There are many pressures on organizations to make the most out of every customer interaction and maximize the return on investment on marketing and sales spend. However, businesses often don’t have the work force necessary to handle these functions as timely and effectively as they would like or the tools and processes in place to measure and track success. Companies that are able to track interaction, engagement, investments and customer patterns and behaviors often enlist the help of a customer relationship management (CRM) tool.
“A CRM tool helps businesses manage sales, marketing and customer service operations without significantly expanding their work force,” says Gina Rosen, a consultant at Columbus. “CRM, in the past, may have been nice to have — a luxury technology, but in today’s marketplace, it’s a must have to stay competitive.”
Smart Business spoke with Rosen about CRM, its applications and how it has helped businesses improve processes to better engage customers, target sales and gauge marketing effectiveness.
What are the typical features offered by a CRM system?
The features offered by CRM are very diverse. It’s primary applications are contact management; marketing automation; sales force automation; sales and lead management; reporting and analytics; call center and case management, particularly with respect to customer inquiries or complaints; workflow automation, or automating manual processes; and social media integrations. Businesses have the option for on-premise solutions where the software is hosted at the business on its servers, or they can utilize a Web-based or cloud option, which involves less initial financial investment. The software can also be customized to meet the particular needs of a business.
Is CRM cost prohibitive for businesses?
No it is not, however, had this question been asked six or seven years ago the answer would have been yes. Previously, enterprise-ready CRM software required significant funds to get the software and hardware in place. But with the advent of cloud-based solutions, even businesses run by a sole proprietor can afford CRM and leverage its applications to optimize processes. The cloud-based model allows business owners to pay through subscriptions that charge per user. The pay per user cloud-based model offers a low-cost opportunity to implement CRM, experience the value and see the return on investment (ROI).
What are the most compelling reasons an organization would implement CRM technology?
A recent survey of 200 top-performing small and medium-sized businesses showed that the number one reason businesses implement CRM software is to establish data-based metrics for sales and marketing. It also provides the ability to show ROI and quantitative key marketing metrics that mean a lot to businesses.
The second reason CRM is implemented is to proactively communicate with customers. Customers expect a lot these days, and one of those expectations is that businesses, whether small or large, interact with them. To stay in front of your customers and offer personal interaction is critical.
Within that same vein, the third reason companies take advantage of this software is for custom-targeted sales and marketing. With CRM you can customize that end user experience, which makes your sales force more effective. Customers can interact directly with your CRM custom solution through your existing website and experience a tailored visit based on previous interactions, or your sales force can utilize the standard feature when interacting with customers and have all of a customer’s history available in one spot.
What are the most important value drivers for CRM?
The top value for a business is the software’s ability to help manage marketing and sales campaigns. CRM can help businesses test marketing and distribution strategies and gauge customer reactions. This information can be applied to future marketing efforts.
Another important value driver is that the software serves as a customer data repository, allowing you to consolidate customer knowledge within the organization in CRM. This includes far more than just contact details, but also customer behaviors and attitudes and price sensitivity. This, combined with personal data, can allow businesses to build more effective and predictive sales models and marketing campaigns that result in higher sales.
Further, CRM systems can help demonstrate ROI. With CRM you can quantitatively show increases in sales, customer referrals and participation in promotions.
What is the most common challenge a business faces when implementing CRM?
Typically the challenge is user adoption — getting your sales force and front line users to embrace CRM. They often see populating the fields as double entry, an extra step, or another way for management to check in on them. But once the sales force sees that using the software results in more sales, they can easily overcome that hurdle.
What are the most common performance metrics?
The top one, hands down, is revenue growth. The faster you can show ROI the better.
Second is growth in a business’s customer base, which means adding new customers or converting leads into paying customers.
The third most common performance metric is aggregating customer data. Many companies have customer data spread out over disparate systems. CRM gives businesses a one-stop shop for their records.
Can you give us some examples of companies that have benefited from implementing CRM?
The Toledo Mud Hens baseball team, which works within the media and entertainment industry, had ticket sales go up 88 percent in one year and their internal operations couldn’t keep up with demand. Adopting CRM allowed them to automate and streamline inefficient processes, which translated into more ticket sales. A customer testimonial is available with more information.
Another example is the human resources consulting firm Findley Davies. Implementing CRM in their call center has given them the ability to manage daily responsibilities and track productivity. It has dramatically changed and improved day-to-day operations within their Benefits Administration department.
Gina Rosen is a consultant at Columbus. Contact her at (248) 850-2195 or email@example.com.
With more than 20 years in the market and 6,000 successful business implementations, Columbus is a preferred Microsoft Dynamics business partner for ambitious companies. Columbus’ key deliverables include flexible and future-safe ERP, CRM, BI and related business applications that deliver competitive advantage and immediate impact.
Polly LaBarre is the co-author (with Bill Taylor) of “Mavericks at Work: Why the Most Original Minds in Business Win.” The strategies, tactics and advice in “Mavericks at Work” grew out of in-depth access to a collection of forward-looking companies. These maverick companies are attracting millions of customers, creating thousands of jobs and generating billions of dollars of wealth.
Here is a portion of my interview with LaBarre about the book, which covers forming strategies, unleashing ideas, connecting with customers and enabling employees to achieve great results.
Q: Describe what you mean by “maverick.”
