FRANK JANTZEN is the vice president of Client Service at AvMed Health Plans. Reach him at firstname.lastname@example.org.
You might not think of your accountant as some sort of bean counter, better suited for the Dark Ages than for the Age of Information. Most folks, after all, recognized the error of that thought years ago.
You also might not think of that same accountant as a trusted business adviser. But you should.
Gone are the days when your accountant would just sit down with the company ledger and crunch numbers. An accountant is able to offer so much more now, especially in this economic state.
Need to evaluate your inventory turnover, to analyze what is selling, what is not and why? An accountant can do that.
What about an examination to make certain that all available credit lines are being used or that capital needs are being met? An accountant can do that, too.
And, of course, there are taxes, an area where there has been so much evolution that one industry expert says he estimates the number of allowable tax incentives and minimization techniques has more than doubled during the quarter of a century since he analyzed his first set of financial reports. Another expert says the number has more than tripled during that period. Whatever the actual amount of exponential growth, there is no doubt that accounting is more complicated, and more important, than ever.
“Clients need to stay even closer with their accounting firms more so now than in the past,” says Pete Wellman, assurance partner, Ernst & Young LLP. “The issues and the challenges are probably trickier than in an up market, and I think it’s even more important that companies view their relationships with their accountants on a more holistic basis, not as just a compliance relationship.”Talk with your accountant
The key to developing a business relationship with your accountant is communication. Nothing is more important, just ask an accountant.
“Your accountant should be part of the inner circle when you’re contemplating major transactions to make sure that you have a team approach,” says Mitchell Less, partner-in-charge of audit practice services, Grant Thornton LLP. “Your accountant should have a relationship with your attorney, and perhaps your banker, in order for them to know one another so they can work together strategically.”
Without some level of constant and consistent communication, your accountant cannot know the full spectrum of activity within your company and, in turn, might be unable to offer constructive criticism and potentially prosperous ideas and suggestions. The more communication between you and your accountant, the more opportunity and the higher the possibility you will receive a far more favorable result.
Many industry experts recommend you plan to get together with your accountant for at least three or four formal meetings per year, though multiple variables might swing that number higher or lower, including the size of your business, the challenges you are facing now and expect to face during the course of the next year, and the strengths and weaknesses of your internal financial team. Others recommend more casual meetings or phone calls in order to communicate on a regular basis.
Whether you meet in the boardroom or at your favorite bar, take advantage of that time to ask your accountant important questions, like how can you best utilize your accountant? What should you do internally? Externally? And what are your priorities for the next year?
A high level of communication with your accountant can also lead to you becoming more comfortable around each other. Your accountant should be familiar with the folks on your upper management team, and you should be familiar with the folks who play top roles for the firm.
“It’s important for the accounting firm to have relationships with the executives at the highest level of the company, so that the accounting firm has a clear view through the eyes of the business and the related risks and opportunities,” Wellman says. “The more we understand the business from the eyes of the very top management, the more we can add value.”Take advantage of financial opportunities
The reason so many accountants prefer to be so involved is because the more information they know about you and your company, the more areas they will be able to explore in order to save dollars and cents. And saving dollars makes sense.
“If you want the best out of the relationship, it’s important that the client provide knowledge on their business [and] that you understand their business model,” Less says. “Where are they today? Where do they want to be five or 10 years from now? We need to gain a good understanding of what the hurdles may be in terms of the company achieving those goals.”
But the burden of trimming the budget lies not only with your accountant you need to do your part, too. So be organized, be prepared, be proactive and be accessible.
Just consider the average audit. If your files are scattered around your office, stacked in piles that are toppling over, an audit performed by your accountant might last far longer than it should. In order to avoid a heftier bill, keep your internal financial team on a schedule to update your books regularly, perhaps even every day. Exorbitant costs for an audit or even just a review or a compilation financial statement are normally only incurred when you are not organized and prepared.
“Attention to detail as the process is moving forward is typically the best way to prepare for an audit, to do it right the first time,” Less says. “That’s much more cost-effective than for an auditor to look back over an entire year and help you find the error.”
If you are particularly strapped, you might even consider consulting with your accountant and other business advisers to consider altering the end of your fiscal year from the end of the calendar year to the end of another quarter. That would allow your accountant to work with you less during the peak months of January through April and more during the off months, when rates are far less expensive. And though such a shift is filled with internal and federal paperwork, the potential savings of such proactive measures can reach more than 20 to 30 percent.
There are even extreme situations where you might be able to save hundreds of thousands of dollars because you and your accountant are both accessible and open to conversation.
Several years ago, one industry expert was working with a client who had installed defective materials in a sewer and storm drain system, and the client lost thousands of dollars. Though the client was able to file a claim against the manufacturer, the expert was also able to find a case law that allowed for the property loss to carry back 10 years, a far longer retroactive period than the standard two or three years. The result? The client received $500,000 in large part because the expert had been involved in the situation from the start and because the two sides were accessible to each other.
“There may be many companies that think we are approaching the bottoming out and they don’t want to miss out on opportunities to capitalize on low prices,” Wellman says. “It’s more important now than ever for them to reach out to their accountants.”
It’s important to give open enrollment the attention it deserves, so that everyone is able to make informed decisions.
“Employers benefit from employees who are educated well in advance, have the opportunity to understand the changes, see reasons for changes, and know the new benefits,” says Frank Jantzen, vice president of Client Service at AvMed Health Plans. “If employees know in advance, there will be fewer questions for the benefits person after enrollment.”
Smart Business spoke with Jantzen about open enrollment, how to get employees engaged and how to work with your health insurance provider during open enrollment.
How can you give open enrollment the attention it deserves?
Have established times or meetings where there’s a general session and everybody gets the same information. Make sure to publish employee questions and answers where everyone can see them. That helps everyone get the same information and dispels rumors. Employees can then make their own decisions based on facts and not on what their neighbor tells them might be true.
Remind employees to come prepared with Social Security numbers for spouses and dependents and necessary documentation so enrollment isn’t delayed. It’s frustrating if you sign up and think everything is fine, but when you go to use the insurance after the effective date, you find out your application is pending because information is missing.
