Garfinkel Immigration Group
Featured In Issue: CLT.biz Insights – Spring 2017
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- Website: The digital first impression should be organized and professional.
- Phone: Formal phone manners make an impression before an arrival.
- Parking: Poorly marked parking areas or difficulty finding a space is arduous.
- External Cleanliness: Landscaping, cleanliness of sidewalks make an impression.
- Internal Cleanliness: Cleanliness of bathrooms, lobby and dining room say a lot.
- Greeting by Host/Hostess: A warm greeting can set the right tone.
- Time: Being seated, receiving the menu, ordering food and drink and receiving the food are details that greatly impact an experience.
- Interactions: Attitude of the server plays the largest role during the experience.
- Assess all customer points of contact utilizing the five senses: touch, taste, hearing, visual and smell. Evaluate each impression on five stars.
- Evaluate employees and their ability to deliver amazing service.
- Inquire how your customers feel about the experience using surveys, or just ask!
- Be adaptable to make necessary changes to achieve five-star outcomes.
- Consistently deliver a great experience each day.
AdTrap et al.: Holy Grail of the Internet or Death Knell of Free Content
In this age of technology disruption, a fierce battle is brewing over Internet advertising and ad blocking that may transform the Internet and marketing into yet another iteration.
Ad filtering has existed for a number of years, initially introduced in protection software from companies such as McAfee and Symantec. Ad blocking, or the use of tools (software or hardware) to automatically remove most forms of advertising from Web pages—banner ads, text ads, sponsored links, sponsored stories, pop-ups and even video pre-roll ads on Facebook and YouTube—is a somewhat more recent phenomenon, rapidly gaining popularity.
To users, the benefits of ad blocking include quicker loading and cleaner looking Web pages free from advertisements, lower resource waste (bandwidth, CPU, memory, etc.), and privacy benefits gained through the exclusion of the tracking and profiling systems of ad delivery platforms. Blocking ads can also save minimal amounts of energy. Users who pay for total transferred bandwidth (pay-for-usage connections), including most mobile users, also benefit financially from blocking ads before they are loaded.
For advertisers, the ability to automatically render paid placements invisible without so much as an acknowledgement of being seen (no analytics generated), renders ineffective the principal benefit of digital advertising in the first place, arguably gutting its continuing popularity.
For businesses, online advertisements can be an important source of revenue. For online businesses, ad blocking directly damages the business model they depend upon for revenue, including popular ones like Facebook and Twitter. In some cases, it can even threaten their continued existence, and thus the cry that ad blocking may be the death knell to the otherwise free content available. Rather than let ad-free surfers use valuable resources without indirectly “paying” in the form of viewing ads, a few publishers have gone so far as to reject ad blocking visitors, but that has not been a satisfactory solution.
If widely embraced, ad blocking might actually have some unintended consequences for Web surfers. By rejecting anything that is easily identified as an advertisement, ad blocking software actually encourages more aggressive forms of generating revenue. If legitimate advertising is eliminated, content sites will feel the pressure to sacrifice editorial integrity by using artfully constructed advertorials, charge subscription fees for content…or be forced out of business.
Ad Blocking Tools
Ad blocking can be accomplished in a number of different ways. The most common method, browser integration, enables users to block ads by installing an appropriate Web browser extension. Extensions exist for all major Web browsers—Firefox, Chrome, Safari, Opera, Bing, Internet Explorer, etc., as well as Android and iOS—and are free, fast, and easy to install.
The most popular extensions are AdBlock and Adblock Plus (unrelated). AdBlock claims 80 million total downloads and 20 million regular users per week. Adblock Plus is the most downloaded browser extension—its downloads on Firefox alone grew from 100 million in 2011 to 200 million as of April 2013, a compound yearly growth rate of approximately 35 percent.
Both AdBlock and Adblock Plus, as well as most other ad-eradicating extensions, block ads automatically, but enable the user to allow ads by whitelisting designated pages or domains—like Google search results pages.
In an ironic twist, AdBlock has begun a crowdfunding campaign to raise money to fund online ads to tell people how to block online ads with their AdBlock tool! After just one month, AdBlock had already surpassed its goal of $50,000 at the beginning of September, which it indicated was enough to enable it to not only post online ads but also get space on a Times Square billboard.
CNN Tech touted it as “The device that could change the Internet,” saying that the invention is either “a step forward for the Internet—or a death knell for free content.”
They were referring to Chad Russell and Charles Butkus’ invention called the AdTrap, which intercepts online advertisements before they reach any devices that access your Internet connection, allowing you to surf the Web—even stream videos—without ads.
Russell says his inspiration for the contraption came during a conversation about the early days of the Internet, which he describes as “just page, text and pictures—and that’s it.” Using the slogan, “The Internet is yours again,” Russell and Butkus wanted to recreate the Web-browsing experience with zero ads.
As opposed to ad blocking Web browser extensions, AdTrap is a piece of hardware created for the purpose of blocking ads across all devices, all platforms, and all browsers. So, rather than being limited to the particular device (desktop, laptop, tablet, phone) or specific browser, AdTrap, by comparison, works across every device connected to your network, including those across WiFi.
Russell and Butkus started AdTrap as a Kickstarter crowdfunding campaign early this year, generating interest and enthusiasm for the product idea and soliciting funds for its production.
In the course of 30 days, the AdTrap Kickstarter campaign garnered in excess of $210,000, more than the $150,000 they were asking for. Production began over the summer and devices started shipping out in August.
AdTrap is a white rectangular box that is lightweight and about the size of a wireless router and sits between your modem and router. It currently sells for $139 at www.getadtrap.com and more than 10,000 units have been sold.
