There’s a lot of opportunity for investors in Cleveland to fund up-and-coming technology companies.
“There’s a growing sense of entrepreneurship and innovation,” says Steve Haynes, managing partner at Glengary LLC. “It has become the norm for colleges, universities, hospitals and other institutions to think about monetizing the technology developed in their facilities. They’re getting research dollars and they’re trying to convert science into something commercial. In addition to institutional technology transfer, incubators, accelerators, etc., are being formed to drive economic development.”
Patrick R. Roche, a partner at Fay Sharpe LLP, adds that there are many companies in the area looking to assist the right companies with capitalization.
“It’s very competitive — there are a lot of deals to be looked at,” he says.
While the market is fertile with both investors and entrepreneurs, Roche and Haynes say there are many things entrepreneurs fail to account for when seeking funding, including the viability and strength of their intellectual property (IP).
Smart Business spoke with Roche and Haynes about what investors look for in entrepreneurs’ IP before a deal can be done.
What does an investor look for in the IP of an entrepreneur seeking funding?
From an investor’s perspective, when an entrepreneur approaches with an idea the investor has to ask, ‘Will this idea have value in the marketplace?’ If yes, then one of the next questions is whether it can be protected, from an IP perspective. Otherwise, releasing it into the public creates a marketplace for anyone who can reproduce it. Then it becomes a marketing game, and early-stage companies don’t have the money to compete with well-capitalized competitors.
From an IP attorney’s perspective, basic due diligence dictates that a business owner or entrepreneur should present to the attorney what he or she thinks is the IP, so it can be analyzed.
It’s important to know when a patent application was filed and whether foreign rights have been preserved. The IP attorney, working on behalf of the investor, will examine in detail what the U.S. Patent and Trademark Office has done with the application and conduct his or her own research to try and predict what the patent office might do with it, called a patentability study. If it’s determined the patent application has little chance of being granted, that will likely kill the deal.
Patent attorneys also are looking at whether the invention can be designed around. Can noninfringing copycat products be created that could hurt the market?
What commonly turns an investor away from a fund applicant?
At an early stage, many of the potential obstacles for investors relate to whether or not there’s IP protection, both legal and otherwise. The strength of that protection is determined by identifying the difference between the applicant’s invention and prior art — the new invention has to be a nonobvious improvement over the state of the art.
Another part of the due diligence analysis is to determine if there’s an obstruction to the right to practice or use the invention freely in the market. It’s dangerous if it’s necessary to get a license from another party to sell a product in order to avoid infringing.
How can entrepreneurs best prepare before pursuing funders?
Entrepreneurs should check their IP ahead of time. Patent applications need to be filed, research should have been conducted, and their novelty and any likely obstructions identified and clearly understood. Investors need to see a thoughtful canvassing of the principal issues that an investor needs cleared. If the efforts of the entrepreneur are consistent with the IP attorney’s findings, and the entrepreneur is honest and truthful with the potential investor, the momentum carries through to a deal.
There’s not much worse than when an entrepreneur says they have a patent and it’s just a provisional application; the person hasn’t done any research and is just hoping everything works out.
It’s understood that every nickel is precious when a company is in the early stages, but it’s important that a company conducts thorough research on its IP before seeking funding. •
Insights Legal Affairs is brought to you by Fay Sharpe LLP
When Albert “Chainsaw Al” Dunlap was the CEO at Sunbeam in the late ’90s, he had a reputation for ruthlessness. Besides massively downsizing the company, he was also known to intimidate everyone around him and resort to yelling and fist pounding.
While extreme, Dunlap’s behavior is an example of the type of “dictator” leadership that used to be fairly common in the C-suite. Rules were rules, there were no exceptions for anything and people were just a line item on a budget. Need to cut thousands of jobs? Don’t think twice about it.
On the other end of the spectrum is the Christ-like leader. This leader focuses more on building people up rather than tearing them down. This type of leader understands that there are rules, but sometimes to do the right thing, the rules need to be broken. For example, during the economic downturn, some Christ-like leaders went well beyond what was called for to make sure laid-off employees were taken care of.
They made sure they had the use of office resources to look for a new job and did everything they could to lessen the hardships. They weren’t required to do this; it was just the right thing to do. They saw employees as human, not just numbers on a spreadsheet.
