One of my favorite business books, which also made it as a Broadway play and a big-screen movie, is “The Wonderful Wizard of Oz,” written by L. Frank Baum in 1900. My hero in this story is not the young orphaned Dorothy, nor the Cowardly Lion, the desperately in-need-of-some WD-40 Tin Man, nor even the Scarecrow in search of a brain.
Instead it is the Wizard. To understand why the dubious Wizard is my favorite character, one must get past the portrayal of him as scheming, phony and at times nasty.
To appreciate the man behind the curtain, recognize that he is a very effective presenter, though at times this ex-circus performer behaved a bit threatening. OK, he was a jerk, but the point of this column is to take you down the yellow brick road on the way to the enchanted Emerald City and corporate success.
From this tale there is a lesson that one can say all sorts of things, not be visible, and yet still have a meaningful impact.
Another takeaway is that playing this role provides plausible deniability. This absence of visual recognition is particularly beneficial in negotiating when you, as the boss, use a vicar, aka a mouthpiece, to speak on your behalf. This allows you to have things said to others that you as the head honcho could never utter without backing yourself into a corner.
Another plus is you can always throw your mouthpiece under the bus if necessary, of course, with his or her upfront understanding that sometimes there must be a sacrificial lamb. This is not only character-building for your stand-in, but also many times presents an unprecedented opportunity for him or her to learn in real time.
Perhaps the Wizard was the first behind-the-curtain decision-maker, but today this role is used frequently in business and government. In a similar vein, the “voice” of Charlie from the well-known 1970s TV series “Charlie’s Angels” was always heard, but he was never seen.
Frequently there is much to be said for using anonymity to float a trial balloon just to get a reaction. Think about a son having his mom test the waters by talking to dad before the son tells him he wants to drop out of junior high school to join the circus. Maybe that’s even how our former circus-drifter-turned-Wizard-of-Oz got his start.
In the negotiating process it is important to have a fallback when the talks hit a rough patch by instructing your vicar to backpedal, saying that he or she has just talked to the chief and the benevolent boss said, “I was overreaching with my request.”
This also serves to build a persona for the boss-behind-the-curtain as someone who is fair-minded and flexible. All the while, of course, it’s the boss who is calling the shots and maneuvering through the process without getting his or her hands dirty.
The value of using this clean-hands technique is that it enables the real decision-maker to come in as the closer who projects the voice of reason, instead of the overeager hard charger who at times seems to have gone rogue.
It actually takes a bigger person to play a secondary role behind the curtain rather than always be in the limelight. It also takes a hands-on coach and counselor to maneuver a protégé through the minefields to achieve the objective.
However, accomplishing the difficult tasks through others is true management and the No. 1 job of a leader who must be a master teacher.
After you have guided a handful of up-and-comers a few times through thorny negotiations, you will gain much more satisfaction than if you had done it yourself, while engendering the respect and gratitude of your pupils. They in turn will have learned by doing, even though they were not really steering the ship alone.
The final step is to let the subordinate take credit for getting the big job done. This will also elevate you to rock star status, at least in his or her eyes. Soon those who you’ve taught will emerge as teachers too, and the big benefit is that you will populate your organization with a stellar team of doers, not just watchers.
So, forget about the Wicked Witch of the West and move backstage for the greater good of the organization.
“America likes cheap gasoline,” says Sandra Dunphy, director of Energy Compliance Services at Weaver. “But as much as we want cheap gasoline, we also want clean gasoline and clean air — and they are not necessarily mutually exclusive.”
In the balancing act between the two, Renewable Identification Numbers (RINs), which are attached to gallons of renewable fuel as it is produced, have become very valuable to the oil companies required to own them.
“If you bought 1 million RINs on Jan. 1, it would have cost you about $70,000,” Dunphy says. “Today, that same purchase would cost about $1 million.”
Because there’s so much money in RINs, there’s also the potential for fraud. After a handful of fraud cases rocked the market, the Environmental Protection Agency (EPA) has stepped in with a solution — Quality Assurance Plans (QAPs).
Smart Business spoke with Dunphy about the EPA’s Renewable Fuel Standards program and how QAPs fit in.
How do RINs and the RFS program work?
Congress passed the Energy Independence and Security Act in 2007 to introduce fuels with lower greenhouse gas emissions, reduce dependence on foreign oil, and promote domestic agriculture and employment. This act spawned the EPA’s RFS regulations that encourage biofuels beyond corn ethanol — those made from non-food sources like used cooking oil, wood chips and algae.
Oil refiners and importers of gasoline or diesel are required to own a certain amount of RINs at year-end. The RFS requirements will increase annually from about 16.5 billion gallons in 2013 to about 36 billion gallons by 2022.
Why have RINs become so valuable?
We are hitting the blend wall. When this law passed, Congress anticipated that the volume of gas and diesel we consume would increase each year. But demand has fallen with fuel-efficient vehicles and fewer driving miles, and now there’s nowhere to put additional renewable fuel into the declining gas and diesel pool. Anticipating higher mandated renewable fuel volumes, and a possible shortage of RINs, many oil companies are buying RINs now to use in 2014 — 20 percent of RINs can be carried forward from one year to the next.
Why did the EPA create the QAP program?
