Kristen Hampshire

Businesses today face more competition than ever, driving them to go beyond their own backyards and look globally for ways to capture market share and meet the needs of customers. Whether doing business at home or abroad, many of the challenges businesses face remain the same — turning a profit, delivering value to shareholders and satisfying customers, says Robert Olszewski, a director in the Audit & Accounting Group at Kreischer Miller, located in Horsham, Pa.

“Beyond those basic goals of running a business, customer demands have become more persistent, with heightened expectations from markets that companies can potentially serve,” says Olszewski. “The good news is that significant advances in technology during the last two decades have provided the tools that businesses need to grow their presence internationally. Companies that take advantage of these resources and think beyond geographic borders can capture market opportunities outside the U.S. The business world has become a flat playing field, and companies have developed strategies to adapt to an ever-changing world that may present expansion across the globe.”

Smart Business spoke with Olszewski about the advantages of going global and how a business can prepare to compete in the international marketplace.

What benefits can businesses realize when they go global?

International expansion can provide an opportunity to deliver new products or services to a previously unexplored market. Making this possible are technological advances that have enabled companies to operate efficiently across international boundaries at spending levels that were previously insurmountable.

Global expansion continues to extend beyond sophisticated overseas markets. Companies have benefited from expanding into newly industrializing countries such as Korea, providing an additional stimulus to international business activities. By going global, companies can take advantage of an enhanced supply chain network of facilities and distribution centers that expedite the delivery of goods. There are tightened demands with respect to procurement, manufacturing materials into intermediate and finished products, and product distribution to consumers. Global expansion may give companies geographic leverage by having production facilities, distribution centers and sourcing points that may drive efficiency and promote success.

How can a business prepare to expand its operation for global business?

Before simply jumping into the pool, it’s a good idea to test the waters and determine whether global expansion is truly an option for your company. Companies that have effectively integrated into global markets must have a well-designed strategic plan, which involves market research and analysis of those results. It requires establishing a first-year operating budget and developing a support structure to accommodate anticipated growth.

The plan should also prepare the company for expansion, answering the question of what is next. The creation of a plan will serve as your roadmap, albeit one that is reviewed often and revised as needed. The main goal of your strategic plan for going global is to identify the right mix of domestic and international operations, and the sequence of expansion into varying markets.

Ultimately, success at the international level requires a broad awareness of the local environment. The company and its leadership should be flexible and prepared to adapt to change quickly. By identifying the risks and opportunities of expansion in advance, a company can make smart tactical decisions while implementing its strategic plan.

What are some common mistakes companies make when doing business globally?

The most common mistake is not playing by the rules. Corporate policies must be appropriate and comply with conditions in the countries in which a global expansion occurs. Simply put, a one-size-fits-all approach will not work. Companies involved in international markets must be aware of government regulations and pay careful attention to these when conducting business.

This can be difficult without a well-established management team that possesses an understanding of the requirements. It’s a good idea to enlist the help of a third party who has expertise in international business and who can steer your company in the right direction as the strategic plan is implemented.

It’s also important to recognize that international trade and financing have grown at a rapid pace. Companies are buying, selling and making financing decisions across borders. As a result, businesses must formulate policies for managing cash flow in foreign currencies that must be updated and monitored as relevant information becomes available.

Finally, companies must carefully manage human resources if they want to succeed in the international market. Again, since no two companies operate the same way, how HR issues are handled will depend on the organization.

What advice would you give to companies that are considering entering the global business marketplace?

First and foremost, global expansion is not meant for everyone. The U.S. is blessed with a significant population, high gross domestic product, large median income and a limited language barrier.

For the majority of companies that fail with global expansion, the reason is not a substandard product or service. Instead, they fail because of poor advanced planning, refusing to understand the local environments and investing funds without regard for the anticipated return. That is why careful analysis and planning are critical first steps to expanding business globally.

Consult with trusted advisers as your strategy is developed to ensure that the company stays on course for success.

Robert Olszewski is a director in the Audit & Accounting Group at Kreischer Miller in Horsham, Pa. Reach him at (215) 441-4600 or

With the growth of the sustainable business model and conscientious companies’ focus on the triple bottom line — people, planet, profit — a new corporate structure is emerging that speaks to these values.

The benefit corporation model allows sustainably minded companies to adopt a structure that frees them of the traditional corporation’s requirement to maximize profit and shareholder returns. Benefit corporations can stay true to their socially responsible missions and still earn a profit, two things that used to be at odds, says Gabrielle Sellei, an attorney at Semanoff Ormsby Greenberg & Torchia, LLC.

“Unlike a nonprofit entity, a benefit corporation may issue stock to investors, offer stock option plans to employees and in all other respects operate as a traditional corporation,” Sellei says. “The benefit corporation is a market-driven response to the recent and dramatic growth of the sustainable business enterprise, and legislation across the country is recognizing that companies no longer want to make the choice between doing well and doing good.”

The opportunity to elect benefit corporation status gives companies the leverage to continue their mission to create a public benefit while capitalizing on a free market economy. At press time, seven states — including New Jersey and New York — had adopted laws creating benefit corporations, with legislation pending in Pennsylvania.

Smart Business spoke with Sellei about how a benefit corporation works and what considerations a business should review before moving toward this model.

What is a benefit corporation?

A benefit corporation allows — and requires — its directors to take into account public benefits that include the environment, the community and other constituents, some of whom may not be directly connected to the entity. Under the proposed Pennsylvania law, any corporation that elects benefit corporation status must, in addition to its business purpose, also have a purpose of creating a ‘public benefit.’

