Northern California (1069)

Monday, 26 October 2009 20:00

Giving back

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Every business owner wants to make an impact and leave behind a strong legacy. One of the best ways to do that is to not only create a strong company but to also consider creating a charitable foundation.

A charitable foundation gives you an opportunity to influence your community, in terms of where you place your money, how you make your grants and which organizations you serve and support. Take, for example, Tecumseh, Michigan. It’s not a town many people have heard of, but it’s consistently voted one of the top 100 places to live in the country. A big reason for that is the philanthropic work of Kenneth G. Herrick, who founded Tecumseh Products Co. and created The Herrick Foundation, which is one of the largest charitable foundations in Michigan.

Among other things, Herrick gave to libraries, museums, schools, human service agencies and health care providers.

“During his lifetime and since his passing, Herrick was a significant philanthropist, helping to shape and grow the community of Tecumseh,” says Gregory A. Schupra, the vice president and group manager for the Charitable Services Group at Comerica Bank. “Like Herrick, you too can perpetuate your legacy and affect the quality of life in your community for generations through a charitable foundation.”

Smart Business spoke with Schupra about charitable foundations, how to set one up and what you need to know when doing so.

Why should business owners establish a charitable foundation as a charitable trust as opposed to setting up a nonprofit corporation?

There are two main reasons: One, with a charitable trust, you can protect and preserve your charitable intents more easily. Two, you can protect and preserve your family’s involvement with the foundation as well so that it does not get ‘hijacked’ by outsiders.

When you set up a nonprofit — no matter what state you’re in — the trustees or directors can amend the articles and bylaws of the nonprofit to change the charitable purpose without anyone knowing or having any say-so. However, if you have a charitable trust, the trustees or directors would have to go to court to make a change like that, at which point it would be up for public debate.

Another aspect of a nonprofit is that trustees and directors are self-appointing, so, if they keep appointing nonfamily members to the nonprofit, the family can lose all authority and control. You could put family protection into the articles and bylaws of the nonprofit, but it’s a lot easier to have a charitable trust with certain requirements that family members have to be involved.

What tax implications should business owners be aware of when creating charitable foundations during their lifetimes?

The thing to keep in mind is that tax law is different for gifts from people’s estates as opposed to gifts given to a foundation during a lifetime. For example, if you have a piece of real estate — which many business owners do — and you give that real estate to your foundation during your lifetime, you can only deduct the cost basis. On the other hand, if you leave that real estate to your foundation in your estate, your estate can deduct the full fair market value. It’s the same for closely held stocks. If you give during lifetime, deduction is only on a cost basis; if you leave through your estate, deduction is full fair market value.

How should the foundation’s assets be invested?

First, the foundation has to determine what its grant-making and spending polices are going to be. If it’s going to grant out a higher percentage of its assets each year, then the assets should probably be invested in more fixed-income vehicles, such as bonds and treasury bills, in order to preserve more value. On the other hand, if the foundation is going to be giving, say, only 5 percent a year — which is the required minimum by law — then the asset allocation should be in longer-term investments like equities.

If you asked this question a year ago, I’d say that a perpetual long-term charitable foundation should have an asset allocation of 60 percent equity and 40 percent fixed income. But, because of the paradigm shift in the economic markets, it’s now 40-50 percent equity and 50-60 percent fixed income. It’s likely to stay like that for the next three to five years.

Bottom line, you want to create an asset allocation that fits your spending needs and the short- and long-term objectives of the foundation.

When looking to set up a charitable foundation, what are some other key considerations?

The key is to ask yourself the following four questions:

  • Do you want to conduct charitable activities (educate, feed the homeless, etc.) or make grants to organizations that conduct the charitable activities?
  • Do you want to establish during your lifetime or testamentary?
  • Do you want to support specific charities, particular charitable purposes or geographic areas?
  • Do you want your grant making to be competitive or noncompetitive?

There are many philanthropic options for business owners, and those options might seem complex, but if you work with professional advisers who know what to do and how to do it, you can have a great experience, both during your lifetime and by perpetuating your legacy over time.

Gregory A. Schupra is the vice president and group manager for the Charitable Services Group at Comerica Bank. Reach him at (734) 930-2417 or

Friday, 25 September 2009 20:00

Space exploration

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Savvy CEOs are taking advantage of the slumping commercial real estate market by evaluating whether their space meets their needs while the cost to buy or lease is low.

