Overseas sales and exports can really help business owners grow their companies. But, when the company gets its first international inquiry, an owner might say, “I always deal cash in advance. Send me a check. I’ll send you the product.”
That’s not how the world works, says Art Rice, vice president and manager of International Operations and Product Management at FirstMerit Bank.
“The world rarely operates on cash in advance anymore. So, it may be days, weeks or months between the actual sale of the merchandise or service and the resolution of the accounts receivable,” he says.
This extended sales cycle can strain your working capital, but the U.S. government has several programs to help, Rice says, including the Export-Import Bank of the United States (Eximbank) and the Small Business Administration (SBA).
And your banker can be very helpful as you get into international sales or expand into new markets, says Frank Pak, vice president, International Division, at FirstMerit.
“We can serve as a great referral source to other professionals involved in supporting exporters, and also referring them to government assistance centers like the U.S. Export Assistance Centers or the SBA, an international lawyer, a freight forwarder, export insurance broker, etc.,” he says.
Smart Business spoke with Rice and Pak about available export support programs.
What are some export support programs?
The Export Working Capital Programs of the Eximbank and the SBA provide an exporter with funds for things like materials and payroll while producing the product. Banks receive a 90 percent guarantee on the loan’s principal and interest, because the government wants to encourage U.S. job creation. Also, the work in process can be included in the advance funding calculations.
It’s better to work with a bank that has Delegated Lending Authority from the Eximbank or Preferred Lender designation from the SBA for this program as it can expedite the process and assures that you’re working with an experienced lender.
Credit Insurance on foreign receivables is when an exporter purchases protection against non-payment of its foreign receivables from Eximbank or a private insurance company. Normally, banks don’t allow the foreign accounts receivable to be included in a company’s borrowing base because of the perceived heightened risk when buyers are located in a foreign country.
With insurance, an exporter has the opportunity to offer longer repayment terms. For example, a company, that typically offers no more than 60-day terms to its customers, sees its competitors in foreign markets offering 120-day terms. With export credit insurance, the exporter is able to take the risk of longer terms that will enable it to be more competitive. Also, if it assigns the insurance policy to its bank, the bank can advance against those receivables, improving cash flow.
For larger export sales, buyers in higher interest rate countries often look for some form of extended payment terms. Typically referred to as buyer financing, the exporter can decline and lose the sale, offer unprotected terms or use a form of insurance to protect its medium term receivable. The U.S. government supports such sales with programs called Medium Term Loan Guarantees. A bank is willing to participate because repayment is guaranteed by the U.S. government. The exporter benefits because it satisfies what the buyer needs and receives payment from the bank almost immediately after shipping its product. While there are restrictions, successful exporters have used such programs for 70 years.
What’s important to know about using export programs like these?
You don’t have to go it alone. Your banker is an advocate who can help you find the right resources as you set up your export program and understand the advantages and disadvantages of available payment methods.
Contacting your banker early in the process, as you’re developing your business plan and researching markets, will shorten your learning curve and help you become successful sooner. Banks can also direct you to government resources, which have additional tools available to support exporters as they expand into new markets. Reach out to your bank now, even if you’re just thinking about exporting overseas, because your banker will be happy to share his or her expertise. ●
Art Rice is vice president and manager of International Operations and Product Management at FirstMerit Bank. Reach him at (330) 384-7178 or email@example.com.
Frank Pak is vice president, International Division at FirstMerit Bank. Reach him at (216) 317-7399 or firstname.lastname@example.org.
Insights Banking & Finance is brought to you by FirstMerit Bank
Many people join a nonprofit board of directors because they are passionate about the organization’s mission. What they really want to do is to help the organization accomplish it, but there is a host of governance responsibilities that go along with that.
Marie Brilmyer, CPA, M.Acc., a director of assurance services at SS&G, says nonprofit boards need to think about strategy, monitoring, oversight, compliance and financial health like a corporate board.
“A board needs to think ahead,” she says. “It needs to be sure that the organization can fulfill the mission today and tomorrow. It can’t be uncomfortable with profit because a model where an organization continues to lose money, and is budgeted to do so, is clearly not going to be sustained.
“While there are different nuances, at the end of the day, they really need to be looked at, whether it be for-profit or nonprofit, in a similar manner with regards to finances.”
Smart Business spoke with Brilmyer about the nonprofit board’s role in creating smart, sustainable fiscal decisions.
Many nonprofit board members are from the corporate world. How similar are the two board types?
It’s not that different. Nonprofit boards look at the executive director’s performance; corporate boards look at the CEO’s. Corporate boards look out for investors; nonprofit boards look out for the donors. The two discuss compensation, internal controls and fraud risks. Each of the respective boards’ charges can be aligned.
Nonprofit boards often have people with financial backgrounds for their expertise. The organization looks to the board to set financial policy and help management make decisions. Boards go through the budget process, review financial reports regularly, ensure investments are prudent and oversee compliance. Compliance is key because nonprofits follow rules and regulations for gifts, endowment restrictions, fundraising, lobbying, tax filings and private inurement, when a 501(c)(3)’s money is devoted to private use, not charitable purposes.
What can happen if the oversight falls short?
Not only could the nonprofit organization be unsustainable, it could lose its tax exemption status. Recently, there’s been a slight trend of nonprofits, especially in Ohio, losing that status by not properly filing taxes. Although recent IRS regulations make it easier to regain tax-exempt status, it can still cripple the organization.