Does it cost money to take the more humane route with your leadership? Yes and no. From a short-term, bottom-line perspective, it probably does cost a few more dollars to help people through a hardship. But long term, it can pay dividends. By treating people with respect and doing the right thing, it helps eliminate animosity toward you and your company from both the ex-employees and current ones. Maybe there are some good employees who you wanted to keep, but couldn’t afford. By showing compassion, when the economy turned around, they were far more likely to consider coming back than if they had just been shown the door with little regard to their well-being.
And what happens when these ex-employees end up in key positions in companies that could be customers? Do you think an ex-employee who you mistreated is going to buy anything from you or recommend your company to someone? It’s a small world, and what goes around often comes around, so it’s always best to treat people as best you can.
You can lead like a dictator and still get results. But do the ends justify the means? Will you conquer all, only to find yourself alone with no friends, the equivalent of Ebenezer Scrooge in “A Christmas Carol?” Or will you have an epiphany and realize there’s a better way to do things?
During this holiday season, think about your leadership style and the long-term effect it has on people’s lives. If this exercise makes you uncomfortable, then maybe it’s time to change how you lead. ●
Cloud computing for business has become commonplace. The reason? Companies want technological conveniences and marketplace advantages. However, phone services are often left behind because of traditional phone service capabilities.
This is starting to change. Now, instead of being subject to the capabilities of a phone system, businesses are dictating how they want to communicate with their customers.
In the future, Alex Desberg, sales and marketing director at Ohio.net, says he envisions a mass migration away from stationary services tied to brick and mortar to Voice over Internet Protocol (VoIP) capabilities that incorporate the desk phone, the cell phone and Web-based services.
“VoIP can play a huge role by incorporating offices with telecommuters and a mobile workforce,” he says.
Smart Business spoke with Desberg about the evolution of VoIP, who is driving the changes and what he expects in the future.
How is the VoIP world evolving to serve its customers?
It’s amazing how quickly the VoIP industry has evolved in a relatively short time. In contrast, traditional phone services are nearly exact replicas of what they were decades ago. While traditional telecom offers different services and features on various phone systems, the fundamental telephone service hasn’t changed.
In the VoIP world, the primary change we’ve seen has been moving from basic emulation and hosted services to highly expandable VoIP solutions that incorporate many new features. Businesses have developed a high comfort level with VoIP, so there has been a shift to businesses wanting to manage their own VoIP solutions; they just don’t want the responsibility of hosting the phone system. This do-it-yourself approach has gained traction as a tactic to save money by limiting outsourcing. Since VoIP systems are cloud based, a company’s communications infrastructure, which is hosted remotely, is still safe and secure.
Are there any other areas of evolutionary change?
Another example of evolutionary change is that VoIP providers are now incorporating functionality into cloud platforms that were traditionally only available on a network.
For instance, call recording on a hosted system used to work by having a server with devices that were able to record phone calls. With the second generation of cloud-based private branch exchange, this can be brought into the cloud environment and is immediately available for anyone on the phone network in real time.
Who is driving the changes?
Most VoIP systems are driven by the software and platform that they were built with. That has been the limiting factor of early versions of VoIP. Now, customers are dictating how they want the system to work and how quickly the evolution curve is. In essence, the customer’s input is impacting the direction of VoIP.
How is VoIP able to respond to changes in the telecom market so quickly?
The VoIP life cycle moves at an accelerated pace when compared to traditional telephony. Perhaps the best way to measure VoIP time is to compare it to Internet time, which moves at a much quicker rate than anything we’ve seen historically.
Over the next several years, as software changes and new technologies develop, consumers are going to witness further evolutions in the VoIP field.
How do you envision the future of VoIP?
We are going to continue to see the shift to a cloud-based model. With hosted VoIP, there are still phone devices on the office desk. However, businesses want their phone services to integrate with their mobile devices. A common request from customers is to have their business phone number integrate to their cell phone so they can respond to the needs of their customers more timely.
Businesses are looking for different characteristics associated with their phone system that will help set themselves apart from their competitors. ●
Alex Desberg is sales and marketing director at Ohio.net. Reach him at firstname.lastname@example.org.
Insights Telecommunications is brought to you by Ohio.net
Business owners today may understand that technology can be customized to streamline their internal processes. But exactly how that customization is realized may be unclear.
