As the national economy works to right itself, many business owners find themselves in the position of struggling to stay in business. With credit harder to come by, surely this isn’t the time to think about growing your business. Or is it?
“I think it’s more challenging, but any growth you achieve is ultimately going to be more sustainable,” says Chris Harless, senior business relationship manager at Wells Fargo Bank, N.A. “The key is to have a solid business plan.”
Smart Business talked to Harless about opportunities for business owners to expand their companies and the resources available to help make them successful.
What are the hurdles to growing business in the current environment?
The biggest challenge of growing the business in any capacity is whether you can handle the growth yourself. If you need to increase your inventory and add employees, how are you going to pay for it? Are your receivables getting stretched up to 60 days? Are your vendors asking for cash up front? If so, how will you pay for it? Will it put a huge demand on your cash? If you can handle that, then it’s a great time to grow, because your competitors may not be able to follow.
Being prepared and knowing your market are essential. If you can hit the price point and provide the service your customers and prospects need, it’s growth that you can sustain. If you get the business now, imagine how good things will be when the economy turns around.
What kinds of resources are available to help businesses grow?
Right now is the best time to work with your banker and financial advisers to make sure you have a good business plan in place, and evaluate the necessary resources to enact that plan. It doesn’t matter how hard you go at it, if your plan is flawed, or underfunded, then it’s not going to work.
Your business has multiple options for its different stages of growth. Some of the options include working capital lines of credit, real estate loans, equipment lines and loans, and U.S. Small Business Administration (SBA) guaranteed lines and loans. The American Recovery and Reinvestment Act (Stimulus Bill) has temporarily eliminated the SBA Guaranty Fee from its flagship 7(a) loan program. The Stimulus Bill also temporarily increases the guaranty percentage to 90 percent for loans up to $1.6 million.
This temporary reduction in the SBA Guaranty Fee is great news because it allows you to now save up to 2.5 percent of the loan amount in the payment of loan fees, take advantage of growth opportunities without depleting your capital, and keep your capital where it belongs in your business.
Overall, what role does the SBA play with small businesses?
Since Congress created the SBA in 1953, business owners have taken advantage of SBA guaranteed loan programs to meet their business financing needs to fund real estate purchases to house business operations, construction, renovation or lease-hold improvements, furniture, fixtures, machinery, inventory and working capital. The benefits of participating in the SBA loan programs typically include lower down payments, longer maturities and more flexible terms.
In addition to financing, the SBA provides small businesses with other quality programs, such as its Small Business Development Centers and SCORE program, that provide training, counseling, and other resources. Additionally, there are other agencies like the local economic development council, community development corporations (CDC) and local colleges that assist business owners in developing business plans and preparing them so that they can address issues they may encounter when attempting to gain financing from their bankers. These agencies and programs can also provide the small business owners with a strong foundation upon which to grow their business.
What else should a potential business owner do before starting a new business?
You have to do your research so that you understand the market completely. You may have a great idea but if it’s just a tiny niche in a big market then you really have to understand if there will be sufficient demand for your product or service.
You have to be adequately capitalized. Too many times we see people with a good idea and they start working without proper funding in place, and when they realize they need more money, it’s too late. It’s difficult to get financing once you’ve started because you are not in a position to pay that money back. A solid plan will ensure that your business is structured properly and you have sufficient working capital in place.
Does the size of the business influence whether the business will be able to grow?
Growth is not based on size; it’s based on management. Some of the companies that you see failing right now had a faulty plan. It may have been a good plan at one time but as the current recession began, management didn’t change their plan or pay attention to the market. So if the business plan is faulty the business won’t grow, regardless of the size.
Part of effective management is surrounding yourself with a strong team. A proactive adviser will identify products and services to help you grow your business. This will allow you additional time to seek future growth opportunities.
Chris Harless is a senior business relationship manager at Wells Fargo Bank, N.A. Reach him at firstname.lastname@example.org or (281) 290-6086.
Right now, there are great opportunities to be had in the office real estate market if you know what you’re doing and where to look.
But just because it’s a strong buyer’s market doesn’t mean that you can land a good deal with little to no work. As J.W. “Jay” Wall III, a senior vice president with Moody Rambin Interests, says, you’ve got to plan the work and work the plan to get a great office lease.
“Even with the current tenant-friendly environment, there will be winners and losers, and winning is much more fun and profitable,” says Wall.
To get the best results, Wall recommends that businesses perform an existing cost analysis, develop a transaction schedule and formalize a negotiating strategy.
Smart Business spoke with Wall about the factors a business needs to consider in office real estate transactions.
What are the first steps a business should take to land a quality office lease?
First and foremost, look at the existing cost analysis. Review the current lease for problems and opportunities, measure the efficiency of the current space and assess the applicable market conditions. This exercise essentially creates the road map for the project.
Another important thing to look at is transaction schedule. If there is one fatal flaw in office space transactions, it is not allowing adequate time to complete the process. Obviously, a build-to-suit office building will require more time than an as-is lease renewal, but even simple transactions will be considerably more successful if adequate time for negotiation, counteroffers, planning, pricing, permitting and construction is factored into the equation. The potential savings can be 25 percent to 40 percent or more.
Finally, conduct a thorough market analysis. Companies making decisions without market research run the risk of overpaying for their real estate. Unless you can demonstrate realistic relocation options and available terms, a landlord will never put his or her best deal on the table. The creation of ‘fear of loss’ is critical in any potential renewal scenario. If you are an educated consumer, you will be able to make better decisions. Not only that, prospective landlords will be better able to fully address your needs and your decision-making will be based on a rich framework of relevant information.
