By Pat Petersen    

Which group of employees would be better for your company: a group of talented and motivated individuals, all diligently working on their own to further the goals of the organization or a group of employees who shared a common vision and common goals—a group that works together and who supports each other in furthering the goals of the company?

According to researchers Katzenback and Smith in The Wisdom of Teams, 1993), “Teams outperform individuals acting alone … when performance requires multiple skills, judgments, and experiences.” What this means is that whole is much greater than the sum of its parts. Many other researchers confirm these findings.

Virtually every organization, regardless of size, mission, product, and/or service can and will benefit by establishing teams. Don’t think that excludes you if you are a sole proprietor, an independent consultant, or a “mom and pop” business. These types of businesses also need teams in order to survive and thrive.

Needless to say, many of us are in a “survival mode” in this economy, and it will take a lot of flexibility and adaptability to thrive. Teaming can be a huge help.

Too often, however, business owners look for a “silver bullet” to solve all of their challenges, especially when it comes to helping people work better together to produce the best possible outcome for their organizations. In doing so you may be overlooking a concept that’s been around for a long time and for good reason. People produce better results when working as a team.

Do you need teambuilding?

How can you determine if teambuilding will benefit your business? If you have ever said or thought any of the following, teambuilding may be appropriate for your organization:

• I thought I explained everything well, but I didn’t get the results I needed.

• I don’t understand how people can sit next to each other and not offer help without being asked.

• Everyone gets his own piece of the pie to complete, but in the end, nothing fits together; we don’t have a whole pie, only separate slices on the same plate.

• Each one of us seems to have a different solution to issues and challenges. If they all achieve results does it matter? Should I set down a single way of doing things or would it be better to let majority rule?

• There seems to be a lot arguing among staff about which is the “right” way to do things.

• I seem to spend a lot of my time redoing everything other people have done.

If any of these situations sounds vaguely familiar, you may want to consider doing some team building, which can be done in a variety of ways, with most of them are relatively “painless.”

Before starting however, first determine what outcomes you want to achieve from these events or programs, such as improved communication, less bickering, more cooperation, on-time completion of projects, or fewer “do-overs.”

The teambuilding process

Here are some of the basic steps in a teambuilding process.

• Determine your starting point. This involves doing a baseline assessment of where the team is currently, prior to any intervention, so you can determine which process would be the most suitable. Then, be certain to conduct a post assessment to see if the results you wanted were achieved.
• Create an unbiased environment. Include the team leader working side-by-side with their team members.
• Assess preferred work styles. Determine work preferences and how those preferences affect teamwork in your environment.
• Do team profiles. Some very simple ones are available, for free, online. Some more sophisticated assessments, such as OPQ, Life Style Inventories, Myers-Briggs, can also be used. Understanding work and communication behaviors of individual team members will provide insights to you and them.
• Decide on the teambuilding exercise. Teambuilding exercises (also called interventions) can range from simple interactive games to group problem solving exercises to facilitator-led events. (See sidebar for examples.)

Many cost-effective teambuilding opportunities are available for any size team. With a little research, you should be able to find a facilitator or program that will fit your organization.

Patricia Petersen

Patricia E. Petersen, MS, MBA, is an organization and human resource consultant with Leadership Development Associates. She can be contacted at 904-631-8219 or

corpleader09@gmail.com.

Sidebar 1

Examples of teambuilding exercises

• Interactive games. These create an environment that may be competitive, but when team-appropriate behaviors are employed, the outcomes change. These can be board games, survival games. ball toss, puzzle solving, or project building, to name a few. The cost for games ranges from free to several hundred dollars.

Remember, though, that the objective of the game is not just to have fun—but to understand and improve teamwork. Consequently, it is important to discuss the game playing in terms of teamwork: What roles did each person take on? How did you decide on your goals? How did you communicate? What frustrations did you feel? How can these experiences be applied to work?

• Participative events. These facilitator-led exercises can range from $200 to several thousand dollars, based on complexity and facilitators needed. Examples include: low and high ropes courses; outdoor expeditions such as, scavenger hunts (orienteering) and sailing; or indoor events such as cooking schools, computer games, or mystery theatre.

Again, remember that discussion about the event (as described above) is critical to its success, otherwise the expense is just a recreational activity.

• Group problem solving. One of the most effective teambuilding events does not cost anything but yields tremendous results. It is employee involvement in solving organizational problems. The key here is to do group problem solving as part of your organizational culture, focus it on real problems as they arise, and act on the team’s solutions.

Sidebar 2

When does a group become a team?

What are the indicators that a work group has turned into a team?

The goal of most teambuilding sessions is to take a group of people who work together and transform them into what Katzenbach and Smith define as a real team: A small number of people with complementary skills who are committed to a common purpose, performance goals, and approach for which they hold themselves mutually accountable.

The key phrase here is “… they hold themselves mutually accountable.” In most instances, a team is focused on a specific mission/objective/purpose, which is clearly evident in their actions and behaviors. They use a collaborative, solution-oriented process to come to a consensus about their plan of action, methodology for implementation, and continuous improvement. They have criteria that define success.

When a team is functioning well together, you will see them:

• Interacting with each other often, throughout the day;

• Clarifying and confirming action plans;

• Adapting the plan of action, as new information is shared;

• Helping each other, without being asked;

• Remaining focused on their mission; and

• Celebrating their successes.

From your perspective, the most important result will be that your business will gain focus and improve productivity with fewer headaches for you and much happier, engaged employees.

How an advisory board can improve your business

By Dawn Josephson

Whether you’re a “solopreneur” or employer of hundreds of people, at some point every entrepreneur reaches a startling conclusion: “I don’t know everything, and I need help making decisions.”

Yes, it’s a tough pill to swallow. But the sooner a business owner reaches out and accepts key insights from others, the more successful the business will be.

This realization often marks the pivotal moment when many entrepreneurs decide to form an advisory board. While many business owners interchange the terms “advisory board” and “board of directors,” they are actually two very different things.

Just as the name implies, an advisory board simply offers advice to the business owner.

