SBN Staff

I began these series of Online Insights articles addressing the process of your writing a personal financial and business plan. My objective was to uncover the “source” — the purpose — of this planning process. I was hopeful that examining the purpose of your financial and business plan would lead to the personal question as to what is your life’s purpose. Identifying your life’s purpose should have moved the business and personal financial plan writing to a different dimension.

To further help illuminate that inner purpose and destiny, I asked you to consider two questions. The first question was intended to allow you to explore the possibilities of living life without the fear of not having enough money and think about what you would do with your money. Would you change anything? Let yourself go. Don’t hold back your dreams. Describe a life that is complete, that is richly yours.

The second question added a new “wrinkle” to your financial and business journey — your own mortality. I asked you to consider an approximate 10-year remaining timeframe to your life. Your next decade would continue as it is now. The bad news is that you will have no notice of the moment of your death. What will you do in the time you have remaining to live? Will you change your life and how will you do it?

This second question drew you closer to defining a life with purpose. Remember, our compelling theme throughout these articles is about your creating the experiences to manifest your current life of success into a life of significance. There are many paths you can take to become significant. Your own creativity and inner soul-searching will provide you with numerous ideas that equate with significance.

What adjustments would you make to your current definitions of purpose if I introduce the third question? All three questions are intended to “drill-down” to the “why” of what you do and “who” you are.  So here it is:

This time, your doctor shocks you with the news that you have only one day left to live. Notice what feelings arise as you confront your very real mortality. Ask yourself: What dreams will be left unfulfilled? What do I wish I had finished or done? What did I miss? [i]

So as we do goal planning, is today just a means to an end? All the things we chart out and itemize, does that minutia allow us to “smell the roses along the way?” Are we actually living each day to the fullest? Or, as Eckhart Tolle suggests in his book “The Power of Now,” are we living in the Now? Take the time to reflect upon the questions within this third question. Even though we plan, we are only guaranteed the present moment. How are we using each moment to create our journey of significance?

Previously we used “making an impact on people’s lives” as one example of purpose. Our prior discussion in previous articles progressed from pleasure and passion to purpose.  Philanthropy may be one of the ways to demonstrate a sense of purpose in impacting people’s lives. But what does the third question evoke in you? One question provided you with a 10-year timeframe to plan accordingly. Now, your time frame is 24 hours. In addition to all of the emotions that consume your every thought, the word “legacy” may pop into your thoughts. What legacy is created at my death, and how will that impact people’s lives?

This last question has a tendency to question all those trivial things that you once thought were so relevant and important. You have left a succession plan at death for your family (either by choice or through the intestacy rules within the state/county in which you reside). The long and short of it is whatever you have documented will transfer to your heirs and the next generation of family and employees. Hopefully planning, and not chance, will determine the future disposition of your estate. Legacy refers to the inheritance or bequests that will be created at your death.

So “piggy-backing” upon the discussion with your family and employees about philanthropic planning, what other content can be include in your “open” discussion with family and staff? Have you discussed your business succession plan? What relevant discussions have you had with the disposition of both your personal assets and your business interests? Are your heirs informed to the extent that they feel comfortable with your wishes, and are your employees comfortable with the continuation of their jobs as well as the future of the company? You’ve empowered your staff and made them ambassadors of your business’s purpose. Where do you start with finding the right successors? How do you document your transition?

So in the next few articles, let’s explore the many ways of transferring assets and purpose to our intended beneficiaries.

Robert A. Valente, CFP®, AEP®, CEO & Managing Member of RAV Financial Services LLC, can be reached at

[i] These questions are taken from the book “Lighting the Torch: "The Kinder Method(TM) of Life Planning” by George Kinder and Susan E Galvan.

Thursday, 31 March 2011 21:01

The multiple uses of business valuations

Is a business valuation needed when you aren’t planning to sell your business? What factors determine a company’s value? What do you need to know before hiring a valuation professional? These are some of the common questions that business owners pose when the issue of a valuation is raised. Since 2011 is expected by some economists to see an increase in mergers and acquisitions activity, it is a good time to review the role of business valuations.

“Valuations are useful in such circumstances as mergers and acquisitions, due diligence by a lender, succession planning, estate planning and complying with government regulations,” says Jeff Hipshman, partner, HMWC CPAs & Business Advisors in Tustin. “Even if none of these trigger events are happening now, it still can be beneficial to have a valuation. A business valuation can impart insights into a company’s strengths and weaknesses, as well as provide a road map for increasing its value. Understanding what adds value to your company can help you in future business decisions, such as timing the sale of your business for the maximum selling price.”

Smart Business spoke with Hipshman about some of the typical questions that business owners ask about business valuations.

