On Feb. 12, President Barack Obama signed the executive order, Improving Critical Infrastructure Cybersecurity, which will set cybersecurity standards for certain private companies.
However, remarks by Lisa J. Sotto, chair of the U.S. Department of Homeland Security (DHS), Data Privacy and Integrity Advisory Committee, raised red flags. She said: “I would suggest that these standards will become the standards by which companies will be judged, so that if there is a cybersecurity event there may be negligence claims that follow if the standards are not complied with. Also, there could be shareholder suits, if a company suffers damage as the result of a cybersecurity event where they’re not complying with the cybersecurity framework.”
“If the government says, ‘We’re officially setting the bar and if you’re not above it you’re going to be found negligent,’ then companies will need an insurance policy that will defend them,” says Cliff Baseler, vice president at Best Hoovler Insurance Services Inc., a SeibertKeck company.
Smart Business spoke with Baseler about possible implications of this executive order.
What is the executive order’s goal?
After failing to pass the Cyber Intelligence Sharing and Protection Act of 2012, the Obama administration wanted to protect what it felt was critical infrastructure — private companies. This executive order establishes the foundation for a ‘framework’ between the private sector and government, seeking to set standards for certain industries. The goal is to improve communication and awareness so the private sector can take steps to protect itself.
Currently, only some private industry sectors have set cybersecurity standards, such as the credit card processing industry. This is the government’s first attempt to set a wider standard for all private companies.
Do you think many are aware of this?
Large corporations should be aware, but this could have been missed by many middle-market and owner-managed businesses that may not have an in-house compliance group to stay on top of developing regulations.
What will be impacted?
The areas that will be impacted are defined as critical to our country and economic infrastructure, such as financial services, and electrical, water, water treatment and fuel suppliers. Before July 12, the secretary of the DHS will identify where a cyberattack could cause catastrophic problems, regionally or nationally, for public health or safety, economic security or national security.
Executive orders cannot make mandates. However, courts may choose to use these as the standard for negligence. Government contractors will be incentivized to comply as a criterion for contract selection.
What are the cybersecurity implications?
One positive is the improved flow of information from government to the private sector about cyberthreats. CIOs and IT staff will have improved access to timely information about potential hazards.
However, Sotto’s remarks are troubling. Anytime someone in government uses the words ‘negligence,’ ‘judged’ and ‘claims,’ it’s generally not good for businesses. It will be critical that companies minimize potential weaknesses in cybersecurity infrastructure.
What does this mean for insureds?
A general liability policy excludes most cyber-related losses, so insureds will need to fill coverage gaps with a cyber liability policy.
It also will be important to keep informed as insurance policy language changes to incorporate the standards within your policy. Good dialogue around your business model, Internet presence, and interaction with customers with an informed adviser or the right consultants will be essential to helping companies adapt and protect themselves from negligence claims. Director and officers executive liability policies, often overlooked by non-publicly traded companies, generally cover the defense of shareholder suits.
What are some next steps?
The private sector, in conjunction with the National Institute for Standards and Technology, is being asked to help design the standards and develop a fluid framework, as cyberattackers frequently change tactics. The proposed framework will be published Oct. 10, with the final due Feb. 12, 2014.
Cliff Baseler is vice president of Best Hoovler Insurance Services Inc., a SeibertKeck company. Reach him at (614) 246-7475 or firstname.lastname@example.org.
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As Voice over Internet Protocol (VoIP) matures, a growing number of businesses are making the switch from traditional phone services to Internet-based services.
When looking for a VoIP provider it is important to seek a company on the forefront of technology that can serve as a trusted adviser.
“Businesses are looking for flexibility, reporting functions and a provider that has its best interests at heart — someone who can help them recognize current trends and provide true consultative services,” says Alex Desberg, sales and marketing director at Ohio.net.
Smart Business spoke with Desberg about the latest VoIP trends, the importance of adaptability and the re-emergence of user-friendly phone systems.
What are the trends for new or growth companies?
Organizations are creating subgroups within themselves for different lines of business.
The best way to illustrate this is to think of a holding company with smaller companies underneath — they want a division within their organization and they are using a phone system to create this impression.
