM processes are not in place. In this manner, an effective TaxRM process can help nonprofits minimize UBIT through careful and deliberate planning, affording the organization greater after-tax cash flow to fund its core operations and further its mission. As such, TaxRM should be a key element of ERM processes in nonprofits as well as for-profit corporations.

Walter M. McGrail, JD, CPA, is a senior manager at Cendrowski Corporate Advisors. Reach him at (866) 717-1607 or wmm@cendsel.com or visit www.cca-advisors.com.

With businesses getting back on track and reinvesting in themselves, many companies are expanding their capabilities and bolstering their staffs.

But don’t rush into making a new hire — regardless of how extensive his or her credentials and references seem to be — just because you can (and need to). Before you do anything, make sure you perform a proper background check on all new hires.

“Over the past 10 years, background inquires have quadrupled,” says Melissa Hulsey, the president and CEO of Ashton. “It is standard protocol to perform background checks on all job levels.”

Smart Business spoke with Hulsey about background checks, how to perform them and why doing so protects an organization’s employees — and the organization itself.

What specific criteria are included in a candidate’s background check?

There are many types of background checks — reference, criminal background, driving record, education, credit report, credential verification, workers compensation claim records and legal working status checks, to name a few. When evaluating a new candidate it is important to establish what type of background check is required for the job.

A custom screening process can be designed for each job within an organization. It is very important to be consistent. Background checks can be different for each job; however, candidates applying for the same position need to be evaluated equally.

At what point in the process should an employer ask for references?

References should be provided early in the selection process. Any blemishes on reports can then be discussed in the interview process, or it may eliminate the candidate immediately. It is always better to know up front if a potential problem exists than to wait until time and resources have been invested. Most background reports are not expensive to run and it is money well spent to find out the truth early.

How much faith should companies put into references in the background check process?

Let’s face it: the personal and professional references provided by a candidate will almost always be good. Why? They would not list them if they were not confident a glowing report would be given. Therefore, take most of these with a grain of salt. It is more important to verify accurate dates of employment and rehire status, if at all possible. Many times, candidates exaggerate this information. Stick with the facts and try not to make your evaluation on emotion.

Should companies take search firms’ background information at face value?

Clients should always request a copy of background reports to verify that hiring criteria have been met. The candidate will have to authorize the release of this information, so make sure to ask for this verification as well. Search firms want their candidate to be hired, especially if they are in competition with other services. By requesting copies of all reports and reference checks, it keeps everyone honest.

What information detected in the due diligence process will most likely lead to being a deal-breaker for the candidate?

Any type of felony conviction that was not clearly explained up front will most likely be the end of the road for that candidate. Bankruptcy, DUI and lying on the application can all be deal-breakers when discovered. The important part is to have a system in place to make sure these things can be discovered.

How have background checks changed over the years?

Technology has made obtaining personal information much easier and more cost-effective. Gone are the days of calling someone and waiting for them to return your calls in a timely fashion.

There are databases, such as E-verify (www.uscis.gov/everify), the Georgia Department of Corrections free inmate search (www.dcor.state.ga.us) and fingerprinting service Cogent Systems (www.cogentsystems.com), that can provide almost instant access to any requested information. A word of caution, though, databases are only as good as the information put into them. Some are not frequently updated and many rural counties do not report to a central system at all. So, if an individual was convicted of a crime in a rural county and that county does not upload its information, the only way to obtain it would be to personally go to that county’s courthouse. Background information is not foolproof.

Does it hurt morale to request internal candidates to undergo a new background check?

No, just like random drug tests, it’s becoming standard procedure to periodically update personnel files. The key, again, is to be consistent and have a documented policy for what is required to maintain a good employment status. Morale is hurt when change is not effectively communicated and understood. Explain why it is important to do these checks for the safety of the employees and the company.

Melissa Hulsey is the president and CEO of Ashton. Reach her at (770) 419-1776 or mhulsey@ashtonstaffing.com.

