Consider this business scenario: You’ve landed a big account for your company by converting a highly prized prospect into a valuable client. The new client has hired you to handle a specific scope of work and is counting on your team’s ability to deliver work that goes above and beyond.
While nothing is more important than delivering great customer service to satisfy the client, you may not realize that you’re probably overlooking unrealized opportunities to forge a stronger relationship with your customer.
In today’s business landscape, most large companies offer an array of products and services. More often than not, however, your clients use you for a specific service or skill set. And unfortunately, in this scenario, most companies focus solely on the task at hand — delivering what they’ve been contracted to deliver — failing to take ample time to think about the bond they’re creating with the client and what could be next.
In more simple terms, it is one thing to provide service that keeps a customer; it is another to keep that customer and expand the relationship to become a trusted partner.
Provide value in a deliberate way
The good news is that this is an easy fix. Establish a content marketing program that allows you to distribute thought leadership to your clients.
A content marketing program will help you provide value that other service providers may not, and when clients see you as an informational resource and partner, it will be easier to expand the relationship.
Take this example into consideration: You are an insurance provider and your main product is life insurance, therefore most of the communication you have with your clients surrounds that topic.
With a comprehensive content marketing program in place, however, you can educate your clients on the recent trends in the insurance industry and how that affects the individual. At the same time, you can give them an overview of your company’s wellness program and let them know that if they joined, they could reduce their monthly premiums.
As you can see, you’re not just providing your client with the original service, you’re also providing them with both your thought leadership — aka value — and additional offerings.
Personal connections payoff
Aside from providing value to the client with the content you distribute, a strong content marketing program allows you to showcase your brand’s personality. Clients will be able to connect with your brand on a more personal level.
Providing continually updated content through the right channels to the right clients enhances your day-to-day communications. Clients start seeing you as thought leaders and partners instead of just service providers.
It will help you expand relationships and, as a result, generate new business through more products and services.
Show them more than just what they see on the surface — show them how active you are in the community, or how much fun you had during a recent company outing. If may sound trivial, but your clients do similar things, and seeing you connect with the community and/or employees will help forge a more personal connection. You never know; you and your client may support the same charity, organization or team.
Open communication also will help strengthen relationships to the point where you can capture a premium price and eliminate price-jumping clients. Clients will pay more for a valuable relationship than simply look to get the lowest price elsewhere. ●
David Fazekas is vice president of marketing services for SBN Interactive. Reach him at email@example.com or (440) 250-7056.
You would think someone like Douglas Merrill would be a heavy multitasker, with multiple devices in hand, fielding several conversations — both real and virtual — simultaneously.
But you would be wrong.
Merrill, who was the CIO at Google until 2008, doesn’t like to multitask. He says that when you do it, you aren’t using your brain’s full capacity and aren’t as effective. He recommends focusing on one thing at a time.
Billionaire Mark Cuban has his own time management strategy. Cuban, owner of the NBA’s Dallas Mavericks, says you should completely avoid meetings unless you are closing a deal. Otherwise, he says, they are a waste of time.
Both of these proven leaders have learned that how you manage your time is paramount to your effectiveness.
As a CEO, you are swamped every day with calls and emails from people wanting a piece of your time. Some are internal, some are charity requests, some are from friends or family members and others are from service providers.
To help wade through this sea of information, it’s important to have a system in place to help you free up time to think about your business and the things that matter most in life. These open times are what author Richard Swenson refers to as “margin.” They are the spaces between ourselves and our limits that are reserved for emergencies.
But for many business leaders, there are no spaces left.
The way out of this trap is to set clear goals and values for yourself and your organization. Once you do that, you will have a filter through which to evaluate everything. Everything will have an immediate yes or no answer, eliminating the “let me think about it” category completely.
The key is to establish what your goals are first and then prioritize what is important. With your priorities straight, you will find more time to put toward important things on your goals list, but don’t forget to leave time on your daily schedule. There is no way to foresee all emergencies, so by leaving yourself some margin, when something unexpected happens, you already have time built in to deal with it.
Once you have margin built into your life, you have to have the discipline to stick to it. There will always be the temptation to take every meeting or answer every email. But if you use your goals and priorities as a filter, those requests are easily either accepted or declined based on where they fall on your priority list.
If you want a life where you can experience more peace and joy and less anxiety, start looking at your priorities and establish some margin in your daily schedule. ●
Deny, deny, deny; fall, tuck and roll; or put your head in the sand?
The quick answer to this headline is none of the above. A leader, by definition, must do exactly that — lead, which means being in front of a variety of audiences, including employees, investors and customers. Not everyone is going to be a gung-ho supporter. Sooner or later you’ll encounter a naysayer who either has a point to prove or is on a mission to make you and your company look bad.
Many of these verbal confrontations come out of nowhere and when least expected. As the representative of your organization, it is your responsibility to manage these situations and recognize that sometimes a “win” can simply minimize the damage.