Software, platforms and applications evolve quickly, which can make finding the right technology intimidating. However, by partnering with the right solution provider, you can improve your current processes with technology that’s inherently scalable.
“Business owners are experts in their industry; they shouldn’t have to be experts on the technology solutions they bring into their company,” says Heather Stump, a business analyst and AIIM ECM Practitioner at Blue Technologies.
Smart Business spoke with Stump about available software, platforms and apps, and how to integrate them in your company.
In your experience, which software and platforms are the most useful?
The most prevalent office applications are the Microsoft Office programs, Word, Excel and Outlook. Other platforms integrate directly with these familiar interfaces to enhance them without replacing what employees currently use, or changing their day-to-day activities.
Imaging applications can be installed on your desktop or embedded in your multifunction printer, which can then:
- Convert documents, such as PDFs and images, to a Word or Excel file on the fly.
- Route documents throughout the enterprise to a shared folder, document management system or email account.
- Name documents at the time of the scan to save time on the back end.
Many document management systems can integrate directly with Outlook or hardware devices. Employees can store and retrieve documents without leaving the familiar email interface, and multifunction devices can allow employees to search, retrieve and print documents directly from a device.
Organizations typically have an accounting and/or a customer relationship management system, such as Salesforce or SharePoint. These systems are vital to any business, but they do require supporting materials to be useful. Technology solutions integrate with these programs to provide a comprehensive view of all necessary data and documentation, such as emails and customer correspondence, eliminating the need to search through multiple systems and file cabinets, reducing the burden on employees.
What are some must-have apps?
Many employees already have a smartphone or tablet, so more businesses are implementing a bring-your-own-device strategy. Most mobile integrations are not device specific and fall into the document or print management categories.
The most well-known document management mobile apps such as Google Docs, Dropbox or SkyDrive allow users to store and retrieve documents. Other apps allow you to take photos or scan from your mobile device, and then upload to the cloud or existing document management repositories. Advanced solutions allow employees to interact with workflow off-site, which facilitates continuity and productivity.
Hardware manufacturers now offer print management apps, so you can print from anywhere, whether on- or off-site. The files are held in a print cloud. The user can then authenticate themselves at any networked device, see their print queue and release the jobs when they’re ready. This helps reduce costs and improve information security — people aren’t as likely to leave confidential documents sitting around.
How can businesses find a provider to maintain, assess and upgrade technology?
Do your research and trust your instincts. Meet with providers and look at a variety of software packages to get an idea of the distinctions. One tip, on the manufacturer’s side, is to see who is spending money on research and development; only innovators survive in the tech industry.
Your solution provider should be assessing the technology quarterly or semi-annually to help you learn new features and functionalities. In addition, manufacturers usually release at least one upgrade and a few minor software fixes every year. Make sure you understand what your provider includes in the yearly maintenance of software or platforms. With due diligence and the right provider to support your software and provide training, you’ll better understand the value of your purchase. ●
Heather Stump is a business analyst and AIIM ECM Practitioner at Blue Technologies. Reach her at (216) 271-4800 or email@example.com.
Insights Technology is brought to you by Blue Technologies
To a business owner looking for market penetration, establishing a franchise provides a number of benefits.
“We’ve taken clients operating from a few local locations to expanding into many states through franchising because they had aggressive expansion plans and were a great candidate to franchise,” says Kacie Davis, an associate with Kegler, Brown, Hill + Ritter.
However, launching a franchise system isn’t an easy get-rich-quick scheme.
“It’s really a cost/benefit analysis for a business as to whether they’re ready to expand and can support an on-going franchise system,” says Davis.
Smart Business spoke with Davis about the process of franchising a business.
What is a franchise?
Essentially it’s a business arrangement where one party grants rights to offer goods or services under its company or brand name. The seller provides significant control or assistance over the business, and the purchaser makes a minimum payment to enter into the arrangement.
What are the benefits of franchising?
Franchising allows you to build brand recognition and increase market share with a limited risk of financial exposure. Franchisors can shift the burden of operations and obtaining necessary capital to open new locations onto individual franchisees. Additionally, the franchise model provides new revenue streams to the franchisor by way of franchise fees and royalties. Franchisees also benefit because they start with a proven business model and leverage a successful brand name to tap into an immediate customer base.
How do you determine if a business is suitable for a franchise?
While it’s somewhat intangible, there are certain hallmarks of successful franchises.