It takes only a few minutes to set up (you can watch on video) and works on most sites including YouTube, and Russell says “blocks about 98 percent of online ads.” (There are a couple of sites that they are working on solutions for, but that will be an ongoing project.)
AdTrap can be easily configured from a Web browser. Like online ad-cleansing tools, it also allows users to whitelist pages and domains where they still want to allow ads to be seen.
Says Russell says of his success, “I think it speaks to the mindset of people right now of their experience on the Internet…At some point, it’s gotten a bit much.”
Ad Blocking Going Mainstream
PageFair, a service that allows website owners to measure how many of their visitors block ads, issued a recent report on how ad blocking is threatening the business model of online publishers. Their data shows that ad blocking is being rapidly adopted by consumers, and in fact, becoming “mainstream.”
Based on measurements taken from hundreds of websites, they show that up to 30 percent of Web visitors are blocking ads, and that the number of ad blocking users is growing at an astonishing 43 percent per year, which if it were to continue unabated, would reach 100 percent by 2018. They estimate that a typical client with a 25 percent block rate loses about $500,000 a year due to ad blockers. They acknowledge, “The scale of revenue loss can be fatal.”
Not surprisingly, websites where ads are most often blocked tend to cater to the technologically savvy: Gaming sites had their ads blocked by one of every three visitors, technology sites by one of every four. For travel websites, by contrast, the figure was only five percent.
There’s a similar variation depending on which browsers people are using. Mozilla Firefox, a favorite of techies, heads up the list; over 35 percent of those who use it have installed an ad blocker. Google’s Chrome browser is not very far behind with over 30 percent. By contrast, only one percent of Internet Explorer users block ads.
The demand for ad blocking technology continues to increase. With AdTrap able to block ads on all Internet-enabled devices at one time, that may up the ante.
AdTrap founders Russell and Butkus have already engaged legal counsel in case advertisers get feisty. YouTube and Facebook, for example, depend on advertisements to generate the bulk of their revenue and could stand to lose billions of dollars and even shut down if they don’t adapt quickly.
Good or bad, this product could have massive implications for the near future of the Internet. We will see if ad-based businesses will be able to sustain themselves or if the news sites and small-time bloggers likewise sustain themselves without advertisements for income. Who knows, maybe AdTrap will single-handedly bring back balance to the Internet and create a Web 3.0!
For more information: www.getadtrap.com, www.getadblock.com, www.adblockplus.org, www.pagefair.com.
Carolinas HealthCare System, which cares for more than 100,000 people with diabetes, is leveraging its expertise and extensive database to develop innovative ways of managing and preventing the widespread chronic condition beyond the doctor’s office.
The medical costs for a person with diabetes are 2.3 times higher than for those without the illness, and a 2012 study estimated that diabetes costs the U.S. economy another $69 billion in lost productivity. A person with diabetes is more likely to be unemployed and those with jobs miss two or three more days a year on average than a worker without the condition. Engaging individuals at the community and employee levels can help detect precursors for disease and disrupt unhealthy routines that lead to chronic illness.
Clinicians can identify who is at risk for diabetes, including those with prediabetes, and interventions, such as weight loss, nutrition and exercise, can prevent the onset of type 2 diabetes. Much of the vital education and intervention can happen at the workplace.
“We recognize of course that most people spend much of their time at their place of employment,” says Dr. Charles Rich, medical director for Corporate Health and Wellness at Carolinas HealthCare System and a practicing internist for 30 years who has worked extensively with diabetics.
“That environment, that location, the culture there and the employer’s understanding and commitment to helping people understand issues important to their health is very important to improving the health of the community.”
Almost 26 million adults and children—8.3 percent of the U.S. population—have been diagnosed with diabetes, and almost 2 million cases are added each year. An estimated 7 million are undiagnosed, and 79 million live with prediabetes.
“The importance of this disease to the health of our population, the health and wellness of the people we love and work with, is colossal,” Rich says. “It’s something that needs focused attention. It’s one of our major cost drivers. It’s a major cause of human suffering.”
With its diabetic population base one of the largest in the country, Carolinas HealthCare System is positioned to find new solutions, he says.
“We are laser-focused on this disease,” Rich says. “What can we do to impact this disease for our individual patients and for the population in general? Very importantly, we’ve created and maintain a very robust registry of our diabetics over a number of years. We have the metrics, we have the information on the population we serve.
“All of our clinicians provide very detailed information about their population and how they’re performing and how the system is performing around important measures to control that disease. It’s a very data-rich environment. We understand who we’re caring for.”
Big Data Yields Personal Solutions
Dr. Michael Dulin, chief clinical officer for analytics and outcomes research for Carolinas HealthCare System and a family medicine physician, says data analytics work can leverage information to improve outcomes for patients with chronic diseases such as diabetes.
“I think it really is the foundation for us transforming the health care delivery system so we can improve the outcomes of patients, specifically patients with chronic diseases,” he says, adding that the doctor’s visit is just part of the solution. “Health care is influenced by much broader contexts of the patient experience—home, work, community.
“Big Data allows us to think about all those different factors that impact a patient’s health. Are they getting exercise? Are they eating the right foods? Do they have access to resources?”
The data is so extensive that proactive interventions can be tailored to an individual. For example, it can reveal that a particular individual with prediabetes who lives near a greenway could join a local walking club in order to get more exercise.
Diabetes is unevenly distributed. Compared to non-Hispanic whites, the risk of diagnosed diabetes is 1.2 times higher among Asian Americans, 1.7 times higher among Hispanics, and 1.8 times higher among non-Hispanic blacks.
