Many of us have heard the saying, “By failing to prepare, you are preparing to fail.” While most business owners meticulously plan the ongoing management of their organization, far fewer prepare for a successful sale. If the sale of the company is a part of your exit plan, it quite literally pays to be prepared.
With merger and acquisition activity heating up, Smart Business sat down with Kevin Strain, Audit Partner at Sensiba San Filippo LLP to discuss what specifically businesses can do to ensure they are ready.
Why is it critical that businesses be prepared for an acquisition?
The current climate for acquisitions makes it more likely than ever that you’ll find yourself talking to a potential buyer. Acquisition activity has been ramping up since 2010, and is only expected to increase. Low interest rates and resurgent equity markets have left corporations flush with cash, and looking for opportunities.
Yet even in the current environment, the majority of deals still fail. More than 85 percent of prospective deals are never completed. Suitors come calling, but the process breaks down prior to execution, often because sellers are unprepared.
What is the first step a company should take to prepare?
It is critical to identify and document the areas that drive organizational value. Every organization is different, and what makes you an attractive candidate for an acquisition depends on the nature of your business. Some acquisitions are technology buys, driven by intellectual property. Others are organizational or revenue buys, driven by the desire to add personnel or future earnings.
Regardless of what drives the marketability of your company, it is important to recognize the value drivers and document them. For example, if you hold technology patents, it’s essential that these are defended and documented.
What financial preparations should be made?
A detailed examination of financial records and projections should be expected during the negotiation process. If you haven’t had an audit completed recently, that should be the first step. If you have been through an audit, you need to be ready to provide the same information on relatively short notice. Make sure to keep the information that your auditors ask for current.
The focus of the financial review may also be driven by the type of acquisition. If a suitor is seeking to buy a future revenue stream, you need to be sure your projections are tight and defensible.
What pitfalls can derail the sale of a business?
Areas of potential risk can provide bargaining power to a buyer or stop the process in its tracks. Whether it’s an uncertain tax position, legal exposure or patent dispute, exposure can damage or kill a deal. Ideally, you’d like to resolve these issues. But if that’s not possible, put them on the table as soon as possible. It’s best for buyers to know where you stand sooner rather than later so the investment in the process is not wasted.
What else should business owners keep in mind?
Understand your own expectations and limits. You don’t want to be deciding where you are willing to bend during negotiations. That will weaken your ability to negotiate the best deal. Are you comfortable with an earn-out? How much guaranteed cash do you need? Are you willing to indemnify the buyer against any contingent liabilities?
Finally, it’s wise to find an experienced adviser to help you navigate through the process. The majority of business owners only sell a business once, so it’s important to get it right the first time.
Kevin Strain is an audit partner at Sensiba San Filippo LLP. Reach him at (650) 358-9000 or firstname.lastname@example.org.
Blog: Visit www.ssfllp.com/blog for more insights on merger and acquisition best practices.
Insights Accounting is brought to you by Sensiba San Filippo LLP
As part of the planning and investment process — and pretty much anything in life — goals are fundamental to thinking about the future. However, very few people take time to set and write down specific goals. And, without a clear plan, you’re more likely to get absorbed in the day-to-day, losing sight of what’s truly important.
“For me, that’s the essence of financial planning. Too often people think about financial planning as just being investments or a calculation to see how much money they need to retire,” says Norman M. Boone, founder and president of Mosaic Financial Partners Inc. “Those are all important, but the greater value of financial planning is making sure you’re on track for the things that are important to you, not just things that you think you should be thinking about.”
Smart Business spoke with Boone about how asking the right questions can help you understand what you want and how to get there.
What is important when setting goals?
When you financially plan, the essence is: Where are you now, where do you want to be and how do you get there? You may have general ideas of your direction, but by writing down and sharing specific goals you are more likely to be successful.
For goals to be effective, they need to be SMART:
• Specific, as opposed to general.
• Measurable. Clear to all as to exactly what is to be accomplished, which usually means you’re able to measure the results or outcomes.
• Achievable, not unrealistic.
• Relevant to your overall role or purpose.
• Time bound. You need to be clear when you are going to finish.
How do you figure out your priorities to start goal setting?
You can use George Kinder’s three questions of life planning to find out what’s important to you.
• If you had enough money, how would you live your life? Would you do anything differently?
• If you go to the doctor and find out you only have five years to live, how would you live your life?
• If the doctor tells you that you have one more day to live, what would you think about? What things do you wish you had done, or said? What are your regrets?
