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
The idea of driving aimlessly seems glamorous in movies and songs. In reality, few of us get in a car without knowing how to reach our destination. We’ve created smartphone apps, GPS devices and satellite mapping to make our trips as efficient as possible and to avoid what we know to be an inconvenient, expensive outcome — getting lost.
I bring up this idea because many companies using social media have inadvertently become lost drivers. They start using social platforms with the goal of reaching some number of likes, retweets or shares, but as they embark on their social media strategies, many experience a disconnect between the content they post, blog and tweet and their progress on measurable business goals. These companies are driving without a roadmap; they just don’t know it.
Sound familiar? If social media isn’t working for you, your social media approaches may be missing a fundamental component: an effective content strategy. Here are three ways a solid content strategy will enhance your company’s social media success.
A like is just a like
All social media engagement is not created equally. To be successful, the social media activity that you generate needs to support your marketing goals — whether you want to improve employee engagement, boost customer conversions or build interest in a new product.
Creating a content strategy before you engage in social media will help your business clarify the specific marketing goals you want to achieve through content, as well as what messages you need to communicate to reach those goals. This process will ensure you get the right likes, shares and retweets from social interactions.
Social is a vehicle
Social media is a vehicle for sharing compelling content with your audience, and it doesn’t work if you don’t know what issues, topics and trends your audience finds compelling. Part of developing a content strategy involves learning how those you are trying to reach want to be talked to. Where do they go for information? How much time do they spend online? What kind of content are they looking for from your industry?
By getting to know the interests and pain points of your audience (customers, employees, shareholders, etc.), you can develop tactics to reach your online audience more effectively, saving you time and enhancing your company’s social influence.
Relevant content is meaningful
Kings of social content don’t become that way by luck. They use strategic tactics to connect with their audience through the right channels at the right times. More importantly, they make these connections meaningful and memorable by posting and sharing strategic, relevant content that their audiences desire.
When you deliver social content that your audience members find valuable or interesting, they’ll reward you by sharing your content, engaging with your business and, ideally, helping to promote your reputation as a thought leader in your business or industry. A content strategy allows you to do that by providing a roadmap for what kinds of informative, helpful, educational or creative content you need to make meaningful interactions.
As a recent Huffington Post article put it, the golden rule of the web is clear: “To know us better is to sell us better.” Ultimately, being successful in the social media space means taking the time to map out what success looks like. In this sense, a solid content strategy is not only an important component of any social media strategy, it’s the key to driving the results your business wants.
Michael Marzec is chief strategy officer of Smart Business and SBN Interactive. Reach him at firstname.lastname@example.org or (440) 250-7078.
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. ●
Employers today are more likely to have an employment practices liability (EPL) insurance claim than a property or general liability claim.
EPL provides protection against claims made by employees, whether former, current or potential, regarding discrimination — age, sex, race, disability, etc., wrongful termination, sexual harassment and other employment-related allegations.
When looking to have your exposures covered, underwriters carefully evaluate your company’s written procedures and practices.
“You need to confirm that these procedures are distributed and enforced constantly throughout the organization,” says Daniel R. Slezak, vice president at ECBM. “There should be a way to promote awareness and a ‘hotline’ for employees to communicate concerns without fear of intimidation or retaliation.”
Underwriters also will look at factors such as turnover rates to judge employee moral and/or possible management problems.
Smart Business spoke with Slezak about what is — and is not — covered by EPL insurance.
Retaliation claims have greatly increased, according to the Equal Employment Opportunity Commission (EEOC). What do employers need to know about their risks?
Title VII of the Civil Rights act of 1964 states an employer may not fire, demote, harass or otherwise ‘retaliate’ against an individual for filing a charge of discrimination, participating in a discrimination proceeding or otherwise opposing discrimination. The same laws that prohibit discrimination based on race, color, sex, religion, national origin, age and disability, as well as wage differences between men and women performing substantially equal work, also prohibit retaliation against individuals who oppose unlawful discrimination or participate in an employment discrimination proceeding.