- The franchised business has one or more established and profitable locations.
- The business can be replicated into a turnkey operation.
- The concept is transferable to other markets or locations.
- The business has been lucrative and is attractive in terms of ROI.
Any type or size of business can be franchised, but a key component is its capability of supporting long-term franchisee relationships — a franchise system will only be successful if its franchisees are successful.
How is a franchise established?
In order to sell franchises, you must comply with Federal Trade Commission (FTC) regulations, which involves the preparation of a Franchise Disclosure Document (FDD). The FDD provides the franchisee with information on the business, the services the franchisor will provide and other information about the franchisor, including financial statements. Several states require registration of the FDD before franchises may be sold within that state. This means working with the state’s attorney general or securities division.
In addition to the FDD, you’ll need a franchise agreement and other contracts that detail the franchisee’s compliance requirements, such as how they use your brand name and trademarks, and how you can enforce your rights.
In order to support your franchisees, you also need a very specific operations manual for the business and a training method to teach new franchisees how to operate the business and implement the operations manual. This will ensure uniformity and protect the franchised brand, ensuring consistency and increasing brand value.
What are some common problem areas?
One problem a business owner can run into when expanding is starting to sell a franchise without realizing it. People enter into licensing agreements thinking they are not selling franchises and can avoid FTC regulations and requirements. However, what can trip an owner up, and turn the license arrangement into a franchise arrangement, is providing the right to use your brand name in connection with providing assistance or control over that licensee’s business operations.
Another risk is putting capital into franchising a business that wasn’t market-tested. Without this, you don’t know that anyone would buy into the concept and replicate the success you’ve had. ●
Kacie Davis is an associate at Kegler Brown Hill + Ritter. Reach her at (614) 462-5402 or firstname.lastname@example.org.
Insights Legal Affairs is brought to you by Kegler Brown Hill + Ritter
John Carroll University: How a new shipping route from Cleveland to Europe could save businesses money, timeWritten by SBN Staff
Many Northeast Ohio companies receive raw materials or components from European suppliers, or ship their finished products to European customers. The cargo is transported by truck or rail to New York or Baltimore, and then loaded onto ocean-going ships bound for Europe — a longstanding logistical process for Midwestern businesses. However, this route is also expensive, slow and has lengthy delays, especially at the Port of New York.
An innovative concept is being developed to solve these problems. Small, Seaway-sized ships could be loaded at the Port of Cleveland, located next to FirstEnergy Stadium. The Spliethoff ocean carriers then begin a dedicated round trip to Antwerp, Belgium. Dubbed the Cleveland-Europe Express, its service is scheduled to begin in April 2014.
Smart Business spoke with Bradley Hull Ph.D., Associate professor and Reid Chair, Department of Management Marketing and Logistics, John Carroll University, who together with the Dutch Consul laid the groundwork for this project, to learn more about this project and what it could mean for local businesses.
What are the business advantages of the Cleveland-Europe Express?
The advantages are the savings that could be realized in time and money. The Cleveland-Europe Express takes four to five fewer days to make the trip to Europe than the existing route. This makes the Cleveland-Europe Express ideal for Just In Time manufacturers or anyone needing quick deliveries.
Money can also be saved using the new route because water is inherently the least costly form of transportation. The existing route incurs excessive costs from the unnecessary and expensive overland transport to the East Coast, double handling at the East Coast port, expensive ocean carrier rates to Europe, and lost time due to East Coast congestion. The Cleveland-Europe Express is all-water and as such avoids many of these problems and costs.
Companies also gain more control over their cargo since this method relies on fewer people handling the products. Businesses are no longer dependent on long distance overland transportation and handlers in New York. This means companies face less risk of loss or damage.
The service will run on a reliable fixed schedule. Initially, the service will run once per month to Europe. As business grows, the service could become bi-monthly or weekly.
What could the establishment of the Cleveland-Europe Express mean to Northeast Ohio?
Companies contributing to the success of the Cleveland-Europe Express help create jobs in Northeast Ohio. Ports are ‘engines of job creation.’ As business at the Port increases, the downtown area becomes a more attractive location for distribution centers and manufacturers that would benefit from prime transportation access. If successful, the Cleveland-Europe Express could contribute to the revitalization of downtown Cleveland and ultimately Northeast Ohio.
How was the Cleveland-Europe Express developed?