How should a board be set up?
Boards need to discuss financial matters routinely, which might be more often than standard board meetings occur. At every meeting, the board should receive a formal report from the treasurer or staff — and then ask questions of those reports. Check for consistency from period to period.
Monitor restricted dollars regularly. If a donor donates money for a specific purpose, such as a scholarship, somebody must keep track of that donation to ensure it gets used for what it was intended.
Examine the organization’s internal controls. In a small organization with few employees, the board should see if it could possibly be part of that internal control function, such as acting as a check signer or reviewing certain transactions.
Assess the capabilities of the accounting staff. Is the bookkeeper capable? Are things being recorded properly, or is it somebody who is inexperienced? Assessing this upfront can help lessen the headache later when things have to be cleaned up.
Always check on compliance, whether taxes or other areas. The board needs to review and approve of tax filings, making sure they are going out the door properly.
Finally, assess the fraud risks and see if there is potential for fraud. Does staff have an open line of communication to the board? Direct communication can head off fraud that may occur later.
Board members need to know what their responsibilities are, and if for some reason they can’t fulfill them, especially for complicated matters, seek outside council.
Do board members get nervous about finding funds to pay for outside expertise?
That’s always the No. 1 concern, but often the board gets accountants involved too late. You can save time, energy and money by setting things up properly first, rather than going back in after something has been accounted for incorrectly. ●
Marie Brilmyer, CPA, M.Acc. is a Director of Assurance Services at SS&G. Reach her at (330) 668-9696 or MBrilmyer@SSandG.com.
Insights Accounting & Consulting is brought to you by SS&G
It’s difficult to protect your data when you don’t know where it is and who has access.
“Most companies don’t go through a data classification process. The No. 1 thing businesses can do to protect their data is to know where it is and the value it has,” says Joe Compton, CISSP, CISA, a principal with the Skoda Minotti Risk Advisory Services Group.
Smart Business spoke with Compton about actions companies can take to improve information security.
How do you go about finding and classifying data?
There are many different models you can use, including a simple checklist of three things:
■ Does the data contain private information?
■ Should this information be restricted to a limited number of people within the organization and from outside vendors?
■ Is it critical to the business? Would losing it negatively impact you or stop you from running your company?
If the data doesn’t fit under any of those areas, it would be considered an unprotected asset or unimportant data.
But the model can get complex; there could be 13 or 14 categories used to organize your information. The point is to develop a data classification scheme so you can protect it. You don’t want to provide the same protection for all data if it isn’t necessary.
After data has been classified, what’s the next step?
Once you know the data you have and its location, you need to establish controls. Most companies don’t have a disciplined approach to implementing security controls.
A good source for best practices is the PCI Security Standards Council, which offers downloads that provide a detailed list of controls that should be placed around sensitive data. In the case of PCI, it deals with credit card data. Most businesses handle some sort of credit card data, but even if you don’t, you could still adopt the same standards the PCI sets for credit cards and apply it to your sensitive information.
By doing so, you’ll have a very disciplined and defined approach to protecting critical data sets in terms of organized controls. There’s also a defined testing procedure you could follow on a regular basis to ensure those controls are working.
Controls can be as simple as firewalls or segregation of duties in terms of who has access to the data. It could involve logging access to databases and keeping a record of who works with data and where it is going. PCI has a list of 12 defined areas that it has built controls around that are appropriate for any business or any data set.
When you know what and where your data is and have a defined control set, then you need to address a data loss prevention (DLP) solution.
What are some examples of solutions, and how expensive are they?
DLP solutions range from the very expensive to relatively inexpensive.
For instance, if you run applications like SAP, Oracle financial, Microsoft Great Plains or various accounting systems, they have controls built into the software to prevent information from flowing out along with automatic tracking. But what happens when that data is moved off the system to a spreadsheet or mobile device? You can set policies prohibiting that, but that’s impractical.
You want to enable people to access the data, while keeping it secure. What DLP does is make sure data is appropriately encrypted. DLP software will look inside files and, if it sees data patterns that are sensitive, will force encryption before releasing that information to a device. It will also take inventory of what was on a device. If a device that was properly encrypted is lost or compromised, you can remotely wipe it through mobile management.
There are solutions that cost a fortune, and others that cost as little as $14 per month, per user. Some are preventative — they will notify you if a mobile media device is connected to a computer and catalogue the data moved over so you know what was on the device if it gets lost.
But the first step toward a solution is identifying your data. You’ll never reach the point of implementing a solution until you know what data you have and where it resides. ●
Joe Compton, CISSP, CISA is a Principal with Skoda Minotti Risk Advisory Services Group. Reach him at (440) 449-6800 or email@example.com
Insights Accounting & Consulting is brought to you by Skoda Minotti
As a rule, you make money in real estate when you buy, not when you sell.
With that said, it’s common for an owner not to know when to sell, says Joseph V. Barna, SIOR, a principal at Cushman & Wakefield/CRESCO Real Estate. The property owner needs to weigh market conditions, along with internal factors like occupancy, cash flow and the condition of the building.
“You don’t want to wait until you’re in trouble, because there are sophisticated buyers out there,” Barna says. “The buyers know you’re in trouble and that sooner or later the building is going to go back to the bank, where they can buy it at a discount. You don’t want to put yourself in that situation.”
Smart Business spoke with Barna about when to put your property on the market.