Commercial real estate prices fell again in the second quarter, showing an 18 percent national decrease compared to the previous quarter, according to Massachusetts Institute of Technology Center for Real Estate’s index. The drop placed the price index 39.2 percent below its 2007 second-quarter peak.

Clearly, the market is experiencing volatility, but opportunities are present.

“Lease rates are down significantly in the Bay Area, so this is an outstanding time to be a tenant,” says Mark Geisreiter, executive vice president and regional managing director, San Francisco Bay Area, Grubb & Ellis Co. “Prices to purchase buildings have dropped significantly, as well, so it is a buyer’s market right now and savvy tenants [and] savvy owners are lined up and getting ready to take advantage of that.”

Whether you’re searching for a new property or hoping to reconfigure space for efficiency’s sake, cost savings can be yours. The first course of action is to connect with an experienced commercial real estate broker to weigh your options because there are plenty of them.

Debate to buy versus lease

The decision to buy or lease property has less to do with the current state of the market and more to do with each company’s individual circumstances.

Think about your industry, your strategic plan, your company culture and what those will look like five or 10 years from now; then add the amount of capital you have for discretionary spending. Most companies lease to stay adaptable.

“There’s a tremendous amount of positives to owning real estate, and there’s a tremendous amount of positives to leasing or renting real estate,” Geisreiter says “But I think really the most important question that you need to answer is what is the right decision for your business, and that’s not always driven just by price.”

One of the bigger challenges facing the market today is that the capital markets are at a standstill, leaving few lending opportunities. The loan-to-value ratio has changed dramatically. Once, you were putting 10 percent to 30 percent down for a loan; today, it might be as much as 50 percent.

“I think with the tight credit markets you’re seeing that lease opportunities are obviously more plentiful,” says Bryan Courson, managing partner, office division, NAI BT Commercial. “I think, at the end of the day, you can probably get more favorable terms on a lease overall just by virtue of the competitive landscape.”

It’s important to work with your broker to analyze your options and ensure the best deal, especially because prices and volatility vary by market and even within markets. Renting sublease space may even be the way to go because it’s cheap, but be sure to investigate the leaser’s financial standing before signing anything.

No matter what your decision, you’ll more than likely see savings because sales prices have fallen and landlords are becoming more and more creative with incentives to retain and attract tenants.

Renegotiate your lease

If your lease has been tucked away, dust it off and read the fine print. Renegotiating your lease can lead to immediate savings and even allow you to get better use out of your space. Again, the returns may vary based on your landlord’s willingness to bargain, but your market insight can be used as leverage.

Before you go to your landlord, there are a few questions to ask yourself. First, how much time do you have left on your lease?

“I’d say the environment today is the typical landlord is very receptive to renegotiation particularly as you get within 12 to 18 months of your lease expiration,” Geisreiter says.

Second, how much time do you commit? If you discuss the popular blend-and-extend deal, where you sign a lease extension in exchange for reduced rent, you have to think about whether the space will continue to meet your needs for that length of time.

Third, can you give back or add space? If you’re cash-strapped or your company has reconfigured its employee base, maybe you can work the renegotiation in a way that better uses your space, such as adding or subtracting square footage.

Fourth, use your broker to research your landlord’s financial position, such as insight on how large the mortgage is and whether your landlord has good credit. The information can be critical in determining whether your landlord is financially sound and a safe bet for the future.

Fifth, research your options in the marketplace. Even if staying makes the most sense, at least you can present your landlord with the possibilities that wait should you leave. Some landlords are offering free rent, moving allowances and increased improvement dollars to attract new tenants.

“You want to create and orchestrate a competition, and that brings multiple landlords into play, including your existing landlord,” Courson says.

Consider more than just costs

Before you sign next to the X, take into consideration more than just the monthly dollar amount you’ll be paying. The general checklist for picking property once emphasized location, employee driving time and amenities. Those concerns remain important, but the current state of the economy has also brought to light the need for efficiency, flexibility and sound deals.

Working with a broker will allow you to receive the best bang for your buck, meaning fair market value, tax breaks, relocation incentives, landlord concessions and operational costs, while making sure it’s a strong deal.

The real estate crisis has left landlords hurting. Work with your broker to determine whether your landlord is currently facing or could face financial distress and how that affects the tenant improvements or possible free rent he or she promised.

Nonetheless, you should take the time to work agreements into your lease that protect your rights as a tenant if your landlord forecloses on the property and the lender takes over. Time and savings might also be found in the long run with contraction, addition and termination agreements for flexibility.