Since 2011, a few RIN fraud cases have shaken the market’s foundation and made oil companies nervous about buying renewable fuel or RINs, after the EPA penalized oil companies who used fraudulent RINs for their annual compliance needs. As a result, many oil companies started buying only from the biggest renewable fuel producers who had the ability to replace bad RINs, and small fuel producers suffered.
The QAP program seeks to address the concerns of invalid RINs in the market and tries to level the playing field.
How does the QAP program validate RINs?
There are three options available to a domestic renewable fuel producer or importer with this program. The first option is to maintain the status quo, where oil companies do their own due diligence reviews.
Second, under the QAP-B program, the producer hires an auditor to audit its paperwork and conduct an engineering visit quarterly to ensure the energy and mass going into the plant are equivalent to the energy and mass going out. It reassures those buying the RINs that the producer is doing everything it is supposed to. The oil company has an affirmative defense against EPA penalties if they use a QAP-B RIN for compliance. They just might have to replace bad RINs if the producer cannot.
Another option is the QAP-A program. It’s the same as QAP-B, but the scrutiny is more ongoing. In addition, the auditor must hold an insurance policy. So, if a producer makes an invalid RIN and can’t replace it, the auditor is responsible.
What’s the timeline for the QAP?
The EPA has not issued the program’s final regulations. That is likely to happen in the third or fourth quarter of this year and become effective beginning in 2014. However, the EPA is encouraging producers to get started now. A renewable fuel producer’s purchasers will probably dictate what type of QAP the producer will need, if any.
Sandra Dunphy is director of Energy Compliance Services at Weaver. Reach her at (832) 320-3218 or firstname.lastname@example.org.
Follow up: Weaver has been pre-approved to perform U.S. EPA RFS Quality Assurance Plan audits. Contact Sandra Dunphy if you’re a domestic producer or importer of renewable fuel and would like to learn more.
Insights Accounting is brought to you by Weaver
Social, technological and political changes, a global business environment and evolving regulatory demands have put increased emphasis on organizations to proactively identify and treat risks that impact their performance and even their survival. Yet efforts to initiate enterprise risk management (ERM) programs often result only in frustration.
“In many cases, ERM has consisted of creating a list of risks, prioritizing those risks and developing loose plans to mitigate them. The problem is that managers and executives often observe that the risks ‘identified’ had been known and adequately addressed,” says Marc I. Dominus, ERM Solutions leader at Crowe Horwath.
Smart Business spoke with Dominus and Jim E. Stempak, a principal at Crowe Horwath, about moving past identifying risks to implement an ERM program that produces results.
How is ERM defined?
One definition is from the Committee of Sponsoring Organizations of the Treadway Commission: ‘Enterprise risk management is a process, effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.’ The basic elements of ERM programs include:
- Understanding risk and developing a repeatable process to establish acceptable levels of strategic risk; identifying, analyzing and prioritizing risks that are critical to achieving business objectives; and communicating the guidance necessary to allow management of risks that fall within accepted parameters.
- A governance structure that aligns responsibility for oversight with responsibility for escalation.
- Information systems to support decisions, monitoring and communication.
- Recognition of how an organization’s culture affects its risk profile.
Why is an ERM program important?
A well-constructed program provides collective responsibility for risk management and produces a resilient organization protected from negative consequences of unexpected events. Timely and meaningful risk intelligence also allows leaders to make impactful strategic decisions that incorporate intentionally taking risk to achieve rewards.
Where do organizations fail in terms of implementation?
They generally start off well, identifying and prioritizing risks, but the executives and boards responsible for the programs may not provide clear guidance to the organization regarding how to apply the results. There’s no clear path toward implementation, and there may not be adequate initiative to support the culture shift necessary to sustain an effective process. The keys to successful ERM transformation include:
- Confirm and refresh risk assessment results. Executive and management team members need to agree on the results, the definition of each risk and the criteria being applied to assess the risks. The risk inventory must be continuously updated.
- Develop and monitor consistent risk treatment plans and processes. For each high-priority risk, uncover the root cause; establish a management strategy, such as to avoid, reduce or share the risk; and create a treatment plan.
- Establish an enterprise risk policy, which articulates the program’s value and outlines the responsibilities, reporting requirements, methodologies and risk governance criteria.
- Establish risk governance practices and structure, which guide how risk is prioritized and resources are allocated, based on risk culture, appetite and tolerance, and management capabilities.
- Communicate and report information. Management, process owners and employees need to regularly receive ERM risk information to help oversee administration. Transparency is essential.
Once in place, an ERM program needs to evolve continuously with experience and experimentation. Today’s business conditions require flexibility and adaptability. A fully developed program provides a competitive advantage by allowing organizations to improve and protect their performance by confronting, exploiting and managing risk.
Marc I. Dominus is an ERM Solutions leader at Crowe Horwath. Reach him at (214) 777-5213 or email@example.com
Jim E. Stempak is a principal at Crowe Horwath. Reach him at (214) 777-5203 or firstname.lastname@example.org.
Social media: To learn more about Crowe Horwath’s risk services, find us on Twitter: @Crowe_Risk.
Insights Accounting is brought to you by Crowe Horwath LLP
A few years ago, one of my friends embarked on what he deemed an ambitious, yet simple plan: Write a New York Times Best Seller.
“Ed” had reason to be optimistic: His first two books had sold well and he had successfully leveraged them to launch a burgeoning consulting practice. Ed also had a nationally known book publisher to handle distribution for this book, and he had developed a comprehensive marketing and promotions plan for the launch.
