"I don't think I have ever seen the rates like this," says Jay Shaw, vice president and manager of Fifth Third's commercial real estate group.
Whether you're interested in constructing a new facility or adding to an existing one, if all the other financial puzzle pieces are in place, you may want to act now. Or if your business has been leasing space, it may be the right time to buy.
"The advantages of ownership are similar to those you experience when you purchase a home," says Shaw.
For instance, your business can deduct the depreciation of the building on its tax return, and most buildings increase in value over the years. Also, says Shaw there has been overbuilding in parts of Columbus, meaning buildings are priced to sell.
So what financial pieces need to be in place?
"Banks look at cash flow to cover the debt, first of all," says David Vogt, senior vice president and commercial real estate product manager at Huntington Bank.
If your current cash flow covers the debt, great. If it doesn't, be prepared to calculate projections, based on the increased income the investment will bring.
"You may have to make some assumptions," says Vogt. "If the expansion means more sales, then you'll need to develop projections that show the increased sales covers the debt."
Loan to value ratio is also important.
"The sweet spot is a 75 percent loan to value ratio," says Vogt.
In other words, if you're purchasing a building for $1 million, the loan amount cannot exceed $750,000.
And don't forget location.
"If your customers come back to you because of your location, you may want to stay where you are and expand," says Shaw. How to reach: Jay Shaw, Fifth Third Bank, (614) 341-2553, David Vogt, Huntington Bank, (614) 480-4988
On June 5, the state passed a bill that affects how you claim depreciation on certain assets. As a result, some businesses may need to amend their 2002 tax returns, says Kathy Petrucci, tax manager at Schneider Downs' Columbus office.
"The federal government offers all corporations and businesses a 30 percent credit on depreciation of business assets and tangible property," says Petrucci.
This Depreciation Bonus Act reduces your federal taxable income, which is the base number normally used for state returns. But thanks to a new Ohio law, corporations must add back one-sixth of this depreciation credit to their state taxable income. The remainder is added back in equal parts over the next five years.
"A lot of businesses already took the full 30 percent credit in 2002," says Petrucci. "And now they will have to amend their 2002 returns," or they could face penalties.
Another change in the tax law is designed to help tech companies. According to Paul Naumoff, state and local tax partner with Ernst & Young, Columbus, House Bill 405 will help fledgling tech companies in the product development stage.
"Prior to the bill, a company paid taxes on its actual income or its net worth," says Naumoff.
Tech companies often receive venture capital to keep them running while in the R&D phase, making their net worth and corresponding taxes higher than if they paid taxes on their income. Thanks to House Bill 405 companies that have been in business for at least one year but fewer than three and are conducting research and development will now pay taxes on business income rather than net worth.
At 8:20 a.m. on that 15th day, I called the pediatrician again. The nonemergency messaging system at the doctor's office promises that a doctor or nurse would return calls within 90 minutes.
I left an irate and probably irrational message demanding that SOMETHING be done for my sick child, and when I had not received a return call by 11 a.m., I called another pediatrician. My son's original doctor returned my call at 8:30 that evening, and only apologized for not getting back to me sooner when I asked why it took so long.
She said she had misunderstood the message and assumed I had spoken with the nurse, not left a message on the phone message system.
After discussing my son's case, I was still dissatisfied, both with my son's treatment and with mine as a customer. The bottom line was, she had not acknowledged my anger -- justified in her opinion or not -- and hadn't addressed my concerns until 12 hours after my call.
Every business makes mistakes, and any business can produce an irate customer. But it's how you address that customer and turn that experience around that can make or break your company.
As a former customer service manager, I know through training and experience that the first thing you need to do is acknowledge the customer's emotions. Ignoring them doesn't make them go away, and can escalate the situation. And you never wait 12 hours to return an unhappy customer's phone call, even if you don't have answers.
As I said to the pediatrician, just a call back -- within the first few hours of my call -- to let me know she was looking into the situation would've gone a long way toward defusing my anger.
Whether there was a mistake made at your end or not, apologizing for the confusion and inconvenience is part of turning around the disgruntled customer. Happy customers rarely spread the word about the wonderful experience they had with you, while unhappy customers (like me) will most certainly complain about you to as many people as they can.
And the result may not be just the loss of that customer, but of potential customers as well.