Flexibility is key for surviving this economy — and that includes your real estate. Your broker will have a space planner who can help you efficiently design the space you’re in or determine which space best suits your company.

“They can look at your space in ways in which you can maximize your head count,” Courson says.

Companies are saving money by going to open floor plans, narrowing cubical sizes and hoteling, which supports employees working outside the office and sharing desk space.

Whether you’re planning to buy, lease, move or stay, make sure you give yourself ample time — at least a year but probably longer depending on size — to ensure you’ve settled on the best choice for your company. And make sure you’ve explored every option because there are ways everyone can save.

“If you’re going to go out to the market and negotiate, hire an adviser and orchestrate a competition,” Courson says. “If you’re going to do something internally and you’re not out to lease new space or your lease isn’t up, there’s ways in which you can be more efficient inside your own walls.”

Friday, 25 September 2009 20:00

The Nandy File

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Born: In a small town in a state in the eastern part of India, called Ranchi

Education: Bachelor’s degree in physics, the Indian Institute of Technology, Kharagpur; bachelor’s degree in electrical technology and electronics, Indian Institute of Science in Bangalore; MBA from the Indian Institute of Management in Ahmedabad

As a child, what did you want to be when you grew up?

Nuclear physicist. That was my dream to be a nuclear physicist, and I did my first degree in physics. … It’s still my first love. My side reading, when I’m not reading management or technology, I still read quantum mechanics, what’s happening in physics, what are the unsolved problems ... because that still remains a huge interest for me.

What’s the best advice you’ve ever received?

The person who came for our convocation was one of the great constitutional lawyers of India, and his advice was, and he put it very nicely, there are two kinds of fools — one that gives advice and one that doesn’t listen to advice, so I will be the first kind of fool in hope that you are not the second kind of fool. And he said, ‘Never, no matter where in the world you are and what industry you’re in, draw circles around the accident in your birth.’ In other words, where you are born is an accident. There are good people, there are great people working all over the world in every religion, culture, skin color. Don’t draw circles. Don’t be parochial — don’t only look for people like you. Look for diversity in every aspect in order to excel.

He just said one sentence — ‘Don’t draw circles around the accident of your birth.’ That was the best advice I ever got from anyone. I love to work in multicultural things. I’ve worked in the U.S. for six years. I worked in Europe for four years. It’s a universal advice he gave, great advice.

Wednesday, 26 August 2009 20:00

Risky business

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This economy probably has your company facing heightened risks — risks that you might not be prepared for and that could ultimately cripple your business.

The global economy is the No. 1 risk businesses say they face today, according to the Aon 2009 Global Risk Management Survey. But the survey points out that less than 66 percent of respondents have formally reviewed their major risks or have plans in place to deal with them, including the economic downturn.

Now is a crucial time to have a detailed risk management program in place. After all, budgets are tight, you’re looking for savings and managing risk can directly influence your bottom line.

“First and foremost, it lowers your cost of uninsured losses,” says Matthew H. Davis, resident managing director, San Francisco, Aon Risk Insurance Services West Inc. “Second it lowers your cost of insurance premiums. … And third it minimizes the impact of financial disruptions to your business.”

Hiring an in-house executive to focus on risk may financially be out of the question. But a good insurance broker can help you put the puzzle pieces in place, starting with the questions that will lead to true solutions.

Identify potential exposure

Like anything in business, a true commitment to risk management starts with the company’s leadership. Set aside time for your organization’s key players to sit and outline the different risks you might face, such as financial, property and casualty, and legal.

“We recommend starting off by just sitting down and identifying the top five or six, or could be more, risks that could truly threaten the viability of the company,” says Brian Murphy, vice president, Heffernan Insurance Brokers. “These aren’t necessarily insurable risks; they can be any risk facing the company.”

There are a number of assessments you can do — such as risk mapping or enterprise risk management — depending on the amount of detail and commitment you want your program to include. Regardless of what direction you are going, you should include your insurance broker in the conversation. Odds are his or her experience, benchmarking data and outside eye will lead to valuable questions. A good broker has dedicated risk management and claims services and will go through a checklist that will bring your risks to light.

Once your risks have been identified, your broker can help you develop a strategy to quantify your risks and determine whether you should mitigate or transfer the risk.

The process is fairly systematic, but it’s also continuous. A true risk management plan involves constant monitoring. It’s worth the effort to work with your broker to match a timeline of monthly musts with your plan. Especially in volatile times like today, your company could face different risks than it did six months ago.