The public benefit can be either a ‘general’ public benefit, defined as bestowing a material positive impact on society and the environment, or it can be one of the specific benefits enumerated in the proposed statute.  These include providing low-income individuals or communities with products or services; promoting economic opportunity beyond creating jobs in the ordinary course of a company’s business; preserving the environment; improving human health; promoting the arts and sciences; increasing the flow of capital to public benefit entities; or conferring any other specific benefit on society or the environment. Under the proposed legislation, the definition of even a specific public benefit is quite broad and potentially applicable to many companies’ missions.

What type of company is an ideal candidate for this structure?

As long as a company commits to being a corporation and creating either a general  public benefit or one of the specific enumerated public benefits, that business can elect benefit corporation status. However, it’s important to make this decision with the guidance of an attorney who is well versed in business law and familiar with benefit corporations, and who can provide sound advice based on the governance requirements for this type of entity.

What governance and accountability requirements must a benefit corporation comply with to uphold its status?

A benefit corporation is in some ways similar to a nonprofit entity in the sense that the entity gains relief from certain requirements in exchange for providing a public good, and must hold itself accountable to the public as long as it retains its special status. In the case of a nonprofit, that relief takes the form of tax relief, and in the case of a benefit corporation, the relief is from the fiduciary obligations of its directors to maximize profits and shareholder value. But there are requirements to comply with, one of which is to appoint an independent benefit director.

Under the proposed Pennsylvania statute, the benefit director is required to prepare an annual benefit report to the company’s shareholders, the Commonwealth and the public. The report must detail the benefit corporation’s compliance with its benefit mandates and include a description of the entity’s efforts and success in pursuing a public benefit. The benefit director’s name and business address must be included, along with the compensation paid to each director and the names of holders of 5 percent or more equity.

Finally, the benefit director must state his or her opinion as to whether the entity acted in accord with its stated public benefit. The report is sent to each shareholder, is publicly posted on the entity’s website and must also be filed with the Commonwealth, although compensation information may be redacted from the web posting and state filing.

What should a company consider before deciding to become a benefit corporation?

The benefit corporation structure is not ideal for every company, and there are several issues a business should weigh before electing this status. For one, a business that will need to raise capital should consider whether it will be hampered in this effort by its explicitly stated intent not to focus primarily on maximizing returns. Another issue is the still-scant body of law that has yet to coalesce into a set of predictable and coherent conventions and practices that allow a business to govern itself with a high degree of confidence. Finally, there are the compliance issues that a public benefit company will need to manage.

On the other hand, a benefit corporation may be attractive to socially responsible investors. In addition, businesses may find that their status gives them an advantage with respect to attracting and retaining employees, marketing themselves to consumers and possibly even gaining price advantages over competitors. Careful consideration of these and other issues is critical for companies considering a benefit corporation model.

Gabrielle Sellei is a member at Semanoff Ormsby Greenberg & Torchia, LLC. Reach her at or (215) 887-0200.

A business partnership is like any relationship. You want to partner with someone who shares your long-term goals and complements you, someone who shares your work ethic, values and vision. Without this common ground, a marriage in business or in life is bound to unravel. And that can get ugly, says Tom Christy, an attorney at Garan Lucow Miller PC.

“What business owners often forget when they enter into a new partnership is that once you let someone into your business, it can be hard to get them out unless you have a proper buy-sell agreement in place,” says Christy.

Whether your reason for inviting a partner into the business is to infuse capital into the organization, to reward a longtime employee or to execute a succession plan, you need to proceed with caution and prepare formal documentation to protect the business.

Smart Business spoke with Christy about what to consider before bringing on a new partner in order to ensure a successful relationship that benefits all parties and the business.

Under what circumstances might an owner consider bringing in a new partner?

Some owners decide to reward employees with partnership if they are top performers or are part of a succession plan that is being executed over time. In other instances, equity partners are brought on to help infuse capital into a business. Also, you may take on new partners — and I’m using ‘partners’ loosely here, as the actual form of the business today is almost always a corporation or LLC — after a merger or acquisition; these arrangements are the product of the newly formed business structure.

Whether new partners are invited to join an existing firm, or owners decide to partner and launch a business together, the same rules apply: Be sure you truly know your partner, that you share common goals and a vision for the business and that your roles are complementary and defined. Go into the deal with your eyes wide open to your partner’s perspective.

What determinations should an owner carefully weigh before inviting a partner into the business?

It’s important to have those tough conversations about money and control before entering into a partnership. How much decision-making power will each partner have? How will disputes be resolved? Do not make the mistake of assuming that your 51 percent stock in the business means that the other partners must yield to your authority. Disputes can result in litigation in which a minority partner can argue shareholder oppression. So talk about how much power the new partner will have and what this means in the board room.

Be sure that you have the same goals for the company. Your opinions on how to reach those goals may differ, but successful partners work toward a shared vision for the company. Ask yourself, ‘Can I work with this person?’ The main reason partnerships eventually fail is because the partners failed to address the tough questions in advance.

Remember, a business partner is more than a manager or someone you hire to help run the company. This person shares in the decision making and the resulting profits, and this person can drive the success or cause the failure of a business. Take on new partners with caution, and always consult with an adviser who can provide a third-party perspective and challenge owners to dig deeper before entering into a formal arrangement.

What common mistakes do owners make when making an employee a partner?

In the case of making an employee a partner, first consider whether this is the best reward for that person. Giving an employee stake in the business is not the only way to financially reward him or her for top performance. Consider whether a profit-sharing plan would provide a more appropriate financial reward. Even if you do not want to meet the stringent requirements of a tax-advantaged profit-sharing plan, you can still create profit-based incentives.