For example, a publishing company might have a traditional publishing arm and an electronic publishing arm. By setting up different VoIP phone routes within their organization, they are able to have different pods even though they are all just part of a greater whole.
With this model, if a customer needs to reach the electronic publishing division he or she doesn’t have to go through the traditional publishing arm’s receptionist and get re-routed, he or she is directly reaching the people that he or she wants to talk to.
Why is VoIP a good fit for companies that are start-up, virtual, experiencing growth or changing their structure?
There has been an insurgence in the number of businesses turning to VoIP solutions that are either start-ups or changing their structure away from the brick and mortar model to a virtual model.
Some change so they can gain the advantage of having a new phone system with new capabilities. Others make the change so they can segment various parts of their business operations.
Either way, they are able to present a new look, sound and feel when they are communicating with their customers.
How important is a phone system’s adaptability for a company in transition?
A good VoIP system can almost serve as a marketing tool for a business. Companies want to know how their phone system can adapt to changes in their customers’ desires to communicate.
For example, VoIP offers custom reporting tools so management can track how customers react to different messages.
If needed, the system that drives communication can be adjusted in order to ensure optimal customer satisfaction.
What features are businesses looking for today?
There has been a huge shift back toward the importance of talking to a live person.
Bringing the customer closer to the person that they really want to talk to is paramount in the business world today.
Businesses want to make sure that their customers aren’t on hold for extended periods of time and that they don’t have to go through voice mail hell.
Advances in telecom technology should not be used to create barriers between a business and its customers — they should bring them closer together.
Alex Desberg is sales and marketing director for Ohio.net. Reach him at email@example.com
For a list of educational seminars, follow this link.
Insights Telecommunications is brought to you by Ohio.net
The retirement plan marketplace is a buyer’s market right now. Plan sponsors that haven’t shopped around in the past couple years might not be getting the most value for their money.
“The retirement marketplace is constantly changing with the addition of new products and services and the compression of costs,” says John Adzema, Vice President of Sales and Consulting at Tegrit Group. “Plan sponsors need to be aware and take advantage of these enhancements.”
Smart Business spoke with Adzema about the necessity of reviewing and benchmarking your retirement plan.
How often should plan sponsors have retirement plans reviewed?
Have your plan reviewed every three years or as certain events dictate, such as company acquisitions/divestitures, workforce changes, etc. You also could look at your company and its demographics to see if it makes sense to add another plan type such as cash balance, employee stock ownership or non-qualified.
What should you discuss with your financial advisor during a review?
As the plan quarterback, the financial advisor typically is tasked with overseeing plan investments, taking some type of a fiduciary role and managing the involved service providers. So, you should ask:
- Are my plan costs reasonable?
- Are my plan’s service providers, including the financial advisor, meeting service standards and helping me meet my fiduciary requirements?
- Are the plan investments performing as expected?
- Is my plan receiving the best consulting and latest technology?
- Are my employees getting the investment help they need?
What could happen if plans aren’t reviewed?
Even though you might not change anything, you need to compare your plan to the marketplace. You may save on costs or be able to expand to another fund family. You could get more tools for participants, website capabilities and educational materials. If your company acquires another firm and the plan assets increase from $1.5 million to $8 million, not only do you need to review from an operational standpoint to ensure compliance, but as a bigger plan you’ll have more purchasing power.
There can be legal consequences as well. In March, a court ruled against the plan fiduciaries in Tibble v. Edison International because they selected retail mutual funds with higher fees when lower cost institutional funds were available. To protect against Tibble-type claims, fiduciary committees should:
- Follow written plan documents and procedures, including any investment policy statements and committee charters.
- Document committee meetings and decisions with respect to plan investments.
- Review 408(b)(2) fee disclosure information and benchmark fees to comparable plans based on the number of participants and plan assets.
What’s the value of benchmarking?
Retirement plan benchmarking is the act of comparing your own plan’s qualities to similar plans. People immediately think about the plan investments or costs, but benchmarking also extends to a plan’s operating provisions and comparing your plan to plans of the same demographics, industry and geography. Benchmarking this helps ensure you are getting the best value for the price paid.
It’s wise to benchmark certain plan items like investment rates of return on an annual basis, but the entire plan’s workings and its service providers should be reviewed at least every three years.