“Business is very dynamic; the way our business runs today is not (going to) be how it runs six months from now,” says Trish Drew, vice president of marketing, Jenkins Insurance Group. “Things change and so the closer that relationship is and the more the broker knows the intricacies of how that business is run, the better poised they will be to make recommendations about change or suggesting new ways of mitigating risk.”

Review risks

Your risk analysis is a great guideline for your specific needs, but there are a few areas of coverage the economy has made more relevant. And today’s evolving risks can be enhanced by geography and industry.

“The poor economy hasn’t created new risk, but it has greatly enhanced and complicated risk that organizations already face,” Davis says.

Business interruption and trade credit insurance are two areas to review. If a client can’t pay or your operations are halted, how will those scenarios affect your balance sheet if you’re already strapped for cash?

Insurance executives are warning that desperate times produce desperate people. If you’ve decreased your work force or plan to, keep in mind workers’ compensation and employee discrimination claims tend to rise in a down economy, as do employee crime and cyber theft. Now might be a good time to evaluate directors and officers coverage, employment practices liability insurance, crime insurance, cyber insurance and workers’ compensation coverage.

“We don’t think that the types of insurance have necessarily changed, it’s just a matter of taking a look at all of those insurances given the economic climate,” Murphy says.

Find cost-saving solutions

Insurance is one line item that hasn’t been immune to budget cuts. But before you start scaling back coverage, keep this in mind: We’re still in a soft commercial insurance market — meaning insurance is a cheap form of risk capital.

A 2009 benchmark survey by the Risk and Insurance Management Society Inc. shows a lower average in premiums contributed to a 9.4 percent drop in the average total cost of risk per $1,000 of revenue.

If you’re worried about the size of your insurance allotment, call your broker now, review your contracts and review your risks. You don’t have to wait until your renewal in order to find savings or renegotiate your contract. Just remember, before you can responsibly lower costs, you need the details of what you are and aren’t covered under.

“Many companies are going through cost-reduction measures, so in the risk management space, we have had several clients that are being forced to reduce their overall spend,” says Tane Abbott, managing director of the San Francisco office of Marsh Inc. “We generally don’t recommend they stop buying insurance, but what a lot of companies are doing is looking at their retention levels, deductibles, so essentially what they’re retaining of every loss and perhaps increasing them in exchange for lower premium.”

Immediate savings can be found by passing risk to others, such as tenants or vendors. You also can play around with increasing deductibles to lower premiums or scaling back nonmandatory insurance. If the latter two are options, first weigh whether you can financially assume the risk or if the cost of managing the risk is cheaper.

One of the only ways to decrease the costs you can control is by reviewing your claims. You should have regular claims review meetings with your broker to see where prevention methods can be put into place. Your insurance carrier can help with loss control, such as safety training.

“Roughly 65 to 70 percent of the risk management cost comes out of the loss side,” Abbott says. “While many companies focus on the premium, helping to reduce that loss component, ultimately, over the long run is the best place to focus because that will save you money directly on retentions and will help lower your premiums in the long run.”

Some brokers say clients recently have seen cost savings of 20 percent.

Part of the answer is building a long-term relationship with your broker and even carrier. Share with them details of your operations. Invite them to tour your facility. The more your broker understands your business, the better he or she will be able to provide holistic advice. And a lasting relationship with an insurance carrier can mean more flexibility and negotiation.

“I think probably the most important thing is the continuity that you have in that relationship,” Drew says. “By building a history with a broker, they become almost a part of your organization.”

Northern California

Special Report

Wednesday, 26 August 2009 20:00

Money in the bank

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Earlier in his career with Comerica Inc., J. Michael Fulton was an account officer in Detroit and was working on the Chrysler relationship. At the time, Chrysler was near bankruptcy, so Fulton was flying to New York every week, because the bank had so much money tied in to the automobile company. It made for some long trips and late nights, but before he crashed to get some shut eye, he always did something that seemed so small at the time.

“These were the days before computers but after abacuses,” Fulton says. “I’d go home, and I’d type up the memo, everything that happened in the meeting, and I’d go in the next morning, and I’d put it on the chairman’s desk.”