For the past eight years there has been a strong feeling that such a service could be economically viable. John Carroll University and the Dutch Consul have conducted analyses, held four Seaway conferences, partnered with Erasmus University of Rotterdam to get a European perspective of the project’s practicability, given numerous presentations to local and regional groups, and organized a trade mission to the Netherlands was held this past summer. There is much excitement building for the potential of this shipping route to revitalize Northeast Ohio and increase the viability of Northeast Ohio companies. ●
Bradley Hull Ph.D., Associate professor and Reid Chair, Department of Management Marketing and Logistics, John Carroll University. Reach him at (216) 397-4182 or email@example.com.
Insights Executive Education is brought to you by John Carroll University
No one wants workplace injuries. But accidents can happen, particularly when projects need to be finished right away.
“That’s usually where the breakdown occurs. If you have to rush a project through and you’re potentially cutting corners for the sake of efficiency, that’s generally when injuries happen,” says Derek M. Hoch, president of Leverity Insurance Group.
Smart Business spoke with Hoch about complying with Occupational Safety and Health Administration (OSHA) standards, which can result in a safer overall workplace.
Do most manufacturers have workplace safety programs?
Larger corporations usually do. Some smaller operations may not have any program in place, as they have had the same employees for a long time and, while they know the equipment and systems very well, they don’t necessarily follow established procedures.
Employees may take shortcuts because they’re comfortable with equipment they’re using. They can lose sight of the fact that doing something in a hurry and not in the proper manner can result in a workplace injury.
How is a workplace safety program developed?
The best way is to sit down with your risk manager — your insurance broker — to develop a program because it’s really about managing and controlling risk. You should work with an expert who can guide you through proper policies and procedures that should be in place.
This plan should be followed by a legal review to ensure that everything complies with OSHA regulations.
A good safety program includes appointing a company inspector who will routinely evaluate the workplace and conduct self-audits to make sure employees are following standards and adhering to policies.
The company inspector asks the same questions and uses the same checklist that an OSHA compliance officer would. These items include required employer postings, record keeping, medical services and first aid, fire protection, personal protective equipment, lockout/tagout, company evacuation plan, tools and equipment, environmental controls, electrical safety and accident investigation.
How often do programs need to be updated?
Programs need to be updated accordingly to comply with workplace and regulation changes. But, more importantly, you need to educate employees by providing refresher courses and holding quarterly or semi-annual safety meetings. The staff should have knowledge of OSHA standards and what the regulations are within their specific industry.
Revisit the program and make it real, because there is a tendency to get complacent in a job you’ve been doing for a long time. Spot checks help to ensure that everyone is complying with company procedures.
What are particular areas of risk?
OSHA’s most frequent citations are for violations of standards covering fall protection, hazard communication and respiratory protection.
Problems are particular to industries. For example, a manufacturing facility presents potential respiratory hazards if employees aren’t wearing the proper protective masks, or losing limbs if they are not wearing protective guards or guards aren’t properly installed on the equipment.
Powered industrial trucks, like forklifts, also can pose potential risks if proper training is not established. Another issue involves lockout/tagout procedures — having machines shut off and started up properly when there is maintenance or servicing work.
If violations exist, what are the potential costs and penalties?
Penalties can be significant, but not valuing a workplace safety program will lead to larger issues beyond OSHA citations, like employee injuries, fires and mechanical failures. Unfortunately, many companies wait until there is an accident before focusing on implementing, correcting or amending a safety plan. ●
Insights Business Insurance is brought to you by Leverity Insurance Group
At this point last year, Congress was debating a “fiscal cliff” deal that included the elimination of Bush-era tax cuts and several tax provisions favorable to businesses. Many of those provisions, extended for 2013, are now due to expire unless further action is taken.
“Based on what has occurred in Congress recently, I can’t say I’m optimistic that a lot will be accomplished,” says Terry Silver, CPA, J.D., a partner at Skoda Minotti.
Smart Business spoke with Silver about expiring tax provisions that affect owners of small and midsize businesses.
What key tax provisions are set to expire?
From a business standpoint, most are related to depreciation. Other changes impact individuals, but for businesses the important one is the Section 179 deduction for tangible personal property. For 2013, you can expense up to $500,000 for property placed into service during the year. That starts to phase out if you have property additions of more than $2 million, and basically doesn’t apply once you reach $2.5 million. At that point, you must capitalize purchases of property and equipment and depreciate them over a period of years. That taxpayer-friendly treatment is substantially reduced in 2014 to $25,000, with the phase-out limit falling to $200,000.