“Understanding individual risk and scores, having access to medical care, and taking small steps toward healthier living can mitigate the progress of diabetes,” Rich says.
Keeping Business Healthy
Carolinas HealthCare System has long focused on the workplace as an opportunity to boost wellness understanding and practice.
“We engage with many employers and have for decades,” Rich says. “We have a variety of services we can provide to them—including population assessment, current health assessment, identification of people at risk, and worksite-based consulting and programs. We work with them on establishing logical and good incentive programs to help motivate their employees to understand and seek appropriate attention for their disease.”
Employers’ interest, driven by rising health care costs, has accelerated in recent years. Today, 1 in 10 health care dollars is spent treating diabetes and its complications; 1 in 5 health care dollars is spent caring for people with diabetes.
“Employers are at different stages of understanding this, just like patients,” Rich says. “We’re there to help work with employers in any way. Many of these employers are very interested and committed to help provide financing for the health care of their employees. My perception is there’s more of a genuine than a simple bottom line motivation to have a healthy workforce.
“I think employers are smarter. It’s a more competitive world. Part of that is taking care of your employees and having a healthier workforce. If you take good care of your folks, you have engagement and commitment. Self-insured employers especially have a commitment to employees’ good health.”
Carolinas HealthCare System has its own workplace health initiative—LiveWELL—where physicians and other employees practice what they preach.
“We’re really trying to change our culture inside the health care system so we can be examples to our patients,” says Dulin, who has seen meeting snacks shift from cookies and candy to apples and popcorn. I feel like it’s been a very successful program to engage with people in the workplace to change behaviors.”
In the past few months, Carolinas HealthCare System has developed its ability to partner with employers and conduct data analysis to help improve the health of employees and hold costs down. Simple online surveys or data mining can identify at-risk people based on such factors as body mass index, glucose levels and family history.
“There’s an understanding that there’s a need out there. I think employers are looking for a different approach. I think it’s pretty cool to think about partnering directly between a health care provider and an employer,” says Dulin.
Solutions, for example, could include embedding a mid-level health care provider at the worksite so employees can be seen without scheduling an appointment and going to a doctor’s office.
“It’s about using the data to tailor the interventions so they are applicable to that individual,” Dulin says. “We actually have done it in the research area as a result of some pilot studies,” says Dulin, referring to a neighborhood exercise group that started more than two years ago is still operating.
“I think it’s those kinds of things we need to launch on a broader scale. We’ve done the piloting. We’ve started to think about it. All the foundational work is in place and the pilots have been going on for over a year and a half.”
Carolinas HealthCare System has already conducted a large predictive analytics project with asthma sufferers and plans to conduct a similar study for people with diabetes.
“Diabetes is our emphasis for 2014,” Dulin says. “I think it’s a very exciting time. I think we’re just at the beginning of the next wave of looking at how we deliver health care across the community. We’ve made investments, and we’re now launching the next wave on top of those investments. I would imagine 2014 is going to be a pretty exciting year for us.”
“We’re mission-driven,” Rich says. “That’s why we’re so keenly interested in helping employers. We realize at the end of the day that we’re about the health of our community, the population we serve, and the employer space is so vital.”
Managed IT for Business Today
Over the past several years, we’ve watched smart companies survive—and thrive—by learning to manage resources more effectively. Successful technology management, in particular, has undergone a sea change due not only to the uncertain economy, but also to changes in the technologies themselves.
Prior to the recession, most growing companies invested in an internal IT department to manage and maintain infrastructure, to install new equipment, and to provide day-to-day technical support. This structure provided the benefit of on-site IT staff to address concerns as they arise—especially important in an environment in which physical interaction with equipment was a daily necessity.
However, thanks to remote monitoring technology, physical management of IT equipment is now unnecessary on a daily basis. Today, in fact, the benefits of internal IT often are outweighed by the costs:
· High staff overhead that does not easily flex with the business
· Limited skill sets—the company gets only what the existing staff brings to the table, with little room for growth and change as the technology environment changes
· Potentially low productivity,
o Staff is available only during regular business hours, so if a problem occurs overnight, the entire business team must wait for the IT team to resolve the issue
o Because the IT team spends their time in the weeds, there is little time to look for new developments and see better ways to support productivity
· Staffing shortages during employee vacations
· Knowledge transfer gaps when adding to or losing personnel
Essentially, the old structure leaves the traditional IT guy stranded on a desert island, disconnected from the wider world of best IT practices, and unable to leverage his strongest skills and talents to best support the organization.
Fortunately, current technology has sped the rise of a model of IT support that solves all of these problems: Managed IT. The outsourced, managed IT model provides all the services of an old-fashioned IT department, plus many additional benefits—without the overhead and headaches. A good managed IT company can complement current IT staff, freeing them to focus on their strengths and talents—or, when appropriate, manage the entire IT infrastructure.
The model works so well in part because remote monitoring enables fast and effective troubleshooting, diagnosis, and often problem resolution, without ever stepping foot on site. Complex problems requiring on-site presence can be addressed by specialized staff deployed to match the specific concern. In this newer model, businesses gain access to the proactive services and expertise of an entire team of IT experts at any time of day or night.
Of course, not all managed IT companies are created equal. To outsource effectively, companies should look for a managed IT program that offers these benefits:
· Cost Containment. A flat fee based on a careful assessment of the client’s needs.
· Flexibility. Multiple service levels, permitting investment in company growth simultaneous with cash flow preservation.
· Team of Experts. Focused expertise across multiple platforms and technologies.
· Modern Tools and Advanced Security. All the latest security and productivity tools.