Sandy Bartow

Sandy Bartow, vice president of the Jacksonville Regional Chamber of Commerce’s Small Business Division, explains, “An advisory board is a non-fiduciary board of advisors who assist in a business’s growth and planning. This group provides a 360 degree view of differing viewpoints and combined expertise related to an issue, a challenge, or planning.”

In contrast, a board of directors is a body of elected or appointed members who jointly oversee the activities of the company. They govern the organization by establishing broad policies and objectives; select, appoint, support, and review the performance of the CEO; ensure the availability of adequate financial resources; approve annual budgets; and are held accountable to the stakeholders for the organization’s performance.

Knowing this, an advisory board is often the better choice for a for-profit small business. (Non-profits of any size typically must have a board of directors.)

A fresh perspective

Having an outside perspective for your business sounds good in theory, but is it always good in practice? Some local business owners certainly think so.

Clint Drawdy

Clint Drawdy

and Chad Perse started Hire Methods, a professional staffing company, in 2004. A few months into their new venture, they realized they needed some guidance and formed a six-person advisory board. Today, they couldn’t imagine running their business without one.

“In the beginning, our company was growing very fast— perhaps too fast,” explains Drawdy. “Our advisory board helped us navigate that period and work with banks effectively so we could get the capital we needed to keep growing the right way.”

Chad Perce

Since then, they’ve relied on their advisory board for a number of specific issues, including growth, financing, marketing, and overall strategy. “Sometimes the board members act as a devil’s advocate, and other times they offer experiential learning,” says Drawdy. “Both are important. The key for me is not leading my advisors to the answer I want. I’ve learned that it’s best to just state the problem and give some company background, but not to paint a scenario in such a way that I inadvertently force them to a certain conclusion. That’s when I get the best advice.”

Nathn Fabrick

Nathan Fabrick

, president of 110%, an athletic apparel company, was fortunate in that when he purchased the company in 2009, an eight-member advisory board was already in place. Since day one, he’s leaned on them to help with the business’s strategy.

“Getting to use other people’s experience, wisdom, and guidance helps you stay on track,” he says. “When you run a small business, it’s easy to slide into rabbit holes and start working on things that might be good for today, but not good for the business’s long-term growth. It’s helpful to have outsiders ask you questions, make sure you build systems, and hold you accountable.”

Both Drawdy and Fabrick agree that their advisory boards have positively impacted their company’s growth. They also encourage all business owners to form their own advisory board as soon as possible.

Tips from the pros

If you think an advisory board sounds like a good option but you’re unsure how to form one, here are some tips to get you started.

• Pick the right people. Cathy Hagan, area director for the UNF Small Business

Therefore, she advises that you seek out professionals from a variety of backgrounds, such as finance, marketing, and human resources. Reach out to those people, even if you don’t personally know them, and ask if they’d be on your advisory board. You’ll be surprised how many people say “yes.”

• Establish a meeting schedule. According to Bartow, the board’s meeting schedule will depend on the stage or current activity of the business. If something intense is going on, such as an acquisition, the advisory board may meet weekly. However, for routine matters, bi-monthly or quarterly will often suffice. Both Drawdy and Fabrick meet with their advisory boards on a quarterly basis.

• Enforce term limits. While you could have the same advisory board members forever, you also want the ability to dismiss one and bring in someone new. “As the business grows, the owner’s needs of expertise will change,” says Hagan. “You want your board to reflect the advice you need and the stage you’re in. So bring board members in with a one or two year term, with an option to renew. That way there’s no hard feelings should you want to get rid of someone.”

• Decide compensation. While many business owners pay for food and other meeting expenses for board members, being on an advisory board is typically an unpaid position. “Experts agree to do it because they like to give back,” says Bartow. “They want to support a business owner and help them grow their company.”

Additionally, Drawdy reveals that the meetings aren’t always about him. “Sometimes the issue we’re discussing also pertains to a board member’s business,” he says. “My board members often say they leave the meetings having learned just as much from the experience.”  

No matter how helpful or insightful an advisory board may be, the final decisions the business owner makes are solely their own. “At the end of the day, you have to go with your gut,” says Fabrick. “No one knows your business better than you. So listen to your advisors and learn from them…but take everything with a grain of salt.”

Dawn Josephson is a contributing editor to Advantage. She can be reached at dawn@masterwritingcoach.com.

By Jim Molis   

Buying a company is like finding a spouse. You must know what you’re looking for, recognize when you’ve found it, and commit to making it work.

Mergers and acquisitions can be good ways to grow your business, but you must be proactive in your approach and deliberate in your execution. “Nothing is a good deal if you don’t need it,” said Don Wiggins, president of local investment banking firm Heritage Capital Group. “It’s what you need. It’s what fits.”

Growing by merger or acquisition should not be done hastily. It requires diligently following four steps:

• Define your strategy,

• Make the approach,

• Negotiate the deal, and

• Execute the plan.

Define your strategy

Start by determining your reasons for expanding. Are you trying to grow geographically? Or gain more local market share? Remove competition? Add new services?

Companies often consider mergers and acquisitions if growth plateaus, said Joe Palermo, a partner in B2B CFO. You can continue to grow organically but you will pick up market share faster by buying a competitor, he said.

Identify the criteria for the company you want to pursue, including its annual revenue, number of employees, and market share, suggested Palermo. Consider your top three competitors based upon your knowledge of your industry, their performances, your previous dealings with them, and their reputation. Buying or merging with a competitor typically brings synergies such as the ability to consolidate operations, streamline management, improve purchasing power and leverage relationships.

It also may be easier to acquire a competitor’s customers by buying the company than trying to lure them individually, particularly if they are loyal to the other business, said Cal Heseman, a business broker with Transworld Business Brokers.

You may have to review several companies to find one that will work for you, Wiggins said. Be methodical in your process, and proactive rather than reactive.

“You want to make sure you’re prepared to go to market on your terms, not someone else’s,” Wiggins added.

Make the approach

Once you have honed in on some target companies, reach out to them discreetly. You can use an intermediary like Wiggins or Heseman, who protect your identity early in the process. Or, you can approach them informally.