When under siege, it’s human instinct to fight, flee or freeze. Typically these behavioral responses aren’t particularly productive in a war of words. Engaging in verbal fisticuffs could simply escalate the encounter, giving more credence to the matter than deserved.
If you flee by ignoring the negative assertions, you’ll immediately be presumed guilty as charged. It’s hard to make your side of the story known if you put your head in the sand.
By freezing, you’ll appear intellectually impotent. Worse yet, pooh-poohing a question will only fuel the aggressor’s determination to disrupt the proceedings. You could use a SWAT-type police and military technique to elude a confronter by falling, tucking and rolling to safety, but that usually only works on the silver screen.
Perhaps the best method to manage unwelcome adversaries is to be prepared prior to taking center stage. This applies to live audiences or a virtual gathering when you’re speaking to multiple participants, which is common practice for public company CEOs during quarterly analyst conference calls.
Most gatherings of this nature include a Q&A segment where the tables are turned on the speaker who must be prepared to respond to inquiries both positive and negative.
Before any such meeting, it is critical to contemplate and rehearse how you would respond to thorny or adverse statements or questions.
A good practice is to put the possible questions in writing and then craft your responses, hoping, of course, that they won’t be needed. This is no different from what the President of the United States or the head of any city council does prior to a press conference or presentation. The advantage of this exercise is that it tends to sharpen your thinking and causes you to explore issues from the other perspective.
In some cases you’ll find yourself in an awkward or difficult situation where there is no suitable yes or no answer, or when the subject of the interrogatory is so specific it is applicable to only a very few.
The one-off question is easiest to handle by stating that you or your representative will answer the question following the session rather than squander the remaining time on something that does not interest or affect the majority.
The more difficult question is one that will take further investigation and deliberation, in which case the best course of action is to say exactly that. Answer by asserting that rather than giving a less-than-thoughtful response to a question that deserves more research, you or your vicar will get back with the appropriate response in short order. This helps to protect you from shooting from the hip only to later regret something that can come back to haunt you.
Effective speakers and leaders have learned that the best way to counter antagonism is through diplomacy. It’s much more difficult for the antagonist to continue to fight with a polite, unwilling opponent.
Finally, when being challenged, never personalize your response against your questioner; always control your temper; and don’t linger on a negative. Keep the proceedings moving forward and at the conclusion keep your promise to follow up with an answer. This will build your credibility and allow you to do what you do best, lead. ●
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. “The Benevolent Dictator,” a book by Feuer that chronicles his step-by-step strategy to build business and create wealth, published by John Wiley & Sons, is now available. Reach him with comments at firstname.lastname@example.org.
My 7-year-old son Cole recently gave me a Rainbow Loom bracelet, which is made of linked rubber bands. It is today’s school-age children’s craze, and Novi, Michigan-based Choon’s Design LLC is churning out the kits at a record pace.
With more than 1 million units sold in the last 24 months, Rainbow Loom is the brainchild of Choon Ng, a former Nissan crash safety engineer who invented it while working on a craft project for his daughters.
And Rainbow Loom, it turns out, isn’t its original name. When it was created, it was called Twistz Bandz.
Timing is everything, and Twistz Bandz may have sounded a bit too much like Silly Bandz — the last “wrist” craze that swept the nation. Between November 2008 and early 2011, every school-age child in sight was wearing layer upon layer of Silly Bandz on their wrists. It was as hot a product as anything since Beanie Babies.
Twistz Bandz’s arrival, it seems, happened just as Silly Bandz ran into what every hot new product eventually faces: competition. Look-a-likes with similar-sounding names began flooding the market. They were cheaper, and you could buy them more readily at more retail locations. The core brand quickly diluted. So Ng did what any smart businessperson would: He changed the dynamics of the situation.
Thus, Rainbow Loom was born.
Enter social media
Within a few months, the product — which allows its young owners to custom-create bracelets — was gaining attention. Much of this was due to a full-tilt social media blitz, including videos on YouTube and an engaging Facebook page, where users could share their designs.
More recently, Ng has become vigilant in protecting his patent and U.S. trademark — battling all wannabe competitors from launching similar-sounding products and flooding the market to dilute his own brand.
His success — or failure — is yet-to-be determined. But his efforts will prove fruitless if he’s not already looking ahead to the next product. This is the dirty little secret to any hot toy craze and the core dilemma every business leaders faces: How do you remain relevant as consumers’ wants, needs and desires ebb and flow — sometimes as swiftly as the wind changes direction.
Get beyond being a fad
Success in business relies upon building a sustainable operation that will outlast any cyclical “must have” product explosion.
There needs to be the creation of an idea continuum — an innovation factory, if you will. Innovative leaders must review, measure and adapt a company’s products, services and solutions to the changing whims of the marketplace. You need to talk to customers, vendors and prospects. And you need to regularly take the pulse of the market.