How do owners get into trouble with commercial property?
Many people purchased properties when the market was robust, buildings were at a premium and rents were high. They’ve seen values decrease 10 to 30 percent and rents decreased or stayed flat, and now face a balloon payment that’s more than the building’s worth. Let’s say they paid $1 million and put 20 percent down, but when the note is up and principal is due, the property is reappraised at $700,000. The lender might finance 80 percent of the $700,000 and the owner will need to invest additional cash to consummate the transaction.
Another problem is when you start to have vacancies and cash flow dries up, especially if you’re carrying a mortgage. Then, not only do you have to find a new tenant, you’ll also need to pay for the carry plus improvements and related fees.
Owners procrastinate thinking they will get a tenant or the market will turn, but nothing happens quickly in real estate, so they keep digging themselves a deeper hole. In some cases, they give the keys back to the bank and walk away if lucky enough to have a non-recourse mortgage, rather than continue to feed an unprofitable investment.
What’s a better way to handle a property?
Instead of waiting until you’re in a negative position, it makes sense to evaluate how that property is positioned and possibly bring it to market sooner — especially if you foresee a vacancy issue, capital improvements or refinancing situation. If you have a small or midsize portfolio, you don’t want to be in a bind with major vacancies and limited cash flow.
It’s not uncommon for a building to sit vacant for years. Therefore, if you sense you could be at risk you should bring the property to market and have time to find that ‘highest and best’ user or investor. Again, it goes back to ensuring you don’t overpay when you buy, while understanding the functionality and need in the market for that specific property type.
How can a sale-leaseback be a tool for business owners who own their property?
A sale-leaseback allows owners to sell their property while retaining the benefits of tenancy through a long-term lease. This increasingly utilized tool allows owners to use their essential real estate without tying up large sums of debt and equity capital.
It is possible to exceed market values depending upon the credit of the seller and the term of the lease. A sale-leaseback is also a logical solution to a short- or long-term exit strategy. Other reasons why owners utilize this tool include paying down debt, making an acquisition and reallocating capital in more productive uses, as well as estate planning.
How can a broker help?
If you are considering selling your property, it is important to understand who is the ‘highest and best’ potential buyer no matter if it’s a user or investment sale. You need to know the demand of your specific product type, market conditions, most effective manner to position the product and what needs to take place to maximize value.
By consulting with a broker, you’re not committing to anything; you’re doing your due diligence and getting questions answered. Gathering all the facts early will help you make the right decision at the right time. ●
Insights Real Estate is brought to you by CRESCO
When John Sheppard stepped into his role as president and CEO of EveryWare Global Inc. nearly two years ago, he knew he was faced with the difficult challenge of bringing together two ingrained cultures of two iconic brands — what he didn’t know, was that the two companies had yet to meet.
Anchor Hocking and Oneida, two of the most well-known and long-time consumer brands in tabletop and food preparation products had been purchased by Monomoy Capital Partners in 2007 and 2012 respectively, and the two companies were set to become one under the umbrella of EveryWare.
“I think there might have been a phone call at one point, but for the most part, they operated independently,” he says. “There was no discussion between them.”
Sheppard has more than 25 years of senior leadership experience with some of the world’s largest consumer goods companies, including 20 years in executive positions at Coca-Cola Co. When he came to EveryWare, he was looking for an opportunity to move back into a CEO role, growing a branded business, especially on the international side.
Sheppard was up to the challenge of turning perfect strangers into one team.
“This was exciting to me because Anchor Hocking and Oneida, particularly Oneida, are some of the best-known brands in the business,” he says. “When I came in, the whole objective was to take these two companies and great brands and combine and integrate them — so, pull together a leadership team, create a vision for the company and then execute on that.”
Here’s how Sheppard merged the companies together and took them public, creating an organization with more than $440 million in annual revenue and 2,000 employees.
Becoming one company
The first step in a merger is usually to get the management teams together and go through the transition punch list, as it were.
Sheppard began by telling them how EveryWare was going to operate moving forward. Then, he looked for strengths and weaknesses, finding the right talent and putting them in the right place.
Sheppard says he came in with an open mind, trying to meet with and listen carefully to the employees in the first few months he was there to find out where they believed the business could expand, and where it couldn’t.
“It became pretty clear where the strengths and weaknesses were, and where we had opportunities to cut costs,” he says.
“There were definitely some headcount reductions during that process, and that was natural because in any acquisition you don’t necessarily need two complete sets of SG&A [selling, general and administrative] costs,” Sheppard says.
But open communication is key — letting people know what you’re doing and when you’re doing it. Sheppard says the uncertainty is what drives people crazy.
“They would rather hear the bad news, as opposed to just dragging on, with no information at all,” he says.
Over time, it became apparent that most of the resources would be moved to the Ohio headquarters.
Sheppard says even though he’d been through many mergers and acquisitions before, you always learn as you go forward and see things you would have done differently.
In addition to making sure you communicate proactively with your board and the outside public as much as possible to avoid surprises, management changes should be made quickly if there’s a problem.
“I think probably, from a management team standpoint, I would have integrated food service and retail sooner, rather than later. I waited until last year and I probably should have done it earlier,” he says.
“So, move quickly when you know you have an issue to resolve.”
At the end of 2012, the decision was made to take EveryWare public. An initial public offering would create currency for the company, opening the door to potential acquisitions down the road.