Palermo often invites a potential seller to lunch or dinner. Business owners who are proud of their companies often enjoy discussing common trends and issues over a meal. During the meal, Palermo may ask, “In a perfect world how do you see your company moving forward?”

The question often prompts the business owner to consider scenarios he or she may not have otherwise. “A lot of people who own companies don’t think about doing anything until they’re approached,” Palermo said. “Everyone is so busy running their company they don’t plan ahead for this.”

Palermo lets the conversation flow naturally, without pushing. He lets business owners identify opportunities such as joint ventures on their own.

Depending upon the business owner’s age, Palermo also may ask about retirement plans. Specifically, he will ask what the owner intends to do with the company, the tax ramifications of the plan, and how the owner would invest any proceeds if the business were sold.

His goal in asking these questions is to get the business owner thinking of selling so that the possibility could be explored further in additional meetings.

Negotiate the deal

Once you have an interested seller, start drafting the parameters of a deal. A merger would combine the two companies into one, while an acquisition would be a purchase of one business by the other.

“A lot of companies out there are on the ropes,” Heseman said. “If their numbers are still the same as they were a few years ago, you can pick them up a little cheaper.” Seller financing often is available as well, he said. “Just because the banks aren’t financing doesn’t mean we aren’t going to get a deal done.”

Heseman cited a recent deal in which the buyer paid 50% of the purchase price in cash. The seller financed 10%, and the remaining 40% will be earned out as a certain percentage of revenue over 24 months. “We have to be a little more creative in how we get deals done, but they’re getting done,” Heseman said.

If you buy a company, consider whether you will purchase just the assets or if you will buy the stock, which would also transfer liabilities, Palermo said. Review the company’s financials closely, particularly the number of customers and how much they generate. “If the revenue’s not there, no matter what you do you’re going to have a problem,” he said.

In addition to ensuring all of the numbers are accurate, Palermo asks business owners if they run any personal expenses through the company. If they do, there could be additional savings by eliminating those expenses through the deal. He also will ask for financial projections.

Due diligence is taking longer than in the past because buyers don’t want to make mistakes, Wiggins said. He recommends reviewing a company’s operations, financials, legal compliance, and (if applicable) technology.

Envision how you will combine the companies, and what the resulting business will look like, Palermo said.

Execute your plan

Know where your synergies and savings will come from before completing the deal, Palermo said. Possible synergies including getting better pricing on benefits, services, or materials through increased purchasing power. You also may increase sales. “You have to be careful cutting the marketing and sales people because they have those relationships,” said Palermo.

You can often save money by consolidating your back office operations, combining facilities and trimming payroll. Identify the savings in advance and reap them according to your plan.

If you plan to combine accounting operations in 45 days but take longer, then you push the savings out further, affecting other parts of your plan, Palermo said. “If you say you want to implement these types of changes you have to stay on the game plan.”

Watch your numbers carefully as you move the combined company ahead, Heseman emphasized. “The person who buys a business and learns to focus on revenue growth while closely managing expenses is going to be well positioned when the economy improves.”

Jim Molis is a contributing editor to Advantage: The Resource for Small Business. He can be contacted at jim@creatwoodpr.com.

SIDEBAR

Acquisitions from a buyer’s point of view

Venture capitalists and the companies they support often begin with the end in mind.

Investors favor companies that could eventually be sold, thereby generating returns commensurate with a high-risk investment, said Al Rossiter, president of Springboard Capital Management, an equity investment fund specializing in early-stage venture investments.

As they consider each investment opportunity, Rossiter and fellow investors evaluate a company’s potential appeal to financial or strategic buyers. Financial buyers acquire companies for cash flow or other strong fundamentals, without intending to operate the business. Strategic buyers acquire and operate companies that align with their plans for growth.

Rossiter looks for companies with a “sustaining competitive advantage” that would appeal to strategic buyers. Examples would include a proprietary technology or geographic market share that would be more difficult or expensive for an acquiring company to develop independently. “There needs to be something of distinct value there,” Rossiter said.

If a company ultimately seeks to be acquired, you can position your company for a potential sale to a strategic buyer from the start. “You have to understand what the value of your company represents to the potential acquirer,” Rossiter said. For example, if you produce medical equipment that a larger company may eventually want to manufacture at its own facilities then don’t build your own plants. The acquirer would not pay for your facilities, only the core technology.

“Understanding the strategic benefit that it brings to an acquirer allows you to develop the business plan that enhances that strategic value without adding baggage,” Rossiter said. “You’re developing the company to expand or enhance those attributes that the acquirer would desire.”

If you plan to sell to a competitor, get attention by building a strong customer base. “Generally you need some sense of scale, some operating track record to even become noticed within a market,” Rossiter said. Having a full understanding of the desired outcome is key to the business-planning process.

Patience is a virtue and knowledge is essential.  

By Erica Courtney

We have seen the statistics. The federal government spends more than $550 billion on goods and services annually. That is $10,000 per second, every minute of every day. This is normal spending and does not even include the $787 billion recovery package passed by Congress last year to jump-start the economy. In addition, there are millions being spent on disaster recovery/natural disaster events.

Have you thought about penetrating the government marketplace? Perhaps it is time to stop thinking about it and do it. While you sit and wait, your competition is most likely figuring out what they need to do to be successful in this space.

Typically, companies fall into one of three categories:

• Those that have been writing proposals for months or even years, spending countless resources with no awards granted. They are just about to throw in the towel and can’t understand why they are not successful.
• Those that have never attempted to enter the space and have no idea where to begin.
• Those that need a bit of direction but not full positioning.

The fear of the unknown is scary but as with anything in life, you just need to know how to play the game. It is not that hard if you have the right tools in place along with the proper know-how. Take the proper steps in the beginning and you’ll be doing business with the federal government before you know it.