He didn’t have to do that, but he just thought it would be nice for him to know the details of these meetings since they seemed very important. That simple act got him noticed. Down the road, that chairman plucked him out of his position and put him in a greater role, which springboarded Fulton’s career. He eventually led the company’s entry into the California market through the acquisition of a San Jose-based bank, and today, Fulton is president of the bank’s Western Market, overseeing more than 2,000 employees in about 100 locations. During his nearly four-decade career with Comerica, he’s learned the right — and sometimes wrong — ways to lead in business.

Accept mistakes

Years ago, on Fulton’s first day as an assistant manager at Comerica Inc., he was feeling around his desk and accidentally set off the alarm button, and 10 minutes later, he had three police officers bursting in the front door. He initially didn’t fess up about it out of fear of getting in trouble, but the incident was eventually traced back to him.

It’s not the only mistake he made early in his career either. On his first day as a teller — his first job with Comerica — he was out of balance, which isn’t the best way to start in a bank. While he’s made countless other mistakes over the years, he’s learned from those and recognizes that he needs to be accepting of other people’s mistakes, as well.

“If I remember those things, 37, 38 years ago, I think people really learn from mistakes,” Fulton says.

By moving forward instead of dwelling on mistakes, it’s gotten him to where he is today — and as a result, he welcomes employees making mistakes when it’s a learning experience.

“Trust their judgment, and on something where they’ve used their best judgment, mistakes are forgiven, and you learn from it,” he says. “I find that kind of environment fosters growth, creativity and makes it more enjoyable.”

Fulton sometimes shares his embarrassing mistakes with his people to show them that it’s OK to make them, as long as they learn from them.

“If occasionally they don’t [make a good decision], we’re not going to come down on them so hard that they’re afraid to even make a decision anymore,” he says. “It’s seeing that when someone did make a mistake, they were forgiven. It’s promoting the mistakes I made so people know I don’t think I’m immortal.”

By forgiving people for their mistakes, it also helps foster trust between himself and the people below him. It’s also important to help people learn how to make better decisions, and to do that, you have to give them guidelines or parameters. At Comerica, the company has policies and procedures to help people make decisions.

“You can draw the box, and as long as I stay within the box, whether I’m in the upper left or lower right, and that box is big enough, I have lots of flexibility to do my job,” he says.

While you can create guidelines to help people, recognize that sometimes people may have to stray outside of that box if the situation calls for it.

“If I inadvertently stray a little outside the box to get a deal done or I thought there was a really good reason with the right kind of explanation, I would hope I’m forgiven, too,” Fulton says. “Most often, I am, and most often, I would want to treat my people the same. I don’t like micromanagement, and I don’t want to micromanage my people.”

You have to recognize that the more policies, procedures, guidelines, or checks and balances you put in place, the more people will fear making decisions and the longer it will take to make those decisions.

“Every company has policies or controls,” he says. “I think when you put those together, you have to make sure that you’ve given enough latitude. If you require something has three levels of approval, you just have to recognize that you’ve added more time in the decision.”

Stick to your strategy

Fulton has also learned that it’s critical to have a strategy when moving forward.

For instance, when the Comerica team decided to enter the California market nearly two decades ago, it didn’t simply rush in.

“It’s really understanding the market, market size, market growth, the needs of the market, how the market’s being served today,” he says.

He logged nearly 200,000 frequent flier miles flying between Detroit and California to investigate the market. Fulton asked how well potential customers were being served, what customers’ perceptions of their banks were, what they valued in a relationship with a bank and how they evaluated their current service. By doing this and asking these questions, Fulton and his team saw that the small and midsized businesses weren’t that happy with the large banks, which had most of the market share and were all trying to do 500 different things. So they saw a real opportunity to simply focus on relationship banking with small and midsized businesses.

“We had to ask ourselves, first and foremost, is that market, or what the market’s looking for, something we truly believe we can be good at?” he says. “If it is, then we’re going to look for a way to get started here.”

Sometimes it can be hard to know if you can be successful at something, but that’s when you look at your track record.

“Some of it, in our case, has been, ‘Have we done it before elsewhere?’ and to critique how well it was working and was it consistent with our competencies,” Fulton says.

In this case, the way to move into the market was by acquiring a bank based in that region. After doing that, Fulton and his team focused just on one area — relationship banking — because they wanted to differentiate themselves from the competition. Over the years, he’s used that same strategy when choosing new areas to enter, so he says it’s also important that you know your strategy and don’t try to sway from it.

“There are two kinds of strategies,” he says. “One is low-cost — ‘We’re going to beat the competition because we’re going to be cheaper.’ … The other strategy is, ‘We’re going to differentiate ourselves. We’re going to truly charge a premium because we’re providing a service that we think exceeds the competition.’”