These questions give you the incentive to think about your goals in the context of family, career, education, community involvement, friends, loved ones, personal accomplishments, etc. It’s rarely just about money. You find out what you really want in order to see how you go about making it happen.
How does an outside consultant help with seeing priorities and setting goals?
A consultant can help set up a plan that puts you on track toward accomplishing your priorities. Just like someone on a diet or an athlete in training, it’s hard to push yourself without outside help. You need someone to ask pointed questions, and just as importantly, wait and listen as you contemplate and struggle with the answers.
Almost everyone is too close to his or her own issues, problems and experiences, which blinds him or her to the possibilities. You get locked into what is, and have a hard time imaging what could be. You need that arm's length, 30,000-foot perspective.
Is there a certain time when you should set goals?
At minimum, you need to think about and get help with these kinds of questions at the major turning points in your life — when you finish school, when you get married and start having kids, etc. However, if you do it more frequently, such as once a year, it can be healthy. Maybe you come up with the same thing that you came up with last year and the year before, but maybe you don’t. When you get caught up in the day-to-day, you easily forget the things you’ve said all along were important.
Norman M. Boone, founder and president, Mosaic Financial Partners Inc. Reach him at (415) 788-1952 or email@example.com.
Insights Wealth Management & Finance is brought to you by Mosaic Financial Partners Inc.
Commercial banking today isn’t just about loans, it involves a partnership with a bank that helps build a business.
“Probably the most overused word in banking right now is relationship; everyone talks about it,” says Paul Duren, senior vice president at Bridge Bank. “Several data collection agencies even changed their terminology from ‘standard commercial loans’ to ‘relationship loans.’ But what exactly does that mean?”
Smart Business spoke with Duren about what relationship banking means and how it can translate into improved customer service as well as increased profits for your company.
What makes for a good banking relationship?
A good relationship involves a banker bringing value beyond providing access to capital. Businesses need a banker who understands their business — one who takes the time to learn about your vision so he or she can fully understand your goals. A proactive banker can anticipate your needs and bring information and services to help you grow or run your business.
In a good banking relationship, the banker acts as your advocate within the bank. However, much of the banking industry utilizes centralized credit processing and call centers, so there isn’t always the personal touch that a good banker will provide.
Can you provide an example of how this relationship works?
There was a drink manufacturer that saw a need to take its product from powder form to liquid for store shelves, and needed additional capital to do so. The banker saw the vision and understood the potential market for the product. That extra capital turned the company from a small manufacturer to a major player in the sports nutrition industry, and it started with an injection of capital from a loan made possible because a banker understood the vision.
Has banking changed since the recent recession?
It definitely has. There’s been growth in lending, but there’s also been a shift to more small and medium business sector loans coming from small and medium-sized banks. According to the Small Business Administration, big banks controlled 31 percent of the small business loan market in 2005, and that grew to 39 percent in 2009. That trend has reversed and small banks are gaining more share of that market. A Federal Reserve Bank of Boston study showed that smaller institutions continued to lend to small businesses at a stable rate during the recession, whereas big banks cut back.
Small to medium-sized banks are more invested in the community and more invested in the small business owner. For that reason, they are more likely to provide financing. Bigger banks focus on large companies in order to move their numbers. A smaller bank can get the same percentage growth through smaller loans. In one of its papers, the Federal Reserve Bank of Boston talks about how community banks are better at the soft skills — understanding the vision of the business owner, how he or she operates. Small banks take the time to listen.
What are the benefits of a good banking relationship beyond access to capital?
When people talk about relationships, they focus on the loan. What gets neglected is the deposit, or treasury management, side of the relationship.
During the downturn, businesses were looking for ways to get more out of their existing systems. Banks can help them do that with data feeds and other ways that save significant time and money. A good relationship banker also reviews the customer’s systems.
An experienced relationship banker has a toolbox filled with solutions to help his or her clients. This business is still about people, and banks need to be in touch with their customers and the community.
Paul Duren is senior vice president at Bridge Bank. Reach him at (408) 556-8688 or firstname.lastname@example.org.
Insights Banking & Finance is brought to you by Bridge Bank
Abraham Lincoln may have been the first lawyer to recognize the pitfalls of litigation but certainly not the last. He noted that: “The nominal winner is often a real loser — in fees, expenses and waste of time.”
Fortunately, today’s executives have an alternative way to resolve disputes that doesn’t put your fate in the hands of a judge or jury.
