By Isabel Graf, PhD    

Seventy. That number could be the age when you plan to retire. Or, it could be how many millions of dollars you want your company to make.

In realty, seventy is the percentage of owner-operated businesses that do not survive past the original founder, according to research from the Family Firm Institute (www.ffi.org).

In another study, the Phoenix Company (www.thephoenixcompany.com) found that two-thirds of family business owners (66%) have no business succession plan. The survey cited lack of a succession plan as one of the primary reasons that these businesses fail, along with poor estate planning and inability to pay estate taxes.

So, why do business owners fail to prepare for succession? Often, owners will say that they are too busy with the day to day work, or that retirement seems far away, especially with the current economic conditions. Regardless of the reasons, it is critical for business owners to prepare for the eventual transition of the company.

Succession planning is the process of preparing for the leadership transition. There are several steps to creating a succession plan, including deciding on which jobs need successors, assessing the individuals who are potential successors, making the decision what to tell the potential successors, and preparing the successors for their eventual roles.

Here are eight tips to help you make a smooth leadership transition through succession planning:

1. Start your planning early. Even if you don’t plan to retire for five or more years, you could change your mind, or something could happen to you. Plans change— yours, those of your family members, and those of your key leaders. You want to be able to adapt your plan as circumstances evolve.

2. Think about how you want your business to continue. Do you want to pass it on to a family member, sell to a key employee or third party, or form an ESOP (employee stock ownership plan)? Founders usually want to see their companies continue after they retire, and they may retain financial interests in the businesses. Regardless of how you handle the transaction, it’s in your best interest to ensure that the business remains successful. You need to prepare yourself, your employees, and your customers.

3. Identify the jobs critical to the success of your company— now and in the future. These positions certainly include the CEO and other top executive positions, but don’t neglect other key managerial or supervisory roles. Do you have the right people in those critical jobs now? Should, or will, these people continue in these roles once you leave? Your company needs the right team in place to continue as a viable business. Do you handle multiple roles? If you do everything, you need to have people who can take over the various roles you now handle.

4. Identify the successors; play to their strengths. Do you want certain people to hold certain jobs? Do these people have different expectations than yours regarding their roles in the company? Which individuals are right for which roles? It’s not just the role he or she wants; you need to determine if the person is the right fit for a given role. Even if you plan to pass your business on to your family, is there a non-family member who has been critical to your company’s success? If yes, what role should that person have after you retire?

5. Prepare yourself for this transition. Yes, you want to retire, but will you be ready to turn the reins over when the day comes? Is your life and identity so tied up with your business that you will have difficulty stepping back from the business? Can you start to give power or authority to the successors so that they have time to learn from you? Or, do you feel the need to remain completely in control, until the day you retire? Do you expect to have some kind of role in the business after retirement? Owners who are retiring may benefit from working with a leadership transition coach.

6. Discuss your succession plan with the parties involved. Ensure that they understand what you expect of them and why you made the decisions that you made. You want to minimize the stress and conflict as much as possible upon your retirement; you want the successors to focus on the business and not on making power plays for different jobs.

7. Evaluate the successors. Consider two elements when evaluating your successors: knowledge and skills to perform the job and the right personality traits to be successful in the role. Even if someone has the right technical background, does he or she have the right personality? If it’s your personality that drives your business success, will your successor be able to step into your role and be as successful? There are different kinds of assessments that can help determine if an individual is a good fit for a role. From these assessments, you can decide if an individual needs formal training or education or leadership development. You, or a coach, can work with the individual to develop their skills, build on certain personality traits, and find ways to compensate for any weaknesses.

8. Prepare the successors for the transition. Identify roles in the business they can assume now, so that the company changes hands without any disruptions to employees and customers. Help them learn as much about the business as possible. Provide them the appropriate education or training.

Once a formal, written plan is created, do not put it on a shelf and wait until the day you retire to implement the plan. Review the succession plan annually or as needed, just as you review your business finances. Things can, and will, change.

Finally, discuss the plans with your financial advisor and your attorney. Your advisors can discuss your retirement plans and may have recommendations on how to transfer authority and on how to address the legal aspects of your plan.

Isabel Graf, PhD, is a principal with Insights2Talent, a succession planning and leadership development consultancy. She can be reached at www.insights2talent.com or 904-382-8755.

By Candace Moody

Almost every company has a rulebook— a set of policies and procedures that help the company keep employees’ behavior between the lines. HR managers generally agree that workers need direction on how to dress and how to behave. They also agree that how happily your employees comply with your policies may be a function of when they were born.

For the first time in history, as many as four generations may work side by side in the workplace, thanks to longer life spans and retirement plans that have been delayed by the economic downtown. Those four generations are the “matures,” the “baby boomers,” “generation X,” and the “millennials.”

Born between 1930 and 1945, the matures comprise a small part of the current workforce (less than 10%). Although small in numbers, they bring a strong, traditional work ethic and depression-era values to the workplace. At 64, the youngest members of this generation still feel that they have several productive years of work ahead of them. They may also be owners or founders of the companies they work in, making their personal values one of the most influential factors in the business.

At 73 million strong in the United States, baby boomers have been a dominant generation since they were born—between 1946 and 1964. They currently comprise about 44% of the workforce. Next in line are the gen Xers (generation X). Born between 1965 and 1980, these workers are the independent “latchkey” kids, sandwiched between two enormous cohorts. Numbering just 46 million and 29% of the workforce, generation X is dwarfed by the boomers and the millennials.

This last group was born after 1980 and started coming of age in 2000. They number around 80 million and currently make up 15% of the workforce. Their numbers will grow as they continue to graduate and go to work, however.

This unprecedented combination of generations in the workplace creates a new diversity dynamic, and may make developing policy a real challenge. Each of the generations responds to rules and constraints differently, and each responds to different incentives and rewards.

Generation issues

Anna Lopez Brosche, CPA, runs operations at Ennis Pellum & Associates, a public accounting firm located on Jacksonville’s south side. Its workforce of 35 is well-balanced by age; workers range from 24 to 60 years old, with the founder and partners at the older end of the spectrum. Brosche attributes the balance to a policy of recruiting young talent from college and providing a supportive work environment for long retention of young workers.

Brosche is 37, but says she embraces traditional values and identifies more with baby boomers, partly due to her immigrant family upbringing. “As a family, we believe strongly that whatever you have, you earned through hard work,” she says.

Part of Ennis Pellum’s approach to a supportive work environment is a commitment to more flexible schedules. Unlike many accounting firms, Ennis Pellum does not enforce mandatory weekend hours during tax season. Employees who can get work done from home are permitted to do so. Brosche says that the real challenge with flexible hours is not results, but expectations: Baby boomers are proud of thriving under long hours and brutal deadlines. “And for baby boomers, ‘working’ means being at the office,” she says. “That’s not always the case with our younger workers. We’ve had some miscommunication because the boomers don’t think they should have to explain terms or be very specific about deadlines. I sometimes have to translate and mediate to make sure we’re all on the same page.”

Tina Wirth

Tina Wirth, director of education at the Jacksonville Regional Chamber of Commerce, at 38, is typical of the generation X in her attitude toward policies in general. “Whenever I see a new policy come out, my first instinct is to be skeptical,” she says. “I look at policies to see if they make sense to me—if I can figure out why it’s needed. If I can’t see the point, compliance is much harder for me.”

Policies that promote a healthy work-life balance hold a real attraction for Wirth and many of her generation. She once worked for a company that insisted on a 7:30 a.m. report time, even if you’d worked until 10:00 the night before. “I hated that I had to ask permission— and take vacation time— to come in an hour later the next day,” she said.

Despite that experience, Wirth says she still struggles with the whole “face time” issue at work; she, like many X-ers, believes that you should be judged at work by the results you produce, and not how much time you spend at the office. “But even if I’ve already put in a 40-hour week, I feel weird about leaving the office early on Friday afternoon. I’d hate to be considered a slacker.”

Jayne Jett

Jayne Jett directs HR for Parc Management, a Jacksonville-based company that manages 25 theme parks and attractions throughout the United States. During the summer peak season, the company employs up to 8,000 workers, and Jett estimates that 70% of the seasonal workers are under 25.

Jett says that she has no trouble creating and implementing policies for workers that are for the most part, just beginning their careers. But, she emphasizes why those policies are needed.

“These workers need a ‘why’ to go with the ‘what’,” she says. “They consider providing a reason a sign of respect.” Jett says that she doesn’t have trouble with providing the ‘why’ on most of the company policies. “We’re focused on safety. We limit access to texting and phones because our workers are dealing with large and dangerous machinery [roller coasters and rides] and need to be alert.

“Our dress code, which prohibits things like large dangling earrings, is mostly about safety around equipment. We do prohibit out-of mainstream body art like tattoos on the face or offensive messages because our customer base is very mainstream. Our workers understand that.”

Jett says that she manages to promote attendance and punctuality by emphasizing to workers that when they are late, they are letting their team members down by not showing up.

Gary Desjardins

Gary Desjardins, 46, runs The Little Gym in Jacksonville, one of two franchised locations in Northeast Florida. The company runs programs for children from four months to 12 years old, helping them build physical and cognitive skills through activities including martial arts and gymnastics.

