Southern California Professional May June July 2012 by Southern California Professional Magazine

www.SoCalProfessional.com

MAY.JUN.JUL 2012

MAXIMIZE THE

Value

OF YOUR BUSINESS Turn Your Firm’s

YOUNG PROFESSIONALS Into New Business Machines

CLOUD COMPUTING Is It Right For Your Business?

OUTSOURCE SOLUTIONS Nine Tips For Savings & Success

How To NEGOTIATE A

GREAT LEASE In Today’s Market

MARKETING

Business Development For Young Professionals Getting young professionals to blend online and offline marketing strategies will grow the receivables for your firm. BY BRIAN HEMSWORTH

PUBLIC RELATIONS

Crisis Management In A Rapid-Fire Communication World Disasters. Lawsuits. Scandals. Criminal Matters. All strike fear into the souls of business owners. Having a wellthought-out crisis plan can help you avert a business-threatening problem. BY CINDY RAKOWITZ

VALUATION

Creating Maximum Business Value Understanding what drives value in your company will pay you dividends when you decide to sell. BY DAVIS R. BLAINE, ASA

REAL ESTATE

How To Save On Your Next Office Lease Landlords lease office space 365 days a year. How often do you? Good information is the first step in obtaining a more favorable lease. BY SHERYL L. MAZIROW, CCIM

TECHNOLOGY

Cloud Computing Cloud computing is taking the business world by storm. Here’s what you need to know about “the cloud” and your business. BY BOB GREEN, CPA.CITP

HOW CAN YOU GET THE YOUNG ASSOCIATES TO HELP MAKE IT RAIN?

FACEDIN, LINKBOOK, TWITREST & PINTWIT: WHO’S DOING WHAT?

IS OUTSOURCING A GOOD OPTION FOR YOUR BUSINESS?

WHAT FACTORS HELP INCREASE THE VALUE OF YOUR BUSINESS?

SOCIAL MEDIA

efficiency

REAL ESTATE BLOGGING

PUBLIC RELATIONS

VALUATION

MARKETING

TECH

IS YOUR BUSINESS PREPARED FOR WHEN A CRISIS HITS?

WHAT THE HECK IS THE CLOUD ANYWAY?

INSIDE

NEWS & VIEWS: MATTERS OF FACT

MEDIA MATTERS

SHOULD YOU EVER GO TO THE NEGOTIATING TABLE ALONE?

BUSINESS: EFFICIENCY 3

INSIDE SOUTHERN CALIFORNIA PROFESSIONAL BY JERRI HEMSWORTH

Finding The True Value In Business Today hat an amazing time it is to be in business. Social media has everyone scrambling to rethink the value of their own marketing and how can it be leveraged into actual profit. But let’s be realistic, folks.

Facebook just went public. Initial valuation estimates were between $90-120 billion. In some people's minds, this company was worth more than McDonald’s, Bank of America, Kraft Foods and/or CitiGroup before a single share of stock was sold. Really? Yet, look at the hit the stock took on its second day of trading. Where is its real value? Facebook does have more than 900 million sets of eyeballs that make up its user base. There's definitely value in that. But how much value? Currently, it’s generating a couple bucks of revenue per user annually. That’s not much, and it’s far below the industry norm. Google generates nearly 8 times that in peruser revenue. What does it mean when General Motors just pulled its plug on advertising on Facebook since it was not helping them sell cars? Certainly nothing good. Other than users, what are the assets? McDonald’s has recipes, stores, franchise revenue streams, real estate, trademarks and subsidiaries generating tons of revenue. Bank of America has loans, fees, credit cards, mortgages and other revenue sources. I'm reminded of AOL, which if you recall, was sold in 2000. It was valued somewhere north of $150 billion, only to become one of the largest value declines in history. It’s currently estimated to be valued at

around $5 billion or less. What is a company worth? Or a product? Or a piece or art? Well, the simple answer is, “What someone will pay for it.” Here at Southern California Professional, it’s fun to follow the rare big business news such as the Facebook IPO, but we live and breathe the realities of everyday business. We’re more concerned with your business, your clients and your products and services. Maybe you’re an M&A attorney or an accountant helping a client buy a business. Maybe you’re a business owner who someday wants to sell your business, but your biggest concern is making it more profitable now. You live in a more realistic world of day-to-day business. You’ve come to the right place. We’ve put together another issue full of business, legal and financial insight to help you do better at what you do. The information in this issue will truly help you find and increase the value of your business. So sit back and enjoy another great issue of Southern California Professional Magazine! • Jerri Hemsworth Publisher publisher@socalprofessional.com

California’s first online Dual Internet Platform™ publication written exclusively by leading business professionals that focuses on business, financial and legal matters affecting businesses, business owners, and their clientele.

Publisher Jerri Hemsworth Editor William Colinas Managing Editor Abby Ventzke Assistant Editor Taryn Gray Art Direction/Production Newman Grace Inc. www.newmangrace.com Designer Steven Higginson Assistant Designer Stephanie Capretta Contributors Sandy Allan, Technology & Operational Solutions Davis R. Blaine, The Mentor Group Bob Green, SingerLewak Systems Brian Hemsworth, Newman Grace Sheryl Mazirow, Mazirow Commercial Cindy Rakowitz, Blackman Rakowitz Public Relations Editorial/Advertising Offices NGI Publishing 6133 Fallbrook Avenue Woodland Hills, CA 91367 P: 818.713.1678 www.ngipublishing.com Southern California Professional Magazine is published quarterly by NGI Publishing, a division of Newman Grace Marketing Communications Inc., 6133 Fallbrook Avenue, Woodland Hills, CA 91367 Volume 1.02. MAY.JUN.JUL 2012. Copyright ©2012 by NGI Publishing, A Division of Newman Grace Marketing Communications Inc. (NGMC) All rights reserved. Reproduction in whole or in part without written permission is prohibited. Advertising rates and information sent upon request. Acceptance of advertising in Southern California Professional in no way constitutes approval or endorsement by NGI Publishing or NGMC of products or services advertised. Southern California Professional Magazine, NGI Publishing and NGMC reserve the right to reject any advertising. Opinions expressed by authors are their own and not necessarily those of Southern California Professional, NGI Publishing or NGMC Southern California Professional Magazine reserves the right to edit all contributions for clarity and length, as well as to reject any material submitted. Not responsible for unsolicited manuscripts. This periodical’s name and logo along with the various titles and headings therein, are trademarks of NGI Publishing, A Division of NGMC. PRODUCED IN U.S.A.

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MATTERS OF FACT

News & Views Q1 VC In Southern California Nears $1 Billion he MoneyTree™ Report from PricewaterhouseCoopers, The National Venture Capital Association. Thomson Reuters tell us that there were just under a billion dollars in venture capital investments in the Southern California region in Q1 of this year. This bucks a national trend where VC investment is off 19%. In terms of dollars, San Diego led Southern California with $357.0M in investments; Los Angeles was next with $317.8M; Orange County had $249.3M.