It also was an opportunity for the private equity firm to take some money off the table. Because it owned 100 percent, an IPO allowed the firm to give back to its shareholders and partners.
Sheppard says they worked intensely for four or five months before going public under the stock ticker EVRY last May.
“That was intense,” Sheppard says. “That was a lot of midnight, 2 a.m., weekend, holidays, you-name-it meetings.”
Sheppard drew on his experience working in public companies and taking companies public to help spearhead the time-consuming and complicated transition.
“It’s quite an intense process,” he says, “It requires an understanding of the difference between a private and public company. You have to be extremely open about business, making sure you’re communicating effectively both internally and externally.”
Everyone had to come to the realization that life as a private company is a lot different than life as a public company.
“Some people found that more difficult than they would have thought,” Sheppard says.
“It’s probably not a great place to start trying to learn — right when you get thrown into the middle of a public offering,” he says. “We had some learning curves with some of the finance people, as they were learning the systems and processes and how to go public and all that. But we had a lot of hardworking people in finance and everywhere else.”
Expanding to new markets
After two major changes over the past two years, Sheppard says the company’s biggest challenges now are execution and focus as management works on a number of initiatives.
EveryWare has begun to expand into new categories, launching new products and SKUs.
“We entered into Brazil, Korea and expanded our business into Mexico and China,” Sheppard says. “And we also added a bunch of new customers in 2013, and we’re also starting to announce some in 2014.
“We’ve really started to grow the brand — expanding both horizontally and vertically. We’ve expanded our current customers and we’ve added new customers.”
EveryWare sells tableware, flatware, dinnerware, beverageware and serveware to retail outlets like Wal-Mart, Target and Bed Bath & Beyond. It also sells to hotels, restaurants and cruise lines.
Sheppard says the top-line growth was about 5 to 6 percent in 2013, which is three times the industry rate.
“International is driving a lot of that. International drives a lot of the growth — that’s because of both new markets and doing better in existing markets,” he says.
Again, Sheppard can draw on his 12 years of experience running Coca-Cola’s operations in Africa, England, Poland and Austria to help guide global moves.
The company chose to enter Brazil and South Korea for a number of reasons: the two countries have a $1.2 billion tabletop market and there are not many Western companies there, though both have relatively stable governments and a strong affiliation towards American goods.
EveryWare also wants to focus on penetrating new U.S. channels.
“Our retail business will be focusing on clubs, department and grocery stores, and in new product innovation, where we launch new SKUs,” Sheppard says. “Internationally, we’ll be opening new markets. In food service, we’re really focused on driving our placement of new products in restaurants and hotels. We’re excited about that. That’s going to be the focus going forward — profitable top-line growth.” ●
- Communication is key.
- Going from a private to public company requires new thinking.
- Finding the right international markets will drive top-line growth.
The Sheppard File:
Name: John Sheppard
Title: President, CEO and director
Company: EveryWare Global Inc.
Born: Washington, D.C.
Education: Bachelor of arts in marketing at the University of Georgia, master’s degree in business administration in finance at the University of Georgia’s Terry College of Business.
What was your first job and what did you learn from it? I was in graduate school and saw an ad in the paper for Coca-Cola about an IT job, a systems job. I didn’t really know what system they were talking about, but I read up on it and got familiar enough with it so that when I went into the interview, I could talk about it. It was a financial IT package that I had used a little bit in graduate school.
So, I expanded my knowledge of the financial software package and got the job at Coca-Cola. After I became an expert on that software, I moved on to more regular financial analysis and financial management, eventually going overseas as the CFO of the Africa division.
I got my foot in the door at Coca-Cola, which is what I wanted to do. I knew once I got in, I could probably find my real calling in life.
Who do you admire in business? I’ve met so many. I met Bill Gates a couple of times. I really like that he was tough and always saw the end game.
I also joined a group called YPO, Young Presidents’ Organization, which is a worldwide organization. That brought me in touch with a lot of different executives around the world in a similar position. It was sort of networking for senior executives.
What is the best business advice you ever received? Listen well and base your decisions on facts, and then act decisively. Don’t waffle.
When you’re the leader, you listen, you gather the facts and then you act decisively. That’s what leaders do. They need to do that because then people will follow them.
Learn more about EveryWare Global Inc. at:
Health care used to be one of the more scrutinized types of insurance, but that’s no longer part of the landscape.
Under the Affordable Care Act (ACA), the only criteria that determines price for small group health insurance is date of birth, zip code and whether you smoke or not — making it one of the few insurances where risk isn’t really considered, says Pete Seminaroti, vice president of the Healthcare Division at SeibertKeck Insurance Agency.
But even in the ACA era most business owners need a competitive health plan.
“Why do employers provide benefits? Not only to retain the employees they have, but also to entice a strong candidate as a new employee. Employees look beyond wages to health benefits,” Seminaroti says. “Benefits are important to retain and hire good people, and that still overshadows the other issues.”
Smart Business spoke with Seminaroti about trends in Ohio health insurance.
Who needs to buy health insurance?
Practically everyone needs to purchase insurance, either as an individual or group. If your employer doesn’t provide coverage, you need to enroll for an individual plan.
As business owners, the ACA has changed the rules for providing coverage. If you employ two to 49 full-time equivalent employees, you aren’t required to provide insurance as a small business. If you have 50 to 99 employees, you are considered a large group and need to provide insurance by 2016. Those with 100 or more employees must provide insurance by 2015. Failure to comply will result in government penalties.