Why is developing a strong negotiating strategy so important?
Essentially, this is a game. And from your perspective, the landlord can be a daunting competitor. The landlord has a team of people with a fundamental goal of maximizing the return on the landlord’s assets. Therefore, you need to make sure your goals for quality and cost containment are achieved. An experienced tenant representative will help counterbalance the landlord’s professionals and will ensure that your goals are met.
A key factor in getting the best results is controlling and channeling the flow of information. Mishandling information often scuttles a potentially beneficial negotiation, costing you additional rent. Fundamentally, only those making decisions need to know the details, and they need to be careful. Loose lips don’t just sink ships; they also sink real estate transactions.
Also, the typical landlord lease is written to protect the building owner from any possible problems related to a proposed tenant and is obviously very one-sided. Thus, it is the responsibility of you, your broker and your attorney to make sure that the agreement tracks the terms sheet and has language amended to reflect a more fair perspective for you. This can be a tedious and somewhat expensive process, but it is absolutely necessary to get the best possible result.
How can you make sure an office space will meet all of your critical needs?
First, visit prospective spaces, tour the common areas, check out the view, see the amenities, meet the management and drive into the garage. Imagine how it would feel to be a tenant in the building.
Second, get an interior architect on board. The architect can help assess your requirements, fit you into different spaces and aid in the development of preliminary cost estimates, which provide valuable assistance in the negotiation process. Good space planning is more than having an interior decorator make the space look spiffy. An effective space plan will have a positive impact on operating and capital requirements, employee morale, productivity and public perception.
Once you have it narrowed down to a few different spaces, a financial analysis can be prepared comparing them on an apples-to-apples basis. This analysis will normalize financial factors that complicate the real estate decision-making process, such as varying lease terms, different amounts of free rent, add-on factors (the difference between usable and rentable areas), different operating expense stops or base years and different amounts of capital required for build-out and moving.
What’s the final step?
Before the final financial analysis has been run, there may be as many as three or more sets of offers/counteroffers exchanged. At this point, a terms sheet is prepared that will minimize the chances of any misunderstanding of what the salient points of the transaction are. A good broker is also a good ‘jailhouse’ lawyer as it relates to assisting your attorney with lease terms. Not to be forgotten is service after the sale, including assistance with value engineering regarding construction costs, the selection of move consultants, etc.
J.W. “JAY” WALL III is a senior vice president with Moody Rambin Interests. Reach him at email@example.com or (713) 773-5578.
George Zimmer has one word to describe his culture at The Men’s Wearhouse Inc.: trust.
“That’s not to say every single person in our organization trusts the organization,” he says. “We have 17,000 overall employees. But the critical mass of our company does believe in the organization, trusts the organization, and in fact, the organization trusts its employees, and we both trust our customers. I think that’s where it starts.”
When Zimmer talks about trust, he doesn’t want to sound new age, because the word has a business application to it. One of the significant expenses in the retail business is called shrinkage, which includes theft by employees. Yet, the difference between shrinkage at Men’s Wearhouse and one other major retailer is 200 basis points a year.
“That’s a lot of money,” says the founder, chairman and CEO of the retailer, which posted $1.97 billion in 2008 sales. “So, trust is a significant leverage in your economic model.”
Because Zimmer was a child of the ’60s, he brought ideas from that generation with him to Men’s Wearhouse, including respecting people regardless of their position in a company.
“There can only be one manager of a store, but nonetheless, the manager has to have a relationship with the other people,” he says. “I think it was that type of thought that created the original foundations.”
Those foundations helped Men’s Wearhouse and its more than 1,200 stores again be named to Fortune magazine’s 2009 “100 Best Companies to Work For” list.
Aside from accolades, the culture helps Zimmer retain employees, but he hopes it will also help the company through this tough economy.
“Customer loyalty is harder to measure,” he says. “As we are in this recession, one way to measure this is that I believe when the recession ends, Men’s Wearhouse will have a higher market share than when the recession began. That will be because of our corporate culture, which will be the glue that holds the customer and the employee and the organization, the shareholder, holds it all together.”
Encourage feedback and ideas
One of the best ideas Zimmer ever received for the company came from an employee. About 10 years ago, Zimmer attended a training class for company employees, and an employee wanted to run an idea by him. The employee made a presentation to Zimmer during a meal about tuxedo rental and how it could benefit the company. The idea made sense to Zimmer and is now a valuable part of Men’s Wearhouse. But the lesson there isn’t in the value that the idea brought. It was the fact that if Zimmer wasn’t willing to listen to an employee’s idea, he would have never heard it.
To create that type of openness between manager and employee, the company has three key principles of interpersonal communication it teaches to managers.
One principle is to listen carefully.
“What we mean by that is try not to speak until the other person has said the last syllable of what they are saying,” he says.
It’s a simple concept. Waiting one second after your employee or colleague has said his or her last syllable will create a more communicative and trusting culture.
“You can actually change the tenor, not to mention the rhythm of any conversation by forcing each person to wait one second after the other person finishes before speaking,” he says. “In that one second, the human brain is able to have an enormous number of thoughts so you get a different dialogue because there’s been a larger universe considered.”
The second principle is to elevate the other person’s respect.