Brown To Build Electric Car Charging Network overnor Edmund G. Brown Jr. announced a $120 million dollar settlement with NRG Energy Inc. that will fund the construction of a statewide network of charging stations for zeroemission vehicles (ZEVs), including at least 200 public fast-charging stations and another 10,000 plug-in units at 1,000 locations across the state. The Governor also announced that he has signed an executive order laying the foundation for 1.5 million zero-emission vehicles on California’s roadways by 2025. “This executive order strengthens California’s position as a national leader

in zero-emission vehicles,” said Governor Brown, “and the settlement will dramatically expand California’s electric vehicle infrastructure, helping to clean our air and reduce our dependence on foreign oil.” The network of charging stations funded by the settlement will be installed in the San Francisco Bay Area, the San Joaquin Valley, the Los Angeles Basin and San Diego County. This new infrastructure network is a breakthrough in encouraging consumer adoption of electric vehicles and will contribute significantly to achieving California’s clean car goals. •

The largest areas of investment were Industrial/ Energy, Medical Devices and Software in L.A./Orange County while Biotechnology led the way in San Diego. Nationwide, Software and Biotechnology were the leading industries. •

$ 9.78million Average $ Per Deal in L.A./Orange County During Q1 2012

EMPLOYERS DON’t HaVE tO ENSuRE LuNcH he California Supreme Court recently ruled that employers are under no obligation to ensure that workers take legally mandated lunch breaks. This case has impact on millions of California

workers and thousands of California employers. Brinker v. Superior Court began as a case more than nine years ago. The class action was brought by restaurant employees who claimed they were denied rest and meal breaks. The California Supreme Court ruled that while employers must still “provide” breaks, they “need not ensure that no work is done during an employee’s meal period.” • www.socalprofessional.com

California in Recovery— Slowly But Surely

alifornia ended the quarter on a slightly upbeat note. The state added more than 18,000 non-farm jobs in March 2012, according to the Employment Development Department of California. While the unemployment rate rose one tenth to 11%, pundits believe this is part of a trend of more people coming back to the job market, so media consensus is that California is continuing to recover, albeit slowly. In year-over-year performance, the state added 181,000 jobs. Eight categories posted job gains over the year, including construction; trade, transportation and utilities; information; financial activities; professional and business services; educational and health service; leisure and hospitality; and mining and logging. Government jobs went down in year-overyear comparison, losing about 46,000 jobs. •

Obama Signs Jobs Act to Help Small Businesses resident Obama signed into law the American Jobs (Jumpstart Our Business Startups) Act, which is designed to help add jobs and bolster the economy. The bill includes $253 billion in tax credits and $194 billion in spending, plus extension of unemployment benefits. Among its elements are the following specific actions:

Cutting and suspending $245 billion worth of payroll taxes for qualifying employers and 160 million medium- to low-income employees.

Spending $62 billion for a Pathways Back to Work Program for expanding opportunities for low-income youth and adults. n $49 billion—Extending unemployment benefits for up to 6 million longterm beneficiaries. n $8 billion—Jobs tax credit for the long-term unemployed. n $5 billion—Pathways Back to Work fund.

Spending $50 billion on both new and pre-existing infrastructure projects.

Spending $35 billion in additional funding to protect the jobs of teachers, police officers and firefighters.

Spending $30 billion to modernize at least 35,000 public schools and community colleges.

Spending $15 billion on a program that would hire construction workers to help rehabilitate and refurbish hundreds of thousands of foreclosed homes and businesses.

Creating the National Infrastructure Bank (capitalized with $10 billion), originally proposed in 2007, to help fund infrastructure via private and public capital.

Creating a nationwide, interoperable wireless network for public safety, while expanding accessibility

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to high-speed wireless services.

Creating additional regulations to rein in businesses who discriminate against hiring those who are long-term unemployed.

Loosening regulations for small businesses that wish to raise capital, including crowdfunding, while retaining investor protections. Think positive—it may just be the boom small business needs! •

Business Development for

Young Professionals

MARKETING

Getting young professionals to blend online and offline marketing strategies will grow the receivables for your firm. BY BRIAN HEMSWORTH, MBA

oung attorneys and accountants have traditionally been a firm’s worker bees. Senior partners throw tons of work at them, and they’re expected to

crank out the billable hours. And if they do that long enough, one day they may become partners—some of whom bring in new business, while others just continue on the “worker bee” route.

“It’s all changing,” a managing partner at a Los Angeles firm recently declared over lunch. “Finding new clients isn’t something just for senior partners anymore. The economy has taught us that we have to market the firm, and everyone has to do their part.” When asked about new hires and associates, he responded, “If they ever want to make partner at our firm, they need to learn how to bring in clients. The day will soon be here when you won’t make partner at a firm without a developed book of business.”

Two Reasons It’s More Important The economy downslide of 2008 triggered a series of actions that SOUTHERN CALIFORNIA PROFESSIONAL

caught law firms and accounting firms off guard. Business slowed, clients were slow to send in their payments, and the phone wasn’t ringing like it had before. Law firms felt the effects almost instantly, and 2009 was a down year for many firms. Divorce became “too expensive” for some law firm clients. Litigation gave way to settlements and mediation, which reduced billable hours and workloads. Bankruptcy attorneys did well, but real estate transactions dried up, which affected a lot of Southern California law firms. Accounting firms felt the effects a little later. Many accountants had a profitable year in 2009, when clients locked-in losses and needed to account for them. The following 1.02

year, 2010, was the year that many accounting firms felt the slowdown. The second trigger is marketing itself. Until Bates v. Arizona State Bar (1977), it was considered unethical to advertise legal services. And while attorney advertising seems to be everywhere, there are many firms that have personnel who still reject the notion, feeling it belittles the firm. In the early 2000s, attorney marketing began to increase. This, in large part, has occurred in the more “retail” oriented areas of practice, such as personal injury, class action litigation and family law. But in the past five years, more traditional areas of law have adopted the practice. Law firms focused on business and transactions have joined the

Business Development for

Young Professionals ranks, and today marketing and business development is on the rise in most areas of practice. It’s interesting to note that this rise has also paralleled the shift of marketing dollars from traditional advertising to Internet and alternative forms of marketing. Firms that traditional advertised in “yellow pages” phone directory ads have diverted their budgets to more website, Internet and search engine advertising. The pressure of a slowing economy and the rise of marketing is forcing senior partners to work harder to bring in business, and that’s given rise to asking even more of younger attorneys and accountants.

What’s In It For Young Professionals? Other than maintaining a Facebook presence, a lot of young professionals don’t like the notion of marketing. At a recent training session, a young accountant asked, “What’s in it for me? Why should I bring in business if I’m not a partner?” There is not one reason—there are three. First, learning to bring in business increases your value to the firm. Cranking out the client work is important, but learning client service, client development and new business techniques makes you a more rounded professional. Learning what attracts clients to a firm will help you become better at taking care of the clients you already have. This is particularly important when you consider that it takes far less time and money to keep an existing client happy than it does to go out and find a new one. Second, business development increases our chances of upward mobility in your firm. Once senior

members of your firm see you not only handling your current clients, but bringing in new ones, you will be marked as a long term asset to the firm. They will want to keep you. And to keep you, sooner or later they will invite you to the partners’ table. The third reason young professionals should learn business development is to prepare for a career future that may include breaking out on their own. A legal recruiter recently mentioned that she is seeing an increase of younger attorneys leaving firms, sometimes solo and

sometimes with a few others, and opening their own shops. Generation Y (also known as millennials) are on a fast track to life. They live faster and communicate faster. They want to achieve, but they are also concerned with the environment, family and quality of life. This leads to some Gen Y professionals to feel less inclined to stay in the trenches at big firms for long periods of time.

Three Key Strategies For Young Professionals If you’re a senior partner, you don’t need to worry about teaching young

What Makes a Potential client choose You? recent study by Hinge Marketing asked companies that hire professional service firms what makes them choose one over others. The results reveal several very specific things that professional services firms should take to heart and integrate into their business development practices.

1 Personalize Your Understanding of the Client

Unprepared cold calls don’t work, and they were cited as the number one pet peeve of clients. Rather, potential clients said that they want potential professional service providers to display knowledge and/or expertise of the client company and industry.

2 Pitch Your Skills and Your Team

Potential clients want to know what you bring to their party, and they want to know who you are bringing. Your firm’s size, your price and personal relationships are less important. Research also shows that the best way to do this is not by email, and not by phone, but rather in person, and if you really want the business, bring your team to their place of business sometime during the search process.

3 What Do Potential Clients Really Want?

Research shows that someone who might potentially hire you wants you to answer three fundamental questions: A. Can you fix our problem? B. Will you make our life easier? C. Do we like you, and will we have a good relationship? Work to address those questions, even if they are not specifically asked in a meeting with a potential client.—B.H.