Why is a valuation needed?

Valuations can be helpful in many situations, including some you may not have even thought about:

  • You want to buy or sell a business.
  • You are divorcing.
  • You use gifts as a tax strategy in your estate plan.
  • You are liquidating your business.
  • You are the executor of an estate.
  • You are setting up a buy-sell agreement.
  • You are seeking business financing.
  • You are doing strategic planning.
  • You require a fairness opinion.
  • You need to comply with certain FASB standards.
  • You are converting your C corporation to an S corporation.

What methods do valuators commonly use?

The business is first analyzed and then a valuation method is selected based on the analysis, the interest being valued and the purpose of the valuation. Your financial statements are a starting point when setting a value for your company. But important information will be missed if the analysis relies solely on the financial statements. Valuators select their valuation methods based on their analysis and all other facts and circumstances.

Typically, a valuator considers one primary method to derive the asset’s value, and one or two others to serve as checks or supports of that value. The process of valuing a business is necessarily somewhat subjective. Valuation professionals may vary in their estimates. In using the various methods, even the same valuator may come up with several estimates.

Here are some of the most common valuation methods:

  • Income approach. This approach capitalizes the company’s expected income or cash flow stream by determining the rate of return on investment required by a potential investor, and it sets the value at the amount appropriate to generate that rate of return. This method is often used in conjunction with a discounted cash flow analysis to estimate the present value of the future stream of net cash flows generated by the business.
  • Market approach. This approach gathers data from acquisitions of similar businesses or from the stock prices of comparable publicly traded companies. The valuator adjusts the data to account for differences between the subject company and comparable firms. An adequate number of comparable companies are necessary to produce credible results.
  • Asset-based approach, also called adjusted book value method. This approach requires establishing the value of all assets and liabilities as a method of valuing the entire business. This method is often used when a business’s earnings and cash flow don’t materially contribute to its value. The identification and valuation of intangible assets is the most challenging aspect of this method.

To ensure a quality valuation, be sure to hire an independent valuator who knows the ins and outs of your company and industry.

What makes some businesses worth more than others?

Many factors affect your company’s value. In addition to financial factors (e.g., profitability, revenue sources, cash flow, current debt and equity), some of the key factors affecting value include:

  • Economy: Economic conditions, especially costs of materials and availability of capital, can profoundly affect a company’s continued profitability.
  • Industry: A particular industry’s economic outlook can have an impact on the value of a business. In addition, markets and channels of distribution as well as changes in production technology can greatly affect a company’s future potential and have a major impact on value.
  • Competition: The number and nature of current and potential competitors and their ease of entry into a company’s market can profoundly affect a company’s success.
  • Regulations: From a valuation standpoint, compliance requirements and restrictions to market entry may be particularly important. Also, current or anticipated zoning and licensing restrictions can substantially affect price.
  • Market position: Reputation, pricing policies and diversification of customer base all significantly affect a company’s ability to generate earnings.
  • Intangibles: An established name and reputation, a customer base, a skilled work force and many others are what increase the value of a business above its tangible assets’ fair market value. They can greatly increase a company’s profitability.
  • Internal controls. The functioning of accounting and operational controls affects risk. If internal controls are faulty, financial and other data could be as well.

Jeff Hipshman is a partner at HMWC CPAs & Business Advisors (, one of Orange County’s largest local accounting firms. Contact him at (714) 505-9000 to discuss how your company or client could benefit from HMWC’s business valuation services.

Every business owner has, or at least has heard of, a business plan. It summarizes the operational and financial objectives of your business and gives a high-level overview of the operations of your company. Business plans are not only useful for planning purposes, but are oftentimes necessary to obtain financing and attract investors.

But what about a business model? This distant cousin of the business plan is rarely written or talked about, but it’s what separates a Starbucks from an ordinary coffee shop. It describes your business and how it will generate revenues. It assesses the marketplace’s needs, risks and costs and is the basic framework your company will follow to become profitable.

Smart Business learned more from Matt Marchbanks and Paul Orsborn of Comerica Bank about the main components that your business model should contain.

What is the first thing a business model should contain?

Marchbanks: The first item to include is a description of the products and services your business will offer and why customers should purchase them. What makes your business unique and differentiates your products or service offerings? How will they fulfill the needs of customers? You must consider in your business model how you will transform your product or service into something attractive to consumers and how it will be made available to them. In essence, you should describe what will make your business successful.

Should necessary expenses be included in a business model?

Orsborn: Yes, the next crucial item to consider is how much your fixed expenditures will be. First, think about the core operating costs of the business. This includes everything from rent and employees to equipment and office supplies like computers. Also take into consideration the cost of any fees you may encounter when starting your business, like licenses, agreements and legal, accounting and insurance fees. You should also determine how much your product will cost to produce. Will you need a factory or supplier to produce it? Will you need to pay for shipping or transportation across the country? If you’re going to offer a service, think about what upstart costs you will incur.