Partners not only gain financial stake in the business, they also get a voice and some control. Decide if the employee you want to reward will be happy with a financial reward and if giving that person voice and control is truly beneficial for the organization.

What steps can an owner take to protect the business when bringing in a new partner?

First, be sure that a partnership is the best arrangement. Would you be better served by setting up a profit-sharing plan to reward employees if that is your goal? Second, be sure that all terms of the partnership arrangement are on paper, and consult with a legal professional who can be sure there aren’t any issues in your agreement that could result in litigation down the road. Third, establish a buy-sell agreement to determine, before you get into a partnership, how you can get out.

Other ways to protect the business include setting up a probationary period for the new partner during which he or she earns a financial stake in the company after a determined period of time. Also, if you plan to bring in a partner who specializes in one area of your firm – for example, design — you may consider splitting your business and creating separate companies so this partner does not gain control over all operations.

Splitting up the company can preserve control and profit in areas where the new partner is not involved.

Tom Christy is an attorney at Garan Lucow Miller PC. Reach him at or (248) 641-7600.

Whatever their long-term plans for a company may be, owners and investors are interested in increasing the value of their companies. When an owner takes the perspective of an outside, objective investor in looking at the company, he may see more clearly opportunities to grow value.

This type of analysis gives a company the ability to identify opportunities to increase long-term value and creates an important roadmap to help increase the likelihood of success. This strategic roadmap, coupled with a long-term tactical plan for increasing value, is critical for any company that wants to succeed in today’s highly competitive global market.

This means looking beyond your five-year plan and considering what your business will look like and how your customer base will have changed 10 to 15 years from now and beyond.

“Companies that have the highest value are those with a track record of sustainable growth in sales and profitability, and that both understand their customers’ needs and meet those needs as effectively and efficiently as possible,” says Cathy Roper, director of financial advisory services at Brown Smith Wallace. “They know what they do better than the competition  — whether that’s speed of delivery, customer service, or low pricing — and really focus in on refining and communicating those differentiating factors.”

The tried-and-true SWOT analysis is an important evaluation tool. Identifying the company’s strengths, weaknesses, opportunities and threats can help an organization define a path toward success in the new economy.

“Other less time-consuming options can also provide an organization with actionable insights,” says Tony Caleca, member in charge of audit services. “Tools such as competitive benchmarking can help expedite critical changes in the short term.”

In addition, trade publications are often a great source of information on what best-in-class companies in your industry are doing and what important trends are occurring that may impact your business in the future.

However they get there, companies need a strategic plan for how they will address industry disruptions, changes in the work force, global competition, and the online business world and its lack of borders. There’s also the question of, “What’s next?” and figuring out how to execute a succession plan, particularly considering the aging population and its effect on future management at all companies, especially private and family-owned businesses.

“A big part of figuring out the next step is to carefully assess your key managers and your entire work force,” says Bill Willbrand, member in charge of industry services. “Do you have the talent pool in place to take your business to the next level? And, more important, what does that next level look like? Who are your customers and what do you offer them? How will you get to where you want to be from where you are today?”

Accomplishing all this is admittedly a big task, but having the support and guidance of a team of professionals who can bring independent, specialized perspectives on these business issues can help position a company for accelerated growth.

“Whether the long-term plan involves selling the business, growing it through acquisitions, or any number of strategic moves, business leaders need help looking at their companies with an investor’s critical eye so they can make the best decisions to reach their goals,” says Ted Flom, member in charge, risk advisory services. “This means facing up to the hard questions, answering them and executing the answers. It’s a challenging process, but it’s essential to ensure sustainable growth.”

Smart Business spoke with this team of professionals at Brown Smith Wallace about how to position your company to succeed.

What prime areas do investors focus on when looking at a business?

First, investors factor out nonrecurring income and expenses of the business to estimate its future earnings potential. Second, they look at the company’s competitive position, along with anticipated changes in the market to determine the business’s long-term viability, especially as it relates to the transition to new ownership. Third, investors will factor in efficiencies that they believe the current owner/operator has not fully realized. They want to identify areas where they can improve profitability to boost the business’s cash flow and value.

Once owners recognize the areas that investors focus on, they can work to maximize the value of the business. For example, if a company’s average receivables collection period is significantly longer than that of competitors in the industry (thus negatively affecting cash flow), the company can work to reduce the average collection period, improve cash flow and reduce interest expense associated with financing customer receivables. Of course, if the company is in very poor shape, investors will consider whether it’s even possible to revive the business.

Investors will also look at risk factors such as too much concentration of business coming from one customer, or a critical production component whose price (or supply) is unstable and/or is controlled by a few key industry suppliers. If certain intellectual property is critical to the success of your business, the investor will want to see that it is protected by the appropriate patents, copyrights and trademarks. For example, an investor looking at a drug company is going to pay a lot more for a company with relatively new patents than he or she would for one where the patents are close to expiration with no new patents on the horizon.

Investors will also look at potential liabilities such as environmental and other regulatory compliance issues that could result in legal actions and/or fines. They will evaluate the loyalty of the existing customer base and will look for any obsolescence that must be addressed, such as equipment that needs to be replaced or upgraded, or technology that must be updated.


What are the key drivers that contribute to growth and sustainability?

Sustainability relies on maintaining relevance in the marketplace. In this global economy, and with fast-changing technology, that encompasses many things. You need to be nimble, stay close to your customers, have an intimate understanding of your competition, constantly evaluate your work force, raising the level of talent, and keep an eye on the long-term business plan rather than just focusing on year-end and other shorter-term goals.