Desjardins manages 10 employees ages 18–29, and finds that his young workers share his strong work ethic. He says that his 20-something workers are very confident  and want plenty of autonomy; “But if you can manage that, they do a great job for you.” Desjardins does admit to more challenges with his youngest workers— those 18–22 years old. “They’re connected all the time to a vast network of online friends—they’re constantly reaching for those cell phones,” he says. He invests extra time in team-building exercises, because these very young workers seem to need help in bonding with their co-workers—“relating face-to-face,” as he puts it. He manages around that, too. “When I have something really important to say as the boss, I text it.”

Candace Moody is a contributing editor to Jacksonville Advantage. She can be contacted at CTMoody@comcast.net.

Sidebar

What works for each generation?

• Matures. They want to be valued for their loyal and reliable service. Compliant with rules and regulations, they prefer face-to-face communication and consistent application of rules. They also want to be recognized for their experience and commitment to quality work rather than speedy results.

• Baby boomers. These employees work well with systems and processes, and they thrive on pay for performance incentives and achievement-based promotions. They value face time with the boss and care about perceived status symbols, such as titles and corner offices. Many are discovering the value of flexible schedules as they seek to extend their careers and still make time for leisure activities.

• Generation X: This generation values work–life balance as well as autonomy. They want to be treated like entrepreneurs within the company. Bosses get the best results from them by recognizing the results they achieve rather than the hours logged or seniority. This group of workers wants access to the latest technology and to be able to set their own goals.

• Millennials. The youngest generation of workers needs to feel connected to friends via technology, so smart bosses limit social networking only when absolutely necessary. This confident generation multi-tasks better than any previous cohort, but they want to know the reasons behind every policy and decision. They also want to take an active part in making important decisions. Policies need to provide specific guidelines for attendance and other constraints on behavior, since millennials are used to structure and appreciate knowing the rules.

By Robyn A. Friedman    

What would happen if one of your key employees—a top salesperson, manager, product developer, or IT guru—suddenly died or became disabled? Would the business survive?

It would—if you had purchased key person insurance.

“Every business—no matter how small—has to plan from almost the time the business is put into place how you’re going to cover the death or incapacity of an individual who’s mandatory to the success of the business,” says Robert A. Sullivan, author of The Small Business Start-Up Guide (Information International, 2000). “You have to develop a worst case scenario.”

Key person insurance is a type of life insurance that protects the business if an invaluable employee dies or becomes disabled. If that person is the company’s rainmaker, for example, it might cover lost sales; if the key employee is a product developer, it could cover the cost of finding a replacement.

Key person insurance is just part of what should be a comprehensive business succession plan, says David Phillips, a financial services professional with Financial Design Associates in Jacksonville, an agency of Massachusetts Mutual Life Insurance Co. “It helps makes sure that you don’t lose momentum at the loss of a person,” he says. “It’s one of the elements every small business owner should address.”

Yet, strangely, although 71% of small businesses say they’re very dependent on one or two key people, only 22% have key person insurance, according to the National Association of Insurance Commissioners.

“It’s not as common as it should be,” Phillips says. “Most business owners are so busy running their business that they postpone it. Unfortunately, that can create a problem.”

John Ruoss and his partner, Steve Rushing, recently purchased key person insurance to protect their company, TOPSSCo Sales and Service, which sells pumps and industrial parts in Florida and Georgia. Each partner plays a unique role in the business, so the insurance provides the survivor with time to regroup in the event of a tragedy. “We sat down and looked at the cost to bring in someone else if something happened to one of us,” Ruoss says. “To bring someone on, train them for two or three years—that cost would be covered by the money we got from the insurance.”

Like other forms of life insurance, the cost of key person insurance varies based upon the age and health of the insured. Using term insurance keeps key person affordable, but other life insurance products can be used as well.

How much insurance do you need? That depends upon the business and the employee insured. “It could be a million for a senior individual that’s literally running the business,” says Sullivan. “If this guy can no longer perform his duties, it may take up to a year to replace him–that could easily cost even a small business a million dollars.”

Dan Dearing, president of Jacksonville-based Professional Retirement Services, says small businesses might not be able to survive the loss of a key employee and may have to hire multiple people just to replace him or her, thereby incurring much higher costs. So he recommends it to his clients—particularly due to its low cost. Still, he says there are some businesses—such as those based on commissions—where key person insurance may not be, well, as key. “If you are paying someone a salary, but it’s essentially coming from sales they make, and they disappear, you’re no longer making revenue from that person—but you’re also no longer paying that person,” he says. “It’s not like a fixed expense.”

Thinking about purchasing key person insurance? Here are some tips:

• Shop around. Premiums vary widely, even by companies with the same safety rating. “It can literally be X or six times X for the same age person, depending on what their health is,” Dearing says. Get quotes from different companies, or use an independent agent, who will do the legwork for you.

• Find an insurance agent you can trust. If you don’t already have a relationship with an agent, interview a few to find one you’re comfortable with. Make sure the agent has experience in writing business insurance.

• Determine who needs to be insured. Don’t overlook employees who aren’t top managers or owners of the company. “It could be Fred down in the shop,” says Sullivan. “He may be the only guy who knows how to put A and B together.”

• Write a succession plan. Without proper planning, a small business may not survive if an owner or manager suddenly dies or becomes incapacitated. Many small businesses are sold—at fire sales, for less than their full value—due to lack of proper planning. But those devastating results can be avoided by consulting an attorney, accountant or financial planner to set up a succession plan that includes, at a minimum, key person insurance and a buy/sell agreement.

• Do it today. The cost of life insurance increases with age. “You’re never going to be younger than you are today, and you’re probably never going to be healthier than you are today,” says Phillips. “If you wait too long, the person may become uninsurable, and then you’re stuck between a rock and a hard place.”

Nick Furris, a co-owner of Spectrum Films, a Jacksonville-based film, video and interactive production firm, is “strongly considering” the purchase of key person insurance not just to protect his two partners but his 16 employees as well. “We have a responsibility to our employees to keep the business safe and healthy so they can continue to have employment,” he says. “Just as you protect your business with insurance from flooding or theft, you have to protect the key people who make your business successful. Or else, God forbid something happens, the business will not survive.”

Robyn A. Friedman is a contributing editor to Jacksonville Advantage. She can be reached at RAFWriter@att.net.

If your employees are not giving you the results that you want and need, take a look at what you are assessing. “Change your measure, and you change employee behavior,” said Harold S. Resnick, PhD, CEO of Work Systems Associates, Inc., a Ponte Vedra Beach, Fla.-based consulting firm.

“People will respond to whatever it is you are measuring,” Resnick told a group of business leaders at a recent meeting of Executive Advantage (www.theexecadvantage.com), a professional- and business-development group for Jacksonville-area CEOs. “Measurement is your most powerful feedback and control tool,” he stressed.

But, measurement cannot be done haphazardly. He told the group about an organization whose accounting department provided monthly reports on 35 different measures. “Unfortunately,” he said, “they had no projective sales measurement, no operational performance measures of any substance, no human-factor measures, no customer-satisfaction measures at all.”

What that organization needed—and all organizations need, he said—were measures to assess the organization, individuals, and departments. These types of measurement are essential to entrepreneurial companies because:

• It’s not possible to understand something until you can measure it;

• You have to understand something before you can improve it; and

• You cannot respond to threats and opportunities unless you know where you stand.

“People respect what you inspect,” he summarized, “and what gets measured gets better.”

Organizational measurement

“Folks don’t realize how much their success in the company is driven by measurement,” said Resnick. “Most companies unfortunately drive behavior only from financial results. The problem with financial results is that they tell you nothing. Financial information does not tell you why your performance was great or poor. So financial measures by themselves don’t give you any guidance about what actions to take — or prevent — in the future. It’s like driving a car with no windshield and only a rear view mirror.

So, if financial measures by themselves are not the answer, what is? Resnick said businesses should first identify and assess their critical success factors. “To figure out what these factors are, ask yourself what you would want to know first about your company if you had had no contact with it for three months. What would be your first questions?” Those questions identify your critical success factors.

For each critical success factor, ask yourself:

• What will this measure tell me about my business?

• How can I use this information to impact the future?

• What behaviors will the act of measurement likely create?

• What are intended consequences of this measurement?

• What are the likely unintended consequences of this measurement?

“The act of measuring changes behavior,” he explained. “So for every measurement you take, consider, ‘How are the people in my organization going to start to behave? What are the intended consequences of what I want? What are the unintended consequences?”

Some of the most common key measurement categories include:

• Financial progress and results,

• Sales and/or revenue and/or margins,

• Market share,

• Customer base and customer satisfaction,

• Cost of manufacturing,

• Operational performance (cost and process),

• Human resource measures,

• External benchmarking, and

• Other special categories peculiar to your business.

Resnick said that measures should be objective, obtainable without great difficulty, generated automatically output from existing systems whenever possible, and able to be tracked over time so that trends become apparent.

Individual performance

The second type of measurement every organization should make is individual performance. “If you could shift the performance of your organization one standard deviation to the right,” said Resnick, “you would get a 34% improvement in productivity!”