If you haven’t taken at least some of the gains from today’s success and invested it into research and development for tomorrow, you’re already losing ground. Today is today, and just like the disclaimers for financial investing warn — past performance does not indicate future results.
In the end, the only thing that matters is this: Is your next big thing built to last? Or, like every other craze that’s every hit the market, will your opportunities to remain relevant long into the future fade away after the competition creeps in and dilutes your market? ●
Dustin S. Klein is publisher and vice president of operations for Smart Business. Reach him at email@example.com or (440) 250-7026.
After realizing the difficulty health plans and government organizations had in arranging transportation services, Peg and Lynn Griswold were determined to develop a company that ensured people had access to health care.
Founded in 1995, their company, Medical Transportation Management Inc., quickly set industry standards. But after a career with Blue Cross Blue Shield and eight years running and growing MTM, the Griswolds were ready to retire.
In 2003 they chose to transition out of the business by bringing in Lynn’s daughter Alaina Macia to help run the company.
“I joined the company when it was around $30 to $40 million,” Macia says. “At that time, I focused in on every aspect of MTM from marketing to sales strategy to operations, financial review and technology.”
Over the course of two years, Macia got more responsibility and freedom to make decisions and in 2005 was promoted to president and CEO of the company.
“In the beginning, I was really focused on the marketing and sales process,” she says. “We had a good product, but I wanted to make sure people knew about MTM.”
MTM doesn’t own vehicles; rather, the company coordinates transportation that’s already available and manages it from a quality perspective. Over the years, Macia and her leadership team recognized opportunities to expand MTM’s service offerings. Leveraging its resources and experience, MTM adapted its management model, offering new products to help clients align incentives, reduce cost and increase customer satisfaction.
The demand for better transportation products and services was certainly prevalent, and with Macia at the helm MTM has grown to 1,000 employees in 28 states with annual revenue of $175 million.
Here’s how Macia is steering MTM with a focus on growth.
Become a better company
In the beginning of Macia’s tenure as CEO, she had to focus on making MTM better known by the company’s potential clients.
“I wanted to make sure people knew about MTM, knew that we were a potential vendor for their services nationwide and that we understood who our core clients are and where our growth is going to come from,” Macia says. “You have to make sure that you’re marketing to your target audience and that it’s a message they want to hear and that the person carrying that message is someone the client is going to listen to.”
After ensuring the company’s message was targeting the right clients, Macia turned her focus to MTM’s operations and technology.
“As you bring on more clients, you need to become more efficient and continue to lower your overhead and operating costs so that you can grow profitably and in a high-quality manner,” she says. “If you don’t, you’re going to have issues going from a small to midsized company.”
Once MTM got to a critical mass point, Macia had to turn her attention toward ensuring the right people were on the team.
“The people you start with may not be the same people you need at a higher level,” she says. “You really are only as good as your team and the people around you. You have to focus on bringing in talent and not just hiring to fill a seat, but finding that best person for that job and that culture.”
Manage new growth
Despite all the areas of the business Macia has been focused on over the years, her biggest challenge has remained managing the growth of MTM.
“We are a high-growth company, but we never want to grow and sacrifice the quality to our existing customers,” Macia says. “So we make sure we isolate those clients so it’s business-as-usual for them while we’re growing, implementing and staffing for new programs.
“Like a duck, we want to appear very smooth to all our clients even if we’re working very feverishly under the water.”
MTM has continued to grow in its core markets, but has been leveraging its capabilities to become more diverse.
“One of the things we’re focused on for growth is home and community-based services, and that’s all the services an individual needs to stay in the home as opposed to going into a nursing home or a long-term care institution,” she says. “Transportation is a big component if somebody’s going to stay in their home and still get to medical care, church, to see friends and have a social life.”
MTM is putting networks together to deliver home and community-based services, which are a big push under health care reform. However, those services aren’t the only ones Macia has her eyes on for expansion.
“We are also focused on moving into public transportation and school-based transportation and working with our managed care clients to provide additional services like ambulance management, claims management and customer service operations for them,” Macia says.
Growth in your core service offerings is one thing, but growing new offerings takes a lot more focus and attention.
“It’s really about prioritizing what you believe you can be successful in and what is going to generate return on investment so you can continue to invest in your services,” she says. “You need to realize what you can do effectively and make money as well. If you can’t make a profit then you’re going to diminish what you could have invested in your core product.”
When growing both your core service and a new offering you have to make sure you’re not taking your eye off of either ball.
“You have to have enough energy around the new products that you’re actually going to be successful in making it happen, but not take away so much attention from your core product that you’re diminishing the value to your clients,” Macia says.
“It’s about being honest with yourself, your company and your staff about what you can achieve. At the same time, human nature is to avoid change, so a lot of times as a business leader you have to make sure people aren’t pushing back. So you have to assess what your capabilities are and what your team can do.”
Tap strong talent
As MTM has grown and expanded its services and product offerings, the company has had to ensure that its team is equipped to handle the new work.