What are key things to remember during the open enrollment process?
The employee doesn’t necessarily make the benefit decision — someone else, like a spouse, sometimes makes it. Depending on who is in your audience, it’s important that the spouse, not just the employee, understands the plan and how to get the most out of the benefits. You have to make sure the information goes home. That also means giving employees enough time to make a decision.
Employees moving from a co-pay to co-insurance design need to be given examples of the cost of care received. Give examples of hospital costs versus free-standing facilities. Make sure that information goes home to the spouse, as well.
How do you get employees engaged in the open enrollment process?
A lot of employers now are increasing the co-pay for hospital emergency rooms to make it significantly higher than going to an urgent care center. Urgent care centers are abundant right now, and they’re easy to get to. You may want to provide extra information to your employees on the cost of seeing a doctor at an ER versus an urgent care center. You can also distribute a list of urgent care centers to let employees know where they are and their hours. That would encourage them to use the urgent care center and avoid ERs when possible.
Another important item is prescription drugs. All plans seem to have similar formularies, yet there are differences. If you move from a carrier without a progressive medication program to one with a program, let employees know what drugs are pre-authorized and which ones will be questioned. This will give employees full exposure on the plan.
Provide a benefit calculator so employees can see how much their out-of-pocket costs would be for different medical procedures if they’re using a health reimbursement account or high-deductible plan with an HRA or health savings account. Let them know in advance when the deposits to their HSAs will be made so they can budget appropriately.
Contests and games are fun too. You have to grab their attention with some astounding facts, reward them with a gift card or something and then move into the education portion of the topic.
How can you help employees understand any changes that have been made to the plan?
You need to take ownership of the benefit decision. If there’s a change from one carrier to another, take time to explain to the employees why you switched. If it was cost — tell them what the increase would have been if you stayed and relate it back to their individual contribution. Most employees only think about what it’s costing them, not the employer’s total premium. Tell them what it costs and what it would have meant for them.
If you’re changing plan design, tell employees why the decision was made. It’s easy to avoid that conversation and let employees blame the new carrier. But it’s not the new carrier they’re unhappy with most of the time, it’s the plan design. Take ownership and tell employees why this plan was chosen, and how much it will cost or save them.
If you’re moving to a high-deductible plan, provide examples of how employees can avoid high-cost procedures, including how much an MRI will cost at a hospital versus an urgent care center. Give them hard numbers.
How can you work with your health insurance provider during open enrollment?
Share information with the carrier about your contribution. Some information may only be given to the employee and not the carrier, which makes it difficult. The carrier is then not able to step up, answer questions and help out. When you talk about the decision, what the employer/employee contributions are and what, if any, HSA deposits are, have the health plan provide details on benefits and specific ways to get the most cost-effective, quality care.
Your presence at all meetings is very valuable. It should be a team effort. The carrier will explain about the benefits and how employees can get value out of them. You can explain the decision and the reasons for selecting the plan. <<
Paying a lawyer may be the last thing you want to think about. But when it comes to keeping your company afloat, seeking counsel can be your life vest.
During troubled times, you need an adviser who understands your business and your leadership personality. While many CEOs see trips to the lawyer’s office in terms of dollar signs, keeping ahead of the legal curve will pay off in the long run.
“A good, experienced lawyer will understand or try to understand his client’s business and will come across legal and business developments that can be invaluable to the client,” says Bowman Brown, chairman of the executive committee and the Financial Services Industry Practice Group at Shutts & Bowen LLP.
Your attorney can be a valuable member of your cabinet who provides strategic advice to boost your bottom line. By viewing your lawyer as a business partner and his or her fee as an investment in your company you can capitalize on your lawyer’s legal training and experience.Develop an effective relationship
By understanding where you’ve been and where you’re headed, your attorney can help you navigate the corporate waters and avoid legal icebergs. But the only way he or she is going to acquire that knowledge is through open discussions.
“Too often, during the discovery phase, the legal team or the client are finding information that is either beneficial or detrimental to the client’s case,” says Lee Teichner, partner, Holland & Knight LLP. “Finding that out at the initiation and not somewhere near the middle is beneficial for everyone.”
While some matters, such as tax tips, can result in tangible savings, others may not show an immediate fiscal return. Still, it’s hard to image what costly bumps you may encounter without the foresight of a seasoned professional.
“You can avoid serious problems if situations are developing that involve legal issues by consulting with a lawyer before the problem really blossoms into a major disaster,” Brown says.
The best advice at the right time can save a bundle. However, you can’t be shelling out for unnecessary discussions. Thinking through an issue before calling your lawyer makes the best use of his or her time and your money. Routine situations, such as hiring matters, may be handled by your human resources department, where more complex situations, like harassment claims, require immediate legal attention.
“There are some issues that are technical issues that require a lawyer’s technical advice and experience, but some businesspeople, especially HR people, get very experienced at handling the particular issues that come up in their areas,” Brown says.
If a matter requires a meeting with your lawyer, prepare notes, gather documents and create an agenda in advance. Sending information to your attorney ahead of time lets him come prepared to address the issue. Ensuring that the appropriate people are in the meeting or available on-call can avoid a costly follow-up.
“Anything that can avoid a surprise in the end is something that should be brought to the meeting,” Teichner says.
Investing in appropriate communication builds a long-term partner. However, it’s important to trim away excess chatter. Designating one contact person in your company eliminates the chance of your lawyer giving the same advice twice. If you have a recurring document, such as a purchase agreement, ask your attorney to approve a form you can use repeatedly, without getting his or her OK each time.
If you are hesitant to call your lawyer for fear of being charged by the hour, you may find relief in negotiating a flat rate for some services. Flat fees work best with a finite project, such as trademark filings. With many companies anxious to budget their costs, most attorneys will discuss fee structures.
“Most firms are always willing to sit down with clients to work out a fee arrangement that suits both the client’s needs and our needs,” Teichner says. “And we’re certainly willing to be creative if that benefits the client.”