And it is possible to get that gain, he emphasized, stating that on average, employees spend about 1.5 hours each day not working. Instead, they are shopping online, updating their Facebook page, or answering personal e-mails. “Are they doing these things and falling behind in their work? Or, are they doing these things because they do not have enough productive work to do?”

Only a small percentage of people get fired because they are not performing to the standards set for them, said Resnick. The problem is that the standards are set at a baseline level—the minimum employees have to do to keep their jobs. “The assumption is that a worker’s performance should improve over time,” he said. “Your job is to raise the bar with every employee every year, because you are paying more for that employee every year.”

Peer measurement

Individual measurement is further strengthened by adding peer assessments to the process. “If you have a number of employees who do the same or very similar work, it is statistically impossible for their performance not to resemble a bell-shaped curve,” said Resnick. What this means is that some people will be low performers, some high performers, and most will be “average” performers. The implication of the bell-shaped curve is this: First, you should either get dramatic short term improvement or remove the lowest performers. Second, you should focus on the high performers; that is, leverage your best people to give you really great performance. Then work on consistently raising the bar and performance levels for the middle third.

Honest peer assessment depends on understanding and factoring in three variables: talent (skills and attributes an employee inherently brings to the job), competence (the ability to perform), and performance (what is actually done).

A relatively new employee may have low competence (because she has a lot to learn), but high performance, judged relative to her competence. On the other hand, a 10-year veteran is probably highly competent, but if he is delivering the same amount and quality of work as the one-year person, his performance should be considered low in comparison to his peer group.

When you look at employee performance in this light, said Resnick, you are then able to compare experienced employees with less experienced ones. And, if you have a number of employees who do the same type of job, you can create a forced bell curve—something that is critical if you want to reward people for their actual performance.

Harold S. Resnick, PhD, is CEO of Work Systems Associates, Inc., www.worksystems.com, located in Ponte Vedra Beach. He can be reached at 904-273-2558.

Executive Advantage is a business development and networking group. For more information on joining a group, call 904-704-5058.

SIDEBAR 1

Align your mission and measurements

Although having a vision for your company and a stated mission are important to success, making sure that you are measuring the right things is crucial, says Resnick. “If your measurement system is different from what you are intending to accomplish, then your measuring system is going to control behavior more than your vision statement. That’s a pretty compelling message that people don’t really think about.”

A story illustrates: A company boasted that it focused on quality, but its employees were incentivized by the number of completed shipments they made.  Employees knew their pay depended on sending out complete orders, so they made sure each order had the necessary number of boxes. Unfortunately, some of the boxes were empty or partially filled or filled with defective parts. Customer complaints pointed out that quality was not driving employee behavior, despite the company’s mission verbiage. The company’s measurement (and reward) system was in conflict with its mission.

SIDEBAR 2

Common measurement errors

Many companies make a number of common mistakes in their measurements, said Resnick. Their measurements:

• Focus on the financial and do not look at other criteria;

• Are historical, but the past data provides no future-focused help;

• Count transactions, but do not show trends over time;

• Are easy to capture, but are not necessarily important to the business’ success;

• Look only at hard data and ignore soft data;

• Focus on final results, but do not explore process for improvement.

By Robyn A. Friedman      

Chris Hanks has served in the U.S. Navy. He was a construction manager on commercial projects. He’s currently fleet manager for Auto Carrier Express (ACE), a Jacksonville-based auto transport firm.

And now, Hanks is something he never thought he would be—an inventor.

Last October, Randall Long, the father of twin 8-year-old girls and a driver for ACE, fell while loading vehicles onto a car carrier. The fall turned tragic. Long hit his head, and within two days, he was dead. Hanks and his dad, Gilbert Hanks, who founded the company, were left wondering what they could do to prevent future injuries, which Hanks says are not uncommon in the auto transport industry.

“Every company out there that hauls cars has had somebody fall from the head rack [the part of the track that is above the truck’s cab],” Hanks said. “We found it hard to believe there was nothing out there that could protect the driver, so we started thinking about it and brainstorming.”

Hanks tinkered with ideas. He was stymied because there is little room on the head rack to install any sort of safety device without interfering with its function.

But Hanks persisted and realized that he could harness a three-inch gap on the head rack. He ultimately came up with an idea for a product he felt would make loading and unloading vehicles safer. The result: The Surefooting Safety Platform, which provides protection from falls for truck drivers who have to load and unload cars from the tops of car carriers.

After considering various alternatives, Hanks conceived the idea for the platform one weekend and sketched it out for his dad. “You could see the lightbulb go off in his head as well,” Hanks recalled. “He said, ‘We’ve got to get a patent on this right now. We need to protect ourselves.’”

Features of the Surefooting Safety Platform, which has a 300 pound capacity, include:

• Hydraulic activation, which makes deployment and storage easy for the operator;

• Bypass prevention, to help ensure the operator will use the system by limiting access to stowed vehicles when the platform has not been deployed;

• Safety cables, so the operator has a good gripping surface; and

• Door safety zones, which provide ample room to open vehicle doors without damage.

Within 24 hours, Hanks—who is not an engineer but says he’s “just a handyman”—built a prototype—a 1/18th scale model—in the company shop. A few weeks later, he had a working model on one of his trucks.

Chris and Gilbert Hanks also visited a patent attorney, Jo-Anne Yau, with Wood, Atter & Wolf in Jacksonville. She guided them through the steps they would need to take to apply for utility and design patents for the platform. The patent applications have since been filed, and Chris said it will take between 18 and 24 months before the patents are approved. Application and legal fees cost approximately $10,000, he said.

The invention has been well-received in the industry. Dave Campbell, who has been involved in the auto transport industry for 20 years and writes an industry blog from his home in Wewoka, Okla., said it’s easy to fall when loading or unloading a vehicle, especially at night, when many deliveries occur. He was impressed with the platform. “This will make it better for drivers,” he said. “And that will make it better for our whole industry. I can’t believe somebody didn’t do this sooner.”

Campbell said if the platform ultimately proves to lower workers’ compensation claims, then the insurance industry might encourage companies to install it, and that will help fuel sales.

Barriers remain

But despite an apparent need for the platform and indicators of demand, Hanks faces several barriers to bringing the product to market.

The first: The current state of the economy. “We couldn’t have picked a worse time,” he said. “This is something everyone needs but something no one can afford now.”

Another barrier is the size of Hanks’ company. ACE is a small business—just 30 employees. To build more platforms, Hanks said he needs not only additional employees but also a new building. “We don’t by any means have the ability to mass produce these,” Hanks said. And even if he licenses or sells the patent to another company—and he’s considering doing so—research and development budgets have been slashed, and it will take deep pockets to bring the invention to market.

The platforms are constructed from thin-walled steel, expanded metal, and hydraulic cylinders. Hanks said pricing has not yet been finalized, but he estimates that each unit should sell for “somewhere in the neighborhood of $5,500 to $6,500.”

Despite the challenges, opportunities exist for the invention. Philip Kopman, an ACE co-owner who is handling marketing for the product, said there are about 20,000 car carriers currently on the road, and that the trailers have a 10-year lifespan. “About 2,000 a year are being replaced,” he said. “And we hope to capture—eventually—75% of that.”

Kopman said the firm is considering selling the patents or entering into a distributorship with a larger company that can better produce the product, such as Cottrell Inc., a manufacturer of car hauling equipment. “This is not our expertise,” he said. “It was a great idea, but Cottrell has the engineering expertise in-house and the large-scale manufacturing facility, as well as the connections and market capitalization to do this.”

Chris Hanks agrees. “It’s a challenge for us to find the time and ambition to develop a second business right now,” he said. “There’s a learning curve.”

Still, Hanks would advise other would-be inventors to have confidence in their product and follow their dreams. “If you have an idea, move forward with it,” he said. “Be persistent.”

Chris and Gilbert Hands and Philip Kopman can be reached through Sure Footing Safety (www.surefootingsafety.com) or Auto Carrier Express (www.acecarrier.com), 904.358.3830. Attorney Jo-Anne Yau works in the law offices of Wood, Atter & Wolf, PA (www.woodatter.com).

Robyn A. Friedman is a contributing editor with Jacksonville Advantage. She can be contacted at RAFWriter@att.net.

SIDEBAR

6 steps for getting an idea to product stage

If the light bulb is glowing above your head, and you’re bursting with joy because you just came up with an idea for the next great [whatever], before you start calling your friends to celebrate the good news, stop. Your idea needs to be protected. What to do?

Jacksonville patent attorney Jo-Anne Yau advises her clients to take the following steps:

1. Document it. Yau has her clients create an “inventor’s diary” to describe how the product works, what the design looks like, and how it will be built. She said documenting the steps it takes to invent a product helps to show the thought process involved and creates a paper trail. That might make it easier to prove that you are in fact the inventor if anyone ever presents a challenge.

2. Research. Conduct a patent search to confirm the originality of your idea. The place to do this is the U.S. Patent and Trademark Office (USPTO), http://patft.uspto.gov/.