“Not only is mediation less expensive than litigation, the parties are in control of the outcome and they can be completely creative in finding a solution,” says Jennifer E. Acheson, partner and insurance and bad faith expert at Ropers Majeski Kohn & Bentley PC.
Smart Business spoke with Acheson about the benefits of mediation.
What is mediation and how is it different from arbitration and litigation?
Mediation is a type of alternative dispute resolution, where a neutral or trained mediator helps conflicting parties resolve issues, ideally before a lawsuit is filed. Mediation differs from arbitration and litigation in that it’s not a sworn evidentiary hearing or trial, and the mediator doesn’t rule on the merits of the case or take sides. The parties still have the opportunity to air their grievances during caucuses with the mediator and there’s more leeway in offering testimony.
What are some common business situations where a mediator might be used?
Mediation can be used to settle a variety of disputes including:
• Employee disputes with other employees.
• Employee disputes/grievances with management.
• Sexual harassment complaints.
• Hostile workplace issues.
• Discrimination complaints.
• Americans with Disabilities Act compliance issues.
• Business partner disputes.
• Contract disputes.
How do you select an appropriate mediator, who pays for mediation and how much do mediators charge?
The actual cost of mediation varies with the complexity of the case; however, the parties split the charges and avoid the cost of pre-trial maneuvering, court reporter fees or similar expenses. Mediation is a bargain when you consider that lawsuits cost small businesses $105.4 billion in 2008, according to the U.S. Chamber of Commerce. Since the process of being heard is often the overture to resolution, look for a mediator who is a close and patient listener.
Is mediation confidential?
Yes, anything said during the course of mediation is inadmissible in court, and the communication among participants is confidential. In fact, the mediator needs permission to disclose information revealed during individual caucuses with the other party. This protection even extends to the settlement agreement, unless the parties agree to waive confidentiality. In contrast, trials are normally open to the public.
What happens if the parties can’t agree?
Unlike arbitration or trials, which have a mandatory and possibly binding decision, the mediator doesn’t have the power to force the parties to reach an agreement. The process is voluntary and either party can withdraw at any time. If the parties can’t resolve their issues in one session, with the parties’ permission, the mediator can continue the process until the dispute is resolved.
Is an agreement made at mediation enforceable?
A mediation agreement is enforceable as long as the authorized parties agree on a deal and sign the memorandum. If a party refuses to comply, the parties can appoint the mediator as an arbitrator for the sole purpose of rendering an award that complies with the agreement, as long as the dispute hasn’t gone to litigation. If the matter is already in litigation, a motion for enforcement can be brought under the civil code. This makes mediation an enforceable and cost-effective alternative to litigation.
Jennifer E. Acheson is a partner, insurance, and bad faith expert at Ropers Majeski Kohn & Bentley PC. Reach her at (650) 780-1750 or email@example.com.
Insights Legal Affairs is brought to you by Ropers Majeski Kohn & Bentley PC
Business credit cards can be highly useful, efficient and versatile tools for many small business owners, as long as they are used in a prudent way. What are the benefits of using business credit cards? How should you select one? What best practices should be employed?
Smart Business spoke with California Bank & Trust Senior Vice President and Corporate Marketing Director Steven Borg to discuss how entrepreneurs can best use business credit cards to improve financial management processes and streamline cash flow.
Why should small business owners use a business credit card instead of a personal card for company expenses?
Using a business credit card instead of a personal card lets you more easily track your spending, keeping business and personal expenses separate. Most card issuers provide highly detailed reports categorizing your expenses, which can be very useful for accounting and tax purposes. Like personal cards, business credit cards may come with various rewards programs, such as cash back or additional savings on business expenses. Using a business credit card also may provide public relations value to your business by making a good impression when you’re purchasing goods and services, or entertaining clients.
What are the advantages of using a dedicated business credit card?
Using a dedicated business credit card allows you to control spending, streamline your operations, view your transactions efficiently and provide your business with fraud protection.
Business credit cards typically permit multiple users to have individual spending limits, giving you the ability to control your company’s spending while still allowing your entire team to move forward with their business needs. Additionally, having your employees use their respective business credit cards eliminates the need for your company to reimburse them for expenses. This saves on paperwork, streamlines processes and gives you more precise control over your team’s spending.
Most business credit cards come with enhanced reporting features, allowing your management team to watch expenses closely, categorize the transactions and make strategic decisions based on the complete spending patterns of your company — an excellent cash flow management tool.