“That sometimes is difficult. The idea is to not take respect away from somebody in a dialogue,” he says. “You try to find something that the employee is either good at or has made good progress at. Start with that. And, then, this is where leadership is an art at the appropriate time and the appropriate way, move from that to the area you believe needs improvement.”
The third is to always ask the person who is being supervised for his or her suggestion as to how a problem might be solved. This eliminates waiting for a lower-level employee to come to you with an idea or question and instead allows you to open the door of communication.
“We’d say it like, ‘What do you think we ought to do about this?’ because it’s oftentimes a coaching conversation a store manager is having with somebody in his store,” he says.
Yet, even with the three principles, Zimmer still says there can be improvement, especially when it comes to employees who have a question or a concern.
So, along with the three principles, the company also has 10 employee representatives inside the company who have a certain number of stores for which they are responsible.
“When there is a problem that somebody has in one of our stores, it’s suggested if it can’t be resolved in store or by the regional manager, that they call the employee representative, who, although they are paid by the company, is told to represent the employee and think like the employee,” he says. “That doesn’t mean that we agree with the employee, but you’re allowed when you are an employee representative to understand the employee’s position differently than their regional manager might.”
While having a position dedicated to dealing with employee problems can be efficient, direct communication with you can also solve many problems.
Anybody in the company can e-mail Zimmer with a question or concern.
However, one hurdle Zimmer runs into with e-mail is some employees aren’t college graduates, and they don’t think they write well. That significantly reduces the feedback he hears directly from employees.
“I tell people I like primary information, as opposed to information sifted by various levels of management, but I only get five a day on average,” he says.
To try to increase that number, Zimmer reminds employees every time he speaks to them that he wants their feedback, and he wants e-mails.
You need to constantly communicate that message to improve the chances that employees will buy in to it and communicate with you. Then, once you get an e-mail regarding feedback or a question, you need to address it as soon as possible.
“I consider anything to do with employees or the stores to be my priority,” he says. “That’s one of the other things, I guess, when it comes back to trust and authenticity. That is my priority. I don’t say that, I don’t pay lip service to that. That is how I run this business and how I live my life. So, I think the people that work in our stores, know that.
“And there’s some sense of comfort they get there, I believe. Normally it’s the people that are in the ivory tower that are sort of getting the time of the CEO. It’s kind of in reverse here.”
Even if you don’t know the answer, reply to the employee that you received it and have someone working on getting the answer.
“If I don’t know the answer, I say, ‘Thanks for the question. I’ve sent it to so-and-so who will contact you.’ If I do know the answer, I give them the answer,” he says.
The fact that you are responding will go a long way in creating a culture of trust and responsibility.
“The lower you are in the company, the more shocked you are and the more impressed you are with George,” he says.
It’s hard enough for an employee to come forward to you with an idea or with a question, so the chances of them stepping up and admitting a mistake is even less likely to occur. That’s why you have to create a culture where employees aren’t afraid to own up to a mistake.
“One of the things that I’ve never actually understood and what I’ve heard a thousand times in my career is, ‘You should hold people accountable.’ I actually don’t know what that means,” he says. “It sounds to me like holding somebody accountable means when they make a mistake of a certain size, you terminate them. That’s not how I run the company.”
One way to make it easier for employees to come forward with a mistake is to put it in your mission statement.
“In our mission statement, it says we want to be a company where you can admit to your mistakes,” he says. “You wouldn’t be able to admit to your mistakes unless the company was prepared to not adversely impact your career because you admitted to it.
“I don’t have a lot of experience as an adult in other companies, but I would imagine that in many companies a mistake is made and somebody is afraid to admit it, so they try to cover it up. When it’s finally uncovered months later, it’s not traceable back to them, even if it cost the company a few bucks.
“At our company, we say, ‘Hey, don’t worry if you made a mistake. Nobody is going to adversely impact your career when you come forward right away, because it will make it easier to correct the mistake.’”
Much like someone coming to you with an idea, you need to constantly remind employees they can come to you with a mistake.
“I think that what people might be concerned about is having a supervisor somewhere along the line that just doesn’t like them because of their having taken the initiative to say something,” he says. “Knowing this, I speak about it every time I speak to our employees, and I remind everybody that I can protect their anonymity if that is what they want. I’d rather not. Part of the culture is that you have to learn to have somebody say something that’s not the nicest thing you’ve ever heard about yourself and be able to overcome your natural tendency to not like that person.”
Zimmer will fire an employee for stealing or not being able to meet job requirements, but he is more lenient if the person made a mistake trying to improve the company.
“We wouldn’t let somebody go under any conditions if they had the right intentions and made a mistake, regardless of the size of the mistakes,” he says
If you do have to confront somebody who made a mistake, avoid using anger when speaking with him or her.
“Sometimes the mistakes are on one-off things, in which case, it’s not that important that they fully understand the mistake,” he says. “But, if it’s something that is part of their routine, then of course it has to be corrected. What I’ve found is when you lean on people and are hard to people, particularly when they’ve made mistakes, you might get a temporary short-term burst out of fear, but it shortly erodes and you are left with less than you had.”
How to reach: Men’s Wearhouse, (800) 851-6744 or www.menswearhouse.com
Jamison Day is a professor at the University of Houston, C.T. Bauer College of Business, with special research interests in supply chain management, enterprise resource planning, and advanced planning and scheduling optimization. While teaching at Indiana University, he won the Panschar Award for Outstanding Associate Instructor of the Year. Prior to teaching in Houston, Day worked as an independent consultant for Microsoft Corp. and was chief technology officer for a southern Indiana technology and business incubator.