Ed felt all the pieces were in place and was sure he would succeed. His goals were two-fold: break out from the pack and grow his business, and hit the New York Times Best Seller’s list. While his head told him the first goal was more realistic, his heart was set on the second — publicly claiming it was his only true benchmark of success.
Needless to say, Ed’s book didn’t make the list. Few books do. That doesn’t mean Ed’s book was a failure. Quite the contrary, it was a huge success.
As a result of Ed’s book, he landed numerous speaking engagements with organizations and companies around the world. He began to command four- and five-figure speaking fees from those engagements, and his book was purchased and distributed to every attendee.
Further, Ed’s speaking engagements lead to dozens of private companies hiring him to provide one- and two-day seminars, where he taught executive teams how to implement the ideas he espoused in the book. Ed was also presented with numerous business opportunities for new and existing clients to tackle initiatives beyond the book’s subject matter that he had not previously considered but were related to his expertise.
Finally, Ed did sell thousands upon thousands of copies of his book in bookstores nationwide and online through booksellers like Amazon.com and BarnesAndNoble.com. His book was in the hands of the right people — and lots of them — and he had established a national profile.
Viewed through this lens, there is little doubt that Ed’s book was wildly successful — even if it wasn’t a New York Times Best Seller and even if it didn’t stack up to his primary benchmark.
This is the reality of book publishing. Each month, I speak with dozens of entrepreneurs and CEOs about their nascent book ideas and the possibility of having Smart Business Books handle development and publication of their stories and manuscripts. I begin every conversation the exact same way: “If your goal is to have a New York Times Best Seller, we’re not the right option for you.”
That’s because you should write books for the right reasons. If your only goal is getting on a best-seller’s list, then your ambitions are off the mark. Writing and publishing a book is not like a professional sports team’s season — there isn’t one winner who takes the championship and a bunch of losers who fall short. Publishing a book is not an all-or-nothing proposition.
This isn’t to say you shouldn’t aim high with your goals, and having your book become a best-seller is certainly one way to measure success. Setting reasonable expectations, however, is essential.
So why write a book?
One of the most important questions you should be able to answer when thinking about writing a book is, “Who is going to read it and why?”
As Ed’s story demonstrates, a book is a very useful business development tool. It is an immediate conversation starter, an excellent credibility builder and one heck of a leave-behind. If you’re engaged in marketing, why not capture your expertise through a book?
Another reason is to celebrate a milestone or establish a legacy piece. It could be for a 50th or 100th anniversary, or to recognize the history of an organization upon the founder’s retirement or death.
And, if you are interested in helping others succeed, a book is a great way to share your expertise or what makes you and your organization special. For example, if you’ve built an amazing corporate culture where productivity blossoms and innovation flourishes, the “how” and “why” are good subjects for a book. And if you’ve been involved with several mergers and acquisitions, consider sharing what worked and what didn’t, and the lessons learned along the way.
Whatever your story, the key is having a reason to share it with others. The bottom line: It’s your story. Make it count.
One mistake companies make with cash management is getting too comfortable banking the same old way and not exploring new and improved processes available, says Suzy Frazier, Senior Vice President and Manager of Treasury Management Sales at ViewPoint Bank.
“You may not be getting the services you need or you could be paying for services you don’t need. A thorough review of bank services after the first 90 days, followed by annual relationship reviews, will ensure the needs of the company are being met,” Frazier says.
Smart Business spoke with Frazier about how to select a bank for your cash management needs.
What does treasury management entail?
Whether it’s called treasury or cash management, it’s the basic services that help businesses run more efficiently. It’s managing the cash going in and out of the business and streamlining the process through automation.
Treasury management services include:
- Access to account information through Internet banking.
- ACH (Automated Clearing House) and wire transfer processing.
- Remote deposit processing.
- Lockbox processing with remittance detail reporting.
- Fraud management and account reconciliation services.
- Automated sweep solutions for investment and loan transactions.
- Corporate and purchasing card services.
What mistakes do companies make when setting up treasury management systems?
One mistake is staying with the status quo and not taking advantage of the newer technologies. People have a tendency to just do things the way they’ve always been done.
Another mistake is expecting all services to be free. There is a cost for technology, automation, and all the bells and whistles. Do the legwork, investigate the offering, make sure it meets your needs and understand the price.
Finally, communicate regularly with your bank partner, the good and the bad. They cannot improve products and processes if they are unaware of the problems.
How can you compare bank service?
It’s still a people business and often you need to speak with someone to resolve issues. It’s important to know whom to call — don’t waste time rummaging through business cards or automated phone systems. When you have a need, you want it handled quickly and correctly. Being able to reach someone knowledgeable who can make a decision is critical to moving on to the next task.
Today, the Internet and mobile apps provide the flexibility to handle day-to-day business from anywhere you can connect. But technology has its challenges, and banks with good backup solutions keep your business moving.
Challenge your bank partner to be your advocate and consultant when it comes to your business. They can help you build your business and your customer base through their connections and other bank clients. It can be a win-win for everyone.
What fraud prevention is available?
Banks are constantly trying to stay one step ahead of fraudsters. It’s important to discuss the products available to prevent fraud with your banker.
Traditional positive pay has been around for more than 15 years, but the ability to provide payee information and clear exceptions quickly are just two of the newer enhancements.
