20 minute read
Legal
As president of Resolute Commercial Services, company founder Jeremiah (Jerry) Foster leads the firm’s team of industry experts in advising creditors, equity holders and enterprises as they navigate the many phases of a turnaround, restructure or crisis management plan.
Foster has been appointed as a chief revenue officer, interim chief executive officer, trustee, receiver, special master, or liquidating trustee for more than 100 different enterprises. resolutecommercial.com
Merchant Cash Advance: Sound Fast Financing or Recipe for Disaster?
It’s a solution that cedes a portion of future credit or debit card sales
by Jeremiah Foster
The merchant cash advance (MCA) is a financing option that typically ends in a death spiral for most small businesses. In fact, more than 60% of the receiverships assigned to Scottdalebased business advisory firm Resolute Commercial Services involve at least one, if not more, merchant cash advances.
That’s because once a business enters into an MCA agreement, it is nearly impossible to repay it without securing additional financing from other merchant cash advance providers.
WHAT IS A MERCHANT CASH ADVANCE?
Merchant cash advance companies provide small and medium-sized businesses with a lump sum cash advance in exchange for a portion of future credit or debit card sales.
Retail and restaurant operations that have strong credit card sales are most likely to fall prey to this type of cashraising option.
Typically, merchant cash advance companies will recoup their advance by making daily withdrawals, of either a fixed amount or a percentage of daily sales, directly from the customer’s bank account. advance company to allege a payment was missed — for funds to be seized from the business.
Because the MCA provider already has direct access to the business owner’s bank accounts, the merchant cash advance company can start withdrawing funds from the account without warning.
Court clerks and financial institutions have no option but to comply with the looting of the business owner’s accounts. In the wake of a breach, bank accounts are often swiftly drained of funds, and the business owners find themselves destitute.
The business owner has no recourse in this situation, having already agreed to lose any legal dispute against the MCA company.
WHEN TO USE A MERCHANT CASH ADVANCE
As a general rule, it is best to avoid merchant cash advances.
However, an advance could provide an interim solution, only if guaranteed financing is on its way.
Any business owner who pursues an MCA should never agree to sign a confession of judgment and should have an attorney review all contracts before signing.
WHAT’S IN A NAME?
Currently, MCA companies are charging rates of up to 400% annualized interest. In many states, interest rates that exceed 20% are illegal under usury laws.
However, merchant cash advance businesses have long maintained they are not providing loans but are merely purchasing a business’s future credit card sales or future accounts receivable.
This is an important distinction, and it’s how most MCA companies are able to avoid complying with usury laws.
BEWARE OF THE DOWNSIDE
Merchant cash advance companies use an obscure legal strategy called a confession of judgment to ensure they will be able to collect.
In order to receive an advance, the cash-strapped business owner is often required to sign these confessions and agrees that the business is liable for any future legal disputes, while waiving the right to action in court — before a dispute even occurs.
Effectively, the signer admits to breaching the contract with the merchant cash advance company in advance, before a breach ever takes place.
Many business owners who use MCAs are not aware that a confession of judgment is part of the application and sign unwittingly. With the confession of judgment signed, all it takes is one missed payment — or for the merchant cash
FIGHTING BACK AGAINST MERCHANT CASH ADVANCES
If merchant cash advances are determined to be loans, then state usury laws prohibiting lenders from charging excessively high interest rates may apply to these transactions.
A recent landmark decision by the District of Montana U.S. Bankruptcy Court did just that. The ruling could severely impact the ability of merchant cash advance companies across the country to continue practices with questionable ethics.
The ruling, issued by Chief Judge Whitman L. Holt of the Eastern District of Washington in September, determined that New York-based merchant cash advance company CapCall, LLC provided a loan, rather than purchased future accounts receivable, to a struggling restaurant group known as Shoot the Moon.