Q. What can a company add or eliminate from its transportation logistics strategy to save money?
If transportation logistics isn’t part of your core competency, outsource to a third-party logistics provider. If you have efficient transportation logistics, you need less finished goods to buffer error or inaccurate consumption estimates. This means less warehouse space is needed and possibly fewer employees. This would mean that the stock you do have is sold or about to be sold, allowing you to increase your realization of revenue, since this isn’t calculated until after the goods are distributed.
Q. How can transportation logistics improve a company’s bottom line?
Efficiency can reduce the need and cost of labor. Efficiency also means better customer service, reduced lead times and reduced cost to produce [goods]. This is a sustainable improvement and affects revenue. With this accomplished, customers will be more loyal and willing to pay you more for a job well done.
Q. Is there a particular error that businesses tend to make in the shipping process?
Yes. Relying on human brains typically settles into using inefficient routes and policies. Technology that uses ant colony logistics or makes your transportation method run like an ant colony, means you will drive less [and] eliminate people’s likeliness of doing stupid things that costs time and money. Software can reduce overtime costs and reduce driving time. Accepting technology isn’t always easy, but it is the best route. The technology doesn’t replace the humans, it augments them. Technology will free up workers to perform jobs that didn’t exist before. Looking at lean principles and designing logistics to ease all partners in the supply chain is the way to go. When using a third-party logistics firm or consulting an ‘expert’ on software, make sure they aren’t simply selling their own systems.
When President Obama signed the $787 billion stimulus package last month, it was done with the intention of providing banks with money to lend consumers in an effort to jump start an ailing economy.
“I believe that Houston is somewhat insulated from the national economy,” says Paul Gianelli, a vice president at Wells Fargo Bank. “I’ve seen energy consulting firms still spending money on exploration, still investing money in capital and equipment; so we are still seeing a steady stream of business in that field, although it has dropped off since the decrease in oil prices.”
Smart Business asked Gianelli about the state of commercial real estate in Houston and if banks are still lending money.
How has the economy affected commercial investor real estate in the Houston market?
With the softening of the economy, which is really the result of a contraction in the overall spending as well as a reduction in wealth due to an adjustment in real estate values, you have increased unemployment and a lack of market confidence. I’ve seen a reduction in start-up businesses and also a reduction or an adverse effect on existing business expansion. That translates into an overall decrease in the need for commercial space. I have clients who have sidelined their expansion projects and others who have pushed forward their anticipated plans to purchase real estate in lieu of leasing.
In my opinion now is a great time to purchase if your business model allows you to, just because of the depressed real estate prices. There are some good deals out there and some good prices. I think the cost of funds at this point is at historical lows, so financing is relatively cheap. So it’s a great time to buy if your business is cash-flowing and you have some good anticipated cash flow going forward.
Are banks making loans available?
Yes. Just today I learned that the Small Business Administration, due to the stimulus package under the Obama administration, plans to guarantee loans of up to $1.6 million with a potential 90 percent guaranty. It gives banks the ability to aggressively pursue those loans.
In 2008, the overall growth rate for loans within the Houston region has increased year over year for both business lending and SBA lending. So I know the dollars are available and if the business model makes sense and the repayment is there, we have the dollars to lend.
Is it better for a business owner in this economy to own or rent the facility?
There are many factors when comparing owning versus leasing and I’ve narrowed them down to four. The primary factors I look at are the cash outlay/opportunity costs, the growth factor in the business, relative market valuations and the desire for property management.
Cash outlay/opportunity costs. When you’re purchasing the property there’s a certain amount of equity that needs to go into the project. Usually it can range from 15 percent to 50 percent, depending on what kind of project it is. The business really needs to take a look at its finances and see if that is a down payment they are willing and able to make, and then weigh the opportunity costs of that against leasing. Leasing is a much cheaper form of location ownership, when compared to purchasing. And associated with that, you need to take a look at the cost of funds used to acquire the real estate. Is the interest rate associated with the purchase inexpensive enough for you to go ahead and purchase the property?
Growth factor. In most instances, if your business is new and experiencing significant increases in growth, a more viable option might be leasing, just so you can acquire additional space relatively fast. For a mature, stable business, purchasing may be a better way to achieve your financial goals.
Relative market valuation. If the primary goal in achieving long-term increase in value is through price appreciation, then purchasing is the way to go. The customer may want to look at purchasing real estate as another form of retirement savings. Also, compare real estate values to the local market as well as to historical values. There is the potential for appreciation there as well.
Property management. Business owners need to take into consideration whether they want to manage this property or not. When you purchase property there’s going to be a certain amount of time that you will have to spend managing the property, such as managing capital expenditures, and that could take away from the time that you have to manage the actual business. Or there could be a cost associated with hiring a property management firm, which would need to be figured into the company’s cash flow performance to make sure it makes sense from a cash outlay perspective.
PAUL GIANELLI is a vice president at Wells Fargo Bank. Reach him at (281) 362-6656 or firstname.lastname@example.org.
The million-dollar question about making an investment in diversity is: Will it pay back?
While experts say diversity in the work force is a business imperative, defining diversity by employees’ physical attributes won’t foster a functional or profitable environment.