1. Get registered. As required by law, at a minimum, your firm must be registered in a few systems. First, you should have a D-U-N-S number, assigned by Dun & Bradstreet at no charge to federal contractors. (Go to http://fedgov.dnb.com/webform for information on obtaining the nine-digit number.) Then register in Central Contracting Registration (CCR) at https://www.bpn.gov/ccr/default.aspx.

You will be asked basic information about your company such as points of contact, size, and products and services offered. If you are a small business, you will also register with the Small Business Administration. When your CCR is complete, you will see a prompt to register your information in their system.

Next register at Online Representations and Certifications Applications (ORCA) at https://orca.bpn.gov/. Because this is a regulatory site, completing the form can be complicated. Set aside some time to complete your entry and ask for help if needed. CCS has a great resource page at www.courtneysolutions.com/resources.html for more information related to company size standards, codes, regulations, and opportunities.

2. Differentiate your company. Once your company is registered with CCR, SBA, and ORCA, you can begin scrolling through Web sites such as www.FedBizOpps.gov looking for open market solicitations. Of course, so are millions of other companies, so you need to be one of a handful that stand out.

Being classified as small or disadvantaged is not enough, because there are millions of small businesses competing for the same jobs. More contracts do go to small businesses than in the past, but the majority of money goes toward large businesses that can perform many tasks and manage the overall projects. There is room for both. Search the Federal Procurement Data System (www.fpds.gov/fpdsng_cms/) to see exactly how federal funds are spent.

So how do you differentiate your firm from others? Here are some questions you should ask yourself:

• Do you have a contracting mechanism in place to make it easy for federal, state, and local buyers to do business with you?
• Have you been pre-screened for compliance and competency?
• Have your prices been deemed fair and reasonable for the taxpayer? If yes, then you save the buyer vast amounts of time spent to do background checks and manage risk.
• Do you have a fixed-price contract? (If you do have a long-term fixed price contract in place, buyers using stimulus funds must buy from you over others as stipulated by Congress in H.R. 1 ARRA Section 1554.)

3. Get a fixed-price contract. Across the board, fixed-price contracts are used most often by all major federal organizations when acquiring goods and services. But it is not easy to get one. In fact, more than 90% of all applications get rejected immediately, spawning a whole industry of consultants to help companies work through the process

General Services Administration (GSA) is the federal government’s largest acquisition arm and owns/leases more federal buildings than any other entity. You must apply through the GSA to secure a fixed-price contract, but the process can take from six months to more than a year with a consultant’s help. Without a consultant, the process is virtually unmanageable for the average business owner who does not have the time or resources to devote to the tedious process.

However, when choosing a consultant to outsource this function, make sure you hire a firm that not only gives you the tools to be effective in this marketplace but the know-how. You may have a contract, but if you do not know what to do with it, you have just wasted a lot of money. (For more information on GSA go to www.gsa.gov. Click on “For businesses,” then “Getting on schedule.”)

Tackling the government market can be daunting but the rewards are well worth it if you are willing to put some effort into it. Get good guidance from a reputable consultant and have a clear plan for what you sell and to whom you intend to sell. Understand that nothing happens quickly in the government.

Once you have your first shot at government work, make it count and do the best you can. Once that door is open others will soon follow. Be persistent and smart about approaching this market. There is no reason you can’t succeed and grow your business exponentially.

Erica Courtney

Erica Courtney is the president of Courtney Consulting Solutions,

www.courtneysolutions.com. While serving in the U.S. Army, she was responsible for buying millions of dollars worth of goods and services to support some of the most highly deployed units in the country. To contact her, call 904-371-1938 or visit her Web site at www.courtneysolutions.com.

By Suzanne K. Lemen

Most managers complain about their lack of time. They work long hours and are under relentless stress. The recession has exacerbated the problem: They are working longer and harder than at any other time in their careers.

The problem is further compounded if you are a small business owner, because when you own your own business, you often feel that you have to do everything yourself. But do you? Granted, you may do it all yourself because:

• You like to do it. It gives you satisfaction to see the finished product;

• It’s easier. You don’t have to explain or teach—both of which take time and patience;

• It’s faster. Because you are skilled at doing the task, you get it done quickly. If you were to hand off the task to someone who is less skilled, that person would take more time;

• You get it done right. Because of your skill, you can do the task right the first time, unlike someone who must learn how to do it.

All of these reasons may be legitimate, but unless you learn to delegate, keeping everything to yourself will eventually inhibit the growth of your business. You need time to focus on important strategies like business development and strategic partnerships. And your employees need to learn new things and feel as if they are progressing in their development. Delegation accomplishes all these things.

Because delegation is so important—to your sanity as well as to the life and success of your business—it’s important to identify what you should be delegating. Essentially, the tasks to be delegated are those that are not the best use of your time or those that require skills and knowledge you do not have. In the business lifecycle, needs change. To be successful, a business owner must be able to adapt and give up tasks to others. If your business has hit a plateau, this may be the reason.

Identify tasks to delegate

Delegation should be a well thought-out process—not a “dumping ground” of grunt work.

• Understand how you use your time. Write down what you do for a week, a day, or even a few hours. Do these activities support the strategies and goals of your business? Are you spending time on tasks that others should be doing?

• Identify your special skills. As you review your list, you may find items only you can do. Code them accordingly.

• Label tasks that can be delegated. What do you currently do yourself that could be delegated in a nine-week time period? You will be surprised at how many things you do out of habit and not for any strategic reason. If someone else can do the task, label it for delegation. (And if you find some tasks no longer serve a viable purpose, eliminate them.)

Why nine weeks? This period gives the employee to whom you delegate a sufficient amount of time to learn and practice the task. It also gives you a sufficient amount of time to accept that you don’t have to do it yourself.

How to delegate

Effective delegation requires seven steps.

1. Define and prioritize responsibilities. What is the task to be delegated? What are the tasks that need to be completed? Break down large activities into all of the steps.

2. Identify to whom you should delegate. Who is capable of handling this new responsibility? Consider current workload and qualifications (skills, knowledge, and experience). Employees feel empowered and valued when they take on new responsibilities.

3. Teach. If the employee does not currently have the skills or has never done the task, teach him or her how to do it. Work with the individual until you are comfortable he or she has developed the skill set.