Putting all of your expenses on a business credit card also offers you a certain level of protection against fraud. Like personal credit cards, the card issuer may be able to resolve problems with any products or services you’ve purchased with the card.
What are some of the pitfalls of using business credit cards?
Like any other credit card, interest builds if you let balances grow too high. In some cases, a ‘penalty rate’ is imposed for late payments, which can seriously impact your credit rating and be costly for your company, so pay off your balances regularly.
Although business credit cards allow for improved efficiencies, it is important that managers and owners continue to monitor their team’s transactions, control their expenses and pay off their balances monthly. Additionally, if your company decides to allow for multiple users, there is potential for misuse. Setting strong boundaries, creating specific spending limits and monitoring transactions monthly will reduce the risk in this area.
What should a small business owner do before applying for a business credit card?
Sit down with a business banker who understands your business and industry to help you chose the right product for your specific business needs. Review terms such as rate, grace period, any rewards programs, and perhaps most importantly, the type of information and functionality available in the monthly reporting. It’s also important to find out how credit limits are set and how you can control your employees’ use to minimize risk.
Above all, remember that while the use of a business credit card may very well be a smart business practice, it certainly does not replace astute management.
Steven Borg is senior vice president and corporate marketing director at California Bank & Trust.
Insights Banking & Finance is brought to you by California Bank & Trust
When Experian arrived in Allen, Texas in 1993, the city was “at the end of U.S. 75 and just starting as a community,” says Russell Tieman, vice president of facilities and administration.
The consumer credit services company has grown along with the city, and last year signed a lease extension to stay through 2025. That came on the heels of a 2010 agreement with the Allen Economic Development Corporation to invest $30 million in facilities in return for incentives totaling $1.5 million over 10 years. As part of the agreement, Experian plans to add 300 employees to boost its workforce in Allen to 1,000, with most being part of the national assistance call center or global technology services team.
“We have a great relationship with the city, and there’s a great, highly educated labor force here,” says Tieman.
Smart Business spoke with Tieman about Experian’s investment and what makes Allen a good location for its business.
What makes Allen a good location?
When Experian originally moved to Allen, there was nothing here. Since then, there’s been so much commercial and retail growth, as well as new housing. It’s been an up and growing suburban community, and Experian tends to be in locations outside of central business districts. For example, the company headquarters is in Costa Mesa, Calif., as opposed to a downtown area. Allen and the surrounding communities have good, safe neighborhoods and an excellent labor force. Quality of life is important and you want to limit commutes.
Did Experian consider other locations before renewing its lease?
Yes, but we conducted an analysis and it made more sense to stay. It was challenging to remodel an occupied space instead of building new. But, although we tested the local real estate market, we never considered looking outside of Allen. In the end, we chose to stay because of our long-standing relationship with the city of Allen and the deal we negotiated with our landlord.
What impact did the Allen Economic Development Corporation have on that decision?
They assisted as much with their customer service as the incentives that they offered. It’s very competitive among local economic development groups in Texas, and Allen works hard to keep and attract companies. They are really great to work with — the whole city, not just the economic development team.
What was involved in the $30 million investment made by Experian?
About $20 million has been put into remodeling in the past few years, with at least $10 million more going toward equipment and other assets. The space was originally built in 1993 with cubicles that had very high walls, and it was very dark and chopped up. The work plan is more colorful and energetic, and builds collaboration. There is a lot of meeting space, video conferencing, game rooms, TV rooms, quiet rooms and amenities that would not have been thought of in 1993. We had been working in a space based on 1993 technology and it was time to invest in the property.
There was surplus space, and the space that was being used is far more efficient with the remodel. The final phase of the second floor was recently finished and received all sorts of accolades. Employees who had worked in the old design have been saying, ‘This is fantastic.’
Would you recommend Allen to companies looking to relocate?
Absolutely, it’s a great community. The Allen Economic Development Corporation is a great group to work with and very helpful. That help would probably be even more beneficial to a company that didn’t already have experience in Allen. Any company should look at the North Dallas metroplex area, particularly Allen.
Russell Tieman is a vice president of facilities and administration at Experian. Reach him at (714) 612-0597 or firstname.lastname@example.org.
Reach the Allen Economic Development Corporation at www.allentx.com or call (972) 727-0250.
Insights Economic Development is brought to you by Allen Economic Development Corporation
Decent bosses typically try to lead by example. As a leader, you must model appropriate behavior to promote the greater good and to send a constant message with teeth in it.