What are the biggest factors to consider when purchasing health coverage?
Obviously, pricing drives most things, when we make a purchase privately or corporately.
Another large factor is the benefits structure. More than ever business owners want to ensure their network of providers, doctors, hospitals and medical facilities is strong. The insurance options have narrowed in the small group market; before, you might have had 50 to 70 choices, and now, it’s been simplified to about a dozen.
An owner also wants to go with a quality company that processes claims efficiently, with few errors. Typically the industry has done a good job of that. When you consider how many claims are processed daily, the number that go awry is minimal.
Finding the right insurance is easier when business owners can draw from their health care adviser’s knowledge. This ensures the owner has their choice of plans with the proper coverage and good network at a price within their budget.
With limited underwriting, are prices rising more than usual? Wasn’t Ohio projected to face large increases?
Over the past couple of years, there was a lot of that going around — Ohio was projected to increase anywhere from 40 to 80 percent.
In truth, some rates have gone up significantly, while other small groups have benefited from the ACA. An increase or decrease can highly depend on your small group’s makeup. In the past, if you had a group with high utilization, you were forced to stay with the same carrier for multiple years and your rates would increase. Now, that same group cannot be penalized because risk is no longer a factor.
What other tools are available to help?
In Ohio, we have a co-op that’s starting to bid out to small groups. It’s supposed to cost 10 to 15 percent less because it has eliminated the top layers of an insurance company. The co-op is run by a board of trustees comprised of the companies that have plans with that co-op. It will be interesting to see how the first year goes. If it’s successful, more co-ops may start.
There has been more interest in certain levels of self-funding. The self-funding industry came out with new structures that don’t expose employers to as much risk. It’s also a way to avoid some of the ACA taxes.
The health care insurance environment will continue to change over the next five years, and having a knowledgeable agent will be crucial in navigating the best course of action. Currently, most businesses still need to offer health insurance, and many employees, given the choice, would prefer for their employer to pick the health plan. Working with your trusted health care adviser, you can create a plan that will work for both the company and offer solutions for the employees. ●
Insights Business Insurance is brought to you by SeibertKeck
It can be more than a full-time job to keep up with technology as it evolves, and smaller and midsize entities that tend not to have dedicated technology staff can face even more acute challenges.
So many changes occur, it’s hard to know what’s available, says Paul Karlin, M. Ed., director of Education Technology & Services at Blue Technologies Smart Solutions. Also, you must train staff and invest in maintenance to keep technology from sitting around unused or broken.
At the same time, organizations need to continually budget for change.
“They’ll say, ‘OK, we’re done. We’ve got a great network and computers,’” Karlin says. “They don’t realize that it’s going to be three, four or five years, and then they have to do it all over again. It’s an ongoing need that has to be budgeted for every year.”
Smart Business spoke with Karlin, who helps schools integrate technology into classrooms and buildings, about how all entities can stay on top of technology needs.
How are schools and classrooms using technology today?
Schools like any organization use technology to conduct business — from keeping track of attendance and grades to payroll, accounts receivable, marketing and communication. And like the corporate world, the right technology maximizes efficiency and employee productivity, while reducing costs.
In addition, whether your classroom is in the educational world or corporate America, technology can improve learning. It’s a vehicle for direct instruction, such as Internet research, educational software or apps. Another use is assessment. In schools, based upon Common Core Standards, groups of states are adopting national tests given on computers, driving schools to update bandwidth.
Technology also is used as a tool to solve problems, create things and be more productive. This higher-level learning, when educating students or employees, isn’t just reading material and taking a test. For example, when learning about global warming, a science teacher challenges students to come up with energy-saving devices, using computer modeling and 3-D printers to develop prototypes. It goes beyond comprehension to becoming part of the dialog of how to make the world better.
What do you recommend as the way to best keep up with technology changes?
There are two overarching strategies. Entities can invest in their own technology staff. If they are large enough and have the resources, it’s a good way to go. But the technology field is very competitive, with IT people moving from job to job. If your key tech person puts in his or her two-week notice, it can leave you scrambling.
The other strategy is to build technology partnerships. Your technology partner can use proven business practices, which in IT includes monitoring, providing a help desk, having disaster recovery, ticketing systems to track problems, etc. You don’t have to worry about retention, and there’s no knowledge gap. You’ll get regular updates on what’s working, what’s not and what’s coming to help inform your decision-making.
Technology partners usually don’t just consult; they deliver products, and provide equipment, services and training. Their middle name has to be accountability, because if they don’t get it done, they aren’t going to be around anymore.
How can organizations prioritize updates or new technology?
The latest technology fad shouldn’t drive updates. For example, organizations are implementing one-to-one computing, where there’s a computer for every person. But if that takes too much attention away from instructors in an educational setting, it may not be a good fit. First, understand organizational goals and needs, and then match those to updates or new technologies.
Consider how to improve efficiency and reduce costs. You may save money by introducing a new technology like server virtualization — five servers function as 20, via software, to reduce support and energy costs. Also, determine if introducing a software package or process will save time or allow staff to focus on their core roles.
Whether it’s technology change or any other change, don’t jump on the bandwagon. Start with the need, problem and/or goal before you come up with solutions. Technology is not going to fix everything; it’s just a piece of the answer. ●
Insights Technology is brought to you by Blue Technologies
More Ohio employers are becoming financially stable after the Great Recession. These same business owners are earning high compensation and looking for additional ways to defer taxes. This has led to an increase in companies desiring to start a 401(k) plan.