· 24/7 Support. Monitoring and help desk available at any time, meaning IT crews identify and address problems immediately, no matter when they occur.
· Advanced Security. Staying ahead of the latest security threats.
· Technology Leadership. Proactive guidance in the best current tools for the client’s business, often acting as a CTO, always acting as a true partner to the business owners.
A well-managed move to a primarily outsourced IT model saves companies approximately 30 percent on technology costs over the long term—a percentage independently verified by a recent Berkeley study of the credit union industry. With so much to gain, few companies can afford to ignore the growing trend toward managed IT.
In last month’s article, we discussed what succession planning really is. Succession planning is a process that all business owners will ultimately have to deal with. There is no if in the need for succession planning because one thing is sure—you as an owner will one day leave your business in one way or another—whether through retirement, disability or death. There is only when and how you should plan for these eventualities.
A succession plan is the specific planning which must take place in order to insure the survival and continuing success of the business after the departure of the owner—whether through the owner’s retirement, disability, death or after the sale of the company.
Succession planning involves planning for the transition of ownership, management, and control of the business from one generation of people to the next, as well as the particular terms and conditions under which the current owner(s) will leave the business.
The average life expectancy of a privately held business is only 24 years. On average, only 33 percent of businesses survive their founder(s). Only 12 percent of businesses survive the second generation of owner(s). Only 3 percent survive the third generation of owner(s).
In our experience, very few businesses really have a succession plan which sufficiently addresses all conditions under which the owner(s) leaves the business, i.e., retirement, disability, death or upon sale of the company. If you just look at owners of very successful businesses, only about 36 percent of these businesses have a succession plan. Approximately 53 percent of these owners have considered a succession plan, but have not implemented any plan. The remaining 11 percent have never even thought about succession planning.
Assume you are an owner of a successful privately owned company without a succession plan. What are the prerequisites for a successful succession plan?
First and foremost, you must have enough time between the development of your plan and your eventual exit as an owner in order to make mistakes. The biggest mistakes that owners make are lack of planning and picking the wrong management successors.
The only way to overcome these mistakes is to leave enough time in the process to correct them. Ideally, a business owner would begin implementing a succession plan at least 10 years prior to the owner’s expected exit. However, when your planning window is less than five years, the odds of implementing a successful succession plan diminish greatly.
Second, the business must be profitable and successful. Some businesses cannot be transferred to the next generation (or sold to anyone else). They simply do not deserve to live.
The third prerequisite is a qualified team of advisors. No one person knows all the answers. Not you. Not your lawyer. Not your CPA. Not your insurance and investment agent. Succession planning is best done with the right team of advisors who have the right expertise.
Fourth, you need a facilitator who is trained and knowledgeable about not only the succession planning process, but also about methods of building consensus between all the parties and stakeholders who need to “buy in” to whatever plan is developed.
Fifth, you need a good process. One that goes beyond your lawyer saying, “Well, here is the form of a buy-sell agreement that a lot of people use and also, you need to contact your insurance agent so you can get a life insurance policy for the buy-sell agreement.” That is not a process.
Finally, there are certain truths that must be embraced before embarking on the succession planning process. These include:
a. There is usually no one answer to the issues that will arise. The answer depends on many factors, including the goals and personalities of the owner and other key people involved in the business. There is, however, usually an optimum solution and succession plan for each particular business and owner.
b. It does not matter what actually is “fair” in the owner’s mind—just what is perceived to be “fair” by the owners and other stakeholders, and
c. The degree of consensus on a final plan is directly related to the perceived amount of input and meaningful participation by all necessary stakeholders.
Consensus on a succession plan is best obtained when there is an atmosphere that permits sharing of information (especially financial data) and a clear willingness to seek and give input before major decisions are made.
In next month’s article, we will discuss the particulars of a good succession planning process.
Good advertising is not the same as good marketing.
Advertising is one piece of a marketing strategy. Effective marketing converts a customer into a loyalist. Establishing a connection and delivering an experience are the necessary elements for the customer-to-loyalist conversion to occur. This is internal marketing.
Internal Marketing: Creating an Experience
Internal marketing is in the details. It’s the essence of a business. As the French would say, it is the ‘Je ne sais quoi.’ These details showcase the intangible of caring without having to say, “We care.”
Creating an experience is as important as the end product or service and is what matters when recruiting loyalists to unknowingly join your company’s marketing team by telling the world through sites like Facebook, Twitter, Yelp, TripAdvisor and Google Reviews about their love (or disdain) of your enterprise.
Examining customer touch points is where the development of internal marketing begins. The goal is to deliver a five-star experience for each customer interaction. Using a restaurant as an example, note the numerous points of contact before a meal is ever served.
If asked to be a secret shopper, what merits a five-star review? If the food is impeccable, but all touch points mediocre, five stars is unlikely. What motivates an individual to make the effort to post via social media? The answer is simple, sell an experience versus a product or service. In the list above, the individual details don’t appear to hold great importance, but the combination of each affects the experience. The fine points do matter.
Similar to a Broadway production, business operators must pay close attention to the minutiae. Before the curtain ascends, hours of preparation is focused on how the audience will judge the show. Beyond the playhouse being clean, the lighting must be correct, audio fine-tuned, actors well-rehearsed and support staff from the ushers to the concession attendants, well-trained. When the curtain rises, the show will not stop until the last note is sung and final bow is made. Thereafter, the process is repeated meticulously. The success of the show will be heavily influenced by the critics in the audience who publish reviews of praise or disappointment. So it is with organizations. When the doors open each day, we are judged not just by our product or service, but also on how we make customers feel.
