Business Tips Guides

Before even asking questions about what wealth managers do and where to find one, most people will want to know if wealth management is even relevant for their business. Below are common questions, and answers, about wealth managers.

DO YOU NEED ONE?
You don’t have to have to be a Rockefeller to secure the services of a wealth manager. Any business owner who is about to have a “liquidity event” should seriously consider retaining a wealth manager.

WHAT DO THEY DO?
Wealth management is a high-touch, high-service approach to managing all things financial. A wealth advisor works with a team of experts on banking and insurance, works with a client’s attorney on issues such as power of attorney and wills, manages the client’s investments. In an a la carte approach, what ends up happening is that the left hand doesn’t talk to the right hand. The concept of a wealth manager is to have one person manage the team. Wealth management can even include a ‘family office’ where the wealth manager takes care of all the client’s financial problems or situations, perhaps obtaining mortgages or loans for them and paying bills. So even though you probably work with a financial professional, you just might be short-changing yourself if you haven’t investigated working with a wealth manager.

WEALTH MANAGEMENT ISN’T JUST ABOUT RETIREMENT.
With the sale of your business, your focus shifts. The focus of wealth management is also shifting from the accumulation of assets to the distribution of assets. Things to consider are how to pass your assets on to the next generation. Do you want them to inherit all at once or over a period of time? If you have a child with special needs, how will you protect the assets of that child? Should you set up a charitable trust? Remember, you are not just protecting your assets for yourself and perhaps a spouse, but also for your children and even for future generations, or charities.

WHY YOU SHOULD STAERT LOOKING NOW
The biggest mistake is that families and business owners wait too long before they start the process. Once you already have a successful business or you’ve sold a business, many strategies that would have been available to you are no longer available, or they are not as effective. Say you have two children who are working in the business, for example, and you want to start giving them a quarter of the business in stock. Giving a quarter of the business when it is worth $2 million can be done without paying any gift tax, but giving them a quarter of the business when it is worth $10 million cannot be done without paying gift tax.

QUESTIONS TO ASK A WEALTH MANAGER
Services Do they offer comprehensive services? Is it all in-house? Do they have strategic partnerships with other folks? How do they work with the client’s accountant or the client’s attorney? What do they do about coordinating banking services? You should feel that the advisor could actually advise you personally on several of those different issues or have a team of experts available to do that. Also look at how the routine reports and information is presented, to make sure it fits your preferences. Competence You also want to look at an advisor’s designations–Certified Financial Planner, Chartered Financial Analyst, Certified Public Account–and the experience and skill sets of the others on the team. Fees There is no industry standard regarding compensation, regarding the amount charged as well as how fees are structured. Fees can be based as a percent of assets managed, by the hour, by the year, and so forth. As in most purchase decisions, price is usually not the primary determining factor.

Mark Heitner, MD, MBA, the founder of MidMEx, is a psychiatrist, author and software developer. Many patients have been owners of mid-sized companies with a business for sale. MidMEx helps sellers by creating a supportive community of verified buyers and expert business appraisers, brokers and attorneys. Many resources are available to help owners sell the business.

Personal events involving the owners or senior management are what usually raise the question: is it time to sell the company. For the most part, the decision to sell is made for personal reasons. We discuss the most common reasons for a sale and goals of a sale below.

1) Fatigue: the owner-CEO wears several hats. After many years, some parts of the job remain enjoyable, but others are a burden. Many CEOs would like to stay active in the business, but want to devote energy only to the tasks that are in his or her “sweet spot”. One solution is to bring in a co-owner/senior manager who will one day assume complete control of the company.

2) Illness: both acute and chronic, progressive illness impact a CEO’s motivation and ability.

3) Pressure from spouse: the owner’s or CEO’s spouse may push the owner to move on to the next phase of life. Or a divorce may require liquidation of the owner’s holdings.

Pressure from heirs: Heirs, whether they intend to assume management of the firm or not, may be eager to enjoy a liquidity event. Heirs may have expressed disinterest in assuming management positions in the firm. Succession planning within the family may not be an option.

Pressure from other owners: often middle market companies have multiple owners. A number of them might like their stake liquidated, before or along with the majority owner.