Another prevention tool is for electronic transactions, known as ACH blocking. With this service, the company has the ability to designate the transactions to clear the account while rejecting all others.
The Internet and various platforms available today are changing the landscape for companies of all sizes — enabling them to conduct business from anywhere and at anytime. Not everything is a rush; there are steps to follow and safeguards that must be in place. Being able to do business remotely is here to stay, and providing access to information to make informed decisions about your business, securely and in a timely manner is the key. Banking should be quick, easy and secure so owners and company personnel can promote their business.
If not, maybe it’s time to make a phone call to your bank.
Suzy Frazier is senior vice president and manager of Treasury Management Sales at ViewPoint Bank. Reach her at (214) 217-7026 or email@example.com.
Website: To learn more about ViewPoint Bank’s Treasury Management Services, visit www.viewpointbank.com.
Insights Banking & Finance is brought to you by ViewPoint Bank
Don’t look now, but family fun has become a prime export for the U.S. thanks to the global expansion efforts of Mike Magusiak, president and CEO of CEC Entertainment Inc., the parent company of Chuck E. Cheese’s.
Facing a 12-year decline in the domestic birth rate and diminishing sales in the arcade, food and entertainment industry, Magusiak has redoubled his efforts to find new markets with a booming birth rate, burgeoning middle class and a penchant for family-oriented fun.
“When I look long term, I see no reason why we can’t have twice the number of stores internationally than domestically,” Magusiak says. “There are lots of places where the population is growing and people like spending quality time with family. Those markets are ripe for a concept like Chuck E. Cheese’s.”
That’s a pretty bold statement, when you consider that the rodent-mascotted chain, which generated revenues of $803.5 million in 2012, currently has 566 sites and only 18 are located outside Canada or U.S. territories.
After a rather slow start, Magusiak and the company are picking up steam. Together, in 2012, they’ve signed seven new development agreements for 42 stores in Mexico, Peru, the Philippines, Trinidad, Bahrain, Saudi Arabia and United Arab Emirates.
Although the international marketplace offers tremendous opportunities for growth, Magusiak says that a number of challenges must be properly understood and mastered before rapid expansion is wise.
“First, you need a differentiated product,” Magusiak says. “It would be very difficult to succeed if we were just selling pizza. Fifty percent of our revenue comes from food and 50 percent from entertainment. It’s our over-all experience that sets us apart.”
Once he’s surveyed the marketplace and verified that his brand will stand out, Magusiak relies on the following three-pronged strategy to identify and develop prime global opportunities.
Assess tangible and intangible assets
Magusiak says selecting an ideal global location isn’t rocket science but it does require an in-depth assessment of a region’s tangible and intangible characteristics.
For starters, he reviews GDP growth, birthrates and income data, but surprisingly, population density is a better predictor of success than discretionary income. Historically, Chuck E. Cheese’s stores in affluent areas haven’t fared as well as those located in lower income areas with high-density levels.
“We offer customers a great value, so we need sales volume to make our model work,” Magusiak says. “And because margins tend to be lower overseas, our international locations need even more volume than our domestic locations to turn a profit.”
Magusiak honed his location hunting formula by examining the profiles of top producing domestic stores like the one located in Bell, Calif. The store is adjacent to East Los Angeles, a largely Hispanic community that happens to be the most populous unincorporated region in California.
As a result, his initial forays into the global marketplace were focused on Latin American locales with similar demographics; however, the general population must also pass Magusiak’s cultural scrutiny.
“Our executive team visits the area and talks with prospective franchisees and guests to assess the cultural fit,” Magusiak says. “I’ve personally traveled to more than 150 locations including Abu Dhabi and the Philippines to gauge the local appetite for family-oriented entertainment.”
He says it’s easy to adjust menus, game distribution and pricing options to appease customers once they visit a store, but sustained growth hinges on cultural similarities, especially for a unique brick and mortar operation like Chuck E. Cheese’s.
“It’s not a ‘build it and they will come’ model; our guests have to like what we offer and what we represent,” Magusiak says. “You have to get out there and talk to people to see if your values match before committing to an overseas location.”
Find competent, passionate partners
A country’s populace isn’t the only place where Magusiak looks for compatible values; it’s a must-have requirement for Chuck E. Cheese’s franchisees. Successful candidates need business acumen, local market expertise, sufficient capital and what he calls a passion for the food and entertainment business.
“We don’t want absentee owners,” Magusiak says. “We’re looking for franchisees who are willing to immerse themselves in the business and interact with guests, because it’s their hands-on involvement that creates mutual success.”
Although 514 U.S. locations are company-owned, local ownership has been a critical component of Chuck E. Cheese’s early global success. In fact, every international franchise has been profitable from the outset.
Prospective franchisees are screened by staff and then interviewed by the executive team. Those passing muster then spend time in a U.S. store to get a feel for the guest experience and the basic operating model.
“We spend a lot of time with prospective franchisees, and we turn down a lot of people, but our slow and cautious approach has helped us avoid false starts,” Magusiak says. “Actually, many of our franchisees have been so successful they’ve asked to purchase additional development rights.”
In addition to turning a profit, Magusiak expects franchisees to boost the local appeal of Chuck E. Cheese’s brand by suggesting advantageous modifications to the company’s menu and operating procedures. For example, the franchisee in Monterrey, Mexico, added piñata rooms, and in Santiago, Chile, the chicken wings are spicier than those served in U.S. restaurants to satisfy the taste buds of local residents.