A: Mavericks are different, edgy and independent of spirit. Their personal style or message may not appeal to everyone. But that’s precisely the point. Mavericks are defined by the power and originality of their ideas. They stand out from the crowd because they stand for something truly unique. What’s more, they take stands against the status quo, in defiance of the industry elite and offer compelling alternatives to business as usual. Mavericks may be fighters, but they’re not rebels without a cause. Their sense of purpose is not only powerfully distinct (Think: Southwest Airline’s quest to democratize the skies); it’s provocative and disruptive (Think: HBO’s declaration of originality, “It’s not TV. It’s HBO”).
Don’t confuse mavericks’ unswerving commitment to a cause and their lack of patience for the status quo with the egotism, monomania and power mongering modeled by too many celebrity CEOs and moguls. Mavericks, in fact, have a sense of humility.
Q: Are mavericks born or made?
A: It’s probably a little bit nature, a little bit nurture. We wrote this book to nurture the maverick in all businesspeople. What red-blooded working person wakes up in the morning, looks in the mirror and says, ‘I think I’ll stand for business as usual today’? We all want to make a mark, forge our own path and express ourselves in the world. It’s just that some of us need more of a nudge down that path than others.
Hopefully, the maverick individuals and ideas we present are inspiring and instructive enough to move people. The 32 companies we feature have vastly different histories, cultures and business models. We examined glamorous fields like fashion, advertising and Hollywood, as well as old-line industries like construction, mining and household products. The maverick leaders of these organizations are young, old, women, men, Americans, Europeans, charismatic and preacher-like, retiring and almost reticent. They just don’t fit any one mold.
Q: How does a maverick survive within a traditional company?
A: We encountered a bunch of mavericks inside big traditional companies. They all seemed to have a couple of survival strategies in common: They unleashed tough questions and critiques of their organization without losing their sense of loyalty to it. They’re the kind of questions every CEO should be asking. For example, Jane Harper asked of IBM, ‘Why would great people want to work here?’ And Larry Huston, now vice president of innovation at Procter & Gamble, argued, ‘The current business model for R&D is broken. How can P&G possibly build all of the scientific capabilities we need by ourselves?’
Mavericks don’t just ask questions, they act. We saw this again and again: They just got started, usually without a budget or formal permission, by designing an experiment around their question. Jane Harper launched an experimental Extreme Blue lab in Cambridge and spent a couple of years begging and borrowing resources until the program’s impact became clear.
Mavericks look for peers and fellow travelers outside the boundaries of their company. Not surprisingly, mavericks tend to click when they meet other mavericks. They’re great networkers and learners and are always looking for kindred spirits for support and ideas.
Q: Who is the quintessential maverick in American business?
A: Herb Kelleher and the team at Southwest Airlines. In the midst of the financial carnage and heartaches of the airline business, there’s one company that keeps growing, keeps creating jobs and keeps generating wealth. And that, of course, is Southwest. Southwest didn’t achieve these results because its fares were a little lower than Delta’s or its service was a little friendlier than United’s. It achieved those results because it reimagined what it meant to be an airline. If you ask Herb Kelleher what business he’s in, he won’t say the airline business or the transportation business. He’ll say that Southwest is in the freedom business. The purpose of Southwest is to democratize the skies, to make it as easy and affordable for rank-and-file Americans to travel as it is for the well-to-do. That’s a pretty commonplace idea today but largely because Southwest fought the entrenched conventions of the industry so doggedly in pursuit of that purpose. Its unrivaled success is based on its unique sense of mission rather than any breakthrough technology or unprecedented business insight.
Guy Kawasaki is the co-founder of Alltop.com, an “online magazine rack” of popular topics on the web, and a founding partner at Garage Technology Ventures. Previously, he was the chief evangelist of Apple. Kawasaki is the author of ten books including Enchantment, Reality Check, and The Art of the Start. He appears courtesy of a partnership with HVACR Business, where this column was originally published. Reach Kawasaki through www.guykawasaki.com or at firstname.lastname@example.org.
It seems that every other week there’s a major story in the media about a company claiming that one of its competitors has purloined a cherished secret that provided an unfair competitive advantage. This is all part of running a business in today’s fishbowl environment, where sensitive information is too abundant and can be obtained by almost anyone and everyone who is so inclined.
In this era of heightened visibility, some of the best companies, especially high-tech firms, play everything incredibly close to the vest, particularly when it comes to providing information about current sales trends, new products and projects that they are exploring or developing. This is because such information is a coveted company asset. In today’s “victory at almost any cost” world, too many are looking for that edge to leverage whatever they can to stack the odds in their favor.
We also read too frequently about how easily these secrets have somehow wound up in the wrong hands. Sometimes a loose-lipped employee simply talks too much to too many people in the wrong places. Occasionally, someone simply leaves a briefcase or smartphone, jam-packed with confidential information, in a bar, at a restaurant or on a plane.
What’s not talked about much is the frequent practice of competitors simply asking what appear to be innocuous questions of lower-level personnel in a company in order to garner nuggets of “inside information” usually without risking the perils of violating any legal statutes. It’s also common practice for Wall Street security analysts to simply walk into a retail store, as an example, and begin asking questions about trends, what products are selling and which aren’t. It all gets down to the reality that it never hurts to ask a question because one never knows when a valuable tidbit will be revealed.
Like it or not, this is just the way it is, and there will always be people who ask and others who tell. What can you do to protect your coveted information? The answer is basic: mandate that providing revealing responses to specific questions is a violation of company policy and could result in draconian consequences for anyone who spills the beans, no matter if well-intended. Once your employees and suppliers know the ground rules and the consequences, you’re one step closer to closing the possibility of vital information inadvertently slipping through the sieve.