Each customer possessing a smartphone has the capability to reach hundreds or thousands of people within minutes. Leveraging customers to be advocates will yield a higher return on investment than any form of advertising.
5 Steps to Improve Internal Marketing
Generating traffic via advertising is one segment of a marketing blueprint. Retaining and converting customers into devotees is more comprehensive. An unyielding attention to the fine points activates word-of-mouth marketing and separates a business from its competition.
Word-of-mouth is more influential than any form of advertising and cannot be purchased from an ad agency. It is created internally at a nominal price and can be achieved by any business owner interested in creating an experience while simultaneously selling a product or service.
Do you really have a succession plan for your business? If you left work today and for one reason or another (retirement, disability or death) never returned to your company, what would happen? Does everyone know who would be in charge and who would make the decisions? Does everyone know who would manage and lead the company? Has a leader been selected and trained?
Who would own the stock of the company upon your death? Would it be your wife, or your children, or a trust for the benefit of your children? Is this what you want? What does your will say?
Do you have any shareholder’s agreements or other documents that place the ownership, management, and control of the company in the hands of the people who you would want to manage and control the company in your absence? Who would deal with the major customers you have always kept as “house accounts” and that you have the closest relationships with?
How about your star salesman who accounts for one third of the revenues of your business? Would he now join the competitor who had earlier offered him an ownership opportunity? Would you keep all of your key employees? Who would deal with the bank?
If you left work today and for whatever reason (retirement, disability or death) never returned to your company, would your company not only survive your departure but also thrive after you were gone? Is there “anything” that you need to do to be absolutely certain that it would thrive without you?
If you are honest with yourself, you will probably acknowledge that there are some things that need to be addressed before that happened. But you say, “Well, I hear you, but that type of thing would hardly ever happen and if I did die or become disabled and never returned to my company, I have plenty of life insurance and disability insurance which would protect my family.”
I hear you…but what if, instead of dying or becoming permanently disabled, you wait until you are ready to retire before addressing these issues? Will you be able to retire when you want to and, if so, will you have the necessary financial resources to live the way you want to live in your retirement? Or will you have to work until you die because you have not planned for your own succession so that your company can thrive without you?
What we are talking about is succession planning. What is succession planning? It is part of your strategic business plan. It’s a plan for how the business survives separation from the owner or founder—whether because of retirement, disability or death. It involves planning for the continuation of your business after you leave.
Three things have to be planned for: 1) the transition of ownership; 2) the transition of management and control of your business; and 3) the particular terms and conditions of your “exit” from the business.
Succession planning is a process that all owners of privately owned businesses will ultimately have to deal with. There is no “if” in succession planning. There is only “when” and “how.” When and how will you deal with or have you dealt with your succession plan? Again, this process not only involves planning how your business will survive you, but it also involves how your business can thrive with or without you.
Succession planning is one of the greatest unmet needs of business owners. According to a U.S. Trust survey, 50 percent of closely held business owners would like to transfer their businesses to “insiders” (family members or key employees), but only about 16 percent are able to do so. The others end up selling to “outsiders,” or liquidating their business for the value of its assets less its liabilities—usually a nominal amount.
Why is that? Why can’t more business owners accomplish their objectives? In most cases, it is simply because of poor planning (or no planning) and the failure to identify and prepare true successors who are ready, willing and able to take over. In fact, statistics show only one third of the “most successful” businesses have succession plans which address all of the issues set forth above.
In next month’s article, we will address some of the prerequisites for a successful succession plan and begin to discuss the particulars of a succession planning process for business owners.
Recently, I had lunch with several small business owners and executives, and the topic of discussion quickly focused on hiring new employees and partnering opportunities within the community. Some questions around the table included:
„To what level do you conduct a background check on key people?
„Are there better ways to verify a candidate’s credentials?
„How did Joe do at Company XYZ?
„Do you hire an outside recruiter to prescreen candidates?
„Is anyone using a search engine or exploring social media to look at a candidate’s history?
„What do you know about Company ABC?
As part of our own services, we develop technologies for collecting surveillance and intelligence information for the military, so I became intrigued with the mining of public information and databases to support decisions related to recruiting key personnel and entering into business partnerships. I wanted to assess recent improvements in commercial search engine technology, the ability to rapidly aggregate disparate data, and the amount of historic information that has been made available via the Internet, so I decided to investigate myself as a prospective employee and assess my “digital exhaust.”
I did a quick search on Google and Bing and looked at the most recent news articles. I then checked the LinkedIn postings to see who was making professional recommendations and reviewed postings from business associates. Then, I decided to look into public records using Intelius and was impressed with the level of detail available about my multiple residences, tax payments in those localities, construction permits, and other information mined from public records over the past 25 years.
Taking it to the next level, I ran some searches using proprietary tools and was quickly able to map my usage of multiple Internet devices and appliances such as mobile and VoIP phones, email servers, and cloud-based peripherals. Turning to social media sites, I looked for postings that referenced me or my business.
During this walk down the digital yellow brick road, I discovered professional papers I had written more than 20 years ago that had been archived in a government information center, as well as statements that I had made to various publications over the years that are now accessible via the Internet. I even found some technical reports that I had written in the 1980s that have been digitized and made searchable by the Federation of American Scientists.
In the 27 years of my professional life, I have created a modest digital exhaust. That digital exhaust has increased substantially with the digitization of photos, videos, transcripts, and professional publications, and the storage of that indexed information on the cloud.
As an employer and business owner, evaluating the digital exhaust of a prospective employee or business partner is invaluable. Within an hour, I was able to construct a comprehensive profile of a person or entity to include: validating statements made on a resume or application, identifying the history of any legal and financial matters, assessing professional performance over time, and developing a general character profile.