The billable hour makes sense when it is unclear how much attention the matter will require, such as litigation. In hourly situations, it’s wise to ask for the person with the lowest billing level who can perform the work well. A junior associate can handle smaller issues in exchange for a slimmer bill. With complex matters, it is more efficient to pay a higher hourly rate for a fast-working, experienced partner.
No matter the billing structure, be sure to get a written contract that includes not only the services and the rate but also builds in checkpoints where the lawyer will call to discuss progress.
“The goal is to maximize the client’s experience with minimal cost to the client,” Teichner says. “Whether that is done with an hourly rate or flat rate, the goal is the same.”
When your business is moving along, it’s beneficial to check in with your attorney at least once a year. Such interactions make you a household name in the firm and can result in better overall service.Find the right fit
Before you turn over your spreadsheets, make sure your attorney complements your style. You may be eager for your day in court, but your attorney is best in settlements. Being on the same page is imperative to long-term success.
“Sometimes the litigation train leaves the station and, if the goal is not clear, the case can take off, and a case that could have been resolved early ends up getting resolved for somewhere around the same terms but could have been resolved much earlier,” Teichner said.
Finding a legal mind that matches your corporate spirit is no small task. As with other services, it’s wise to get recommendations from your colleagues. Referrals from your current professional team, such as your banker and accountant, can be especially helpful. Also consider the lawyer’s role in the area.
“The most important thing is to find somebody who has a lot of experience in handling whatever kinds of matters are needed and has a good reputation in the area,” Brown says.
Consider where others in your industry get their legal advice. Intimate knowledge of your market is priceless when it comes to staying on top of regulatory changes. And the legal relationship is bound by attorney-client confidentiality, so you can sleep easy knowing your company’s dark secrets aren’t being broadcast.
Once you’ve identified a few lawyers, schedule brief meetings with each. While many firms can handle the technical work, it’s important to find someone you feel comfortable with. Ultimately, the better you and your lawyer know and understand each other, the more hazards you can avoid.
“A company who seeks legal advice before initiating any action can be given a road map to navigate the various legal minefields that are out there,” Teichner says.
Tom Petrillo has a simple philosophy when it comes to growing his business: If he doesn’t know it, he doesn’t do it.
“I tend to not get into businesses that I’ve never been in before or ones where I don’t understand the business model,” says Petrillo, founder, president and CEO of The Salon People Inc. “Then I’ve got to rely on other people to coach it and feed me information and I don’t know if they are right or wrong.”
It’s not that Petrillo is unwilling to try new things. He just never wants to go into a new opportunity without a full understanding of what he’s getting into.
“My experience has told me that when I didn’t pass and I acted too quickly on a great opportunity, it never turned out to be a great opportunity,” Petrillo says.
By making smart decisions, Petrillo has grown from 12 employees six years ago to 140 employees in 2009.
Smart Business spoke with Petrillo about how to put yourself in the best position to experience healthy growth.
Follow a plan. You start by understanding the business model that you are in and comparing your business model against an industry standard. If you can get your hands on an industry standard business model, then you can understand what your gross margin should be, what your expense structure should be and what the capital infusion that you need should be.
When you understand that and you test sales projections, you literally live to that. If you end up with a good sales plan followed by a strong expense plan, meaning that you’ve thought out all of your expenses that drove you to profitability, you forward project what your business is going to do and what capital it’s going to require to do that.
It’s like looking through a rearview mirror in a forward way. We constantly look at trends and then adapt ourselves to that trend so we don’t get bit by hoping that trend is going to change. We monitor our trends and then look at our forward projections against those trends.
Understand the business sector you are in and what business models your competitors have in place. The more you understand about how they have built their business models and made good estimates about what it costs to put that business model together, the better you understand how you can compete in that sector.
Be selective. There are so many different opportunities that are sitting out there. I understand retail extremely well, and I understand product marketing extremely well. I’ve got to make sure whatever businesses I engage in that I could actually lead that company if I need to.
If you’re going to be a good coach at something, you have to understand the game you are coaching. For myself, I’m extremely disciplined in that I will only get into businesses that I understand fully.
For example, I would never get into the medical supply business because, at this juncture, I don’t know anything. I understand sales techniques and how to put marketing together, but I don’t understand that world. I don’t understand how the relationships are built in that world or what makes it move.
Put in the research. We have an HR services arm, which also includes insurance. We could have started on the insurance piece four years ago. We spent two years researching what aspects of the insurance would be appropriate for the business. We went all the way to state legislators and insurance commissioners and to a legal team to educate us before we embarked on it.
I don’t run the company, but the person who comes to it has 25 years of experience. I know the business extremely well now, but I would not have embarked on it until I became a student of the business. ... I’m not talking about reading a book; I spent a good year learning that business.
If you’re selling something and you don’t figure out who your target audience is and you don’t test the salability of that product with that target audience and you don’t do your focus groups, if you don’t put that level of time and energy into it, it’s a crapshoot. And personally, I don’t believe in crapshoots.
Measure behaviors. I don’t lay out a strategy; I lay out a desired outcome. From that desired outcome, we’ll challenge whether that outcome is possible and, if it is, how we’ll get there.
We constantly, on a quarterly, weekly and monthly basis, measure our results. We measure the results on all levels and that just makes ourselves and our team completely transparent. In doing so, we can make adjustments to the strategy. Things that are doing well, we accelerate. Things that aren’t doing well, we either redesign or we discontinue.
I actually take a backward approach to measurement. I believe in measuring behaviors first, and if the behaviors are in line with what you know to be the desired outcomes that that behavior can obtain, then the final result will be there.
We’re in the high-end salon business. So we know that a good consultation with a guest is of the utmost importance to deliver a retained guest. What do I mean by that? If somebody on the team who is doing the hair is asking the right questions or is asking a series of questions that’s leading them in the direction of giving them a good outcome, then I know the haircut becomes the least important.
The perfect haircut is not what’s important. It’s delivering to the guest what they really wanted. They may have come in and really wanted to know how to style their hair and were less concerned about the actual cut.
We have a process in place that goes through what a good consultation is. When I walk the floor, what I’m listening for is, ‘Are those questions being asked in the consultation?’ When they are, I know I’m going to get the outcome, which is a retained guest. When they aren’t, they break down. I could retain the client or I might not.