The best way to accomplish this is to establish, enforce and continually reiterate a “one voice, one company” policy. This translates into all hands within your organization knowing what can be told to outsiders and, more importantly, what can’t. This policy must be in writing and must state what types of questions are off limits. It must also explain how the questioner is to be handled when the interrogatory is posed. In my retail chain experience, we often had competitors, vendors and industry analysts visit stores and ask all types of questions. Candidly, I don’t blame them, but with a clearly understood policy, employees know how to respond by referring the questions to headquarters and a specific department or individual. Ninety-nine percent of the time the person asking the question never follows up with the corporate office because he or she knows the desired answers will not be forthcoming.
Most employees want to please their employer and most want others to think they are in the know. When you create an ironclad policy, it takes the pressure off of your people and adds another layer of security about things no outsider needs to know. For your suppliers, require that each sign a confidentiality agreement and specify that you have a simple “one strike and you’re out” policy. Also use your own secret shoppers to test your vulnerability by having them ask the forbidden, just to verify that the company veil is not being lifted by the unauthorized.
This protocol is certainly not foolproof, and periodically, there will be lapses — the most frightening of which are the ones you’ll never learn about. It all gets down to a numbers game. Confidential information, just like the cash, equipment and other assets on your balance sheet, can never be taken for granted and must be protected. Anyone can look in your fishbowl in this day and age, but it is your job to make sure that what they think they might find is not what they get.
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. Reach him with comments at email@example.com.
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Are we grateful for the things we have? Are we grateful that we live in a country where the government can’t seize our businesses, where there’s no threat of rebellion and where we can go home to the comforts of our modern homes?
Many people in the world don’t have any of those luxuries. Some can’t even look forward to a good meal or clean drinking water. Most of us here in the United States don’t have to worry about such problems because the people that came before us worked hard to create a nation that has an amazing standard of living. The generation before us rose from the troubles of the Great Depression, led the fight against Nazi aggression that killed millions and returned home to finish making America into a superpower, but do we ever pause to think about the contributions our mothers and fathers made to make things easier for us today? They lived in small houses, often sheltering multiple generations, and worked long hours to make a better life for their children and grandchildren and selflessly went off to war to protect our freedom.
Do we ever think about any of that? The answer for many is no. Gratitude is in danger of becoming a lost art as we focus on accumulating money and possessions, always looking to be better or richer than the next person.
How many times have you read about or talked to someone who had everything you could ever ask for — nice home, nice car and no money problems — lamenting the fact that he or she doesn’t have as much as or more than someone else? We sometimes catch ourselves comparing who has more instead of who has less.
As business leaders, we should have some sense of moral obligation to help those within our sphere of influence, whether it’s our peers, employees or the person who lives down the street. We should be doing our best to look out for those around us, but too often, our days are consumed with the details of business.
Our world may be built on information, but wisdom is lacking. Business has been boiled down to statistical analysis and quarterly earnings reports while people are just another line on the ledger. There is often little room for gratitude in corporate America, and that’s a shame.
When our focus is on accumulating things, we can never enjoy it, because we don’t know how. How can we enjoy something when we’ve already raced off to try to get more? Like a kid tearing through a pile of Christmas presents, we never really take the time to appreciate each gift.
In this season of giving thanks, we should take a moment to think about those who came before us and who helped us get to where we are. Let’s thank those around us for a job well done and consider reaching out to someone who could use a helping hand. But most importantly, let’s consider putting our lives in perspective by thinking about those who are less fortunate.
When we focus more on gratitude, we’ll make a difference that’s far more effective than any business plan. It will allow us to take the time to celebrate success and enjoy the fruits of our labor. Gratitude doesn’t require a giant donation or a huge event; sometimes the little things are more effective.
In the end, we’ll find that the only things truly worth accumulating are good will and happiness. It’s in our control to start helping everyone around us get their fair share, and that’s something all of us can be thankful for.
Fred Koury is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or firstname.lastname@example.org.
Optimism and pragmatism can go a long way toward achieving success. If you strategically put optimism to work through a focused agenda and celebrate successes, you can see a positive influence on attitudes and results.
A great example is the story of the pessimist who argued the glass was half empty, the optimist that exalted that the glass was half full, and the college student who grabbed the beer, drank it and was the only one who quenched her thirst. The college student was optimistic, pragmatic and focused — and she achieved the desired result.
I was first introduced to a meeting concept called Positive Focus while attending a Strategic Coach session taught by Colleen O’Donnell of Strategic Wealth Partners and designed by Dan Sullivan. She revealed the importance of kicking off staff meetings with positive energy derived from the attendees themselves. This is not a New Age method or fluff but rather the celebration and recognition of successes as seen by the eyes of your employees.
How it works
In the opening of management meetings or departmental meetings, each attendee shares one item he or she feels is positive and deserves the spotlight. It should be quick and it should avoid dragging a lot of detail into the explanation. This meeting concept:
? Actually highlights challenges — and how they were resolved — without the dreaded “update” process that slows down meetings.
? Provides recognition.
? Gives managers the opportunity to congratulate their staff or others on the recognition and praise being given.
? Starts the meeting on a high-energy note.
? Shows that challenges can be overcome through teamwork and any challenges that are going to be discussed in the meeting have a positive precedent to follow toward resolution.