3. Build a prototype. After the prototype is completed, Yau asks clients for sketches, photographs, and even video. Those are provided to a draftsperson who prepares CAD drawings for submission to the USPTO.

4. File the patent application. There are two main patents to choose from: a utility patent (for a new and useful process or machine) or a design patent (for an original and ornamental design for a manufactured article).

5. Be prepared to wait. Yau said it can take several years before a patent is approved.

6. Market the product. After you have applied for the patent, you can use the term “patent pending,” Yau explained. Only after this point does she advise clients to begin looking for a manufacturer to mass produce the product or to engage in negotiations to license the idea or sell the patent. 

Video

To watch a video demonstration of the Surefooting Safety Platform, click here.

By P. Douglas Filaroski     

Andy Harold always knew where he wanted to take his e-training company. Despite early questions about its own course, the city of Jacksonville’s Small and Emerging Business Program (JSEB) helped lead it down a successful road.

Started about the time Mayor John Peyton’s JSEB program was launched, A. Harold and Associates in five years has grown into a $6-million company, with 34 employees. City work helped fuel that acceleration.

“There are just so many opportunities,” said Harold about the procurement program Peyton proposed to replace the city’s Small Business Enterprise/Small Disadvantaged Business program that was threatened by reverse discrimination lawsuits.

At first, there were doubts about the program’s ability to deliver work to women- and minority-owned business. But since its inception Peyton said the program has awarded $180 million in contract work and paid out $195 million to all small and start-up businesses. Of that, about 40% is going to African-American-owned companies, 30% to women-owned firms and 12% to businesses owned by Hispanics.

“The results of the program have been quite significant,” said Peyton, a former Gate Petroleum executive. “Small business is a big driver of our economy, and the JSEB model helps to grow and expand this important sector.”

Last year, the city awarded $83 million and paid out $92 million to certified businesses—a number expected to rise again this year, said Ivy Johnson, who oversees the program as chief of the city’s Equal Business Opportunity Office.

The list of certified businesses has reached 422, but is expected to continue to rise with companies hunting for work in a struggling economy, Johnson said. These days, the program is an important as ever for small business, which can be among the most vulnerable, she said. “The program was designed to create opportunity for small businesses.”

The certification process requires time, but is not that difficult, Johnson said. The basic criteria state that:

• A business owner or its headquarters reside in Duval County,

• The owner’s net worth doesn’t exceed $605,000, and

• The business’ annual revenues are less than $6 million.

The city offers JSEB-certified businesses help accessing capital through Essential Capital, formerly the Jacksonville Economic Development Commission. It also offers free training and education programs, including courses at Florida State College Jacksonville, on legal business structure, finance, accounting, and understanding the procurement process.

What certification means

Once certified, a business owner can bid for contracts advertised on city Web sites and posted on a city phone hotlines and bulletin boards. The city has placed links to bid advertisements by other government agencies on its site. City law requires performance bonds, but another JSEB program has helped dozens of companies receive bonding, and the city can waive the requirement on projects of less than $500,000.

“We have a wide gamut of projects, from geotechnical, to lawn mowing, to general contracting, to CPA services,” Procurement Division Chief Michael Clapsaddle said. Projects range from small to large for both goods and services. Small businesses can partner with large companies as subcontractors on big projects, such as the upcoming county courthouse construction project that will include goals for JSEB-qualified small business participation.

A partnership is how Harold’s company got its start. It became certified and bid on a contract. It failed to win the contract, but it teamed up with a larger company that won the bid to provide services for a portion of the larger company’s project.

Harold, an African-American who was named this year’s “Entrepreneur of the Year” at the 17^th Annual Small Business Celebration co-sponsored by the Small Business Development Center at the University of North Florida and First Coast WorkSource Development, encouraged business owners to learn details of the program so they can position their companies for work.

Harold attended a city vendor fair, met the city’s chief of training, and stood watch over the bidding process. When he saw a larger company with lower costs had bid, he offered that company, Skillsoft, a partnership, and accepted a deal to be brought onto the project.

“I think the biggest thing is you have to establish a relationship with your customer [the city],” he said.

Ruth Murr, who owns Printing Edge, took it a step further. Murr became JSEB-certified and took advantage of the city’s referral to other government agencies seeking requests for proposals. She, too, did not land a contract but partnered with public relations firm Robin Shepherd Group to produce brochures for Duval County Schools and, with engineering/design firm Edwards and Kelcey, to print materials for a Jacksonville Transportation Authority road project.

“It’s really been extremely beneficially for us,” Murr said.

SIDEBAR 1

5 Lessons learned by small business owners

1. Get on the list. Sounds simple, but many small-business owners don’t make the time to qualify for the Jacksonville Small and Emerging Business Program. Here’s the link to the program’s Web site, http://tiny.cc/jsebWebsite, where you can find a link to the application form.

2. Keep an eye on bidding opportunities. The city publishes each bidding opportunity on the JSEB Web site. Recently it began providing a link on the same page to bidding opportunities of related quasi-city government agencies, such as JEA. You can also call 904-630-BIDS.

3. Keep an eye on bidders. If you don’t win a contact—or if you don’t qualify even to bid—you may find opportunities to partner with winning bidders. So, again, watch the process, and consider contacting companies participating in the process.

4. Market yourself. Network with others on the list. Attend JSEB trade shows held by the city, JEA, and others offering contracts, such as Duval County Schools, the Jacksonville Transportation Authority (JTA), and Jacksonville Port Authority. In addition to what you know, it’s also who you know.

5. Educate yourself. In addition to learning the process, attend education programs held by JSEB at Florida State College, formerly FCCJ. Officials with the program conduct sessions on accessing capital, managing paperwork, and preparing financials. They like to see small business owners they are going to hire get involved in improving their business practices.

SIDEBAR 2

Key Web sites

• City of Jacksonville, Equal Business Opportunity. Oversees certification through JSEB program; http://tiny.cc/EqualBizOp; 904-630-0969 or 630-1165.

• City of Jacksonville, Procurement Division. Oversees bidding process; http://tiny.cc/procurement162. For suppliers of commodities, 904-630-1184; or for professional services, 630-1297.

• Vendor lists. For information on current qualified and disqualified vendors; http://tiny.cc/vendorinfo.

• Bidding opportunities. For information on successful recipients of various types of bids, including professional services and capital improvements; http://tiny.cc/biddinginfo

By Jeffrey D. Wilke        

Price is important. It is the only element of the marketing mix that produces revenue. (The other elements—product, placement, and promotion—produce costs.) It is also a powerful tool that conveys the company’s image and its position within the market.

For example, price positions a company to be:

• A low-cost discount provider,

• An upscale provider with high price points, or

• A focused provider serving only narrow segments.

These three positions are very different. None is right; none is wrong. But whichever a company selects, it is crucial that it formulate an effective pricing strategy suitable to its business.

Pricing can be determined by using any number of strategies and tactics. However, these strategies must be in line with the company’s marketing plan and objectives. Choosing a suitable strategy for your company can be a complex undertaking that requires decisions based on logical factors and an intuitive insight.

To determine a proper pricing strategy for your company:

• Understand your business. Understand its nature and the industry in which it operates. Is competition fierce or weak? Is the industry growing or is it saturated? What is your business model and its mission? What image do you want to establish in the market? All of these things affect pricing.

• Understand the cost structure of your business. You have to know your break-even point before you can determine an appropriate profit margin for pricing. Calculate your company’s variable and fixed costs and use this information to determine your price floor.

• Research. It is essential to know the price sensitivity of your customers to determine your price ceiling. Research what your competition is doing and the trends in your industry. Consider surveying existing and potential customers. Your research will give you insights about the ability and willingness of your customers to pay for your products and services.

• Analyze the pricing strategies of competitors. And study the changes of supply and demand in the marketplace.

• Identify the special value provided by your company’s products and or services. In addition, decide what image the company needs to create in the minds of its customers.

Lower prices in a recession?

During a declining economy or in a mature market, many small business owners are tempted to reduce prices. This may not be best for your business. It can lead to price wars among competitors, reduced profits, and harm to your company’s image.

As an alternative, try the following tactics:

• Try to remain neutral. Don’t overreact. Instead of reducing pricing, focus your marketing efforts on the benefits and the value of your products or services.

• Evaluate and understand the true value that your company offers to customer. The “true value” are  the benefits your product or services give to customers. To articulate these benefits, think in terms of the problem(s) the product or service solves or the needs it addresses. Use the results of your value analysis to build pricing confidence within your company. Then communicate the value you offer to your customers. In other words, focus on selling value instead of price.

• Avoid depending on discount pricing to increase sales and profits. Instead, increase efficiencies and control costs throughout your supply chain to add greater value to your company’s products and or services.

• Avoid the follow-the-leader pricing strategy. Always strive to differentiate your company and create a unique image in the eyes of your custom.

Remember that because of an ever-changing business environment , your pricing strategy should never remain fixed. Continually monitor your business environment and the trends in the marketplace and adjust your pricing strategy accordingly.

Jeffrey D. Wilke is owner and managing member of Easy Step Solutions, LLC, www.easystepsolutions.biz, consulting services specialized on meeting the needs of the small or start-up business owner

By Keith E. Johnson, CPA

Your decision to start a new business is the first step toward joining the real power fueling the American economy. The second decision you must now make concerns how you want your business to be structured.