“We are continually recruiting talent and making sure we have the right fit both from individuals who are running our programs in our local markets that are client-facing, and internally with the specific talent we need across different areas of the business,” Macia says.
During the hiring process, you have to be diligent and ensure that the person you bring onboard fits into your company culture.
“Obviously when you’re looking to bring someone in, they need to have the background and experience for that position, but it’s not just background and experience,” she says. “They need to fit within your culture and should interview with multiple individuals within the organization. After we’ve identified top candidates, we usually use a third-party vendor to assess their critical thinking skills and whether they’re a fit for the role.”
MTM’s process helps slow people down who might be looking to simply fill a position because they have a gap versus truly finding the best person for the job.
“We want people to be successful at MTM for them and for MTM,” Macia says. “We don’t want to hire people who are not a good fit, because it’s time and money for MTM, and its demoralizing to be put in a role that you can’t be successful at.”
Once someone is hired at MTM the company does extensive employee training and engagement.
“Companies that have high employee engagement outperform their competitors, and it’s not just because of that, but because it makes for a great work environment where people want to get up and come to work every day,” she says. “I like to come to work every day, and I like what I do and I hope my whole company feels the same way.”
Employee engagement can’t just be lip service. For employees to truly engage with your company, you have to prove to them that you are serious about having engagement be a part of the business.
“It has to be a priority,” she says. “A lot of times, business leaders are looking at how to save money, and I think it’s a penny-wise and pound-foolish thing not to invest in training and employee engagement because it pays dividends back.
“As a leader you need to focus on giving employees the tools to be successful — training and moving barriers. It’s multi-faceted and there’s no secret ingredient, but it’s open communication with your staff, clear goals for the organization, tools and training, and then recognition for a job well done.”
With many aspects of MTM running smoothly and sights set on further growth, Macia is excited for the opportunities in front of the company, but is waiting for that right time to pounce.
“We are interested in looking at the potential of international growth, but right now we are growing at such a rate that we don’t need to look for additional ways to grow,” she says. “We are growing at about 35 percent a year or more. When that slows down, we’ll look at acquisitions and other ways to grow, but right now we’re focused on organic growth.” ●
- Understand what areas of your business need improving.
- Manage your core product or service growth while finding new opportunities.
- Build and engage the right team to develop your company’s growth.
The Macia File
Name: Alaina Macia
Title: President and CEO
Company: MTM Inc.
Born: Washington D.C.
Education: Attended Washington University and received a bachelor’s degree in biological engineering and a master’s degree in business administration with a focus in finance and accounting.
What was your first job, and what did you learn from it? I worked as a lifeguard and also worked at a restaurant, but the one job that I had that gave me the best experience was working at my mom’s CPA practice. I worked with clients, helped meet deadlines and helped process information for staff. Being 16 and working with the public was a great experience.
Who is someone you look up to in the business world? Sir Richard Branson. I’ve always admired his entrepreneurial spirit and the fact that he believes in large goals. He inspires people to think outside the box.
What is the best business advice you’ve received? The 80/20 rule. Understanding what’s driving 80 percent of what’s going on and ignoring the other 20 percent so you can make vast improvement quickly.
What are you excited about at MTM? I get excited watching my employees engage, grow and have new opportunities.
If you could speak with anyone from the past or present, with whom would you want to speak with? The people I want to talk to are the people who are great at what I’m not great at. Both Barack Obama and Bill Clinton can speak well and engage their audience. That’s a great skill because people who master that can be successful.
How to reach: MTM Inc., (636) 561-5686 or www.mtm-inc.net
Innovation is the central issue in economic prosperity. — Michael Porter
Innovation is on the lips of almost every business leader in the U.S. and probably the world. Each of us loves those moments when, like Archimedes, we can cry out that we’ve solved a vexing problem.
In addition, government leaders are also focused on innovation as the key to economic success. The White House document, A Strategy for American Innovation, includes the following assertions:
■ America’s future economic growth and international competitiveness depend on our capacity to innovate.
■ The American people will do best when their inventive, entrepreneurial spirit is unleashed. Government policy must nurture that spirit and ensure it is not deterred.
Take steps to enhance inventiveness
Let’s assume for a moment that these statements about nurturing entrepreneurial spirit and harnessing our inherent ingenuity to ensure our nation’s economic success are true. If the policy document referenced above effectively does that, are there ways business leaders can take greater advantage of this infrastructure? Are there ways to enhance that inherent ingenuity?
According to researchers in neuroscience, that answer is yes.
Let’s look at one example of what doesn’t work to spawn innovation. Most of us have heard, in one form or another, the idea of the “burning platform.” It is often used to simply communicate the reasons why any change needs to be made. The challenge is that true burning platforms are emergencies, which aren’t fertile ground for innovation.