In fact, the definition of diversity is always evolving. Twenty years ago, the word spurred thoughts of gender issues since men held a high majority in the work force, while today the gender gap is narrowed and is less of a concern. Diversity’s definition has expanded, and diversity of thought, education, socioeconomics, religion and life goals are only a few of the seemingly endless list of terms people use when defining the term for themselves. These differences in your employees can make or break your business. If you foster an inclusive environment, where all employees can contribute thoughts and plans to improve your product or service in confidence, you will improve your bottom line.
A February 2009 Groundbreakers report by Ernst & Young defines diversity as an equation for success and notes that research has proven diverse groups outperform homogenous groups even in cases where the nondiverse groups have heightened abilities. Scott Page, a professor of complex systems at the University of Michigan at Ann Arbor, created the diversity prediction theorem, which says the collective ability of any crowd is equal to the average ability of its members plus the diversity of the group, claiming diversity is a sure way to attain a strategic advantage.
“Having a list of essential job functions, periodic job functions, and the knowledge, skills, abilities and education required to perform the job should be posted in a variety of areas to make applying to a position appealing,” says Abel Garza, executive director, Office of Affirmative Action/EEO, University of Houston. “If relevant media exists that target minority and or female audiences, then businesses should consider advertising in those also. Other excellent sources are minority fairs, college university career services departments and professional references.”
Still, the return on investment is the hard evidence you want to justify devotion of time and money. Some say it’s difficult to quantify diversity ROI, but metrics are attainable. If you start with a plan that establishes your company goals and maps out a strategy, you can document the benefits and obstacles of a diverse team’s functionality that will best benefit your business.
Why it’s important
Since the country’s demographics are continually changing, a failure to branch out and move past your comfort zone when hiring and communicating with employees will ultimately result in financial punishment for the business.
“Consumers want someone they can communicate with,” says Rob Steward, vice president of sales, LatPro Inc. “LatPro.com is a niche job board for Hispanic and bilingual professionals — we post positions and network so employers and those seeking employment can connect. These types of sites are increasing because the population is changing in the U.S.”
U.S. Census Bureau reports show Hispanics are the fastest-growing population, with an increase of 121 percent since 1999. The Asian population nearly doubled since 1990 and the African-American population is predicted to increase to 65.7 million strong by 2050, an increase of 15 percent since 2008.
“People initiatives build the team,” says Aisha K. Washington, market diversity leader, PricewaterhouseCoopers LLP. “If you live and breathe diversity and you make it part of your culture, you will be successful. You need to find a mix of affinity groups and networking for recruiting that best fits your needs. These insights will enhance your brand and improve creative innovation.”
Affinity networks — employer-recognized employee groups who share a common race, gender, national origin or sexual orientation — are a great way to attract and retain diverse employees. Networking by affinity groups reduces turnover and gives companies insights to consumers they otherwise may have never understood.
General Motors Corp.’s People with Disabilities Affinity Group has been a consistent resource for providing input and support relative to accessibility of products and services. The group played a role in helping OnStar develop the addition of TTY capability, the text telephone for the hearing impaired, for OnStar-equipped vehicles. Another example of diversity was witnessed in PepsiCo Inc.’s Hispanic professional organization called Adelante. Its Hispanic employee network provided insights that resulted in the development of the guacamole chip. In the first year of distribution, PepsiCo’s Frito-Lay division sold $100 million in Lay’s guacamole chips.
“If you have a Spanish-speaking customer base or want to reach a specific demographic, it would be smart to have staff that can effectively communicate with them,” Steward says. “With Web sites being used so frequently for daily business functions, companies can do business anywhere they want. Having a diverse team will provide insights to reaching people around the globe. Age diversity is equally important. In an interview, you’re not allowed to ask a person’s age, but they’re gender and race are very apparent. Try not to allow age to have a negative impact on your decision because your customers are old and young.”
What you need to know
Diversity isn’t about being politically correct; it’s about keeping your business competitive.
“If you have a nondiverse group of workers, it limits your organization’s thinking on issues,” Washington says. “Diversity is a business imperative, not a back-office or front-office thing, Washington says. “You raise your cultural IQ with cultural dexterity.”
Keep in mind the customers who you want to attract and then investigate opportunities in markets in which you want to expand or improve business. If you’re interest is in attracting a broader customer base, employees should mirror the communities in which you want to expand. Forge relationships with diverse community organizations and let them know about opportunities in your organization. Sponsoring events that interest diverse groups makes your company more attractive to diverse candidates. For example, host events in coordination with Cinco de Mayo, Chinese New Year or Disability Awareness Month, and make your business’s diversity interests and job openings known.
If you’ve established affinity groups within your company, they can also help with recruiting. They may be able to give you suggestions that will help your business attract more diverse candidates and offer ideas of where to post positions.
Starting an affinity group is easy.
“Once you have a diverse team, you’ll want to utilize their skills,” Steward says. “Having affinity groups is the best way to encourage brainstorming among employees. You can provide employees with a specific project that you need help in reaching the customer. In an affinity group, employees may feel more relaxed to speak their ideas, too. Then as a group, they can present the consensus on how to approach the issue, which makes employees feel they’ve helped their community and employer, while the company can potentially profit.”
Hiring managers also need to keep in mind how to motivate and manage their staff as part of a recruiting plan. Experts encourage incentives for staff contributions to a diverse work force, considering employees’ job satisfaction can be your best advertising.
