Born: Beckley, W.Va.
Education: Bachelor of science degree, general engineering, U.S. Air Force Academy; master’s degree in guidance and counseling, University of Northern Colorado
What is the best business lesson you’ve ever learned?
You’re not as smart as you think you are, and the other guy is smarter than you think he is. Be confident but not overconfident. Assume that your adversary is very good until he proves he is not.
Whom do you admire most in business and why?
Warren Buffett. He’s done the most spectacular job of winning in a very tough environment; doing that spectacularly and regularly over a long period of time and managing to be a regular human being all along the way.
What was your first job ever?
Picking cantaloupes. I was 8. I grew up in Arizona. It taught me I didn’t want to pick cantaloupes for a living. I just did it during summer with my cousins to make spending money. It taught me an appreciation for hard work.
What is your favorite movie?
‘Forrest Gump.’ I’m not sure why; it just is.
It’s easy to imagine that the day after the first business in the world was founded, the company probably presented its first advertisement, and the art of branding was born.
Perhaps one of the biggest decisions a company can make is how it decides to brand itself. A catchy tune? Perhaps a play on words that reveals the true mission statement of the company?
“A trademark and a copyright can both identify the entity,” says Harvey Yusman, an attorney at Greensfelder, Hemker & Gale, P.C.
Smart Business asked Yusman about what makes a good trademark and how companies should use trademarks to their advantage.
How much of a difference is there between a trademark and a service mark?
The law is exactly the same between the two. Specific services, such as retail grocery, would use the service mark. A trademark is the exact same thing, except instead of promoting a service, you’re branding a specific product. And by doing so, you identify and distinguish your product from somebody else’s product. Think of Nike shoes, with Nike being the trademark and shoes being the generic product. When you see the ‘swoosh’ or the name on the box, you know Nike is distinguishing itself from, say, Adidas.
What can be used as a trademark?
Anything can be a trademark. The Nike swoosh and the Polo pony are very recognizable design trademarks. Words alone can be a trademark. Sound can even be a trademark, as well as slogans or colors. Numbers and letters used separately or at the same time can be a trademark. It can be almost anything that sets your goods or services apart from somebody else’s. That’s your company’s identity. It’s like a franchise. The name itself can be the most important part of the identity, such as McDonald’s. You should be able to go into a McDonald’s in Iowa and get the same kind of hamburger as you would from one in St. Louis, and you expect that because you recognize the name. It’s the very name ‘McDonald’s’ that sets the restaurant apart from the others.
How does copyright work?
Copyright is not as clear. It identifies a lot of things, but it concentrates on the visual aspects of a creation and not the actual brand. That usually includes your brochures, your marketing materials, that sort of thing. And, obviously, your marketing materials are different than anyone else’s, as is your Web site. And those things are identifiable intellectual properties that identify your company.
How do you pick a trademark and make it protectable?
In theory, there are four classifications to a trademark. If it’s being registered at the U.S. Patent and Trademark Office, if you’re defending it in court, if you’re prosecuting somebody else in court, the key is always the same.
The best class is called arbitrary/fanciful. An arbitrary mark is a random word that has no relationship to the product at all. Such as Camel to cigarettes or Apple to computers. Fanciful trademarks are made-up words like Rolex or Kodak.
The next best class is called a suggestive mark. A suggestive mark makes the mind go through two or three steps to make the connection to the product. An example is the trademark ‘uncola,’ which is used in connection with a noncola soft drink.
The third class is called descriptive, and this one should be avoided because it can only be registered with certain qualifications. You need to show the word(s) has a secondary meaning.
The last class can never be registered, and it is the generic mark. These are all specific names that have come to stand for the type of product, like automobiles. Xerox, for example, does a lot of advertising telling people not to use their mark generically. The more creative your mark, the easier it is to register and eventually to protect from other companies.
HARVEY YUSMAN is an attorney at Greensfelder, Hemker & Gale, P.C. Reach him at (314) 516-2630 or email@example.com.
David Porter is CEO of FURminator Inc., but that’s not his only title.
According to his business cards, he’s also the company’s top dog.
Porter and his wife, Angie, developed FURminator’s unique pet grooming products, but another part of his job is to maintain an environment where employees can think outside of the box an atmosphere that he says is key to the success of FURminator.
“If Henry Ford would have listened to his customers, we’d all be riding horses,” he says.