Today, brand is everything, and brand identity is communicated with each customer transaction as well as with the product itself. The first step in developing a brand is to agree on one coherent and focused message and consistently communicate it throughout the company. If the company isn't clear on what its message is, no one else will be, either.
"There can be huge misunderstandings from outside the company if everyone within doesn't understand the essence of the brand," says Kevin Roche, CEO of Fitch North America, whose client roster includes Maytag, Chrysler and Bath & Body Works.
The idea is that once the brand is well defined and every employee understands it, that message will be communicated to customers.
"It's important to remember that your brand has meaning, so that when a customer sees or reads the brand name, an association forms in his or her mind," says Greg Allenby, professor of marketing at The Ohio State University.
Once the brand's message is agreed upon within the organization, it can be clearly communicated through marketing and advertising channels, as well as daily customer interactions. Employees are a vital link to a company's customers, and if they can accurately and enthusiastically reflect the core brand values in everything they do, that reaches everyone from customers, to friends and family.
And that word of mouth advertising has a huge impact on a company's overall image.
So why is branding so important now?
Thanks to the Internet, companies compete on a global level more than ever, says Vince Parry, a branading expert who heads Columbus-based inChord's new branding arm Y, in New York City.
"Because customers can see what is available almost worldwide on the Internet, there is increased competition," he says. "The world is a smaller place."
Add to the mix a slow economy and fickle consumers, and there is a greater need for setting yourself apart from the competition.
Experts say that it is in a slow economy when branding is need the most.
"When there is a strong competitive environment, it is essential to have sustainable brand equity," says Roche.
Defining your product
Allenby recommends clearly defining your product's positive attributes with a strong name.
"Your brand name has to have meaning and it has to be associated with particular attributes," he says.
Take for example, Tupperware. The product was not catching on when it first hit the market. But as a result of its branding efforts, the company went on to become one of the most recognized household products.
"Tupperware began using the brand phrase 'Use Tupperware to show your family you care,'" says Allenby. "That worked."
Branding may seem like an abstract concept, but it has a huge effect on the success -- or failure -- of a product. And developing a successful brand means stepping back and focusing on the company's strengths and the value it offers to customers.
"You the need the ability to look at yourself from different directions. And it is tempting to be everything to everybody, but that doesn't work," says Bruce Rooke, chief creative officer of Columbus-based Gerbig, Snell/Weisheimer & Associates (GSW), a division of inChord.
inChord, a global market research and advertising firm, practices what it preaches. Using its own branding finesse, it has grown from $3 million to $75 million in revenue in just seven years.The company attributes its success to the ability to recognize its own strengths and messagem all the while doing the same for its clients.
"We began to grow significantly in the mid '90s," says inChord chairman and CEO Blane Walter. "Our clients were large pharma companies like Astra Zeneca and Eli Lilly."
Walter found a common need among his clients: branding. "We discovered that branding was critical to the success of the products our clients were marketing," he says.
A large part of branding is sticking to a single direction to create confidence in the company and its products, which is attractive to customers. Rooke says that's exactly what Harley-Davidson Motorcycle Co. has done over the years, and it's why the brand continues to be so popular.
"Customers sense that a company with confidence knows what it's doing," he says. "Harley-Davidson stuck to who they were."
Once you've established a brand, you can't let that brand image gather dust.
"You can update your brand image, but stay true to the basic premise of who you are," says Rooke of GSW. "Don't be predictable or complacent. Be new and fresh in how you communicate your company's promise."
As intangible as it may be, there is real value in a successful brand.
"Building brand loyalty and equity is the most important line on the balance sheet," says Roche of Fitch North America.
Brands can go along way in determining a company's success and can have as big an impact as a new plant or a breakthrough in technology. And a strong brand can help a business through tough economic times, allowing businesses to continue to command a premium.
Rooke emphasizes that creating a brand messages is as critical to your company -- perhaps even more critical -- than the product or service you sell. Spending so many resources on an intangible may seem extravagant, but industry experts say that a company without a brand image is like a ship trying to steer without a wheel.
"Branding is like corporate DNA," says Roche.
What makes a successful brand?
Knowing that branding is an important part of business is just the beginning of the battle. Pinning down the ingredients that make up branding is difficult.