“Don’t stop recruiting even if there’s a hiring freeze,” Steward says. “Gather a group of diverse candidates you’d like to employ — and be honest with them, noting your interest in connecting in the future. This is a great way to get the word out about your assets.” <<
If you’re looking at your budget and considering cutting back on support for customer service, you might want to reconsider. About 96 percent of unhappy customers don’t take the initiative to tell you they’re unhappy with your service, but they will tell nine other people and not return.
Customer service should be as important to you as it is to your customer, and customer service is second in importance only to product quality when it comes to satisfying customers.
The difference in today’s market is that brand loyalty isn’t what it used to be. Businesses are making a new promise every day without credible reasons for the consumer to believe the promise. Customers make purchases because they believe you’re selling something they need, but they also know they have many options. A single bad experience with you can result in your customers making purchases from the guy down the street next week. The products may be similar, but the quality of your customer service can be why they prefer to make purchases with you.
“Technology is an enabler for good customer service to be performed,” says Steve DeBauge, director, customer and marketing support programs of Texas Instruments. “In today’s Web-based market, offering online self-help alternatives is a must. It benefits the customer when it is their preferred channel for support and ultimately lowers support costs.”
If customers have a good experience with your business, they’re more likely to return and spend money again. Positive word-of-mouth is one of the cheapest and most effective means of growing your business. It’s also much less expensive to retain a customer you already have than to attract new ones.
Customer service in today’s market entails doing business where and when your customers want to. The trick is to cut costs while being flexible with your ways of improving customer service quality across all avenues, including online and by phone.
There’s an easy formula for this, yet it’s not utilized. It starts with paying better wages. Then you have to invest in your employees’ ability to perform through education and train them to respond to customer needs.
Why a customer service program
Your customer service representatives have unlimited access to your customers, products and equipment, yet they’re largely considered dispensable and are treated as such. This is the wrong approach. You can’t personally know who your regular customers are or what their preferences entail, but your employees do, so it’s important to retain them. Investing in customer training and rewarding them with a pay increase upon completion of the course or offering another benefit, such as time off, makes for a more enthusiastic employee.
“Training and incentives equals a happy employee and makes for a happy customer,” says Jason Few, senior vice president of smart energy and residential for Reliant Energy. “Rewarding your employees monthly in some way for good customer service will be incentive to perform at their best with all customers.”
Although many customer service positions are considered entry level, giving the employee the option to advance within the company will be an incentive for the employee to stay and can help you reduce employee turnover, which on average costs businesses 20 percent of the employee’s annual salary to replace.
You may see investing in customer service training as a luxury in today’s economy, but experts warn that not doing so could lead to your company’s demise.
What you can do
The biggest error you can make is getting too caught up in cutting costs and other internal workings to see your business from the customer’s point of view. Customer service is what keeps the lifeblood of your business — the customers — coming back. Even when inevitable mistakes are made, customers return if the error is handled properly.
“Customer service should really be the bread and butter of any business,” says Jennifer Howell, branch sales manager of Todays Office Professionals, a division of Spherion, a recruiting and staffing service.
“Training for great customer service differentiates you from other companies, and when done right, [it] makes the customer feel really good about doing business with you.”
Another mistake is investing money in loyalty programs focusing on drawing in new customers, while losing focus on appeasing your current customers. If you don’t ask customers about their experience with your business, they’ll likely not tell you — but they will go home and tell others. If you stay flexible and listen to what they say by acting on their feedback, you can best design a customer service program that works for you.
“All employees should want to solve customers’ problems,” Howell says. “There will be cases where the front-line employee can’t be the final stop, but they need to follow the request to the finish to ensure the issue was resolved.”
What many companies don’t understand is that good customer service is rare. If you already have brand recognition, you can further your competitive advantage by listening to customers’ concerns and acting on them. You need to define what good customer service means to your specific set of customers before you can best meet their expectations. This can be achieved by polling them in a variety of ways, including comment cards, e-mail or an online form.
“The range of methods of supporting customers has exploded over the years,” DeBauge says. “Many companies have implemented automated phone systems, voice recognition, online chat, call back and the list goes on. Some companies have coupled this with other tactics that leave the customer with an experience that doesn’t meet their expectations.”
Even with well-trained employees and a list of customer recommendations, you still need your managers to be an integral part of your program. They should point out positive behavior and not just the negatives. Successes should be noted to encourage employees to do more than the bare minimum, and negative incidents should be handled immediately instead of waiting for an evaluation.
“Employees may repeat a behavior they’re not aware is undesirable,” says Liz Tahir, an international marketing consultant and speaker. “Having the proper communication with employees is essential. If you treat them well on a regular basis, they won’t react negatively when a manager points out an area that needs improvement.
“Employees treat customers the way you treat them. Ask yourself if you greet employees enthusiastically, interact politely and try to accommodate them in their requests.”
Making sure employees have the correct set of tools to perform their jobs is another important step in ensuring good customer service. Proper training and empowering employees to handle customer’s concerns or problems will build employee confidence while expediting the customer’s requests.
“Always putting yourself in the customer’s shoes when determining how to best resolve issues or respond to a request is the best way to resolve issues,” Tahir says. “All of the great companies have incorporated customer service in their core business philosophy, helping to brand their business as one known for great customer service.”
The Obama presidency is still in its infancy, but businesses are bracing for possible changes that could affect dayto-day operations and yearly records. Some anticipated changes include payroll tax increases; the reduction of the maximum tax bracket for corporations and the raising of the maximum tax bracket for individuals; the elimination of some deductions; and the reinstatement of prior tax laws that were not extended. As of this writing, little has been decided or formalized; however, business owners should contact their tax advisers now and proactively monitor potential changes that may affect them.