The 24-employee company’s innovative tools and creative workplace have propelled it to a three-year growth rate of nearly 500 percent to post 2007 revenue of $25 million.
Smart Business spoke with Porter about how to create a culture where employees feel appreciated and why you have to act fast to weed out the bad apples in the bunch.
Q. What are the keys to being a good leader?
When you get a business to a certain size, you need to work on the business instead of in the business. People are absolutely critical. They need to know where you’re going.
Set your north up, as far as where you’re going. Then drive everything from the top down, whether it’s customer service or really going in and establishing that corporate culture.
Realize there is so much more to a job than a desk and a phone and a paycheck. There are certain things that really get a person to buy in to what makes a company great.
For instance, we’ve got a great environment. Every day is bring your pet to work day. We throw Lunch-a-Palooza every month, when we turn our conference table into a 14-foot shuffleboard table for fabulous prizes.
If you do things like that, you can really build the camaraderie. Instead of managing through fear, enable people to make decisions and get things done. Measure results and efforts; set their goals. There are a whole lot of things that go into leadership, but lead by example and let people support (you) to grow.
Q. How do you get your employees to buy in to your vision and your culture?
First of all, you have to empower them to let them know that they can make decisions on their own. It gets back to working on the business versus working in the business.
You’ve got to have some mutual trust and look at them like a person. You want them to set goals, not just business goals but personal goals. You want them to have that life balance so that they’re working to live and not living to work.
So be concerned about them, but still instill that everyone should have that sense of urgency of getting things done.
I get on my soapbox all the time at work and say, ‘FURminator is your nondysfunctional family. If you want dysfunction, come to my house for Thanksgiving. But if you’re the type of person who likes talking behind people’s backs or making cliques, it’s not going to fly here.’
This is where we’re going to be spending a lot of our lives. So we regularly have team-building activities, not only from our Zen lounge, which is our cool break room, but other things we do once a month. These are just things that build the FURminator family.
Q. How do you handle someone in the organization who is gossiping or forming cliques?
You’ve got to nip it in the bud. Just like raising children, you’ve got to move fast. If you look at it as finding the right people in the first place, you have less of a chance that you need to go through that process.
It’s that ‘hire slow, fire fast’ mentality. Really reinforce that. Let people know that this is how it is around here. You try to set an example and let everybody know what the rules are. Let them know they can flourish and have fun doing it.
Q. How do you establish a culture that makes employees want to stay?
A lot of it is how you treat people. There are a lot of managers out there who manage out of fear or intimidation. I think one of camaraderie and friendship is better accepted.
Everything from when you walk in the front door to their office furniture to lighting we’re in an industrial park, but I would say we probably have the nicest office in the industrial park. You come in and we have ceramic tile flooring and a nice-looking lobby. We don’t have a lot of walk-in customers. There are not a lot of people who walk in through our front door, other than insurance salesmen. But to have a nice conference room and nice employee lounge and having a built-in putting tee it’s all things that give that feel when you come in.
Also, we try to keep everyone in the loop, so we try not to have a lot of closed-door meetings. Every Monday, we get the whole company together in our Monday morning meeting and we throw everything out there. Good news, bad news, ugly news, we throw it out there.
HOW TO REACH: FURminator Inc., (636) 680-9387 or www.furminator.com
Franchising is an American institution. From where you go to eat lunch, get your hair cut or have your oil changed, franchising in the last 30 years has changed the business landscape.
As the U.S. economy continues to take its lumps, certainly the stream of franchising must have slowed down, ready to pick up again when the economy starts to turn things around. However, that’s not the case, as franchising numbers actually go up during a recession.
“Good franchise concepts that provide a good value are going to flourish for two reasons,” says Eric Riess, practice group manager of corporate and franchise groups at Greensfelder, Hemker & Gale, P.C. in St. Louis. “One, the enormous pool of prospects available and, two, because during a recession, people aren’t spending less, they’re spending smarter.”
Smart Business talked to Riess about how franchising increases when an economy is in a downturn.
Wouldn’t franchising slow down during a recession?
Actually, it flourishes for two reasons. One, there are going to be more potential franchisees looking for potential opportunities in a recession than there are when times are good. Why? There are a bunch of executives getting laid off or encouraged to take early retirement. Those folks generally have money, business experience and don’t feel like their days in business are over.