3. Assign, and set a deadline. When must the task be completed? Ask the employee for input on the length of time to complete the task and provide guidance.

4. Establish checkpoints. Plan a timeline to check on progress and coach/counsel the employee on progress. Keep to the schedule

5. Provide authority. Don’t micromanage the delegated task. Give the employee authority to be successful even if the steps aren’t exactly the same ones that you would use.

6. Turn over ownership. While you may provide advice and counsel, let the employee “own” the task. It is tempting to get involved and “take back” the task when there are challenges. However, you don’t “own” it anymore so resist that temptation.

7. Reward accomplishment. Be immediate and specific with your feedback. Make sure you assign credit appropriately to your employee.

Finally, once you have delegated a task, don’t take it back. Instead, keep reviewing your own workload to see what else you can give away. You, your employees, and your organization will all benefit.

Suzanne K. Lemen, SPHR is CEO of Dynamic Corporate Solutions, Inc. www.dynamiccorp.com, a human resources consulting company which she has led for the past 18 years. She also owns Orange Park-based Idea Staffing. She can be contacted at slemen@dynamiccorp.com or 904-278-5383.

How to protect your work product and avoid infringing others’

By Robyn A. Friedman

As president of AXIA, a public relations firm in Jacksonville, Jason Mudd is accustomed to seeing his name on the Internet. He is often quoted as an expert on crisis communications. But

Jason Mudd

Mudd was shocked about a year ago when a Google search disclosed an article he had written—posted on the Web site of an Arizona public relations firm, was attributed to its CEO and even branded with that company’s logo.

“I was appalled to see that they took our material,” said Mudd. “It was my work without anything changed other than my name and my company.”

Unfortunately, Mudd’s experience is not unique. The Internet has made it easy to infringe the copyrights of others—and it’s not just nefarious plagiarizers who are guilty. Many Internet users think that if articles or photographs are posted on a Web site, they’re free and available for the taking.

They’re not.

Tom Saitta

“There are a lot of copyright issues related to the Internet—things that didn’t exist 25 years ago before there were Web sites,” said Tom Saitta, who heads the Intellectual Property Practice Group at Rogers Towers, a law firm in Jacksonville. “Everybody has original content they associate with their business, whether it’s brochures or Web site pages, and it’s relatively simple to maximize the copyright protection, but a lot of small business owners don’t even think about it.”

What exactly is copyright? Federal statutes afford protection to the creators of “original works of authorship,” including literary, dramatic, musical and other types of intellectual property. Use someone’s intellectual property without permission, and you’re infringing their copyright (unless you’re within the bounds of “fair use,” as defined in the statutes). It’s important to note that ideas are not protected; copyright protection attaches when the work is “fixed” in tangible form, such as when music is recorded on a CD or a book is typed up in manuscript form.

The use of a copyright symbol is not required under federal law, but it’s recommended as a way to put others on notice that you’re asserting a claim to the material. Similarly, copyright registration is not required. In fact, any work created on or after Jan. 1, 1978 is automatically protected; however, registration, which is inexpensive and can be done online, does afford the creator additional rights.

Why should you care about copyright if you’re not a writer, musician, or photographer?

Greg Allen

“If a business owner is not aware of the basics of copyright, then he puts himself at risk of being copied, facing the expense of bringing suit in state, or more often federal, court to enforce rights that have been infringed or—worst case—being sued for copying the works of others,” said Gregory B. Allen, an attorney with Allen, Dyer, Doppelt, Milbrath & Gilchrist in Jacksonville.

Allen once represented a real estate magazine owner who published a photograph in print and online that was provided to her by an advertiser. The publisher was sued for copyright infringement even though she didn’t know of the photographer’s rights when the advertiser gave her the photograph. “Defense of a federal court case is not a cheap proposition,” Allen warned.

It may seem easy to avoid misappropriating someone’s intellectual property and ending up in a similar situation: just avoid copying someone else’s work or using their photo without permission. But the copyright laws are more far-reaching. Experts offer the following advice to avoid infringing:

• Seek written permission to reprint anything that is not your original work. Remember also that if you purchase the right to use an image or article, that doesn’t mean you can use it in perpetuity. Depending on the license agreement, using an image on your Web site may be considered one use and putting it in your brochure may be a second, and the copyright holder may expect to be paid twice.
• Ensure that your own Web site contains only original work. The contract with your Web site developer should contain an indemnification clause to protect you in the event that someone comes forward and claims their Web site was copied.
• Be vigilant about photos you use on your Web site or in printed materials. If you use stock photos, make sure you’ve purchased all necessary rights. If you deal directly with a photographer, confirm that it’s his original work. “Your Web site developer should guarantee that they’re using photographs they have the right to use,” said Saitta. “Try to get some sort of indemnity clause that guarantees that if a problem comes up, it’s the Web site developer on the hook and not the business owner.”
• Consider insurance. Invest in a commercial liability policy that includes coverage for copyright infringement.

What can you do to protect your own intellectual property?

• Use the copyright symbol. Although no longer required, it’s still beneficial. Include the following: the symbol © or the word “copyright”; the year of first publication; and the name of the copyright owner. Example: © 2010 John Doe
• If you use a Web site developer—or anyone to create intellectual property—
  

  Joe Lemire

  make sure the copyright is transferred to you in writing. “If it’s not specified in your contract, that can become a contentious and potentially big issue,” said Joe Lemire, owner of ELYK Innovation, a Web application development firm in Jacksonville. Lemire has had to “rescue” Web sites, recreating source code that prior developers felt was proprietary.

• Consider using source code in your Web site that prevents viewers from right clicking to cut and paste a section. This provides limited protection, however, since a plagiarizer can still just re-type the section he likes.
• Keep a watchful eye. Consider setting up a Google Alert in either your name or keywords related to the work you want to create. Google will then monitor the Web and notify you by e-mail when your search term is used in new articles, blogs, or Web sites.
• Register your intellectual property. “The only truly effective means of protecting
  

  Howard Caplan

  work subject to copyright is to register it,” said Howard Caplan of the Caplan Law Firm in Jacksonville. By registering, you can also recover “statutory damages” in the event of an infringement, which means that you don’t have to prove an actual monetary loss. Registration can be done electronically and costs $35 for a basic claim to an original work of authorship.

