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
States looking to add revenue to tight budgets are upping efforts to collect sales and use taxes from businesses that may not know they owe money.
“Sales tax is one of the largest revenue producers for many states, second only to personal income tax. Since there are so many transactions involving the exchange of property and services, the states are getting more creative in their attempts to collect the tax due on these transactions,” says Susan Nunez, J.D., LL.M., a principal in Tax Services at Brown Smith Wallace.
Smart Business spoke with Nunez about who owes the taxes and what to do to ensure you’re complying with state laws.
How are sales and use taxes different?
Sales tax is a transaction tax imposed on sales of tangible property and certain services. Use tax is a compensating tax to sales tax. If a transaction isn’t subject to sales tax, it will be subject to use tax.
Typically the sales or use tax is due when the final consumer purchases and uses the asset. A company that buys components or machinery and equipment to manufacture a product may be able to purchase them exempt from tax, but ultimately someone will pay the tax when the product is made, sold and consumed.
How are states trying to collect these taxes?
One way is by sending out nexus questionnaires to out-of-state sellers. These notices are used to determine whether an out-of-state company has a filing responsibility. For example, if a manufacturing company from another state is selling product to customers in Missouri, the state may send that manufacturer a letter to determine whether it has sufficient presence in the state to require a tax filing. The state can also obtain federal records of imported products to determine if they were shipped into a state and, regardless of whether the company paid tax on that asset, send a notice that says tax is owed.
These are fishing expeditions; you may not owe tax. But it can be threatening to get a letter saying you owe $100,000.
Is not remitting taxes owed common?
Usually we see it in reverse — clients overpay taxes because of the complexity of the tax laws. Taxpayers err on the side of being conservative and pay tax on items that may very well be exempt.
It is difficult to determine what state has the right to the tax and who is responsible for remitting it. For example, drop shipments are particularly problematic. Say a Missouri company has a customer and a supplier in Illinois. An order is shipped directly from that supplier’s Illinois facility. It’s taxable in Illinois, but the question is, who is liable for that tax? It varies on whether the Missouri company is registered in the destination state, whether the supplier has a valid resale certificate from its customer and other factors.
Should companies determine if they owe tax or wait until they receive notification?
It’s best to calculate your liability and make a decision. If a business has a nexus in a state and its tax liability is $30, the amount is most likely immaterial to the company. But if the company is making $10 million in sales in a state, it should want to take action and ensure it’s in compliance.
Many states are conducting amnesty programs to bring in more money. Amnesty periods are attractive to taxpayers not only because they often abate penalties, but they also limit the number of years the state can assess tax.
The most important steps for businesses to take is to get a handle on how tax decisions are made, and to develop efficient processes to manage and streamline their sales and use tax compliance burden. People making tax decisions aren’t usually in operations and don’t understand how purchases will be used, so they can’t apply the laws to see if those items will fall within an exemption.
You can increase tax compliance, and ensure you’re not overpaying, by developing a customized sales tax decision tool. This enables the person who procures items or prepares the invoices to determine what is taxable and what may be exempt. It also provides your company the control needed to make good tax decisions. ●
Insights Accounting is brought to you by Brown Smith Wallace
The Patient Protection and Affordable Care Act (ACA) will have a profound effect on most employers that offer health plans in 2014.
“Passing the law was the easy part. The process of issuing regulations and guidance between three separate federal agencies — Health and Human Services, Department of Labor and the IRS — is the difficult part. Add to the mix an occasional court ruling and you have the perfect recipe for confusion and the risk of misinformation,” says Chuck Whitford, client advisor at JRG Advisors, the management arm of ChamberChoice.
Smart Business spoke with Whitford about points to consider in the coming year with the ACA.
What’s the first step going into 2014?
Going back to basics, determine if your plan is ‘grandfathered.’ A plan that essentially hasn’t changed since March 23, 2010, is most likely grandfathered. However, if you changed insurance companies before Nov. 1, 2010, or passed along the majority of the rate increases to employees, the plan you thought was grandfathered may not be.
You must tell employees if you have a grandfathered plan. A grandfathered plan can be exempt from some of the ACA rules, such as covering preventive care at 100 percent, continuing coverage for ‘adult dependents’ to age 26 and nondiscrimination rules for fully-insured plans.
How will the exchanges affect employers?
You will most likely be asked questions about the new health insurance benefits exchanges, also known as marketplaces. They are primarily online marketplaces for purchasing health insurance, run either by a state or the federal government. The federal government has a hand in, at least, running exchanges in 33 states. There are two types — one for individuals and one for small employers, generally up to 50 employees.