The other issue is, ‘Aren’t people spending less?’ That’s hooey. Let’s not start believing what our government is feeding us. Have you been to an Applebees lately? Do you really think people are spending less money? People are looking for value for their buck. That’s why Target is gaining market share on Wal-Mart like crazy. People believe that Target gives them a better value even though they’re spending a bit more money at Target than they would at the Wal-Mart. The same is true in regards to the franchise industry as a whole. You’re local Mexican food chain may not being doing too great, but if you look at your restaurant concept that actually provides good value for the money, they’re doing quite well. We could go through a list of restaurants, and I use restaurants because they seem to be synonymous with franchising.
What types of businesses franchise more during a recession?
People used to think the next line was a joke, but if you take time to think about it, you can’t get your car gassed up, your carpets cleaned, your lawn cut, your family fed and, recently, some of your health care services provided without going to a franchise. Franchise stores are all over the place. Every time you go to the mall, just about every store in it is franchised except the anchor store, which generally is not.
Franchising, in general, covers a wide array of goods and services. The ones that are flourishing today are the ones that people can get involved with by investing $250,000 or less, and here’s why: One, people want to buy a franchise where they can purchase multiple locations. People need a decent income; people involved in franchising are looking to make $100,000 or more a year.
Also, many of these franchises are sold quickly because third-party franchise brokers sell them. They get paid the same to sell a $2 million franchise concept, which may take a year to sell because it takes a long time to get up enough investors, as they are to sell a $250,000 franchise concept. In the time in takes to sell the $2 million concept, that broker can sell 10 $250,000 concepts. Would you rather have one commission or 10 commissions?
When the recession ends will franchising slow down?
Yes. Oddly enough, franchise growth slows as the economy improves as there are fewer people looking to invest. There are fewer executives being laid off and the stock market becomes a formidable competitor to investing your money in a business. Would you rather invest in a stock that will double in value in the next 12 months or take that money and buy three sandwich shops and work your butt off to make $150,000 to $200,000 a year? Plus, there are other options besides the stock market, such as real estate. Would you invest in real estate in today’s market? No. When the economy comes back around? Of course.
The economy is completely cyclical, and there is no need to panic over the recession. We’re going to see higher interest rates, inflation and a recession. However, once those things peak, the economic cycle will go back up. It always does.
ERIC RIESS is the practice group manager of corporate and franchise groups at Greensfelder, Hemker & Gale, P.C. in St. Louis. Reach him at (314) 345-4723 or firstname.lastname@example.org.
Charlotte A. Martin hates excuses. The president and chief operating officer of Gateway EDI Inc. says there is no reason that your employees shouldn’t have the tools they need to do their jobs, and to make sure they do, she scours the results of the annual employee survey.
“When I see silly foolishness in there like, ‘We don’t have enough printers,’ it just upsets me, and we buy printers,” she says.
If you give your employees the resources they need, they’ll pay you back by going above and beyond with customers which is easily worth the cost of a few printers.
Gateway EDI, which does electronic claims processing for the health care industry, is in demand: The company posted $28.7 million in revenue last year and is on track for $38 million in 2008.
Smart Business spoke with Martin about how to let your employees take on more responsibility but why you shouldn’t rush them either.
Q. How do you motivate employees to go above and beyond?
We’re growing so fast; we need people to step up. So we encourage people.
We have a process improvement team that’s called the PIT crew. We encourage people by giving them financial rewards and recognition for coming up with ideas that help our process be more efficient.
During that process, people will come up with neat ideas and neat projects if you just give them a little encouragement and support and I’m talking support. I’m not talking, ‘That’s a good idea; that’s a bad idea.’ I’m not talking about the idea judges.
This group’s whole deal is to scour and beat the bushes for people who have great ideas but are too afraid to speak up.
Once we get them to speak up, we can encourage them and show them how to bring a project forward. And you should see how they blossom when we do that. They feel like, ‘Oh my gosh, we can do something.’
Q. How do you develop employees into leaders?
Every time somebody comes up with a neat idea and helps put it into play and watches it be successful, it’s just more and more reinforcement on developing their abilities.
When a person does that repeatedly and becomes sort of a natural leader, we give them a title called team leader. It lets them practice it.
They don’t really write reviews or do all the things the supervisor does yet. But it gives them a chance to practice it in a totally risk-free way. So they can say, ‘You know, I like this,’ or they can stay as a team leader and just be a go-to person who knows the answers.