It took Jason Mudd several weeks—and the threat of legal action—to get the Arizona firm to remove his work from its Web site. He has since created strict policies to protect his own work and that of his clients. “I guess plagiarism is a nice form of flattery,” he said. “But it was my vision—for me to write an article takes time and commitment. So I felt like someone had stolen from me.”

Robyn A. Friedman is a contributing editor to Jacksonville Small Business Advantage. She can be reached at RAFWriter@att.net or through her Web site www.everythingwrite.com

Now is the time to prepare for the exit from your business, according to John Chappelear, a certified strategic exit planner and author of The Daily Six, and Don Wiggins, president of Business Valuation, Inc. and Heritage Capital Group. According to these experts, who spoke at a recent Knowledge Is Power workshop, if you wait until you get a call from a potential buyer to sell your business, you will be on the defensive and will not get top dollar.

Unfortunately, said Chappelear, “People research buying a television more than they do selling their business,” he said. “They don’t know how much their business is worth.”

John Chappelear

However, you can take control of the transition process and maximize the value of your business so that it looks its best to a buyer, he said. The key is to start early.

Wiggins explained that planning is a multi-step process that requires you to look at your company in an objective manner:

• Define your personal goals. What is it you want to do after you sell your business? Typically, said Chappelear, business owners develop personal goals related to funding their retirement lifestyle; staying meaningfully active in retirement; giving back to the community; and enjoying more leisure time.

Don Wiggins

• Put together your advisory team. “This is a risk-reducer,” said Wiggins. The individuals on your team will help you throughout the exit process. The key, though, is to coordinate the activities of all of the advisors. The team should include your investment banker or valuation firm; CPA or tax advisor; estate-planning attorney; general corporate attorney; financial planner; insurance professional; real estate professional; and others as needs are identified.

• Evaluate your ownership transition options. Transition options include a sale to a third party; transfer to a family member(s); transfer to other shareholder(s); sale to management; sale to an ESOP; IPO; and liquidation. The right option depends upon your personal goals and objectives.

• Value your business. Sales, expenses, customer concentration, expansion opportunities and capital availability, and personnel are all examples of key drivers, which vary according to the type of business you have, said Wiggins.

Identifying these drivers is a critical step, because it allows you to see opportunities to improve the worth of the business. For example, depending upon the key driver and its current status, you may see opportunities to implement a marketing program to increase sales; reduce dependency on you; install an expense-control program; diversify your customer base; expand geographically or by product lines; or establish an aggressive recruitment program to find strong sales or management team.

• Develop a personal financial and estate plan. This plan makes sure you can have a life after business. Your accountant, financial planner, estate attorney, and CPA should all work together to determine your income requirements for the future.

• Document and prepare to implement your plan. Write it down—in detail.

Wiggins emphasized that the preparation process typically takes from 60 to 90 days, but it can take six months or longer.

The plan should not be a well-kept secret, said Wiggins. Rather, once you have the plan on paper, it is time to implement it. According to Wiggins, implementation may take between six and 18 months to complete. “It could be the most profitable time of your life,” he said, “because for every dollar that you increase the recurring profit of your company, the value will increase by three to eight times or more.”

Why do all this? Chappelear and Wiggins likened the business transition process to buying and selling a ’57 Chevy convertible. If you buy this classic beat up and rusted out and then try to resell it, you won’t get much for it—only a few thousand dollars. If you make cosmetic repairs, you’ll increase its value, perhaps to $20,000. But if you do a complete restoration, its value may skyrocket to $100, 000!

The same applies to your business. Planning and implementing the plan can maximize the price you command for it when you are ready to give it up.

John Chappelear and Don Wiggins spoke on Value-Track, a business transition process, at the Knowledge Is Power workshop, presented by Heritage Capital and US VenturePlex.  

By Jill Metlin   

Are you guilty of this fatal retirement-planning flaw? You believe that after pouring a lifetime of sweat, time, and capital into building your business, you will be able to sell out someday for a ton of money, and then settle back and enjoy a financially secure retirement.

Many business owners are so sure this will happen that they don’t bother to make any other retirement plans.

Who is this person who, at just the right moment, is going to show up with cash in hand to buy the company— and pay a fair price? For thousands of small business owners each year, no one steps forward. The reasons vary: Some businesses are too specialized or are tied too closely to the owner’s unique personality and skills. In other situations, possible buyers equate “retirement sale” with “distress sale” and make only low-ball offers. Whatever the reason, many owners find that their company has suddenly become a white elephant that nobody wants.

One possible solution

A good solution is right in front of you: Groom your own replacement, someone who will buy your company when you are ready to retire. This person may be a current co-owner (but be careful if he or she is about the same age as you and will be counting on retiring around the same time). Or, it could be a son or daughter active in the business, or a younger key employee.

Business owners who successfully groom their own replacements leave nothing to chance. They realize there is no room for error at the point of retirement.

If you want to take chance out of the sale of your business, here are some steps to take:

• Be cautious. Make sure your heir apparent is the right person in terms of temperament, personality, competence, and personal goals.

• Set up a probation period. This is time frame in which you can terminate the relationship if you find the person simply will not work out. During that period, keep everything informal, strictly verbal.

• Include a termination provision. When you go to a formal agreement, make sure it contains a termination provision.

• Use ‘gold handcuffs.’ Weave golden handcuffs and incentives into the contract to ensure that your replacement stays until the baton is passed. An ambitious successor needs and deserves gradually increasing authority and benefits. Options include deferred compensation or the opportunity to acquire partial ownership prior to their retirement. This provides both parties with something to win by sticking to the agreement—and something to lose if it falls apart.

• Put it in writing. Get the help of an attorney to spell out who does and gets what, all details and caveats, including how to establish the final valuation of the business. This formal buy/sell agreement protects everybody.