Resolute pursued the case as trustee of the Shoot the Moon Liquidating Trust. CapCall is now required to return more than $2.7 million in interest, preferential payments and attorneys’ fees to the Shoot the Moon Liquidating Trust for distribution to Shoot the Moon’s creditors.
The ruling could set legal precedent for future bankruptcy proceedings involving merchant cash advance companies, resulting in larger recoveries for creditors during the bankruptcy process.
However, winning court battles in individual states is not enough. Legislative regulation of this industry is needed to ensure fair business practices that no longer prey on struggling businesses.
Arran Stewart is cofounder and CVO of blockchain-powered recruitment platform Job.com. He has spent more than a decade working to disrupt the recruitment industry with innovative first-of-itskind technology. Stewart’s expertise on hiring, recruitment, technology and job market trends has been featured in Forbes, Inc., Reuters, Wired, Fortune and Nasdaq, among others.
Could the U.S. Really Move to a Four-Day Workweek?
Is it quality of life versus productivity?
by Arran Stewart
The pandemic is responsible for opening our eyes to the importance of “quality of life.” We were all confined to our homes in the blink of an eye, and the requirement for a drastic increase in remote work saw 42% of people working from home in 2020, according to the American Time Use Survey from the U.S. Bureau of Labor Statistics.
At the time, the labor force was able to reflect on their working conditions, health, family and future. This has caused the workforce to demand more quality of life, hence the recent struggles to hire labor even as the pandemic has begun to subside. Companies are looking at how to best entice talent back to their organizations — the most obvious is increasing wages and the sign-on bonuses that Amazon introduced to its warehouse staff. However, there are other dimensions of benefits that can facilitate the re-hiring of the currently unemployed, which, as of right now, appear to be choosing to remain unemployed. One of these potential benefits could be to introduce a four-day workweek; there is a vast amount of data to support this practice, which not only benefits workers but also actually increased productivity in some cases, according to Autonomy.
This study sent shock waves around the planet, as Iceland dared to introduce a four-day workweek to approximately 2,500 people (more than 1% of the working population) from 2015 to 2019. The results were eye-opening: Employees were much happier and there was at least the same level of productivity as before. Workers were compensated the same amount as they had been for five days even though they were physically now working only four. One caveat of the study was a cushion built into it — the workweek would normally be 40 hours over five days, but this was shrunk to 35–36 hours over four days, which means that the actual time spent working during the week was reduced by only roughly half a day and workers committed to more hours over a shorter period of time. This, of course, helped soften the blow on the reduction in days and increased the chances of success of the study.
Iceland found the program to be a major success, and today 86% of Icelanders are now either working shorter hours or gaining the right to do so. But could this really be rolled out across the U.S.?
At a micro level, it seems it would be very possible to offer this level of flexibility to workers and allow them to embrace a shorter workweek, especially for those with output-measured job roles, such as web developers or salespeople who have revenue generation targets. The U.S. is already globally regarded as a leader when it comes to flexible working, according to the World Economic Forum. Another extension of this could include offering the shorter working week as an incentive to employees who have the ability to be as productive or, in some cases, more productive within a fourday workweek.
But, and this is a big one, at a macro level, can the U.S. really afford to lose a day of productivity on the competitive landscape? The data published in the World Economic Forum’s “2020 Global Competitiveness Report” shows that the U.S. simply could not afford to fall any further behind. When comparing the macroeconomic and government agenda of Iceland and the U.S., there couldn’t be two more opposite agendas. A 40-hour workweek is something that most “high performers” are easily capable of in an output-based role in the U.S., so arguably many would opt to work the hours required to remain competitive in the labor market (as well as to potentially earn the additional commissions for sales-based roles that compensate in such a manner).
The U.S. holds a very different position, purpose and, in many respects, responsibility globally, which means it could risk this role if it stopped its strong competitive focus. It’s fair to say that we have all experienced the sacrifices that go with being competitive in anything in life and that winning typically does not happen by taking a relaxed approach. Also, the culture of the U.S., its government and its economic agenda simply wouldn’t support such a move, especially in the midst of the Fourth Industrial Revolution.