Everybody has those people in their companies. If they decide, ‘I want to do more, I want to learn more about managing, I want to take on that responsibility,’ we move them up to group leader, and we give them that training. It’s a supervisory certificate program, and they go to it eight to 12 hours every week. It’s on our dime. We want them to learn the skills that they need.
Q. How do you handle employees who aren’t ready for leadership?
They don’t have to go forward; they can stay there. Sometimes people’s lives are not ready. They want to be the go-to person, but they’ve got things at home. They’ve got a new baby. They’re still going to school. Something’s happening in their lives that they can’t take that on, but they still want some responsibility.
That really helps us because times change. In a year, they may be ready. Then they can move up to supervisor.
Sometimes as you grow, people aren’t able to grow to the position that maybe you hope they would. In that situation, we try to be sensitive and move them into a position that may serve them better.
Those are tough, and we’ve had to do three or four of them. Sometimes it doesn’t work, and people choose to leave. There are no bad people; there’s just bad fits in my world.
Q. What is the benefit of the team leader system?
It’s risk-free lots of people want to try something but they’re scared to death of what happens if they fail. But here if you fail, so what? I don’t care. We’re never going to move forward if we don’t try things.
Failure is not a big deal. What I don’t like is dishonesty. So if we make a mistake, we just say. ‘I’m sorry, I made a mistake,’ and we make it right.
We do the same thing with our customers. We tell them right upfront, ‘I’m so sorry.’ Every one of our employees has the authority to give an adjustment. Just say you’re sorry that’s what most people want when they call.
When you’re mad about your bill or your service, you just want some human to say, ‘I’m sorry. We should have done that better. I’ll make it right.’ So we have that philosophy with our customers and our employees.
HOW TO REACH: Gateway EDI Inc., (314) 802-6700 or www.gatewayedi.com
As one of 12 children in his family, Dennis Schoemehl learned early on the importance of compromising, listening and multitasking.
Those sibling survival skills became second nature to him growing up, and they continue to serve him today as a leader and a role model for his 120 employees.
The president and CEO of Logistics Management Solutions LLC formed his company in 1996 from a transportation logistics division at Monsanto. More than a decade later, the third-party logistics provider posted 2007 revenue of $94 million.
Smart Business spoke with Schoemehl about how he leads LMS’ work force using a delicate balance of understanding, communication, fearlessness and motivation.
Be thoughtful. You can’t just look at people as a number. People are people, and everybody pretty much has the same wants and needs.
If you’re going to get the most out of people, you’ve got to look at the world through their eyes. If one of their kids has a concert at 11:30, you want to give them the flexibility to get off to go see that. Things like that are very important if you’re going to get trust and enthusiasm out of them.
If you understand what their needs are, then they’re going to be understanding about what your needs are, especially if you communicate your needs.
Open up your books. Even though we’re a privately owned company, we still share numbers with employees. Then, we look, in return, to an open-door policy. If people need help with anything, they know they can always come in. If somebody gets into a bind and needs a couple hundred bucks, we set up a program that helps them get through the short times.
If somebody comes in and has a question and I take the time to answer it sincerely and help them work it out, that spreads word-of-mouth. When the next guy comes in with a question, everybody says, ‘You ought to go talk to Denny about that. He’ll have the answer for you.’ It’s the personal side and the business side.
Our two assets are our technology and our people. Technology usually doesn’t come knocking, saying, ‘I have an idea where we can think outside of the box,’ where people do. As long as we foster an environment that encourages creative thinking, that’s what we’re looking for.
Take risks. You have to be willing to not let failure affect you because you’re going to fail. And, when you make decisions, you have to make them as rapidly as your business changes. If your business has a lot of velocity, your decision-making has to have a lot of velocity to it also. If not, you’ll never grow.
Then you have to accept what those decisions are. If they don’t work out, you can’t dwell on those. Learn from your mistakes, and analyze those mistakes.
The old saying is, ‘Hindsight is 20/20,’ but not everybody has that crystal ball to see what’s there. When you make a decision, base it off factors you think will fall into place, and when they don’t fall into place, you have to look back and ask, ‘What was the driving force to make this fail?’
What you can’t do is look back on it and say, ‘I’ll never try something like that again,’ because sometimes you try it, and it turns out to be a great success.
Motivate your employees. There are two different motivators that drive employee productivity. It’s kind of like a bicycle.