How should revenues be factored in?

Marchbanks: The next step is determining how you will make money to offset the cost of your expenses and, in the end, be profitable. Who will your potential customers be? Look at the demographic you will be targeting and identify your target customer. Next, start to think about how you will develop customer relationships and how you will sell your product or service. You will need to develop a marketing and distribution strategy. Entrepreneurs should learn about trends and new breakthroughs and research their competitors. It’s also a good idea to talk to people outside of your industry. You never know what valuable information you can gain from an outside perspective.

Should a detailed financial plan be developed?

Orsborn: Yes, your detailed financial plan should include the initial investment needed to get your business up and running, like facilities and equipment, and also working capital to begin and sustain operations. It should also include an itemized list of expenses and revenue projections and keep track of profit, return on investment and cash flow. Also remember to keep continually thinking about your business model after you start your business, especially when it’s time to branch out. If your business goals change, it’s time to revise your business model.

Matt Marchbanks and Paul Orsborn are senior vice presidents for Comerica’s Texas Business Banking Division. Comerica Bank is the commercial banking subsidiary of Comerica Incorporated (NYSE: CMA), the largest U.S. banking company headquartered in Texas, and strategically aligned by three business segments: The Business Bank, The Retail Bank, and Wealth & Institutional Management. Comerica focuses on relationships, and helping people and businesses be successful. In addition to Dallas, Houston and Austin, Texas, Comerica Bank locations can be found in Arizona, California, Florida and Michigan, with select businesses operating in several other states, as well as in Canada and Mexico. Comerica reported total assets of $53.7 billion at Dec. 31, 2010. To receive e-mail alerts of breaking Comerica news, go to

A “set it and forget it” belief is the fast-lane to failure in Web marketing. In fact, one of the most detrimental moves that many companies make is to build a website without understanding that the creation of the site is just the first step in an endless commitment.

According to Kevin Hourigan, the president and CEO of Web designWeb development and Internet marketing agency Bayshore Solutions, you have to constantly update and market your website.

“Recent statistics show that 80 percent of customers begin their buying research online, and to ensure that your product or service shows up for these potential customers, you need to take some basic actions to keep your website current and performing,” says Hourigan. “This includes frequent updates and publishing relevant content that showcases your company’s subject matter expertise.”

Smart Business spoke with Hourigan about what it takes to keep your Web strategy up to speed so it produces consistently positive results for your business.

What is the first step in an effective Web strategy?

You must start at your website. Basic requirements of being found at the top of the search results when people are looking for your product or service are the relevancy to the topic they are searching for and the freshness of the content. Websites that are built with the correct structure to support relevancy and the flexibility to allow fast changes are the essential core of a successful Web strategy.

My best advice on how to start is to build with the never-ending end in mind. Really understand what you want from your website before you design or develop it. What are your goals for your website? What do you want your website to do? Generate leads; be used as a research tool where prospects can learn more about you; serve as an interactive tool for your existing customers; recruit employees, etc.? Your website goal, or prioritized goals when there are more than one, are your guide. Make these the driving force and litmus test for all aesthetic and functionality considerations when creating your site.

How do I bring it all together?

Three things to be sure to have your website integrated with are:

  • A content management system (CMS).
  • Analytics (Google analytics is free and can serve this need well).
  • Integration with your CRM for tracking leads through to sales.

These will help ensure that your website is built to be search engine optimization-friendly, and friendly to your Web marketing needs in general, which are a moving target. If it takes a Web programmer to add Web pages or affect a change to your website, then your Web marketing is nearly doomed before it begins. When you are forced to incur the time and expense of programming to achieve the ongoing needs of your Web marketing, you bog down your ability to quickly adjust to the dynamic nature of marketing. This costs not only time and money; it will cost you sales and competitive performance in your market. A CMS enables marketers to do your Web marketing. Analytics is a prerequisite to effective SEO and measurement. Integration to your CRM enables accurate tracking of the bottom line impact of your Web investment.

Having your core website solidly in place and able to meet the needs of ongoing change enables you to best utilize Web marketing tactics that achieve your goals.

How do I develop a winning ongoing Web strategy?

A Web strategy that continues to perform is an ongoing process of planning, executing, measuring and adjusting.

Planning your Web strategy is often the most intense and most crucial exercise.  Again, your website goals are your litmus test for identifying, evaluating and selecting the tactics you will use, as well as how and when to measure their successes.