? Reinforces the culture of collaboration and communication.
It is tough to say that there is a “typical” positive focus in our meetings. The majority of the comments include a shout out for an employee or a team of employees by name for what they have been able to achieve. We also have customer stories and the success that a great win or implementation is doing for the company. We have had cheers for an improved bill of health or a clear cancer screen after a long health issue. We have celebrated the refreshed feelings after taking a vacation.
The content is not controlled or restricted. The purpose is to reflect on what is making our work lives better. This purpose helps us focus on what is right in the world and reminds us that we are among great, talented people and we can tap those resources.
Positive attitudes are proven to improve results and health. I believe executive teams should spend additional time developing more of the “can-do” attitude in our approach toward business. By focusing on optimism, it’s easy to see the pragmatic benefits to the organization.
The next time you are facing the dreaded update drudgery of a departmental meeting, I highly encourage you to turn the agenda around a bit and start with a Positive Focus moment. Then incorporate the agenda of every appropriate meeting. There will be time to discuss and solve the challenges you are facing, but the mental approach to the problem will make a difference in the approach.
My Positive Focus
Today, my Positive Focus is that I have had this opportunity to share a tactic that really works and has changed the complexion of meetings in a highly successful business. I believe it can have far-reaching impact elsewhere, too. <<
Lois Melbourne is co-founder and CEO of Aquire, a workforce planning and analytic solution company based in Irving, Texas. Visit www.aquire.com for more information.
Brian Schultz has learned some important lessons while leading Studio Movie Grill on its impressive growth path since he founded the Dallas-based company in 1993. Two of those lessons stand out among the others. The first is that if you want to change an entrenched business practice in your market, expect stiff resistance and you’ll need to be extremely tough and persistent in order to see the change through.
The second thing Studio Movie Grill’s CEO has learned is the meaning behind the saying, “Be careful what you ask for because you may get it,” coupled with this corollary, “And then you may find yourself with so much new business pouring in your doors that you don’t know which way to turn.”
“The first big challenge we faced was the need to get first-run movies so we could be considered a real movie theater,” Schultz says. “In our early years, we couldn’t get first-run features. Basically, all of the movie-theater-restaurants in those early days were like us — in older theaters that had one screen, maybe two. And therefore, we were only able to get sub-run movies — movies that had reached the end of their first run and would soon be released on video.”
Then Studio Movie Grill began building its second location in Addison, Texas. It was a larger-capacity theater with five screens in an upscale area. Schultz recognized that SMG might run into difficulty obtaining enough sub-run movies to fill those screens.
“We were looking at film distribution and the number of competitors that were in the area, and we were thinking, ‘Oh, man — we’re not going to be able to get enough movies,’” he says.
So a key challenge presented itself to Schultz: For SMG to realize its long-term growth goals, it would have to persuade the Hollywood studios to let it show first-run features on its screens.
“I saw that as the next evolution for movie-theater-restaurants,” he says. “As a moviegoer, you should be able to have the option to see whatever movie you want to see in this environment. So we began to think about what arguments we could make to break through this established mindset.”
Here is how Schultz got his 2,400 employees in focus for SMG to earn annual revenue of $70 million.
Insist, persist, repeat
Schultz began making rounds asking the studios to let Studio Movie Grill screen first-run movies at its theaters. The response was discouraging.
“I started contacting the people with their hands on the reins to tell them what we wanted to do,” he says. “The reaction was negative — strongly negative. I got doors slammed on me, one after another, for a lot of reasons: because we were too small, because the studios had their traditional system down and they weren’t willing to change, because they wanted to hold on to the way things were.
“But one thing I’ve learned about being an entrepreneur is that, a lot of times, it’s not about being the smartest guy in the room or anything like that — it’s about being able to get back up when you get kicked down.”
So Schultz kept calling and knocking. And calling. And knocking.
“I told myself that I was just going to keep on calling every studio distribution head for as many days as it took to get this thing done,” he says. “So that’s what I did. I would find their home phone number, their home fax machine, all of these different ways to contact them. I’d find out where they were going to be and I would show up at the place. I’d try to call their assistant. I’d try every way I could think of to get through to them. But I didn’t have any success.”
Finally, a gentleman who worked for Disney threw Schultz a bone — a meager one, or so the bone-thrower thought.
“This guy was the regional head for Disney in Dallas,” Schultz says. “I had been working on him for months. He kept saying no. I had annoyed him so much. Finally he said, ‘OK.’ I said, ‘OK what?’ He said, ‘Here’s the deal: I’m going to give you one movie to try. If it does well, we’ll talk. If not, you have to agree to never call me again.’ Then he basically picked the worst movie he could think of, just to get me to shut up.
“There was this no-name actor and this small movie that was supposed to do absolutely horribly. There was no marketing behind it, nothing. And that small-named actor was Adam Sandler, and the movie was ‘The Waterboy.’ We ended up being the top gross in all of Dallas with this movie that was supposed to be a dog. It just happened to fit perfectly with the type of customer that likes to come to a movie grill.
“By the time I got to work the following Monday, I had messages from all the other studios asking us if we would run their first-run movies.”
A key barrier had been knocked down. The tiny movie-theater-restaurant sector now had a critical tool in its hands that would enable it to compete with “real” movie theaters and, consequently, to grow and thrive.
“We were actually the first movie-theater-restaurant in the world to get first-run products,” Schultz says. “It changed the entire industry. It created this niche, which has really become the future of movie going.”