Retaliation occurs when an employer, employment agency or labor organization takes an adverse action against a covered individual because he or she engaged in a protected activity. For example, it’s illegal to refuse to promote an employee because he or she filed a charge of discrimination with the EEOC, even if the EEOC later determines no discrimination occurred. The law forbids retaliation when it comes to any aspect of employment, including hiring, firing, pay, job assignments, promotions, layoff, training, fringe benefits, etc.
Employers can reduce claim risk by training managers and supervisors to be aware of anti-retaliation obligations under Title VII, including specific actions that may constitute retaliation. They also can reduce risk by carefully and timely recording the legitimate business reasons for disciplinary or performance-related actions, while sharing these reasons with the employee.
What is covered with Family and Medical Leave Act (FMLA) claims?
The FMLA was virtually unknown, but now most employees know it’s a tool they can use to adapt to life changes. Plus, with recent Americans with Disabilities Act amendments, the number of persons defined as having a disability has increased. While disability discrimination is covered, typically there isn’t coverage for the cost of accommodation and employer fines.
How are social media, harassment and gender/sexual orientation covered?
Social media has little regulation at this time, but employers need to have policies in place that address those practices. An event involving a social media claim is covered to the extent there was discrimination.
Harassment claims increased by 33 percent from 2006 to 2008, according to the EEOC. This seems to always be in the news, whether in schools or the NFL’s Miami Dolphins locker room. These events may trigger coverage, but you should make an effort to ensure everyone is getting along.
Policies can be extended to cover third-party discrimination claims made by customers and tenants. The policy also covers discrimination and sexual harassment claims made by customers for the acts of employees.
Read your policy and pay attention to carve outs and exclusions/endorsements that give coverage or take it away. Expert insurance professionals are available to help with any issues or questions. ●
Insights Risk Management is brought to you by ECBM
What would it take for a company to succeed if its leader could effectively do only one of the following: innovate, instigate or administrate? We all know that an innovator is the one who sees things that aren’t and asks why not? The instigator sees things that are and asks why? The administrator doesn’t necessarily ask profound questions but, instead, is dogged about crossing the “t’s,” dotting the “i’s” and making sure that whatever is supposed to happen happens.
Ideally, a top leader combines all three traits while being charismatic, intellectual, pragmatic and able to make decisions faster than a speeding bullet. Although some of us might fantasize that we are Superman or Superwoman, with a sense of exaggerated omnipotence, the bubble usually bursts when we’re confronted simultaneously with multiple situations that require the versatility of a Swiss army knife.
Business leaders come in all shapes and sizes with various skill sets and styles that are invaluable, depending on the priorities of a company at any given point in time.
Every business needs an innovator to differentiate the company. Without a unique something or other, there isn’t a compelling reason to exist. Once those special products or services that distinguish the business from others are discovered and in place, it takes an instigator to continuously re-examine and challenge every aspect of the business that leads to continued improvements, both functionally and economically. It also takes an administrator — someone who can keep all the balls in the air, ensuring that everyone in the organization is in sync and delivering the finished products as promised to keep customers coming back.
As politicians and pundits of all types have pounded into our heads in recent years, “It takes a village to raise a child.” All who practice the art and science of business have learned that, instead of a village, it takes a diverse team working together to make one plus one equal three.
On the ideal team, each member possesses different strengths, contributing to the greater good. The exceptional leader is best when he or she is an effective chef who knows how to mix the different skills together to create a winning recipe.
In many companies, however, leaders tend to surround themselves with clones who share similar abilities, interests and backgrounds. As an example, a manufacturer may have a management team comprised solely of engineers, or a marketing organization could have salespeople who came up through the ranks calling all the shots.
If everyone in an organization comes from the same mold, what tends to happen is, figuratively, one lies and the others swear to it. This builds to a crescendo of complacency and perpetual mediocrity.