The French term “esprit de corps” is used to express a sense of unity, common interest and purpose, as developed among associates in a task, cause or enterprise. Sports teams and the military adopt the sometimes-overused cliché, “One for all and all for one.” “Semper Fi” is the Marine Corps’ motto for “always faithful.” We commonly hear, “We’re only as strong as our weakest link.”
However, the real test of team-building and motivational sayings is that they are good only when they move from an HR/PR catchphrase to a way of doing business — every day.
As soon as you put two or more people in the same room, a whole new set of factors comes into play, including jealousy, illogical pettiness and one-upmanship, all of which can lead to conflicts that obstruct the goals at hand. Certainly, much of this is caused by runaway egos. Perhaps a little bit of it is biological, but most of it is fueled by poor leadership. Everyone has his or her own objective and it’s the boss’s responsibility to know how to funnel diverse personal goals in order to keep everyone on track. This prevents employees from straying from the target and helps avoid major derailments. Essentially, it all gets down to the boss leading by example with a firm hand, understanding people’s motives and a lot of practicing “Do as I say and as I really do myself.”
Communicating by one’s actions can be very powerful. A good method to set the right tone is stepping in and lending a hand, sometimes in unexpected and dramatic ways. This shows the team that you govern yourself as you expect each of them to govern their own behavior. In my enterprises, I constantly tell my colleagues that the title following each person’s name boils down to these three critical words: “Whatever it takes.” Certainly, I bestow prefixes to this one-size-fits-all, three-word title, such as vice president or manager, but I consider these as window dressing only.
After speeches, when I explain this universal job description, I always get questions from the audience about how I communicate this concept. I follow with a real-life experience that played out in the first few months after I started OfficeMax. As a new company, we had precious, little money, never enough time and only so much energy, which we preserved as our most valuable assets in order to be able to continually fight another day.
In those early days, too frequently, I would see what looked like a plumber come into the office, go into the restroom and emerge a few minutes later presenting what I surmised to be a bill to our controller. I knew whatever he was doing was costing us money and probably not building value. The third time he showed up, in as many weeks, I immediately followed him into the restroom (much to his shock and consternation). I asked him what in the world kept bringing him back. He then proceeded to remove the john’s lid and give me a tutorial on how to bend the float ball for it to function properly. That was the last time anyone ever saw this earnest workman on our premises. Instead, after making known my newly acquired skill, whenever the toilet stopped working, I became the go-to guy.
This became an object lesson to my team about how to save money. At that time, 50 bucks a pop was a fortune to us. It got down to people knowing that all of us in this nascent start-up were expected to live up to their real, three-word title. This was our version of how to build esprit de corps. Others began boastfully relaying their own unique “whatever it takes” actions, and it became our way of doing business.
The lesson I learned in those early days was that it wasn’t always what I said that was important but rather what I did that made an indelible impression. A leader’s actions, with emphasis on the occasionally unorthodox to make them memorable, are the ingredients that contribute to molding a company’s culture.
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. Reach him with comments at email@example.com.
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Steve Jobs was the master of spotting trends and the opportunities that go with them. He was so good at it that he could see trends when they were still in their infancy. This allowed him to create products that kept his company at the front of the waves of change and ultimately drove massive profits and stock growth for Apple.
While not many people possess the uncanny sixth sense that Jobs had, it’s important to spend time studying your industry and what’s happening at various levels, from customers to suppliers to competitors.
You need to recognize when the trend is pushing positive growth and when it’s not. The additional challenge is to know the difference between a trend and a fad. A trend is more long-lived and drives a lot of long-term opportunity, while a fad tends to burn out quickly. This isn’t to say that trends last forever, because they don’t. An important part of studying trends is to know when to jump off the wagon and find the next opportunity, because if you ride a trend too far, you may find yourself in a rapidly declining industry or an area of waning interest.
For example, Y2K was a fad. For those who don’t remember, the Y2K boom was caused by old computers that only saw years as two digits instead of four, and widespread computer issues were predicted if systems weren’t upgraded. A giant boom in computer consulting and sales resulted from this issue, but it was short-lived. The moment 2000 rolled around, the need for Y2K upgrades dried up.
The dot-com boom, which was partly fueled by Y2K, was a trend. For a number of years, a ridiculous amount of money was being thrown at any project that contained the word “Internet,” regardless of its business model or competitive factors. While it was active, there were plenty of online growth opportunities for businesses to take advantage of.