4) Retirement planning: the owner may be ready to start retirement. Likewise, the non-owner CEO may be ready to retire, and the owner may not relish the job of hiring and training a replacement.

5) Business opportunity: owners may see other more lucrative business opportunities in other fields, and may need to liquidate their holding sot raise funding for the next company. Owners may wants capital to expand: owners may be interested in expanding the business, and are most interested in equity financing than in debt financing.

There is a range of buyers for each of these scenarios. Financial buyers, for example, will insist that senior management stay for a period of one - three years to help facilitate the transition. This is not an empty consulting role, but a meaningful management role. Other buyers will want to buy the company with the expectation that senior management will be largely replaced. Some buyers desire a minority position, others a majority, while others want 100% of the assets.

The critical factor in closing these transactions is for owners to be clear about their actual goals in selling or recapitalizing. Nothing frustrates buyers more completely than a seller who isn’t sure what he or she actually wants. As the middle market becomes more efficient, more buyers will be interested in acquiring your company. Besides valuation, the most sensitive deal term will involve the future roles that current management might play. All the more reason to have this issue well thought about before listing the company for sale.

Mark Heitner, MD, MBA, the founder of MidMEx, is a psychiatrist, author and software developer. Many patients have been owners of mid-sized companies with a business for sale. MidMEx helps sellers by creating a supportive community of verified buyers and expert business appraisers, brokers and attorneys. Many resources are available to help owners sell the business.

Managing cash flow has always been a bit of a headache for small businesses when taking care of their business banking. Customers often leave payments until the last minute or even overdue and this means that forward planning with money management is near on impossible.

Many small businesses leave financial planning and tax matters until the last minute because of this which can cause problems and incur financial penalties for the 35% of companies that miss deadlines through this practice.

However, there are things that the small business owner can do to simplify his business banking and even make themselves that little bit richer.

Changes being phased in as part of the new banking code governing small and medium enterprises (SME’s) mean that once a business cheque is paid you, you can be sure it will be cleared within six days. This will enable financial planning to run a little more smoothly and company bosses can rest assured that that cheque will not bounce.

Many businesses, particularly small ones, organise their business banking by setting up their current account and putting all finances through this with no further consideration as to how it can work for them. With a significant amount of money in a SME current account, it would be better to pay it into a business deposit account.

With a minimum deposit of 50,000, pounds interest rates are much more attractive and your money will grow without you having to touch it. Banks offer a fixed rate of interest for a fixed term on a ‘Term of Time’ deposit. The longer you can afford to have your money tied up for, the better the interest rate.

If you are not keen on having your money completely inaccessible for any length of time, try incorporating a ‘Restricted Access Deposit Account’ in your business banking. This will offer a better interest rate than your average current account and will allow you a limited amount of withdrawals before incurring penalty charges.

When it comes to SME’s, it is reported that only four of the high street banks hold up to 90% of the business banking accounts. With complicated systems for switching between banks and very little incentive to do so, competition has been weak. In fact, only 8% of small businesses had moved their business banking account in the last three years.

On top of this, price controls were set in place by the Competition Commission after investigations into the SME banking market in 2003.

An Office of Fair Trading study has revealed that there really needs to be more competition in the business banking market to ensure customers are getting the best deal with the choice to shop around.

Price controls are now to be lifted with banks still under an obligation to advertise and inform their account holders of any price changes. The process of switching your business banking to a different bank has also been made easier and banks will now have to work harder to keep your custom.

So, with all these new measures in place, business banking should be simpler, more competitive and more profitable.

Expert banker Catherine Harvey looks at some of the answers to business banking difficulties. To find out more please visit http://www.lloydstsbbusiness.com/accounts/index.asp/

Fire exits should be strategically located, with an outward opening door that has a crash bar and outward leading signs on it. Knowing where to find the emergency exits in a building that you frequent can save your life. Inward opening, rotating and sliding doors are unacceptable for use as fire exits, as they might need to be fixed open using a latch or chain if the door is needed as an exit route.