• Build in a funding mechanism. This is crucial. No matter how good the terms of the buy/sell agreement, it will be worthless if the money is not there when needed to carry out the plan. Under one option, the successor may be able to purchase the company from ongoing profits. Other options include setting up a sinking fund or allowing the successor to simply borrow the money.

These options may work, but they leave much to chance. Instead, consider a funding vehicle that protects your family in the event of your disability or premature death, such as life and disability income insurance.*

• Have a back-up plan. As a business owner, you know that very few things go exactly as planned. What if your business hits tough times, or your successor dies, becomes disabled, or—all too common—leaves because of a personality conflict? Or what if there simply is no heir apparent waiting in the wings? Sometimes, it’s simply best to dismantle the business.

Whether or not you have a possible successor for your company, you should begin mapping out your exit strategy today. Your insurance professional, business consultants and trusted CPAs and attorneys may be able to help you develop this kind of business strategy. Do you homework early and avoid any unexpected fallout from pitfalls along the way.

Jill Metlin

Jill Metlin, LUTCF, MS (www.jillmetlin.com) is a financial services professional and New York Life Insurance Company agent, offering securities through NYLIFE Securities LLC (member FINRA/SIPC). She can be contacted at 904-997-3074 or jmetlin@ft.newyorklife.com.

By Kenneth H. Marks    

If you are the owner of a small business and are refinancing debt or a bank loan or leasing a facility or new equipment, chances are that the lender or lessor will require you to sign a personal guarantee.  

For several years prior to the recent recession, credit was easy, and it was possible to obtain a line of credit or lease new equipment or space without having to personally back-stop the liability. Not today.  With rare exception for those businesses with extraordinary financial strength, obtaining credit of almost any type for emerging growth or middle-market businesses—that is, those from start-up through $100 million in sales—will require guarantees by the owners with 20% or more of the equity in a company.  

What does this mean? It means that you need to be prepared to pay out of your own pocket if your company no longer can make the scheduled debt payments.

So how do you manage the risk and mitigate the liability associated with these personal guarantees?  Developing an effective strategy for structuring and managing the personal guarantee begins with understanding your lender’s objectives and perspective.  

• Ask why a guarantee is needed. Start by asking the lender or lessor why the guarantee is necessary. Some may want it to assure that you, as a significant owner, are tied to the business to increase their likelihood of being repaid (especially if things do not go as planned).  In the case of a financially weak business, they may be requiring additional collateral or assets to make the loan or lease.

• Determine how much risk you will take. Next, determine the maximum out-of-pocket amount that you are willing (or able) to actually pay if everything goes wrong and you must personally write a check.  Knowing this amount will play into the terms and the amount that you should guarantee.  As an example, some owners do not mind guaranteeing their company’s debt as long as they are never really at risk of loss—in other words their worst case out-of-pocket amount is zero.  You can accomplish this by assuring that the amount of debt guaranteed never exceeds the liquidation value of the assets of your business, taking into account the priority of liens and repayment if the business went bankrupt.

If you are okay with taking some financial risk, then calculate the same liquidation value and add the acceptable amount.  Once you have established a limit, have your controller, bookkeeper, or accountant provide a monthly or quarterly estimate of liquidation value based on your actual financial statements. This will provide you visibility so you can track and manage the risk being taken.

If you are in a position to shape the deal, use the information above when negotiating the terms of the guarantee so they fit your situation and limits.  

Here are some of the key points that you should consider as you talk to your lender or lessor:

1. Guarantee of payment vs. guarantee of collection. The most common guarantee is that of payment.  This means that if your company does not meet the agreed payments, the lender (or lessor) can demand payment directly from you as the guarantor without pursuing further action against the company.

As the guarantor, you would rather be a guarantor of collection.  This arrangement typically requires the lender (or lessor) to first exhaust its options against the company before it can demand payment from you.  So, if you never allow your company to borrow more than the liquidation amount of its assets and you made a guarantee of collection, you could avoid ever having to write a check from your personal assets. Alternatively, you might seek to completely limit any risk unless you commit fraud in managing the business; this is sometimes referred to as a fiduciary guarantee.

2. Limit scope and collateral. Limit the scope of the guarantee to exclude recourse against your house or other specific property.  In addition, do not agree up-front to liens against your property or a pledge of the stock in the business.

3. No spouse signature. Avoid having your spouse sign the guarantee, so that the guarantee is based solely on your assets.  Be prepared to provide financial statements showing only your individually owned assets and liabilities.  

In most states this limits the risk to only assets held solely in your name, not joint assets or those of your spouse.  So, if your house is owned with your spouse jointly (or just by your spouse) the laws in most States would prevent the lender from taking recourse against it.

4. Set limits. Quantify the limits on the amount of the guarantee, either in relative terms or absolute terms.  For example: Your company may have a line of credit with $2 million total availability.  Seek to limit your exposure to 20% of the outstanding balance or a maximum of $200,000.  This is particularly appropriate with multiple owners whereby you may desire to limit your exposure based on your percentage ownership.

Additionally, negotiate to reduce the guarantee as the performance of the company improves.  As an example: Your company has a debt-to-equity ratio of 3:1 post-financing. Seek agreement to reduce or limit your guarantee when the company’s debt-to-equity ratio falls below 2:1.  

Also consider having the guarantee become less onerous over time, based on the bank’s continued relationship with your company.  For example: A guarantee of payment could convert to a guarantee of collection after a couple years of a spotless repayment record, or the guarantee could burn off gradually.

5. Adequate insurance. Insure the supporting collateral for the loan or lease on a replacement cost with limits commensurate with the cost to replace the property.  You do not want to find yourself caught off-guard in the event of theft or hazard and then be obligated to personally pay for lost inventory or property that is part of the deal.  

Also, take the time to make sure your business interruption (business income and extra expense coverage) limits are in sync with the amount of time and additional expense it would take to restore normal operations after a disaster. In addition, consider fraud insurance to protect against an officer or employee stealing from the company and incurring debt on a line of credit.  Broad form property insurance usually covers only a small amount unless specifically added to the policy; increase this policy limit to match the credit facility limit.

