When you flip a light switch, turn on the water or start your car, you expect reliability every time. For employees, it’s just as mandatory that they be reliable, by showing up on time, completing the tasks at hand and basically doing their jobs time and time again.
By the same token, your employees expect you, as their leader, to be reliable. This means when you say you’ll do something, you do it, when they need direction, you provide it, and when the chips are down, you’ll be there for them.
Being reliable is good, but being too predictable — not always. In fact, being too conventional can make your company a “me, too” organization that only reacts to what the competition does, rather than taking the lead. It can be a bit more daring to set the trend, but if managed and controlled correctly, the rewards dramatically outweigh the risks.
Warning signs that your leadership has become too predictable occur when your subordinates begin finishing your sentences and know what you will think and say before you utter that first word on just about every topic. Compounding the problem is when your employees begin to perpetuate the negative effect of you being so darn predicable by believing it themselves and telling others, “Don’t even think about that; there’s no point bringing up your idea about X, Y or Z because the boss will shoot you down before you take your next breath.” This bridles creativity and stifles people’s thinking and stretching for new ideas.
It’s human nature for subordinates to want to please the chief. Under the right circumstances, that can be good, particularly if you are the chief. But it can be a very bad thing if you are looking for fresh concepts that have never before been run up the flagpole.
Uniqueness is the foundation of innovation and the catalyst for breaking new ground. George Bernard Shaw, the noted Irish playwright and co-founder of the London School of Economics, characterized innovation best when he wrote: “Some look at things that are and ask why. I dream of things that never were and ask why not?”
The “why not” portion of this quote is the lifeblood of every organization. A status quo attitude can ultimately do a company in, as it will just be a matter of time until somebody finds a better way.
As a leader, the first step in motivating people to reach higher is to dispel the image that you’re exclusively a predictable, same-old, same-old type of executive who wants things a certain way every time. There are dozens of signals that a boss can give to alter a long-standing image and dispel entrenched mindsets. You can always have a midlife crisis and show up at work in a Porsche or Ferrari instead of your unremarkable Buick. This flash of flamboyance will certainly get people questioning what they thought was sacrosanct about you. The cool car might also be a lot of fun; however, the theatrics might be a bit over the top for some, not to mention a costly stage prop just to send a message.
A better solution is to begin modifying how you interface with your team, how you answer inquiries from them and, most importantly, how to ask open-ended questions that are not your typical, “How do we do this or that?”
Another technique is when somebody begins to answer your question, before you’ve finished asking, particularly in a meeting, abruptly interrupt the person. Next, throw him off guard by stating, “don’t tell us what we already know.” Instead, assert that you’re looking for ideas about how to reinvent whatever it is you want reinvented or improved in giant steps as opposed to evolutionary baby steps. If you’re feeling particularly bold, for emphasis, try abruptly just getting up and walking out of the meeting. In short order, your associates will start thinking differently. They’ll cease providing you with the answers they think you want. Some players will hate the new you, but the good ones will rise to the occasion and sharpen their games.
If you want reliability, flip the light switch. To jump-start innovation, you could begin driving that head-turning sports car. Better yet, get your team thinking by how you ask and answer questions and by not always being 100 percent predictable but always reliable.
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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A trusted adviser can help you track data and review ways to boost profit. Mark Van Benschoten, a principal at Rea & Associates Inc., lists some things to consider in discussions with your accountant.
Q. What accounting missteps might lead to decreased profitability?
A. Not having timely and accurate monthly financial statements can hurt a business. Within a few days of month’s end, you should have a current income statement, cash flow statement and balance sheet. A trusted adviser, like a CPA, banker or CFO, can help you understand how each of these reports reflects how your business is performing.
Q. What accounting tools could prove most valuable to business owners?
A. It does not matter how large or small your business is, a budget will help you keep your eye on the things that are most important. Compare your actual results each month to your budget, giving you an indication of how your business is performing in key areas like sales, margins, overhead and cash flow.
Q. What do businesses commonly overlook that can pose problems?
A. Many businesses don’t have a good handle on the true cost of a product. This leads to underpricing and potentially critical losses. In addition, many business owners will cave into lower price points for larger clients without evaluating the impact of shrinking margins. You also need to review your current pricing. You cannot set prices for an extended period of time without considering price increases in raw materials.