Fulton wouldn’t even entertain anything that gravitated more toward the low-cost strategy, because he wanted to truly provide top-notch service and differentiate Comerica in the market. Over the years, Comerica added just 14 other businesses using this approach.

“They all started with the vision that there was existing and future opportunity always, then validated with research,” he says.

And each time someone floated an opportunity out there, he made sure to evaluate it for its long-term viability. For example, during the dot-com bubble, Comerica stuck to its principles and required that companies be backed by well-known venture capital firms, and that saved the company from being affected by the bubble burst. When many of its competitors were making nonrecourse loans for developers just to get deals during the real estate boom, Comerica didn’t do that.

He says, “It gets back to that consistency thing that you just have to make sure that you’re really sticking to what you know well and how you prosecute the market and don’t get caught up in the hour and the quarter and the month and the year because things are getting too frothy.”

Develop your people

It’s not uncommon for Fulton to spend 10 or 15 hours in a week working on talent management, which involves looking at both the results as well as the behaviors of his managers. It may seem like a lot of time, but another thing Fulton has learned over the years is that you have to constantly be looking to develop your people.

“If you really believe that retention is a real priority in your business, then you have to put together some type of talent management process within your organization,” he says.

One of the easiest ways to see who’s performing well is by looking at results, but often you have to look beyond those and at behaviors, as well. For example, do people follow that person because they have to or because they want to? Does the manager have good development plans in place for the people? What are people like with their employees? What are they like as speakers? What are they like with customers?

“It’s a variety of probing on what kind of development these people need,” Fulton says.

He says it’s also important to look at their bench strength — the managers behind the managers and other key employees under them. Sometimes one of the biggest talent development areas is helping managers simply develop the people on their bench.

It’s also important that as you evaluate your people, that you’re looking at where people can move.

“We’re looking at who’s ready now, who’s going to be ready in a year or two, who’s going to be ready in three to five years,” Fulton says. “We actually identify names there, and then we want to make sure that those people have special attention and development there.”

In order to know who’s ready, it comes down to having relationships with your managers.

“You have to get to know that person,” he says. “You have to rely on your managers to know that person. We see the results, and we can measure their results monthly in terms of how they’re performing.”

When it comes to programs for development, sometimes it simply requires internal training, but in other situations, Fulton will bring in someone with more expertise to work with that manager. Regardless of how you provide additional training, be sure to follow up. On an annual basis, Comerica reviews managers to see how they’ve progressed, and then most meet on a quarterly basis just to talk about how they’re improving. By having a process like this, it ensures that you have people slowly stepping up when they’re ready, which will help your business grow in a healthy way.

“I think if you’re steady, you’ll develop people, you’ll retain those people, and you’ll have a good plan you can stick to,” Fulton says. “We’re trying around here to hit singles and doubles rather than hitting home runs and then two strikeouts.”

By retaining your people, it also ensures you’ll make customers for life.

“One of the ways we retain customers is by having good employees that aren’t leaving every other year,” he says. “So our customers know our people when they call. They don’t have to start all over again with the explanation of what they do and how they do it. We’re already familiar with it, so retaining customers goes hand-in-hand with retaining our employees.”

How to reach: Comerica Inc., (408) 556-5000 or

Sunday, 26 July 2009 20:00

Thinking globally

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Now more than ever, companies need to find ways to grow or else the uncertain economy will swallow them whole. One great way to grow your business is to “go global.”

But, obviously, this is no small feat. You can’t just start shipping your products overseas and expect everything to fall into place. However, if you do your homework and follow a well-thought-out plan, you can take advantage of opportunities in global markets. Regardless of your company size or global experience, effective management of working capital throughout your global trade cycle is a critical success factor.

According to Gigi Moore, the senior vice president and national group manager of international trade finance for Comerica Bank, the global trade cycle — commonly referred to as ‘global supply chain’ or ‘physical and financial supply chains’ — represents the various stages of the buying and selling process among trading partners.

“Working capital requirements throughout the global trade cycle vary from company to company,” Moore says. “Some require solutions only for preshipment or post-shipment, while others require end-to-end solutions. It all depends on the nature of your business, your customers’ requirements and the financial resources available to your company.”

Smart Business spoke with Moore about the global trade cycle and what your company can do to expand globally.

When companies are considering global expansion, what should they know?