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associates how to network online. Gen Y created social media, and they own it. You may help them focus their efforts, but they’ve got the technology down. Possibly the most important strategy you can teach a young professional is offline social networking. While conducting a recent training session for young professionals at a firm, the managing partner made it extremely clear to, “Get your butts out of the office and go see our clients—in person!” Millennials have grown up with emails, instant messages and texting.

to know their trusted advisor before beginning the engagement. Senior professionals tend to market themselves. Even if they work at a large, well-known firm, they market themselves because they know one true thing: if the client comes in, they will enjoy the largest share of the profits. Younger professionals have less experience, so it’s harder for them to be perceived as experts and therefore justifying higher rates. This makes business development harder for many young professionals. One strategy for clients with

Ofﬂine social networking means getting face time with clients, pressing the ﬂesh, and learning to have a chat over a cup of coffee. While this works well with their network of friends, it does not work so well with clients. A client recently complained that one of his best young accountants had a bad habit of expecting clients to email him back quickly, and if they didn’t, the accountant just emailed again. It never dawned on him to pick up the phone and make a call, or better yet, go see the client face to face. Part of offline social networking means getting face time with clients, pressing the flesh, and learning to have a chat over a cup of coffee. While these things are less comfortable for young professionals, this is the way most clients want to network. Study after study shows that people who hire attorneys and accountants not only want a referral, they also want to meet and get SOUTHERN CALIFORNIA PROFESSIONAL

younger associates is to get them to market themselves as part of a larger team. Associates can ride the coattails of senior partners, leveraging the team’s experience and expertise. By doing this, potential clients can feel much safer engaging a firm because they know there is a depth of experience. They also feel more confident that there are several people working on their account. This also helps justify different billable rates, as most clients will understand that the rate of an associate three years out of school is different than a senior partner with 25 years in the field. Young professionals can succeed using this technique by learning as much as they can about the senior partners on their team. They should know what schools they 1.02

went to, what articles they have written, the latest case results they have achieved. A third strategy for associates is to begin developing an expertise very early in their careers. This works very well when a young associate can focus on one specific area of a practice, and learn anything and everything about it. For example, an accountant who, in addition to his general tax practice, studies the tax strategies of Internet start-ups. In this case, since many Internet startups are engineered by young entrepreneurs, they are generally much more open to having a young accountant who can speak their own language.

Final Thoughts The days of associates working in the background and not generating business are a thing of the past. Young professionals will increasingly need to generate income for the firm beyond their billable hours. Senior management needs to know that young professionals will be most effective when they combine their own knowledge and skills with tried and true practices of the past. By learning what motivates them, giving them the tools to succeed, and compensating them for success, you can turn your younger staff into a business generating team. •

Brian Hemsworth, MBA, CBC is the President and Chief Marketing Officer of Newman Grace Inc., a Los Angeles-based marketing and brand consulting firm. He is also a member of the adjunct faculty of Pepperdine University, and has published more than 100 articles on business, marketing, technology, travel and fitness. Visit www.newmangrace.com or www.executivemarketingcoach.com to learn more about Brian and the benefits he brings to his clients.

Crisis Management In A Rapid-Fire Communication World

Disasters. Lawsuits. Scandals. Criminal Matters. All strike fear into the souls of business owners. Having a well-thought-out crisis plan can help you avert a business-threatening problem.

BY CINDY RAKOWITZ

www.socalprofessional.com

PUBLIC RELATIONS

hat happens when there is a natural disaster? There are injuries, there are hundreds missing and the city is in shambles.

As a business leader, you have to disseminate information immediately. The messages must be succinct and cohesive for multiple constituents to understand and respond quickly. This is why individuals and organizations should make crisis planning a priority. Emergencies are not only limited to physical disasters. Rapid response is also required for crises such as civil disorders, labor unrest, criminal charges, death, illness, system failure, scandals, indictments, convictions, lawsuits, hostile takeovers and bankruptcy. From Ponzi schemes to Occupy protests; from unpredictable weather patterns to factory explosions; from terrorist attacks to mall melees; from celebrity mishaps to sinking cruise ships, crises happen every day. This is why comprehensive crisis planning is imperative for saving lives as well as saving brands. But where to start? Service professionals and corporate executives from the smallest mom-and-pop to the largest multinational organizations often find it daunting to roll up their sleeves and facilitate a crisis plan.

Crisis Planning Road Map Crisis planning begins with ethics and trust-building in the community. Identify your organization’s core values reflecting your dedication to serve with honesty and integrity, then you can easily develop your mission statement, defining your organization’s reason for existence. Effective mission statements include purpose, value, contribution

and distinction. If a reporter should call a food manufacturer, asking for a comment related to a food-poisoning incident, a well-constructed mission statement serves as the foundation for the company’s response. For example, “We are committed to providing quality product with top-line inspection techniques to guarantee the delivery of healthy, fresh goods.” Without a mission statement, the manufacturer would have to scramble for a response. Before setting the date for your crisis management planning session, consider viewing Steven Soderbergh’s feature film Contagion about a fictional bat virus pandemic that kills millions. The lesson learned is how quickly the Centers for Disease Control, the World Health Organization and medical researchers respond. They begin immediate research of the problem. They are proactive with the media. Public Schools become quarantine centers. FEMA sends food trucks. The National Guard is on the scene. They activate emergency hotlines. Social media’s influence was not lost on director Soderbergh either. He includes in the film a blogger who might not have been the most credible journalist, but is loved and respected for entertaining his 12 million followers through the darkest days of the outbreak.

Where To Start Now you are ready to create your plan. Bring together your top executives and agree that your crisis plan will: n Reduce uncertainty

Improve efficiency Maintain employee morale n Include core values, mission statements and messages n Identify your audiences n Collaborate, inform and educate n Reinforce alliances, win over neutral audiences and minimize attacks from hostile audiences n Build credibility n Include media response n Include digital communication and social media platforms n Include victim assistance n Include simulated drills and exercises The first step is to designate an Emergency Incident Leader to oversee and direct plan creation and later operations and logistics in a crisis. Boxer Mike Tyson once said, “Everyone has a plan until they are punched in the face.” Remember that every emergency is unique and the team must be ready to improvise when things go sideways— because they inevitably will. Alan B. Bernstein included this overview in his Emergency Public Relations Manual published 30 years ago, but the application is still relevant today. n n

Overview The Overview section of a crisis plan usually includes these items: 1. Purpose: Identify what emergencies the plan covers. 2. Authority: Identify what laws, policies and regulations support and govern the emergency response. 3. Approvals: List the individuals who wrote the plan and those who approved it. 4. Command Structure: List the management hierarchy in command of an emergency along with contact information and keep it updated. 5. Scope: Define the exact emergen-

Crisis Management cies and disasters covered in the plan. This should include delegation, collaboration and technical experts for each. 6. Policy Statement: This statement confirms who has the authority to provide breaking news and information on behalf of the organization in the event of an emergency. 7. Concept of Operations and Executive Summary: A mission statement designed to familiarize internal audiences, crisis assistance partners and the community with an organization’s preparedness efforts.

the organization should include legal counsel, public relations, financial officer, human resources, IT and systems management, telecommunications coverage and security. The list of those outside your organization should include hospital liaison, police, fire department, Red Cross, Federal, State, local jurisdiction.

Communications Emergency PR plan communications should include these items: 1. Designated Spokesperson: Ideally you will have one individual

Crisis planning begins with ethics and trust-building in the community. The Basic Plan These are a few items the basic emergency PR plan will address: 1. Continuity of Operation: Define a succession plan if responders can no longer carry out their duties. 2. Risk Assessment and Information Communication: Identify your organization’s vulnerabilities and the methods planned for dissemination of information. In a crisis, it is critical to tell the truth and tell it fast. 3. Command, Control and Coordination: Clearly identify the Emergency Incident Leader and the people in charge of operations, logistics and public relations by title, function and name. 4. Procedures and Guidelines: Identify the primary and secondary responders by title, function and name. 5. Duties and Responsibilities: This section lists the emergency action tasks along with the names of the individuals responsible for carrying them out. The list of those within

represent your company, respond to media questions and release statements. In addition, designate technical experts to provide supplemental information and support to the spokesperson. 2. Mission Statement: This reinforces the manifest goal of protecting your company’s integrity and reputation. Core values and trust play a crucial role. 3. Spin: A company must empathize with how the public perceives the crisis. An immediate apology wins sympathy and allies. Organizations can even preposition their responses to crises such as: • Unauthorized procedures • Misuse of confidential information • Errors in judgment and honest mistakes • Attacks from hostile competition 4. Media Procedures: Your PR director’s strong relationships with the