The front wheel steers it; that’s motivation as a group. That’s having lunch brought in for everybody a couple times a month, having Johnny Cash Day where everybody gets to wear black, sponsoring softball teams. You’ve got to keep doing that ‘Hey, this is a neat place to work’ kind of thing.
Try to do some things that are much different than you could find anywhere else.
The back wheel is on the personal level. It is employees being able to pay their bills and having the flextime that they need. You have to provide bonuses down to a transactional individual level, give different goals to different people and let them drive their own behavior.
Hire the best. Surround yourself with people who are smarter than you. I check people out, and I talk to references and see what people have to say about them. You want to make sure that they’re well-respected and have the pedigree that you expect.
And don’t be afraid to compensate them fairly. If they’re going to make you money and make the company successful, then they should be compensated for it.
Establish professional alliances. Build strong relationships with a good accountant, attorney, insurance man and banker. Have dinner with them, and get to know them on a business and personal relationship because they’ll have a lot of good advice for you.
While they are suppliers, they are a vital support to your company. They are around business every day; they see what people are doing and what’s working and what’s not. There’s nothing wrong with running ideas by them on what you’re doing and getting their advice.
HOW TO REACH: Logistics Management Solutions LLC, (800) 355-2153 or www.lmslogistics.com
You probably don’t wake up every day thinking about what your business will be like when you are gone. In the hustle and bustle of daily operations, estate planning often falls to the bottom of the list.
But it is critical to consider all of the “what ifs” life can introduce and how this will affect your business and your wealth. Estate planning is more than deciding where all the money will go. If you procrastinate planning, you have far less control over what will happen to your hard-earned assets.
“Unfortunately, it often takes a serious life event to get the ball rolling,” says David Heilich, CPA, practice leader, family wealth planning, Brown Smith Wallace LLC.
Smart Business spoke with Heilich and Robin Bell, CPA, a member-in-charge with Brown Smith Wallace’s tax group, about estate planning and the tax law changes that will affect your plan.
What should people consider when they want to develop estate plans?
You need to understand what motivates you and whom you want to give your money to once you are gone. It’s not always family children aren’t necessarily next in line to take over the business (or interested in taking it, for that matter). A business owner may want to give to charitable organizations or create a legacy by starting his or her own foundation or charitable trust. How do you want to allocate your wealth? What do you hope your successors will do with those assets do you have specific intentions for your money? Are there any mechanisms in place to help you reach these goals?
Who is affected by estate tax? Who needs family wealth planning?
In a general sense, everyone needs to develop an estate plan including basic documents like a will, revocable living trust, durable power of attorney and health care directive. Also, keep an eye on your lifetime exclusion amount. This is the amount an individual can pass free of estate tax at death to anyone he or she chooses. In 2007 and 2008, the lifetime exclusion is $2 million for each individual. Thus, with proper basic planning you can transfer up to $4 million for married couples free of estate tax. By the time you account for a home, retirement plan and perhaps a $1 million life insurance policy, you can easily exceed the $2 million mark. Estate planning should be addressed as early as possible so business owners have flexibility and there is time for the planning to be effective. While business owners’ greatest fear may be giving up control, they can restructure the company so they retain voting stock, and then use non-voting stock for gifting or other estate purposes. There are a variety of solutions that allow owners to maintain their roles in the business and still plan for the future.
What legal documents and tools should individuals and business owners consider?
Beyond the four basic documents mentioned previously, individuals and business owners engaging in detailed estate planning will utilize entities such as irrevocable trusts, limited partnerships and limited liability companies. In addition, there are charitable vehicles that provide opportunities. Whatever the tool, the key is to follow through with planning. The No. 1 mistake that individuals and business owners make, besides avoiding planning altogether, is to neglect funding and utilizing the tools they put in place. For instance, you can spend time and money setting up a revocable living trust, but if you do not transfer title into the trust’s name, it may not provide the tax savings you desired or distribute your assets as you had intended.
For instance, a joint bank account should be titled to the name of the revocable living trust. (Rather than Joseph and Lisa Smith, ‘Joseph Smith Revocable Living Trust’ or ‘Lisa Smith Revocable Living Trust.’) This applies to bank and investment accounts, real estate deeds, stock certificates, etc.
Will the estate tax be repealed, and what should be done in the meantime?