The 401(k) plan is not only good for retention and recruiting, it’s also a great way to lower taxable income. Plans today are a good blend of benefiting both rank-and-file and highly compensated employees.
“However, when designing the plan, a big pitfall is when an employer doesn’t understand the provisions and how to operate the plan going forward — that can get plan sponsors into a lot of trouble,” says Heather Taylor, QKA, QPA, Manager, Sales and Business Consulting, at Tegrit Group. “Sponsors must stay engaged after the plan is implemented. It’s not just quickly scanning the document and signing. You really need to understand it, because the biggest risk is not operating a plan the way it’s written.”
Smart Business spoke with Taylor about what to know when setting up a 401(k) plan.
What common mistakes do you see when plan sponsors set up 401(k) plans?
Plan sponsors should consult with a third-party administrator (TPA) or consultant to identify a plan design that meets the company’s needs. Too often, providers put plan sponsors in a design that may be easy to administer but does not necessarily meet their goals and objectives. Don’t let a provider put your plan into a ‘box’ to make their job easier. If someone isn’t taking the time to sit down and talk through what you want to accomplish in detail, it’s a sign they may not implement the right plan for you.
Remember to take advantage of annual tax credits. Companies with fewer than 100 employees starting their first qualified plan are eligible to receive up to a $500 tax credit each year for the next three years to offset start-up and installation costs. Employer contributions may be deductible as well.
During the start-up process, don’t rush. Why would you want to offer a bad 401(k)? Ask lots of questions and take time to understand the plan’s limits, testing, reporting and required disclosure notices.
Be sure to give a complete picture of your organization, including discussing other entities you own or plans to acquire or merge with other companies. The more information you provide, the better. You may not think it’s important, but let the experts decide if it’s relevant. For example, controlled group and affiliated service group testing is complex. Your TPA will need to determine if employees at the holding company or other organizations you own (if you are above certain ownership percentage thresholds) must be included in the plan.
What’s key to know about employer contributions?
If you’re setting up a safe harbor plan, employer contributions are mandatory. Take a survey to see which staff will make contributions to get an idea of what your obligation is going to be. In contrast, many traditional 401(k) plans have a discretionary match or discretionary profit sharing contribution, which isn’t required every year.
Safe harbor plans are more common today. They allow highly compensated employees to put away maximum contributions without plan testing. It doesn’t bypass all testing, but is a good option if you’re concerned about discrimination.
Once the plan is set up, what’s next?
You can rely on the experts to perform the above functions, but review the plan regularly. Be aware of and adhere to:
- Not giving participants investment advice.
- Timely deposits. For plans with less than 100 participants, the employee deferral deposit time frame is seven business days from the time the payroll is effectively segregated from corporate assets.
- ERISA fidelity bond coverage. Persons handling plan funds or other plan property generally must be covered by a fidelity bond to protect the plan against loss resulting from fraud and dishonesty.
- Compliance requirements to avoid penalties and fees.
- Maintaining updated salary deferral and beneficiary designation information.
You’re also obligated to ensure employees who have satisfied eligibility requirements are given the opportunity to participate by the effective date of the elective deferral component. Failure to do so can be costly in terms of lost earnings and penalties. ●
Insights Retirement Planning Services is brought to you by Tegrit Group
The current market is making some investors question their allocation strategies amid concerns of volatile equity markets and where bonds might go.
Your portfolio strategy, however, needs to be about how you want to be positioned in the market for the long haul, taking into account your financial risk capacity and emotional risk tolerance, says Sabrina Lowell, CFP®, chief operating officer at Mosaic Financial Partners.
“If you’re investing with a sound, diversified strategy, the conversation shouldn’t be that much different if the market is up, down or flat,” Lowell says. “If you’re not trying to outguess things, you’re just making minor tweaks around the edges. Making big moves, if there’s a lot of upside or downside volatility, can be really expensive in the long run if you make the move at the wrong time.”
Smart Business spoke with Lowell about the current market conditions and setting up a sound investment strategy.
What are the biggest market questions?
When the market is doing really well, some people ask, ‘Should I be moving more into equities? Should I be doubling down?’ That, however, is exactly the wrong strategy.
With standard rebalancing, you typically employ a buy-low, sell-high strategy. So, that could mean taking money out of stocks and deploying it in bonds or other asset classes that aren’t necessarily as correlated with stocks or bonds. Putting more dollars in the stock market could increase your portfolio’s risk profile at just the wrong time.
Another concern is that when interest rates rise, the bond market will go down. Yes, that’s a concern, but it doesn’t mean you should get rid of all bonds. Instead, look at the type of bonds you’re investing in. Diversify with a balance of domestic, international and world strategy bonds for the short and intermediate term with an emphasis on shorter maturity, which is less subject to longer-term volatility.
How should your allocation strategy be set up? How does behavioral finance affect this?
Don’t put as much weight into what the market is currently doing. That doesn’t mean you should have your head in the sand. However, if you’ve employed a sound strategy, and came to a conclusion about how your portfolio should look before the market caught on fire, don’t switch strategies in light of what’s going on now.