Any final words on benchmarking?
Your financial advisor or another trusted party should carry out the benchmarking process for a consistent and independent approach. Generally you will get better pricing if you’re a bigger plan with larger average account balances and your plan is easier to run.
While benchmarking is a good indicator of what the masses are experiencing, your plan may have unique provisions that work well for you and your employees. If you pay a little more for someone to administer a plan that’s outside of the norm, then that’s OK.
John Adzema, QPA, QKA, TGPC, AIF, is vice president of sales and consulting at Tegrit Group. Reach him at (330) 983-0525 or firstname.lastname@example.org.
Visit Tegrit’s Advisor Resource Center for additional retirement planning tips.
Insights Retirement Planning Services is brought to you by Tegrit Group
It may not seem vital to know the value of your business until it’s time to sell. However, by then, it’s too late. There’s nothing you can do if it’s not worth what you expected.
“Typically, a closely held business is the largest asset owners have, perhaps 60 to 80 percent of their net worth.
Unfortunately, many just guess at the value and guess wrong. Then their retirement is significantly different than what they expected,” says Tim McDaniel, CPA/ABV, ASA, CBA, a principal with Rea & Associates.
Smart Business spoke with McDaniel about determining the value of a business and steps owners can take to help it grow.
How is the value of a business determined?
There are a few different approaches an evaluator will use to value a business, but in most cases, the most effective way is an income approach. In this approach, the valuator uses the mindset of an investor to project the company’s future cash flow and determine how much risk is associated with it.
All valuations are really a forecast. Historical trends are reviewed to predict future cash flows, but the valuator will also interview management to understand what the company’s future looks like.
Should owners always know what the business is worth?
People will spend a lot of time with an investment manager trying to grow a stock portfolio that may be only 10 to 20 percent of their net worth and ignore their largest asset, their business. In order to treat the business as an investment, the first step is to know the value.
Next, set goals — how much should the value grow annually and where do you want it to be when you exit — and implement a plan to reach them. There are three major factors that impact the value of a business:
- Increase expected future cash flow.
- Decrease risks associated with your business.
- Increase the future growth rate.
Develop a plan addressing how to positively impact these three areas. Too often business owners don’t develop a plan — they work in their business, not on their business. Between keeping customers happy, ensuring employees are doing their jobs and maintaining quality control, it’s easy to get caught up in the day to day.
It’s rare when an owner treats the business as an investment and has an annual or biannual valuation. One owner recently thought his business was worth five times its actual value because his CPA told him the value was one times gross revenue, which is completely erroneous. That may be how a CPA firm is valued, but there’s a lot more involved in valuations than a simple multiplier, and it takes years to develop the necessary skills. The unfortunate part is that some people have been living with the assumption that they will retire as millionaires, but come to find they might not be able to retire.
What are the best ways to exit a business?
Exit strategy depends on the individual. If you want the highest dollar amount, sell to a synergistic buyer — a bigger company in the same industry. The downside is that some of your long-term employees might lose their jobs. Another way is to sell to a financial buyer or employee stock ownership plan where the business may continue to run in a similar fashion. Many owners prefer to keep businesses in the family and give stock to children. If that’s the case, make sure your retirement is funded and you gift stock when the value is down. Another strategy that’s gaining popularity is retaining the business and hiring a professional management team to run it so you can significantly reduce your role.
It’s important to develop exit plans early. If you want to retain the business, it takes time to develop a good management team. If you want to sell, you want to sell when cash flows are highest. If you want to gift it to your children, they have to be ready. No matter which way you proceed, it’s a long process.
Tim McDaniel, CPA/ABV, ASA, CBA, is a Principal at Rea & Associates. Reach him at (614) 889-8725 or email@example.com.
More on this subject can be found in Tim’s new book, “Know and Grow the Value of Your Business: An Owner’s Guide to Retiring Rich.” Learn more here.
Insights Accounting is brought to you by Rea & Associates
Cloud computing is a broad term that can include hosting a website and data management. Unfortunately, small businesses are picking up many misconceptions in the marketplace about what the cloud is and what it means to be in the cloud.
“It’s not always the right solution for every business,” says Ryan Niddel, CEO of QuickLaunch Solutions. “It takes research and consultation from someone with knowledge to really understand how it can work for your business.”