“A new president is often successful in converting his agenda to law, so many of the proposed tax changes are likely to come to fruition,” says J. Steven Awalt, a shareholder with Briggs & Veselka Co.
Smart Business spoke with Awalt about the potential tax law changes and their effects.
What tax changes are being deliberated?
In an effort to stimulate the economy, President Obama has proposed the following tax cuts for individual taxpayers with hopes they will be enacted early in his administration:
- Tax relief for middle-income taxpayers
- Expanding the refundable earned
- Removing the repayment requirement
on the $7,500 first-time homebuyer credit
- Exempting seniors with less than
$50,000 of income from income tax
- Providing employees with a modest payroll tax credit (rather than a rebate) that would appear in their paychecks ($500 per individual; $1,000 per family)
Will there be tax increases?
Proposed tax increases for upper income taxpayers will most likely not be enacted in 2009, due to the economic conditions, and may be deferred until 2010 or 2011. This will likely restore the former 36 percent and 39.6 percent tax brackets for taxpayers with adjusted gross incomes of more than $200,000 for single taxpayers and $250,000 for married taxpayers.
Upper income filers may be required to pay increased payroll taxes. Limitations on itemized deductions and personal exemptions (which will disappear in 2009 under current rules) are likely to be reinstated by Congress. Capital gains and dividends will likely also face an increased 20 percent tax rate (presently 15 percent) for those with mid- or upper-level incomes.
It is likely that the 2009 system for estate tax will be made permanent (a 45 percent flat rate tax on a decedent’s net worth over the $3.5 million exemption amount; it could increase to 50 percent for higher value estates). Legislation has also been introduced to eliminate the ability to use valuation discounts with respect to transfers of family-controlled businesses and partnerships.
What possible tax changes could affect businesses?
- The Obama administration is considering the following tax adjustments for businesses:
- Possible reduction of the 35 percent
maximum corporate tax rate
- Elimination of the 6 percent domestic
- Ending LIFO inventory valuation (i.e.,
the use of FIFO inventory valuation would
be phased in over eight years)
- Eliminating tax breaks for oil drilling
and production activities
- Imposing higher self-employed Social
Security taxes on owners of S corporations
and partnerships (extending the tax to limited partners and S corporation owners rendering services)
- Allowing companies with net operating
losses incurred in 2008 and 2009 (other than
those receiving financial bailout funds) to
apply those losses to their prior five years
for refund of previous taxes, rather than two
years under current law
- Extending for one year the $250,000 Section 179 first year depreciation deduction and 50 percent bonus depreciation that were enacted in the Emergency Economic Stabilization Act of 2008
Many of these items are included in the current economic stimulus proposals recently introduced by Congressional leadership that would provide tax relief of about $275 billion. Congress and the new president are targeting this legislation for enactment as soon as possible.
What benefits could businesses see from these tax changes?
The extension of the $250,000 Section 179 first-year depreciation deduction and 50 percent bonus depreciation will surely benefit companies and, if passed, will last throughout 2009. Companies will benefit because most depreciable assets a business buys could be deducted in the same year acquired. An extension of the 2008 law through 2009 that allows a deduction equal to 50 percent of the cost of new assets purchased is likely to occur.
Additionally, a reduction in the maximum corporate tax rate from 35 percent to a yetto-be-determined rate would be beneficial. And, if companies with net operating losses incurred in 2008 and 2009 are able to apply those losses to their prior five years for refund of previous taxes, rather than two, it could be beneficial to go back to those third, fourth or fifth years when, perhaps, the company was in a higher tax bracket.
STEVE AWALT is a shareholder with Briggs & Veselka Co. Reach him at (713) 667-9147 or email@example.com.
When Edelmiro “Ed” Muñiz had a heart attack in 2004, his employees began to doubt not only the health of their founder, chairman and CEO but the health of the company, as well.
While he was recovering, Muñiz decided he needed to shift the focus of MEI Technologies Inc.’s employees from worries about him to a more positive concern, so he challenged them to double the size of the $30 million company in two years.
Redirecting their attention worked, and in two years, the company’s revenue had tripled. And in 2007, MEI posted revenue of $115 million.
“This problem that I had earlier just kind of went away, and I was very surprised that I was able to survive this from the company standpoint,” Muñiz says.
The next challenge became absorbing the company’s rapid growth. To do that, he relied on his three keys to growth — trustworthiness, listening to your customers and building a relationship with your banker.
Smart Business spoke with Muñiz about how to grow your company.
Assemble a team of trustworthy and honest employees. You’ve got a set of values that you decide you’re going to have as a company, and you start with hiring people with those same values. I’ve always valued integrity, honesty and ethics.
I try to hire people that have those characteristics very, very visible. It’s part of what makes a business grow.
I don’t have a problem with those who don’t know everything when they come here because they will learn what they need to know after they get here most of the time. But you have to be honest.
I read the resume first, and I try to look for inconsistencies. If something doesn’t make sense, I’ll flag that, and that will be the object of questions in the interview. Why do you say this here, and that doesn’t seem to jibe with what you said here?
If it’s a good response, I’ll take it for face value. If I suspect that somebody has kind of stretched it a little bit, I generally just write those people off.
If they’re not honest when they start with us, they can’t become honest later.