But the key driver contributing to growth and sustainability is planning, and planning requires strategic analysis — a serious look inside and outside of your business. It means asking global questions such as what is your internal capacity and how does that match the opportunities available in the market today and in the future? Then it means breaking down the hard numbers that lead to the answers.

It also means understanding what need you fill for your customers and other ways in which that need may be met. For example, had railroad executives in the 1940s and 1950s defined their business more broadly as ‘transportation,’ they might have identified the growing interstate highway system and jet planes as competitive threats much earlier than they did.

How does a company assess its management team?

First, determine who holds key leadership roles in your business. Analyze whether your business requires oversight in a particular area where it is currently lacking. For instance, a manufacturing operation with plans to expand its product offering by starting a new division might require a leader with different skill sets not currently available in the company. Or, perhaps there are areas of the business that are not competitive and could possibly be phased out in the future, but they have underutilized leaders.

Do the managers in these uncompetitive areas have talents that can be applied elsewhere in the business? If so, what additional training may be required for them to successfully make the transition? In short, assess management strengths and weaknesses with an eye to the changes required in the future.

Next, be sure that the business is successful because of what it does, not because of who does it. The business should be sustainable with any good team at the helm. An organization should continue to drive success based on properly trained employees and the right management team. If this is not the case, it’s time to do some serious succession planning and focus on raising talent that can take the business into the future.

What key aspects of the work force should be evaluated?

Start by getting a business evaluation so you have a real measuring stick to use as you work toward goals. Then begin matching the talent you currently have with the organization’s goals. Are all needs met? Where are the gaps?

You’ll want to focus on gaining the expertise required, whether that means training existing employees or hiring new talent. This can be an especially delicate issue in a family business.

Have conversations about who is accountable at the business and where you will recruit your work force of the future. How will you replace employees, if necessary?

When should a business evaluate its strategic opportunities, and what does this process entail?

There’s no better time than now. In the short run, you’ll identify costs you can drive out of the business and, in the long run, you’ll be well positioned when things turn around. Evaluate the economic environment and the changes taking place in the organization and the industry on all fronts: legal, technology, market share, customers, competitors, work force, etc. The key is to map out how you will do business in the future, and what resources you need to succeed down the road. For example, those companies in the health care industry that anticipated and strategically planned for the aging baby boomer demographic are now on track to tap into a significant and growing customer base.

Of course, the global economy is a major factor. What role does your company play in this world market? Look at how the Internet, technological advances and online businesses have truly removed borders, even in industries where we never expected to see changes driven by global competition.

For instance, hospitals have typically never worried about global competition because health care used to require health care professionals to be physically present, but intense cost pressures, coupled with technological progress, are working to change that. Today, a surgeon halfway across the world may be performing surgery through the use of a robot whose movements are controlled by the remotely located surgeon. Even the location of the patient is no longer a given. Several insurance companies have started to give patients the option of flying to India to have their surgery and recuperate in an Indian hospital in exchange for reducing the patient’s out-of-pocket expense.

Start by analyzing risks and opportunities your company faces today. What could put you out of business? What other alternatives are available to your customers? Think outside of your comfort zone. What opportunities exist for you in the future?

We’re not saying this is easy to do. That’s why working with a team of professionals with expertise in key areas such as tax planning, process improvement, valuation and turnaround consulting, and who possess extensive experience providing integrated solutions for private companies, can help you build a sustainable platform for growth.

Cathy Roper is director of financial advisory services at Brown Smith Wallace LLC. Reach her at (314) 983-1283 or Ted Flom is member in charge, risk services at Brown Smith Wallace LLC. Reach him at (314) 983-1294 or Bill Willbrand is member in charge, industry services at Brown Smith Wallace LLC. Reach him at (636) 754-0200 or Tony Caleca is member in charge, audit services at Brown Smith Wallace LLC.  Reach him at (314) 983-1267 or

Today, it’s not enough to simply select a retirement plan to offer to your employees. The rules are changing for plan sponsors, even if you have been working with the same broker for decades.

Business owners must understand and defend their retirement plan decisions. As a plan sponsor, you are considered a fiduciary, held to the standards of an industry expert.

And the Department of Labor is enforcing the laws with increased civil and criminal penalties being assessed. In 2010 alone, the DOL collected more than $1 billion in fines, says Richard Applegate, president, First Commonwealth Financial Advisors.

“Plan sponsors are trying to do the best thing they can for their employees, but increasingly, they have to be able to defend their plan decisions,” says Applegate. “There has been a movement toward expecting plan sponsors to understand their fiduciary responsibility and to develop processes that can be defended.”

Smart Business spoke with Applegate about a business owner’s fiduciary responsibility as a plan sponsor and how to withstand an audit.

How has the fiduciary environment changed for business owners who offer retirement plans?

In years past, retirement plans were primarily seen as a product, offered along with a company’s other benefits, such as group health, group life and other coverages. That was the case until the enactment of the Employee Retirement Income Security Act of 1974, which oversees how retirement plans are managed. But in the decades since ERISA’s enactment, many companies continue to handle their retirement plans as products, not processes that support the plan’s operation with the best interests of plan participants in mind.

Under George W. Bush’s administration, Secretary of Labor Elaine Chao emphasized procedures and processes that underscored a plan sponsor’s responsibility as a fiduciary. The DOL published guidelines to help plan sponsors adhere to these expectations and offered numerous regional seminars as part of that educational effort. Now, regulations going into effect in April 2012 hold plan sponsors responsible for knowing how their plan’s service providers are contracted, what they charge for their services, what those specific services are and whether the provider is acting as a fiduciary.