There have been glitches in these online systems. Once problems are fixed, it should be easier for individuals to review available plans and see if they qualify for subsidies to reduce premiums or, in some cases, reduce the cost sharing of deductibles and coinsurance.
What’s important to know about full-time equivalent (FTE) employees?
For the purpose of the ACA, a full-time employee works 30 or more hours per week, or 130 hours per month. The law requires employers to track the number of full-time employees and add up the hours worked by their part-time employees each month (up to 120 hours per month) and divide by 120 to determine the number of fractional ‘equivalent’ employees.
Employers with 49.99 or fewer FTEs don’t have any requirements to offer coverage and won’t be assessed penalties. The ACA still will impact their health plan’s rates, and they must comply with the 90-day waiting period limit and other ACA provisions.
Employers with 50 or more FTEs must offer coverage, deemed affordable and of minimum value, to all full-time employees and dependents to age 26. If any full-time employee receives subsidized coverage in an exchange, it triggers employer penalties. The ACA defines affordability as the employee’s cost for single coverage not exceeding 9.5 percent of income. A plan covering at least 60 percent of costs on average is considered minimum value.
In July, the Obama administration announced a one-year delay in the penalties and employer reporting. This can create a different set of issues for an employer that offers coverage to employees that work, say, 40 hours per week and has employees who work between 30 and 39 hours per week. These employers may want to hold off extending coverage to their 30- to 39-hour employees until 2015. However, with the individual mandate, employees not offered employer-sponsored coverage might go to the exchange. Some will qualify for a subsidy and also may qualify for cost-sharing reductions. Fast forward to 2015, employers wishing to avoid the nondeductible excise taxes (penalties) may extend eligibility of an affordable plan that meets minimum value to these employees, removing exchange subsidies and increasing the employees’ cost.
Because of the complex nature of the ACA, employers are encouraged to review their employee benefits strategy and communications for 2014 and beyond with a qualified advisor. ●
Insights Employee Benefits is brought to you by ChamberChoice
The modern employee assistance program (EAP) is an employer-sponsored benefit designed to support the achievement of employer health and productivity goals. EAPs also have evolved to become a strategic partner to maximize the human capital of an organization.
“An EAP’s main goal is to resolve problems before they interfere with work attendance or productivity. And, in performing that task, EAPs have a positive impact on a company’s bottom line,” says Sandra Caffo, a senior director at LifeSolutions, an affiliated company of UPMC WorkPartners.
Smart Business spoke with Caffo about how EAPs work and their ROI.
What is the potential payoff of using an EAP?
A study found that for every dollar spent in a typical EAP, there was a return of $5.17 to $6.47 in increased work productivity. The study also showed that 80 percent of costs from lost productivity were associated with presenteeism, which is when an employee is at work, but is not productive, largely because of personal problems.
EAPs employ behavioral health experts who can provide short-term coaching and counseling that focuses on problem resolution. The goal with all EAP services is to resolve problems before they interfere with work attendance or productivity. Because of that, EAPs can help supervisors understand how to manage those valued workers whose productivity suddenly and mysteriously plummets.
How do EAPs enhance value?
Supervisors may be able to spot a troubled employee and express concern, but typically they are not equipped to work out a plan of action to address the problem. Many supervisors would argue — correctly — that this isn’t part of their job description. That’s where an EAP can help. It can provide consultation to both the manager and the employee to develop a plan of action.
EAP consultants are able to guide leaders at all levels to shift their focus to management strategies that will make a difference in an employee’s job performance. With an EAP management consultant, leaders learn how to coach employees toward improved performance while holding them accountable for negative patterns of behavior.
Because EAPs are able to provide services that consider all of the occupational and non-occupational factors that affect job performance, they are able to increase the value of an organization’s investment in its workforce. They achieve this in several ways:
- By increasing employee engagement and improving productivity, morale and workplace harmony.
- By focusing on building the capacity of employees and their dependents to successfully respond to life’s personal and work-related challenges.
- Through EAP coaching and consultation, which helps leadership, managers and supervisors increase their skills to effectively address difficult employee situations. It can tailor programs and initiatives for key workforce groups to meet specific needs.
How does an EAP mitigate business risks?
Supervisor consultation helps to build action plans and handle new or complicated employee situations, from incompatible employees to workforce reductions.