media will be helpful in the midst of a crisis. The PR staff must know how to handle the barrage of inquiries via telephone and social media. Your emergency PR plan must establish a media center with designated areas for press briefings and interviews before an event ever occurs. This plan must also designate media representatives to ensure smooth traffic, safety and information control. 5. Media Training: Anyone authorized to speak on behalf of your organization must be media trained. A glaring example of someone untrained for interviews on prime time network news was Sarah Palin during the 2008 Presidential campaign. When Charles Gibson asked Palin about her insights into Russia, viewers were aghast when she said that Alaskans could see the country from their windows. Had Palin trained and prepared, her answers to questions about foreign policy experience would have been credible. Your emergency PR plan must anticipate the toughest questions from the media and rehearse the best answers. 6. Prepared Statements: Statements and news releases should include the answers to who, what, where and when in response to a crisis. 7. Collateral Materials: The press will ask for fact sheets about your organization. When they cover a crisis, reporters want to know a company’s history. Simplify any technical information and make it easy to understand. Members of the media appreciate illustrations, pronunciations of uncommon words and flow charts explaining what went wrong. Provide reporters with credible information they can use for their reports. Absent credible, accurate and usable information, you risk them constructing their own interpretation of the story. Make these collateral materials part of your emergency PR press kit. 8. Key Audiences: The media is usually an organization’s toughest audience. Even so, consider your other www.socalprofessional.com

PLaYBOY ENtERPRISES:

How a Mission Statement Saved the Day arge companies such as Playboy Enterprises have many mission statements written for specific divisions. Playboy magazine developed its mission statements through authoritative editorial guidelines developed by their founder, Hugh Hefner, and adhered to for decades. When Playboy magazine expanded its global reach through 17 international editions of the publication, the U.S. editorial guidelines were clear and concise in every contractual agreement. In April 2000, Playboy Enterprises learned that major international women’s groups were protesting against the company for violent graphic images in the newly released Romanian edition. The offensive article was entitled “How to Beat Your Wife Without Leaving Marks.” The misguided Romanian editor intended the piece as an April Fools’ satire. Playboy’s senior management team responded immediately to defuse the situation. This rapid response with a clear and focused message was possible because the company’s editorial policies pertaining to violence toward women was clear and unequivocal: “There is no place in Playboy for any kind of violence whatsoever, and most particularly violence against women. Playboy Enterprises and Playboy Magazine has zero tolerance for the depiction of violence, or the use of threat or coercion against women in any form. It violates the very essence of our message of the joy of life and freedom between the sexes.” Additionally, CEO Christie Hefner issued an immediate apology for any anguish this ill-conceived satire caused. She reinforced Playboy’s long-standing history as a powerful corporate proponent of women’s rights and an enterprise that has worked closely with many groups and organizations in support of women’s rights. These swift and clear actions mollified the women’s groups and the media. Indeed, the public and media applauded the fact that the company took punitive action against the editor of the Romanian edition.—C.R.

constituents when constructing a statement. Change positioning of your statements to address the concerns of specific stakeholders such as: • Local, national, international, digital and trade media • Employees • Shareholders, analysts, bankers, stock brokers, investors • Customers • Community organizations SOUTHERN CALIFORNIA PROFESSIONAL

• Distributors, wholesalers, retailers and consumers • Suppliers, trade associations, strategic alliances and licensees •. Legislative, regulatory, judicial and government bodies • Special audiences, including physically challenged, minorities, senior citizens and religious groups Now that you have reviewed the 1.02

components required for a comprehensive crisis plan, you might consider hiring a professional media trainer to master messaging and delivery. Distilling memorable messages from complex ideas made Albert Einstein one of the most popular figures in history. Make sure that your organization has its own website to control the messages and that your PR department has learned to master social networking to monitor and market the brand. Using the Internet and social media, your company can identify and respond to negative press immediately, in real time and while it is happening. In today’s Web 3.0 world, the majority of information about us already is or quickly can become public. Bad news spreads like wildfire, so communication response has to move even faster. Building your own content bank filled with an accurate chronology of events and impressive references can work in your favor when it becomes necessary to diffuse a negative incident. •

Cindy Rakowitz is the CEO of Blackman Rakowitz Public Relations. She is a highly respected, award-winning executive with more than 25 years experience in marketing, communications, public relations, promotions and product development. Working in a variety of industries, including accounting, law, television, radio, magazines, film, packaged goods, sports, hospitality, fashion, music and wellness, she enjoys continued growth and success. Her newly released book, Emergency Public Relations, Crisis Management in a 3.0 World is available for purchase at www.emergencypublicrelations.com, www.amazon.com, and www.xlibris.com. More information on Cindy can be found at www.brpublicrelations.com.

BUSINESS | VALUATION

C R E A T I N G B U S I N

very business owner wants the maximum value when he or she sells a business. Not many succeed. What prevents business owners from generating higher

value? By looking at several critical factors, we can see what creates higher (or lower) value in a business.

The problem stems from the fact that most sellers do not fully comprehend what drives value for buyers of a particular business. More importantly, they do not usually consider or know the best “windows of opportunity” for selling. Many sellers today are fixated on terms and conditions that will never be accepted, rather than trying to understand the nuances of legitimate compromise. Sellers today are also usually not prepared to fully support the mercurial adjustments to EBITDA (Earnings before interest,

taxes, depreciation and amortization, or the cash-flow basis to which a pricing multiple is applied). Private firms typically co-mingle some personal and business expenses. The true reflection of EBITDA would include adding back “personal” items not readily apparent in the financials. These items can have a dramatic impact on the true financial picture of a company. 1

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M A X I M U M E S S V A L U E Understanding what drives value in your company will pay you dividends when you decide to sell.

BY DAVIS R. BLAINE, ASA

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C R E A T I N G B U S I N E S S Finding Value Drivers So, how does a seller prepare for and execute the appropriate deal? The first step is to assemble competent and trusted advisors. Using a well-qualified valuation firm and investment banker (IB) are often necessary. Together, they can determine the exposures and carryover liabilities most acceptable to the seller, as well as understand and explain the value drivers to the buyer(s). A value driver is one aspect of a business that is crucial to overall value. Somewhat in order of importance are the following: 1. Management: A well-run firm has experience and expertise at several levels. In addition to the visionaries and top-level leaders, mid-level executives are key to effective, daily operations and execution of business strategy. If one or more persons in senior management does not remain after the sale, the buyer typically wants the next layer of leadership to fill that void. The key aspect of the post-sale transition is the meshing of cultures. Nothing harms or destroys an organization faster than in-fighting or politics and a culture of uncertainty and negativity. 2. Cash Flow: A strong gross margin (GM) is a key ingredient of a high-value company. Has the seller improved the GM in the last few years? Solid and flat is fine for established sellers; but nicely growing firms should find methods to improve gross margins. Is the seller affected by seasonality of sales? For some buyers, this is a detriment to business value. Adequate working capital is another key aspect, as is the growing (or declining) need for capital expenditures. Solid growth in cash flow or EBITDA (and not peaks and valleys) is probably the most important factor among value drivers, after the breadth and depth of management.

M A X I M U M V A L U E

3. Market Share: The position in the industry (ranking in terms of revenue) or industry niche is a critical aspect of value. In addition, how strong is that position? Is the firm strongly affixed at

Number 2, for example, or is it on the decline? The intensity of current competition could detract from one’s value, as well as the ease of entry for fast-charging newer firms.

turning Value Drivers Into a Successful Sale he owners of a company in business for more than 40 years recently made the decision to begin positioning the company for sale. They knew that they would need a year or so to prepare the company for sale. The powers that be began the process of organizing and improving internal affairs to maximize the sale price. The company provided specialized, high-quality products and services for a sector within the construction/remodeling industry. Products included many types of sealants for retaining inside temperatures; heat/cold; fire retardation; driveways and pavements; and general caulking. In addition, the company manufactured specialty and ornate doors and windows, framing products, industrial ramps, and mechanized inventory access systems. The company enjoyed steady growth in revenues and profits the last five years, and integrated several acquisitions into their national firm. The Mentor Group was first engaged by the company to help identify and analyze the company’s value drivers and understand their impact on a sale. After thorough research in the company’s financial aspects as well as their industry standards, we looked at management and operations. We provided suggestions to improve operations and consolidate the diverse but related business lines. We also counseled them to put in place the appropriate senior- and middle-level management to make potential buyers more confident of a purchase. Once our initial business and IP valuation was complete, the company hired us to initiate the sale process and execute a sale of the company. Our first task was to raise $20 million of senior debt to retire the unfunded ESOP repurchase liability and improve working capital. From there, we were then able locate potential buyers, negotiate terms of the transaction, and complete the successful sale of the business This was accomplished largely based upon the clear presentation of the value drivers and EBITDA add backs.—D.B.