Q. How does risk affect company value?
A. There is an inverse relationship between your business value and the amount of risk associated with your business. Why does risk lower value? It is because risk causes uncertainty about the future cash flows. Once you understand how specific risk factors impact your value, you will be motivated to set a plan of action to reduce your business risks.
Mark Van Benschoten, CPA, is a principal at Rea & Associates Inc. Reach him at (614) 889-8725 or email@example.com.
Digital Storage Inc. saw business decline but Simon Garneau took a line of novelty flash drives and brought some comic reliefWritten by Dennis Seeds
With the market for computer backup storage devices decreasing about 15 percent a year as far as revenue and number of units sold, Simon Garneau feared that Digital Storage Inc. might soon be one of the many in the technology scrap yard.
“It took us awhile to see that it was declining because obviously all our suppliers were trying to convince us otherwise — that it is growing, and it is exciting,” he says. “Secondly, there are all kinds of competing and advancing technologies that satisfy the demand for more storage.
“So our challenge was what else can we do because if storage devices and distribution are all we do, we will disappear from the surface of the map,” Garneau says.
The parent company, Dexxon Group, which distributed high-capacity tapes for computer backups, decided it was time to diversify rather than to stick with the way things had been. Its response was to establish a division in North America of Emtec, its retail side of storage devices that grew in Europe out of the former BASF brand.
But there was a challenge, and Garneau knew it would be a formidable one.
“The whole strategy was to focus on the retail market of which we knew absolutely nothing,” he says.
“We had no idea how retail worked, how do you introduce these kinds of products to retail, and we were facing very large and well-established competitors: SanDisk, Kingston, Lexar and PNY,” he says.
Garneau was not fazed. His business sense told him that in a competitive market, you have to be different to survive.
Here’s how Garneau, president of Digital Storage Inc. and Emtec North America, built a $75 million successful retail business over the last four years by offering customers something the competition didn’t.
Pitch to a different crowd
If you are a clothing manufacturer and you are searching for the next big thing, it may be as easy as signing a promising designer and going with his or her creations. But Garneau didn’t have the luxury of just adding a new line to the market he was already in.
He was finding himself in the much the same stadium, but he was going to have to pitch to a different crowd.
“Digital Storage had focused on the commercial market, or the B2B as a wholesale distributor,” he says. “Our challenge was to find a growth market for the company because we knew that we could not stay where we were.”
The company started looking for opportunities in the data storage arena because it was a field in which it had familiarity as well as capabilities with logistics and distribution. Emtec would be the company’s own retail brand in North America that was sold through the business-to-consumer sector. An added bonus was that the European division had been marketing flash storage, or key USB flash drives, for a number of years.
Garneau and his team began discussions with existing customers about what Emtec could deliver that other companies would not.
“For instance, doing private labels, modifying their products, packaging it differently and that sort of thing,” he says. “So we decided as a strategy, we said, ‘Well, since we have no brand recognition, we will do for them what the other guys wouldn’t do.’ That was our differentiation strategy.”
The company began creating the novelty type of USB flash drives, with animal characters and popular culture comic icons such as Looney Tunes, Angry Birds and the European Asterix characters.
“Up to that point, most flash keys were totally utilitarian; they were all black or silver, fighting on price and no special attraction,” Garneau says. “But taking the lead from the customers, we decided to do private labels, and we added colors, patterns, schemes, shapes and forms and so forth. That’s really how we got in.
“So we got lucky in that sense and based on the advice of our marketing reps, they gave us good coaching as far as which programs to support with the customers.”
Garneau says that by taking the approach of listening to the customers, being sensitive to what they want, responding, making suggestions, engaging in a working dialogue as opposed to a high-pressure sales pitch — as well as receiving a vote of confidence from the headquarters in Europe — a solid retail effort was launched.
Get off to a good start
Once Garneau and his team had their strategy, it was time to find those who would drive in the revenue. The question then was whether to go in-house with sales associates or outsource the efforts.