All in all, the Icelandic study shows the world what is possible, if it’s possible for companies to embrace this working practice. But ask most manager-level workers in any company and see if they are actually working 40 hours a week in the U.S. That would be rare; many work north of 50 hours a week. The data supporting the four-day workweek simply does not translate to the U.S., as things are today.
Jon Picoult is the founder of Watermark Consulting and author of “FROM IMPRESSED TO OBSESSED: 12 Principles for Turning Customers and Employees into Lifelong Fans” (McGrawHill, Nov. 2, 2021). A noted authority on customer and employee experience, Picoult is an acclaimed public speaker and advisor to top executives at some of the world’s foremost brands. watermarkconsult.net
Three Hacks for Creating an Effortless Customer Experience
The hardest part of making it easy for customers? Knowing where the pain is.
by Jon Picoult
Most every company strives to be “easy to do business with.” But as common as that mantra is, it remains a rarity to come across a business that is consistently effortless to patronize. One reason: Most organizations aren’t detecting the pain points that drive their customers away.
Sure: the 30-minute call center wait or the poorly designed website — these are examples of pain points that are easy for businesses to discern (though that doesn’t mean they’ll actually tend to them). But unnecessary, avoidable, loyaltysapping customer effort can creep into a company’s customer experience in subtle and insidious ways. To deliver a truly effortless customer experience requires spotting those circumstances and addressing them.
That requires looking at one’s business through the lens of customer effort, and using techniques like the three outlined below to reveal the pain points that customers aren’t telling the business about:
#1 – FIGURE OUT WHY CUSTOMERS CONTACT YOU
Nobody wakes up and says, “I can’t wait to call my cable company today.” Or their health insurer. Or their appliance manufacturer. Customers typically don’t crave contact with their product and service providers. They prefer things to work as promised, to go as expected, obviating the need to contact anyone for assistance.
For many businesses, outside of the initial product purchase, a customer contact means that something has gone wrong in some way, creating added effort for the purchaser. For this reason, it’s a good idea to track why customers contact the company, be it by phone, email, text or in person. (Note that this is different from how businesses typically track customer contacts — an exercise that’s normally focused on what the inquiry was about.)
Once the firm identifies the most common reasons why customers seek assistance (e.g., to clarify a line item on a recent bill, to inquire about a product feature that’s not working right, etc.), it can then figure out what’s really triggering that inquiry, upstream in the business process. It could be a product design issue, or poor expectation-setting at point-of-sale, or a jargon-filled customer communication.
By making improvements to those upstream touchpoints, the business can preclude some or all of those customer inquiries. That translates into a more effortless experience for the customer, as well as smarter demand management for the company’s service operation.
#2 – LOOK FOR REPEAT CONTACTS
For customers, if there’s one thing worse than having to contact a company for assistance — it’s having to contact it twice. Or more.
Businesses can watch for this by monitoring when the same customer contacts the organization more than once in a specified period (two weeks is a good rule of thumb, but the most appropriate time window really depends on the type of product the business sells).
What’s great about this approach is that it not only catches situations where customers must follow-up on a single unresolved issue, it also catches situations where customers have a second but related inquiry that could have been preempted during the first contact. For example, a software-as-a-service customer who calls to get a new feature activated, and then calls back two weeks later with a question about how to use it.
Businesses should look for the common themes that trigger these repeat contacts, as that will help them identify business improvements to eliminate the inquiries, saving customers time and frustration.
#3 – CAPTURE EVERY ‘NO’
When a business declines a customer request, it usually creates more effort for the customer. After all, that customer still has to figure out some other way to address the needs that prompted the call — even if that means switching to a competing provider, which requires effort in and of itself.
Therefore, it’s a worthwhile exercise for companies to track every instance where the business has to decline a customer request — and then mine that data for common themes. Some of those situations may be borne of limitations to the company’s products or services, highlighting an opportunity to enhance the offerings to address unmet customer needs. Others may be triggered by rigid policies that may be ripe for reevaluation.