A More Complete Picture While the management of a company, its cash flow, and its market share are critical value drivers, there are more. So to paint a more complete and accurate picture of the value of a business, let’s look further at some additional value drivers and factors. Product/Service Uniqueness: If a seller has very distinct

products or services, the company should ensure that the intellectual property (IP) is protected. That protection should include all locations where revenues are generated (U.S. states and foreign countries). IP protection encompasses many facts— from patent applications to copyrights; from brand names to goodwill; from proprietary technology (not patented) to R&D; and from clear ownership positions to restricting employee access to or theft of IP. Well-documented and secure IP allows for and enhances the seller’s increased value. It may preclude easy entry to a market, as well as lengthen the time it takes for a competitor to capture profitable market share. The longer the length of time a company has been in business is just another feather in the hat of the selling candidate. Issues of Size: Larger companies usually have more customers and are better able to lose a few than a smaller competitor. For example, companies larger than $25 million in revenues command higher multiples than those below this level. Again, without significant customer concentration, larger firms are usually more stable and less risky. Diversification: Diversity of products or services is usually a plus, in that product life cycles overlap and revenue growth can be sustained. Other factors that drive or detract from value are the size and prior years’ volatility in the industry, as well as long-term prospects and viability. Buyers always want more stable, predictable outcomes, with SOUTHERN CALIFORNIA PROFESSIONAL

improving metrics for per-customer revenues, costs and profits. Systems and Procedures:

Buyers do not expect the ideal systems and procedures (S&P) will be in place at the seller. However, without solid and viable S&P, there is an added cost to improve them, and probably a loss in value. More important to the buyer is that the lack of good S&P is a red flag for other potential problems. Possible questions a buyer will raise include: n Can I trust the internal accounting records? n Are personnel records accurate or are there looming lawsuits? n Is the property and casualty insurance coverage adequate? Effective against future product effects, etc.? n How current and accurate are the various contracts? Agreements? Supplier chain/pricing? n How overstated or understand is the inventory? n How reliable are the seller’s identified adjustments (add backs) to EBITDA? n Which assets are pledged? Collateral? The list goes on from here, but you get the idea.

do not need to wait if they really want to sell. n The threat of higher capital gains (from 15% to 23.8%) and ordinary income tax rates in 2013 is a real motivation to close a deal before year end. Of course, this action assumes that EBITDA has not declined in 2011 or currently. n Capital is available. First, banks have been prodded by the regulators to loan more money. Second, while more costly than senior (bank) financing, mezzanine funds are readily available for cash flow lending. Third, there is an ample supply and appetite for private equity capital to be put into deals. While this is not exactly the perfect M&A storm, it is likely the economic environment we have seen in the past four years. Business owners who have been waiting on the sidelines can be more confident of sale intentions, but still have to take adequate steps to building a strong advisory team, and building strong value in their companies. By understanding what drives value, particularly from the buyer’s perspective, business owners can seek to maximize business value and thereby maximize the sale potential. •

Selling In Today’s Environment Several factors bode well for selling a business today. The sale cycle has elongated since 2008, likely adding three months to the 6- to 12- month norm. However, there are these very positive reasons for deciding to sell your business now: n Mergers and acquisitions (M&A) activity was up for 2010 and 2011, versus 2008-09. The expectation for 2012 is at least the same as 2011 and the overall pricing is above average, adding to a generally good climate for an exit. n Since most prognosticators believe that the current economic climate is the “new norm,” sellers 1.02

Davis R. Blaine is the Chairman of both The Mentor Group, Inc. and Mentor Securities, LLC (FINRA registered). He is an expert in the accounting, tax and financial aspects of acquisitions, recapitalizations, valuations and appraisal. He has frequently lectured and written on technical valuation issues. Davis has counseled many clients on buying, selling, or raising capital. In addition, he has prepared companies for public and private investment, strategic partnership, and joint ventures. You can find more information here on website for The Mentor Group.

O N Landlords lease office space 365 days a year. How often do you? Good information is the first step in obtaining a more favorable lease.

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our office says a lot about you and your firm. The city,

the building, the space, the furnishings are all a part of your brand, so finding a space that is both productive

for your employees and inviting to your clients and customers is a big decision. The average business professional doesnâ&#x20AC;&#x2122;t spend a lot of time researching office space. His or her research

may involve just asking around, or worse, just driving around. This is exactly what landlords want you to

do: look a little, see a space, and sign a lease. When this happens, the landlord has all the chips on his side of the table, and the tenant-tobe has very few. Conventional thinking is that the buyer has the advantage, but when leasing commercial space, few tenants have the knowledge to be able to negotiate the best terms.

www.socalprofessional.com

REAL ESTATE

What You Don’t Know Can And Will Cost You There are often many hidden items in a lease (and even some not so hidden) that cost tenants significant amounts of money over the term of the lease. Advance knowledge of these items obviously will prevent surprises down the road. These items can also become a part of the negoti-

ation, since questioning or investigating these items can potentially reduce your overall lease expenses. For example, most landlords will include clauses in the lease that allow for the pass through of the building’s operating expenses. In this case, a “base year” determines the landlord’s charges for operating expenses in year one of a lease, which the landlord absorbs. This base year is then used to compare operating costs in subsequent years during the lease term. It is it essential in leases, although not necessarily standard, that the base year be “grossed-up” to reflect a building that is at least 95% occupied. This issue is in the forefront today, given the significant vacancy in the market. Expenses such as utilities, water, supplies and janitorial will be less in a building with a 20% vacancy than a building with a 5% vacancy. If in a base year there was no “gross-up” for the costs of running the building, the tenant would see significant SOUTHERN CALIFORNIA PROFESSIONAL

increases each month in comparison years on operating expenses when the building is 95% or 100% leased. There are always items that will not be negotiable, but due to the recession of the past few years, there has been a shift from a landlord’s market to a tenant’s market, and tenants now have much more negotiating power than in year’s past.

Many of the hidden costs found in leases are remnants of contracts written during better economic times and just don’t have to be agreed upon in today’s market.

Tenant Beware One of the best ways to save money during the lease process is to carefully analyze the conditions of the lease. “Tenant beware” is always a good strategy to follow, so start by asking questions about key items that may not be explained thoroughly in the lease. These are just a few examples: n Is the floor area computed using the standard method pursuant to The Building Owners and Managers Association guidelines? Furthermore, is the amount of square footage subject to change during the lease term? Believe it or not, leases often give landlords the right to increase the amount of square footage, thereby increasing the rent, if this is not addressed 1.02

during lease negotiations. n Does the lease give you an option to renew the lease at market rates? An even more fundamental question is “What is market?” It’s wise to check in the body of the lease if “market” is simply limited to the rental rate without consideration to concessions of the market at a given time. In today’s tenant’s

market, rental abatement and tenant improvements are certainly some of the standard “market” items that a wise tenant will address. Often the fine print of the option language will state the rental rate is at market. However, if current market is less than the last month’s rent, the new rent will be the higher of the two numbers. Essentially the tenant would be penalized for being an existing tenant unless the option clause is carefully drafted to protect him.