A great rule of thumb is to be readily able to answer:

  • What goal you are furthering with a tactic.
  • How it influences or causes this progress.
  • What metric you are using to gauge it.

In addition to the core functionality and flexibility of your website that supports this iterative process, it is key to have talent on board that understands the balance and interdependencies of different Web marketing tactics. This allows you to best execute to achieve your goals.

When measuring your Web marketing performance, focus on metrics that are tied to achieving your goals. An example of this is to look at not just the number of leads a tactic generates, but also the cost per lead and the percentage that converts to proposals and sales. This perspective will keep you from getting lost in the metrics, which is easily done.

Regular analysis will guide the critical fine-tuning of your Web marketing mix.  This is an ongoing effort, customized to your business and the evolving conditions of your marketplace. When done right, your Web strategy can be made of very different elements from one year to another, and for good reason. It needs to be a moving arrow locked onto your moving target.

Taking this disciplined approach to crafting your Web game plan is how the consistent best performers separate themselves from the competition.

A constant of the Internet world is change. Very often this is rapid change. Having your core and flexibility in synch puts you ahead of the game. From there, it is vital to put in place the processes and the people who are skilled and equipped to keep the strategic cycle of Web marketing in motion and delivering best results.

For a snapshot of Bayshore Solutions’ Web marketing methodology, visit

Kevin Hourigan is the president and CEO of Bayshore Solutions. Reach him at (877) 535-4578 or

When it comes to being successful, it’s all about momentum. One small win needs to be parlayed into two wins, which in turn need to fuel the big win needed to make budget. You not only have to get people moving in the same direction, you have to keep them moving at a faster and faster pace. Otherwise, everything just stops. There are many aspects to momentum, and it starts with vital business ideals like the mission and vision statement, runs through relationship building and ends somewhere on the far side of culture. Only when everything is working together are you able to turn multiple small victories into momentum that can change an entire organization.

Below is a sampling of what three CEOs previously featured on the cover of Smart Business Pittsburgh had to say about keeping your momentum going to drive change.

“You’ll have a lot of people who won’t really share your vision and will tell you all of the reasons why it won’t work. But if you really believe in it, you move forward anyway and find ways to make it work.”

Ed Stack, CEO, Dick’s Sporting Goods

“The key is to really show them what’s going on today and explain very clearly why the organization needs to change; then get them to help develop that future collectively with you.”

Dr. Christopher Olivia, president and CEO, West Penn Allegheny

“Whether it’s your clients or your employees, you’re less successful unless you have a relationship with these people. Everything we try to drive is relationship-driven, and it makes us more successful on the service side, it makes us more successful on the sales side, and it makes us more successful on the employee-retention side.”

Patrick Hampson, founder, chairman and CEO, MED3000

Believe in your plan and don’t be detracted by naysayers.

Explain to employees why things need to change and get them to help you do it.

Everything in business is driven by relationships.

Monday, 28 February 2011 15:35

Power to the people

One morning in January, Ric Selip asked his wife for his last goodbye kiss as the owner of Grand River Rubber & Plastics Co. Later that day, he signed purchase agreements and transition documents for his Ashtabula company.

Fortunately, Selip was (and is) confident about the move because the buyers are a pretty familiar group – his employees. The company is converting to an employee stock ownership plan (ESOP), a transition that will mean minimal operational or cultural changes and continued financial stability.

In the press release, Selip said he, co-owner/executive vice president Joe Misinec and senior vice president Donald Chaplin - who will all continue to manage the company during the transition - are “confident we have chosen the very best people - employees right here in Ashtabula County - to carry on the legacy, success and great work of this company.”

Smart Business spoke with Selip about the benefits of ESOP.

Tell us about the impetus behind turning Grand River into an ESOP.

My partner Joe Misinec and I have been running Grand River Rubber & Plastics for 35 years. While we looked at other options, the ESOP option offered us a smooth transition to the new leadership team. The improving economy of 2010 further proved it was time to put the leadership and direction of this great company in the hands of the next generation. We have always recognized that our people are our greatest asset. We have many long-term employees who have been with us every step of the way, and we wanted to share the future with all of them. There was no additional bank financing taken on to complete the transition. We will hold the note and be paid as cash flow allows. This was important in that we did not want to, in any way, put the company under any financial stress. This is how we have always run the company and will until we exit stage right, as they say.

How does this benefit you, as owners?

As owners, we were honored by the fact that the employees have chosen us to continue to run the company through the transition. By transitioning the company to the employees, it will not only allow the company to maintain a strong balance sheet, but allow us to secure our future personally. Until the ESOP loan is paid by the employees, we will still manage the company. Additionally, we do not have to be distracted by a strong culture change – a change that would undoubtedly come from an outside buyer.