There is a better way. Good leaders surround themselves with others who complement their capabilities, and savvy leaders select those with dramatically different backgrounds who will challenge their thinking because they’re not carbon copies of the boss. This opens new horizons, forges breakthroughs and leads to optimal daily performance.
Strange bedfellows can stimulate, nudge and keep each other moving toward the previously unexplored.
To have a sustainable and effective organization, you can’t have one type without all the others. While everyone on the team may not always agree, each player must always be committed to making the whole greater than the sum of the parts.
The single most important skill of the leader who has to pull all the pieces and parts together is to have the versatility of that Swiss army knife — selecting the precise tool to accomplish the objective at hand. ●
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. “The Benevolent Dictator,” a book by Feuer that chronicles his step-by-step strategy to build business and create wealth, published by John Wiley & Sons, is now available. Reach him with comments at email@example.com.
“Planning for an exit can be a very emotional event in a business owner’s life. There are feelings of mortality — not only with one’s health, but also his or her role as the leader of a business. Businesses that achieve long-term success typically do a good job planning for succession,” says Steven E. Staugaitis, a director in Audit & Accounting at Kreischer Miller.
“It makes sense that companies that effectively plan leadership transitions will do better because they can sustain positive momentum when a leader is properly groomed and allowed to rise within the organization,” he says.
However, many business owners and executives don’t properly plan for an orderly exit. Less than 20 percent of organizations are well prepared for the departure of a key individual, according to the American Management Association.
“We see that particularly with first-generation business owners. One day they realize they’re 65 and ready to retire. They expect to be able to turn a key and exit the business. In those cases, it is rarely a successful exit,” Staugaitis says.
Smart Business spoke with Staugaitis about planning for succession and what business owners should be considering to increase their chances for success.
What steps should owners consider?
The succession process involves evaluating several steps. These steps include, but are not exclusive to:
- Identifying potential candidates.
- Training those qualified candidates.
- Publicly affirming the decision.
These action items are necessary to set the right tone and expectations for the organization and those around them.
When should owners start thinking about exit planning?
Successful transitions occur where sufficient planning takes place — five to 10 years from a planned exit is best. This time frame allows for potential ‘false starts’ as circumstances change. These changes can be a shift in the operations of the business, the unplanned departure of candidates or candidates simply not demonstrating the necessary qualifications to take over. It is important to start the process early in order to keep your options open.
Who should be involved in the selection process?
Certainly the current owner or owners should be involved as well as any identifiable candidates. These candidates need to confirm their intention of really wanting to take over.
Also, having an outside, independent entity such as a board of directors or advisory board can be helpful. The board can help balance decisions by removing the emotion, since they don’t work as intimately with the candidates on a daily basis. Board members are able to provide outside perspective and new, innovative ways for evaluating candidates.
What about contingency plans?
It’s always a good idea to have what is sometimes referred to as a ‘disaster plan’ in place. These plans are a set of key instructions for a spouse or the management team of a business to act upon in the event something happens to the owner. Unfortunately, there are situations where a key owner of a business passes away suddenly. If there is no clear direction left to anyone either in the family or in the company, the company may go out of business as a result.
Are there any other things an owner should be thinking about?
A leader who is planning to leave the organization should think about what he or she is going to do once he or she actually leaves. The most successful transitions occur when the owners take up an active hobby or they participate on advisory boards of other companies. Showing up at the business every day can undermine the whole process and give the perception that a succession has never really occurred.
The succession process needs to be mapped out like you would any other aspect of the business. Even if you’re not planning on exiting the business in the near future, being prepared ahead of an actual event sends a positive message to employees and customers that you’ve built a strong company that is focused on long-term success. ●
Insights Accounting & Consulting is brought to you by Kreischer Miller
More than 800 years ago, medieval philosopher Maimonides outlined eight levels of charity, the greatest of which was supporting an individual in such a way that he or she becomes independent. In Maimonides’ view, support was defined as a gift or loan, entering into a partnership or simply helping that person find employment.