To ensure that modifications don’t stray too far from the company’s core values and brand, alteration requests are reviewed and approved by the company’s executive team.
“We don’t want to change what’s sacred about Chuck E. Cheese’s,” Magusiak says. “But if you hire smart, passionate people with good judgment, you need to listen to them.”
For instance, targeting teens instead of children isn’t an option, and it’s not OK to remove pizza from the menu. But Magusiak had no problem shutting down a salad bar in a Chilean store after sales records showed that locals weren’t embracing the concept.
“Customization is less important if you’re selling products over the Internet,” Magusiak says. “But it’s vital when you’re selling an experience and our franchise model has been instrumental in helping us develop a local approach and a solid business plan.”
Walk before you run
Magusiak honed his expansion strategy for three to four years while using his existing staff to identify and develop selected global opportunities. While some executives might question his speed, his methodical approach was designed to protect the company’s bottom line, iron out the kinks in the franchisee selection and assimilation process, and ensure the success of early adopters.
“We didn’t try to force things,” he says. “We wanted to remain profitable by expanding our model based on demand and by adding resources as necessary. Now that we’ve built out our infrastructure, we’re in a perfect position to jumpstart global expansion.”
To keep costs low, early franchisees were trained in U.S. locations. For example, the Peru franchisee spent time in Bakersfield, Calif., learning the nuances of Chuck E. Cheese’s guest service model before transferring the concept overseas. In addition, Magusiak insists that locations are profitable before granting additional rights to global franchisees.
“Going slow helps us tweak game distribution, token pricing and the details that contribute to a store’s profitability,” Magusiak says. “Plus, we can fund infrastructure investments as we go, which helps us try new things without incurring substantial risk.”
Once the company got solid footing, Magusiak hired an experienced globe-trotting Sherpa to identify new locations and a salesperson to recruit franchisees. He also hastened the franchisee assimilation process by adding a regional trainer.
Proof of Chuck E. Cheese’s concept, a proven track record and the addition of resources are behind the company’s recent surge in global expansion.
“You have to be patient,” Magusiak says. “We’re not just selling food. You have to make sure your brand aligns with the local culture when you’re selling quality family time and memories.”
How to reach: Chuck E. Cheese’s (972) 258-8507 or www.chuckecheese.com
Identify global expansion opportunities by evaluating a region’s tangible and intangible assets.
Look for aligned values when selecting business partners.
Be patient, test and achieve profitability before aggressive global expansion.
The Magusiak File
President and CEO
CEC Entertainment Inc.
Birthplace: Warren, Ohio
Education: He received a bachelor’s degree in accounting from the University of Southern Mississippi and a master’s degree in business with an emphasis in finance from the University of Texas at San Antonio. He’s also a CPA.
What was your first job and what did you learn from it?
I worked as an auditor for Holiday Inn in Memphis, Tenn., after graduating from college. It was there that I got my first exposure to international business, because I traveled all over the world auditing various subsidiaries.
Who do you admire most in business and why?
I admire Dick Frank, who served as chairman and CEO of CEC Entertainment Inc. from March 1986 to December 2008. He was not only a great person, but from a business perspective, he was a great simplifier. He was bombarded by opportunities, demands and challenges all day long, but he had a way of filtering everything down into a few simple priorities. He would often say that the key to business success is keeping guests happy or pursuing the right opportunities. He definitely had a knack for keeping everyone focused on what was important.
What is your definition of business success?
First of all, I’m not sure that you ever get there because success is a never-ending journey. But over time, seeing people grow is not only rewarding it’s the hallmark of a high-quality organization that’s financially successful. It’s all linked together; you can’t have financial success unless you have successful people.
What was the best business advice you ever received?
You can’t go from good to great if you get spread too thin. Focus on what you do best, execute and your company will be successful.
Success for a business can be fleeting. A wave of interest and customers can come in, but if the company’s business model or value proposition is not sound, then it’s difficult to maintain the momentum.
Once a business is moving along, most entrepreneurs will also reach a decision point as to when to move on from the company, whether it’s through a sale or simply ceasing operations.
Below are seven core tips for entrepreneurs who are looking to build a company and also some advice for those who need to leave their venture and create another.
Set realistic goals
A positive attitude and confidence in your business’ long-term success are vital. When it comes to setting goals, however, you need to inject a dose of realism.
Manage your own expectations so that even if you reach modest success benchmarks, you won’t have any sense of disappointment. Set conservative goals that will allow you to grow slowly. Use market research to gauge the size of your market and set reasonable sales goals.
Doing this legwork on the front end will pay off by helping you see if your plan is flawed and needs tweaking.
You have to stand out
The attributes that make your product or service unique will be your main selling proposition.
Be honest about the true uniqueness and don’t simply trust your biased opinion. You need to be able to market your competitive differentiator, and it needs to matter from the customer’s perspective.
Set the value proposition
If your product’s special traits don’t offer value, then they won’t do you any good. Gather the advice of others to gauge if you are presenting true cost versus value to customers. The value proposition is a core of the business, and without one it will certainly fail.
Implement and follow a sound business model
Do you have a plan in place for how the company will make money?
You should be revenue-focused right away and closely watch all expenses, especially your initial capital costs and any personnel salaries. Creating a full business plan at the outset will also protect you from overextending yourself or dipping too far into your personal finances.