“The No. 1 issue was if you don’t know anything about this business, you hire manufacturers’ reps,” he says. “We went with manufacturers’ reps because we felt that they would know the business, we would have the benefit of their contacts, and we could move quicker, if you will, and we only pay once we have sales, so it is not a drain on cash flow.”
Garneau was able to recruit in a short period of time a network of manufacturers’ reps, including one particular standout whose performance was excellent. A major opportunity for a large line review with a large company was obtained, which as luck would have it, already had a relationship with the European division of Emtec.
“Then here in the U.S., we were able to get some strong references from distribution customers who could say, ‘Digital Storage is very strong from a logistics point of view, and they are responsive, and we are happy with them,’” Garneau says.
With a sound strategy and a good bit of luck, Emtec was underway in the U.S.
“The first order we got was like $4 million,” he says. “We literally created a new category of flash keys. Now, we are challenged to keep it up because all our competitors are trying to imitate us. We have a thriving business.”
Sales figures support that observation. Two years ago, the business grew by 32 percent, last year 37 percent, and this year, Garneau budgets about 50 percent growth.
Keep the old as important as the new
If a company launches an innovative venture and the sales figures indicate that things are pretty rosy, there is still the challenge the company faces of how the new plays against the old.
“When you face a situation like this, the challenge is how do you motivate the people — all of them?” Garneau says.
“You have a group of people who are dedicated to your old business, which is declining. And at the same time, you are building a new business, which is all new and exciting, but you have to keep a balance between the two because you need the first one to provide the cash to fund the new one.
“The key challenge then, which is also ongoing, is how do you motivate everybody and not make the old people feel that they are not so important anymore versus the new guys who are building all the excitement,” he says.
Should you find yourself in this or a similar situation, communication will often make or break the situation.
“We do this through a lot of information exchange,” Garneau says. “We tend to be very open with everybody. We share the numbers. We have town meetings every quarter. We state the strategy in simple terms.
“The trick is to make sure that everybody feels they have a role to play and that they are very important in that challenge.”
This has to be reinforced all the time, Garneau says.
“I like to do a lot of walking around,” he says. “If I talk to the people in the warehouse, they have to understand how important it is for them to be quick and caring and satisfying for the customers, which they do. But everybody has a role to play. We need people to sell the old media because we have to maintain that business as long as we can.
“So it’s ongoing. Let’s communicate; let’s talk. Let’s share the information. Everybody’s important; everybody has a role to play.”
In short, you need to develop your company culture to include two extremely important aspects.
“What makes us different from others is that people care,” Garneau says. “Everybody here cares. If a customer hurts, everybody hurts. We don’t tolerate indifference. We don’t hire indifferent people; you have to be excited. You have to believe in what you do, and you’ve got to care.”
The second point is to try to be fast, not fast to the point of making mistakes but to the point, quick and responsive.
With a major retailer that didn’t know Emtec from anyone, Garneau established a 24-hour turnaround policy for communications.
“Every single thing that they asked of us, we responded within 24 hours,” he says. “They were totally surprised. They were flabbergasted. It gave us such credibility with them because they were thinking, ‘Well, gee, if they respond to our legalese that way, we can only imagine how they will service our account.’ And we really got their attention that way. We ended up doing business. We’ve been doing millions of dollars of business with them ever since.” ?
How to reach: Digital Storage Inc., (800) 232-3475 or www.digitalstorage.com
The Garneau File
Digital Storage Inc. and Emtec North America
Born: I was born and raised in Québec City, Canada. I am French-Canadian.
Education: I have two degrees from Université Laval in Québec City, a bachelor of arts and a bachelor of science in engineering physics.
What was your first job and what did you learn from it?
As a teenager, I pumped gas at a gas station. I realized that, in those days you had to serve the people gas. But it struck me that most people wanted to talk to you, as opposed to sitting in the car and to let you finish filling the gas tank. So it really hit me. I felt that, gee, this was an opportunity to be of service and be pleasant and listen and be curious about these people and you can have a little chat. It could be to your advantage to take the lead with people as opposed to assuming that they don’t want to talk to you.
What is the best business advice you ever received?