It Pays To Plan Ahead It is easy to overlook significant issues when negotiating a new rental rate. Tenants, for ideal positioning, should start the process 18 to 24 months before a lease expires or notification of an option. The most pressing reason for tenants to address a lease expiration in a timely manner is the “holdover” provision often found at the end of a lease document. This provision outlines

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lease the cost for a tenant remaining in the premises beyond lease expiration, even if he remains in the premises with the landlord’s consent. This holdover cost could run as high as 300% of the last month’s rent, another unforeseen expenditure if the tenant does not protect himself. A tenant may have negotiated aggressively for the high-identity location directly off the elevator lobby. Can the landlord relocate him? Yes. Leases often provide a landlord the right to relocate a tenant at the landlord’s discretion— again an unforeseeable cost, which may be limited or avoided with careful attention to this clause. Keep in mind that a very small amount on the price-per-square-foot can add up to a large sum over the life of a multi-year lease. A mere $.25cent increase in rental rate for 5,000 square feet hits the bottom line with a $75,000.00 increase of occupancy

cost over a five-year lease. Leasing shouldn’t be complicated, but it can get that way very quickly. Your best strategy is to assemble a trusted team of professionals to help you understand your options and obligations, and to make sure your interests are being looked after. •

Sheryl Mazirow, CCIM, is President and founder of Mazirow Commercial, Inc and brings 30 years of expertise in Tenant Representations Services to the table. Ms. Mazirow has been recognized as a “Women of Influence in Commercial Real Estate in Southern California by Real Estate Southern California Magazine, as well as awarded the San Fernando Valley Business Journal Executive of the Year award, and Woman of the Decade award. She also holds the coveted Certified Commercial Investment Member designation from the CCIM Institute, which less than 1% of the world commercial real estate professional achieve. Ms. Mazirow spent 20 years at a national real estate firm gaining invaluable experience. She can be reached at www.tenantadvisory.com.

Negotiating Before a Lease Is Finished client came to us with two years left on his lease. He was interested in staying in the building, but was seeking more favorable terms. We approached the landlord and learned he was anxious not to have the space go vacant in this soft economy. With that in mind, we created a plan that included renegotiating the remainder of the current lease in addition to a new term of lease. Though this is not always possible, in this case we knew the local market and the landlord and believed we could strike a deal. We were able to restructure the lease (reducing the current “over market” rental rate) in exchange for signing a long-term lease. At the same time we achieved all the concessions in the market as though our client was a new tenant to the building. Our client realized a $140,000 cost savings over the existing lease obligation, and the landlord was able to keep the space filled for years to come.—S.M.

three cost-Saving Strategies Here are three proven strategies that can help you lower your cost and make the leasing experience a better one.

Have Good Tenant Representation—It’s Free!

Most business owners don’t realize that signing with a qualified tenant advisor or representative costs you nothing. Much like the sale of residential real estate, a commission is typically structured into the landlord’s rate structure, which pays the tenant representative when a deal is made. This means that not only do you not have to go to the negotiating table alone, you can go with an expert! Good tenant representatives will know the area, the buildings, the landlords, the management companies, the current market status, the lease contract provisions, and much more. Simply put, you would never go to court allowing the opposing council to represent your interests. Why would you go to the lease negotiating table without your own tenant advocate!

Question Everything.

Think Long Term.

Leave nothing to chance. Ask your tenant rep about the area, the building you are interested in, the landlord’s history, and the current market rates. As you get close to a deal, review the lease contract with your tenant advocate and get clarification on any points you don’t understand. They will also talk to the landlord on your behalf and get explanations for anything you don’t understand. (Be sure to have an attorney review any contract before signing.)

Whether you plan on signing a threeyear lease or a 10-year lease, consider your options when that time expires. Do you have a renewal clause? At what rate? Can you add space? Are you able to sublet or assign the lease? Also, when reviewing the lease, think in terms of total costs— everything bundled in. This will help you assess true cost and value to make better long term decisions.—S.M. www.socalprofessional.com

commercial Leasing

LINgO Abatement: Often referred to as free rent or

monies expended to influence or persuade the tenant to sign a lease. Above Building Standard: Upgraded finishes Escalation Clause: A clause in a lease which and specialized designs necessary to provides for a rent increase to reflect changes in accommodate a tenant’s requirements. expenses paid by the landlord, such as real estate As-Is Condition: The tenant accepts the taxes, operating costs, etc. existing condition of the property at the time the Face Rental Rate: The asking price or rental lease is consummated. rate as determined by the landlord. Base Year: Actual operating expenses for a Full Service Gross: An all-inclusive rental rate specified base year, usually the year in which the that includes operating expenses and real estate lease commences. taxes for the first year. Building Classifications: Building Low Rise: A building with fewer than four stories classifications are generally Class A, B, C and above ground level. sometimes D. Class A properties are usually newer Market Rent: The rental income that a property buildings with better would command on the open H O W t O S a V E construction and finish in very market with a landlord and a O N Y O u R N E X t good condition and may offer tenant ready and willing to lease. amenities such as on-site Pass Throughs: A tenant’s pro management or covered rata share of operating expenses parking. As the Class of the paid in addition to the base rent. building decreases, factors Prime Tenant: The major such as age, location or tenant in a building serving to construction of the building attract other, smaller tenants into become less desirable. adjacent space because of the Building Standard: Construction materials and customer traffic generated. finishes that represent a landlord's minimum Renewal Option: A clause giving a tenant the quality standards with respect to tenant finish. right to extend the term of a lease, usually for a Build-Out: Space improvements done per the stated period of time and at a rent amount tenant's specifications. This takes into provided for in the option language. consideration the amount of Tenant Finish Space Plan: A graphic representation of a Allowance provided for in the lease agreement. tenant’s space requirements, including wall and Build-To-Suit: An approach taken to lease door locations, room sizes, and sometimes space by a property owner in which a new building furniture layouts. is designed and constructed per the tenant’s Step-Up Lease: A lease specifying set specifications. increases in rent at set intervals during the term of Comparables: The lease rates and terms of the lease. properties similar in size, construction quality, age, Tenant Improvement: The amount of money use, and typically located within the same subcontributed by the landlord toward tenant market that are used as comparison properties to improvements. The tenant typically pays any of the determine the fair market lease rate for another costs above and beyond this amount. property with similar characteristics. Triple Net (NNN) Rent: A lease in which the Concessions: Cash or cash equivalents tenant pays certain costs associated with a leased expended by the landlord in the form of rental property, which may include property taxes, abatement, additional tenant finish allowance, insurance premiums, repairs, utilities and moving expenses, cabling expenses or other maintenance.—S.M. early occupancy.

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computing Cloud computing is taking the business world by storm. Here’s what you need to know about “the cloud” and your business. BOB GREEN, CPA.CITP

o to My PC” is a product that allows people to sign in to their office PCs from other locations, and is being aggressively promoted through

advertising. This tool may sound like “wow” technology, but it isn’t. In fact, it really reflects the antithesis of what current technology is able to do for businesses. While many point to it as a form of “cloud computing,” cloud technology has come a long way. Despite the outdated technology, older cloud-type products are still used in many businesses. Let’s take a look at a typical business scenario, one told often in today’s business world. My company is not in the IT business but you wouldn’t know it. We actually

manufacture shiny widgets for aerospace. With growing competition, globalization of our offices, and tightened governmental budgets and compliance regulations, our profits are lower on every sale. This is compounded by the growth of our IT spending, year over year. It seems that IT is the one depart-

ment that is immune from cost cutting. It also seems to be an ever-growing fixture in our organization, enabled by the fact that they are not shy about telling us that they are the keepers of all our secrets. My company is spending too much time maintaining and growing an infrastructure of IT staff and everything that comes with it. For example, someone from IT is always doing server and desktop maintenance that interrupts our work. Additionally, my company spends money on software and upgrades for just about everything. From a security perspective, I find it odd that to do my work out in the field I have to be tethered by Internet to my desktop at the office. This means that my PC has to stay on all night. Where is the security in that? www.socalprofessional.com

TECHNOLOGY

away from the office. Recently I was working at home using our new cloud computing software tools, and my computer hard drive crashed. Everything was lost except the work I was doing at the time of the crash because the data wasn’t stored on my machine. Everything was there, just as I left it. When I started working from my son’s PC I was able to pick up right where I left off. This could be your business: A business not held hostage to a growing IT department, and non-budgetable IT spending. A business with a bottom line that has improved with changes to process and technology. Migration to this kind of business model isn’t simple and it isn’t always a happy process, but it is a growing trend among businesses everywhere as improvement, control and better profitability become increasingly important. Quite frankly, unless you’re in the IT business, it’s time to get out of the IT business.