Those who recognized the trend were able to capitalize on it, and more importantly, those who recognized the end of the trend were able to cash out before it went bust. Not every trend will be as big as the dot-com boom, and depending on your industry, they may not be so obvious.
Finding and recognizing trends starts with studying your industry. You need to stay in tune with what’s happening with competitors and constantly read about not only your industry but related ones as well. Talk to suppliers and vendors to get their opinions as to what direction your markets may be headed. But the most important thing may be to have an open mind. Don’t assume that because something hasn’t changed for 20 years that it isn’t ever going to change.
With an open mind, you are more likely to recognize an emerging trend before everyone else has rushed to capitalize on it, putting you ahead of the curve. Once you are exploiting a trend, you have to be equally diligent to know when it’s going to end, and that’s done in a similar fashion to identifying it in the first place: Stay plugged in to your industry.
These are exciting times and change is all around us. Look for the hidden clues that can lead you to the next big opportunity, and never stop challenging your own beliefs. The CEOs who do the best over time are the ones who don’t accept the status quo.
Fred Koury is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or firstname.lastname@example.org.
Charlie Rosson identified where it hurts for his clients; now Woodruff-Sawyer delivers services more efficientlyWritten by Laura Green
As a 20-year veteran of the insurance industry, Charlie Rosson has seen his fair share of financial uncertainty, economic downturns and business struggles. So when he was promoted to CEO of Woodruff-Sawyer & Co. on Jan. 1, 2008, Rosson recognized rather quickly that his tenure was going to coincide with all three.
“Right from the start, like everybody, we were thrown a pretty difficult set of circumstances to deal with,” says Rosson, CEO of the San Francisco-based insurance services firm. “So many businesses were impacted in terms of their sales and access to capital and their business overall. The recession impacted our clients directly, and we were challenged to respond to that by coming up with more aggressive programs for them to quickly save them money and to help a lot of them through survival mode.”
Although clients were losing revenue and facing serious financial struggles of their own, the firm still needed to find ways to keep business profitable. But many clients could also no longer afford the firm’s services and products at the same rates or prices as in the past.
Like most professional service firms, Woodruff-Sawyer needed to find ways to keep clients’ businesses afloat but also avoid losing their business.
“Obviously, we had to become more efficient in the way that we do business, and we had to recognize in a lot of cases our clients weren’t willing or didn’t have the wherewithal to pay the same type of fees or commissions that they might have before the difficult time,” Rosson says.
“The way we would structure an insurance program before the financial crisis or before things got really difficult obviously wasn’t implacable anymore. So we had to kind of come to terms and help them with declining values and property, shrinking payrolls and overall downturn.”
Finding creative ways to deliver the same types of programs for clients more affordably wouldn’t be simple, especially because each client’s business was so different.
Rosson knew that the firm needed to work much more closely with clients to figure out win-win solutions.
“We had to negotiate greatly reduced premiums for them and come up with coverages that met their needs but were at a price point that they could afford,” he says.
So as Rosson and his team began talking with clients about their changing risks and opportunities, they also asked each client for a list of must-haves.
“We really had to dig in and find out what are the things our clients truly value and what things are sort of “nice to haves” that they didn’t value as much, and frankly, weren’t willing to pay for,” Rosson says.
“We’re fortunate that the clients we serve we have a great relationship with and normally have a pretty deep dialogue with them and attempt to fully understand their business,” he says. “So we can go in and talk about the services we deliver, how they’re delivered and how the team is structured, then drill into what things are important to them. Then we ask them honest questions about what things they can live without.”
Knowing your customer’s “deal breakers” can help you pinpoint the exact value that you add for them, allowing you to identify and recommend business solutions that are cost-effective but that still meet that customer’s needs.
“What clients are looking for is value, and in our case, it’s quality of advice,” Rosson says. “It’s how do we help our clients become more successful? And oftentimes when we partner up with them and really understand their business, we can help them execute a strategy that maybe they wouldn’t be able to execute without us.”
You may see opportunities to meet the future needs of your customers as trends emerge of where their businesses are moving and as new technologies come along. For example, the recession spurred the firm’s investment in technology to help address client issues.
“The current generation of buyers has already adopted technology as a core part of the way they do business, and that curve is only going to get steeper as newer generations come into the workforce and become leaders of companies,” Rosson says. “They’re going to expect that they can interact with service providers and professionals through some sort of technology medium. They’re not going to expect the traditional back and forth model that’s defined our industry for quite a while.”