Analogous to the greenhouse effect, it became apparent that the digital exhaust of a person or company does not dissipate with time—it’s trapped forever in the peripherals connected to the Internet. I cannot help but wonder about the many college students who will post photos, comments and other digital media to a website, blog or social media site that will be accessible to the public for the remainder of their professional careers.
As a business professional, it is imperative that we recognize our own generation of digital exhaust and the accessibility, and potential use, of that information by others.
No matter the legal form of your business, the IRS may challenge your assertion that you are engaged in a business rather than a hobby. There is a significant difference in how the tax code treats hobby income and expenses versus business income and expenses. The IRS estimates that incorrect deductions of hobby expenses account for an estimated $30 billion per year in unpaid taxes due to overstated adjustments, deductions, exemptions and credits. If you tell the IRS you are engaged in a business you had better be able to “walk the walk” and prove it.
Generally, an activity qualifies as a business if it has a profit motive. If not, the activity is subject to the hobby loss rules which state that deductible expenses are limited to the amount of income generated. Further, the expenses must exceed two percent of adjusted gross income before providing any tax benefit. Losses are unable to offset a taxpayer’s other income and a portion of a hobby income may be subject to tax.
The IRS and the courts have provided the following factors to be considered in determining a profit motive.
Do you have a business plan? Business plans provide directions to the business owner, investors, bankers and the IRS. You should have a plan that projects an overall profit and reasonably predicts when you expect this profit to occur.
How do you run your business? Your activity should be conducted in a business-like manner. Your business should maintain a separate bank account, keep a separate set of books, and act like similar profitable businesses. You should have a yearly income statement and balance sheet, advertise your business, and have business cards and stationery. If you conduct your business like other successful people in the same industry you have a strong argument.
Do you have expertise in the field? A business operator should have extensive knowledge of his or her chosen profession or activity. This can be demonstrated by seeking advice from experts in your area and studying accepted business methods. Prior business experience with a similar product or service can also make a difference to the IRS.
Do you expend substantial time and effort? Devoting time to your business indicates intention to make a profit. Even if you have another job, using your free time to pursue this activity indicates an honest intention on making a profit. Document your time spent in order to better support your for-profit intent.
Have you changed your operating methods to improve profitability? If you have incurred losses in the past, documenting your efforts to improve profitability would lend credence to your assertion of a for-profit business motivation.
Will your business assets appreciate? If you expect assets used in your activity—such as land—to appreciate in value, IRS regulations say that appreciation may be used in lieu of current profits to indicate a profit motive for the business.
What is your past record in business? Even when your present business is unprofitable, if you have been able to convert other businesses in the past from unprofitable to profitable, this would be considered a factor in determining your profit motivation in your current business.
What is your history of income or losses? Losses in your business alone are not indicative that you are really engaged in a hobby. However, a long series of losses may draw the attention of the IRS, whereas sustained earnings indicate a business run for profit.
What are your relative profits and losses? According to the IRS, “The amount of profits in relation to the amount of losses incurred, and the relation to the amount of taxpayer’s investment and the value of the assets used in the activity, may provide useful criteria in determining the taxpayer’s intent.” However, the presumed profit motive in the IRS Regulations states that if an activity has a net income for three or more of the last five years then the activity is generally presumed to be for-profit.
What are your other sources of income? The IRS considers whether you have other sources of income. Having other income sources does not necessarily preclude your activity from being considered profit-motivated. The amount of time and effort you expend on your business may determine whether or not the business is considered to be operated for-profit.
Do you have recreation or “personal motives” for the activity? Activities that have recreational appeal and sustained continued losses may be more difficult to establish as for-profit activities rather than hobbies. For example, if you are serving as a guide for tour groups, it could be construed that you are using the activity to cover the cost of your travel expenses. On the contrary, if you are providing janitorial services such as scrubbing bathrooms and mopping floors, there is very little recreational appeal.
Using the guidelines above can help strengthen your case with the IRS for running a profit-motivated business rather than being engaged in a hobby.
Famous last words… Since the enactment of the Immigration Reform and Control Act in 1986 (IRCA), federal and state governments have become increasingly determined to shift the burden of immigration law enforcement to U.S. employers. State legislatures, concerned that the federal government is not doing enough to enforce current law, are now enacting their own pieces of immigration law, making it a challenge for employers to do business in multiple states and apply corporate policies evenly. This shift has resulted in a minefield, one that even the most diligent and well-intentioned employer has difficulty navigating unscathed.
Following the tragic events of 9/11, Congress passed The Homeland Security Act of 2002 to address perceived deficiencies in our immigration law, and creatie the Department of Homeland Security (DHS). Two of DHS’s agencies, U.S. Citizenship and Immigration Services (USCIS) and U.S. Immigration and Customs Enforcement (ICE), are now tasked with ensuring that U.S. employers are IRCA-compliant.
USCIS is responsible for immigration benefits, for Form I-9 Employment Eligibility Verification (Form I-9) and for the federal e-Verify employment eligibility verification program. ICE is tasked with penalizing violators. Too often, the two agencies interpret provisions of the law differently, with employers forced to rely on a maze of unofficial policy guidance as to how best to comply.
For example, an employee in H-1B status may begin working for a new employer upon the filing of a petition with USCIS; however, it is not clear how to reflect such authorization to work on the Form I-9 absent an approval from USCIS. In the case of an ICE investigation, questions may arise as to whether the individual is indeed authorized to work for the new employer.