While it’s unrealistic to think that any business can make all those “noes” go away, it is feasible that some subset could be minimized through business improvements. And that’s a good thing, because the less often customers hear “no,” the more effortless their experience will be.
People’s most valuable, finite resource is their time. Any company that seeks to strengthen customer engagement should treat customers’ time as sacred. Because if a business consistently gives customers the gift of time and convenience, then those customers will surely reward that business with their enduring loyalty.
Capacity Impact through Sound Leadership
Nurture others to be ‘doers,’ too
by Bruce Weber
We are living in different times right now, and I suspect everyone knows that, but one thing remains consistent: Strong leadership and succession planning within an organization has a tremendous impact on its long-term success in building capacity. Today, we are faced with survival in a climate that is dominated by financial austerity, technological disruption and political uncertainty. Each of these can cause major headaches for a leader when trying to sustain and develop capacity within her or his organization. The task to maintain/increase capacity to deliver within an organization seems insurmountable but it is achievable with a carefully designed leadership strategy.
To begin, leaders influence the culture and the long-term effectiveness of an organization. Strong core values form the framework that impacts the behavioral attitudes of both individuals and groups within an organization. What follows is a roadmap for consideration when embarking on leadership impact on organizational capacity
Begin with articulating the “void.” Where is the organization now versus where it would like to be? Help individuals see the potential in the organization’s future and their future and what might be missing. Allow them to dream and envision the possibilities of what could be coming next.
The next step on our journey is to empower people with the tools and the resources that they need to be effective in their role to create additional capacity inside the organization. Continue to support them but get out of their way and allow them to succeed. I once had a manger who was wellliked throughout my company. He was very approachable, personable and said all the right things. However, when it came to strategy sessions, his way was always the “correct” way. My team and I often left those meetings feeling less motivated and inspired to be creative. We as a team never recognized the big impact in sales we were looking for and were always behind where we could have been. Trust in people and allow them the freedom to succeed or fail. Even in failures, we learn, build and move forward.
Along with the points above, avoid being the doer and instead allow the team the freedom to move forward in a way that provides the greatest impact without enabling but providing the freedom to create. Leaders should be continually asking themselves, “As a leader, am I truly leading the organization or am I an obstacle to success?” When leaders create capacity, the organization and the people in the organization increase their capacity and things grow.
Leaders model the way if they want to gain commitment and achieve the highest standards. The leader must be a model of the behavior she or he expects of others, as those behaviors must align with the organization’s values. Great leaders inspire a shared vision and enlist others in a that common vision, and the process.
Lastly, have a plan! Investing in the development of leadership increases the capacity to perform at multiple levels. It inherently creates a competitive advantage, offering skills and talent that other organizations may not have. Leadership development fosters innovation in the organization, whether it be in product, services or support. Future leaders are often those who make that leapfrog contribution that takes an organization to the next level.
Often, when capacity is discussed, it focuses on the business model with things like revenue source identification, customer base, product set and financing details. While all those are critical, organizations that build capacity within are the ones that develop the people within the organization and empower them to envision the future and think big. Steve Jobs, Apple’s cofounder once said, “innovation distinguishes between a leader and a follower.” Let’s head out in 2022 to innovate and empower everyone in our organizations to do so as well!
Bruce Weber is founder and president/CEO at Weber Group. Weber brings more than 20 years of experience to the for-profit and nonprofit community, working with startup, growth and mature organizations. His focus is in strengthening organizations through strategic planning, organizational development, leadership and board development. He is a BoardSource Certified Governance trainer and a founding partner of the Nonprofit Lifecycles Institute. webergroupaz.com
Johanna Collins is an architect and office resilience leader at Gensler. Gensler strives toward the elimination of all greenhouse gases associated with its work. Gensler’s announcement of its new green materials initiative at COP26 in 2021 marked an important next step for the company in meeting its goals.