Communication needs are changing, and if businesses don’t keep up with new and emerging technologies, they could quickly be left in the dust by their competitors.

But with new technologies launching almost every day, it can often be difficult to know if the latest “next big thing” will actually help your business or just be a waste of money.

While there are many buzzed-about technologies being pitched to business owners, there are certain technologies that, if properly implemented and maintained, can really change the way a company carries on day-to-day operations and interacts with its customers.

“The business world is always changing and, with the proliferation of new technologies, that change is exacerbated,” says Kurt Fennell, vice president of product management for Time Warner Cable Business Class. “You don’t need every new technology that comes out, but there are things that can really make a difference for businesses of all sizes.”

Smart Business spoke with Fennell about current technology trends and what businesses should be paying attention to.

What current technology trends should business owners be most aware of?

There are three main technology trends right now that business owners would be wise to pay attention to:

• The migration from TDM to IP. Businesses are looking for increased flexibility, scalability and value, and moving from time-division multiplexing (TDM) to Initiation Protocol (IP) applications helps them achieve that. Traditional services such as voice and conferencing can now be run over IP infrastructures, thus simplifying integration, enhancing communication and improving interactions.

• An increase in mobility. With more companies employing mobile workers (people who work on the road) and teleworkers (people who work from home or some other remote location), there has been an increase in wireless applications. These applications allow employees to be more productive and more collaborative, regardless of where they may be working.

• The emergence of managed services. With companies now able to get more bandwidth, flexibility and scalability due to the migration from TDM to IP, we’re seeing an increase in mobile managed services, such as storage, messaging and security.

How are the phone needs of businesses changing?

There are two key things that today’s businesses want:  the ability to self-manage and the ability to utilize more advanced features.

Self-managing means that a business has remote access to things such as call forwarding or hunt group configuration. A hunt group is the ability for a call to be routed to a station or person based on a set of rules. For example, you could have one telephone number for your sales department. If a call comes in to one of your phones and that salesperson can’t answer it, the hunt group will route the call to another salesperson who is available to take the call.

Advanced features include capabilities that allow your people to interact with customers in the way they want to — like having an auto attendant or Web access for live chats.

How are Virtual Private Networks (VPNs) changing the way employees do their jobs?

A VPN enables two locations to be connected together on the same network, so you can transparently and securely share information between those two locations, as if they were existing on one network. An example of this would be a company’s headquarters connecting to its branch offices, so that employees in the branches could access the file server, e-mail server and/or Internet connection of the headquarters.

Another aspect of a VPN is the ability to tie in mobile or remote workers to that network environment. Normally, this is done through software components that talk back to the VPN, connecting the remote or mobile workers to the network. This offers increased mobility and the ability to access company resources in a secure fashion. Secure remote capability is vital to doing business in today’s technological business world.

How does mobile Internet tie in to all of this?

With a large increase in mobility and the need for employees to be connected while on the go, applications such as productivity tools, messaging systems, video, etc., need to be always available and as fast as possible. Whether employees are connecting their laptops or smartphones with USB cards or Wi-Fi devices, they need to be able to access the applications they need to do their jobs. They also need to be able to connect and interact with colleagues and customers across the country. With the proliferation of 3G and now 4G networks, the mobile Internet allows workers to always be connected.

What would you say to business owners who don’t think they need all this new technology?

There are more traditional businesses that are not on the forefront of the adoption of technologies, and there are other more tech-savvy companies that always adopt technologies early on. There’s no hard-and-fast rule as to when to adopt a new technology, but it does make sense for a business to take advantage of those technologies that could improve productivity, enhance operations and save money.

If you have a business that has employees who need to collaborate in any way, or need to maintain a flexible work environment, you should look at what these technologies can do for you. Doing so can not only help you attract and retain the best and brightest employees, it can also help you remain competitive with other businesses that may have more resources than you do.

Kurt Fennell is the vice president of product management for Time Warner Cable Business Class. Reach him at (703) 345-2443 or kurt.fennell@twcable.com.