When I look at the keys to growth, trustworthiness I think it’s No. 1. If you don’t have trust and you’re not trustworthy as a business — and that means every employee that you have also needs to be trustworthy — then you can’t sustain a business. Your customers don’t trust you, your employees don’t trust you, your competition doesn’t trust you.
This is what allows you to get new customers, but, more important, allows you to keep the ones you’ve already got. You can’t grow without keeping what you’ve already got under your belt.
Listen to your customers’ needs. We’ve got to listen very carefully to the customer. ... We have to listen carefully to what they want and sell them what they want. Not what we think they need.
That’s very important because we have a lot of engineers and scientists, and they like to analyze, and they like to figure out what the customer really needs. If we do that, we’re really selling our arrogance. Listen and give them what they want.
I try to listen. I try to visit them as often as I can but not too often because I can become a nuisance.
We typically have people embedded in the customer’s organization that’s the type of work we do. They listen to their customer every day, whether they’re talking to them specifically or to someone else.
If you expand your ears to include not only your pair of ears but your management and your employees, you can pick up stuff so that you can gauge exactly what that customer wants.
If they don’t have to tell you over and over, ‘No, that’s not what I wanted; this is what I want,’ they will appreciate it, and they will keep asking you to come back.
They certainly don’t want arrogance, i.e., ‘I see the way you work, and I understand what you do, and this is what you need.’
There’s a fine line between arrogance and confidence. You have to be confident with a customer, but you cannot be arrogant. Nine times out of 10, your customer tells you if you listen.
Build a relationship with your banker. The third most important factor in growing your company is having your banker as your best friend. You need to be right in step with them all the way — in good times and in bad times.
Share information with them. Tell them who your customers are. Tell them what they’re doing. Tell them what you’re doing. Tell them who you want your customers to be — your new customers — and why.
Share everything you can with them because when the time comes and you are successful in getting this new business, now you have to pay that upfront money, that seed money.
Secondly, you make a higher profit if you use some of your own money and you use some of someone else’s money. The return on that amount of money is better when you have borrowed some.
It has to be built on trust. You’ve got to communicate with your bank at all times. You’ve got to invite them to your celebrations when you get a new customer. You’ve got to invite them to your Christmas party, to your picnic. They have to know you and your employees.
Then of course, you have to pay what you owe. You have to do what you say.
HOW TO REACH: MEI Technologies Inc., (281) 283-6200 or www.meitechinc.com
A document retention policy provides for the review, retention and destruction of records and documents that a business either receives or creates in its everyday business activities. A good policy should identify what documents need to be retained and for how long as well as when certain documents can or should be destroyed. It is needed not only for future reference purposes but also to comply with regulatory requirements under either state or federal laws.
“In the past, BCA (before computer age) document retention was based on file capacity, but now capacity is no longer the overriding issue,” says Johnny J. Veselka, a shareholder with Briggs & Veselka Co. “Today, the issue is how long do we need to keep documents in case we are involved in litigation or our records are subpoenaed by government regulators or in other court proceedings.”
Smart Business spoke with Veselka about document retention and why it’s so important in today’s business world.
What role does document retention play in today’s business world?
Document retention is necessary to be able to refer to and extract data that has been recorded in the past, in order to conduct business and also to protect the business in cases of potential legal action and to comply with rules and laws on document retention.
What problems or issues can arise from document retention?
A lack of a good document retention policy can result in a lack of efficiency in business operations and a lack of storage space. You may be exposed to harsh results in litigation. Destruction of the wrong information or deleting important e-mails can have disastrous consequences for your business, as well.
What is the answer for business today?
A good document retention policy not only states how long certain types of documents must be kept but also where they are to be kept and who is responsible for maintaining those records. Today, it is typical for 80 percent of business documents to reside on employees’ desktops and laptops. Therefore, all employees, not just records management people, need knowledge and understanding of the company’s rules on document retention. Beyond knowing how long to keep documents, it’s also important to know how to properly destroy documents that have passed their retention date.
A powerful document retention policy will allow a company to respond confidently to a court order by saying either, ‘The document exists and here it is,’ or, ‘The document no longer exists, and here is the date and time it was destroyed in accordance with our published document retention policy.’
Why are document retention policies so vital?
Most, if not all, information is now being stored electronically. So, you must purge data that is no longer useful and/or is past its retention period. This will decrease the need for more storage capacity and reduce the length of time necessary to perform backups of company data.
Recent amendments to the Federal Rules of Civil Procedures have addressed how electronically stored information can be exposed during legal matters. Thus, it’s important that you and your staff know what, where and how data is being stored and destroyed.
How can you make sure your document retention policy is working?
You have to stay on top of your policy and always follow up on it. Make sure everyone is following it from the day you implement it. Don’t loosen up on the policy over time — always ensure it is being followed to the letter. Also, keep track of your backup tapes and off-site hard-copy storage. Tape backups must be included in the retention policy. This holds true for those that store hard-copy documents off-site. These documents should be included in the retention policy, as well. Finally, make sure your staff, from top to bottom, is well versed in your document retention policy. The more educated you and your employees are, the more successful your policy will be.
The rules for how long documents should be kept can vary by type of business. To learn the document retention requirements for your business, contact any of the following: your accountant, an attorney, or your state or national trade association, or search online for time limits.
JOHNNY J. VESELKA is a shareholder of Briggs & Veselka Co. Reach him at (713) 667-9147 or firstname.lastname@example.org.