I will give you two that really hit me and served me well in my career. I worked for a CEO, and the big thing he taught me was that his approach was to focus on revenue first. Everybody believes that a budget is a license to spend, well, it is not. You only spend if you have the money. If the money is not in there, let’s talk revenue first.
As for the other one, I was the president of the division at National Computer Systems in Minnesota. I learned from the CEO not to feel obligated to fix every problem at once.
Who do you admire in business?
I don’t go by names; I admire attitude and style. Just to give you one example, one billionaire CEO I used to run a company for was so humble and simple had such respect for people. If he made a commitment to you, he would always honor it. That is the kind of person I respect. To me, when I give my word, I come through with it, even if you cross me. I will meet my part of the bargain. But it is this kind of honesty and commitment that I admire. I like people who commit and come through with their commitment.
What is your definition of business success?
Make your numbers, because if you don’t, you can explain and this and that but when you make your numbers, everybody is happy, you are satisfied and everybody wins. And you don’t have to explain it for too long. I remember when I applied for this job that was the point I made to the people. At the time, out of 30 years in business, I had made my numbers at least 28 times. To me that is important.
A merger or acquisition is a sensitive process for all parties involved. Misinformation can abound, egos can be bruised, and business relationships can be damaged. One major cause of problems for companies entering a merger or acquisition is rumors and misconceptions that are allowed to run rampant through all levels of employees and stakeholders, as well as communities surrounding the businesses.
Employees, customers, vendors, community members and other key audiences hold specific interests in every company. To facilitate a smooth transition, companies must provide clear and concise information about the merger or acquisition to all stakeholders.
Implementing a transparent communications program ensures that all interested parties understand exactly how the deal will affect them. Without transparency, stakeholders begin to lose confidence. Flawless response time and a defined communication strategy are crucial to effectively ease any concerns.
Precise planning and messaging
Companies must prepare to beat fast-paced rumors months ahead of a merger or acquisition becoming imminent — especially with the speed information travels in today’s tech-savvy world.
Nothing is worse than having your employees find out about a major change in their company from an outside acquaintance. Why didn’t anyone at work inform them? Will they lose their jobs? These concerns should be addressed long before the rumor mill kicks into action. This takes proactive planning.
Initiating a proactive strategy will uncover communication considerations impacted by a merger or acquisition such as employee, key customer, investor, vendor and media announcement strategies, the company name, updating or merging of websites, and a host of other things.
“Key messages” that contain useful and comprehensive information should be prepared well ahead of time, with planned face-to-face meetings with those most affected by the deal, a detailed implementation timeline, and a plan for 11th-hour changes are essential to create a smooth transition process.
When announcing a merger or acquisition, it is imperative to provide accurate information and to avoid making promises that cannot be kept. If management takes the time to discuss the deal’s benefits and drawbacks, employees are more likely to respond positively instead of resisting change.
Employees expect straightforward and honest information about what the deal means for them. Anticipate questions that may arise and have a solid answer for each. Regular updates should be communicated through management, question-and-answer sessions, staff meetings and company news vehicles. The announcement to your staff must be a top priority — even ahead of key clients. But if planned properly, the announcement can hit all stakeholders within a matter of moments.
You may want to meet with key clients in person. A global announcement can be distributed via email within minutes of a staff announcement to not only clients but also other interested parties. A personal letter can always follow. But don’t stop there. Be sure to reinforce the benefits of the merger in all communication going forward.
Vendors will also be concerned about how the transaction will affect contracts, tax and credit information. A post-announcement letter can address these concerns and include any changes to important information.
Print and electronic media outlets are powerful tools and should be used accordingly. One designated spokesperson should be available at all times to speak to reporters. Communicating with key media outlets during a merger or acquisition offers a means for publicizing a company’s name change and launching new market and/or services announcements.
The perfect mix for internal and external communication plans involves implementing communications quickly, utilizing all available communication routes and delivering consistent, clear and accurate messages. Companies that make communications plans a priority during a merger or acquisition will emerge from the process as an organization that stakeholders, employees and the media can trust. ?