How to reach: The Salon People Inc., (727) 820-3170 or http://thesalonpeople.avedaflorida.com
Within two weeks of joining GE Security Inc. in 2007, CEO Dean Seavers was at an industry trade show, and it wasn’t just to schmooze and get word out about the company. He was there to meet with customers and find ways the company, which focuses on security and safety products and is a wholly owned subsidiary of General Electric, could improve.
He kept hearing the same things from customers: The right solution at the right time when they needed it.
“When you hear a recurring theme, you realize there are a couple of challenges,” he says. “So, there at the show, we actually had most of the senior team with us, and we pulled everyone aside, we talked about it, and we said, ‘What seems to be the biggest challenge in terms of making sure we could deliver that, because those are fundamentals to the business?”
Working the trade show was just a start for Seavers. He had to listen to those around him to get an idea of what the best direction was for his organization.
“We spent a lot of time with our customers so we could understand their needs and how we were performing relative to their expectations,” he says. “We also spent a lot of time with our channel partners to better understand how we could be a better partner. Of course, we spent a lot of time with our employees who had great ideas about productivity improvement. There were a lot of common themes coming from these sessions and that was really the genesis of our strategic imperatives.”
Those imperatives superior customer experience, competitive products, winning solutions, global growth and simplification would become the drivers that would give the company a clear direction and the ability to excel for the future.
“We all get caught up in our current assignments,” Seavers says. “So, taking a step back from that, initially for me, it’s really having a clear direction in terms of where you are going.
“The way you really get there is spending time with customers and employees to figure out what’s really important and what you’re really good at and developing a vision to go after it.”
Here’s how Seavers interacts with employees and customers to find the best course for GE Security to take.Listen to customers
To find out what customers want and what they think of your company, you and your team have to talk to them directly. That means you need to get out of your office and actually see how customers use your products on a day-to-day basis and talk with them about it.
“For us, it’s getting out there on the front lines and actually seeing how people work with our product both our partners but also customers just to see what works well. How do they use it and what are they challenged with?” he says. “That gets beyond the people that actually pay for your product. It gets more to their employees who actually use it.
“That’s a good first step really see how your product or solution is being used.”
After that, you want the customers to give their perspectives on what they need and how you can help them before you tell them what you can do.
“All of our senior team, and I’d say our midlevel team, it’s all of our responsibilities to talk to customers,” he says. “I do travel a lot. I think most of my teams travel a lot because we are a global business. But, I think, when you are going out there, whether it’s to see an employee, whether you are going to a trade show … whether you are just dealing with a problem, make sure you spend time to be in front of customers on a proactive basis.
“Do not just react to a challenge, but, on a proactive basis, make sure you are in front of customers.”
One thing to be prepared for if you aren’t proactive is dealing with unhappy customers.
“At the end of the day, we all encounter disgruntled customers,” he says. “Quite frankly, a disgruntled customer that’s talking to you is not necessarily a bad thing. It’s the disgruntled customers who aren’t talking to you that are a challenge.”
The first thing Seavers does with a disgruntled customer is the same thing he did when he became CEO of the company.
“With a disgruntled customer, the first thing I do is just shut my mouth and I listen,” he says. “I let them explain what their frustration is, let them explain what their challenge is. I do truly try to listen as opposed to try to figure out what the right answer is going to be. I always commit to fixing the problem or at least getting to the root cause of the problem.”
Sometimes there is a perception from the customer that the company does not care, which you have to explain is not the case.
“So, typically, you want to make sure you explain to them what your organization is about,” he says. “Then, I always commit to saying, ‘Here’s what I’m going to do. Here’s what the next two or three things are I’m going to do.’ Part of it is obviously looping back with the people involved and making sure I understand what happened, so I can give the customer a full explanation.
“The second piece is coming up with a solution, and the third one is trying to figure out if it’s a challenge we created, how to put in some sort of mechanism or try to put in some sort of procedure that eliminates the problem so you don’t have to fix the same problem two or three times. I usually give them a timeline for when we’re going to do that.”
If a customer stops doing business with you, don’t just shrug your shoulders and move on to the next customer. Most disgruntled customers will talk to you, so take advantage of that opportunity. If you can’t get time with them over the phone, make an appointment to meet in person.
“It’s one thing to call a customer and they’re busy and they’re putting you off and they don’t want to talk, but it’s another thing to show up,” he says. “Commit to being there, and then (say,) ‘Listen, I understand that you may not want to do business with us anymore, but I just want to listen. I want to hear what the problem is because, while you may have made a choice to go somewhere else, I ultimately want to hear what the challenges are so I can make the organization better. I’d say 9.9 times out of 10, we’re all businesspeople. Businesspeople are reasonable, and that’s the story that gets me in the door.”
Taking the time to talk with both satisfied and unsatisfied customers will set you up for success in the long run.
“One, it builds a relationship,” he says. “Two, it just makes you smarter as an organization. Three, if we are all doing it I’d say front-line employees, midlevel managers, senior-level managers when we come together and talk about who we are and what we want to be as an organization, we’re doing it not just from gut feel but doing it from real-world experience and doing it with customer feedback in mind.”Listen to employees
With so much on your plate, it’s tempting to look for the simple way out on some responsibilities. Don’t let that be the case when it comes to listening to employees.
“With employees, sometimes it’s easy to go out and just tell them what to do,” he says. “But I think the smarter thing is to go out and listen to them and understand what their challenges are. Make sure you communicate what the organization is about, wher e are you trying to take the organization and what’s really important to the organization, but make sure you listen, too.”
Because employees interact with customers and your products all of the time, you need to spend time with your workers.
“Definitely coming on board, we spent a lot of time with employees and now we’ve got a regular rhythm around, whether it’s town-hall meetings, whether it’s round tables, whether we do what we call skip-level meetings,” he says.
With thousands of employees, Seavers has to travel a lot. He travels to different locations and meets with groups of about 10 people made up of employees from a couple of levels below him. The groups comprise a good cross-section of employees from different departments.