"It's one word that describes everything that exists in the mind of the consumer at large when it comes to a particular company," Roche says. This is especially true for retail where a good brand is the sum total of the customer's experience, from the time he or she enters the building until his or her foot hits the gas pedal on the way out of the parking lot. Each element of the experience generates an impression that lends to a company's brand definition.
Roche says many companies are recognizing the importance of creating a unique but unified brand image.
It all boils down to to developing long-term relationships with customers, says Parry, of Y.
"People make buying decisions in nonrational ways," says Parry. "Branding is that intangible quality associated with a company and its products -- a perception that they are better than others. Branding gives companies a competitive edge."
Parry cites the example of the automaker, Volvo. After years of sending out the same message, the company has created a strong association between Volvo and safety. Whether the statistic back that fact up or not is irrelevant; the public perception is that a Volvo is safer than other cars.
"Because of that reputation, clients come back again and again," says Parry. "That's creating brand equity."
How to reach: inChord, (614) 543-6650, Fitch North America, (614) 885-3453
"When it comes to benefits, you only want to offer what is really meaningful to employees," says Andy Marfurt, general manager of CMHC Systems and president of the Human Resource Association of Central Ohio.
For example, many insurance companies offer accidental death and dismemberment insurance, but that benefit alone is not going to sway someone to join your firm.
Instead, advises Marfurt, offer benefits that are attractive to potential employees, such as a flexible spending account. With this benefit, a pre-determined amount is deducted from the employee's paycheck., and the money can be used to pay out-of-pocket medical expenses and dependent care.
"Employees like this because the money is not taxed," Marfurt says. "And the employer actually benefits because it reduces the company's Social Security expenses by about 6 to 7 percent."
Another benefit that helps both the worker and the employer is an Employee Assistance Program (EAP). Marfurt says CMHC System's EAP offers over-the-phone assistance to employees and their families.
"If an employee's mother is going through a divorce, the mother can call EAP and it will put her in touch with an attorney," he says. "EAPs prevent the employee from becoming distracted, and there is less absenteeism."
So what about salary? Although there are more workers competing for jobs, companies are still competing for talent, so wages need to be adequate. Companies should research, through free information on the Internet, the public library, the U.S. Department of Labor or surveys available for a fee, what the going rate is for standard jobs like customer service representatives.
"And then do a sanity check every two years," says Marfurt, "so you're not paying more or less than the market bears." How to reach: Human Resource Association for Central Ohio, (614) 760-0400 or www.nraco.com; CMHC Systems, (614) 764-0143 or www.cmhc.com
Or you've landed a huge contract and need additional facilities and equipment to complete the deal.
Or you are acquiring a competitor.
These are good news scenarios with a common result: the need for large amounts of capital. Today, businesses have more options than ever when it comes to raising capital, whether it's through traditional term loans, private investors or a public offering. Determining which option works best for your situation depends on many factors.
"At some point, the company should be working with a team of advisers," says Melissa Ingwersen, president of Bank One, Ohio. "This team would be composed of the company's public accountant, attorney and banker."
Jane Bittcher, vice president and manager of Fifth Third's business development group, says one common mistake companies make is trying to find one lump sum for everything they need.
"Don't look at the total dollar figure," says Bittcher. "Look at the pieces. There is short-term and long-term debt, and the company will probably need both."
Raising money the traditional way
If you need money to buy real estate or large pieces of equipment, you'll most likely want to repay the funds over a long period of time. That means you'll need some form of long-term debt.
"The best source for money is a bank, especially if your company has a proven track record," says Todd Fulton, senior vice president of Key Bank's Business Banking group. "Bank financing is the cheapest option."
Term loans are repaid over an agreed period of time. If you are building new facilities, you can repay the loan over 20 to 40 years.
Leasing equipment may also be an option, depending on your company's tax situation. And if you own a smaller firm, loans through the government's Small Business Administration (SBA) offer attractive terms to companies that qualify.
"The SBA guarantees or participates in the debt, and the SBA's 504 programs offer special benefits and are very inexpensive," says Fulton.
Another lending program available through banks is the Ohio Mezzanine Fund, which matches companies with investors who do not want ownership in the company but who are repaid at a higher interest rate.
"The Mezzanine Fund is more expensive, but it is a good way to raise money without an investor taking any piece of the company," says Fulton.
Ingwersen says the Mezzanine Fund can also help bridge funding gaps.