Cloud Computing Facts

Does this scenario sound familiar to you? Should businesses really be perpetuating outdated technology that assumes the comfort of having all your eggs in one desktop basket called your PC? Now let’s contrast it with the emerging scenario, this one fictitious but based on actual experience with clients implementing new cloud technologies. Wow! We all just received bigger bonuses this year. Our CFO told us that even though we’re competing with international companies in the aerospace widget business, our profits have grown this year as we’ve streamlined our processes and improved our governmental compliance. We accomplished this in large part due to our cross-department SOUTHERN CALIFORNIA PROFESSIONAL

teams working collaboratively to improve our business. In the course of doing so, we adopted some very prudent technology practices and adopted a wider use of cloud computing. Our IT department is less than half the size of what it was last year, and our on-going cost of IT and software maintenance is one-third of what it was last year. What I particularly appreciate is that I’m no longer interrupted by our IT folks doing upgrades to the servers, software or my desktop when I am trying to get my work done. Now I can focus more on my work and worry less about when the next interruption will happen. I love using the Internet to run software that works in my browser and feels like Google, Amazon and other familiar tools that I run on my tablet when I’m 1.02

These facts help demonstrate why cloud computing has enabled businesses to become better at what they do and achieve greater profits at the same time: Businesses that focus more on what they do best are usually better than their competitors. Focusing on the latest IT crash or departing IT director should not present much risk, yet today, it does. The solution is not having IT managed by internal IT departments. People are constantly connected to the Internet, and as a result the lines between being connected to work and to personal matters are blurred. Employees love flexibility and want to work from anywhere, anytime. This is a permanent change, particularly with our society’s generational shifts. Cloud computing seamlessly fulfills this need.

IT spending comprises hardware, vendor products and services, and most importantly, IT personnel. These expenditures are becoming increasingly expensive. IT is one of the most ill-managed areas of most businesses. This is because most CFOs and CEOs are not IT specialists, skilled at IT governance, and just don’t have time to focus on it. Consequently, IT is always present, but isn’t well positioned in many organizations. Cloud computing—particularly in the form of Software as a Service (SaaS) which is software delivered by a publisher via an internet browser, is becoming wide-spread, and represents a way to make businesses less dependent on IT, and more focused on its core mission. Using SaaS solutions allows CFOs to budget for the use of technology as they do for rent or electricity. This is because SaaS is paid for based on how much of it a business uses, similar to a utility. True SaaS products include software upgrades and maintenance in the fixed monthly or annual fees they charge. This means no surprise budget-killing expenses that normally accompany running IT departments and in-house hosted software. Security is always a concern. In most cases, having employees work from a SaaS environment is safer than the security provided by in-house networks and labor-heavy IT departments. It only takes one disgruntled internal IT staff to delete all of a business’ confidential data, trade secrets, and financial and personnel records. CEOs and CFOs of growing businesses really don’t like to be held hostage by anyone, but frequently they feel this way by their IT leaders. SaaS products can be managed by business managers that oversee their use in a company, rather than an IT department. Technology should be seen as a way to enable employees to

computing

WHat IS tHE cLOuD? loud computing is a generalized term for the concept of delivering hosted services over the Internet. Cloud services different from a traditional environment in that rather than having an significant infrastructure, platform and software housed at your company or place of business, these activities are housed on the internet, or as the metaphor says, “in the cloud.” For the uninitiated, a first question has to be, “Why?” In general terms, moving the infrastructure and software “off-site” can provide efficiencies of scale. Just as Fed-Ex can do a better job of getting a package to Hong Kong overnight than you and I can, cloud computing (in theory) concentrates the service where it can be actively managed more efficiently. Also, the cloud can grow infinitely, and it can grow quickly, making it very advantageous for growing companies. SaaS, or “software as a service”, is the term specifically for software applications that live in the cloud that you access from your own local terminal. SaaS has the great advantage in that you’re not tethered to an office, but rather access to your software comes through an internet connection, where ever that might be. The one cost to SaaS is that there is, well, cost. You typically pay for the use of services like this by the month or by the year. Cloud computing does not come without potential for problems. The biggest concerned of newcomers to the cloud is that of security. “You mean my data is just going to be floating around out there?” Of course the answer to that is yes, and no. Yes, in that it is “out there” somewhere, but no, if done properly, in that it may actually be more secure than in your own internal system. If you work in a heavily regulated field, such as accounting, law, or medicine, you need to be concerned about security whether it’s in your own system or if you are using the cloud. Developers are rapidly creating powerful new cloud products and the migration for many companies to the cloud is well underway. One last note for business owners: asking your own internal IT department is not always the best way to explore the possibility of cloud computing. IT personnel often see the cloud as a threat to their own jobs, and many an IT manager has shot down cloud initiatives unfairly. A good idea is to engage an independent IT consultant to educate you on how the cloud be a potential solution for your computing needs.—B.G.

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www.socalprofessional.com

We know every business comes with its own unique set of financial needs. Thatâ&#x20AC;&#x2122;s why for over 135 years Bank of the West has been committed to ser ving local businesses. Our experienced and knowledgeable business bankers provide one-on-one consultation to help find the banking solutions that meet your needs. And we follow up with great customer service. Souther n Califor nia Business Banking Group Debra Gentz | (818) 728-3625

ÂŠ2012 Bank of the West. Member FDIC.

computing do their work more effectively. True SaaS products are often the most advanced in terms of functionality and beneficial processes for the tasks that they are intended to handle. This is because they are newer and the publishers can write an ideal software tool from scratch. Most non-SaaS product publishers are forced to constantly deliver upgrades to their clients, and these clients typically have to manually upgrade their systems for an additional cost, and deal with business interruption. It is proven that SaaS products deliver large companylevel process and functionality such as financial reporting and customer marketing at a fraction of what it would cost to implement and support similar technology in-house, on in-house servers.

How Do Businesses Move Into The Cloud? We are often asked how a business should move to the cloud. “One bite at a time,” is often the best way, kind of like the “elephant-eating” joke we’ve all heard. Start with an assessment of what business processes are most vital for managing your business and then determine if there are options available in the SaaS marketplace. Next, determine if the SaaS options can provide greater functionality and benefit, regardless of the technology, compared to your existing computing tools. Additionally consider the cost of switching to a SaaS solution versus keeping your existing solution. After all of this, if you determine that SaaS provides the better options, you may find it is a good time to dip your toes into the cloud world, and

migrate to a SaaS solution. Your firm should also consider if you really need to be serving your employees with email, calendar, contacts, and word processing/spreadsheet software from servers that your IT department manages. Most often the answer is no. Managing email is usually not your business’ core competency. This is usually the first place businesses take advantage of the cloud. You can still have your employees use Outlook if that’s what they are used to; however, even that experience can be internet-delivered quite inexpensively, yet securely, by reputable 3rd third party providers. The return on investment from doing this can be remarkable. Any migration of a computing process to another way of processing is challenging and comes with hiccups, regardless of whether it is cloud-based or not. Prudent and professional planning and execution of any migration is imperative. Be careful to manage these migrations well, and create clear expectations among all parties. In exchange for long-term success, buy-in and transparency among your employees is key, as well as realistic visions about the need to take extra time to make these migrations happen. It is also critical that you pick a SaaS vendor that you can rely on. Security is a concern, since SaaS publishers hold important information about your business. Reputable SaaS publishers provide you with assurances as to their information security practices that they employ. They also guarantee your “uptime” and may even pay you for time when and if they are “down” for an extended period of time. Many SaaS publishers

also allow your business to limit the specific Internet connection locations (like an IP address) that can access their programs on your behalf. If you don’t want people to connect from home or somewhere in particular, you can allow mandatory confirmation of the location from which someone is using the system, before he or she can log in. Password changes can be forced or required, and some products make users answer security questions before they use the program on a computer that has not yet been connected to that program. Tantamount to all of these practices is that a quality SaaS vendor who, by default, also gives you peace-of-mind by enabling a disaster-preparedness contingency benefit for your business, since they back up the systems and data for you, in more than one place. The security of reputable SaaS products is more often far stronger than the security of software and information that you host in your server rooms. As you consider how you can improve the efficiencies, effectiveness and bottom line of your business, consider how cloud computing and especially SaaS, can help you get there sooner, more securely and more sustainably. Cloud is real, it’s popular with employees and it reduces your risk profile in many ways. Most importantly, it allows a business to think more about its mission, and less about IT. •