On-site trainings focus on staff development and skill building in areas such as stress management, customer service and multi-generational teams.
EAP intervention also can help when an organization has a traumatic incident like an accident or death to support those managing the situation and those affected by it.
A federal occupational health study of more than 60,000 workers using EAP services over a three-year period found statistically significant improvement from pre- to post-EAP intervention for six measures related to work productivity. These include: employees’ emotional problems, employees’ physical health, the interference of physical or emotional issues on work and social relationships, perceived health status, job attendance and/or tardiness, and global assessment of functioning. In short, the benefits of EAPs are measurable, and they can be used to select an effective EAP, gauge its performance and determine the ROI. ●
UPMC WorkPartners is part of the UPMC Insurance Services Division, which also includes: UPMC Health Plan, UPMC for Life, UPMC for You, UPMC for You Advantage, UPMC for Kids, Community Care Behavioral Health, EBenefit Solutions and Askesis Development Group.
Insights Health Care is brought to you by UPMC Health Plan
Alex Algard wasn’t your typical college student. Rather than lounging around his Stanford dorm room, staying up late and sleeping in, he was using his room to accomplish his vision of helping people find, be found and connect.
In 1997, from that Stanford dorm room, Algard founded WhitePages Inc. Since then, the privately-held, Seattle-based, 100-employee company has become the leading provider of contact information in North America, with a top 40 Web property, 10 top-ranking mobile apps and more than 50 million monthly users.
“Whitepages.com is our flagship website,” says Algard, founder and CEO. “It’s primarily oriented toward consumers. It’s a free, supported service, so our company drives revenue from online advertising. We allow users to find contact information about people and businesses.”
At its core, WhitePages is a data company. Over time it has amassed a significant database of contact information about U.S. individuals and businesses, adjusting more than 1 billion records every month.
“Over time, users have recognized that we provide a fairly unique set of information, and consequently traffic and usage of our website has been on a steady and continuous growth trajectory over the past many years,” Algard says.
Today, he is focused on continuing that growth through new opportunities in WhitePages’ core business, mobile apps and strategic acquisitions.
Stay ahead of the competition
In the space that WhitePages operates in, competition is extremely fierce. Algard is ensuring that WhitePages stays connected to its customers first and foremost.
“My focus is to make sure we offer great services and great user experience to our customers in whatever area that we put resources into, and that we really establish ourselves as the best service in the market in whatever things we may launch,” Algard says. “That’s where I spend a lot of my time.”
In order to do that, especially in the online market that is driven by people, Algard and WhitePages place a high premium on attracting the best possible employees.
“I spend a fair amount of my time making sure we both attract the best and also retain the employees that are with us,” he says.
As a data company, it comes down to offering the most complete database that the company can, the most comprehensive coverage and the best quality.
“That involves continuously seeking out more and better data sources,” he says. “We also have to do a better job building and organizing the data that we collect. Because we’re adjusting 1 billion contact records every month, to some extent our challenge isn’t just to source more data, but finding what to actually do with it.”
WhitePages assembled a team of data scientists that has really elevated the company’s performance in the last year in building a well-structured database.
“There is a lot of rocket science that goes into organizing a database of our size cleanly,” Algard says. “Those are the core things that I spend time on to make sure that we’re staying ahead of everyone else. The next focus after that is making sure all the data flows smoothly to all the people who are customers of our data, whether they’re external customers or internal users.”
One of the biggest challenges for the company recently has been building WhitePages Pro, a B2B service.
“It turns out that a very significant portion of our overall audience is actually business users who come to our website to do all sorts of things from identity verification to fraud screening,” he says. “The reason we got excited about this new segment was that we felt we could offer a whole lot more value to enterprise users if we actually built the service targeted at them.”
Algard has been dealing with how to build awareness of this service to people who already think they’re getting the best of WhitePages.
“It’s gratifying that once people actually do give our new WhitePages Pro service a try, many of them do convert into paying enterprise customers,” he says. “But it’s always a tough sell when what someone is already using is costing them zero.”
All that WhitePages can do is continue to create better services and hope that it keeps in front of competition.
“One of the best ways to stay ahead of the competition is to not actually obsess about what they are doing and focus on how you can delight your users,” Algard says. “In some cases, what the competition is doing is a lying indicator. If all we did was try to match what they’re doing, well, they’re probably working on something new that hasn’t been released yet.
“The best thing we can do is be super customer-focused and try to put ourselves in our customer’s shoes, and ask ourselves, ‘What can we do to delight them?’”