"Maybe the bank can loan $3 million but you need $5 (million)," she says. "You can often get the difference with the Mezzanine Fund."
And don't forget about short-term funding. Finding the right combination of loans is all part of a well-thought-out business plan.
"You have to look beyond what you need now," Bittcher says. "You have to look at what's going to happen next year. If you're expanding and increase sales, will you have the people to service the accounts?"
Revolving credit can help meet additional payroll and receivables needs, say Bittcher.
Public and private investors
Companies needing larger amounts of capital than traditional short-and long-term loans can supply face the question of going public. Whether that's the right choice for your business depends on many factors, says Ingwersen.
"Going public is a fast way to raise the largest amount of capital, but whether a company should go public depends on the business's life cycle," she says.
If a company is financially stable and needs a very large amount of money, going public may be the answer. But whether you're doing a secondary or first offering, shareholders are concerned about the return on their investment.
"There are many subtleties when going public," says Ingwersen. "And you should definitely consult with your team of advisers before making the decision."
Fulton says going public helps a company raise more money than any other option, but the drawback may be the dilution of the company's value.
"With these options, a highly qualified CPA is needed," he says.
And a public offering can be costly and time consuming.
"Whether it's a viable option really depends on the amount you are raising," Fulton says.
Private investors may be a faster, less costly option.
"Banks have departments that can help companies find private investors," says Bittcher. "Ask your banker for nontraditional and more creative ways to raise money."
And don't overlook equity investors such as friends and family or other personal stakeholders, Ingwersen says.
"Sometimes there is a vendor that the company works with that is willing to invest," she says. "You give up some ownership, but often through strategic partnerships, both companies benefit."
The nontraditional option
For public companies that need to raise large dollar amounts, the logical choice may be an additional public offering. But another option is becoming increasingly popular.
"In the past, the questions were, 'Can we get a public offering or borrow from friends and family?'" says E. Kurt Kim, CEO of PrivateRaise.com. "Today there is another viable financing option."
Private Investment in Public Entities (PIPE) can provide liquidity when a company needs it. PIPE financing is cheaper than going public, and it takes less time.
"Plus when you go public, you have to put together quite a dog and pony show," says Kim, referring to SEC public offering requirements.
PIPE money can be raised in two to six weeks. Common stock is offered to a limited number of investors -- usually between three and five -- and provides a greater degree of flexibility.
"Because the deal is negotiated, it can be more flexible in structure and terms," says Kim. "You can tailor the structure to meet both parties' needs."
The company benefits by raising capital, while investors receive stock at a discount.
Prime candidates for PIPE investors are typically companies that have a research and development ramp-up, like biotech firms.
"The stock prices are low today but the investor can receive returns when the company hits milestones, like FDA approval," says Kim.
But because of the potential complexity of PIPE deals, they can be intimidating to companies not familiar with them.
"The CFO needs to be comfortable with this kind of financing, or a banking intermediary can help," says Kim.
The potential downside of PIPE investing is that you are overconcentrating ownership of the company by having a few very large investors. Again, when deciding what's best for your company, Kim advises speaking with your banker. How to reach: Melissa Ingwersen, Bank One, Ohio, (800) 404-4111 or www.bankone.com; Jane Bittcher, Fifth Third Bank, (614) 233-4562 or www.53.com; Todd Fulton, Key Bank, (888) 539-4249 or www.keybank.com; E. Kurt Kim, PrivateRaise.com, (212) 688-4519 or www.privateraise.com
"The No. 1 mistake companies make is awarding their business to the lowest bidder," says Dan Brunell, COO of Acloche, a staffing solutions company. "There may be big differences in what you get for your money. The best price does not always mean you'll get the best talent."
Brunell says some companies make the mistake of paying temporary employees far less than their full-time counterparts.
"The primary advantage to using temporary staffing isn't the pay," says Brunell. "What saves the company money is the elimination of the recruiting and screening process and the insurance and benefits due full-time workers."
According to Brunell, when a company pays temporary staff a lower wage, it results in less qualified personnel on the job.
"Then the manager is scratching his or her head and wondering why it didn't work out," says Brunell.
The biggest benefit of hiring out a company's entire HR function is gaining the expertise of the hired company.
"There is so much to hiring employees that it is more efficiently handled by a company that performs only that function," says Brunell.
Seek a company that has the same business philosophies and values as yours.