Know when to walk away
Ideally, you will walk away from your business on your own terms. Perhaps you’ll have an offer to sell the company that will enable you to take time off or even retire early. If you think the company has reached its peak and cannot grab more market share, then you should consider selling.
Conversely, if your strategies are simply not panning out, then you need to know when it’s time to pull the plug. Don’t risk personal financial ruin pursuing the business. If you have the entrepreneurial spirit then there is always another venture.
When to begin again
If you walked away from your company and are in good financial shape, then you can explore starting another company. You should first have a reflective period where you look at the things you did right and wrong with your other business. Try to spot consistent issues.
Perhaps you overestimated the costs of production or the expenses incurred due to staffing. Don’t be afraid to take some classes to broaden your knowledge base. Once you have learned some lessons and adjusted your strategy, then you can dive into your next company with the right focus.
Find a niche
You not only need a product or service with unique traits, but you also need to identify a good niche within a decent-sized market. What’s a good example of a big market? Consider the hotel lodging business. It’s a $500 billion business. Think of any percentage of that sum and you have a hefty dollar amount.
Bob Diener is a pioneer in the hotel consolidation and online travel industry with more than 25 years of experience. Diener is the president and co-founder of www.getaroom.com and is co-founder of the Hotel Reservations Network, now known as Hotels.com.
Will Gruver found heartfelt riches by bringing electricity, jobs and hope to developing nations through USP&E GlobalWritten by Leslie Stevens-Huffman
Will Gruver pursued the American dream after earning a degree in economics from Northwestern University — but it didn’t take long for the Minnesota native to realize that working at a bank in Chicago’s famous Loop District couldn’t satisfy his entrepreneurial yearning or heartfelt need to enrich the lives of others.
So in 2002 he threw caution to the windy city and moved to the Dallas suburb of Celina where he launched USP&E Global. His goal was to design, build and operate fuel-efficient and renewable power stations, primarily in emerging markets.
Gruver says his decision to risk it all was truly a no-brainer, because the U.S. economy was growing at a snail’s pace while overseas markets were booming. And given the choice, he’d rather be sorry, than safe.
“The barriers to entrance have never been lower while the financial and humanitarian rewards have never been greater,” he says. “There are unbelievable opportunities in out of the way places for anyone willing to take a risk.”
On the surface, it seems like Gruver’s chancy decision might yield big dividends. After all, the International Energy Agency expects global energy demand to increase by one-third by 2035, with nearly 60 percent of the demand coming from countries with a burgeoning middle class like China, India and the Middle East.
But outsiders who try to navigate the business landscape in developing nations are often stymied by language and cultural differences and bureaucratic red tape. Small firms like USP&E also face stiff competition from energy, engineering and infrastructure giants like Siemens, which plans to expand its reach in emerging markets over the next five years.
Gruver would need to leverage the expertise of experienced globe trotting partners and employees to realize his dream of bringing power, jobs and hope to people in underdeveloped countries.
People in struggling countries are often wary of outsiders and for good reason. Consider the impoverished West African nation of Sierra Leone where slavery and the sale of so-called blood diamonds to outsiders during the 1990s fueled a brutal civil war and now only those who can afford generators have access to electricity.
Gruver, who employs a faith-based approach to leadership, believes that creating communities and jobs isn’t a consequence of doing business — it’s a reason to be in emerging markets and a moral obligation. Moreover, he scoffs at strangers who suggest that he should hasten his company’s growth by offering officials in underdeveloped countries financial incentives to secure permits or minimize red tape.
Instead, he follows his moral compass by hiring local people to operate and maintain a power station once construction is complete. He says that providing training and jobs creates trickle-down good will, and an environment of mutual respect, that leads to new opportunities. He cites his firm’s ability to secure multiple contracts in Sierra Leone, which is experiencing annual GDP growth of 35.9 percent, as an example.
He pays local workers well once a week and gives each employee a bag of rice to supplement their family’s meals.
“You build trust by keeping your word, and by giving people jobs and a career path,” Gruver says. “Hope was lost in Sierra Leone when we arrived two years ago. It’s remarkable how just a little bit of reliable growth can make a difference. We’re not only giving these people jobs and electricity — we’re giving them hope.”
Leverage strategic partnerships
How difficult is the business climate in Sierra Leone? The country’s overall ease of doing business ranks 140th out of 185 economies according to data compiled by The World Bank. Worse yet, it ranks 173th in dealing with construction permits and 176th in getting electricity, which means Gruver needs strategic alliances to achieve his philanthropic and economic mission.
“It’s very difficult to break into a foreign country without leveraging the established trust of companies that know the ins and outs of the local business and have tenured relationships,” he says.
In addition, having relationships with highly regarded and diverse companies such as Caterpillar, General Electric, Hyundai and Ernst & Young Africa helps USP&E overtake entrenched local competitors by offering clients turnkey power solutions. And the company’s nimble size and vast network helps it customize its deliverables and pounce on prospective opportunities.
“Some competitors just sell power plant support or construction or they only work in Venezuela because they don’t have the alliances to compete on a bigger stage,” Gruver says. “We can offer everything from design to construction and ongoing support for our plants by leveraging the abilities and products of our strategic partners.”
When USP&E couldn’t find a local printer to deliver documents to a prospective client in Johannesburg, South Africa, E&Y stepped in and its actions helped the fledgling power company close the deal. Other relationships have lead to inaugural deals in France and Spain.