From a practical perspective, guarantees are difficult to negotiate or to get much movement on unless the lender (or lessor) wants your company’s business and unless there is competitive pressure giving your company and you the ability to haggle for improved terms.  Negotiating these terms is done in the context of the overall credit facility or lease agreement at a time of change.

Lastly, get good, independent advice from experienced legal counsel and financial experts.  If you have partners or other shareholders, you will likely want separate counsel representing you vs. your company.  The nuances of the guarantee are specific to you and your circumstances…get qualified legal advice to assure the terms and concepts fit your situation.

Kenneth H. Marks is the founder and a managing partners of High Rock Partners, providing advice and leadership for growth and investment.  He is the lead author of the Handbook of Financing Growth published by John Wiley & Sons www.HandbookofFinancingGrowth.com.  He can be reached khmarks@HighRockPartners.com.  

Consider location and funding strategies before you purchase a commercial space

By Dawn Josephson    

For many business owners, owning their own commercial space is one of their primary goals—and it comes with many benefits: control of the commercial space, the ability to build equity and the owner’s net worth, and a tax write-off on the loan interest. Even with those benefits, though, the fact is that in some instances, leasing is still the better option.

“We’re in a unique environment where there is a lot of vacancy now,” says Colin , CCIM, with Coldwell Banker Commercial Benchmark. “So you have to determine whether the cost of owning is more or less than the current lease rates for similar space.”

Colin Nicholson

Nicholson

Nicholson explains that he’s seen some deals in which leasing was the better option because of how low the current rents are. “If you can get a low enough lease rate, you might be better keeping the cash in your pocket and investing in your business instead,” he says. “The key question to ask yourself is: ‘Is my business growing faster than the real estate appreciation?’”

Sid Jones

To find out whether you should make the plunge into buying, having a lease versus buy analysis is crucial. Sidney O. Jones, CCIM, with Killashee Investments, LLC, frequently performs such analyses for clients. “In putting one together, we look at the needs or requirements of the tenant/buyer,” he says. “What is in their best interest? What is the liquidity and reserves of the principal(s)? There comes a point in the lease/buy analysis where you see the breaking point and it becomes clear whether the owner’s equity is better served in buying or leasing.”

Start with the end in mind

If you determine that buying is the best option for you, choosing the best location is the next step. And while we all know the old adage that the three most important things in real estate are location, location, location, today’s commercial real estate agents suggest business owners think in terms of resale, resale, resale. 

Jeff Evans

According to Jeff Evans, broker/associate with Colliers International, “The most important decision in terms of location is not whether the business can use the property for 20 years; the most important decision is determining who is going to buy this property when you sell it.” Few business owners keep their commercial space forever, he reveals, and eventually everyone does sell their property. So while the space you choose does have to work for you now and have some room for growth, the most important thing is to be looking at your exit strategy. 

Jones agrees. He suggests business owners look at the underlying real estate first rather than get emotionally attached to a property. Some questions he advises business owners ask are: What is the viability of this real estate should my business go down or move? What else can I use it for? How easily can I sell it? Is it something other business owners would want to rent? “You always have to look at the resale or leasing potential of that commercial space,” says Jones.

Borrow smart

Fortunately, if you do decide to buy, getting the funds you need to make the commercial real estate purchase are available. “The market is turning around; credit is unfreezing; and banks are more willing to lend on commercial real estate transactions,” says Evans. Additionally, local funding sources and assistance are available.

Joe Whitaker

Joe Whitaker, business development and recruitment coordinator with the Jacksonville Economic Development Commission (JEDC) says his role is to help connect business owners with the right financing resources and programs. The JEDC is the authorized agent for issuing industrial revenue bonds, recovery zone bonds, and empowerment zone bonds, all of which are used for the purchase of real property, machinery, and equipment used in manufacturing or developments within particular zones. 

“We also work with the private sector financial entities, particularly with the Small Business Administration (SBA) programs,” says Whitaker. “The SBA programs that are effective for small businesses are either the 7(a) program, which is their standard loan guarantee program, or the SBA 504 program, which is a hybrid program that allows businesses to borrow up to 90% of the cost of fixed assets, whether it’s land, building, machinery, or equipment.”

With the 504 program, the business owner gets 50% financing from the bank. Then, the SBA, through a certified development company such as Florida First Capital or Essential Capital, provides the bond financing for the remaining 40%. All SBA programs are nationwide.

When it comes to financing your purchase, Whitaker offers some sound advice. “Make sure you borrow enough money to accomplish your objective,” he says. “Often, people underestimate their costs. They arrange for the financing and the down payment, but they don’t set aside enough for renovations.” As a result, the business owner ends up pulling money from their working capital to invest it in fixed assets. They then don’t have enough money to operate their business.

“I always tell people to borrow what they need to make the deal work, but don’t under-borrow,” he says. “At the same time, people shouldn’t take on more than they need unless they foresee growth within five years. The SBA has a rule of thumb: They require you to occupy at least 51% of a space. If you’re building a new structure, they require that you occupy 75% of the space. They’re leaving you some growth room, but they don’t want to over-finance you.”

Ultimately, when you know your business’s needs, have smart financing in order, and buy with an exit strategy in mind, you can make a sound commercial space purchase that serves your business well today and creates equity for your future success. 

Dawn Josephson is a contributing editor to Advantage: The Resource for Small Business. She can be reached at dawn@masterwritingcoach.com.

SIDEBAR

Selecting a location

Only you can decide the best location for your needs. An experienced commercial real estate agent can help you navigate the choices. But if you’re a DIY kind of person, go to www.expandinjax.com, click on the “real estate” option, and then click on “industrial & commercial.” This site, which is maintained by the Cornerstone Division of the Jacksonville Regional Chamber of Commerce, lists a seven-county database of commercial real estate properties available for purchase. Although it is not all-inclusive, it enables you to see what’s out there so you have an idea of costs and locations.