The current lifetime exclusion is $2 million, meaning the estate tax does not apply until your assets exceed this amount. The lifetime exclusion will increase to $3.5 million in 2009, be repealed in 2010, and then return to the original $1 million in 2011, if the law remains unchanged. The experts predict that the law will be changed, with the feeling that the lifetime exclusion will not go backward. The chances that the estate tax will be repealed altogether, though, are slim. And even if it were, the income tax would likely increase, and there would still be plenty of planning needed to save income taxes, minimize liability and orchestrate business succession planning and asset distribution. The only thing to do now is to plan as if the repeal will not happen. Today, the estate tax exclusion is $2 million. Next year it is $3.5 million. Beyond that, assumptions cannot be made.
How often should individuals and business owners revisit and update their estate plans?
You ought to review your estate plan once a year with your adviser, and every time a major life event occurs new child, grandchild, a death, marriage, divorce, etc. This also includes if you change your domicile. Laws can vary state to state. For instance, a health care directive under Missouri law may not be valid in Florida. California is a community property state and has very different laws. There is no cookie-cutter way to approach estate planning. This is why it is so important to involve an independent CPA with the appropriate expertise and skills as an adviser and member of your financial and estate planning team.
ROBIN BELL, CPA, member-in-charge, tax group, and DAVID HEILICH, CPA, practice leader, family wealth planning, work with Brown Smith Wallace LLC. Reach Bell at RBell@bswllc.com or (314) 983-1217. Reach Heilich at DHeilich@bswllc.com or (314) 983-1273.
Michael Perry not only believes in leadership by example, he lives it.
If you encourage employees to join community organizations or to serve on nonprofit boards, Perry says it is your responsibility to do the same. Perry, who serves as president of H.B.D. Construction Inc., a full-service general contracting firm, says the best way for leaders to communicate their corporate vision is through their actions: If they believe in something, they should pursue it. And it’s a philosophy he lives each day at H.B.D, a full-service general contracting firm that reported $128 million in 2007 revenue and employs 130 people.
Smart Business spoke with Perry about how to delegate responsibility, communicate with your staff and create an environment of positive attitudes.
Allow employees to think on their own. Delegate responsibility where applicable. You do that by assigning responsibilities throughout your process to your managers and holding them accountable for the performance of their project. We have review meetings, whereby the projects are analyzed on a monthly basis. We have yearly reviews for all staff, including administrative, and that’s where compensation comes into it.
I’ve only been president for four years, and delegating was a little difficult at first, only because I worked my way up through the chain here at the company and was, at one time, a project manager. When you realize that there’s way too much to do it all yourself, you’re forced into delegating, and you learn quickly.
When a person is first hired, give them small amounts of responsibilities, and then quickly ratchet that up as they perform. You wouldn’t have hired a person if you didn’t trust them out of the chute.
Our company has an established set of checks and balances on virtually every operation the way our costs are handled, our schedules, our procedures so I rely on those checks and balances. If a person is not representing my company well, I will certainly hear about it quickly.
Constantly communicate. When you have a problem, 98 percent of the time you can trace the source of that to either a mis-communication or a lack of communication between the two parties. To avoid those problems and to have smooth projects, you have to communicate internally and externally.
The best way to do that is to avoid sitting in the ivory tower, letting your employees handle all the problems. When a problem exists that your employees can’t handle, I want them to bring it to me, and then we’ll work toward a solution. To do that, you have to listen to your employees and allow them to bring things to you and not be fearful.
The proof is in the pudding. If you run around screaming at everybody and firing everybody, that will get out pretty quickly as your method of operation, and that’s not a successful one.
I believe in keeping things at a civil level. When problems arise, we learn from them, not only individually but as a company, and then we share those with each other and use them as a tool rather than a reason to get rid of somebody.
Any good leader needs to be a good communicator. If you can’t communicate with folks, you’re probably not going to be leading a company. If you’re a good communicator and you have an employee who’s not communicating well, focus on that with them and help them improve upon it.
Keep the ideas flowing. You can foster teamwork by having regular assemblies of your management team and fostering an idea-sharing environment, as opposed to working individually and not gaining knowledge from each other. I always say that our business is constantly learning because it continually evolves. Things change in business, particularly through technology; there’s always improvements made, so you need to keep up on those.
It’s too big of an arena for one person to think they’ve learned everything, including myself. You foster that by getting together and giving everybody the opportunity to speak up about things they’ve learned, problems they’ve had, and hope that you gain as a company from that.