Smart Business spoke with Niddel about cloud computing and its applications for small businesses.
What is the cloud?
There are two main aspects to cloud computing. There’s the data management side, which is primarily utilized to back up files — think Dropbox or iCloud. This allows anyone, anytime, anywhere to store and access files on servers that exist all over the world.
The other aspect to cloud computing is hosting services, which provides the infrastructure that allows a company to host its website entirely in the cloud. Anything from an entry-level blog to something of enterprise value could be hosted in the cloud. There’s no need for redundancy between the cloud and a dedicated server because the cloud gives you myriad hosting options in its architecture. Even if you’re on a dedicated server now, that data can be easily migrated to the cloud.
Is cloud hosting cost prohibitive?
Cloud hosting for small businesses is really the entry-level for commoditization of a website, and there are pay-as-you-go options that suit each company’s needs. While many hosting services take a one-size-fits-all approach, the pay-as-you-go model is more fluid, offering a billing program similar to those offered by utility companies where you pay for what you use. Using this model, business owners can spend 20 percent less than those using a dedicated server.
There are also deeper cost savings. For example, research has shown that cloud computing reduces IT labor by more than 50 percent. Because the cloud is extremely stable, it’s unnecessary to pay for IT support staff to ensure infrastructure stays operational. Cloud hosting saves money on maintenance, hardware, licensing and support, and is all around more efficient than using a dedicated server.
Is cloud hosting secure and reliable?
Cloud infrastructure is at least as secure and possibly more secure than the dedicated servers many companies are currently using. The hardware virtualization architecture used in cloud hosting keeps systems working through redundancy, which means utilizing multiple servers to back up clients’ data. And the transition from one environment to another happens with no perceived interruption in service. There’s no easier way to have that kind of redundancy. It’s a very fluid, secure and dynamic environment that seamlessly adapts to the needs of the client.
Is cloud computing a fad?
Amazon, Google and Apple have adopted the cloud as the new wave of Internet technology, and this new commoditization, pay-as-you-go model is being widely used. More companies are shifting to the cloud from dedicated servers, and much of the new infrastructure being developed by startup companies is in the cloud, so it’s here to stay. It’s where data management and hosting are going.
What sort of savings might a company realize by utilizing the cloud?
On average, companies can expect to realize an 80 percent reduction in their hosting bill if they can optimize their cloud correctly. Once in the cloud, a company can have its bandwidth utilization monitored to establish benchmarks that show usage during high- and low-traffic periods. Bandwidth will be monitored during a three-month settling period to determine the right services for that company’s needs and ensure it’s only paying for what it uses.
Hosting in the cloud is the wave of future. It allows companies to operate more efficiently and effectively, and keeps the bottom line healthy. It’s also the logical progression in the evolution of data management. And with a good partner in the endeavor, it can be a painless and seamless transition.
Ryan Niddel is CEO of QuickLaunch Solutions. Reach him at (419) 631-1270 or firstname.lastname@example.org.
Insights Internet is brought to you by QuickLaunch Solutions
Ronald Reagan was well known for not only his confidence but also his positive outlook and sense of humor. He had a way of never taking himself seriously and always found a way to find humor even during the direst times.
In fact, following the assassination attempt, he told his wife, “Honey, I forgot to duck.”
His constant positive outlook made him appealing to voters and is one of the reasons he continues to score high in polls ranking presidents.
Do we approach life and leadership the same way that Reagan did? Do we always take a positive outlook into the start of each day?
Some CEOs act as if being in charge makes them a victim and complain of the burden. Leadership is a privilege that all of us should learn to enjoy. We have to train ourselves to enjoy the process, not just the end result.
Let’s take some time to reflect on the victories, no matter how small, and celebrate them. Learn to reflect on the great clients we have and the great people who work for us instead of focusing on the one unhappy customer or an employee with a bad attitude. But most importantly, we shouldn’t take ourselves too seriously.
Each day that passes is a day that we do not get back. We have to look at each day as a series of moments and find the happy things that put joy in our life.