The stark reality for today’s employer is that it is not just a matter of ensuring that a Form I-9 is properly and timely completed for a new hire. Many states and federal contracts now also require that employers register with e-Verify, making mandatory what was once touted as a voluntary federal program.
The interplay between Form I-9 completion and e-Verify confirmations can be confusing. For example, an employee with expiring work authorization must be re-verified for I-9 but not e-Verify purposes. Misuse of the two programs can trigger investigation by the U.S. Department of Justice Office of Special Counsel for Immigration-Related Unfair Employment Practices in the Civil Rights Decision (OSC) for unfair hiring practices.
At a minimum, today’s prudent employer should have a written hiring and employment eligibility verification policy in place. This should include an internal compliance and training program related to the hiring and employment verification process, explaining: how to complete Form I-9 and whether to maintain copies of supporting documentation, how to identify fraudulent documents, and how to use e-Verify and the Social Security Number Verification Service (SSNVS) for wage reporting purposes (if part of the employer’s policy).
Employers should require that Form I-9 completion and e-Verify confirmations be performed by specific employees who have received proper training. A further layer of review should be required to ensure any mistakes are quickly corrected. Employers should conduct annual audits, either using an external auditor or a neutral reviewer within the organization. Employers may also want to consider contractually binding subcontractors to these same standards.
The written hiring and employment eligibility verification policy should include directives concerning how to handle letters from government agencies about conflicts in information between the agency, employer and/or employee. A prime example for this directive is to know how to handle the receipt of a “no match” letter from the Social Security Administration (SSA) which advises an employer that an employee may be using a social security number that does not coincide with SSA records.
Employers should also consider including a provision for a “tip line” so that employees can report suspected incidents of unauthorized employment and a method for handling and investigating these tips. In addition, employers should ensure that authorized employees are not treated differently on the basis of citizenship or national origin in the hiring, firing or recruitment process.
And this is just the tip of the iceberg. The USCIS also conducts site visits to investigate potential visa fraud by employers. The Department of State (DOS) has the authority to review visa applications for potential fraud and recommend revocation of approvals previously issued by USCIS.
The Department of Labor (DOL) routinely audits applications by employers sponsoring foreign workers for permanent employment certification (the first step in the “green card” process). These audits and investigations are pitfalls for the unwary and can lead to enormous expenditures of time and resources if not handled properly.
The Kaiser Family Foundation has put together a brief history of health care reform efforts in the U.S. that is quite interesting and in large part excerpted here.
The country has been on the verge of national health reform many times before. In the early 1900s, smaller proposals began to pave the way. In 1912, Roosevelt’s Bull Moose Party campaigned on a platform calling for health insurance for industry; and as early as 1915, Progressive reformers ineffectively campaigned for a state-based system of compulsory health insurance.
The prominent reformers of the 1920s, the Committee on the Costs of Medical Care, proposed group medicine and voluntary insurance—modest ideas, but enough to raise opposition, and the term “socialized medicine” was born.
Over the years the American public, as measured in opinion polls as far back as the 1930s, has generally been supportive of the goals of guaranteed access to health care and health insurance for all, as well as a government role in health financing. However, support typically tapered off when reforms were conditioned on individuals needing to contribute more to the costs.
Historians debate the many reasons national health insurance proposals have failed, including the complexity of the issues, ideological differences, the lobbying strength of special interest groups, a weakened Presidency, and the decentralization of Congressional power. However, major health reforms have been enacted in the latter half of the 1900s that have proven to be broadly popular and effective in improving access to health care for millions through Medicare, Medicaid and the Children’s Health Insurance Program.
Important lessons can be gleaned from how these major reforms were accomplished. As the nation prepares for the rollout of marketplace exchanges under the Affordable Care Act (ACA), it is helpful to understand the economic and political context in which prior reforms were enacted and the key reasons they fell short of universal coverage.
1934 – 1939: The Depression and the New Deal
The Great Depression (1929-1939) had been preceded by a period of growing income inequality and a shrinking middle class. The worst years were 1933-34 with unemployment as high as 25 percent. Income disparities in access to health care had grown much worse, medical costs were rising, and sickness became a leading cause of poverty. More physician and hospital care went unpaid and welfare agencies began to help pay for medical costs for the poor.
The Social Security Act was introduced and passed in both houses with a wide margin in 1935. By 1938, southern Democrats aligned with Republicans to oppose further government expansion, in part to protect segregation, making additional New Deal social reforms nearly impossible to pass.
World War II and After
During World War II, The War Labor Board ruled in 1943 that certain work benefits, including health insurance coverage, should be excluded from the period’s wage and price controls. Using generous health benefits then to draw workers, employers began to bolster group health insurance plans.
The economy expanded greatly following WW II, building and responding to the needs of growing families, in an era when American capitalism flourished. Large American businesses (e.g., U.S. Steel, GM, AT&T) faced little competition and were sufficiently profitable that unions could successfully negotiate for greater fringe benefits, including health insurance.
1960 – 1965: The Great Society: Medicare and Medicaid
Productivity swelled in the 1960s as did the middle class, with a well-educated workforce financed by the G.I. bill and following the peak of labor union membership in the 1950s. President Kennedy sought to accelerate economic growth through increased government spending and decreased taxes. From this base, Johnson followed and began to build his “Great Society.”
When the House Ways and Means Committee began its work on the Medicare proposal from the White House in 1965, there were two other proposals on the table as well: an expansion of Kerr-Mills (“Eldercare” supported by AMA) and a proposal for federal subsidies to purchase private coverage (“Bettercare” from the insurer Aetna).