Practice the art of positive thinking. No. 1, steer away from negative people and associate yourself with positive people.
No. 2, when you have a negative situation, create a way to turn it positive. You don’t want to have rose-colored glasses and walk around saying everything is wonderful when it’s not, but when you’re faced with a negative situation, deal with it, and then move back to a positive mode of thinking.
I was a bit of a negative thinker in my younger years, and I changed that around as I got older. I was preparing myself to take on a bigger role in our organization, and I realized that I was going to be faced with more problems and challenges than I had in my former position.
I did a checkup on myself, and that gave me a wake-up call: The business was the same, the company was the same, the only thing that changed was me.
Positive thinking has helped me to deal with things, and I try to pass that on to my employees. Positive attitudes are contagious.
HOW TO REACH: H.B.D. Construction Inc., (314) 781-8000 or www.hbdgc.com
One size does not fit all in the world of insurance coverage. The commercial market provides packaged programs that work for some companies, but there are limitations on the type of endorsements and changes you can make to those policies.
If you pay $1.5 million to $2 million or more in annual premiums and “pre-made” programs aren’t meeting your business’s insurance needs, it’s time to consider starting a captive insurance company.
“If you want to get the specialized coverage you need for your business, it’s better to set up your own insurance company than to find those coverages in the marketplace,” says Larry Pevnick, CPA, member of the insurance and reinsurance services department at Brown Smith Wallace LLC.
A captive insurance company is essentially a mini-insurance business a subsidiary corporation established to provide your organization with a tailored insurance program. There are many benefits to this arrangement, including potentially significant tax savings.
Smart Business spoke with Pevnick about captive insurance companies, how to start one and how they can save you money.
What are the hallmarks of captive insurance?
Because you are creating your own insurance program for your own company, you can design it to meet your specific needs. You have greater control over your program and coverage because you do not have to choose a cookie-cutter offering from the commercial marketplace. You also have more control over claims, and your employees are more likely to embrace safety programs and other initiatives at your business to reduce those claims. There is a larger incentive for cost and loss control. If you own the company, you are motivated to keep a clean loss record so premiums do not increase. Every dollar you don’t have to pay toward premiums or claims goes back into your pocket. This is a powerful tool for businesses in all industries, given the right circumstances.
What companies are best suited for this?
Companies that have a lot of exposures benefit most. For example, a $20 million manufacturing firm would have higher premiums than a $20 million accounting firm. The first question to ask yourself is: Do we have a high level of exposures that we are currently not insuring? Or, is the cost of insuring those exposures out of control? A perfect example is a contractor who must pay an exorbitant amount for workers’ compensation coverage. A captive insurance company can be put in place to control workers’ comp costs. Then, the contractor can give employees safety incentives, which further controls costs. Savings compound over time. Insurance captives are especially attractive to closely held businesses that have an incentive to reduce costs and increase profit. Captives are a mechanism of protecting organizations from external exposures.
How does a captive help reduce costs and increase profit?
The IRS gives insurance companies a tax break that other businesses don’t get. Insurance companies set aside reserves to pay for claims. They can deduct the value of those reserves before claims are paid. Most corporations can only take deductions after expenses are paid. If you own a captive, you can use this tax deferral technique to build wealth. Also, captives are estate-planning tools if you, the owner, assign a family member as the president of your ‘internal’ insurance company. As wealth is generated through the captive by way of tax-deferral strategies and savings due to decreased exposures and lower premiums, that ‘profit’ can be protected while being transferred from one generation to the next.
What are the steps for starting a captive insurance company?
First, you should enlist a CPA or insurance broker who is experienced in captive insurance. It is particularly important to work with someone who understands the nuances involved with qualifying the captive as an insurance company for tax purposes. The professional will review the pros and cons of setting up a captive, and review your current coverage. This person will get to know your business inside and out, identifying risk exposures and areas where your insurance needs are not being met. The adviser will review the organizational structure of your company and learn how and where your business operates. Then, he or she will work with you to design a program. The whole process can take three to six months.
Why don’t more closely held companies utilize captives?