The message is this: Be prepared to defend all of the decisions made concerning your retirement plan and to show that you have a defined process that can be measured and repeated.

What responsibilities do plan sponsors bear by offering a retirement plan to employees?

Business owners who offer retirement plans generally do so because they believe the benefit is valuable for their workers. They are giving employees an opportunity: the ability to accumulate retirement dollars through a company-sponsored investment account.

But what many company owners may not recognize is that, as a plan sponsor, there is a tremendous amount of fiduciary responsibility. As fiduciaries of the plan, they are held to an expert standard, at least in the eyes of the DOL. If they don’t have the skills to meet such stringent standards, plan sponsors should choose and retain outside experts who can help guide them through the decisions that must be made on a recurring basis. But the DOL says the plan sponsor must be able to support the choice they made for the expert based on their qualifications and experience.

They also must be able to explain why the plan they chose and its underlying investments are the best options for their employees. Ultimately, this focus on process and the requirement to make informed fiduciary decisions is designed to build more plan sponsor accountability into their retirement plan operation. And since the DOL has stepped up its auditing and will continue to do so, plan sponsors must take care to understand their role and take the job of a fiduciary seriously.

It’s critically important for business owners in 2012 and beyond to completely understand the expertise of the professionals they hire to service their plan and find out whether they are contracted to serve as co-fiduciaries. This will be required by law, effective April 1, 2012.

How can a business owner find qualified fiduciary professionals?

Review the credentials of financial professionals and look for designations such as Certified Financial Planner™, Accredited Investment Fiduciary Auditor and Registered Investment Adviser. Choose an experienced fiduciary analyst and ask for referrals. Obtain disclosures that explain in detail what the professionals’ services include. What are the expenses? This must be spelled out in black and white as part of the new regulations. These disclosures allow business owners to compare one plan with another and to fully understand what they are paying one plan service provider versus competitors. Also, these disclosures are intended to shed light on any hidden fees.

How does a business get started with assessing an existing retirement plan and mitigating risk of an audit by the Department of Labor or other regulatory agencies?

The reality is, many business owners do not realize that they are at risk for an audit because they assume the financial services professionals they have worked with for years are looking out for their best interests. And perhaps this is true.

But that assumption is not acceptable in an audit situation in which a process must be defined and defended. It’s a good idea to consult with an Accredited Investment Fiduciary Auditor (AIFA™), who can take stock of your current retirement plan and help to develop best practice standards for the plan’s fiduciary processes.

Richard Applegate is president of First Commonwealth Financial Advisers, a Registered Investment Adviser. Reach him at (412) 562-3232, (724) 933-4515, or

Saturday, 31 December 2011 20:01

How to attract superstar leaders

Many businesses that put hiring on hold during the recession are now prepared to retool their top talent. Organizations that are prospering in what is the new economy recognize that a sharp, experienced team is critical to success.

“Companies are looking for opportunities to take their businesses to the next level, and that includes upgrading executive talent,” says Tyler Ridgeway, director for the Human Capital Resources Group at Kreischer Miller. “They are evaluating their key players. Who are the executives they can’t afford to lose, and who are the ‘B’ and C’ players that they can upgrade?”

Leading executives have also been affected by persistently high unemployment rates. There are plenty of experienced leaders who are in transition. Some have sold their companies and haven’t yet settled into their next business role. Others left corporations to seek different work cultures.

So the good news for companies positioned to hire executives is that the crop of talent is rich, and those people, too, are looking for the right match.

“They want work that has meaning,” says Ridgeway. “They want to make an impact on a company’s future success.”

Smart Business spoke with Ridgeway about what top executives are seeking in a position, and how companies can implement creative strategies to attract top-notch talent.

What do top executives in transition seek in a new leadership position today?

The game has changed in the last five years, and executives are focused on much more than compensation. They are equally interested in a company’s vision and the ethics of its management team.

They’re looking for inspirational leadership, a strong moral compass. They want to make a difference and they want to make an impact on the company’s growth. We’re also seeing executives potentially take lateral compensation roles if adequate bonuses and incentive compensation are negotiated. Executives for hire are looking closely at companies to be sure they can present a compelling strategy and platform for growth.

How does a company attract interest from experienced top talent?

Companies that have success recruiting the best executive talent use creative strategies to build a strong applicant pool before making their selection. First, reach out to the trusted advisers who know your company best. This includes retained search consultants, bankers, accountants, attorneys and other members of an advisory board.

Talk to these individuals about potential gaps in your business: What expertise is lacking? What functions in the business require more attention or oversight? Essentially, what are those missing pieces? These discussions can help you seriously consider what job functions new talent could fill.

At the same time, tap into social media and utilize resources such as LinkedIn to grow your connections. Social media is not only helpful for finding talent but for getting referrals and accelerating the interview process. Tools such as LinkedIn allow you to develop more trust in candidates and can help you gain a deeper understanding of their experience and their connections.

How has the interview process changed?

The interview process in this market has stretched into a longer course. In some cases, the process slows because of business issues that must first be addressed. However, companies also recognize the ramifications of hiring the wrong person. They want to get it right the first time, so there is greater scrutiny and more screening involved.

For instance, a business might ask a candidate applying for a chief financial officer position to write a business plan for what he or she aims to accomplish in the first six months of employment.

Another option some businesses explore is hiring interim executives to fill roles, often with the potential of transitioning into a salaried, full-time position at the company.

How can hiring an interim executive benefit a business looking to fill gaps?