"Look for a company that has an effective recruitment mechanism built in and that has the appropriate levels of insurance to protect them," says Brunell.
He cautions employers to check out a firm's understanding of hiring procedures.
"HIPAA legislation is changing the way we employ people," Brunell says. "The way it is handled could lead to a lawsuit if privacy issues are not followed. It could be a big disaster if you don't select an appropriate company." How to reach: Acloche, (614) 416-5600 or www.acloche.com
The record number of attendees, a mixture of members and guests, were there to applaud the honorees and gain insight into what has made them successful.
This year's honorees were Jamie Parman, president of the Parman Group Inc., Lisa M. Cini, founder and president of Mosaic Ltd., and Sandy Fekete, president and sole owner of Fekete & Co.
During the luncheon, each woman discussed her road to success and what it has taken to reach that level.
"I don't have time for a vision. I'm too busy," says Cini. "I just show up and move on to the next obligation."
However, Cini notes that her hectic work pace, which she named "survival mode" might be considered extraordinary by others.
"I consider a vision as having the ability to focus on a path or direction," she says.
And Cini's company has become an integral part of commercial interior design in the area.
Fekete earned her stripes through the school of hard knocks.
"I started out as a corporate secretary," she says.
She worked her way into the development of her own $4 million marketing communications firm.
"Despite the fact that I have no children, I compare growing a business with raising a child," she says. "You want the best for your company to succeed."
Jamie Parman says running her disability management services business can be a round-the-clock task.
"My job can go 24/7," she says. "We don't often stop and acknowledge our success. I am grateful to be appreciated by such a great organization."
"Short-term credit terms are not always as lucrative," says Kim Coleman, assistant vice president and credit manager for Huntington Bank. "It would be like purchasing a house with a credit card."
Revolving lines of credit allow for regular draws and payments for a specified period, usually one year. Mike Gonsiorowski, president of National City Bank's central region, says revolving credit lines are flexible and add liquidity for unexpected cash demands.
"But if you use the money for large capital purchases, you may run out of money when you need it," he says.
Revolving credit is designed for short-term purchases like purchasing inventory. And, says Coleman, you need to pay a substantial portion of it off on a regular basis.
"When a company doesn't pay its line of credit down on a regular basis, it incurs more interest costs and it gives a false picture of the financial ability of the company," she says. "One indicator that a company is financially healthy is its credit line going up and down."
To avoid the pitfalls of revolving credit, you need to understand the terms of your line of credit and use it properly.
"It boils down to a lack of understanding," says Gonsiorowski. "The company needs to use it for the purposes for which it was obtained, keep track of the maturity date and bring the credit line to zero for some period of time over the 12-month term."
Coleman says proper use of a revolving line of credit is like a dance.
"Businesses need to be in touch with their business cycles and learn the rhythm of the cycle, know when to use the credit line, and then pay it back," she says. "They dance together." How to reach: Huntington Bank, (614) 480- BANK or www.huntington.com, National City Bank, (614) 463-8250 or www.nationalcity.com
"Most companies already have an intranet system," says Brian Williams, assistant vice president of Aon Consulting, which offers SelfServiceNow. "SelfServiceNow is a fully customizable company intranet site that offers employees a full range of services."
These services are modular, so a company can choose just those portions that work best for it. Services range from benefit enrollment to financial planning and are seamless on the Web site.
"When the employee enters the site, it looks like the company's," he says.
Williams says SelfServiceNow saves companies time.
"A lot of our clients have thousands of employees," he says. "SelfServiceNow allows the HR department to focus on its core mission instead of handling all that paperwork."
The platform communicates with the client's health care plan providers, offering plan descriptions and submitting enrollment information. The system can also generate reports so the client's HR department can track the enrollment process.
"We program the system to know what plans are available to a specific employee, and our ad hoc reports can let administrators know how many employees have enrolled and where," Williams says.
And if your employees are computer illiterate? There are alternative methods for enrollment.
"We also offer an Interactive Voice Response (IVR) system that employees can use to enroll over the phone," he says.
Some companies set up computer work stations during the enrollment period and offer employees assistance in completing the process online.
Williams says employees like the flexibility online enrollment offers.
"The employee can sit down with his or her spouse and discuss the options instead of being pressured to decide in one day," he says. How to reach: Aon Consulting, (614) 436-8100 or www.aon.com