There’s a myth that you have to be a big, public company to start a captive insurance company, but this simply isn’t the case. While candidates are generally in the $25 million to $100 million revenue bracket, any closely held company in any industry that pays $2 million or more in premium costs per year should consider a captive. Another reason captives are not buzzed about more is because many CPAs and business advisers are unfamiliar with them and, therefore, do not recommend them to their clients. This is a highly specialized field, and starting a captive necessitates seeking out a professional who is well versed in how to design and manage a suitable program for your company.
LARRY PEVNICK, CPA, is a member in charge of the insurance and reinsurance industry group at Brown Smith Wallace LLC. Reach him at email@example.com or (314) 983-1247.
If you have an executive or senior management role, chances are you haven’t given much thought to what would happen if you suddenly had to step down from your position. Would relationships with clients continue on a good note? Would projects continue to run without a hitch? If you can’t answer an unequivocal “yes” to these questions, you are not alone.
According to a recent survey, nearly four out of 10 (39 percent) of advertising and marketing executives feel uncertain that someone in their company could fill their shoes if they had to leave. The national poll, developed by The Creative Group, a division of Robert Half International (RHI), included 250 responses from advertising and senior marketing executives from the top 1,000 largest firms in the United States.
“While the majority of ad and marketing executives in our poll reported having a succession plan in place, what is troublesome is that many still do not,” says Carrie Muehlemann, branch manager of The Creative Group in St. Louis. “By taking proactive steps, a manager's departure becomes a workable issue rather than an imminent crisis. You need a plan so that someone can step into a role without massive panic.”
Smart Business spoke with Muehlemann about the importance of creating a succession plan, and how to develop one.
What are the benefits of creating a succession program for not only advertising and marketing firms, but all companies?
Succession planning lays the groundwork for a smooth transition when a manager moves on, or in the event he or she leaves unexpectedly. It is not only good ‘disaster prevention’ in case of an employee’s sudden departure, but it is good for everyday occur-rences, such as vacation or sick leave. A succession plan helps employees feel secure that there is a plan in place for the business to run as usual, even if key personnel are missing either temporarily or permanently.
What are some common reasons companies don’t create succession programs?
Many managers are simply caught up in the present dealing with daily activities, putting out office fires and have trouble making time to plan for the future. Plus, the idea of creating such a plan can be daunting; who really wants to think about and create a plan to replace themselves? A better way to think about succession planning is to look at it not only as a plan of replacement if something happens to the manager, but as a succession plan for when employees are promoted.
What do managers stand to gain from succession planning?
For managers, having a trusted replacement to cover for them while they’re away from the office can relieve some day-to-day stress. It certainly diminishes the pressure of what to do during vacations or any leave of absence they may need to take. Managers can rest assured that things will be under control and handled, and work will not be piled up when they return. They also may feel better about accepting a new role either within or outside the organization if there is someone ready to fill their shoes.
In addition, a succession plan helps instill loyalty among employees who are groomed for the next step, as well as the managers who are grooming them.
What qualities should managers look for in potential succession candidates?
Strengths executives may look for in succession candidates are strong leadership skills, communication skills, strategic thinking, commitment to the company and the initiative to execute change. One thing to keep in mind is that a successor may not necessarily be the next in line for that position. It should be an employee who shows leadership abilities, is able to make good decisions, and is ready to take the next step on the career ladder. But that person once identified needs to be moved up to second in command in order to avoid resentment among co-workers. The successor should preferably be someone within the company (as opposed to recruiting new staff) since promoting from within breeds loyalty. Succession also flows more seamlessly from within the company since the employee already understands the corporate culture.
How can managers help candidates grow into leadership roles?
Once a successor is identified, managers need to let that person know immediately. This not only reinforces to the employee that he or she is on an upward career track, but it also offers the chance for the person to decline, if he or she so chooses. Managers may want to include protégés in strategy meetings and discussions to help them acquire planning and leadership skills, as well as a broad vision of the company and its goals. The successor should start to gain ongoing knowledge of the role for the day he or she may need to jump right in. Managers should also provide regular feedback, plus offer perks or incentives to keep these future leaders engaged and committed to their career paths and the company. A trial run, which can occur during the manager’s vacation, is a good way to assess if the successor is ready for the job.
CARRIE MUEHLEMANN is branch manager of The Creative Group in St. Louis. Reach her at Carrie.firstname.lastname@example.org or (314) 621-8367. The Creative Group (www.creativegroup.com), a division of Robert Half International, is a specialized staffing service providing marketing, advertising, creative and Web professionals on a project basis.