These can be simple things — a funny comment from your child, something silly you heard on the radio or a bright, sunny day. When we start focusing on these small joys in life and start stringing them together, we’ll find that an entire day has become joyous. Enjoy the time you are in now and don’t spend so much time fretting about tomorrow. Be intentional: Start by writing down four little things a day at work that bring you joy on a daily basis and build from there. This can even be a conversation around the watercooler that makes you laugh. String together a few days like this, and we are well on our way to a more joyous life.
By developing this habit, we will be more inclined to treat people better, and they, in turn, will treat others better, which will increase the overall positive culture of our workforce. The work environment is a bigger factor in why employees leave than money is, so focusing on providing a more joyful environment will also help your business in the end.
Whether in business or in life, it all comes down to being joyful. Happiness is fleeting based on circumstances, but joy becomes permanent once we have cultivated it. Start by focusing on the little joys and build from there. Remember, people won’t remember what you said, but they will remember how you treated them.
Fred Koury is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or email@example.com.
The more there is available of something, the less it costs. Conversely, when there’s a limited quantity of that same something, the more it’s coveted and the more expensive it is. This is a rudimentary concept, but few companies know how to effectively manage the process to ensure they balance supply with demand in order to maintain or improve the profitability of a product or service. Of course, before you can maximize profitability, you must have something customers want, sometimes even before they know they need it.
Think about precious metals, fine diamonds and even stocks. The beauty and a portion of the intrinsic value of these things are effectively in the eyes of the beholder. In reality, much of their value or price is determined by the ease or difficulty of obtaining them.
As for equities, as soon as everyone who can own a given stock has bought it, then, in many cases, the only direction that stock can take is down because there are simply more sellers than buyers. On the flip side, when few people own a stock but everybody decides they want it, for whatever the reason, that stock may take a precipitous upward trajectory.
A case in point is Apple. At one time, when its per-share price was more than $400, $500 and even $600, everyone thought the sky was the limit and the majority of institutional funds and many home gamers, aka small individual investors, jumped on the bandwagon. The stock reached $705 a share in the fall of 2012, and just when all of the market prognosticators were screaming, “Buy, buy, buy,” there were too few buyers left (because everyone already owned it) and the stock fell out of bed. In many respects, Apple was still the same great company with world-class products, but there were simply more sellers than buyers and — poof — the share price evaporated, sending this once high-flying growth stock to the woodshed for a real thrashing.
The question for your business is how can you manage the availability of your goods or services to maximize profit margins? The oversimplified answer is once you have something of value, make sure that you create the appropriate amount of tension, be it requiring a waiting list to obtain the product or service or underproducing the item to create a backlog. However, this is a delicate balancing act, because if it’s too hard to get, then customers will quickly find an alternative, and your product will become yesterday’s news.
Some very high-end fashion houses, such as Chanel, have it down to a science. It can be very difficult to walk into a marquis retailer today and obtain one of its satchels without being made to jump through waiting-game hoops, just for the privilege of giving the store your money in exchange for the fancy schmancy bag. That stimulates demand and keeps the price up because customers tend to want something they can’t seem to get.
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. Reach him with comments at firstname.lastname@example.org.
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Business leaders understand the value of employee engagement, yet many have been slow to implement plans within their organizations.
“It’s interesting that 75 percent of leaders have no engagement strategy, even though 90 percent say it has a positive impact on business success. So while they think it’s important, they’re not actively engaged in affecting change. I think they don’t fully understand the impact it can make on the bottom line,” says Beth Thomas, executive vice president and managing director of consulting services at Sequent.
She says employee engagement is about creating an environment where employees understand the company’s values and what is expected of them, and are committed and dedicated to their work.
“Employee engagement is probably the biggest reason why companies are successful. Engaged employees generate 40 percent more revenues than disengaged ones and are 87 percent less likely to leave an organization,” says Thomas.
Smart Business spoke with Thomas about ways to boost employee engagement and the impact it can have on an organization.
What can companies do to foster employee engagement?
There are five keys to creating conditions for thriving, engaged employees:
- Empowering employees. No one wants to be micro-managed; they want to feel that what they bring to the table is valued. They were hired for a reason — let them do that job.
- Sharing information. People get anxious and disconnected when there are a lot of closed-door leadership meetings. Create a connection by bringing employees into the growth of the company with quarterly or town hall meetings.