Although WhitePages has a huge volume of users, those users are fairly anonymous given the company’s online business and the fact that users don’t physically walk into a WhitePages store.
“It takes a little bit more effort to actually mine data and try to understand how people are really using our website based on analytics, surveys and focus groups,” he says. “What it comes down to is being really sensitive to how we can build the best user experience.
“Frankly, sometimes it means not listening to our customers. If we just asked them what we can do to build a better service, they themselves sometimes don’t know how to articulate that. Careful listening sometimes means trying to figure out what it is that customers really want even if they aren’t articulating it, and that takes a level of vision.”
Find new opportunities
Algard never sits still waiting for an opportunity to come to him. He is always out looking for opportunities that can add value to WhitePages. Several years ago, the company built WhitePages Current Caller ID, a caller ID and text identification mobile app service that has proved to offer plenty of value.
“When your phone rings or you get an incoming text message, our app will pop up an alert message that identifies that number even if you don’t have that number in your phone’s address book,” Algard says. “Our app will identify the name and the location of the calling or texting person.”
In addition, WhitePages allows its users to link the app to their social networks.
“If the person you’re communicating with is connected with you on one of those social networks, then when the phone rings you will see their latest tweet, or their LinkedIn job title and employer name, or their Facebook picture or latest status,” he says.
“In those cases you get a very rich set of information about the person who is calling you. By the time you pick up the phone, you have a bunch of contextual information.”
WhitePages learned over time that one of the uses of this service was to identify telemarketers or scam callers and texters.
“We started tinkering around with offering a call-walking or text-walking feature so that if those people call you, based on our automated algorithms, we’d have a way to identify scammers,” he says. “In those cases, the call or text message would go into a black box and the user wouldn’t be bothered at all.”
As the company was looking into this, it identified another app in the market called Mr. Number. It turned out that Mr. Number was truly the market leader in that particular niche.
“We figured that our Current Caller ID product would be that much better with an integrated spam blocking and vice versa,” Algard says.
WhitePages bought the Mr. Number app in May 2013.
“It’s two of the best mobile app solutions that we’re now combining together into what we think is going to be a great offer for consumers to really put their phone on steroids,” he says.
Of the opportunities in the pipeline for WhitePages, Algard is most excited for what lies ahead in the mobile space.
“We’re still in the first inning of mobile development,” he says. “Only about half of the U.S. market has cell phones at this point, so there is going to be a lot of growth in mobile with increasing adoption. On top of that, I think the pace of innovation in mobile is moving faster than in any other growth phase of the Internet in general.”
Since smartphones are packed with so many interesting apps from GPS to cameras, Algard expects decades worth of people discovering new businesses and services that can be launched off of mobile.
“We’ve treated mobile as a strategic top priority over the past many years and that’s why,” Algard says. “We’ve been fortunate to build our own mobile offering into a very important business today.” ●
How to reach: White Pages Inc., (206) 973-5100 or www.whitepages.com
If you had a crystal ball in 2008 and were looking to work for a company that deals in the home improvement industry, you might have been advised to run for the hills. But Ben Davis had no crystal ball when he became president of N-Hance Wood Renewal, a franchise that renews kitchen cabinets and floors — and regardless of the challenges, found ways to grow the company.
“I took the president position with N-Hance in 2008, which was not the best time to take over a home improvement business,” Davis says. “However, when the recession hit, it’s not as if people stopped caring about their homes.”
In fact, in many cases homeowners cared more about their homes because they understood they may be in that home longer than they anticipated. With the recession taking hold in late 2008 homeowners began looking for ways to maintain their current properties and started demanding high ROI decor and remodeling project options.
“We’ve positioned ourselves to fit very well into that space,” Davis says. “We positioned ourselves not to be victims of the recession, but to be opportunistic about changing consumer demands with regard to home improvement projects.”
Instead of the traditional sand and refinish process, N-Hance Wood Renewal’s services renew the existing finish of cabinets or floors, adding additional layers of protective finish and changing the color if the customer wants to get a factory look without all the dust, dirt and inconvenience of having to be out of the home for a few days. And the process saves consumers considerable money.
In an industry where nearly half of mom-and-pop and smaller remodeling companies have evaporated over the last five years, N-Hance Wood Renewal has grown substantially in that same period.
Here’s how Davis grew N-Hance since 2008 and is positioning the company for further growth in the next five years.