Few things are more powerful than philanthropy — especially when its end goal is to better the lives of others. These days, philanthropy, and corporate philanthropy specifically, has assumed a broader role in society.
Today, companies give back more strategically than ever before. They align themselves with nonprofits that foster missions they believe in. The wealthiest people on the planet have even coordinated the Giving Pledge (www.givingpledge.org), where they’ve committed to dedicate the majority of their wealth to philanthropy.
At last count, more than 115 people had taken the pledge. Warren Buffett and Bill Gates may be the most prominent names on the list, but others include Spanx Founder Sara Blakely, Cavs Owner Dan Gilbert, Progressive’s Peter Lewis and Netflix Founder Reed Hastings.
Last month, one member, David Rubenstein, CEO and co-founder of The Carlyle Group, discussed the importance of philanthropy during a presentation at EY’s 2013 Strategic Growth Forum.
In his pledge letter, Rubenstein explains why: “I recognize to have any significant impact on an organization or cause, one must concentrate resources, and make transformative gifts — and to be involved in making certain those gifts actually transform in a positive way.”
One way Rubenstein is being transformative is through “Patriotic Philanthropy.” He has given $10 million to help restore President Thomas Jefferson’s Monticello home and underwrote renovations to the historic Washington Monument. Yet Rubenstein’s most noteworthy initiative is the whopping $23 million to acquire a rare copy of the Magna Carta, ensuring it remained in the United States. After its purchase, Rubenstein gifted it to the National Archives.
Not everyone has Rubenstein’s vast resources. But every organization and any individual can make their own impact.
In the workplace, for example, organizations that give back elevate their status perception-wise among competitors and peers. It doesn’t take much. But by being a company that cares, prospective employees want to work for you. For your existing team, deliberate and well-organized corporate philanthropy programs quickly take on a life of their own, becoming a rallying point.
Think strategically and get started by finding your cause. We all have them. They exist at our very core, forming the belief system we live by every day. So why shouldn’t our philanthropy follow that same course? Consider aligning your giving or volunteerism with something you personally believe in or care about; something that fits with what your company does or something that is close to your employees’ hearts.
Most important, get involved and just make a difference. It really comes down to that. One initiative that has always impressed me has been the annual CreateAthon event undertaken by WhiteSpace Creative, a member of the Pillar Award class of 2005. You can read a first-hand account of this year’s program here.
Being a good corporate citizen goes well beyond making good business sense. When you align yourself with causes you care about, whether big or small, you make a difference in someone’s life. And the bottom line is this: It is all of our duties to get involved. It’s no longer a question of if, but rather of what, when and how. ●
Dustin S. Klein is publisher and vice president of operations for Smart Business. Reach him at firstname.lastname@example.org or (440) 250-7026.
Semanoff Ormsby Greenberg & Torchia: How new FCC regulations severely limit autodialed and prerecorded callsWritten by SBN Staff
To protect consumers from unwanted autodialed or prerecorded telemarketing calls, referred to as telemarketing robocalls, new Federal Communications Commission (FCC) regulations took effect in October.
These regulations require a consumer’s “prior express written consent” before businesses can make telemarketing robocalls, eliminating the prior exception of an “established business relationship.”
“Businesses will need to modify their consumer contracts or create a separate consumer consent if they want to make these calls to their consumers,” says Ashleigh M. Morales, an associate at Semanoff Ormsby Greenberg & Torchia, LLC.
Smart Business spoke with Morales about what the new regulations require.
What calls are considered telemarketing robocalls under the new FCC regulations?
An autodialed call is any call placed using an automatic telephone dialing system that can produce, store and call telephone numbers using a random or sequential number generator. If your organization uses any type of call center software as part of a telemarketing campaign — calls offering or marketing products or services to consumers — the regulations most likely will deem it an autodialed call.
The new regulations apply to calls to cell phones as well as to landlines. In addition, the FCC considers a cell phone text message a call under the regulations.
Are any types of calls excluded?