Behavioral finance looks at how people react. Take the recency bias, for example. When investors see the market go up for multiple months, they think this pattern, which may not even be a pattern at all, will continue — and statistically that’s not the case. It’s important to set up a strategy you can stick with whether the market is up or down. When you take on too much risk, you set yourself up to take poor actions later, because you will be motivated to sell out when the market is down.
Take a careful look at how your experience, outlook or belief system impacts the investment choices you make. What assumptions are you making? Where are you getting your information? You need to understand your emotional risk tolerance — how much risk you are comfortable taking.
How can you discover your risk tolerance?
There are a number of ways to understand your emotional risk tolerance, including filling out a questionnaire to see where you fall on the risk spectrum.
Then, compare that against your investment strategy and financial risk capacity. Are you taking on more risk than you need to in order to achieve your goals? If you are more risk conservative, what other factors can you control, such as working longer, saving more or modifying expenses.
What happens if a couple’s emotional risk tolerances are different?
More often than not, couples have different emotional risk tolerances. You may already have an inclination of who falls where, but it’s important to get baseline, factual data. Then, you can explore the trade-offs with your financial adviser to find a medium balance. The more conservative person usually carries more weight; if you push him or her to be more aggressive, it can be problematic when things don’t go well.
However, now is a great time to assess risk tolerance because with a strong market you’re not in a high emotional state. In panic mode, it’s difficult to make good decisions. ●
Insights Wealth Management & Finance is brought to you by Mosaic Financial Partners Inc.
After more than 10 years as president and CEO of Zippo Manufacturing Co., Greg Booth is still amazed by the product’s brand recognition.
In many places, there’s 90 percent brand awareness. When Japanese consumers were asked to name top American brands, their first responses were Coke, McDonald’s, Nike and Zippo.
“Prior to coming to work at Zippo, I worked for two large companies — a $2 billion and a $10 billion corporation — and on a regular and ongoing basis we worked hard to build our brand and increase brand awareness, and so forth,” Booth says. “And we were very successful in the category. But to get to the level of brand awareness that Zippo enjoys, that is Herculean at best.
“In the oil industry, if we had 25, 30, 35 percent brand awareness in a market, we were thrilled, and just wouldn’t think of spending the next umpteen-million to get to a level of 60 or 70 percent.”
Two of Zippo’s biggest challenges, however, stem from its name recognition — maintaining a strong presence in more than 160 countries while trying to diversify into new products.
Here’s how Booth and Zippo’s employees — 610 at Zippo and 300 at W.R. Case and Sons Cutlery Co. — are keeping the 82-year-old company growing today.
Protecting the brand
Hard work, determination and luck brought global success, and now Booth says the company’s No. 1 challenge is maintaining or protecting its brand.
“And I find it unfortunate, quite frankly, that we have to spend the time, the money and the energy we do just to protect something we already own,” Booth says.
“But trademark owners recognize that if you don’t aggressively protect your brand, you always stand a chance of losing it or having it diluted by others using all or a portion of your name.”
Booth, and owner George B. Duke, grandson of Zippo’s founder, fight an ongoing battle to protect Zippo’s name and shape. It’s something that comes across Booth’s desk weekly.
“Counterfeiters and knock-off artists build products that resemble ours and sell them either with our brand name on them, pure counterfeits, or sell them using as much of our trade dress as they possibly can to pass it off as a Zippo lighter,” Booth says.
The company employs people who spend nearly all of their time surfing the Web for trademark infringers. It also spends time lobbying in China and Washington, D.C.
Luckily, the fight has become easier, Booth says. China, now part of the World Trade Organization, is developing its own brands, thus getting a better feel for the plight of trademark owners.
Along with trademark registrations, Zippo has shape registration in about 60 countries. Booth says shape registration is difficult to obtain because other lighter manufacturers block them, saying that they make that shape, too.
“The brand is what’s worth all the money, not the metal we bend and the lighters we make. It’s Zippo — the trademark is worth who knows how much. We say the billion-dollar trademark. But that’s what you have to protect, and protect aggressively — and sometimes your hair gets grayer as a result of those kinds of battles,” he says.
Zippo’s business has grown nearly 60 percent in the past 10 years. More than 90 percent of its business is still lighters and fuel, even though tobacco-related products are declining.
Part of that is because of global sales — nearly 60 percent of Zippo’s sales are offshore. Zippo has only been in China since 1993, but that market is already about 40 percent the size of its U.S. market.
The other factor is becoming more of a lifestyle product.
When creating products in your brand family or category, or even when creating a new brand, Booth says you need to stay relevant with whoever your target audience may be.
When Booth first became CEO, the average age of a lighter buyer was 44 or 45 and rising, giving them an identity problem with younger generations.
“Most brands want to at least influence young people or people early in their lives so they continue to buy the brand later in life,” Booth says.
A 21-year-old who buys a pocket lighter now may purchase a candle lighter at 45.
But if you want to be relevant to a younger target audience, the execution is critical, he says. You want to talk to them how they want to be spoken to, socializing with them where they live, which today is via social media.
“We talk to them all the time,” Booth says. “We tell them what we’re doing, where we’re going, why we’re doing it.
“You want to be in their face electronically. You want to be involved with something that means something to them, something they enjoy.
“So, we’re involved in music — Live Nation for example,” he says. “We’ll sponsor 100 to 150 concerts around the country each year, and we have the Zippo booth and the Zippo people and everybody there, so the fans know who is sponsoring it.”