Businesses can be structured in a number of different ways—sole proprietorship, partnership, limited liability company (LLC), a C-Corporation (“regular” corporation), or an S-Corporation. Each of these structures has its advantages and disadvantages.

• Sole proprietorship. This is the most common way to structure a business initially. It provides flexibility for the owner in terms of payroll and paperwork, and it allows the owner to take advantage of full deductibility of necessary business expenses.

A sole proprietor files a business tax return in the form of a Schedule C, which is attached to the personal Form 1040.

A sole proprietorship is a good way for business owners to “get their feet wet” before taking on the more formal responsibilities of running a corporation. However, this structure has two major disadvantages: As a sole proprietor, you have unlimited liability, which means if you get sued because of an accident, the plaintiff can claim your personal assets (such as your car, home, or personal possession) as well as your business assets. Additionally, you are responsible to pay a 15.3% self-employment tax (Social Security and Medicare) on net profits over $400 per year . The self-employment tax is on top of the income tax the profit generates.

• Partnership. A partnership is a business formed when more two or more persons pool their assets together to form a business. Partnerships are taxed in the same way as sole proprietorships.

One of the main disadvantages of a general partnership concerns personal liability: Partners are personally liable for the business’ debts and liabilities. Also, each partner may be liable for the debts and actions of the other partner(s). For these reasons, general partnerships are rare today; they have largely been replaced by the LLC (limited liability company).

• LLC. The LLC is a relatively new concept that combines the flexibility of a partnership and the limited liability of a corporation.

Owners of an LLC business do not have to pay the self-employment tax of a sole proprietorship, yet they can still deduct their business expenses on their personal tax return. The LLC also pays no business tax on the federal level. Finally, an LLC affords limited liability, which means that in a lawsuit, personal assets are protected. A plaintiff is generally limited to the acquisition of business assets.

The LLC either files taxes using a Schedule C on the owner’s personal Form 1040 (one owner LLC), a Form 1065 ( Federal Partnership return), or a Form 1120S (S-corporation).

Unfortunately, in the case of a one-owner LLC, an LLC does not preclude paying self-employment tax on net profits. And a multi-owner LLC requires more maintenance with regard to business continuity and division of profits.

Anyone entertaining an LLC with partners should have an attorney draw up Articles of Organization to protect the interests of all owners.

• C-Corporation. The regular C- Corporation is a popular form of business organization. It provides limited liability for the owners and some tax benefits for fringe benefits that may not be available to other types of entities.

A C-Corporation requires filing Articles of Incorporation the Secretary of State. In Florida, filing is done at the Florida Division of Corporations, www.sunbiz.org. The filing fee for a corporation is usually $87.50.

C-Corporations are not without disadvantages. They require completing considerable paperwork, such as issuing stock, filing annual reports, and maintaining corporate meeting minutes. Taxation is also a disadvantage of this business structure. In a C-Corporation, profits and distributions are both taxed—a double taxation situation. The C-corporation is subject to federal corporate tax on profits, and the owners are subject to tax on dividend distributions. The corporate taxes are filed on the IRS Form 1120.

• S-Corporation. To overcome the double taxation hit on small business owners, Congress created the small business, or S-Corporation entity. This entity allows the same limited liability as the C-Corporation or LLC; it avoids double taxation since it avoids taxes on corporate profits; and it allows owners to take probable initial losses on their own individual income tax return.

The operating results of the S-corporation are filed on IRS form 1120S, and a Schedule K-1 is given to each owner, detailing the effect of their ownership on the profits or losses of the company. Owners are taxed on their share of the profits or losses, depending on their percentage of ownership.

Although S-Corporations offer many advantages to small business owners, they also have some disadvantages. The structure puts restrictions on owner compensation, fiscal years, and fringe benefits .

To attain S-Corporation status, you must file a Form 2553, S-Corporation Election when you create your company. S-Corporation, incidentally, is a federal designation and does not apply in Florida. Therefore potential S-Corporation owners need to file the proper paperwork with both the IRS and the State of Florida.

Which business structure is right for you? Among the factors to consider are:

• The number of employees your business has,

• The type of business,

• The number of owners,

• Your marital situation,

• Other income, and

• Expected profitability.

One “size” does not fit all. Years ago, the pitch-person in a commercial for Fram oil filters used to say, “You can pay me now, or pay me later.” Invest in the help of an attorney or CPA to help you decide your business structure. A few hundred dollars of expert advice in the beginning can mean the prevention of thousands of dollars in tax and legal bills later on.

Keith E. Johnson, CPA, can be reached at 904-727-0077 or www.kjohnsoncpa.com.

When you live in Florida, it’s hard to forget hurricane season. From June 1 through November 30, the news media encourage citizens to prepare for the worst.

Personal preparedness is one thing, but how about your business? Can it survive the flooding and wind damage from even a Category 1 hurricane?

Advanced planning

Now—before the threat of a storm—is the time to compile a room-by-room list of your business equipment and assets, advises Ronnie Hicks, Esq., a tax attorney with Jacksonville-based Tax Defense Network, Inc. (www.taxdefensenetwork.com). “Doing this will help you prove the market value of damaged items to the IRS and for insurance purposes.”

• Take photos. An easy way to do this is to take photos or make a video of the contents of your business. (Store the photos with someone who is out of the geographical risk of the hurricane, or upload them to multiple servers, such as Flickr or YouTube, for security and protection.) Additionally, you should document the fair market value of your assets.

• Review insurance policies. Now is also the time to review your insurance policies for both wind and flood damage. (Most policies do not cover flood damage.) And, you might want to consider business-interruption insurance. This type of insurance covers operating expenses and compensates you for income lost after a temporary closure.

• Arrange for document storage. As you prepare in advance, make you sure protect your business records, including all tax, accounting, payroll, and production records, and customer data. Store paper records and backup tapes at an offsite location at least 100 miles away. Keep these documents in a fireproof safe deposit box.

• Use electronic backups. If your tax records, such as W-2s and tax returns, are not electronic, scan them and copy them to flash drives, CDs, or DVDs, recommends Hicks.

To safeguard electronic data, consider using a remote backup system, which works like regular tape backup, but files are stored on a remote server. “There are even free file storage Web sites to take advantage of,” says Hicks. “It’s a good idea to store your files on multiple secure servers (free and paid), since CDs can be damaged and servers can go down.”

Of course, make sure you back up your data regularly so that if you have to restore it, it will be current.

• Get employee contact information. Make sure you have every employee’s emergency contact information, including e-mail and cell phones.

• Develop a communication plan. Good communication is essential and should incorporate a variety of means. Meet with your employees and go over your emergency plans in detail. Make sure all employees know how and when they should expect to hear about work status, both before and following a storm. Consider issuing a wallet card detailing instructions on what to do in an emergency situation.

In a small company, you may want to appoint one person to call everyone if you decide to close your business because of a storm. In a larger company, develop a “telephone tree” in which several individuals are assigned a group of individuals to call others.

Other communication methods you might consider: periodic e-mails, a password-protected Web page, a call-in voice recording.

Don’t forget your customers and vendors in your communication planning. Customers and vendors distant from your location, in particular, may not be aware of a storm situation that affects your business and may affect them. Develop a plan to contact them if you will be out of operation.

• Assign tasks. The task list may include such things as turning off computers and removing all items from the floor. You may also want to put together teams of employees to help in the physical preparation of the building, such as boarding up windows. Keep in mind that some employees may have personal responsibilities with their homes and families. Ask for volunteers whenever possible.

• Prevent sewage backup. Backflow can be a problem in a flood. Consider working with a licensed plumber to install a backflow valve to prevent sewage backup.

If a storm is expected

When a storm approaches, take these action steps:

• Buildings. Even if you don’t own the building you do business in, take steps to protect your assets. Consider installing impact-resistant windows and door systems or plywood shutters.

• Signage, furniture, and decorations. If a storm is imminent, bringing these items inside will help you avoid loss and will protect property from flying object.

• Company vehicles. Put them in a garage or park them away from trees or other potential falling objects, if possible.

• Equipment. Place computers and important files on desk tops to protect them from seeping water.

• Generators. Power outages are common after hurricane. Depending upon the size of your company, consider investing in generators to provide power to run needed equipment.

• Internal shelter. In the event authorities warn to “shelter in place” because of a fast-approaching storm or a tornado, identify a safe place for employees to gather and wait the storm out.

SIDEBAR

Resources

A number of resources are available to small business owners to help you prepare for what some may call an “inevitable” weather event for northeast Floridians. One of the best resources is FloridaDisaster.org, www.floridadisaster.org/business, a Web site that “walks” you through developing a business disaster plan.

Other free resources on disaster planning are available to small business owners:

• Duval County Emergency Management, http://tiny.cc/jaxready. Among other items, you can find information on storm surge areas in Duval County.

• National Flood Insurance Program, www.floodsmart.gov. Information on flood insurance for your business.

• Institute for Business and Home Safety, www.ibhs.org. This Web site offers advice on preparing homes and businesses for hurricanes as well as other types of natural disasters.