The key principle here is that fear is not an effective long-term motivator. If your message is, “We need to be innovative or our competition is going to put us out of business,” you might want to rethink your message. Fear may work in putting out a literal fire, but it doesn’t work when new ideas are needed.
Give a little space
So, what does neuroscience tell us can be done to help fuel innovation? One example — give people some space. Think of this as the opposite of cramming the night before your mid-term exams. Research led by David Creswell at Carnegie Mellon University suggests that complex problem-solving is enhanced by stepping away from a problem by using a “distractor task.”
The distractor task should be sufficiently difficult to ensure that you’re not focused on the complex problem you’re trying to solve. For example, a distractor task could be something as common as a Sudoku or crossword puzzle.
It’s important within a business context to ensure that the task is different from the problem you’re trying to solve. Don’t distract yourself with the branding challenge of one division with the branding challenge of another.
Let go of the problem for a moment
According to one executive coach, no one solves complex problems at will. The answers may suddenly arrive either in the middle of the night or while you do something pleasant and repetitive.
The point is that you have to let go of the problem for the solution to come to you. This quality often surprises people, but keep in mind that our unconscious processing resources are much larger than our conscious ones.
So, fear can be effective for short-term emergencies, but for long-term innovation needed to compete in the marketplace, creating an environment that promotes innovation requires giving your employees time to process and the space to do it. ●
Andy Kanefield is the founder of Dialect Inc. and co-author of “Uncommon Sense: One CEO’s Tale of Getting in Sync.” Dialect helps organizations improve alignment and translation of organizational identity. Reach him at (314) 863-4400 or firstname.lastname@example.org.
The bulk of the Affordable Care Act (ACA) will be implemented on Jan. 1, 2014. Even though large employers don’t necessarily need to go through the chess game of whether or not to offer insurance — pay or play — a number of new initiatives still come online.
The community rating rules, which limit how insurance carriers can classify small employer groups, the individual mandate and $8 billion insurer tax all will shape health care and premiums in the coming year.
“You’ve got to keep your eyes open, and continue to see what’s going on,” says Mark Haegele, director of sales and account management at HealthLink.
Smart Business spoke with Haegele about how to develop a year-end checklist of responsibilities related to health care reform.
What is the first thing an employer must do?
The ACA is not going away, so you must determine how the law applies to your business.
Let’s say you are contemplating offering in 2015 minimum essential coverage plans, ‘skinny plans,’ that just cover preventive care. Employers with 50 or more full-time equivalent employees may want to consider making this move in 2014, even though the employer-shared responsibility provision, or employer mandate, isn’t in effect. This prevents employees from getting subsidies and going through the new health care exchanges, or marketplaces, and then losing these funds in 2015 when you move over to a lower-level plan.
Consider any future health care changes, and how they will impact your employees for the next couple of years. You don’t want to aggravate staff and cause retention problems.
What’s important to know about your insurance?
Many people expect to see sharp spikes in health insurances costs and premiums after Jan. 1, 2014, which could be unsustainable. The $8 billion insurer tax, which likely will be passed onto employers in the form of premiums, is being calculated as a 4 to 6 percent increase. The community rating rules could drive premiums up by more than 60 percent if your insurance group is a young, healthy population. Out-of-pocket maximums have been limited to no higher than $6,350 for self-coverage and $12,700 for family coverage for most insurance.
The upcoming January 2014 health insurance renewals are the last to come into compliance before many large employers face fines. Consider where you are, and the steps it will take to come into compliance before your 2015 renewal.
Business executives need to analyze the costs and benefits of remaining with their current insurance plan or moving to self-funding, which has more freedom from regulations. Take the time to examine this regularly. No one is sure how the insurance market will react to ACA measures.
Beyond strategic decisions, what concrete actions need to be completed?
You need to make sure you sent out the notice to your employees about the new health care marketplaces, or exchanges, required as of Oct. 1, 2013. It’s a good idea to include this with your orientation materials to ensure all new employees are notified.
In addition, a Summary of Benefits and Coverage, an easy-to-understand summary of health care benefits, must be given to eligible participants at least 30 days before your plan year begins. Your insurer, health reimbursement arrangement provider or third-party administrator usually provides this.
Verify your employee-waiting period meets new requirements. A group health plan cannot make new employees wait more than 90 days for health insurance coverage as of Jan. 1, 2014.
Even though the employer mandate was delayed, large, fully insured employers should use 2014 as a trial year. Set up your tracking procedures for employee hours, especially those who work part time, so you can spot any problems. Because of the delay, the government will likely be less tolerant of any mistakes in 2015.
Health care compliance will continue to be a major concern for businesses. You need to make time to understand how the ACA will impact your company, even if it takes outside expertise to manage all your obligations. ●
Insights Health Care is brought to you by HealthLink
It’s wise to consider the tax implications of business and financial decisions as the year winds down. This year, many tax benefits from the American Taxpayer Relief Act of 2012 (ATRA), which was extended through 2013, and many Bush-era tax cuts will end. The tax law changes from ATRA extensions ending and the implementation of the Affordable Care Act (ACA) introduce layers of complexity.