“So that way you’re not just talking about engineering, but you’ve got engineering, you’ve got product management, you’ve got tech support, you’ve got everybody at the table so you can have a pretty rich dialogue,” he says.
Since Seavers doesn’t come to the meetings with an agenda and managers aren’t present, he and the employees can talk about any number of topics that come up.
Group members quickly go around the table, including Seavers, and introduce or reintroduce themselves and give a quick snippet of who they are and what they do at the company.
“That takes a few minutes to do that,” he says. “Typically, when people are introducing themselves, telling where they work, that sort of thing, it may spur something. I may just ask them a question to get to know them a little bit better. Once we finish with that, what I like to do is say, ‘Listen, there is no agenda here. The whole point of doing a round table is so we can have communication, so I can tell you what’s going on in the business. You can ask me questions that might be on your mind. I can learn a little bit more about what you are doing.’ So, I spend a few minutes sort of letting them know there is no agenda, letting them know that it is an open environment and they can ask me anything.
“Whether it has to do with GE Security, whether it has to do with GE, if they are concerned about the economy, whatever they want to talk about is fair game.”
Stressing that any topic is fair game will get the ball rolling in the right direction.
“Typically, what happens is you get one or two softball questions, but if you give a rich enough answer, I think it opens up the door for people to really dig into the things that are on their mind,” he says.
The back and forth conversation will give both you and the employees something to think about after the meeting. Employees get their questions answered and Seavers gets two or three ideas he can take back to his senior team.
“I find those meetings to be incredibly beneficial,” he says. “One, I’d say at a simple level you get a chance to sort of talk about the strategy, the message for the organization. But, I think sometimes at a deep level with the employees, they get a chance to tell you what’s on their mind, what they’ve heard, any concerns that they have, ideas that they have.
“I think what it also fosters is you can say you have an open door, but when you do those kinds of meetings, when you do the round tables, it really demonstrates that you mean it. I think you get great ideas when you do that.”
Those ideas couldn’t have come up without you speaking with customers and employees.
“While there are always things that can take you away from spending time with employees, don’t let it,” he says. “Make sure you get out there with employees; make sure you get out there with customers. So, if you are going to see employees, make sure you schedule a customer visit. If you are going to see customers, try and make sure you schedule a little bit of time with employees, because I think it’s easy to get separated from that.”
How to reach: GE Security Inc., (888) 437-3287 or www.gesecurity.com
Amid the rain clouds of today’s market, there may be a silver lining. With commercial real estate tanking, savvy CEOs can take advantage of the perfect storm and finally cash in on the soaked economy.
Second quarter national commercial real estate prices dropped 18.1 percent compared to the previous quarter, according to a study by the Massachusetts Institute of Technology Center for Real Estate. The plunge sunk the price index 39.2 percent below its peak in 2007. These falls add up to tremendous opportunity for space users.
“The opportunities are alive with tenants and cash buyers,” says David J. Prevé, founding principal, CresaPartners LLC.
Slashing real estate overhead often a company’s second-largest cost can provide a noticeable return on your bottom line. Whether you’re already pounding the pavement looking for a new pad or you haven’t yet evaluated your space, it’s worth exploring your prospects as the market continues to decline.Decide to buy or lease
Before you go running into the marketplace, take time to analyze your current needs and future projections. There are deals for buyers and tenants, and a seasoned real estate expert can help you weigh your options.
If your company is changing either growing or downsizing a lease offers valuable flexibility.
“If you’re a company that’s anticipating growth, leasing is the way to go,” says Albert Bolter, real estate market analyst, Colliers Abood Wood-Fay.
Conversely, if you are well established now may be the time to buy provided you have a large amount of capital.
“This market is an opportunity for those companies, people or organizations that have cash,” Bolter says. “They’re king because they can come in and get these properties and assets at reduced prices or markdowns.”
Even if you aren’t sitting on a mattress stuffed with cash, you may still find a deal. Subleases are flooding the market, and they offer a unique opportunity for the right kind of operation. Subleasing may benefit a younger company or one with less-than-stellar credit. However, the perks aren’t without risks. Keep in mind that subleasing could mean taking on someone else’s problems, such as a shaky landlord or hidden costs.
If you find yourself with extra space that you’re thinking of subleasing for additional income, keep in mind that you will likely suffer the wrath of the market and may have to accept rates that are lower than your own rent. Still, in a pinch, many CEOs may decide that some rental income is better than none.
Every market is unique, and cost can vary significantly between downtown and suburban locations. You may find an urban steal, but be mindful of other aspects, such as parking and access to transportation.Renegotiate to save
If you are comfortable in your currently leased space, you may have one of the best advantages in today’s environment. Fearing empty buildings, many landlords are willing to renegotiate a lower rate in exchange for additional years on your term. The process, known as “blend and extend,” is best for renters with about two years left in their lease, but some owners will talk with more time remaining especially if the property has a mortgage coming due in the next few years. Having solid tenants in place makes the owner more attractive to lenders, and that can give you an upper hand in negotiations.
“If you say you will stay another five years and lock in and negotiate a more attractive rental rate, the landlord will most likely especially if there is pressure from the bank say they want the longer-term deal,” Bolter says. “That will bring stability to the property, and the tenant can use that to their advantage.”
Even with the scales tipped to the tenant, it’s unlikely the proprietor will reduce rates without you first doing some legwork. It’s wise to have your financial statements ready and be willing to talk about your long-term plan on the property.
Before you approach the owner, think about things from his or her perspective and be prepared to appeal to the owner’s needs, rather than pleading your own case for cheaper rent.
Your current occupancy gives you leverage for a contract that benefits both you and the titleholder. Still, should a landlord shoot down your proposal, you likely have options down the street.Consider more than cost
With the uncertainty of how long low rates will hang around, you may be tempted to commit to the offer with the lowest price tag. However, there are factors that can inflate your actual cost. Utility, maintenance and improvement fees can hide within a hastily signed document.
A careful review with a real estate professional can weed out deals that are too good to be true and help you bargain for favorable terms. For example, a clause that ties rent increases to tangible market figures can avoid exaggerated rate spikes. You can also work to include exit or expansion options.