What challenges did you face in both making this decision and executing it?

Statistics consistently show that employee-owned companies outperform non-employee owned companies. Our challenge was educating our workforce as to the benefits of ESOP. In early 2010 we brought a small group of employees to the Ohio Employees Ownership Center Conference. If we learned nothing else from that day, it was: “If you expect employees to act like owners, you need to start treating them like owners.” We embarked on a consistent program of employee education on the benefits and risks of this potential course.

What benefits does this create for the company?

The benefit for our company is a smooth transition without financial stress or the worry that might come from an outside purchaser. Our community, vendors, suppliers and customers can rest easy knowing a strategic plan is in place – a plan authored and executed by owners and executives they have always known.

How will your role change in the new organizational structure, and have you developed an exit strategy for your personal involvement?

Our goal is to continue to operate the company through the better part of this new decade. This will be an exciting time of teaching to lead and learning to trust in our employees. We firmly believe that this plan will be successful as the employees can move forward with their destiny in their own hands. Our plan is to stay though the transition and the completion of the ESOP loan.

How to reach: Grand River Rubber and Plastics,

Dustin S. Klein and Brooke Bates contributed to this article.

When a company finally comes to terms that its voice and data convergence is severely lacking, it becomes essential to establish criteria to launch a consistent, yet potentially tricky, foundation. Because businesses large and small rely on phone and data systems as a lifeline to communicate with customers, suppliers and staff members, practical decisions need to be made and failure is a real possibility.

The key to a successful transition to VoIP (Voice over Internet Protocol) without disruption of company operations lies in the merging of familiar platforms that are currently in use, thus optimizing the existing infrastructure, says Jose Zamora, senior IT technician at ATW Management Inc.

Since VoIP can share the same CAT5e data cabling by prioritizing voice over data to protect quality, phone calls can be made without affecting data speeds. Wiring installation and maintenance costs can be controlled if not eliminated. The new architecture consists of a VoIP phone system merged with the existing data infrastructure to create a unified communications framework.

Smart Business spoke to Zamora about how accomplishing this means taking advantage of how VoIP phone systems and their features have evolved to meet the ever-changing needs of today’s businesses.

What VoIP technology is available to businesses today?

Today’s telecom manufacturers offer VoIP equipment that ranges from easy-to use ’plug and play‘ systems with limited capabilities to feature rich systems that encompass video, voice and data along with all the bells and whistles. The common thread is associated with licenses, which are necessary for connectivity and operational utility. Fortunately, basic functions are sold in bundles. Most VoIP products embrace Session Initiation Protocol (SIP), which allow interoperation within a variety of network hardware implementations and phone sets from different manufacturers that also support SIP. This gives maximum flexibility with a real potential for cost effectiveness and creativity. However, the advanced function licenses can be difficult to understand and implement. But this is also where the real creativity lies.

How can features be used within a business?

VoIP deployments used to be only associated with multiple locations and global entities, but new and expanding features provide compelling reasons to evaluate and consider VoIP technologies for businesses of all capacities. Call centers as well as service centers utilize customizable software license packages that enable multiple auto attendants, with multi-language abilities, to route calls to multiple call groups. The VoIP system will indicate the position of a call in the call queue and relay expected wait time to both the user and caller. Overflow routing can queue a call, place in a holding pattern, and forward it to a less active user or a prominent sales associate, reducing the chance of a missed call or lost sale. Call attached data components can track vital notes and caller identification information and allow data to be exported in various forms. Utilizing a PC in place of, or as an accessory to the phone set, will enable a screen ‘pop-up’ to display a customer’s information prior to taking the call. This allows the user, whether in the accounting, sales, or inventory departments to simultaneously view data as well as use all of the features of their desk phone from their PC screen utilizing IP Softphones. The IP Softphone is an incredible tool that gives the user complete phone system features from the laptop or even a PDA device utilizing Bluetooth technology.

How does this technology benefit today’s remote and telecommuting work force?

Previously only available to receptionists, call appearance and busy extension details are now available to every user. Current VoIP applications can grant access to extension status and incoming call handling and allow anyone to transfer calls to the proper user while informing the user if the transfer will result in a voicemail or land in another queue. Additionally, users can activate a ’find-me, follow-me’ feature that forwards to multiple numbers or extensions until the desired recipient is contacted. To give a 24/7 presence, home phones and computers as well as cell phones can be a part of the network. Telecommuters and sales departments may assign a supervisor to silently monitor calls and provide a ’barge-in’ feature to allow a more experienced representative to handle sensitive situations. Utilizing Exchange servers and Outlook email clients provides system-wide communication options as well. Voicemail messages taken by the VoIP phone system can be converted to text or wave files to be forwarded to a cell or smart phone, email, or voicemail on a different phone. Internal callers can access cellular networks for emergency redundancy or utilize an independent software gateway.