The State of Iowa is leading the way in renewable wind energy. Renewable wind energy is cost effective and environmentally friendly, and Iowa has the land — and the wind — needed to provide that energy.

Because of this, many companies are moving to Iowa to be more environmentally conscious — and to make their business dollars go farther.

The Iowa Department of Economic Development (IDED) has many programs and services to offer individuals, communities, and business. The IDED strengthens economic and community vitality by building partnerships and leveraging resources to make Iowa the choice for people and business. For more information on the Iowa Department of Economic Development, visit www.iowalifechanging.com.

The Iowa Alliance for Wind Innovation and Novel Development is designed to support the State of Iowa in its efforts to continue to attract and nurture wind energy and related industries. The Midwest in general, and Iowa in particular, is uniquely positioned to respond to the need for renewable energy and to take advantage of the opportunity in this growth industry. Iowa is at the heart of the nation’s wind resource and the gateway to renewable energy demand. For more information on the Iowa Alliance for Wind Innovation and Novel Development, visit www.iawind.org.

Thursday, 17 March 2011 05:00

The future of retirement



Mercer, a global leader for trusted HR and related financial advice, products and services, has announced the latest event in their Innovation Conversations series — The Future of Retirement. Emmy award winning journalist Paula Zahn will once again host a compelling and interactive dialogue with leading-edge companies, thought leaders and Mercer experts.

As nearly 80 million baby boomers in the U.S. begin to reach retirement age in 2011, the concept of retirement is being redefined. Driven in part by rising life expectancy and by concerns around securing sustainable retirement income, employees are reassessing their options to take advantage of a more flexible approach to transitioning from work to retirement.

This event will explore the implications and the innovative actions employers can take to drive both retirement plan performance and a more effective workforce management strategy.

Expert panelists from Mercer, eBay Inc., Pfizer Inc., Boston College and Symantec Corporation will share their views and experiences on how organizations are currently meeting the challenge head on through innovative integrated retirement management strategies, as well as provide their insight and advice on the likely challenges ahead for employers in a fast-changing retirement landscape.

There will be a live Q&A with panelists. Participants are invited to submit their questions to Zahn and the panel for discussion.

The Future of Retirement will take place on Thursday, April 14, 2011 ?at? 9:30 am EDT, ?8:30 am CDT, ?7:30 am MDT? and 6:30 am PDT. The event is free and can be accessed with any Internet-connected computer.

Register for the event here.

About Mercer’s Innovation Conversations Series

Innovation Conversations is a new series of signature events developed for U.S. client organizations. Each of Mercer’s Innovation Conversations will focus on a key topic crucial to the ongoing competitiveness of U.S. businesses — health care reform, talent management and retirement.

View Mercer’s last event — True health reform.

Smart Business is honored to be part of Ernst & Young's Entrepreneur Of The Year Awards as its local print media sponsor in several markets across the country.

Since its founding in 1986, the Entrepreneur Of The Year program has recognized more than 8,000 deserving entrepreneurs nationwide. The 2011 finalist and winners will be featured in Smart Business' July issue as a special program report.

Who is Eligible?

The Ernst & Young Entrepreneur Of The Year awards recognizes men and women who put everything on the line in order to translate an idea to viable, sustainable enterprise. A nominee can be a founder, president, or chief executive officer of a private or public company who is primarily responsible for the recent performance of the company and an active member of top management. The nominee's company must be at least three years old. With this criteria in mind, we invite you to  nominate your clients, colleagues, and even yourself for this prestigious award.

The Entrepreneur Of The Year independent judging panel consists of local leaders in business, including past award recipients. Smart Business and Ernst & Young do not participate in the judging process. Nominations will be accepted through March 18, 2011.

If you are interested in pursuing our nominations for this prestigious award, or if you have any questions please contact Director of Marketing John Lotenero at (440) 250-7013 or jlotenero@sbnonline.com.

We look forward to helping you get the recognition you and your business deserve.