- Minimizing toxic behavior and negative feedback. Hire the right talent that will fit the culture and bring positivity. Then hold employees accountable to the values and expectations of the organization.
- Offering performance feedback. Everyone wants to know how he or she is doing, and it shouldn’t be just once a year. Empower them and let them know they’re in charge of their careers, and can move forward if they are motivated and dedicated.
- Appreciating employee value through reward and recognition. Have an employee of the month award and profile that person because people will want to emulate what they are doing. Make it very clear what is needed in order to be successful and profile those behaviors, characteristics and performance standards so everyone knows what is valued. That includes recognizing all the qualities that are valued; it doesn’t have to be based on the same performance. An employee might not be a high-powered salesperson bringing in six-figure deals every month, but might be the most positive person in the office and contributes to the organization’s culture.
Does employee engagement start with the hiring process?
Absolutely. When you are hiring people, it’s just as important to assess their ‘soft skills’ as their knowledge, skills and abilities. It’s more difficult to train people to be team players. Having the personality to go above and beyond to meet a customer’s needs or to be a trusted adviser is a soft skill that is largely innate and takes a lifetime to build. It’s important to evaluate those qualities to ensure they match the organization’s culture beyond the skills they bring.
Is it the workplace culture that promotes engagement?
Yes, it’s about the culture, but also all the employees and the leaders. It’s important for employees to ‘hang with the gang that gets it’ — those people at work who are successful — steal shamelessly and emulate what they do. Conversely, when employees hang with the people who are negative and contribute to toxic behavior, leadership sees them as being one of them, even if they’re not participating in those activities.
Engagement goes hand in hand with happiness. In a work context, happiness is about finding what in your career makes you happy. While it may sound trite, happiness leads to engagement in your work, which motivates you to give 110 percent or more discretionary effort. This is what contributes to business success, not only boosting your own career but at the same time increasing the company’s bottom line. Who wouldn’t want that?
Beth Thomas is an executive vice president, managing director of Consulting Services and author of “Powered By Happy” at Sequent. Reach her at email@example.com.
Event: Get your company “Powered by Happy” with the employee engagement workshop.
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Customer engagement is key to generating website traffic that translates into more revenue. The good news is that to generate that engagement, businesses don’t need to scrap existing websites to see significant improvements.
“Every Web development shop says you need a completely redesigned website; that’s why customers aren’t becoming engaged. On a case-by-case basis that might be true, but most of the time it’s a matter of optimizing what’s already there,” says Ryan Niddel, CEO of QuickLaunch Solutions.
“It’s about mining data from your customers and getting the most out of the visitors to your site; getting them engaged in your brand by taking them through a proven funnel. Capture their information, get them engaged through a follow-up sequence and get them involved in your social media, so when they need your product or service, you’re at the tip of their tongue,” says Niddel.
Smart Business spoke with Niddel about strategies companies can implement that help them grab the attention of existing and potential customers — a circular marketing campaign unifying their overall Web presence.
Where does the process of building engagement start?
It begins with a few simple changes in the website design; nothing more than a giveaway, something related to your business. A business that paints houses might feature a free e-book on how to care for your house’s paint or the simplest way to scrape it off. When someone provides an email address, he or she is added to a database and gets to download the material for free.
From there, it’s a series of email, text and mail promotions that all circle back to the end goal of getting them involved in your brand. Someone doing research and shopping for a painter might take 30 days to make a decision. You’re staying in front of him or her without being intrusive, giving him or her good information on a regular basis while also providing him or her with a way to connect to you. The best frequency is between once every 10 days and once every 25 days; that’s not intrusive at all.
You can also set up a blog that links to your website to allow customers to provide real-time feedback. If someone’s unhappy, that gives you the chance to apologize to the world, and show how the problem was fixed and what you do for your customers.
Does that strategy work regardless of the type of business?
It’s more congruent with someone not selling a product, but it will work for e-commerce as well. We worked with a company that sells various pumps and gaskets for industrial use, which is a niche market so it’s not a high visibility website or search term. But it was able to get people engaged with its site and that has increased its customer acquisition 8 percent in 30 days.
How do you get customers to connect with your business via social media?