Trim the excess
Once you identify your clients’ pain points and priorities, you can begin looking for ways to serve their needs more efficiently.
Rosson realized that although Woodruff-Sawyer continued to deliver valuable services and advice for clients, the firm could save time and cost by streamlining its approach — as could its clients.
“We had to get much more efficient in terms of the way we structured our teams, and we had to use technology in ways that we hadn’t before, in terms of delivering things through the Web that may have been done before either face-to-face or through some other lower-tech way to deliver service and advice,” he says. “So we are using technology in different ways, and we’re just more careful in terms of how we assign resources to client teams.”
Rosson restructured the company’s practice teams to put the focus on having the right people in the right roles, instead of just more bodies, to cut down on unnecessary costs.
“Don’t get swept away by how much revenue you think somebody can generate or how dazzling somebody is,” Rosson says. “Really do your homework and find out what that person is all about. Are they really a fit for the organization? Do they really have the client’s best interests at heart? Can they collaborate well with others? Those are really important things.”
Another way Rosson saw to improve efficiency was integrating technologies that could make communication more user-friendly for clients. Most of the technologies Woodruff-Sawyer has deployed are collaborative, meaning they enable communication between clients and associates outside of the traditional email and face-to-face meetings. In addition to saving its clients cost and time, many changes have streamlined the firm’s processes overall.
For example, the firm now issues all of its certificates online and deployed a portal called Passport, which permits document sharing and collaboration with clients over the Web to expedite projects.
Since seeing the positive impacts, Rosson has continued to pursue a direction that involves technological innovation. Recently, the firm launched an online portal for small businesses called, BizInsure, hired a chief information officer and has made investments in online business to ramp up its overall technology component.
“I’m absolutely convinced that emerging technology is going to have a disruptive impact on our business,” he says. “And I believe it’s going to be in a positive way, and we’ll be right there to capitalize on it. The way that we’re going to interact with our clients in the future is going to be different that our traditional model.”
Enable a responsive culture
Of course, it’s difficult to devise efficient and cost-effective solutions for clients if you don’t empower employees to be creative and test their ideas. Businesses that run their organizations with a heavy-handed, top-down leadership structure can easily stifle the kind of creative, engaged culture it takes to provide the most value to clients, Rosson says.
“To be a top-tier professional services firm, by definition, you want to have professionals — and you need to treat them that way,” he says. “The way to treat them that way is to respect what they do and be there if they need advice and guidance. You have to have a certain amount of structure, but listening and not being overly prescriptive or top-down in our approach has really paid dividends.”
Rosson avoids a command and control culture at Woodruff-Sawyer by furthering the firm’s corporate vision to remain an independent brokerage firm. Being a 100 percent ESOP firm gives the company a flexible infrastructure where top people feel empowered to make decisions and operate with more freedom, he says. With no shareholders, employees are able to focus on the client and do things for clients that might be difficult under a different leadership structure.
“We’re able to do things for clients in terms of being flexible and the people who are working with clients have a lot more authority to get things done for them, deploy resources and make decisions that our competitors who might have a different ownership system can’t,” Rosson says.
“Our independence is a key part of our competitive advantage and a big part of our culture.”
The independent structure has also helped the firm attract talented employees who value autonomy and the ability to be responsible to a client’s needs. And for companies that can’t do an ESOP, leadership comes into play even more. As a CEO it’s important to set the tone for your direct reports and other employees by showing that you trust their decision-making abilities.
“I truly believe that we have the best people in the industry,” Rosson says. “These are people who have arrived at a place professionally. They don’t need me to look over their shoulder or a leader to second-guess what they are doing.”
Rosson says in the future, the firm will continue to be prudent and watching the bottom line while making investments in technology and internal perpetuation to keep the firm independent. By successfully delivering insurance services in an efficient and user-friendly way for clients, the firm has not only retained clients, it’s also been extremely successful in adding new business.
“The vast majority of our growth is organic growth through just going out and telling our story,” Rosson says. “With a lot of our competitors, and the large ones, it can be very difficult or very expensive to access very sophisticated resources. What we do is deliver those same resources or the same level of advice — or even better — but do it in a way that’s less expensive and much more user-friendly.”
As a result, Woodruff-Sawyer has grown its revenue approximately 40 percent since 2007, generating approximately $70 million in revenue in 2011.