Prepare for the flood
The scene now turned to the “Be careful what you ask for” part of Studio Movie Grill’s story. Practically overnight, SMG was inundated with new business. People loved the idea of going to theater-restaurants where they could watch big-screen Hollywood movies while they were still hot, before their pop-culture glow had begun to fade.
But feeding those big crowds and serving all of the new customers well would not be easy. For Studio Movie Grill, it was time to scale up, and fast.
“We went from marginal attendance to huge attendance very quickly,” Schultz said. “So we started to run into problems. Instead of figuring out how to serve 150 meals in an hour when people came in, it was more like how do you serve 800 meals in an hour? That really got us into some operational challenges.”
To make matters even tougher, at the same time SMG was scaling up the quantity of food it had to serve to the bigger crowds, the company had ambitions to increase the overall quality of its offerings as well.
“The basis of this concept was originally more along the lines of, you know, beer and frozen foods — kind of like cheap bar food,” Schultz says. “But I never envisioned it like that. I thought it was important that we had to be able to compete with any casual dining restaurant. So we had to serve all fresh made-to-order food that’s high quality, presented well and tastes good.”
A key move Schultz made at that time was to hook up with a new mentor: Norman Brinker, founder of Brinker International, Steak & Ale and Chili’s.
“I went to a leadership event that [Brinker] hosted, and we hit it off,” Schultz says. “Eventually, it turned into a monthly meeting, with accountability, and it really informed our organization and helped us immeasurably. So if I were going to give advice, I would say that having a great mentor has always been one of the most important keys to our success.”
Optimizing its kitchens was one of the key initiatives that SMG undertook in order to scale up its food service operation to meet the huge increase in demand for tickets to its movies.
“It goes all the way down to the type of equipment you use and simply doing math equations,” Schultz says. “For example, we need to serve this many pounds of french fries, and the output of this particular fryer is X. So will that work, and how many of these do we need?
“How can you reduce the number of steps that it takes for an employee to do their work? Can we place all the things that they need to be successful in a small space to minimize the amount of traffic in the kitchen?”
Another key tool SMG began using was dining trend analyses.
“We saw that we needed to be able to follow the trends of what people are eating, how they’re eating it and when they’re eating it, so that we could be adequately prepared with the right quantity and quality of food and beverages,” Schultz says. “We keep track of what every customer eats and drinks on a per-movie basis. This enables us to predict what people are going to eat in the future. It’s a forecasting model, and it’s been a key basis for our success.”
Mobilize the team
Asked what other recommendations he would offer CEOs faced with the challenge of having to scale up operations quickly to meet a sudden increase in demand, Schultz says soliciting ideas from everyone who works for the company is crucial, as well as making sure everyone is on the same page in order to move forward as a team.
“Ask your line employees who are doing the work what success looks like to them, and use those perspectives to get everyone in alignment,” he says. “It seems like that has been a pretty common theme when we’ve been successful: We’re all aligned on the same page as far as what success looks like.
“What you need to scale up your business is to figure out how you can get your organization in alignment so everyone understands what their success means and what their contribution is supposed to be.”
Another point Schultz recommends is keeping an eye on cash flow.
“Especially when you’re scaling up, it’s important to realize that revenue doesn’t mean cash flow,” he says. “That’s a good lesson. If you’re going through a growth phase and you’re raising revenue but you’re ending up with less [cash] at the end of the day, that’s not a good trade.
“I think some CEOs get too enamored with the top line, and they forget that there are all these details and complexity when you get to a certain size. It becomes a little different. You can no longer touch everything. So cash flow becomes more important. You’ve got to watch it closely.”
Lastly, Schultz suggests that knowing how to uncover the important questions that need to be asked and then figuring out where to go for answers are more important skills than simply trying to answer all the questions yourself.
“The advice I would give is it’s OK not to know the answer,” he says. “I would have saved myself a lot of missteps and problems if I didn’t feel compelled to be a knower versus a learner. If you don’t know how to do something as it relates to, say, financing — or accounting or purchasing or you name it — a lot of times when you’re in the leadership role you feel compelled to respond, to answer — to, you know, provide leadership.
“But hopefully you can get to a point where you realize it’s OK to say, ‘I don’t know the answer to that — let’s figure out how to find the answer.’ And that can become a breakout moment for the CEO and the company.” <<
How to reach: Studio Movie Grill, (972) 388-7888 or www.studiomoviegrill.com
THE SCHULTZ FILE
Name: Brian Schultz
Company: Studio Movie Grill
Education: Bachelor’s degree in finance, California State University, Chico
What lessons about business leadership did you learn during your time in school?
I was the vice president of finance for the student body. We owned and operated all the businesses on campus: food service, event management, catering, copy service, the bookstore. So I basically ran a $15 million corporation all through college. It was unbelievable training and experience.
What was your first job, and what did you learn from it?
It was car detailing. I started doing it when I was 10 years old, and I basically ran my own business. I learned that speaking with the customer and giving them what they want and doing it with quality always yielded better returns, appreciation and repeat business.
Do you have a business philosophy that you use to guide you?
Yes. It’s based on the principles of conscious capitalism. It’s the idea of doing good in the world through business. Our goal is to provide value for all of our stakeholders, which include our customers, our employees, our investors, our vendors, and our local neighborhoods. If we make all our decisions based on that philosophy, we believe it creates superior returns, an energized workforce, and community attachments.
What trait do you think is the most important one for an executive to have in order to be a successful leader?