Elements of each were eventually merged into a single bill with three layers: Medicare Part A to pay for hospital care and limited skilled nursing and home health care, optional Medicare Part B (paid in part by premiums) to help pay for physician care, and Medicaid, a totally separate program to assist states in covering not only long-term care for the poor but also to provide health insurance coverage for certain classes of the poor and disabled.
After Johnson’s landslide election in 1964, he made Medicare his highest legislative priority and acted quickly. Both Medicare and Medicaid were incorporated in the Social Security Act as it was signed by President Johnson in July 1965. The confluence of presidential leadership and urgency, Johnson’s political skills in working with a large Congressional Democratic majority, growing civil rights awareness, public support, and the support of hospitals and the insurance industry contributed to the achievement of the most significant health reform of the century.
1970 – 1992
In 1971, President Nixon instituted wage and price freezes in an effort to curb inflation. With the implementation of Medicare and Medicaid, health care costs had grown rapidly from 4 percent of the federal budget in 1965 to 11 percent by 1973, while millions of those under age 65 still had no health coverage. An era of health care regulation began, leading to certificate-of-need programs, state hospital rate-setting, requirements on HMOs (in return for support to help them expand) and health planning to control growth.
In 1974, President Nixon expanded upon his own proposal. His Comprehensive Health Insurance Plan (CHIP) called for universal coverage, voluntary employer participation, and a separate program for the working poor and the unemployed, replacing Medicaid. Requiring employers to contribute 65 percent of the premium cost was controversial, but fundamental to the plan’s financing. This package failed.
Senator Ted Kennedy proposed that private insurance plans compete for customers who would receive a card to use for hospital and physicians’ care. The cost of the card would vary by income and employers would bear the bulk of the cost for their workers, with the government picking up costs for the poor. Insurers would be paid based on actuarial risk, and payments to providers set through negotiated rates.
President Carter released his own plan one month after Kennedy’s plan, proposing that businesses provide a minimum package of benefits, public coverage for the poor and aged be expanded, and a new public corporation created to sell coverage to everyone else. Neither the Kennedy nor Carter proposals had much of a chance.
Debate on hospital cost-containment during this period however laid the foundation for the Medicare Prospective Payment System enacted in 1983 which changed the way the government paid for hospital care in a major way—from a charge-based system to a predetermined, set rate based on the patient’s diagnosis.
Under the Reagan administration’s policies in the 1980s—that included substantial tax cuts, large increases in defense spending and moderate cuts in domestic programs—federal debt reached record levels. Health care costs continued to escalate rapidly up to and through this period. Even some in the business sector came to accept that fundamental health reform was needed as the health care sector grew to comprise 12 percent of the nation’s GDP in 1990.
A large and varied mix of proposals surfaced: market-oriented reforms expanding the private system, public single-payer plans, employer mandates (play-or-pay), and from President Bush, health care tax credits and purchasing pools.
The Clinton Years
Newly elected President Clinton initially hoped to send Congress a health reform plan within one hundred days of taking office. Clinton’s plan, the Health Security Act, called for universal coverage, employer and individual mandates, competition between private insurers, and was to be regulated by government to keep costs down. Under managed competition private insurers and providers would compete for the business of groups of businesses and individuals in what were called “health-purchasing alliances”. Every American would have a “health security card.”
Support for the complex Clinton plan from key stakeholders was often conditional and eventually waned. Some labor unions and other public health advocacy groups did not want to be seen as opposed to Clinton’s plan, yet backed the single-payer bill.
In 1997, with a Republican Congress and bipartisan support, the Children’s Health Insurance Program was enacted, building on the Medicaid program to provide health coverage to more low-income children
The 21st Century Begins
The Medicare Modernization Act (MMA) passes, creating a voluntary, subsidized prescription drug benefit under Medicare, administered exclusively through private plans, both stand-alone prescription drug plans and Medicare Advantage plans.
Medicare legislation creates Health Savings Accounts which allow individuals to set aside pre-tax dollars to pay for current and future medical expenses. The plans must be used in conjunction with a high deductible health plan.
Medicare Part D Drug benefit goes into effect in January 2006.
Massachusetts passes and implements legislation to provide health care coverage to nearly all state residents. Legislation requires residents to obtain health insurance coverage and calls for shared responsibility among individuals, employers, and the government in financing the expanded coverage. Within two years of implementation the state’s uninsured rate is cut in half.
Census Bureau estimates 45.6 million uninsured (15.3 percent of the population) in 2007.
Mental Health Parity Act is amended to require full parity. Insurance companies must treat mental health conditions, including substance abuse disorders, on an equal basis with physical conditions when health policies cover both.
The House of Representatives passes the Senate bill, the Patient Protection and Affordable Care Act (voting 219-212) and sends it to the President for signature. House also passes the Health Care and Education Reconciliation Act of 2010 that amends the Senate bill to reflect House and Senate negotiations and also includes reform of the nation’s student loan system.
March 23, 2010
President Obama signs the landmark legislation, the Patient Protection and Affordable Care Act, into law. The historic health reform legislation requires that all individuals have health insurance beginning in 2014. The poorest will be covered under a Medicaid expansion. Those with low and middle incomes who do not have access to affordable coverage through their jobs will be able to purchase coverage with federal subsidies through new American Health Benefit Exchanges. Health plans will not be allowed to deny coverage to people for any reason, including their health status, nor can they charge more because of a person’s health or gender. Young adults will now have the option of being covered under their parents’ plan up to age 26.
It is expected that many more changes will be implemented as voters instruct and the government responds over time.
Source: Kaiser Family Foundation, National Health Insurance—A Brief History of Reform Efforts in the U.S. (March 2009), http://kaiserfamilyfoundation.files.wordpress.com/2013/01/7871.pdf