Many property owners are struggling financially, so it is imperative that you research the stability of the landlord. If the building goes into foreclosure, you may be liable for additional costs or be shuffled around by a new owner.
“Today, it’s very important who your landlord is,” says William Holly, chairman and CEO, Holly Sime Realty. “It used to be location and quality of building, but today, in this down market, it’s very important who the landlord is and their financial strength.”
Open layouts and flexible equipment can squeeze more productivity from fewer square feet, and utilizing new technology and energy-efficient fixtures can trim your overall expenses. Some companies are implementing strategies, such as hoteling, that don’t strap employees to a certain workspace.
“The most efficient space typically is open plans,” Holly says. “If you have three or four offices next to each other … you might consider opening that into workstations rather than offices.”
And don’t downplay the importance of location. Though you may be able to get deep discounts in a less desirable area, you need a place that employees and customers enjoy. Favorable factors, such as ample natural lighting, can increase productivity and add to your bottom line.
Also, consider the benefits of moving across city lines, as business-hungry municipalities may offer tax incentives. But before you pack up, calculate the total charge of such a venture. A low rate may be enticing, but the cost to resettle may outweigh the discount.
Overall, there are savings in real estate, as long as you take the time to evaluate your company’s long-term needs.
This economy probably has your company facing heightened risks risks that you might not be prepared for and that could ultimately cripple your business.
The global economy is the No. 1 risk businesses say they face today, according to the Aon 2009 Global Risk Management Survey. But the survey points out that less than 66 percent of respondents have formally reviewed their major risks or have plans in place to deal with them, including the economic downturn.
Now is a crucial time to have a detailed risk management program in place. After all, budgets are tight, you’re looking for savings and managing risk can directly influence your bottom line.
“The idea of risk management is to reduce and hopefully eliminate both the frequency and severity of losses,” says Lauren Bryant, senior vice president, M.E. Wilson Co. Inc. “Ultimately losses do affect that bottom line.”
Hiring an in-house executive to focus on risk may financially be out of the question. But a good insurance broker can help you put the puzzle pieces in place, starting with the questions that will lead to true solutions.Identify potential exposure
Like anything in business, a true commitment to risk management starts with the company’s leadership. Set aside time for your organization’s key players to sit and outline the different risks you might face, such as financial, property and casualty, and legal.
There are a number of assessments you can do such as risk mapping or enterprise risk management depending on the amount of detail and commitment you want your program to include. Regardless of what direction you are going, you should include your insurance broker in the conversation. Odds are his or her experience, benchmarking data and outside eye will lead to valuable questions. A good broker has dedicated risk management and claims services and will go through a checklist that will bring your risks to light.
Once your risks have been identified, your broker can help you develop a strategy to quantify your risks and determine whether you should mitigate or transfer the risk.
“The goal is to analyze what is there, what does that client need, and have dialogue with the client so the client can decide how much risk they can take themselves,” says Alan Read, executive vice president, Stahl & Associates Insurance Inc. “It’s a lot more than just going out there and gathering information and coming in with a quote.”
The process is fairly systematic, but it’s also continuous. A true risk management plan involves constant monitoring. It’s worth the effort to work with your broker to match a timeline of monthly musts with your plan. Especially in volatile times like today, your company could face different risks than it did six months ago.
“By buying the proper insurance products, they’re protecting themselves against lawsuits and protecting themselves against uninsured events,” says Doug Moore, vice president/agency manager of operations and bond manager, BB&T Iler Wall & Shonter. “So it’s really a risk management issue to have the proper policies in place.”Review risks
Your risk analysis is a great guideline for your specific needs, but there are a few areas of coverage the economy has made more relevant. And today’s evolving risks can be enhanced by geography and industry.
“I think to a certain degree some of (today’s) risks are very similar and are currently existing but are more pronounced with the present state of the economy,” Bryant says.
Business interruption and trade credit insurance are two areas to review. If a client can’t pay or your operations are halted, how will those scenarios affect your balance sheet if you’re already strapped for cash?
Insurance executives are warning that desperate times produce desperate people. If you’ve decreased your work force or plan to, keep in mind workers’ compensation and employee discrimination claims tend to rise in a down economy, as do employee crime and cyber theft. Now might be a good time to evaluate directors and officers coverage, employment practices liability insurance, crime insurance, cyber insurance and workers’ compensation coverage.
“With staff cuts and employee layoffs, (companies are) facing employment practice liability suits for wrongful termination,” Moore says. “On workers’ compensation insurance, they’re facing workers that are claiming injury so they won’t get laid off that kind of stuff to try to get some benefits out of it.”Find cost-saving solutions
Insurance is one line item that hasn’t been immune to budget cuts. But before you start scaling back coverage, keep this in mind: We’re still in a soft commercial insurance market meaning insurance is a cheap form of risk capital.
A 2009 benchmark survey by the Risk and Insurance Management Society Inc. shows a lower average in premiums contributed to a 9.4 percent drop in the average total cost of risk per $1,000 of revenue.
If you’re worried about the size of your insurance allotment, call your broker now, review your contracts and review your risks. You don’t have to wait until your renewal in order to find savings or renegotiate your contract. Just remember, before you can responsibly lower costs, you need the details of what you are and aren’t covered under.
“Most companies are analyzing not only the types of coverage that they’re carrying but also the limits that they carry,” Bryant says. “We have done a lot of that over the last year, just analyzing where there might be an opportunity to cut in coverage.
“But a lot of times, they need those coverages both from the standpoint of their exposure and from the standpoint that they might have contracts in place that require they maintain certain limits of coverage.”
Immediate savings can be found by passing risk to others, such as tenants or vendors. You also can play around with increasing deductibles to lower premiums or scaling back nonmandatory insurance. If the latter two are options, first weigh whether you can financially assume the risk or if the cost of managing the risk is cheaper.
One of the only ways to decrease the costs you can control is by reviewing your claims. You should have regular claims review meetings with your broker to see where prevention methods can be put into place.
“There are risk-management tools available from the insurance companies that will provide loss-control services to help maybe change the way some things are done, and the end result is that there’s less claim activity and so there’s less cost,” Read says. “Many times those things can be done at no cost to the employer.”