Persistence — the ability to get back up when they get knocked down.
How do you define success in business?
Our success is based on making the world a better place one movie at a time, creating great experiences for families and memories for individuals. We’re pretty specific on how we measure that, rather than just measuring success on an income statement or a balance sheet. We think the two are related and that we actually get superior returns by doing the right thing.
What’s the best advice anyone ever gave you?
The thing I remember hearing from a young age is the harder you work, the luckier you get. That’s from my father.
The oil and gas industry in the United States faces various trends within the next five years that promote considerable optimism but that also highlight the need for continual vigilance, says Melvin F. “Trey” Hunt III, partner-in-charge of Oil and Gas Services at Weaver. Those trends relate to the cost and availability of credit and capital, technology, the regulatory landscape, and global conditions and energy demand.
Smart Business spoke with Hunt about the challenges and rewards that those in the oil and gas industry can expect over the next five years.
What do cost and availability of capital and credit look like going forward for the oil and gas industry?
Adverse business conditions in the U.S. during the past five years prompted the Federal Reserve to reduce the prime lending rate to promote investment and economic growth. Although the national economy continues to display signs of recovery, interest rates are likely to remain low for quite some time, leaving credit readily available for capital expenditures. That is great news for oil and gas companies seeking funds to expand operations.
How has new technology revolutionized this industry?
Horizontal drilling and hydraulic fracturing might represent a modern-day Industrial Revolution that will make much more hydrocarbon energy available to consumers in the U.S. and beyond.
The Eagle Ford shale area, a few hours southwest of Houston, serves as an example of the impact those technologies can have for increasing hydrocarbon energy production. For more than 50 years, oil and gas companies largely ignored the Eagle Ford shale due to its marginal economic profile. During that span, the area was home to more white-tailed deer, javelinas and rattlesnakes than people. Thanks to the combination of hydraulic fracturing and horizontal drilling, the vast reserves of the Eagle Ford shale area are now being exploited.
While these technologies are often associated with natural gas production and previously untapped areas, oil companies are also using technology to greatly extend the productive lifespans of mature oil-producing regions. Without question, technological advancements will continue to impact the industry.
How is the regulatory landscape creating a potential challenge for oil and gas exploration?
While the low cost of capital, the availability of credit and improved technology hold tremendous promise for energy companies, the national regulatory landscape presents the potential for unfavorable conditions.
The two major political parties in the U.S. differ in how they view the oil and gas industry. Among other issues, those differences are reflected in debates regarding the continuation of the Intangible Drilling Costs deduction, Cost Depletion allowance and other federal tax incentives favorable to the oil and gas industry. Whether or not such tax provisions remain in effect for 2013 and beyond may hinge on the November election results and any ensuing Congressional and White House
While domestic oil and gas companies benefit from technological advances, they also face calls for more stringent regulation regarding hydraulic fracturing and other practices. Up to now, those calls have mainly affected companies operating in the Eastern United States. Such calls, though, may also affect Texas oil and gas operations during the next five years.
What is in store for the future of the oil and gas industry because of global conditions and energy demand?
Various economic side effects caused by regulatory and geopolitical changes may affect oil companies more than traditional market fundamentals, such as supply and demand.
The measured and efficient exploitation of natural resources around the world depends upon maintaining political stability in Saudi Arabia, Nigeria, Venezuela and other energy-exporting nations. Political unrest in such international regions will influence market conditions for Texas companies. At some point, though, the global economy will also regain momentum, and the hydrocarbon-hungry economies of China, India and other countries will most likely drive energy commodity prices higher. All the while, Big Oil, smaller tech-oil innovators backed by eager venture capital firms and everyone in between will be frenetically pursuing new and creative ways to extract the world’s hydrocarbon treasures.
The next five years offer the promise of low interest rates and access to capital, presenting ideal conditions for business expansion by oil and gas companies. The capabilities of horizontal drilling and hydraulic fracturing make it economically feasible for companies to extract more oil and gas. If the geopolitical and regulatory environments cooperate, the United States could have a recipe for energy independence and economic prosperity for generations, a recipe that would particularly benefit Texas oil and gas companies.
Melvin F. “Trey” Hunt III, CPA, is Weaver’s partner-in-charge of Oil and Gas Services. Weaver is ranked the largest independent regional accounting firm in the Southwest with seven offices throughout Texas. Reach him at (832) 320-3296 or Trey.Hunt@weaverllp.com.
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In the face of a stifling economy, many companies have focused on cutting costs as a means to improve profits. Such measures, however, don’t stand the test of time. Inevitably, quality goes down, as do sales over the long haul.
In the technology realm, it is more important than ever for business leaders to invest in new platforms and cater to customers’ needs. According to Steve Carter, president and CEO of ii2P, the market has spoken and they are asking for small and medium-sized businesses (SMB) to provide self-service platforms.
“Our clients that truly have self-service platforms are seeing overwhelming results,” he says.
Smart Business spoke with Carter about issues SMB leaders currently face, the importance of investing in self-service models and the rewards that can be reaped.
What main issues do SMB leaders face as it pertains to surviving in the marketplace?
First, I want to emphasize that the issues are not limited to small and medium-sized businesses. They face many of the same challenges that larger enterprises face — they need differentiating innovation such as a self-service platform. However, SMB leaders do have more difficulties adapting to the self-service platform. If they don’t embrace this new model and are unable to remain competitive from a cost and convenience standpoint, it will affect their ability to retain their company client base. Every decision that is made within a small business environment has an immediate and dramatic effect. Whereas with a large enterprise, although the results may be the same, the consequences show up in a longer time frame — it is not so immediate.