Interim assignments are a very effective mechanism for companies that want to attract solid talent, and the type of positions that can be filled on a temporary basis extends beyond the accounting functions that were once typical. Now, companies are posting interim assignments in the areas of finance, technology, operations and marketing.

The way these arrangements often work is that a business owner hires an executive to manage a specific project. By bringing the person inside, the owner gains a sense of how the executive performs. Does this person mesh with the company culture? In some cases, a project expands into an open position, and the owner can feel confident hiring an executive who has been tested.

The challenge with this type of employment is that you are limiting your pool of candidates largely to those who are not currently employed. But the benefits of an interim hire include the ability to fully realize what skill gaps the company needs to fill and to potentially reduce the hiring cycle.

The key to attaining top talent in today’s market is to think beyond traditional hiring means and keep your options open. Connect with trusted advisers and use tools such as social media to help validate decisions.

Tyler Ridgeway is director of the Human Capital Resources Group at Kreischer Miller. Reach him at or (215) 441-4600.

Personalized medicine has the potential to change the way that medicine is prescribed, and it could provide more targeted, efficient care with better outcomes for patients, ultimately leading to lower costs for everyone involved, says Jacqueline Penrod, an attorney with Semanoff Ormsby Greenberg & Torchia, LLC.

“There is a lot of excitement about the potential that personalized medicine has to really change the way we deliver health care to the benefit of patients, hospitals and insurers,” says Penrod. “The technology being developed can help patients in a way that will be less costly.”

But much of the technology that potentially will drive personalized medicine to the forefront of the health care environment is still being hatched in laboratories as pharmaceutical companies develop products that could help improve dosing and patient education.

Smart Business spoke with Penrod to learn how personalized medicine could change the face of health care delivery, and what steps a business can take to learn more and take advantage of its benefits.

What is personalized medicine?

Personalized medicine addresses the health care challenges of efficacy, safety and cost. It refers to customizing health care to tailor all decisions and practices to patients’ needs. For example, by using genetic testing technologies to gather information about a patient, medical care can be carefully targeted.

Currently, there are a number of laboratory products on the market with respect to genetic testing that allow a provider to better understand a patient’s needs. Then, proper therapy or preventive care can be prescribed in a more effective manner.

Take, for example, the drug Coumadin, used to prevent blood clots in patients with heart problems. A genetic testing product can be used to determine the best dosage for each patient, which helps doctors prescribe the best treatment, prevents hospitalization and return hospitalization, and ultimately, saves all players in the health care spectrum money.

This concept of tailoring health care is a real breakthrough in an industry that is in a state of flux. While we do not know what the future of health care holds, we recognize an emphasis on improving the way health care is delivered to address those key issues of cost, efficiency and outcomes.

How could personalized medicine benefit business owners?

Businesses that offer health insurance to employees with this personalized medicine component could see significant cost savings. Personalized medicine would give doctors the ability to identify a patient’s predisposition for a disease, then preventive therapy could be customized to meet that individual’s needs. As a result, the individual stays healthier, which has an impact on workplace productivity and lost time.

Laboratory products being developed by pharmaceutical companies will allow us to group populations of people who require certain therapies. This could allow for more efficient, cost-effective care, and the cost savings trickles down to the payer. So a business that has watched the cost of health care steadily climb year after year could potentially roll back these costs if personalized medicine practices are adopted by insurers.

But first, this new field must endure continued research and development, testing and market acceptance. Personalized medicine is in its infancy, but the concept is one that is much anticipated in the industry.

What are some of the implications associated with personalized medicine?

For now, personalized medicine does present some regulatory concern, and that’s mostly because the concept is so new and so different than the way health care is currently delivered to consumers. For businesses, the main concern is the idea of genetic testing for employees and the absolute necessity for this information to be treated according to regulations set forth in the Genetic Information Nondiscrimination Act (GINA).

Essentially, this law prevents employers from making employment decisions such as hiring and promotions based on a person’s health history, and also requires employers to keep medical information, including family medical history, diagnosis and treatment information, segregated from the nonmedical information contained in an employee’s personnel file. It’s important to consult with a legal professional to discuss what GINA means for your business, how personalized medicine could introduce some potentially litigious situations if not treated carefully and how to justly proceed if you want to explore personalized medicine if it is available from your insurer.

What steps should a business owner take to learn more and begin implementing personalized medicine?

A number of insurers today are considering the use of newly developed (and developing) personalized medicine products. Businesses should ask insurers whether they offer coverage for any of these products and, if they do not, suggest that they consider ways in which personalized medicine might curb health care costs and lower premiums.

Jacqueline Penrod is an attorney with Semanoff Ormsby Greenberg & Torchia, LLC. Reach her at or (215) 887-0200.

Each year, the cost of your health insurance premium is rising. Rather than sitting helplessly on the sidelines, why not manage the expense with a modified self-funding arrangement instead of your traditional fully insured program?

Modified self-funding arrangements are not just for large companies. Organizations of all sizes can benefit from paying their own claims and capping their exposure.

In addition, with the current health care environment, now is the time to consider taking premium costs into your own hands, says Michael Bartolini, vice president and business practice manager at First Commonwealth Insurance Agency, a division of First Commonwealth Advisors.

“A fully insured arrangement means that the insurance company is taking on all of the risk, and the employer pays the set premium regardless of the company’s claims performance,” Bartolini says. “If the insurance carrier is taking on the risk, its rating development is performed more conservatively than may be appropriate. There is no better time than now to really dig in and determine if a modified self-funding arrangement could create an opportunity to return dollars back to your bottom line.”