“It’s difficult for anyone to keep track of everything that is expiring, let alone what’s new. There are more moving parts than I’ve seen in a long time,” says Cathy Goldsticker, CPA, partner, Tax Services at Brown Smith Wallace.
“You need to plan and do some projections so you don’t discover in April that you have unexpected taxes due or you didn’t take advantage of a departing tax write-off.”
Smart Business spoke with Goldsticker about strategies businesses and individuals can follow to reduce tax liabilities.
What effect does the ATRA have on 2013 taxes?
Many of the provisions enacted under President George W. Bush are set to expire. Although the tax brackets from the Bush tax cuts will remain in place and are now permanent, individuals with taxable incomes of $400,000 or more — $450,000 for married couples filing jointly — are subject to a top marginal tax rate of 39.6 percent instead of the 35 percent marginal rate. These individual tax rates also will affect the taxes of the owners of pass-through entities.
A business relief provision that is scheduled to expire is for the built-in gain tax that is created when converting your C corporation to an S corporation, but is imposed after a subsequent sale of corporate appreciated assets. The temporary rule has been that if you hold your S corporation and related assets for five years, built-in gain tax goes away. Starting next year, the waiting period is 10 years. For owners looking to sell assets or a company, that may expedite the impetus to sell before the end of 2013.
Also being eliminated are faster write-offs for depreciation. Under Section 179, companies were able to deduct $500,000 for equipment in year one assuming less than $2 million in assets was acquired during the year. That will revert to the previous limit of $25,000. Bonus depreciation, which allowed you to write-off half of qualified property, is being removed for common acquired depreciable items.
You should think about accelerating your planned purchases, but also consider what your future income levels might be. You could be taking away deductions from future years when it’s possible to get a bigger bang for your buck with higher tax rates.
On the personal side, this is the last year business owners will have a choice between deducting sales taxes or state income taxes because the sales tax option will be going away. This could be a lost state benefit for those paying Alternative Minimum Tax.
This also will be the final year that taxpayers ages 70½ and older can transfer up to $100,000 from an IRA to a charity and bypass having the IRA distribution included as income. That can be important if you’re trying to stay below the $400,000 level and avoid the 39.6 percent tax bracket.
How will taxes change as a result of the ACA?
There is a new 3.8 percent tax on investment income and 0.9 percent Medicare tax that applies to self employment income for high income earners. Careful planning could avoid the claws of this extra tax.
To avoid these taxes and receive more benefit from your writeoffs, you might want to bunch deductions that are subject to phase-outs based on income. Instead of paying expenses such as advisory fees, and tax planning and preparation fees in 2013 and 2014, you might see if you can pay them in the same year.
Do the expiring cuts mean it’s best to move up as many deductions as possible?
You can’t look at your taxes in a vacuum; you still need to consider the impact of all options to determine the best route. Among the many moving parts, we could still see extensions of some provisions.
You should take the facts as they currently stand and put together pro forma projections for the next several years. Do some tax calculations for these years to figure out what you’ll encounter from a cash-flow standpoint, as well as what you could do to reduce some of the current increases. ●
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Robert Chapman has always been intrigued by the game of business, so to speak. At the highest level of that game is the ability to blend both organic growth initiatives with successful acquisitions to create a stronger organization. Chapman takes that blending further and ensures that his company emphasizes people, purpose and performance.
Chapman is chairman and CEO of Barry-Wehmiller Cos. Inc., a 7,000-employee, more than $1.5 billion global supplier of manufacturing equipment and services. In 2012 the company made four acquisitions and plans to do several more throughout 2013.
“We’ve been very purposeful in looking for companies which align with our value propositions,” Chapman says. “Most people look for great management and great industries. We look for companies that face issues or have opportunities that align with our experiences.”
Chapman is combining those acquisition efforts with organic growth initiatives to help create value for the company and its customers. He relates what Barry-Wehmiller has to what great sports teams do on the field.
“When sports teams go out and execute play patterns, and it almost looks easy, it’s because everybody knows their position and what they’re trying to do relative to the defense and how they’re going to advance the ball for either short-term gain or long-term gain,” Chapman says. “Our goal in our organization is to have play patterns, or strategies that allow us to create value and that everybody knows and embraces their role in that vision.”
Here’s how Chapman keeps Barry-Wehmiller ahead of the game in business.
Have a growth strategy
Beginning about 10 years ago, Barry-Wehmiller began a leadership process it calls visioning, which was an alternative to traditional budgeting and the incremental thought process.
“About 10 years ago we said to one of our divisions that was involved in this incremental budgeting, ‘What if the future was only limited to our ability to recruit and integrate competent people into a good business model? What would it look like?’” Chapman says. “That opened up a whole new way of thinking.”
The company thought it could grow at almost 10 percent a year if that were the case.