The regulations do not apply to manually dialed calls or calls that do not contain a prerecorded message. The regulations also do not apply to purely informational prerecorded calls, such as calls from nonprofit organizations or for political, emergency or non-commercial purposes, such as those delivering information regarding school closings.
Is any customer base grandfathered in?
The FCC chose to not grandfather consumer consents granted under the old regulations. As a result, businesses and third-party telemarketers may need to re-solicit consents in order to satisfy the new requirements.
The old regulations allowed telemarketing robocalls to be made to consumers with whom there was an established business relationship. The new regulations eliminate this exception.
How can businesses best obtain written consent for calls?
To get prior express written consent, the consent must be signed by the consumer and include a clear and conspicuous disclosure informing the consumer that he or she is:
- Consenting to receive telemarketing messages using an automatic telephone dialing system or a prerecorded voice to the telephone number the consumer provides.
- Not required to sign the agreement regarding consent to telemarketing messages as a condition of purchasing any property, goods or services.
Electronic and digital forms of signature are acceptable provided the business complies with the federal E-Sign Act. In addition to modifying current consumer contracts, companies should obtain new consumers’ written consent to future autodialed or prerecorded calls at the time the consumer signs an agreement with the business. Then, the business must implement procedures to maintain records of the consents and ensure telemarketing robocalls only go to the telephone numbers for which the consumers have consented to receive calls.
What are the penalties for failure to comply?
Failure to comply with the new regulations can result in actual damages as well as statutory damages of at least $500 per call, which can be increased to $1,500 per call. In determining the amount of statutory damages, courts will look at whether the violation was willful. Since telemarketing campaigns generally involve hundreds, if not thousands, of calls, the potential damages could be great. If you have not already done so, contact your legal counsel to ensure you are complying with these new regulations. ●
Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC
If your business has benefited from California enterprise zone credits, the next few months might shock your system.
AB 93, signed into law by Governor Jerry Brown on June 12, 2013, effectively eliminates the enterprise zone program. In its place, three new tax incentives will take effect beginning Jan. 1, 2014. Will these new incentives bring the same value to the California economy? Will your business lose benefits that it has come to rely upon, or will it find new benefits?
Smart Business spoke with Marcus Halluin, CPA, tax manager at Sensiba San Filippo LLP, to find out more about these incentives, what’s coming in 2014 and what businesses can expect moving forward.
What was the enterprise zone program and what did it do for businesses?
The enterprise zone program was a long-standing state incentive designed to encourage specific business activities in designated ‘economically depressed’ areas. The program provided lucrative hiring credits, sales tax credits, net interest deductions, business expense deductions and net operation loss deductions.
What new incentives does AB 93 create?
AB 93 creates a statewide sales tax exemption, which will be available for equipment purchases made by businesses engaged in manufacturing or biotechnology research and development. It will significantly modify and restrict eligibility for the hiring credit. AB 93 also creates a new investment tax credit based on a competitive application process.
How has the California sales tax exemption changed?
The new sales tax exemption created by AB 93 targets industries and activities rather than geographic areas. Specifically, the exemption will apply to manufacturers and biotechnology R&D companies. Qualifying businesses can exclude the first $200 million of eligible purchases per year from state sales and use tax. At least 50 percent of qualified purchases must be used in the process of manufacturing or R&D.
How will the hiring credit change in 2014?
Beginning in 2014, the hiring credit will be decidedly more restrictive and will apply only to the net increase in jobs. The expected effect of this change is significant. Many businesses that previously relied on hiring credits may no longer qualify or may see their benefits significantly reduced. The new law also makes changes to the definition of qualified jobs, including reducing the number of qualifying target employee groups and requiring hourly wages between $12 and $28 per hour.
What is the investment tax credit and how will it be administered?
The investment tax credit will be based on a competitive application process and will be awarded by a newly established California Competes Tax Credit Committee. Competitive criteria have been outlined and include the number of jobs created or retained, the compensation paid to employees, the total value of the investment made in the state, the level of unemployment in the area of proposed business locations and the overall economic impact in the state of the project or business. The Governor’s Office of Business and Economic Development will negotiate agreements with applying businesses, subject to approval by the committee.