• Federal ‘Ready’ Web site, www.ready.gov. This Web site details how to prepare for various types of disasters.

• Small Business Administration, www.sba.gov/disaster_recov/prepared/getready.html. This site provides information on how the SBA can help in the event of a disaster.

SIDEBAR

Don’t forget tax and accounting in your emergency plans

Ronnie Hicks, Esq.

asset you acquire, says Ronnie Hicks, with Tax Defense Network.

Include in your emergency kit the following documents:

• IRS Form 4506, Request for Copy of Tax Return

• IRS Form 4506-T, Request for Transcript of Tax Return

• IRS Publication 2194, Disaster Losses Kit for Individuals

• IRS Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook

No business—not even small businesses—can hope to compete in an uncertain economy without the enthusiastic engagement of every person on its payroll. The way to get that commitment and enthusiasm is to create “contented cows” by becoming an authentic leader—someone who genuinely cares about the people who get the work done, says Richard Hadden, co-founder of Contented Cow Partners and co-author of Contented Cows Give Better Milk, and Contented Cows Moove Faster.

Hadden, speaking to a group of business leaders at a recent meeting of Executive Advantage (www.theexecadvantage.com), a professional- and business-development group for Jacksonville-area CEOs, stressed that leaders who create organizations populated by “contented cows” will find their bottom lines blossom. As proof, he pointed to results of two studies he and his partner Bill Catlette did, in 1998 and 2008.

He and Catlette identified a number of high-performing companies, which they dubbed contented cows, and compared them to a number of good (at the time) but not extraordinary companies—common cows. They discovered the contented cows surpassed the common cows in a number of different ways: Growth (6:1), profits ($192 billion more), profits per employee (20:1), and market value added (MVA, also known as wealth creation), 17:1.

Richard Hadden

How did these companies accomplish so much? Hadden said they exhibited what he calls a contented cow strategy. They were determined to:

• Grow faster,

• Be more productive and profitable,

• Have lower turnover,

• Generate more jobs,

• Recruit more talented employees, and

• Create more wealth.

This strategy worked for the contented cows companies, and it can work for you, said Hadden. But to make it work, you need to have engaged, committed employees. “You can get a lot of people—especially in this economy—to go to work for you,” he said. “Work is contractual. But effort is personal—a conscious decision. That conscious decision makes the difference between being a contented cow and a common cow.”

What is a contented cow?

Contented cows—team members who are engaged in their work—are:

• Committed. They diligently and loyally work to achieve the business’ mission;

• Enabled. They are equipped with the tools and systems to do their jobs and use their talents;

• Cared About. Their leaders tell them the truth, whether it is good or bad; “feed their troops first;” say “thank you” for their efforts; and take a genuine interest in their personal and professional lives.

Contented cows don’t magically appear, said Hadden. They become the result of true leadership, which is characterized by honesty and integrity, compassion, decisiveness, flexibility, optimism, and authenticity. These characteristics, he said are also “oomph!” factors. “Oomph! Is reciprocal. If you give oomph!, you will get it back from your employees,” he said.

Oomph! will happen if:

• You care more than others think is wise;

• You risk more than others think is safe;

• You dream more than other think is practical; and

• You expect more than others think is possible.

Richard Hadden is co-founder, with Bill Catlette, of Contented Cow Partners (www.contentedcows.com), a Jacksonville-area firm that helps businesses become great places to work so they can make more money. Executive Advantage (www.theexecadvantage.com) is a professional- and business-development group for Jacksonville-area CEOs that provides a forum for growth through coordinated discussion and exposure to expert speakers.

SIDEBAR 1

Concrete tips on how to create contented cows

You don’t have to be a big company to have a contented cow workplace, says Richard Hadden. To create that workplace:

• Hire good leaders. (And develop your own leadership skills.) Don’t let bad leaders hide behind good numbers, said Hadden.

• Challenge people to speak out. Encourage your team to tell you something you are wrong about and then reward the most courageous and helpful response.

• Listen to your employees. Conduct surveys; feed the results back within 30 days; and act on the results.

• Hire for fit. You can teach a person how to do a job, but you cannot teach them to fit in. To hire for fit, identify the non-technical fit requirements for your company. Use behavioral interviewing to identify candidates that meet those requirements. Most of all, don’t compromise. Keep interviewing until you find people who match your needs. You won’t regret it.

• Define your business’ mission. And communicate it clearly. You will know if you have succeeded by asking employees, “What are our top three priorities?” If their answers are different from yours, you have more work to do on clarifying your mission and goals with your team.

• Give your team the right tools and equipment. They might be able to hammer a nail with a stapler, but they would do it better and faster if they had a hammer.

• Simplify your workplace. Get rid of a policy, procedure, system, or habit under your control that hampers the flawless execution of your mission.

• Show people how their work matters. Put them in contact with customers; let them see and experience other people’s jobs.

• Give more authority. Don’t be the sole decision-maker. Empower people to make decisions, and train them how to do it.

• Provide frequent informal feedback. Be specific and timely, and give feedback about the good work employees are doing as well as what they need to do better.

• Say ‘thank you.’ Saying it to a team member in person is nice. Sending a handwritten note is even better.

• Acknowledge special days. Send notes or cards on their birthdays and anniversaries.

• Spend time with each team member. Every day spend a few minutes with each person who helps make your company successful—that’s everyone!

• Improve your Oomph! Pick one leadership behavior you know affects the Oomph! of your team and resolve to improve it over the next 90 days. Make this an assignment for other managers in your company.

SIDEBAR 2

What is behavioral interviewing?

Behavioral interviewing is a method of screening job candidates. It asks about past behaviors as indicators of future success. In a behavioral interview, instead of asking general or hypothetical questions, the interviewer asks for specific examples.

The first step in conducting a behavioral interview is to identify the characteristics and behaviors you value in employees, such as teamwork, critical thinking, detail orientation, professionalism, and initiative. Once you identify the behaviors that are critical to the job and your business, you develop questions that probe into an applicant’s experience for evidence of the behaviors. 

Examples of behavioral interviewing questions include:

• “Tell me about an instance in which you had to deal with an angry customer.”

• “Give me an example of how you solved a problem affecting your work.”

• “Tell me about a time when you confronted your boss about something you were not in agreement.”

For more information on behavioral interview, go to these Web sites:

• The College at Brockportwww.brockport.edu/career/behave.htm

• Quintessential Careers, www.quintcareers.com/behavioral_interviewing.html

• About.com: Job Searching, http://jobsearch.about.com/cs/interviews/a/behavioral.htm

By Steve Goranson

What does it mean to earn a black belt in any of the various styles of martial arts? In addition to being a form of self-defense and exercise, a black belt a philosophy or a way of life.

I got involved in the martial arts at a very early age but didn’t receive my black belt in Tang Soo Do Karate until I was almost 30 years old. Getting it taught me how to survive the battles of business and life. It taught the importance of goal setting, focus, determination, and the use of systems. 

Each martial art has a series of belts or levels that student strive to reach before they can become a black belt. This systematized approach provides students a process to gain mastery over a particular level of skills before moving on to the next level. Pragmatically, the system demonstrates the importance of setting an end goal as well as identifying milestones along the way to keep you on track. 

My sensei (Karate instructor) taught me that at each level you reach before you become a black belt, you are just learning Karate. Once you become a black belt, you are now doing Karate.

This systematized approached can also be applied to business. You get your black belt in business when you are doing business instead of learning business.

Let’s look at the six belts of mastering business:

1. White belt. At this level, the emphasis is on basic business mastery over time, team, and money. It’s about getting the chaos out of your business, making payroll, and ensuring that your employees understand their roles and responsibilities in your organization.

This is when you learn to delegate tasks to your team, so that you can concentrate on developing advanced skills needed to obtain your business black belt.

2. Yellow belt. At the yellow-belt stage, you work on creating predictable cash flow in the business. You develop your niche and USP (unique selling proposition) so that you can start selling on value, not price.

3. Green belt. When you become a green belt, you create efficiencies in your business by developing systems that will run your business, so you don’t have to.

4. Blue belt. At this level you learn to hire the right team players, who will run the systems that run your business.

5. Red belt. When you achieve a red belt, your hard work comes together. You start to see the synergies of your systems and the team you develop. This is when you begin to groom the general manager who will replace you in your business.

6. Black belt. Now you’ve made it! You’ve created a commercially profitable enterprise that works without you. As a business black belt, you generate passive income from the business.  You can now take the skills and knowledge that you have learned and apply them to other businesses, or start investing your profits so that your money is making money. Or, you can start working on your exit strategy, because you have increased the value of your business to the point that it is attractive to others.

The journey doesn’t stop here. There are new goals and milestones as you reach for the higher levels of being a black belt.

Steve Goranson

Steve Goranson, MBA is a certified business coach who owns and operates the Jacksonville office for ActionCOACH, an international firm with more than 1,000 offices in 26 countries. To learn more about ActionCOACH and Steve Goranson go to www.JacksonvilleCOACH.com.