“We’re not a huge company so we look for mutually beneficial relationships that extend our capabilities,” he says. “We expect to generate revenues of around $50 million this year and that’s largely due to our strategic partnerships which have never been stronger.”
Hire diverse and passionate people
Companies encounter unfamiliar technical and cultural challenges when they venture beyond the U.S. border. Having a diverse, multi-cultural staff with global business experience is critical in an environment where local knowledge plays a critical economic role. This is especially true in emerging markets, where decision makers are interested in knowing whether companies are interested in them as people or just want their dollars.
There’s no shortage of opportunities for globally experienced engineers and energy-savvy technicians — especially in Texas. So how has a mid-size company with fairly limited resources managed to hire 110 movers and shakers over the last three years?
“We promote our mission because it attracts like-minded people who want to work for more than a paycheck,” Gruver says.
Indeed, what people want most is the chance to make a difference according to Alexander Hiam, the Massachusetts-based author of “Business Innovation for Dummies.” Although a great salary doesn’t hurt, professionals are flocking to disruptive, world-changing organizations where they can feel good about what they do.
Interviews at USP&E usually start with a rudimentary question and answer exchange, but the conversation quickly turns toward the company’s overseas exploits. At that point, candidates who are merely interested in collecting a paycheck usually exit, while those who are passionate about the company’s mission are hooked on the idea of traveling the world and meeting buyers, sellers, and facility managers on multiple continents with different languages, cultures and customs.
And since engaged employees are generally more productive than their less motivated counterparts, the passion factor allows Gruver to boost the return on his fairly small staff. His experience is validated by more than 29 studies that link employee engagement to better service, sales, profits and shareholder returns.
“I lead an awesome team of executives, directors, engineers, project managers and technicians,” Gruver says. “They can have any job they want but they work for USP&E because they’re passionate about helping people.”
Harness the power of the Internet
USP&E doesn’t pay for advertising on Google or Yahoo, and it doesn’t have a commercial sales team. Yet, the company manages to garner five to 15 legitimate leads per day through the strategic deployment of some 80 websites.
Gruver studied web development in college — and refers to himself as a technophile — so he knows a thing or two about search engine optimization. Invariably, USP&E comes up near the top of the page when a prospective client searches the Internet for power engineering solutions or providers because the company owns the rights to a variety of keyword-rich domain names.
A strategic domain name can increase a website’s ranking especially if the domain matches the search query. The tactic is especially effective for small companies that don’t have a large advertising budget or well-known brand, since it snares prospective clients who search on keywords or phrases instead of a company name, and having a strong web presence may even attract investors.
“Executives often think that they have to pay for strategic Internet placement but that’s simply not true,” Gruver says. “Managing search engine optimization is so important to growing companies that it needs to be a top priority for executives right after cash flow.”
Speaking of cash flow, it’s still a daily priority for Gruver given the company’s age and rapid growth. He’s learned to say no to unnecessary frills and how to streamline operations by investing in mission critical areas that yield the best return. He credits his mentors with telling him the truth about frivolous spending instead of what he wants to hear while teaching him the virtues of risk taking and pushing boundaries.
“It’s amazing how just one disruptive idea can change the fortunes of so many people,” Gruver says. “We’re not just creating jobs — we’re creating hope — and that’s a wonderful thing.”
How to reach: U.S. Power & Environment Global, (469) 726-4780 or www.uspowerco.com
The Gruver File
Name: Will Gruver
Title: CEO and founder
Company: USP&E Global
Born: Minneapolis, Minn.
Education: Bachelor’s degree in communications and economics, Northwestern University.
What was your first job?
My first job was a youth pastor, but I started my first company when I was just 10. It was a landscaping business which I built up and sold to my partner after I finished high school.
Who do you most admire in the business world and why?
Entrepreneurs, especially those who head-up small businesses, because they’re the risk-takers who are pushing the boundaries and making a difference in this world. It’s the developing nations that offer the greatest growth and philanthropic opportunities, but it takes courage, passion and a forward-thinking strategy to pursue those opportunities.
What’s the best advice you’ve ever received?
Practice work-life balance. It’s easy to become entrenched in your business and overlook family and friends. I’m more motivated and productive on a daily basis because I have balance in my life.
What’s the key to success in emerging markets?
There’s so much corruption that’s it’s critical to build trust. You won’t muster repeat business unless you take the time to become a valued and trusted supplier.
What’s your definition of business success?
It may sound like a cliché, but helping other people. It’s easy to make money; the hard part is making a difference. There are unbelievable opportunities in this world for anyone willing to take a risk. For a company to thrive there has to be a reason for it to exist. Profits are important but it’s how you get there that counts.
Awards: Finalist, 2012 Entrepreneur of the Year, Ernst & Young
Recipient, Dallas Business Journal’s “40 Under 40”Award
Finalist, INC. 500, fastest-growing private companies in the U.S.
Dallas 100 Entrepreneur Award, USP&E placed seventh out of the 100 fastest-growing privately held companies in the Dallas area
I drop off my clothes at the dry cleaner weekly and the staff is always friendly. A hello, good bye is always said but there are a few things that are missing.
1. A few weeks earlier, I dropped off some clothes and picked up and paid for the clothes that I had dropped off the week earlier. As I was getting out of the car I asked my son to bring in my dry cleaning. He said, “Dad — these clothes don’t look like yours.”