Smart Business spoke with Bartolini about how a modified self-funding arrangement works and how to determine if it is the right solution for your business.

How does a modified self-funding arrangement work?

In many ways, a modified self-funding arrangement is paying your own insurance claims while capping the risk/exposure at a point where you feel comfortable. The real cost of this type of arrangement can be figured by adding up claims, stop loss insurance and administrative costs. The result creates a medical benefits program that caps exposure for each employee.

The arrangement is called modified self-funding because you are not alone on an island of risk; your losses are capped at a comfortable level, so you will not go bankrupt from paying an inordinate amount of claims for any one individual.

Why don’t more companies take advantage of the modified self-funding structure?

First, a lot of companies believe that this arrangement is too risky or that their companies are too small. But because you cap your losses, this is not the case.

Second, companies might not have the cash flow to fund the plan. While this is a legitimate concern for struggling organizations, by capping losses, your company could spend less out-of-pocket each month in the long run compared to a fully insured plan.

Ask yourself this: What are your claims trends? What is your plan utilization? Are your numbers lower than an insurance carrier’s medical inflation rates? If yes, a modified self-funding plan may be for you.

What type of company is a candidate for a modified self-funding arrangement?

This method of medical insurance funding is ideal for a company that is willing to take on some risk and to think outside the box. Also, the company should have a culture of strong health care consumerism.

There should be an emphasis on preventive health and wellness, with programs in place that encourage workers to take care of themselves and assume responsibility for their health care.

In environments where employees participate in behavior changes that promote wellness and understand the true cost of health care, plan utilization tends to be lower. In these scenarios, a modified self-funding plan can reduce expenses because the organization’s claims history is likely better than the average and the total costs of a self-funded arrangement could be less than an insurance carrier’s offering.

What is involved in setting up a modified self-funding arrangement?

First, partner with a consultant who can help you take a look at historical claims and determine the risk picture at your company. After a consultant assists with reviewing your claims history, a decision is made on where to capture exposure, based on health care utilization.

Then, secure an administrative service proposal from an insurance carrier to determine the cost of adjudicating the claims. Next, consult with a stop loss provider and get a proposal for the appropriate loss cap level per individual insured in the employee group (called a specific). From there, an aggregate stop loss proposal is secured to protect the company should there be a lot of claims by many individuals in the employee group.

If your current health insurance carrier is issuing premium increases in the single digits, this could be a sign that your claims history is such that a modified self-funding plan could save you money, as a low rate of increase likely shows that your company is a good risk.

Finally, do not be misled into thinking that your company is too small or that this type of arrangement is too risky. In reality, this structure can provide a real opportunity to put money back toward your bottom line and save more on health care expenses in an uncertain economic environment.

Michael Bartolini is vice president and business practice manager at First Commonwealth Insurance Agency, a division of First Commonwealth Advisors. Reach him at or (724) 349-6028.

Changes in patent law could provide a financial break for some companies and individuals, along with opportunities to expedite the process, additional ways to challenge patents and easier patent notification through virtual marking.

Is now the time to consider changing your company’s patent strategy? Possibly.

As the Leahy-Smith America Invents Act is implemented in coming months, the four most notable patent law changes could affect when organizations and individuals decide to file for a patent, how they challenge competitors’ patents, and the speed at which the patent process is expedited.

“The patent law changes affect anyone who has an idea and wants to patent that idea,” says John Skeriotis, Chair of the Intellectual Property Group at Brouse McDowell in Akron. “The legislation was designed to improve the quality of patents, to reduce litigation that occurs by time or by filings, to decrease patent backlog and bring inventions to the market faster, and reduce costs for qualifying applicants.”

Smart Business spoke with Skeriotis about the new patent law changes and how this legislation will affect individuals and organizations seeking patents.

What are the most notable patent law changes?

There are four key changes that could affect the patent strategy at some companies. First, the legislation changes the patent filing process from a First to Invent system to a First to File system. Second, companies now have the ability to more actively participate in their competitors’ patent applications by submitting prior public documents challenging and arguing against those patent applications. Third, there is an expedited patent process (prioritized examination) and some qualifying filers could pay lower fees. Last, there are easier patent notification methods available, such as virtual marking.

How will a First to File system change the patent process for companies?

This is the system that much of the world uses, and, given our global market, a change to this system is beneficial for U.S. companies and individuals filing for patents. In a First to File system, a patent is awarded to the first to file and not necessarily the first to invent.

For example, let’s say you and I invented the same product. You invented it first, but I was the first to file for a patent. In the previous First to Invent system, you could prove you were the first inventor and then be awarded the patent, despite the fact that I filed first. Now, regardless of who invented the product first, the inventor who files first gets the patent.

Some advice: file early and file as often as needed. Remember to file for a patent for product updates and upgrades — small improvements of any kind.

How will the patent challenging process change?

Companies now have more opportunities to participate in their competitors’ patent process in the U.S. Patent and Trademark Office rather than doing so via litigation in federal court. The idea is that managing patent challenges earlier in the patent filing process, and handling them at the office level rather than in federal court, will save time and money.

Here’s how a patent challenge scenario could play out: Your competitor is filing for a patent on a product and your company has public documents that challenge whether that competitor should receive the patent. You can argue why that idea should not be granted a patent. This could change the way companies strategize against competitors’ patents. It’s a good idea to talk to an experienced patent attorney about the benefits and potential downfalls of this patent law change.

How will an expedited patent process help businesses?