What should SMB leaders be investing in?
It is paramount to be market driven and keep pace with where your market needs are today. Today’s market — end users, clients, etc. — have changed dramatically. The demographics of the end user today are not in line with current service models. The service models of today, for the most part, don’t embrace self-service. Yet the behavior and desire of the end user is all about self-service. If you embrace innovative solutions and are able to provide a competent gateway to self-service you will reap the benefits.
What innovative solutions do you believe SMB players should take advantage of?
Many technology developments have been tailored to larger enterprise environments. A good example is something as straightforward as password management. About 30 percent to 35 percent of all IT service-related calls, whether it is in an enterprise environment or a small to medium-sized business environment, have to deal with this matter. Password management is becoming more of an issue today because, as security needs grow, the need for well-disciplined password management solutions becomes more pressing. While password management has been geared toward larger enterprises, this is an area ripe for small and medium-sized businesses as well.
How can this be funded?
The secret sauce is creating a formal strategy and approach for bringing innovation to the SMB, not just reacting. Over the past 15 years or so, a lot of businesses have been plagued with what I call ‘drop off the technology and run syndrome.’ The technology as a standalone looks good and accomplishes what it’s supposed to do. But unfortunately, that’s where a lot of companies have left it. They’ve made the investment in capital, but haven’t been able to realize the benefits because the solution really wasn’t a business solution, it was more of a technology solution.
In order to improve the existing platform, you should first look at the inefficiencies within your end-to-end platform. Examine the platform and change it to make it more efficient and more effective. I have not yet experienced an engagement where there wasn’t significant amount of monies being spent on ineffective end-to-end support solutions. In most cases, the money saved by optimizing the environment is more than enough to support the investment for self-service. There is no magic or big bucket of money sitting out there, but there is a methodology to determining how to begin investing in a self-service platform.
Where should the recovered excess money be spent?
You should invest those dollars in creating a platform that is going to be more market-driven. Then, you will be able to take the return on those monies and spend them on growing your business. It is important to invest in growing your business so you can become more competitive in the marketplace.
If this strategy is applied correctly, what are the outcomes to the SMB?
In today’s existing model, business is driven by using the platform less. In other words, providers are hoping that their end users, their B2B clients, etc, are using their existing model less because every time they use it, it costs the service provider. The paradigm shift is when you develop the self-service model; the more they use it, the cheaper it is. We’re talking about a complete re-engineering that will affect not only the behavior of the end user, but the provider as well. When you adopt the model that your end users prefer, you will benefit because the more they use it, the less it will cost you.
Steve Carter is president and CEO of ii2P. Reach him at (817) 442-9292 or email@example.com.
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The purchase price in the majority of merger-and-acquisition transactions is calculated using a common formula: Multiply the target company’s earnings before interest, taxes, depreciation and amortization (EBITDA) by an agreed-upon multiple.
However, Tom Vande Berg, a partner with Crowe Horwath LLP’s Transaction Services Group, says a seller can juggle a company’s assets and liabilities before the deal is finalized in ways that reduce its future cash flows without affecting its EBITDA.
“This can lead to the purchase price staying the same, although the company’s future cash flows could be considerably different than what the buyer expected,” he says.
This is where a working capital hurdle can be used to protect the buyer’s interest in future cash flows.
Smart Business spoke with Vande Berg about working capital hurdles and how they can positively affect M&A transactions.
What is a working capital hurdle?
A working capital hurdle is a predetermined amount of working capital built into the purchase price of a business. It can be a specific amount or set as a range, and it can be adjusted up or down based on the actual working capital at closing. Working capital hurdles help protect the buyer from changes in the targeted company that don’t show up in EBITDA but that have the potential to reduce expected future cash flows.
The adjustment typically is dollar for dollar, but it could be derived from a tiered structure in which the purchase price would change by a predetermined amount based on available working capital when the deal closes.
What is the benefit of working capital hurdles?
A working capital hurdle attempts to include in the transaction the normal working capital needed to run the business. Without the protection of a working capital hurdle, the buyer could end up with less future cash flow than bargained for because it is possible for a seller to maintain its EBITDA but not deliver the promised mix of assets and liabilities.
A working capital hurdle also has noncash-flow benefits such as increasing the likelihood the seller will maintain normal course business relationships.
Assuming cash is excluded from the definition of working capital, a seller could manipulate its assets by aggressively collecting accounts receivable. If receivables are reduced ahead of the transaction, the buyer will not receive the expected future cash flow from them.
A seller also could liquidate inventories by reducing production and inventories for sale. When the buyer then takes over the company, it will have less inventory to sell and will need to incur higher-than-expected costs to rebuild inventory levels. Another possible detrimental action by the seller is slowing payments of accounts payable, which will leave the buyer facing higher-than-expected obligations when the company is acquired.
A working capital hurdle can pre-empt certain noncash-flow issues, such as any ill will that might develop among vendors if a seller stretches accounts payable ahead of closing. It can also help a buyer deal with other issues that affect a deal’s bottom line.