Don’t participate in the recession
N-Hance has been very fortunate to have a stellar network of franchisees who took on a mantra of refusing to participate in the recession. Every year throughout the recessionary period, the company experienced growth.
“Any organization that was operating without a great deal of fiscal discipline at that time was in a pretty precarious situation,” Davis says. “We’ve always been a pretty disciplined organization. We’re always willing to spend where a growth opportunity presents itself, but we manage ourselves quite well.
“On the other hand, we knew we had some franchisees in the network that enjoyed the housing boom and didn’t have the rigor or fiscal responsibility within the organization.”
Davis wanted to make sure he positioned the brand and its service offering properly to maximize on changing consumer sentiment, but also that the company was taking all steps possible to give its network of franchise owners every chance at surviving.
“It was really a two-pronged strategy of ‘Let’s go out and create opportunity, but at the same time let’s make sure the ship is as seaworthy as possible,’” he says. “It was really helping our franchise owners focus and understand, and our marketing partners focus on and understand changing consumer needs and consumer sentiments.”
A marketing partnership it has with Home Depot has helped N-Hance increase its sales. When Davis took over N-Hance, he met with several kitchen designers in Home Depot stores throughout the country and discussed how frustrating it was for customers to come in with mismanaged expectations as far as time and budget.
“Customers want to do a kitchen remodeling project, but when they see that just the new cabinets alone are going to be $15,000 or $20,000 and their budget is $12,000, they either laugh or cry their way out of the store,” Davis says. “N-Hance can make old cabinets look brand new, change the color and update the look of them for a third or a fifth of the cost of new cabinets.”
Davis positioned N-Hance with franchise owners and marketing partners with a specific message: This is the key to seek consumers who are extremely frustrated with not doing the project they feel they want to do — or in many cases, that they need to do in order to sell their homes.
“This is a new option that allows customers to get more out of their remodeling budget,” he says.
Follow the strategy
The biggest aspect of Davis’ strategy for N-Hance was making sure the franchisees were more profitable and able to perform as growth ramped up.
“We had to seek all the opportunities and be very growth-oriented,” Davis says. “We launched a lot of new tools around helping franchise owners hire the right people and track their labor expenses, material expanses and understand in a very detailed way the economics of every job that they did.”
N-Hance created several initiatives to make sure the franchise network was as secure, robust and healthy as possible. Making the timing of the company’s partnership with Home Depot fortuitous.
“As a lot of other lead sources or places that we would find customers were declining, that’s when we launched our Home Depot partnership and said we need to open doors to new lead sources and opportunities we haven’t gone after in the past,” Davis says. “Home Depot is a major part of that strategy.”
Statistics show that roughly 80 percent of the people who are looking to do a remodeling project to their kitchen walk into a Home Depot design center for the next step. Cabinets represent 75 percent of N-Hance’s total revenue.
“If you’re a new service offering like N-Hance, and you have an uneducated consumer base out there, and 80 percent of them are walking into Home Depot stores, that’s a great partnership,” Davis says. “Home Depot found a home for us in their kitchen design center. In fact, they coined a phrase around the whole idea which is ‘replace, reface, renew — a solution for every budget.’
“One thing we wanted earlier on that we weren’t doing nearly as well as we needed to be doing was getting referrals,” he says. “When our customers saw what we could achieve, we had this amazing moment of ‘Wow!’
“But we weren’t leveraging that unique moment of wow that we were creating in the customer’s home. We have been working with franchise owners on seizing referral opportunities and going after strategic alliances with stagers, real estate managers and property managers.”
Look to the future
Now that N-Hance has established its services and has built-up its partnerships, Davis’ focus is to grow the company’s footprint.
“We have 255 franchises throughout the United States and Canada,” Davis says. “We are looking for overseas expansion and in key markets throughout the United States and Canada. We have a lot of inventory available, so our big focus is building our network.”
One of the biggest ways Davis plans to build a more robust national footprint is to go after other opportunities that N-Hance hasn’t been able to go after like relationships with restoration companies, insurance companies and real estate companies on a national level. He also wants to grow the partnership with Home Depot.
“Today, we cover maybe 1,300 of their 2,000 stores and we want to be in all 2,000,” he says. “Our growth will also help us with the awareness issue among consumers considering a remodeling project. The more franchise owners we have out there that are helping to educate the public and advertising in their local areas, the easier that becomes.
“In my opinion we have a pretty sexy service offering that’s really fun to be a part of.” ●
How to reach: N-Hance Wood Renewal, (435) 755-0099 or www.nhance.com