Some brokers say clients recently have seen cost savings of 20 percent.
Part of the answer is building a long-term relationship with your broker and even carrier. Share with them details of your operations. Invite them to tour your facility. The more your broker understands your business, the better he or she will be able to provide holistic advice. And a lasting relationship with an insurance carrier can mean more flexibility and negotiation.
“It goes back to the importance, as I said in the beginning, having that ongoing dialogue with that risk manager who is going to understand everything that business does,” Read says. “He will help guide the business through those decisions of what to insure and what not to insure.”
Unexpected events can pop up at any time often with a hefty price tag. But having appropriate risk management strategies in place can prevent a bump in the road from becoming a detrimental blow to your bottom line.
With today’s shaky economy, it’s likely your budget is slimmer than ever. You’re not alone. According to the Aon 2009 Global Risk Management Survey, 57 percent of those surveyed reported suffering losses due to the economic slowdown. With less cash in your line items, you may be tempted to skimp on insurance to cut costs. But implementing a prevention program and carrying the right amount of coverage can actually save you money in the long run.
“Being properly insured avoids any large financial surprises,” says Edward Tafur, vice president, NSI Insurance Group. “If you have no insurance and you have a shock loss, it could shut your company down.”
It’s likely your business already has at least basic insurance policies in place. But risk management goes beyond paying workers’ compensation premiums. A few basic pre-emptive measures now could prevent a costly incident from ever occurring and can save you the hassle of dealing with a startling loss.Determine your risk
Before you settle on what policies and strategies to implement, you must first determine which areas pose the greatest threats to your company’s livelihood. A thorough examination of all aspects of your operation, known as enterprise risk management, will uncover vulnerabilities.
With peril lurking around every turn, you may feel overwhelmed. Your insurance broker or carrier can help you analyze how to best prevent disaster. You’re already paying for his or her service through premiums, so including your broker in risk planning is a cost-effective way to bring an expert to your side of the table.
“Most people in our profession have some type of exposure risk survey,” says John J. Liston, area president, Arthur J. Gallagher & Co. “They sit down with a client and take them through a series of questions: Does your firm do X, and does it do Y? How do you do X and Y? That way they get at the operations and the ownership of the company.”
The slumping economy has exaggerated the market for some risks. Strapped with smaller budgets, many CEOs are reducing staff and facing the hazards that come with such measures. Wrongful termination lawsuits can soar during layoffs, and employees who fear they’re next on the chopping block could suddenly fall victim to a fabricated injury.
“As a result of that, there is an increase in employee-related exposure,” Tafur says. “Lots of employees are on the street, and they are now looking for ways to get back at the company or just to make money.”
To protect your business from frivolous claims, consult with your insurance agent and attorney to ensure you are properly covered through employment practices liability and workers’ compensation insurance and that the actions you intend to take are legal. Directors and officers coverage may also be valuable during these times, as executives are forced to make tough decisions that deeply affect the company.
“You pay all this insurance for other people, but directors and officers will give you that sleep insurance,” Liston says. “People may be much more prone to file a suit against you because of economic harm you’ve done as an officer of a company or a decision you’ve made.”
Additionally, you may be interested in credit insurance to keep your business running if your receivables are late. While many carriers have pulled back on providing such coverage, you can still take measures to protect yourself, you can still protect yourself by running credit reports on customers and reducing the amount of debt you take on.
For each risk area, map out worst-case scenarios to determine which exposures you can tolerate and which components will require more in-depth attention. Once you have pinpointed the most dangerous aspects, you can begin examining insurance policies and preventive measures.Save money
If you’re concerned about the cost of managing risk, there may be good news on the horizon. A recent survey by the Risk and Insurance Management Society found that the average total cost of risk which is composed of insurance premiums, retained losses and risk administrative costs fell 9.4 percent per $1,000 of revenue in 2008.
Still, you can’t afford to pay for coverage you don’t need, so it is imperative to create a risk management plan that works for your company. If you’re willing to put in the time to calculate your options, it’s likely you can save money on premiums and avoid loss events altogether.
While some minimum levels of insurance may be mandated by your state, it is up to you to decide how much additional coverage you require. By bulking up your policy in areas that are most prone to loss and by peeling back your insurance on more stable items, you can devise a plan that optimizes coverage and minimizes your out-of-pocket cost.
However, if you choose to reduce your premiums or take on higher deductibles, you must ensure you have accounted for the potential gaps in your budget.
“You can only drop what you can afford to lose,” Tafur says.
A common way to reduce risk exposure is to transfer the obligation to a third party, such as requiring tenants to provide their own insurance. You may also want to consider implementing safety measures in your business plan, such as employee workshops. These actions can improve your risk profile and make you more attractive to a carrier and more apt to get a better rate.
“If you can go to your insurance company and show them that you’re implementing loss control, that you’re doing employee training seminars, you’re doing things to help employee morale and you’re willing to retain some of the risk that is how you’ll be able to negotiate better terms, and that’s how you can save money,” Tafur says.
To ensure you have the proper coverage in the adequate amounts, you should step back and review your strategies at least once a year. It’s recommended that you reanalyze your plan each time a major change occurs, such as a new acquisition or new product.
And don’t hesitate to reach out to your agent or carrier any time you have questions or concerns. Regular discussions help build a meaningful relationship that ensures the broker has your best interests in mind.
“Talk to me like I’m your banker and you need money,” Liston says. “Tell me about your operations. What do you own? What is your scope of operations? It very much becomes a consultative process.”
In the long run, maintaining a stable partnership with your insurance provider makes sense for both sides: You benefit from receiving better service and pricing, and the broker is saved the time and effort of cultivating new clients.
“But it never hurts, even if you have a long-term relationship just to keep him honest to give (your business) to someone else and see what they can do. If he’s your best friend, you will always go back to him, but at least you’ll know he’s doing a good job,” Tafur says.
You’ve probably met with your executive team and members of your staff to devise ways to weather this economic cycle on sound financial footing. But you may have forgotten to invite a key player to the table: your banker.