By Robyn A. Friedman 

Elizabeth Salem always wanted to be an entrepreneur, so in March she took the leap and opened A Sweet to Eat, a Jacksonville-based bakery and catering company. Although some people might question her decision to open in the middle of one of the worst recessions in history, Salem disagrees.

Elizabeth Salem

“Contrary to popular belief, this is a good time to open a business,” she said. “People are staying home, and they want small pleasures. They’re getting back to being with family, and part of that is eating good food and good sweets.”

Salem is not the only one starting a new business now. Experts say the recession is boosting entrepreneurial spirit and activity. Some people are launching new businesses out of necessity after losing their jobs. Others are relying on severance packages to bankroll their business dreams. There are also savvy entrepreneurs who realize that the recession—and resulting business closings—are creating niches they hope to fill.

A recent survey by Findlaw.com reveals that 61 percent of Americans have either started or thought about starting a small business. And one in four workers (25%) who have not found jobs are considering starting their own business, according to a CareerBuilder survey released in April.

Local groups that support entrepreneurs saw a spike in interest as the recession worsened. The Small Business Development Center (SBDC) at the University of North Florida, for example, conducted 26 start-up workshops in the

Janice Donaldson

first quarter of 2009, with 509 attendees. During the first quarter of 2008, the SBDC ran more events—35—but had only 361 attendees.

“The economy is a catalyst right now because it’s forced some people to make the leap,” said Janice Donaldson, regional director of the SBDC in Jacksonville. “The reason a person is an entrepreneur is because they have a willingness to take a risk.”

Even though experts agree that now is a good time to start a business, they also advise entrepreneurs to get back to basics and stick to the fundamentals of good business planning; after all, the margins for error are slimmer in a recession. Here are some tips for would-be entrepreneurs:

• Write a business plan. This should be one of the first steps any entrepreneur takes, but many businesses don’t have one. “A business plan is a road map for your business,” said Salem. “You may add or take away from that map, just like you turn left or right, but it’s still going to lead you where you need to be eventually.”

• Make sure you are properly capitalized. Financing is a stumbling block now, said Bob Adasiak, chairperson of the

Bob Adasiak

 Jacksonville chapter of SCORE, an organization of retired business people who voluntarily mentor others. “For start-ups, it’s almost impossible even with good credit,” he added. The recently-enacted American Recovery and Reinvestment Act of 2009 should help ease access to credit by small businesses but its effects will probably not be felt until at least the second quarter of this year. Pursuant to the Act, the Small Business Administration (SBA) has eliminated certain loan fees and raised guarantees on some 7(a) loans in the hope of getting the lending markets flowing again. That should help people like Salem, who would have liked to base her operations in a freestanding building but instead had to settle for renting a commercial kitchen. 

• Stick to an industry you know. Having experience in an industry can give you a leg up. That way, you don’t have to learn the basics of the industry but can hit the ground running.

• Follow your passion. “You have to love your business,” said Sandy Bartow, vice president of

Sandy Bartow

small business for the Jacksonville Regional Chamber of Commerce. “You don’t have to love your product or service, but you have to see a need in the marketplace, have a feasible business model and be determined to succeed.”

• Don’t be afraid to get help. There are many local providers of free or low-cost advice, referral

Jackie Perry

and counseling. “No matter what level or stage your business is, if you have an idea or are looking to grow to the next level, consider the business support, tools and resources that are out there for you,” said Jackie Perry, executive director of the Beaver Street Enterprise Center, a business incubator in Jacksonville. “You don’t have to do it alone.”

After losing her job in October 2008 and looking, unsuccessfully, for a new one, Jeanne Maron launched a new business—The Gifted Cork, a wine and gift shop in St. Augustine—in February. “Even in a recession, people are still drinking wine,” she said. “And by starting in a recession, I’m already at the bottom–I don’t have to climb out of anything. Things can only go up.”

Elizabeth Salem agrees. But she cautions prospective entrepreneurs to do their research and make sure they are willing to put in the hard work necessary–particularly in a recession. “Gather as much information as you can, and don’t be deterred by the small details,” she said. “Take a look at yourself, and ask yourself the hard questions. Starting a business is not for the faint of heart.”

Robyn a. Friedman is a contributing editor to the Jacksonville Advantage. She can be reached at RAFWriter@att.net.

 

Wilfredo J. Gonzalez

• Be creative. Look for opportunities in places you may not ordinarily consider. For example, the vast number of foreclosures occurring now is creating a need for businesses to clean up and maintain those properties. “For people who are innovative, the recession helps because they can come up with new ideas,” said Wilfredo J. Gonzalez, district director of the SBA’s North Florida District Office. “Maybe they lost their job or their salary was diminished, so the recession is causing them to bring their ideas to fruition.”

No one likes to do it, but sometimes—especially in economic downturns—it is necessary to let employees go. What are your legal obligations regarding the last paycheck?

In Florida, employers are not required to give terminated employees a final paycheck immediately. However, you are obligated by law to pay them by the time the next paycheck would be due. Florida state law does not require the payment of severance or vacation days since these are considered benefits. However, if your company has a policy concerning vacation time, you should include it in the final paycheck. (For more information on Florida labor laws, go to www.Floridajobs.org or call 800-342-3450.)

Severance pay is often granted to employees upon termination of employment. It is often based on length of employment for which an employee is eligible upon termination. The Fair Labor Standards Act does not obligate severance pay. Severance pay is a matter of agreement between an employer and an employee (or the employee’s representative) and is often outlined in an employee handbook.

If you decide to offer a severance package, many employers have the terminated employee sign a release, an agreement not to sue in exchange for receiving certain benefits. If the employee signing that release is an older worker, special rules apply. If the employee is 40 years of age or older, the Older Workers’ Benefits Protection Act dictates what must be included in a release. Among other things, you must give these employees a longer period of time to review the release, allow them to revoke the agreement for a limited time after they sign, and advise them in writing to consult with an attorney.

Source: Business.gov

Although you might assume the incentives for energy efficiency included in the newly passed American Recovery and Reinvestment Act of 2009 (Economic Stimulus) are only for consumers, many can benefit small businesses.  Because the “placed in service” dates vary, hold onto your receipts and energy rating stickers.

Some of the incentives include:

·         An extension of the commercial buildings tax deduction to the end of 2013;

·         Expanded tax credits for electric vehicle purchases ;

·         $50,000 maximum credit for businesses installing most clean refuleing systems, up from $30,000;

·         A new 30% investment tax credit for establishing, re-equipping, or expanding select energy technology…

·         A new tax credit for the purchase of small wind turbines (home, farm or business use) 

To take advantage of these incentive, consider projects that do not call for big investments, such as improving your facility’s current building shell (insulation, windows, etc), lighting, HVAC (Heating, Ventilating, and Air Conditioning) systems, refrigeration, and office appliances .

Start by estimating your savings potential through an energy-saving calculator. You can also get free, unbiased information and technical support through the ENERGYSTAR for small business program, where you can download or receive a no-cost hard copy of its small business guide —“Putting Energy into Profits.” Also, consider networking with other green businesses to get expert advice from engineers, architects, and other service providers.

After you have made some low-cost upgrades, consider looking for larger upgrade opportunities based on your industry.  Industry-specific resources for auto dealers, construction contractors, commercial food service (including grocery/convenience stores, restaurants, schools, and congregations, sports/entertainment centers), home-based businesses, lodging, retail, and small-to-medium sized manufacturers are available on Business.gov. Keep in mind, bigger energy savings will usually require a bigger investment.  

To finance these larger projects, small businesses have a number of resources available to them:

• SBA loan programs. The Small Business Administration (SBA) offers several loan programs that can help offset the cost of purchasing energy efficient equipment and facilities for your business.  One of the most common  is the 7(a) Loan Guaranty Program, which offers eligible small businesses a loan to either purchase ENERGY STAR and other energy-efficient equipment, or retrofit an existing facility to increase efficiency.   

• State and local aid. Florida has an energy efficient assistance for small businesses.  The Florida Energy Office (FEO) is the state’s primary center for energy policy and the place to initiate your research.

• Energy pools. The collective buying power of pooling businesses to group purchase energy efficient equipment can result in lower unit prices on volume orders.  ENERGY STAR offers a helpful guide to group purchasing.

• Loans and grants. Business.gov’s Loans and Grants search tool can help you locate the environmental financing that your business is eligible for.

Your business can continue to implement sustainable green business practices even after you’ve made significant upgrades.  Consider evaluating your business’ recycling/waste reduction practices, conservation of water, air pollution prevention, even your use of paper.   

Source: Business.gov

Free Green Resources for Small Businesses

• ENERGYSTAR Small Business Program

• Business.gov’s Green Business Guide  

• EPA Small Business Gateway

• Energysavers.gov

By Richard Hadden

A friend recently told me a story about Jim, a man in her company, which specializes in information technology. A reorganization resulted in Jim’s reassignment to a new group, where he reported to a manager he had known only by reputation— and it wasn’t a good one.

Judy, Jim’s new boss, manages by coercion, edicts, and political cunning. By all accounts, she has a remarkable disregard for other people’s time, interests, or needs, and doesn’t feel particularly bound by her own commitments. Athough she is not located in the same city as Jim, she keeps her tendrils tightly wrapped around all members of her remote and virtual team.