Prioritized examination allows companies to speed up the patent process, and doing so involves a rather steep fee of $4,800 for large entities and $2,400 for individuals and small businesses. However, with patent law changes, there is a fee reduction of up to 75 percent for independent inventors who meet certain criteria. There are a number of qualifications for this fee reduction, but the reduced cost and expedited patent process could be highly beneficial for some.

What patent change will make notification easier?

The new legislation takes advantage of technology available today and allows for virtual marking. This means a company can use the Internet to notify competitors and the general public that a patent was granted on a product or service. The patent marking no longer has to be physically included with a product.

In the past, some companies had difficulty determining where to place the actual patent number on the product. Using a tire as an example, should the patent number be embedded in a mold so that it is stamped in the rubber of every tire? Or, should a sticker containing the patent number be applied to every tire? Should the patent number be included in the owner’s manual? With the new law, a virtual marking provides more flexibility through utilization of technology.

How will these patent law changes affect a company’s ability to get a patent?

The changes correct concerns and issues that surfaced with the previous patent process and are supposed to reduce federal litigation. The new law is supposed to make the patent process faster and more affordable for some companies, and will align the application process (First to File) to that of other countries around the world. It’s a good idea to discuss with an attorney how these patent law changes could affect your company’s patent strategy, and to find out what opportunities may be realized in terms of challenging and expediting patents.

John Skeriotis is chair of the Intellectual Property Group at Brouse McDowell in Akron. Contact him at or (330) 535-5711.

Knowing the value of your business is important for making wise gifting decisions, especially because there could be quite a difference between an organization’s perceived value and its actual value.

“Business owners really should know how much their business is worth so they can determine whether or not to make a gift, and to ensure the amount of the gift is appropriate for their estate plan,” says David Heilich, family wealth planning practice leader at Brown Smith Wallace LLC, St. Louis, Mo.

As a result of the recent recession, lower fair market values have made gifting a much more attractive option, giving business owners the opportunity to leverage closely held stock and partnership/LLC interests, especially when applicable discounts for lack of marketability and lack of control (the so-called minority shareholder discount) further decrease the amount potentially subject to taxes.

At the same time, doing a business valuation sooner rather than later — meaning years before a possible ownership change — can potentially add to the future value of the business when an eventual sale to an outside party is planned.

“Now is a great time to discuss with a professional how to take advantage of estate planning opportunities,” says Cathy Roper, director of financial advisory services, Brown Smith Wallace.

Smart Business spoke with Heilich and Roper about year-end gifting and the benefits of a business valuation.

What year-end gifting opportunities make this an attractive time of year to be generous?

Currently, there is a $5 million gift exemption, which is significantly higher than ever before, and, under the current law, in 2013, the estate, gift and generation-skipping tax (GST) exemptions decrease to $1 million, with the GST exemption indexed for inflation. In 2011 and 2012, single individuals with net worth of at least $5 million, and married couples with net worth of at least $10 million should consider making outright gifts and/or executing various estate planning techniques.

Advisers should take into account the nature of the assets being gifted and projected future values to determine if gifting makes sense and to avoid gifting too much.

How should an individual plan this year, considering the uncertainty of gift laws in 2013 and beyond?

It is unknown when the law in 2013 and future years will be settled, and if there will be any changes to the current law. You don’t want to be paralyzed by the uncertainty of the future. The opportunities in 2011 and 2012 could be lost if you wait until there is better guidance on the current and future estate and gift tax laws.

There are a lot of creative estate and gift tax planning opportunities that provide options and flexibility. Consult with a team of qualified professionals and take into account all relevant factors in order to make an educated decision about whether now is the time to take advantage of gifting opportunities.

How can getting a business valuation years before an ownership change is planned potentially add to the future value of a business?

A business valuation is an opportunity to do a ‘wellness’ check of your business and provides you with the type of dispassionate view a potential buyer will have. The valuation analyst will tell you where your company ranks compared to the industry on a number of different measures such as days outstanding on receivables, capital expenditures as a percentage of sales, gross profit margins, etc., and suggest areas where efficiency and, thus, profitability, can be increased.

Here’s an example: In a recent due diligence engagement in which we were evaluating a software business for a potential investor, we recommended switching from a traditional development model in which a client purchases the software and upgrades as new versions come out to a software-as-a-service model in which the software is leased and the continuous monthly lease payments smooth out the revenue stream and cash flow. This reduces the need for interim financing, reduces income variability and stabilizes the customer base, which reduces risk for a potential buyer. The less risk an investor has, the safer the investment is and the more an investor is willing to pay, or, put another way, predictable cash flow is always more valuable.

What is involved in the process of getting a business valuation?

The process is fairly straightforward, but often takes four to six weeks. First, you will receive a document request list that requires gathering at least five years’ worth of financials on an accrual basis, along with the most current financials. These are reviewed, and your ratios are compared to the industry average.

Once the valuation analyst gets a feel for the industry’s outlook and how the company compares to the industry, he or she will schedule an on-site visit in which owners are interviewed and questions are asked to further assess the company relative to the industry and to its competitors. Documents reviewed may include corporate charters, partnership agreements, minutes and any previous offers to buy the company.

Is it too late to begin the gift planning and valuation processes after the New Year?

Not at all. 2011 is an opportune time to take advantage of gifting opportunities, and a valuation is important to make wise decisions. Under current law, the gift exemption continues through 2012, so the New Year will still provide opportunities to continue estate planning and reap benefits from current estate, gift and GST exemptions.

David Heilich is family wealth planning practice leader at Brown Smith Wallace. Reach him at (314) 983-1273 or dheilich@  Cathy Roper is director, financial advisory services at Brown Smith Wallace. Reach her at (314) 983-1283 or