Whether you’re seeing red or thriving during this volatile time, it’s always helpful to ask for input from an outsider. Now is the time you should be thinking beyond just the products your bank offers and see your banker in the role that he or she aspires to be your trusted adviser.
“Businesses really need more than just a bank account from their financial institutions these days,” says Liana Martino, executive vice president for commercial line of business, SunTrust Bank Tampa Bay. “They’re looking for a financial partner that’s going to help them make money and save money by giving them some business advice after they’ve had an opportunity to discuss the business and how the business operates.”
Many businesses don’t think to communicate with their bank on a regular basis, which means missing out on a valuable, free resource, according to industry experts. Think of your bank for ideas and solutions for efficiency, especially now when you’re probably looking for answers.
To take advantage of your bank’s true role as a consultant, you must start by forming and maintaining a strong relationship around trust and communication.Introduce yourself and your business
The first step in using your banker as an adviser is allowing time for him or her to get to know you and your business. Even if you’ve been partners for decades, invite your banker to your office or place of operation for a meeting.
While it’s important for the bank to learn about your operations, over time, it’s necessary for you to return the favor. A good relationship banker will introduce you to managers and key decision-makers in the bank, but if the introductions aren’t offered, take the initiative and ask for a meeting. The more people you know at the bank, the more likely your company will become a household name, the more likely you’ll know who makes the decisions and how they’re made and the more likely a smooth transition will occur if your contact leaves or is promoted.
Once the initial contacts are made, work to maintain those relationships with open and candid communication. Ask your banker how often he or she wants to hear from you. Is it once a month or once a quarter?
If issues arise in the meantime, don’t be afraid or intimidated to call your banker. One thing all bankers will tell you is that they hate surprises both good and bad. The more they understand your financials, strategic plan and any changes in the company’s overall operations, the better they’ll be able to provide products and solutions to keep you on the right track.
“There’s a saying that bad news never gets better with age,” says Mike Gilbreath, senior vice president and West Florida business banking executive, Regions Bank. “It’s always better to hear things that aren’t going well earlier. When a business has a hiccup or a little bump in the road, we have every desire to help them work through it.”Use your bank for regular counsel
Like your lawyer or accountant, use your banker as a true consultant. Whether you’re trying to stay afloat or even rapidly growing, your bank can help in navigating through this economic downturn and in planning for the future.
Once you’ve established a relationship and your banker understands your business and your industry, ask him or her to review your business plan. It’s one of the best ways to utilize your bank’s resources. And if you don’t have a plan, create one.
“It takes very little time to set this budget, but it can really save a business owner a lot of money every month,” Martino says. “According to our internal research with our clients, surprisingly most business owners don’t have or track a monthly budget. A business owner’s banker or their accountant can often assist in helping them prepare this budget.”
Your banker has a true advantage of having a national, regional and industry-specific perspective on economics.
There are a number of questions about your plan that you should be able to bounce off of your banker. Are the assumptions of your business plan reasonable for the current economic environment? How does it compare with other companies in the same industry? How can the plan be improved? What type of contingency plan should be in place? And finally, what products and solutions can the bank offer to help meet your company’s needs?
“I love all kinds of business operations questions about how they deliver their goods or services, do they have an eye toward efficiency in that, because that has an effect on your bottom line and your margin,” Gilbreath says. “There are any number of questions: product, marketing, distribution. It’s basically Business 101. Anything you would learn in Business 101 is of interest to your bank.”Take advantage of products and services
At least once a year, you should sit down with your banker to review the products you’re using. Perhaps you’re paying fees for a product you rarely use or technology has advanced and greater efficiency can be had.
A relationship review with your bank can help you tackle ways to save money and save time.
“Many businesses think in terms of, ‘I need a bank to give me a checking account or some place to deposit my money and I need a simple loan,’” says Susan L. Blackburn, Tampa Bay market president, Synovus Bank. “Those products are out there, but they need to turn to their banker to say, ‘What else can you do for me? What really is the right way for money to move in and out of my business, and how can you help me create the most efficient way to do that?’”
One of the main priorities right now is maximizing cash flow. Among popular products today are rapid deposit solutions, a desktop scanner that allows you to automatically deposit checks into your account.
While you might be thinking short term, ask your banker about options that will help you now and in the future. Interest rates have dropped perhaps you can capitalize on a new loan or refinance. Discuss with your bank how long you’ll need to borrow on a loan and how much money you’ll need to borrow to structure a plan and lock in fixed interest rates while they’re low.
But once again, banks seek to be an adviser. Some banks offer seminars and informational Web sites as additional resources to finding efficiency. And many banks, if you’ve maintained honest communication with them, will honor your need for them to be flexible.
Bryan Miller is the president of Business Finance U.S.A., which acts as a broker between small businesses and lenders. Miller has been helping Florida businesses find financing for more than 30 years and has helped provide $500 million to 3,300 corporate clients.
Q. What is a money broker, and how is it different from a traditional bank?
At the moment, most traditional banks in Florida are not lending any money. We represent financial sources all over the country that do lend money. The biggest difference at the moment is that we can actually provide a service to a small business that needs money for working capital, for growth, to maintain stability or even to survive. A lot of people out there are looking to lend money, but each has different criteria. I know the criteria at different banks, and I match people with those institutions.
Q. What role does a financial institution play in assisting its customers in a down economy?
In any economy, it should be providing short-term working capital. Years ago, banks started going from short-term monthly loans to 90-day loans to one-year loans, then up to 30- and 40-year mortgages. Banks should be providing short-term working capital for businesses, for growth, for acquiring equipment, to expand production and to provide working capital while they wait for receivables.
Q. What questions should a business ask its bank to make sure its plan is financially strong?
They should ask, ‘How do I work it out so that I have at least six months reserve either in credit line or cash or continuation insurance to provide for working capital for the company if there were a catastrophe?’
The reason for the reserve is to take advantage of steep discounts on merchandise that a business can buy when another company goes out of business or is seeking cash and they let go of inventory for very low prices. A business could save up to 75 percent on the purchase price of inventory if they have the cash to act quickly.