Until his reassignment, Jim had loved his work. But after five frustrating weeks spent largely on conference calls and “toting and fetching” bits of what he called “useless information” for Judy, he decided he had had it: He resigned—on the same day the U.S. Department of Labor (DOL) announced an unemployment rate of 8.5%, the highest in 26 years.

He had no job to go to, but, as he told my friend, “Life’s too short to work for a jerk.” And indeed it is.

In these times of unprecedented turbulence and uncertainty, some managers labor under the delusion that everyone who still has a job feels a sense of good fortune that can only be envied by the millions who don’t, and that this blessing will drive them to “put up with anything.”

Not so.

A study released in January of 2009 by staffing firm Robert Half International suggests that even in a lousy job market, the No. 1 catalyst that drives top talent to the competition is bosses who are even lousier than the job market.

When asked “Which of the following is most likely to cause good employees to quit their jobs?” the top answer, given by 35% of respondents, was “unhappiness with management.” That’s up from 23% in 2004.

Speaking of delusions, I know this article is not being read by the hard core, profligate jerks who are legends in their own mind, unless it has been forwarded to them through an anonymous gmail account. Genuine jerks either don’t recognize, or else greatly admire that quality in themselves.

What worries me, however, is that some managers who, in a misguided attempt to wring as much productivity as possible out of their ailing system, will do things that only make matters worse.

To make sure you are not one of those, ask yourself these questions:

1. Do you sometimes think your employees are lucky to have a job? Does a semblance of this thought occasionally cross your mind? “They’ll do what they’re told. They’re lucky to have a job. If they don’t like it, we’ve got 200 applications on file from people who’d give anything to work here. All that squishy leadership stuff is out — this is survival.”

If anything vaguely resembling these sentiments tries to creep into your psyche, get a grip! Banish those ideas before they gain a foothold. And, if you see it in someone you work closely with or care about, pull him aside for a little coaching.

2. Do you take people or their work for granted? Nothing destroys a relationship faster. And whether you like it or not, getting productivity from people is still about relationships, and a matter of choice — theirs, not yours.

As soon as you finish reading this, get up, go find someone who is doing good work, and tell her why you appreciate her. You don’t have to get all smarmy about it. Just do it.

3. Do you find yourself managing by fear? You know—threatening to fire if things aren’t done your way? Coercion doesn’t work. Never has, likely never will. Ditto for intimidation.

Oh, sure, you can make things happen through brute force and fear. But you don’t have enough energy or eyes in the back of your head to keep it going for long. Your colleagues, the ones who win performance through influence, trust, respect, and admiration, will outlast and outshine you.

4. Have you forgotten the concept of quid pro quo? Quid pro quo Literally means “this for that.” In other words, if an employee is willing to do something for you, you should be willing to do something for him. For example, the worker who arrives 10 minutes late is subject to scrutiny and reprimand. But when the same worker stays an hour past quitting time to participate in a conference call originating in another time zone, she has a right—if you are going to be fair about it—to expect a similar degree of scrutiny and, with it, at least a simple thank you.

5. Are you letting stress turn you into a jerk? Years ago, when I was a young, insufficiently experienced manager of software designers, I reacted badly to a pressure cooker atmosphere not unlike the one we find ourselves in today. In short, I became a jerk. My boss cared enough to sit me down and tell me so. Sure, it stung for a while, but he was the best boss I’ve ever had, and this was the best, repeat, the best, performance feedback I ever received.

Not everyone’s in a position to exercise their options and resign. But, jerks of the world, beware. Folks may not actually quit their jobs until things ease up out there, but if they stay, look at what they’re giving you. Is it really their best work?

Richard Hadden, partner in Contented Cows Partners (www.contentedcows.com), is co-author with Bill Catlette of Contented Cows Give Better Milk, and Contented Cows Moove Faster (R. Brent & Company). Based in Jacksonville, he is workplace expert who helps leaders worldwide create a more profitable business by becoming an employer of choice. He can be reached by e-mail Richard@contentedcows.com, by phone at 904-720-0870.

By Robyn A. Friedman

It’s tough out there. Everyone is feeling the effects of the recession, but small- and medium-sized businesses are facing growing challenges. The stock market has plummeted; consumer confidence has skidded, leading to fewer purchases of goods and services; real estate values have crashed; and the unemployment rate is skyrocketing.

It’s a virtual perfect storm of challenging economic data.

Some businesses are responding by laying off staff; others are cutting salaries and marketing budgets. And there are plenty of small businesses struggling to avoid going out of business.

So what’s a small business owner to do? Here are 10 tips to help you weather whatever comes next.

1. Revisit your business plan. If you have a business plan (you should, but unfortunately, many small businesses don’t), review it. It’s essential to tweak it and “reset” it to the current environment, updating business assumptions such as rates of return, inflation, taxes, marketing budget, etc.

And if you don’t have a business plan, prepare one. It will serve as a roadmap to help you navigate the treacherous waters of this recession.

2. Look for ways to reduce expenses. Review your budget, looking for ways to save cash, and reduce spending. For example, consider cutting back on the frequency of routine services, said J. Nelson Bradshaw, city president of BBVA Compass (www.compassbank.com) in Jacksonville, Fla. Often, cleaning services and other vendors can be cut back slightly—or business functions brought in house—without significantly affecting operations. Similarly, look for other opportunities to reduce costs, such as slashing debt service by refinancing at some of today’s historically low interest rates—or cutting out that over-the-top holiday party.

3. Watch receivables closely. Keep a close eye on your accounts receivable. You will probably notice that clients or customers—even good ones who used to pay promptly—are now delaying. But their delay affects your cash flow, and cash flow is the key to survival in a tough economy.

So, a tough collection policy—and sticking to it—is essential. “Consider strategies to get paid currently, such as increased communications with your customers’ accounts payable departments or placing some customers on credit holds if they don’t clean up their accounts,” said Thomas Comollo, a partner with B2B CFO www.b2bcfo.com in Ponte Vedra Beach, Fla. “Problems with receivables will not go away.”

4. Be tough on yourself. Comollo also suggests taking an objective look at why and how you’re operating your firm. Make sure your procedures and policies still work. “Everything has to be justified for today’s operating environment,” he said.

5. Concentrate on your core business. Although many experts recommend diversifying in a tough economy, Louise H. Anderson, CPA, a partner with Davis, Monk & Co. www.davismonk.com in St. Augustine, Fla., advises her clients to exercise caution. “Too often when business starts to deteriorate, people start to grasp at straws and look at other things, but they shouldn’t do that to the extent that they lose their core,” she said.

6. Build rapport with your professionals. “Stay in contact with your professional advisors, whether they are bankers, insurance people, CPAs or attorneys,” said Anderson. “Make sure they’re aware of what’s going on with your business. If trouble is looming on the horizon, it’s better to talk before than afterward.”

7. Be honest with your staff. Don’t be afraid to keep employees in the loop—or to ask them for help. Bradshaw, of BBVA Compass, suggests meeting with staff and advising them that costs need to be cut to avoid layoffs. Frequently, employees can recommend expenses that can be cut—especially when their jobs are on the line.

8. Assess employees for productivity. When a business is struggling to survive, every employee must be productive, especially those in sales. Eliminate those who aren’t contributing to the bottom line. Due to the rise in unemployment, today’s labor pool contains exceptional talent; these individuals can now be hired for reasonable salaries.

9. Expedite your succession plan. If you’re already planning to involve family in the business, consider doing so now. “There is an extraordinary opportunity at this time for small business owners to transfer business interests to their family members,” said Michael W. Fisher, a partner with Fisher Tousey Leas & Ball (www.fishertousey.com) in Jacksonville. “It’s a way of getting talented family members involved in your business with a plan that’s less expensive.”

Two advantages exist for transferring ownership interests now, he added. First, valuations are low due to the stock market decline. That lowers any estate or transfer taxes that may be due. Second, the Internal Revenue Code permits very low interest rates to be charged for business owners who want to provide intra-family financing. Those rates are at historic lows now due to the economy, Fisher said.

10. Position yourself to take advantage of the coming recovery. Many asset classes, such as real estate and stocks, are at depressed prices. That means that there are opportunities for those who have capital—or access to it—to pick up bargains.

Prepare yourself now by plowing cash into savings or lining up credit so you can act quickly when opportunities arise. In addition, keep marketing your products or services. Business owners frequently cut marketing budgets to save money. You can evaluate your marketing plan to make sure it yields a return, but don’t cut it entirely. By doing so, you’ll be eliminating the very thing that attracts new business.

Most important, small- and medium-sized business owners need to be nimble so they can better plan for and respond to changing conditions. With proper planning, business owners can survive nearly any challenge.

Robyn A. Friedman is an award-winning journalist with more than two decades of professional experience. Her publication credits include Business Week Online, Bankrate.com, The Real Deal, the Robb Report, the New York Post, Realtor.com, Florida Realtor, Florida Trend, CBS HealthWatch, CNNfn.com, and the Chicago Tribune. She can be reached through her Web site, www.everythingwrite.com, or by e-mail at RAFWriter@att.net.