What do California businesses need to know before these changes take effect?
Businesses need to understand that the game has changed. Just because your business qualified for credits in the past doesn’t mean it will in the future.
If you were relying on enterprise zone credits, you should sit down with your accountant or tax adviser and analyze the effects of the changes. Getting caught by surprise with an unexpected tax bill could have a negative long-term effect on your business.
The new incentives are certainly worth investigating. Manufacturers and R&D companies will likely qualify for new sales and use tax exemptions. And the investment tax credit could be very lucrative for businesses that qualify and participate in the application process. ●
Insights Accounting is brought to you by Sensiba San Filippo LLP
The Check 21 Act, passed in 2003, had a dramatic impact on businesses’ cash flow by allowing banks to send digital versions of checks — eliminating the need for physical copies. Similarly, important developments are on the horizon to further enhance payment capabilities, says Tom Hoffman, senior vice president and manager of the Treasury Management Services Division at Bridge Bank.
“We’re seeing a lot of start-up technology companies focused on creating better ways to process payments, and adapters to allow accounting systems to interact with bank services,” Hoffman says.
Smart Business spoke to Hoffman about methods to help manage cash flow and services that may be available in the future.
How can a business tell what treasury management services might be needed?
A good banking partner should conduct initial assessments when clients start working with the bank, and also meet with clients on a regular basis to review needs.
For example, a growing business wanted to see if any changes could impact its treasury management needs. It had acquired a health insurance business in Southern California that processes COBRA payments, and payments were being mailed to central accounting at the company’s headquarters in Northern California. That’s a slow process. The business was able to set up a remote deposit capture (RDC) scanner to process checks electronically. There also are fields in the RDC platform for record keeping — for a payment of $100, the insurance company is paid $95 and $5 is kept for processing. Deposits are now made immediately, which speeds up cash flow and improves the flow of transaction data to the accounting system.
It’s a good idea to meet with your bank’s treasury management adviser at least annually to review your account. Look over the fees you’re paying, determine whether the services are worth the cost and see if there are other services you could be using.
Do businesses often pay for services that aren’t utilized?
It happens all of the time. There might be a base charge for Automated Clearing House (ACH) service and no activity. Maybe the business thought it was necessary, not realizing that if you’re not the party originating the ACH transaction, you don’t need the service. That can be confusing to many people. One of the benefits of treasury management consultation is that your bank should catch these oversights and alert you to save your business money.
How can business owners benefit from new solutions on the horizon?
Many start-up technology companies are working on adapters to create better ways to use existing payment rails such as the check clearing system, ACH, ATMs, and debit and credit cards. If you’re overseas, you can use your ATM card at a bank in London; so, why can’t you send a payment to an international vendor through this network and have an immediate settlement?
Technically, it can be done, but there are a lot of issues — international transfers are done through the Office of Foreign Assets Control. However with such efficiency, those things will be addressed. It can take two to four days to send a wire transfer internationally. It would be attractive to deliver a system to settle that immediately.
In terms of treasury management, the next step is to integrate enterprise resource planning systems with banking services. That’s already happening at Fortune 500 companies. The future is finding technology to create adapters that will connect the company’s banking services with its accounting platform. Businesses will be able to evaluate cash needs and reconcile the accounting system on a daily basis, rather than waiting for paper statements. It’s just a matter of creating an interface with whatever accounting software is being used.
One start-up company has a platform to upload accounts payable — all of the invoices a business receives — so payments can be reviewed and approved via tablet. CFOs want the ability to see every invoice and approve payment, even when traveling.
We’re going to see a lot of innovation. It might not be as dynamic as a new payment system, just modifying the ways existing systems are used to make cash flow more streamlined and free up working capital. Check 21 was a good example of that, and the efficiency, economic and environmental gains were tremendous. ●
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