Collins is committed to designing solutions that are as high performing and economically feasible as they are creative and beautiful. She operates on the understanding that experiential design is about more than just a building — it is the intersection of light, materials and landscape that create memorable spaces.
After moving to Phoenix in 2004, she fell in love with the beauty of the Sonoran Desert. She draws inspiration from it in her daily life and work. gensler.com
COP26 – Strategies for Decarbonization and Impact on the Built Environment
by Johanna Collins
It is a known fact that there is a direct relationship between carbon dioxide emissions and global warming, and the real estate industry makes up 49% of global carbon emissions when accounting for construction and building performance. It is of great importance, therefore, to get to zero.
At COP26 – UN Climate Change Conference, Gensler announced its green materials initiative — a move that has the larger goal of shifting the real estate value chain toward net zero carbon emissions. This year marked the first time the annual conference had a showcase on buildings, and only the second year when an entire day was dedicated to discussions on the built environment and real estate development.
Enlai Hooi, the Copenhagen-based head of innovation at Schmidt Hammer Lassen Architects, said, “An architect who creates just three typical buildings over their career will be responsible for carbon emissions equivalent to the lifetime emission of 162 typical Americans.” This illustrates the critical role and responsibility we, as architects, engineers and anyone in the real estate and construction sector, carry in combating climate change.
STRATEGIES FOR DECARBONIZATION IN BUILDINGS
During a typical life span of a building, 72% of carbon emissions are associated with operational carbon and 28% are associated with embodied carbon. Embodied carbon is the carbon emitted during the sourcing and production of materials and ending with the completion of construction. To lower this number, we must select and specify materials by evaluating their life cycle and look at environmental product declarations (EPDs) for specific products or product categories, which document product global warming potential.
REPOSITIONING – STRATEGIES AT SOUTH MOUNTAIN COMMUNITY COLLEGE – LIFE-SCIENCES/ PHYSICALSCIENCES (LS/PS) PARTIAL RENOVATION AND NEW ADDITION
While knowing that re-using an existing structure is an important first step in lowering carbon emissions associated with our work, we wanted to quantify the amount of carbon diverted from the atmosphere by preserving an existing structure.
To do so, our Phoenix team collaborated with our structural engineering partners MEYER BORGMAN JOHNSON in creating a case study project. The SMCC – LS/PS project consists of a partial renovation of the LS/PS building, a total of 15,665 square feet, and a new 18,164-square-foot addition. We are preserving the exterior insulation and finish system (EIFS) envelope, steel structure and slab as much as possible, to accommodate the new program, and adding a steel structure, masonry walls, windows and storefront throughout, new roof throughout and slab as a new addition and expansion.
We began our study by creating a baseline — a ground-up building using the same materials and area — as the existing LS/PS buildings and the new addition, as designed. The new construction of this building envelope and structure would result in a total of 740 tons of carbon dioxide equivalent (CO2e). To help illustrate this, we use the average carbon footprint for a person in the United States, 16 tons per person per year — one of the highest rates in the world; the global average is 4 tons per person per year. So, this would equate to annual carbon footprint of 46 Americans.
We then analyzed the embodied carbon of the existing structure and envelope and learned that by renovating we are diverting 220 tons of CO2e from the atmosphere, a 30% reduction of carbon emissions in comparison to new construction. This equates to the annual carbon footprint of 14 Americans. Those numbers are significant, considering the amount and rate of construction in our Valley and globally.
While we anticipated a high embodied carbon associated with steel and concrete, what was interesting is, the highest embodied carbon in the existing building was associated with the insulation of the EIFS enclosure. This discovery led us to a “deeper dive” of the environmental impact of this category, and, by using EC3 (Embodied Carbon in Construction Calculator), the team selected a material with the lowest embodied carbon.
This case study is just one example of the impact design strategies can have on a project by collaborating with our partners, asking the right questions, being curious and using the tools already available to us.