Bob Green, CPA.CITP is Partner and Practice Leader for SingerLewak’s Enterprise Risk Management Services practice. Executives of growing businesses rely on Bob and ERMS to mitigate the risks inherent in the use of information systems. In 2010, Bob oversaw the birth of SingerLewak Systems—a Cloud Computing advisory services group, a business partner of various SaaS offerings, including Intacct and Avectra software. www.socalprofessional.com

Leading Consciously. Living Consciously.â&#x201E;˘

MEDIA MATTERS SOCIAL MEDIA BY JERRI HEMSWORTH

FacedIn, LinkBook, Twitrest & Pintwit: Who’s Doing What? Here’s a rundown on what’s happening in the world of Internet, mobile and social media. Valuation FACEBOOK AT $90+ BILLION

As of our release date for this issue, Facebook was in the final prep stages for its initial public offering (IPO), and puts valuation on the social media site a little north of $90 billion. Investment experts are predicting this will add about $17 billion to Mark Zuckerberg’s personal worth.

Going Mobile Global Cell Phone Subscriptions: 6 million Mobile Web Users Worldwide: 1.2 billion Percent of Global Website Hits from Mobile Devices: 8.49% Global Mobile Advertising Revenue in 2010: $1.6 billion Global Mobile Advertising Revenue in 2015 (est.): $20.6 billion * Source: mobithinking.com

Ones To Watch TUMBLR.COM

This microblog social network platform is a real upand-comer. Launched in 2007, Tumblr is now averaging 13 billion views per month (yes, billion with a “B”). Why do people like it? Users say it’s like all the others rolled into one easy-to-use site, it’s app friendly, and best of all, it’s cool. PINTEREST.COM

Pinterest takes the ease of photo posting from Instagram and combines it with the posting of comments like the Facebook “wall,” to create a surprisingly new and fun social experience. On paper, it doesn’t sound

like much (what social media does?) but users seem to get addicted very quickly. You can “pin” images, websites, and just about any content to your “pinboards” in a virtual bulletin board environment. Companies are quickly jumping on the Pinterest bandwagon, and while not confirmed yet, some Internet reporting agencies are indicating Pinterest, which was a startup in 2009, may already be the third largest social network in the U.S.

Global Social Media WORLD’S BIGGEST SOCIAL SITES (estimated users)

Facebook: 900 million YouTube: 789 million QZone (mainland China): 480 million Twitter: 300 million Habbo (global, launched in Finland): 200 million Google+: 170 million • www.socalprofessional.com

ONE L O C A T I O N . OUT OF THI S W O R L D .

BUSINESS EFFICIENCY BY SANDY ALLAN

Is Outsourcing An Option For Your Business?

Juggling calls, shipping and staffing on your own will stress even the most seasoned business owner. Here are nine ways to help eleviate the day-to-day burden.

hether you are just opening a new business, or are already established and need to do some budgetcrunching, there are several options to consider and decisions to make.

As a business owner who is constantly juggling and ensuring the right business decisions are made, your biggest goal is to have your products or services benefit clients and customers in a way that differentiates your company from your competitors. These days, a new company is typically a one- or twoperson operation that attempts to effectively cover all aspects of running a business. More often than not, this is the first step toward failure. Many of us know firsthand that a bad customer experience is extremely hard to erase. Delays in customer order deliveries, customer service phones that go unanswered, a website that does not represent a new company appropriately are all instances that make a bad, yet crucial, first impression. A great customer experience sets your new business apart from other companies. An established company can face the same struggles. A large time-sensitive project, employee turnover, and/or extremely high overhead expenses will all have an impact on the work that must get done and the deadlines met. On top of all that, the revenues are not absorbed in the day-to-day operations. What needs to be done for both new and established companies is to provide a benefit to your customers that is not offered by your competitors. Outsourcing many of your day-to-day operational functions can help resolve these issues.

time and efforts to marketing and building your business. You can relax knowing that customers will experience prompt and professional service. The responsibility of hiring, educating and maintaining a professional customer service department in your company is eliminated; itâ&#x20AC;&#x2122;s now the responsibility of the outsourced call center management. Think about the expenses that are eliminated when contracting such a service:

No staffing and management wages.

Salaries are one of the largest expenses incurred by business owners. This includes the time needed to interview, hire, educate and even replace employees. Employee turnover and absences result in this being a continuous cycle and expense.

No employee benefit expenses. The cost

of employee benefits equals an average of 29% expense over and above the actual wages paid.

Outsourcing Your Call Center The support of an outsourced call center can provide consistent and continued customer service, no matter what size your company is. This allows you to devote your

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No office space, telephone, or systems overhead expenses. To effec-

tively manage customer calls, a system is required that can direct and manage large volumes of calls.

No excessive customer wait times during high-volume call periods.

Centers have the flexibility to increase staffing during peaks in call volumes much easier than you adding staff in your business.

No lost calls during emergency situations. An effective outsourced call center

maintains business continuation during emergency situations.

Outsourcing Product Fulfillment Another valuable outsourcing option is product fulfillment. Whether your business is brick and mortar or an online business, your product orders MUST be shipped in a timely manner in order to provide a benefit to your customer. Once more, think about the expenses that are eliminated or reduced when contracting such a service:

Reduced warehouse expense for housing your product. Normally the charge

for floor space in an outsourced warehouse is far less expensive than you would pay to lease or purchase your own warehouse. This is a result of expenses being shared across all of the outsourced fulfillment clients.

Reduced shipping expenses. An effec-

tive outsourced fulfillment center will provide the best options for shipping your product. They can protect against any losses due to damage of lost shipments.

The outsourced center is able to order shipping materials in bulk, thus reducing your cost of raw materials and postage.

No mailroom staff wages. You pay for the

Reduced or eliminated customer complaints due to unfulfilled orders. A

processing and shipping of orders. When there are orders, you won’t have employees sitting around on no the clock waiting for something to happen.

quality fulfillment center normally ships orders on the day they arrive or the next business day. While some fulfillment centers will have an early afternoon cut-off time for processing orders, look for the fulfillment centers that will ship orders up to 4 p.m. PST, so the majority of the orders received are out the door the same day. There are multiple savings in time, money and stress from outsourcing operational functions. Can you think of good reasons why you should NOT outsource those day-to-day functions that can take you away from your successes? •

Sandy Allan is the President & CEO of Technology & Operational Solutions, Inc., a U.S.-based call center and product fulfillment outsourcer. Based in Simi Valley, Calif., TOpS provides outsourced support for other businesses with call centers, product fulfillment, warehousing, direct mail, email blasts, IT and virtual assistant programs. Their mission is to provide the utmost in excellent customer service while delivering cost and time efficiencies for their clients. Sandy can be reached at www.tops-us.com or 888-462-8677.

Other Beneﬁts Of Outsourcing Focus on core activities and competencies. You spend your time on activities that are beneficial to your business growth, such as the marketing and sales of your product, in addition to those things that you do best.

Retain operational control. While you have the control of the operations as the business owner, you are passing the operational functions to an outsourcer to manage the day-to-day operations.

SOUTHERN CALIFORNIA PROFESSIONAL

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Development of internal staff. The staff you have inhouse will be able to focus on the core activities that aid in the success and growth of your company.

Technology and systems requirements. We all know how these expenses can skyrocket. Outsourcing can help control and relieve the burden of constantly paying for these expenses.—S.A.

NAWBO Is Where Women Business Owners Really Click.

If you are a woman business owner in California, there is only one place where you can meet other women business owners facing the same issues as you...NAWBO. Visit www.nawbo-ca.org to find out how you can join one of the nine chapters throughout California.

Inland Empire Los Angeles Orange County Sacramento San Diego San Francisco Santa Barbara Silicon Valley Ventura County

Owners of California Business. Power. Influence.â&#x201E;˘