What about businesses with more than one location?

The most notable environment for VoIP deployments remains with the connection of multiple offices through data connections creating a transparent environment between the users. The use of a single receptionist to handle all calls in a multiple location environment reduces overall operation costs. The common challenge that a VoIP phone system can resolve is the effective management of remote users by giving access to all of the management tools available internally. The elimination of toll charges between locations is another benefit when deploying a VoIP phone system.

When effectively deployed with an existing data infrastructure, a VoIP phone system is the most practical foundation for businesses looking to converge their voice and data applications. Clearly, VoIP is quickly becoming the standard for cutting edge businesses and, when coupled with a technology that can save and make money, the implementation justifies the means.

Jose Zamora is a senior IT technician at ATW Management Inc. Reach him at or (281) 931-8400.

Smart Business spoke with John M. Leonard, first vice president and regional manager of the Atlanta office of Marcus & Millichap Real Estate Investment Services, about the advantages a third-party real estate firm can provide when you’re buying or selling property.

Why should sellers of real estate utilize the services of a third-party agent or firm?

Building owners should utilize a third-party intermediary or brokerage firm when selling their properties in order to achieve the highest possible price for their real estate, while ensuring that their long-term investment and wealth strategies are executed. At this juncture, sellers are facing declining but slowly improving property values in many markets nationwide. Those values, combined with historically low interest rates, make it an opportune time to buy real estate. Now more than ever, sellers require the knowledge of a market expert who understands how to achieve the highest price per square foot, while maintaining the investment goals of their clients, all while having superior knowledge of the submarket in which a property is located.

The key to maximizing value for the seller is the ability of the agent to create a market for each asset. The primary driver to a competitive bidding environment is broad exposure. With the right representation and marketing, an agent will provide a professional package with defensible underwriting to a large universe of qualified buyers. The result is usually a number of offers from which the seller can decide which best meets their objective with regards to price and terms.  

For example, Marcus & Millichap was founded 40 years ago on the premise of making a market for each property we represent. Each agent in every city across the country should have the ability to match the property he or she is listing with the largest pool of pre-qualified investors. That’s the advantage a third-party intermediary can offer: Unparalleled access to investment capital from a variety of sources, including private investors, REITs and other institutions.

With four decades of investment brokerage specialization and the largest sales force in the nation, Marcus & Millichap has access to the largest pool of qualified investors in the industry, including private and institutional investors and 1031 exchange buyers. Each agent has relationships with hundreds of investors, and through these relationships and our marketing network, we operate without geographic limits, making a market for each property by accessing capital from coast to coast.

How can a third-party intermediary firm like yours provide such deep access to U.S. investors?

We have created a property marketing system that contains an extensive inventory of investment real estate, which is enhanced by the expertise of our 1,200 investment specialists. Over the years, we have developed a powerful system for maximizing value for sellers of commercial real estate. One of the cornerstones of this marketing system is our ability to generate the broadest possible exposure for every property locally, regionally and nationally. By making a market for each property, we maximize value for our clients.

This central property and listing database enables the instantaneous communication of listing information to our agents across the country. An agent can specify a client’s property investment criteria. When a matching property is listed, the agent is immediately notified. This system serves as a valuable tool, matching each property with the optimal investors. With an understanding of the owner’s objectives and a thorough underwriting of the property, an integrated marketing plan is then developed. Agents identify and target the most qualified owners and investors locally, regionally and nationally, specifically matched to the property. Marketing materials are then presented along with follow-up contact.

What additional marketing efforts would you recommend?

Further marketing efforts come from advertising in national, regional and local publications to create the broadest exposure for exclusively listed properties. Also, in some of our biggest markets nationwide, we host investor symposiums, supported by our national research group, to educate investors on market conditions and investment trends and to showcase new property listings.

This results in maximized value for sellers, one property at a time. By dedicating all of our focus, resources and training to real estate investment services, we offer an unmatched level of experience and expertise. Investment specialization and submarket focus also results in strong relationships with private investors nationwide and even abroad. Any good brokerage intermediary should encourage a culture of information sharing, not competition.

In addition to marketing, what other services does a premier third-party intermediary provide?

A firm should be able to provide a spectrum of investment and financing services to each client. We enhance our brokerage services by leveraging the expertise of our subsidiary firm, mortgage broker Marcus & Millichap Capital Corporation (MMCC). In today’s challenging financing environment and as underwriting standards continue to remain tight, we provide access to a wide array of lenders and financing solutions across all property types and markets.