Another strategy is being conscious of what makes a lighter worth collecting. Several years ago, Zippo went to the Art Institute of Pittsburgh and asked students to create art to put on lighters. It was so successful Zippo now sponsors contests for student artists to create relevant art for products.
All that effort has paid-off. Today, the average age of a lighter buyer is in their mid-30s.
Launching new products
When Booth saw the buying trends in the tobacco category 10 years ago, the company started working on developing new products.
The strength of the brand name, however, has worked against the company. Booth says the more mature the market, the more challenging it is.
“So, in our oldest market, the good ol’ U.S., it’s harder to diversify because when you say to consumers, ‘What would you think about buying a hand warmer from Zippo?’ sometimes the reaction is: ‘You mean the guys that make lighters? Why would I buy a hand warmer from those guys?’
“If we do the same thing in a less mature market like Japan or China, consumers far more easily grasp the concept and accept the new products because they haven’t been tied to Zippo, the cigarette lighter, for 80 years,” Booth says.
It’s also a challenge coming into channels already crowded with competition. Booth says you have to get retailers on board with putting the product on shelf space that already has velocity and profit.
To keep from stretching its brand into something it shouldn’t, Booth says Zippo does a mountain of consumer research.
“Research is a monumental first step. You have to find what your brand will support by way of a product,” he says. “I’m sure there are 20 different things that we could go out and try to do that wouldn’t be very successful. But if we stay in the flame category, and categories or products that are normally lifestyle-related, the research we’ve done tells us we should do reasonably well.”
Stretching the brand led to a misstep a few years ago, when Zippo bought an Italian leather purse company called Zippo — for the trademark.
Zippo, unsuccessfully, tried to run the business for five or six years. There was a lack of good management, and Zippo just didn’t know enough about women’s leather purses. Booth says they ultimately discovered that Zippo purses weren’t fashion at all, but rather purses that women carried to work.
But research is just the first step. It also takes the right sales force, the right channel of distribution, the right public relations and media, and the correct level of dollar support, while not trying to launch too many new products at once.
“You have to be committed, and I think the other thing you have to be — other than well-organized and smart — you have to be incredibly patient,” Booth says.
Even with the challenges, Booth is excited about growing into more of a lifestyle brand, launching products in the outdoor recreational camper and patio categories. Zippo is looking to add grills and stoves to hand warmers, fire starters and lanterns in the coming months.
“We do these new product development sessions and come up with these potential products for market. We have a potential portfolio of products that could take us out five or six years, but you can’t do it all at once,” he says. “So, we do a couple here and a couple there, because it’s a handful getting them launched, and they are pricey when you build them from scratch.
“Yes, there’s lots of excitement and lots of opportunity as we’re going in a lifestyle direction,” Booth says. “But thank heavens Zippo lighters continue to sell in phenomenal volumes.” ●
- Aggressively protect your brand so others don’t dilute it.
- Stay relevant with your target audience by relating to them.
- Research thoroughly before launching new products.
The Booth File:
Name: Greg Booth
Title: President and CEO
Company: Zippo Manufacturing Co.
Born: Bradford, Pa.
Education: Bachelor’s degree in biology and chemistry from the Indiana University of Pennsylvania.
What was your first job and what did you learn from it? I was a paperboy for the Bradford Era, way back when. I was probably 13, 14 or something like that. I had to walk about a mile and a half to pick up the papers and start the route, and the route took another hour or hour and 15 minutes. I did that before I went to school.
You have to get up and go do the paper route no matter how bad you feel, or how good or bad the weather is. You have a responsibility to deliver these papers — I think at the time I had about 110 customers. You just had to get up.
What is the best business advice you ever received? One thing I was either told or learned over the years is that no matter who you work for or around — no matter what you think of the individual — if you listen and pay attention, you’re probably going to learn something from everybody. I remember in one case, I learned what not to do.
If you pay attention and are open-minded, you can learn something every day from your environment or the people you work around.
Do you have a favorite Zippo lighter? It’s a pink lighter that I carry in my pocket all the time. It’s one of our pink powder-coated lighters that has a beautiful picture of my daughter on it, who I tragically lost in a car accident five years ago.
- The original Zippo windproof lighters cost $1.95. A similar lighter today retails for $15 to $16. The design has remained virtually unchanged.
- The Bradford factory produces 50,000 lighters a day.
- In 2012, Zippo produced its 500 millionth lighter.
- The original 1947 Zippo Car, customized for $25,000, traveled to all 48 states in the 1950s. When Zippo looked to restore the car prior to its 50th anniversary, however, it had disappeared without a trace. Despite a PR campaign asking “Have you seen this car?” Zippo had to buy a second Chrysler, customizing it to look exactly like the original.
- During World War II, Zippo dedicated all manufacturing to the U.S. military; this was a significant catalyst to establishing Zippo as an American icon.
- There are approximately 4 million Zippo collectors in the U.S. and 11 collectors clubs worldwide. The highest amount paid for a Zippo lighter was $37,000 for an original 1933 model.
- There are more than 288,000 Zippo-related videos on YouTube, and 600,000 fans on Facebook. More than 22 million people have downloaded the Zippo smartphone app.
- The Zippo lighter has been featured in more than 1,500 movies, stage plays and television shows.
Learn more about the Zippo Manufacturing Co. at:
How to reach: Zippo Manufacturing Co., (814) 368-2700 or www.zippo.com