Taxpayers can claim Section 179 write-offs for qualified real property as part of that $500,000. You can write off up to $250,000 in qualified leasehold improvements.
Another favorable provision in 2013 is bonus depreciation, which doesn’t contain the taxable income limitations and phase-out provisions attached to Section 179. This 50 percent bonus depreciation allows half of the cost to be expensed without limitations. The only restriction is that it has to be original use with the taxpayer; it doesn’t cover used equipment. Bonus depreciation also is going away in 2014, except for certain aircraft and long production period property.
One other tax provision extended through 2013 is the research tax credit. If your business spends money on research and development (R&D), there’s a tax credit for increasing expenditures related to that activity.
Any chance these might be extended?
Section 179 and bonus depreciation have been extended a number of times in recent years. Given the concerns about the economy, there’s some likelihood that something will be accomplished. While it doesn’t seem likely to happen by the end of the year, it is possible an extension could be put in place in 2014, retroactive to 2013. The most apt to return is the R&D credit, which has been extended numerous times.
Is it too late to take advantage of these expiring provisions?
With some of these, a business may be looking at equipment purchases planned for 2014 and accelerate a purchase to the end of 2013. It is important to note that the property must not only be purchased, but placed in service before the end of the year.
There also are other strategies business owners can follow to reduce their tax burden. Many small business owners, for whatever reason, don’t have a retirement plan. If you put in a profit-sharing plan with a 401(k) feature, careful planning can allow a significant amount of the employer contribution to be skewed toward the owner.
Depending on the nature of your business, you might consider paying out bonuses. But be careful to remember the new additional 0.9 percent Medicare tax related to earned income over $250,000 for couples filing jointly, $200,000 for single taxpayers.
If you’re the owner of an S corporation with a $250,000 salary and have substantial profit for the year, you may want to consider taking distributions in lieu of additional salary. Although the shareholder will still pay income tax on the profits, the 1.45 percent Medicare tax paid as an employee, the 1.45 percent paid by the company and additional 0.9 percent Medicare tax can be avoided. However, the IRS may look at distributions relative to the salary you’re taking — the salary has to be reasonable for the services you provided.
Overall, as 2013 winds down and we head into 2014, owners and executives in the highest tax brackets will face higher tax rates on taxable income, qualified dividends and a 3.8 percent tax on net investment income. Whether Congress passes legislation to provide tax relief and spur the economy will no doubt be a topic of much debate. ●
Insights Accounting & Consulting is brought to you by Skoda Minotti
It’s difficult to know for certain what your clients want if you never ask them.
“Businesses should be asking their customers: What are we doing right? What are we doing wrong? What could we do better? If they’re not asking these questions, apparently they do not care about their customers,” says Rick Voigt, president of Today’s Business Products.
Smart Business spoke with Voigt about ways to gather customer feedback and how to use the results.
How do you find out about customer needs and wants?
You want to conduct surveys, usually at the end of the year. In order to encourage responses, offer an incentive like an entry into a drawing for an Apple iPad. We did that and had about a 20 percent return rate.
With surveys, you want people to be absolutely open and frank. You can’t improve and address problems if no one tells you about them. Another reason to do surveys is that 99 percent come back with praise for the great job being done. When customers put that on paper, it’s really ingrained in their minds. Then if a competitor comes in their door, they’ve just finished saying how great you are. Why would they want to talk to someone else?
What types of questions should be included in a survey?
It’s important to keep surveys short and to the point. When you’ve answered 20 questions and see the survey is only 7 percent complete, you’re not going to finish it.
Two questions we ask are to name their sales representative and driver. That reveals how effectively the sales consultant is at developing a relationship. If they don’t know the salesperson’s name, they don’t have a great relationship. The same goes for the driver — if they know the driver’s name, they have a relationship. Every point of contact with a customer should form a relationship to help establish your business with the client.
We also structure questions to get more information about the customer, such as how many employees work at that location or if they use other suppliers for furniture or office products. This information indicates the customer’s needs and if there’s an opportunity to generate more business with them. Surveys also can be used to determine ways to expand your business into a different product category. If it’s something else the customer uses, they’ll want to purchase it from someone they know and trust.