“It led to a thought process, this visioning process of where are you going, why do you want to go there, and when you get there, what will you have created of sustainable value,” he says. “That division went from modest growth to significant growth because the division began visioning their future as opposed to budgeting their year. That’s a transformation that’s occurred in the last 10 years that every year we get better and better at creating long-term goals three years out.”
That thinking has allowed Barry-Wehmiller to focus on a three-year horizon for each of its nine business units.
“It’s a very reflective, thoughtful learning process to try to continually envision,” Chapman says. “It’s created this organic growth vitality that’s combined with our acquisitions, because it includes visualizing companies that you’d like to acquire to improve the balance of your business.”
Visioning has accelerated in the last few years and the company is now in the flow of that way of thinking.
“It’s not what are you going to do this quarter or the next six months — it’s where are you going, why do you want to go there, and what have you learned that will help make the future better,” he says. “We share that with everybody. That visioning process allows for a very purposeful, focused organization that understands where they’re going.”
The second aspect the company adds to visioning is something it calls people, purpose and performance. It starts with a fundamental concept that the company’s primary focus is on the lives entrusted to Barry-Wehmiller every day.
“Are we good stewards of the 7,000 lives entrusted to us every day to help us achieve a common purpose?” Chapman says. “Is our purpose something that we can share that will inspire people to fully share their gifts? It’s all about gathering people around an inspiring purpose and then we’ve got to perform and create value.
“Each one of those is interdependent. People are not going to share their gifts with us unless they’re inspired, and unless we perform we can’t afford to be good stewards of the lives entrusted to us.”
Find the perfect acquisition
One way Barry-Wehmiller ensures it’s a good steward of the lives entrusted to it, is by increasing performance and growth through strong acquisitions.
“Acquisitions are part of our DNA,” Chapman says. “Our business at more than $1.5 billion is a combination of more than 60 acquisitions. The initial 15 years our growth was fueled by the brute force of acquisition. The last 10 years has been fueled by our focus on being good stewards and allowing people to share their gifts and rewarding people for doing so.
“The game of business is played at the highest level when you can do both organic growth and acquisition growth and blend them together. You have to be very disciplined in terms of making a responsible investment and see how bringing two organizations together makes both of them better.”
Over the past 25 years, Barry-Wehmiller hasn’t sold any of its companies.
“It’s probably one of the few cases that anybody can say that,” he says. “It’s like adopting children and then getting rid of them if they get to be better kids. Why would you sell a business if it’s a good business? If it’s a bad business, why would you pay somebody else to fix it? Why don’t you fix it?
“We’ve never even entertained selling a business, and that’s why when we have the chance to acquire a company, people feel the confidence that they’re a part of an organization that wants them, and they’ll be a part of that for the indefinite future.”
Chapman says the key to a successful acquisition is knowing whether you’re making the right investment up front.
“You have to be very purposeful in what you look for and make sure that with the investment you make, you clearly see how you’re going to make it financially meet the criteria your investors expect,” he says. “Make sure you clearly see the path to get that return because for people who make investments that don’t meet criteria, it becomes demoralizing. Again, you have to have a vision where you’re going, why you want to go there, and why when you get there, you’ll have something that’s sustainable in the future.”
Once you acquire a company you have to remain disciplined to realize the potential you saw in that acquisition.
“Being disciplined means you’re going to pass on a lot of deals, but you have to have that discipline,” Chapman says.
“You also have to make sure that the team you lead is committed to that value creation initiative. There is a pretty high failure rate for acquisitions, which is not a good thing for the investment of shareholder funds. A lot of people don’t have good discipline.”
Despite a large number of acquisitions not panning out for many organizations, the acquisition process is very exciting.
“Nobody likes to be acquired, but everybody loves to acquire somebody else,” he says. “It’s motivational, and it’s a great professional challenge. When I started doing acquisitions in 1984, I did it during a time when the company was financially thin and therefore I couldn’t afford to fail.
“I didn’t have the luxury of saying, ‘Whoops, that didn’t work out, isn’t that a shame?’ If it didn’t work out I died. We were that thin. I began doing acquisitions when failure was death, so our DNA of acquisitions is don’t do them unless you know they are going to be successful.”
While Barry-Wehmiller was driven early on by a strong value-creating business strategy, in recent years that success has been enhanced by grasping the significance of the cultural impact business makes on people’s lives.
“You have to focus on the people in harmony with the vision so that we are creating value for all stakeholders and not just shareholders,” Chapman says. “We are taught in business school and in the business environment that people are necessary to achieve our goals. The way it should be looked at is along our journey of life we have the chance to invite people to join us to create something of significance that creates value for everybody.”
Leadership is the profound sense of responsibility over the lives to which you have an impact in your role.
“You have to see those people as somebody’s precious child who wants a life of meaning and significance, and you have a chance to give them that by the way you treat them in the environment of the work,” he says. “Eighty-eight percent of people feel they work for a company that doesn’t care about them and they’re right. You have to look at the people that you invite to join you as if they are your own children.