Through many years of experience, we understand that companies have four primary business goals: to optimize working capital, mitigate key risks, reduce costs and simplify their trade process.

The first step in accomplishing these goals is to create a global business plan and share the plan with your financial service provider. An experienced international trade finance specialist will help you to identify the global risks and select the payment options and financing solutions that make sense for your company

Even with the current slow business environment, it’s important to consider global expansion. Just selling domestically diminishes your reach, since 95 percent of the world’s consumers live outside of the United States. Don’t let this economic downturn keep your business from growing.

With declining trade flows, do companies need to be more concerned about risk mitigation?

According to the World Bank, world trade flows declined this year for the first time since 1982, declining by 9 percent, which is the steepest plunge since World War II. Even in this environment, companies are still participating in global commerce.

It’s a natural progression that during uncertain economic times companies will see higher risks. Greater protection may be required depending upon which country you are conducting business with and the experience with your trading partners.

Right now, some companies are facing commercial risks, such as insolvency or unscrupulous buyers, and political risks, such as economic instability or government restrictions, not to mention currency, transportation and foreign bank risks. And when there is a downturn in the economy, you want to have protection. Frankly, risk mitigation and working capital strategies and solutions should always be at the top of your list, regardless of economic conditions.

How can companies optimize working capital?

Working with your financial service provider to structure solutions to get working capital at competitive rates is paramount. For example, there are various financing programs sponsored by the government, such as the Working Capital Guarantee Program offered by the Export-Import Bank of the United States. The Working Capital Guarantee Program provides loan guarantees to banks willing to lend to exporting companies. The loan guarantee is secured against foreign accounts receivable, raw materials, work-in-process and finished goods inventory destined for export.

Additionally, when looking to optimize working capital, most companies think of days sales outstanding (DSO), which measures the time it takes a company to collect accounts receivables from credit sales. DSO is one of the best measures to determine receivable efficiency — the lower the DSO, the more efficiently a company manages cash flow. For example, some companies require letters of credit from their global customers. The letters of credit can include certain terms and conditions that result in extended terms for your customers while allowing advance payment for you upon shipment. By working with an international trade finance specialist, you can find ways to lower your DSO, which will increase your working capital and make it easier to export.

How can companies reduce costs and simplify the trade process?

Evaluate the various activities in your global trade cycle to determine if there are more efficient ways to conduct business. You should look for ways to streamline activities through automation and also prepare a comparative analysis of your global service providers. However, recognize that lower cost doesn’t always lead to the greatest value.

Companies that have the greatest success with managing their global trade cycle effectively, again, consult with professionals that have the expertise to identify the right solutions to help them achieve the four primary global business goals: optimize working capital, mitigate key risks, reduce costs and simplify the trade process. Your financial service provider can help you make good global decisions, and when you make good decisions, your company can benefit from global commerce.

Gigi Moore is the senior vice president and national group manager of international trade finance for Comerica Bank. Reach her at (313) 222-7031 or

Sunday, 26 July 2009 20:00

3 Questions

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Michael A. Silva serves as senior vice president and group manager at Comerica Bank Western Market, managing the bank’s Middle Market North Bank and San Francisco regions. His main focus is providing full lending and depository service to middle-market companies and growing medium-sized wineries in the area. Silva has a bachelor of science in commerce-finance from the University of Santa Clara.

Q. What role does a bank play in assisting businesses in a down economy?

Because banks have the vantage point of seeing companies of all different sizes and across many different industries, your banker can share proven ideas and concrete solutions to help a company address issues, such as delayed customer payments, reductions in staff, building inventories or lower demand. As a company’s cash flow is impacted, it is important to discuss the changed circumstances immediately and keep your banker adequately informed.

Q. What are ways a company can work with its bank to save money and become more efficient?

Treasury products are one area every company should be analyzing. To effectively manage your cash position and improve payment processing, ask the basic questions: Are we collecting money as quickly as possible? Are we making it easy for customers to pay us? Are we controlling incoming and outgoing payments? Banks have products that can address each of these, from remote deposit capability and lockbox to electronic bill payments solutions and information reporting. There have also been advances in fraud protection and security measures to help control losses.

Q. What information should a business update its bank on?

Share information on any changes to the management team. Banks want to have confidence in the management and ownership of the company. Provide fiscal year-end financial statements and any interim financial statements on the company, as well as any major changes (positive or negative) in the product line, suppliers and customers. During performance discussions, it is very important to know where the company is versus its projections. Bankers don’t like to be surprised, so you can never share too much information on the state of your business.