As I took a quick look, he was 100 percent right and two minutes later we were back at the dry cleaners exchanging the wrong clothes…. I hoped. Thankfully after 15 minutes they found my clothes and life was back to normal and my shirts were back with me.
The interesting thing was what the owner said or actually didn’t say. The only thing he said was, “Thanks for bringing back the clothes,” which I thought was very odd. There was no sorry for the mix up… no sorry for any inconvenience… in fact, no sorry at all.
Lesson No. 1: Say I’m sorry. It isn’t a sign of weakness; it isn’t a sign of embarrassment. Frankly it is a sign of honesty and sincerity, and it shows the customer you really, really care about them and their business.
2. In the past few months I have also noticed that my dry cleaner will give me a date/time when my clothes will be ready. Lo and behold when I show up, they aren’t. I understand that you can miss a deadline but when you know you have missed a deadline, say something. they have my phone number and email. Make a call or send a text/email.
Lesson No. 2: Everyone will miss a deadline. Doing nothing, sweeping it under the rug and not communicating is a huge mistake and can only cost your business in the long run!
3. This next one was actually very funny or at least I thought it was funny. I lost one of my buttons on my shirt and asked my dry cleaner to sew it back on. They said, “No problem at all and it will be ready when the rest of your clothes are ready.”
A few weeks later I wore the shirt that the dry cleaner had fixed and noticed the button (on my sleeve) was actually a different color than the one next to it. My dress shirts have two buttons on the sleeve so it is very easy for me to notice. I looked at the bottom of my shirt where there is always extra buttons sewn in and lo and behold, all of the extra buttons are still there. Ok, I will admit I did chuckle a little bit.
Lesson No. 3: Pay attention to details. It is the smallest of details that can and will affect your business the most. Rest assured if you pay attention to details your enterprise has a much better chance to be successful.
Merrill Dubrow is president and CEO, M/A/R/C Research, located in Dallas, one of the top 25 market research companies in the U.S. Merrill is a sought after speaker and has been writing a blog for over six years. He can be reached at firstname.lastname@example.org or at (972) 983-0416.
The Division of Corporation Finance, a part of the Securities and Exchange Commission, issued guidance on disclosure obligations related to cybersecurity risks and incidents a few years ago. Public companies aren’t yet required to disclose this information to shareholders, but they could be at some point, says Brittany Teare, IT advisory manager at Weaver.
“Right now, this is guidance that is in the best interest for your shareholders, but that will likely change. It could become a requirement sooner rather than later,” she says.
Smart Business spoke with Teare about the guidance and how businesses can measure and guard against cyberrisks.
What are the SEC reporting requirements for cybersecurity under this guidance?
The guidance expands upon the existing requirements that public companies follow, but there’s no mandatory piece yet that results in a direct impact if a company doesn’t disclose information.
Basically, the guidance states that if cybersecurity risks and cyber incidents have a material effect on your shareholders — if it could affect how financial information is reported — you have to report them.
How do you know when cybersecurity risks materially impact your company?
The guidance addresses some possible risks and whether they should be voluntarily reported to shareholders. If you don’t have cybersecurity controls around your key financial systems, for example, then the way you record or report your data can be easily manipulated or altered. Even if a cyber breach has not yet occurred, it is very likely.
Cybersecurity is a gray area. Employers typically know that network and perimeter security, access and change controls should be in place, but executives may not consider disclosing vulnerabilities. CEOs and CFOs typically look at balance sheets and see line items for hardware and other things they can touch, but it can be challenging to consider the ways a breach can happen.
How would you advise CEOs to quantify data and see vulnerabilities?
First, designate a person or group of people to be responsible for cybersecurity. They should not only understand SEC requirements and where they are potentially heading, but also must identify specific risks.
There is a central entry point in any network, so key people need to know where the sensitive data is because if an attacker gets there, it could add up to a huge loss. If the company does not store much sensitive information, an attack could impact its reputation, which is more difficult to value.
Another challenge is improving communication from the CIO or IT manager. Often, IT will say, ‘We need X dollars for new equipment, applications and hardware that are going to help make our organization more secure.’ When management hears this number, which can be millions in larger organizations, they want to know the ROI. However, IT personnel typically struggle to quantify that.
A CIO needs to be able to tell other executives, ‘If this firewall, application or system is not installed, a breach would cost us X dollars, or the company could lose X dollars per day,’ for example. Not everything can be quantified, but this gives CIOs a starting point.
What will protect your data and reputation?
Some key, high-level steps to consider are:
• Take inventory of the data systems and gain an understanding of where critical data is located. Then, work to ensure that there is an appropriate amount of security in those areas.
• Use complex, strong passwords to protect the network, systems and data, and regularly change them. Have the system lock out users after a certain number of failed attempts and log all such activity.
• Heavily monitor networks and systems. Check who is logging in and from where, who is successfully entering and who is failing. Then, set a baseline to understand any abnormalities.
• Use the principle of least privilege, especially for critical accounts and functions. This ensures that no single employee has all access; rather, access is tailored to the job function.
There is more companies can do. But by implementing key, basic controls, if a breach occurs, the business can more easily identify what happened and how.
Brittany Teare is IT advisory manager at Weaver. Reach her at (972) 448-9299 or email@example.com.
Website: More information about the SEC guidance.
Insights Accounting is brought to you by Weaver