“Like so many businesses, the downturn forced us to work smarter and more efficiently and embrace technology,” Rosson says. “As the economy has slowly improved and our clients’ businesses has improved, we’ve found that we’ve been able to leverage our technology and we haven’t had to increase our costs at the same rate that maybe we would have. So we’re actually seeing that our business is healthier now, after the downturn, than it was before.” ?
How to reach: Woodruff-Sawyer & Co.,
(415) 391-2141 or www.wsandco.com
Ask customers where your business provides the most value.
Utilize technology to cut down on time and cost in customer interactions.
Empower employees to help clients by avoiding a top-down culture.
The Rosson File
Woodruff-Sawyer & Co.
Born: San Jose, Calif.
Education: B.A. in history from UCLA
On growth: If you’ve got a very strong core business — I’m so bullish on the insurance business — you don’t need to take on too much debt or be overly grandiose in your expansion plans. Expansion and acquisitions all should be driven around acquiring people who fit into the organization, really bring something to the table and add to your organization rather than just executing a geographic growth strategy or putting pins in the map. All of your expansion should be for the right reasons, with the right people with client in mind, rather than trying to fill out (geographically) with different offices all over the place.
What is your favorite part of the business?
The best part of the business is getting out and meeting with clients and prospects. That’s why most of us got into this business and what really drives the passion for it. A lot of our relationships with clients go back 10, 15 and 30 years even. That’s the most fun part of it. I think it’s also really gratifying to successfully run the business and see the impact that you can have on employees’ lives.
What would you be doing if not for your current job?
Teaching English in Argentina
What one part of your daily routine would you never change?
Interacting with our clients and prospective clients
How do you regroup on a tough day?
I try to exercise every day.
What do you for fun?
Cooking, traveling, reading, coaching kids’ sports
Most business leaders want to greatly improve customer loyalty, and I am no different.
To drive loyalty to my promotional products business, we have tried all the usual means — low prices, free shipping, membership club benefits, discounts and exclusive product offers.
Once, we even tried sending a vase of fresh flowers after each order. None of these initiatives resulted in the dramatic improvement that we sought. Over the years, we have engaged a series of expert consultants to find even more ideas to try. But in our business, customer loyalty remains a tough nut to crack.
The pharmaceutical giant Eli Lilly & Co. struggled with similar obstacles when it came to problem-solving in their business. Many were scientific, and — even though Eli Lilly’s substantial R&D group is staffed with talented technical experts — some problems resisted a solution for years. However, the company did invent a way to solve some of its problems quickly and cheaply.
Use expert advice — of others
Here is the gist of it: Eli Lilly discovered that it could solve a lot of the most intractable problems by giving them to experts from other fields. Simple? Yes. Counterintuitive? Yes. The surprise is that it seems to work.
The company put together an online network of thousands of scientists from other disciplines and “broadcast” their brain-stumping challenges to these experts from other fields. In many cases, the experts solved the problems by simply drawing on knowledge common in their own areas and applying it to Eli Lilly’s dilemma.
Eli Lilly’s scientists, we may presume, know just about all there is to know in their respective fields of expertise. Likewise, in my company, our experts know just about all there is to know about the industry, our products, our customers, competitors and so on. When the subject-matter experts can’t solve a problem, you need to cast a much wider net. If the specialists are stumped, then a solution, if found at all, will come from people outside the field.
Modify your individual process, if needed
Today, our company is using a version of Eli Lilly’s method in our business, which other organizations might also use to address their toughest problems. I didn’t have the time or means to put together a large team of experts from outside disciplines to work on my company’s challenges. So we use a modified Eli Lilly approach: We deliberately, routinely expose our in-house experts to nontraditional experiences and knowledge.
The idea is to see whether we can find our own answers by investing to acquire experiences outside those we normally encounter. In recent months, this new approach has involved my participation in a variety of eye-opening situations, including a meeting with the Cavalia producers, lots of museum visits, a guided tour of London graffiti and a design school workshop at Stanford University. On a personal level, I’m trying much harder to add new concepts and idea possibilities to my thinking.
I don’t know whether we’ll crack the customer loyalty problem in this way, but I can tell you that the ideas we discuss now are fresher than those we used to generate. That’s why my prescription for increasing the likelihood of solving the toughest problems is this: Live outside the box. ?
Jerry McLaughlin is CEO of Branders.com, the world’s largest and lowest-priced online promotional products company. McLaughlin can be reached at JerryMcLaughlin@branders.com.