For example, consider a target company that does not maintain an accounts receivable allowance for bad debt. Say the buyer finds that the company should have reported an allowance throughout the year preceding the transaction. Adjustments made by the seller to provide for the allowance at the beginning and ending dates of the analysis period will make it look as if there was no net income effect, and both the EBITDA and the purchase price will not change. However, the balance sheet could overstate the asset balance for accounts receivable, which means it has also overstated working capital. Hurdles can include adjustments for such overstatements and would result in a lower purchase price.
Sellers can also benefit from a working capital hurdle, as it can create a higher purchase price for delivering working capital above the hurdle.
How is the amount of a hurdle determined?
Most often, a hurdle is calculated based on the average monthly adjusted working capital over 12 months. The asset or stock purchase agreement might, for example, define working capital as current assets (excluding cash), less current liabilities (excluding debt), less items that are excluded by definition in the purchase agreement plus/minus pro forma or due diligence adjustments determined during the financial due diligence analysis.
However, a 12-month analysis is not always appropriate because, for example, it might not reflect the company’s current working capital needs if it is experiencing substantial growth. If revenue has grown 75 percent in the second half of the year, it is likely that the working capital at closing will be higher than a hurdle calculated on a 12-month average, which would drive up the purchase price. In this case, the hurdle might best be calculated based on the most recent three or six months.
It is also important to note that 12-month hurdle calculations generally factor out seasonality, but working capital levels could swing significantly depending on whether the purchase is made in or out of season. During a peak-season purchase, working capital is likely to be higher than average, leading to a higher purchase price, while the opposite is true for an off-season purchase.
Like most points in an M&A transaction, the hurdle amount is open to negotiation. However, the existence of the hurdle should usually be non-negotiable.
Tom Vande Berg is a partner with Crowe Horwath LLP’s Transaction Services Group. Reach him at (214) 777-5253 or firstname.lastname@example.org.
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When visiting one of InfoCision’s offices, you’ll notice more than the tables, chairs and water cooler found in a typical workplace. It is not out of the ordinary to pass a yoga class practicing downward dog, a physician scribbling a prescription or a preschool class reciting the alphabet.
While these scenes may be out of place in many employers’ offices, InfoCision has worked hard to make them a staple. The company recognizes its employees are the heart of its business, so it focuses on recruiting and retaining them with a variety of amenities and benefits, says Kim Murphy, vice president of employee benefits at InfoCision.
"We strive to give our employees a work-life balance," Murphy says. "We want to provide opportunities for employees to handle things like exercising at work so when they go home, they can focus on their families. And we believe that contributes to a happier, healthier employee."
- InfoFitness centers: These 1,500- to 2,000-square-foot gyms include top-of-the-line equipment such as treadmills, elliptical machines and recumbent bicycles. The centers also offer classes such as aerobics or yoga, and are open from 7 a.m. to 11 p.m. They are free for InfoCision employees and family members covered under the company’s health plans. Many InfoCision employees and even entire departments attend classes together. "My department works through lunch, then at 4 p.m. we all go down as a group," Murphy says. "It's nice to have that support — on the days when you don't want to go, you have your coworkers pushing you, and it makes it a lot easier."
- InfoWellness clinics and programs: InfoCision provides on-site doctors for both employees and family members regardless if they participate in its health plans. The company also has a prescription concierge service so employees don't need to run out to pick up their medications. Other wellness programs include free smoking-cessation programs and subsidized weight-loss programs.
- InfoKids Early Learning Center: This fully licensed child care center at InfoCision's corporate headquarters in Akron can care for more than 90 children ages 6 weeks to 14 years. The center offers summer programs, two infant rooms and toddler and preschool rooms, play areas, educational toys and computers. It provides a creative curriculum education model. InfoCision's satellite call centers offer subsidized child care options.
- InfoCision Management Corporate University: Geared toward salaried staff who have a clear path of advancement within the company, IMCU offers free or discounted workforce development through on-site programs as well as outside classes and workshops through the University of Akron and other local institutions.
- Employee assistance program: InfoCision provides employees with a toll-free number to call for financial advice or free counseling sessions for anything from a death in the family to a divorce. The employee receives recommended local counseling services, and he or she can use the services as much as he or she needs.
- On-site delis: InfoCision's Café 5 on-site delis offer healthy hot and cold meals, snacks and gourmet coffee. In addition, InfoCision's vending machines now offer healthy choices.
InfoCision also offers a comprehensive benefits package for both salaried and hourly employees, Murphy says. These benefits are available upon hire and include health care, vision and dental plans, paid holidays, free life and disability insurance, paid personal and vacation time, quarterly bonuses, paid training and tuition reimbursement. InfoCision also offers 401(k) participation after 90 days of employment.
Aside from amenities and benefits, InfoCision also strives to create a work environment in which employees can excel. "For as big as we’ve gotten, we still have a family feel," Murphy says.
"It starts when you enter the front doors and the receptionist greets you like you're family even if you've never been here before. We also have a newsletter for employees every month, and our executives speak regularly to our employees and are open for questions or available to talk afterwards. That open communication really makes a big difference."
InfoCision also has a group that travels to its facilities and speaks with employees about what's happening at the company and in the workplace. This program, in conjunction with an employee suggestion box, is meant to provide an open forum for employees to voice ideas or concern.
"We have an open-door policy," Murphy says. "Our employees have the opportunity to speak to not only to their supervisors and team leaders — as our supervisor to communicator ratio is one to nine — but our executives as well. That's not something that's typically found at other companies, but we believe it is a key part of recruitment and retention."
For more information on employee benefits and amenities, contact Kim Murphy at email@example.com or visit www.InfoCision.com.