Sunday, 26 July 2009 20:00

The Edmunds File

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Born: Kenbridge, Va.

Education: Bachelor’s degree, accounting, University of Texas at Austin

What was your first job ever?

I cut lawns in my hometown, and I remember, for an acre, it was about $3.50. I’ll never forget, my mom made us business cards that we handed around to the older ladies in town, and our motto was, ‘You grow it; we mow it,’ — $3.50 per acre — I mean it was awful. They were enormous yards, and we’re not talking riding mowers. We’re talking push the mower, you know, forever. I was in good shape. I did it with my brother. I think I was probably 12 or 13.

As a child, what did you want to be when you grew up?

I wanted to be a lawyer. My dad was a lawyer, so I thought about that early on but too much school was involved. To think about it, I actually wanted to be a professional golfer. When I was 11, 12, 13, 14, I played golf every day in addition to mowing yards. I actually wanted to be a professional golfer, but when I got to college, I realized I wasn’t that good. I couldn’t compete with the big guys. I was a big shot in southern Virginia and became a little shot when I went to UT, and I realized I should be an accountant versus a golfer, and that worked out fine.

What’s your favorite board game?

I like to actually do puzzles with the family. We’ll go skiing in the winter and ski for three or four days and lay out a huge 2,000-piece puzzle and do that over three or four days, and it’s pretty relaxing.

What’s the best business lesson you’ve learned?

Don’t defer the tough decisions. Don’t wait until they get worse and worse, but address the tough issues now. Don’t defer tough decisions.

Whom do you admire most and why?

Martin Luther King Jr. He’s not here anymore, but I think he was the greatest leader of the 20th century. I’m pretty famous here for the voice mails I send out on Martin Luther King’s birthday. I think he was an astonishing human being who did more for the U.S. than any other leader in that century, and I just admire him a whole lot.

Tuesday, 30 June 2009 20:00

Entrepreneur Of The Year

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For more than two decades, Ernst & Young and the Entrepreneur Of The Year® awards have honored entrepreneurial men and women and the companies they build and grow. Smart Business magazine is proud to be the media sponsor for eight regional EOY programs: Alabama/Georgia/Tennessee, Central Great Lakes, Florida, Houston and Gulf Coast Area, Lake Michigan Area, Northeast Ohio, Northern California and South Central Ohio & Kentucky.

To hear from each program director and read profiles of the finalists and award winners, click on the links below.


Central Great Lakes (Eastern Michigan, Northwest Ohio)


Houston and Gulf Coast Area

Lake Michigan Area (Illinois, Indiana, Wisconsin and Western Michigan)

Northern California

Northeast Ohio

South Central Ohio & Kentucky


Thursday, 25 June 2009 20:00

The sky’s the limit

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Just three years after the inception of his
company, Vikram Mehta’s technology is being used at 300 of the Fortune 500 companies.

From his humble beginnings in India — where he was labeled “learning challenged” and earned a dollar a day — Mehta made his way to a job at Nortel, where he saw the opportunity for a new kind of intelligent network “circulatory system” for data centers. Along with Nghiem Chu, Andy Gram and Bill Nelson, he hatched the business plan for what he envisioned the idea could become.

But even after he got buy-in from IBM on the new system, Nortel declined to back it. It took three years, but he finally convinced Nortel to spin out BLADE Network Technologies Inc., got IBM and Hewlett-Packard to take a chance on the new venture and got every person in his original Nortel division to follow him to the new company, at which Mehta serves as president and CEO.

Three years later, BLADE has achieved Mehta’s vision to build and deliver the essential data center networking technology that is the heartbeat of the enterprise, and the company is the world’s No. 1 provider of blade server networking, with a 48.5 percent share of the market, two times the share of its closest competitor, Cisco. Its switches can be found in 1.2 million HP Bladesystem, IBM BladeCenter, NEC SIGMABLADE and Verari Systems servers at some of the world’s largest companies, ensuring that their business services are available and secure, and avoiding consequences such as lost revenue, unhappy customers and security vulnerabilities.

And its technology not only serves its clients but the environment, as well. Mehta has implemented a “green mandate,” and recently introduced a switch that only uses the power equivalent of two light bulbs, leading the company to be recognized by AlwaysOn as the first green networking company.

How to reach: BLADE Network Technologies Inc., (408) 850-8999 or