“Barry-Wehmiller is being recognized more every day as a unique, powerful business model that we evolved through this eclectic journey we’ve been on and it is going to encourage others to embrace human leadership.” ●
- Have a growth strategy to know where your company is going.
- Combine organic growth with acquisitions.
- Treat employees well so they in-turn perform well for the company..
The Chapman File
Name: Robert Chapman
Title: Chairman and CEO
Company: Barry-Wehmiller Cos. Inc.
Born: St. Louis
Education: He attended Indiana University and received a bachelor’s degree in accounting. He received a master’s degree in business administration from the University of Michigan.
About business: Business ignited my mind. I fell in love with business as a game.
What was your first job, and what did you learn from that experience?
My first job was working at Combustion Engineering in the Boilermakers Union in St. Louis. I had to join the union and work in the plant as a welder’s helper. Being in that culture I learned how people think and what it was like to punch a time card and be told what to do every day. It was an incredible experience to work in the production environment.
What is the best business advice you’ve received?
In 1982 and 1983 our senior director was a man named Bob Lanigan. We had to make tough decisions because the company was fragile financially and under tremendous stress and Bob used this analogy that I’ve used for years. He said, ‘When you’re in a DC-3 airplane and you’re trying to go out west, and you’re coming toward the Rocky Mountains and your pilots say to you, “Team we need to cross the Rocky Mountains but we’re losing altitude and unless we drop some weight, we’re not going to clear the mountains.” In an environment where you’re going to die unless you lose some weight, your priorities are not very clear. When it’s clear that you want to end up clearing the mountains, your priorities become clear.’ That clarity of thought caused us to prioritize what was important and what wasn’t important.
If you had the opportunity to invite any three people to dinner, who would you invite?
Jesus Christ, Ronald Reagan and Ken Blanchard.
How to reach: Barry-Wehmiller Cos. Inc., (314) 862-8000 or www.barry-wehmiller.com
When you hear someone say, “That person’s got quite an ego,” it’s rarely meant as a form of flattery. In fact, it typically carries a lot of negative connotation.
A more positive way to think of ego is to look at what it takes to maintain a healthy one. Using the word ego as an acronym, here are three key requirements: E-xpectations, G-oals and O-ptions.
If you want to mess with people’s heads, be fuzzy about what you expect them to do. Then give them a rash of trouble when they fail to meet your expectations. That problem crops up often in the performance review and appraisal process. What starts out at the beginning of the year looking like a clearly defined set of goals and objectives can later become a bone of contention.
The employee and the supervisor discover they had different ideas of what successful completion looks like, and guess who usually wins the argument? Even the best of employees can get bruised egos from that kind of experience. Both people bear responsibility for making the process work, but the supervisor has to take the lead in making sure they are on the same page from the outset.
Remember the classic exchange between Alice and the Cheshire Cat in “Alice’s Adventures in Wonderland”? Alice is wandering around lost. She replies that she really doesn’t know where she’s going, and the cat says, “Then it doesn’t matter which way you go.”
Your ego is in jeopardy if you don’t have clear goals. When it comes to the workplace, employees and supervisors have to make sure that well-defined, meaningful goals are in place if they want to keep people feeling happy, healthy and whole.
In my book, “Getting to the Heart of Employee Engagement: The Power and Purpose of Imagination and Free Will in the Workplace,” I talk about imagination and free will as the two essential qualities that differentiate human beings from all other living creatures.
When it comes to free will, our capacity to make choices, to do things that aren’t dictated by the program that controls other animals is a forceful driver of people’s attitudes and behaviors. Failing to appreciate that force leads to some flawed notions about human nature in the workplace. The old bromide that people resist change is a classic example.
The fact is, people change all the time. What they resist is being forced to change without having a say in the matter. People hate not having the control that comes with choices and options. What’s more, they won’t trust anyone who takes that control away from them, and their performance on the job is often subpar when they don’t get it.
That distinction is at the core of a basic misunderstanding about why people supposedly dislike “command and control” cultures. In truth, it’s the command part people hate. When it’s done right, control is just another word for predictability, and employees understand that.
Bottom line, healthy egos are a big part of what makes the business world go ’round. So take the time to make sure employees are clear on their E-xpectations, G-oals and O-ptions if you want to keep them tuned in, turned on and ready to go the extra mile. ●
Les Landes is president of Landes & Associates. The firm provides management consulting services in the areas of organizational communication, employee engagement, marketing, public relations and continuous improvement systems. They are the creators of the “ImaginAction System,” a tool for getting employees engaged in systematic continuous improvement. Landes is also the author of multiple articles, as well as a recently published book, “Getting to the Heart of Employee Engagement: The Power and Purpose of Imagination and Free Will in the Workplace.” For more information, visit www.landesassociates.com.