Also, our dominance in the private investor market results in substantial capital seeking larger, institutional properties. Our specialty groups have long-term relationships with the nation’s most prominent institutions and assist them in market analysis, acquisition and disposition of properties nationally.

What is the role of a specialty group in brokerage firms?

Our specialty groups provide investors with in-depth expertise on each major property sector, as well as some niche sectors. Our biggest group, the National Multi Housing Group (NMHG), provides institutional and private investors with guidance on the U.S. apartment sector. The National Retail Group (NRG) provides investors with investment and capital solutions in the single- and multi-tenant retail sector. Our National Office and Industrial Properties Group (NOIPG) provides investors with investment services related to the office and industrial sectors. Additionally, we have our Net Lease Properties Group (NLPG), National Hospitality Group (NHG), National Self-Storage Group (NSSG), National Manufactured Home Communities Group (NMHCG), among others.

One of our specialty divisions, the Special Assets Services (SAS) division, provides unique services to investors whose properties face distressed situations. During the height of the economic downturn in 2009, the SAS marketed and closed more $1.7 billion in transactions for financial institutions and government agencies. The division encompasses nine regions across the nation and provides a full array of capabilities to lenders. Services range from property evaluation, market assessment and valuation to asset management and sales.

John M. Leonard is a first vice president and regional manager of the Atlanta office of Marcus & Millichap Real Estate Investment Services. Contact him at or (678) 808-2700.

You’ve trimmed all the visible fat from your operations and improved efficiency as much as you can. Yet your bottom line still isn’t where you want it to be. So now you’re thinking about diversifying into a new market or product to improve your bottom line. Not a bad idea. Done right, diversification can be a lifesaver. Done wrong, however, it can be, at the very least, a letdown and, at the very worst, a quick path to disaster.

“Business owners diversify for many reasons, such as to gain a competitive advantage, minimize risks from concentrating too heavily on a particular market, or as a method to adapt to customers’ needs,” says Steve Williams, managing partner at HMWC CPAs & Business Advisors in Tustin. “Branching out to new lines of business, markets and suppliers may seem like a good idea, but, without a careful strategy, adequate resources and realistic expectations, it could turn out to be a bad one. We help our clients to be successful from the initial stages.”

Smart Business spoke with Williams about the best path to diversification.

What are some typical strategies for diversifying?

Diversification can take on many forms. You can take advantage of new market opportunities through introduction of a product developed through research and development. You may want to expand a product or service line to gain additional customers. Another alternative is to take on an entirely new area of business through a merger or acquisition.

Sometimes it makes sense to buy another company for economies of scale, reduced supply-line costs or other economic reasons. One type of diversification is horizontal integration, which involves expansion into the same industry and/or a similar product area. For instance, a vehicle dealership could buy another dealership.

Another type of diversification is vertical integration, in which a company moves into a different level of the supply chain. Usually each subsidiary, owned by the parent company, combines together to form a more efficient and cost-effective supply chain. For example, a manufacturing company might purchase a distributor or retailer. Some businesses use vertical integration strategies to eliminate the middleman — such as wholesalers and retailers — and keep the profits in-house.

These diversification strategies typically require significant capital expenditures. In most cases, you’ll have to pay (i.e., acquisition costs, time, operational changes and other resources) before you can reap the benefits, which may take time to materialize.

What are some easier, less-costly strategies?

There are several less-expensive methods to enhance your product lines and service offerings and provide the best value for your customers while maximizing your business’s growth over time. Some strategies to consider:

  • Ramp up sales. If you don’t have an outside sales team, consider hiring salespeople (or contracting with independent sales reps) to prospect for customers. Your distribution channels, which are in contact with a diverse customer base, can also be instrumental in finding new business.
  • Add the extras. You can compete nationally and globally by offering value-added services to your customers. For instance, don’t just sell a product; offer a complete package that includes warranties, preventive maintenance contracts, educational and training offerings, and any other services that will make the product more attractive.
  • Know your customer. Get to know your customers’ businesses and the changes they’re making, such as an increase in production capacity or new packaging for a product. Offer to support their new business goals by customizing products, services and other offerings to fit their needs. This will convey your value to them, help develop a new business opportunity and keep your customers satisfied.
  • Seek smaller fish. Many companies rely heavily on large-volume customers who make up a significant portion of their sales base. Consider diversifying your customer base to lessen the impact should a major customer decide to depart.

Is a business plan needed?

Adding successful products or services, for example, isn’t as simple as just buying equipment and finding building space. Develop a business plan that encompasses goals, production, human resources, financial and marketing issues. Goals, for example, may include increasing sales, gaining a broader product line, and having greater control over quality and delivery. Make sure that the plan identifies important details, such as capital costs, incurring additional debt, time commitment to manage the new product line, etc. Calculate the potential profitability by projecting an income statement that considers all the additional revenue and expense (both fixed and variable costs) factors. Consider how your projected balance sheet and income statement might affect relationships with banks or investors. These are just some of the issues that should be addressed in your business plan.