Our survey asks respondents to rate customer service regarding accuracy of orders, pricing, ease of placing orders and overall satisfaction, as well as what changes can be made to better serve their needs.
One issue that was brought up was the speed of our website. After seeing the responses, it was imperative to upgrade speed of ordering to better suit customers’ needs. We listened and that issue was resolved.
What else can be done to generate customer feedback?
For larger accounts, you can conduct business reviews that show them your performance. It’s like a report card — how is the fill rate, average order size, product categories purchased, method of purchases, etc.
Customers like the reviews because all the cards are out on the table. There’s a list of the top items ordered, and they can see opportunities to save money by going with substitutes. Changing brands can save a customer about 15 percent on average. Or maybe they can save by ordering a larger quantity at one time.
That helps when a competitor comes into the office and says they can save the business money; the client already knows they could save 15 percent if they changed brands. You have to tell customers this information because if you don’t, someone else will.
It’s important to show clients you’re working on their behalf, as a business partner rather than a vendor. You can replace vendors at any time, but you can’t replace a trusted business partner very easily. ●
Insights Customer Service is brought to you by Today’s Business Products
A flight to quality during the recession saw businesses move to more modern warehouse and distribution facilities. In some cases, companies relinquished functionally obsolete buildings that have the potential to be modernized.
Bob Brehmer, CCIM, SIOR, principal at NAI Daus, says when businesses can’t find what they want in an existing facility, they’ll build. However, there’s a substantial cost difference between modernization and new construction.
“The lack of amenities in their current facilities or lack of suitable options on the market must be sufficient enough to warrant new construction,” he says.
Smart Business spoke with Brehmer about how businesses can take full advantage of real estate trends affecting warehouses and distribution centers.
What’s driving the changes with warehouses and distribution centers?
Facilities are becoming more efficient, leveraging speed enhancements and space optimization to reduce costs. Warehouses and distribution centers are maintaining their existing footprint but adding volume by building up — incorporating higher ceilings — and implementing cross docking, myriad material handling systems that reduce storage times and improve shipping efficiencies, and improved racking systems.
How is this affecting the physical building?
Businesses are implementing racking, conveying systems and automated case picking using robots, which has necessitated changes in the physical construct of warehouses and distribution centers. These optimizations are driving out the uncertainty of human costs to a more fixed-cost, predictable model.
Some warehouses also are incorporating high-efficiency lighting in the form of LEDs, which burn longer, saving money. These cost more upfront, but they’re being mass-produced as demand rises, so prices are dropping. Federal energy policies have incentivized companies to utilize these energy-saving bulbs through rebates.
In the same vein, better-insulated walls and improved dock seals are saving companies money on their energy bills.
It might cost more to construct or retrofit a hyper-efficient warehouse or distribution center, but operating and occupancy cost savings are tangible. If a company is handling millions of stock keeping units per year, it can result in major long-term savings.
What’s key to know in terms of location?
Businesses are building or buying warehouses and distribution centers nearer their customer base, primarily, as well as within a favorable distance to their modalities of transportation.
Transportation costs are a significant determinant. Existing facilities, particularly in the Midwest, are ideally situated in industrial parks and in areas that feature wide boulevards, adequate land, close proximity to a highway, near or in a foreign trade zone, and where labor is available.
While there is an adequate supply of land in Northeast Ohio, there is a limited supply of land sufficient to site larger distribution centers, such as those required by e-commerce firms.
How can companies find properties that align with these trends?
Consider seeking a qualified real estate expert who understands these issues and the inventory in the market. Find someone who specializes in warehousing and distribution centers with knowledge of your industry. Then engage a qualified facilities planner or engineer to analyze your current facilities to diagnose their shortfalls and provide options.
This team will help you identify land or properties, the costs associated with modernizing, redevelopment or new construction, and potential tax and financing incentives. It takes a special set of skills to navigate all the possibilities because each involves many moving parts.
However, if you decide to move forward with new construction, consider your exit strategy. You need to know the facility you build is suitable to sell to a broad spectrum. An overspecialized facility naturally limits the market for potential buyers.
You don’t have a plan unless you have a backup plan. Try to envision the building’s use, and your needs, far into the future, so you don’t get stuck with an unsuitable property. ●
Insights Real Estate is brought to you by NAI Daus