Offer a simple giveaway, a free quote or a 5 percent discount coupon if they follow you on Twitter or ‘like’ you on Facebook. Make sure every online aspect, whether it’s your website, blog, Facebook or Twitter, interconnects and have links to each other.
If you’re doing a good job and providing helpful information, engagement rates will be about 10 percent. That 10 percent will actively stay involved in the brand and provide vital feedback.
People visiting websites usually don’t take immediate action; it’s too easy to conduct research and shop around. Getting customer engagement sets you aside from every other company prospective clients search. Not every business will become a Nike or an Apple, but Joe’s Painting has people who like and trust Joe, and will tell their friends about Joe. That becomes easier when you stay in touch with them.
Ryan Niddel is the CEO of QuickLaunch Solutions. Reach him at (419) 631-1270 or firstname.lastname@example.org.
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In 2002, President George W. Bush signed the Terrorism Risk Insurance Act (TRIA) requiring insurance carriers and the federal government to establish a risk-sharing partnership for future losses. It was created as a result of 9/11 as a temporary measure to allow time for insurance carriers to develop their own solutions. Originally set to expire in 2005, the act has been extended twice, and will now expire in 2014.
“The private markets alone cannot and will not provide the level of terrorism insurance our economy demands,” says Marc McTeague, president of Best Hoovler McTeague Insurance Services, a member of SeibertKeck. “The threat of terrorism has become a greater concern for businesses in today’s uncertain and rapidly evolving global climate. It should continue to be part of a comprehensive risk management program.”
Smart Business spoke with McTeague about terrorism coverage today and where problems still occur.
Why was the TRIA created and how does it work?
For property and casualty insurers, 9/11 losses paid out a reported $40 billion from property, business interruption, aviation, workers’ compensation, liability and life insurance lines. As the largest disaster in the industry’s history, carriers were reluctant to continue providing coverage. State regulators agreed to allow carriers to exclude terrorism from policies, and coverage was soon unavailable or extremely expensive.
The TRIA was created as a temporary federal program of shared public and private compensation for insured losses to allow the private market to stabilize, protect consumers by ensuring the availability and affordability of insurance for terrorism risks, and preserve state regulation of insurance. Carriers set the price of coverage within the limits imposed by regulations.
With the federal backstop in place, commercial lines policyholders could choose to purchase or reject terrorism coverage from existing insurance programs; the program doesn’t extend to personal lines policyholders. This offer continues today with most coverage lines, except workers’ compensation policies where insurers and qualified self-insured employers cannot exclude terrorism coverage because of lifetime medical care for on-the-job duties.
What changes were made when the program was extended?
In 2007, the government modified and extended the act through Dec. 31, 2014. Several provisions changed, including:
- Revising the definition of a certified act of terrorism to eliminate the requirement that the individual(s) is acting on behalf of a foreign person or interest. Some property insurers add exclusionary language related to non-certified terrorism coverage.
- Updating the payout cap to $100 billion per year for insured losses.
- Requiring the Treasury Department to establish a procedure for allocation of pro-rata payments in the event that a terrorism loss exceeds the cap.
When purchasing terrorism coverage, how much do premiums increase?
The cost for the TRIA on an average risk is usually a single-digit percentage of the policy premium. Higher risk businesses such as financial institutions, real estate, health care and utility companies tend to be in the double-digit percentages.
Many policyholders, regardless of size, continue to decline terrorism coverage — not considering themselves targets. Larger risks often feel the coverage doesn’t provide enough to protect their exposures.
What are some of the continuing problems with terrorism coverage?
It is the insurance industry’s goal to work with Congress on creating terrorism insurance renewal past 2014. Terrorism coverage provides market stability.
There will be a significant effect on real estate lending if this backstop disappears. Mortgage-backed securities, for example, will be in default. Private markets aren’t able to offer coverage without the federal backstop and cannot offer the level of insurance our economy demands.
The Government Accountability Office is working to assess options and review proposals, and Congress is encouraging greater private market participation. We’re optimistic that a long-term solution will be reached.
Marc McTeague is the president of Best Hoovler McTeague Insurance Services, a member of SeibertKeck. Reach him at (614) 246-RISK or email@example.com.
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