What about ‘barriers to entry’?

When you expand into new markets, there are ‘barriers to entry,’ which can include capital investment costs, branding, government regulations, taxes and permits, unions, heavily entrenched competitors and a wide array of other factors. For example, when you look to get into new markets you’ll likely be up against many established relationships, so you’ll need to identify solid reasons for customers to jump ship.

Barriers to entry should be fully analyzed, especially the financial factors, before committing to a diversification plan. Consider your company’s strengths (such as a highly skilled work force or any specialized equipment you can bring to the table) as well as its weaknesses (i.e., poor cash flow at the moment). Be objective, honest and realistic in this assessment.

Steve Williams, CPA, is the managing partner of HMWC CPAs & Business Advisors ( in Tustin. He also heads the firm’s Healthcare Practice and has served healthcare clients for more than 25 years. He can be reached at (714) 505-9000.

Family-owned businesses can be one of the most rewarding types of business, but also can be one of the most difficult to manage, especially when it comes to working relationships. Everything from advancement and salaries to hiring new talent and changing vendors can be overlooked or mishandled so as to not offend a family member.

Smart Business learned more from Donna Mittendorf and Jim Terrell of Comerica Bank about managing a family-owned business and how to prevent the problems and pitfalls that typically arise when working with those with whom you have close personal ties.

What are the advantages of having a family-owned business?

Donna: There are numerous advantages to having a family-owned business, such as the continuity it affords with customers and vendor relationships. Customers and vendors know your family name and will continue to work with you as a result. There is also a built-in loyalty to the business, and its long-term approach and nature gives it a competitive edge. Family-owned businesses tend to spend money wisely since they are building wealth to pass on to future generations, and they are typically more stable as they are less likely to make radical cutbacks during an economic downturn.

However, don’t turn these advantages into complacency. It’s easy for a family business to become complacent and not welcome change if the business is successful. The problem is your competition is keeping up with technology, product advances and other advancements that could render your business ineffective.

How can you minimize conflict when working with family?

Jim: It’s difficult to balance business relationships with family ties. A clear understanding of the roles and expectations of each family employee can prevent many of the problems that tend to pop up in family-owned businesses. Keep everyone accountable and, when a major decision needs to be made, make sure it’s made with the growth and stability of the business in mind.

How should a family-owned business plan for change?

Donna: If the business is going to be handed over to the next generation, the decision needs to be made well in advance. Other issues like how management will change with the new generation and what the responsibilities are for each member also need to be addressed well ahead of any leadership change.

Business owners also need to make sure to have their estate planned out and have items like a will and stock transfers in order in case of a sudden emergency. It’s also a good idea to have leadership transition and family ownership plans in writing so there is no confusion.

Family businesses often take great pride in their traditions, but make sure you don’t take this to an extreme and forget to change and grow. This is one of the most common mistakes family-owned businesses make and one of the main reasons some are unsuccessful.

How should family-owned businesses handle succession?

Jim: There can be resentment among family and longtime non-family employees if succession is not handled properly. It’s not easy to bring in a son or daughter and introduce him or her as the new boss to people who have been working at your business for decades. Make sure family members are brought in at the bottom, or close to the bottom, and let them work their way up. They will feel they earned the position and there will be less resentment from other employees than if they start off in a corner suite.

When should a family-owned business look for outside help?

Donna: It’s a good idea to look for outside advice on plans for succession management, buy-out arrangements or in the event of aging of principals, illness of an owner, or children who want in or out of the business. Business owners should seek reputable organizations and professionals and assess what each can offer. Ask the institution for samples of the work they have done and if possible, try to get previous customers’ testimonials. Comerica advisers can help with everything from estate planning and portfolio management, to trusts and insurance.

DONNA MITTENDORF and JIM TERRELL are senior vice presidents for Comerica’s Texas Small Business Banking Division. Comerica Bank is the commercial banking subsidiary of Comerica Incorporated (NYSE: CMA), the largest U.S. banking company headquartered in Texas, and strategically aligned by three business segments: The Business Bank, The Retail Bank, and Wealth & Institutional Management. Comerica focuses on relationships, and helping people and businesses be successful. In addition to Dallas, Houston and Austin, Texas, Comerica Bank locations can be found in Arizona, California, Florida and Michigan, with select businesses operating in several other states, as well as in Canada and Mexico. Comerica reported total assets of $55.0 billion at September 30, 2010. To receive e-mail alerts of breaking Comerica news, go to