Kelly Borth is CEO and chief strategy officer for Greencrest, a 22-year-old brand development, strategic marketing and digital media firm that turns market players into market leaders. Borth has received numerous honors for her business and community leadership. She serves on several local advisory boards and is one of 30 certified brand strategists in the United States. Reach her at (614) 885-7921, firstname.lastname@example.org, @brandpro or for more information, visit www.greencrest.com.
By some estimates, oil and gas wells will be pumping $30 billion into Ohio’s economy in 2015, creating 200,000 jobs. All that money and activity also promises to keep attorneys busy.
“Companies are still feeling things out. So far, there have been about 500 permits issued and there are only about 80 producing wells. But 101 permits were issued in March alone. There will be a lot more drilling this year,” says Michael Schottenstein, an associate with Kegler, Brown, Hill & Ritter.
As companies look to start drilling, property owners with leases signed when offers were lower want to renegotiate more favorable terms. And some communities continue to fight to keep hydraulic fracturing of shale rock formations, a process also known as fracking, from taking place within their borders.
Smart Business spoke with Schottenstein about current legislation and the outlook for oil and gas well production in Ohio.
What’s the status of potential fracking bans?
In a recent case in the 9th District Court of Appeals, State ex rel. Morrison v. Beck Energy, the court said Ohio Revised Code section 1509.02 gives the Ohio Department of Natural Resources, Division of Mineral Resources Management, exclusive authority over drilling permits, pre-empting local ordinances. Municipalities can regulate things like excavation and right-of-way usage and construction, but have no authority when it comes to drilling.
However, there are still municipalities discussing bans. The city of Munroe Falls has appealed to the Ohio Supreme Court and asked the court to weigh in on the issue, but the court has not said yet whether it will take the case. It’s unlikely municipalities will be able to impose outright bans.
What are some other legal developments?
The natural gas severance tax increase Gov. John Kasich proposed in his new budget is significant. Drilling companies and other industry players have been trying to stop it because they say it would discourage drilling. The industry may have won the fight for now, though. The budget plan the Ohio House Republicans recently put forward left the severance tax where it is. It’s still possible it could get passed if the Ohio Senate makes some changes, but it is unlikely.
Another development involves a line of cases dealing with lease terms and whether perpetual leases are void as being against public policy in Ohio. In Monroe County, a judge in the case of Hupp v. Beck Energy essentially said that public policy in Ohio so disfavors perpetual leases that any oil and gas lease that allows drilling companies the right to extend the lease indefinitely by paying delay rentals without an obligation to actually drill are void as against public policy.
There’s also a federal case from the Southern District of Ohio in which the decision says state law disfavors perpetual leases and will interpret them not to be perpetual when possible, but did not say they are actually void.
These are important cases because a lot of landowners are trying to find ways to get out of leases signed when companies were paying a lot less for them.
What are leases going for now?
Royalty percentages had historically been about 12.5 percent for the landowner, but we’re seeing some up to 20 percent. Reports out of eastern Ohio are that some companies are offering bonus payments of $5,000 to $10,000 an acre. Those who entered into a lease 20 years ago, got a small bonus payment and now get a royalty check for $10 a month, are trying to get a better deal.
Oil and gas leases typically provide for a period of one to five years during which companies can explore to see if there’s oil and gas on the property. Leases also usually have a clause that the lease continues as long as oil or gas is produced in paying quantities, which can be an issue if drilling was interrupted for some reason.
Are their other issues on the horizon?
One major concern is waste disposal. Fracking produces waste, called brine, and it can’t just be put it back into the water system. Because this liquid would pollute the water table, drilling and disposal has to be done right and companies must take necessary precautions. A company near Youngstown was recently indicted for dumping brine into the Mahoning River, but if companies don’t cut any corners, our water should be safe. Still, expect more litigation, legislation and regulations involving waste disposal in the future.
Michael Schottenstein is an associate at Kegler, Brown, Hill & Ritter. Reach him at (614) 462-5451 or email@example.com.
Join us for Eggs & ESOPs on Thursday, May 23, for a morning seminar discussing the ins and outs of ESOPs. Visit www.keglerbrown.com for more information.
Insights Legal Affairs is brought to you by Kegler, Brown, Hill & Ritter
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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Insights Business Insurance is brought to you by SeibertKeck
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