In the UK, one exit is satisfactory for buildings where no more than 60 people work, as long as that the building is on the ground floor level only. The outsides of fire exits need to be kept clear and marked with a suitable keep clear sign. Whenever the building is in use, the exits should be well lit by normal mains lighting. Once your workplace follows a course of scheduled assessment, unsafe conditions can be recognized and corrected before they cause serious injuries.

Learn the location of fire escape routes and how to set off the fire alarm. It might be necessary to make available “refuge points” for disabled or elderly persons to wait for assistance in some larger buildings. You should also remember staircase exits, since elevators may not function during a fire, or may expose passengers to gas, heat or smoke.

It is important that there be sufficient and adequate fire exits so that people can safely and swiftly leave the building without being put in any danger should there be an outbreak of fire. The combined use of ordinary and special fire exits allows for quicker mass departure, while it also gives another option if the route to the usual exit is blocked by fire, etc.

The number of people who could potentially use the exit, together with several other factors, will decide the amount of fire exits used in any situation. Fire exits should be spread around the building so ensuring that people can reach a safe exit route. Fire exit routes must be kept clear at all times. Fire protection measures can include the installation of fire doors, a common sight in larger buildings.

Having a sound escape plan will greatly reduce fire deaths and protect you and your employees’ safety if fire occurs. Remember, in the event of a fire, time is the biggest enemy and every second counts! Practice escape plans at least twice per year. Designate a meeting location at least 500 feet away from the building, but not necessarily across the street. Remember to escape first, and then notify the fire service.

Small Fire Procedures
If a minor fire appears controllable, do the following:
1. Avoid personal injury and extreme risks
2. Warn people in the immediate area and set off the alarm
3. Call the fire brigade
4. Smother fire or use the nearest fire extinguisher
5. Always maintain a way to leave the room

Immediately notify the fire brigade if the fire seems unmanageable, and then vacate all rooms, closing all doors to confine the fire and reduce oxygen. Follow your evacuation plan and walk quickly to the nearest marked exit and ask others to do the same. Assist the handicapped in leaving the building. If requested, help the emergency crews as necessary. Do not return to an evacuated building until the emergency crew pronounces that it is safe to do so.

Each workplace building should have at least two separate means of escape. The local fire brigade should from time to time make a plant walk-through to check on fire safety, and to ensure that fire exits are located far enough from each other that a fire in one area won’t block both or all exits. Fire exits must never be locked or blocked when people are working in the building.

Information on fire fighting equipment and fire extinguishers for home or commercial use

As the volume of business transacted between the developing and developed world businesses grows, so too does the need for a fair and efficient process for resolving disputes arising therefrom. Frequently, American businesses demand that an arbitration clause be included in business contracts so that any dispute will be resolved in a United States arbitration forum. Developing world businesses might be suspicious of this demand and assume that the process must favor the U.S. party: Why else would a U.S. Fortune 500 company demand arbitration under the auspices of an American arbitration organization?

A closer look, however, reveals that American arbitration can offer several advantages for the developing world business, among them, flexibility, efficiency, fairness and knowledgeable adjudicators. However, these advantages are attainable only if the developing country business identifies its particular needs and negotiates a process that meets them.

U.S. LAW SUPPORTS AND ENCOURAGES ARBITRATION

The United States is several decades ahead of most other countries in developing an arbitration system that courts and the business community trust and support. Over the last half century, laws have been enacted and courts have issued rulings that encourage parties to resolve their business disputes through arbitration. American courts read arbitration clauses broadly and routinely enforce them. American courts rarely overturn an arbitral result, doing so only where fraud or some other extreme deficiency has corrupted the process. Finally, U.S. courts generally enforce arbitral awards, giving it the same dignity and legitimacy as a court-entered judgment.

ARBITRATORS ARE OFTEN MORE KNOWLEDGEABLE AND OBJECTIVE THAN JUDGES OR JURIES

A non-American party might be suspicious of arbitration under the auspices of an American arbitration organization such as the American Arbitration Association, believing that rules must favor Americans and that the arbitrators will have a nationalistic bias in favor of the U.S. party. This is by no means inevitable. Just because an arbitration is brought under the auspices of a U.S. based arbitration organization, does not necessarily mean that the arbitrators will be American nationals. The parties could agree before or after a dispute arises that one or all of the arbitrators will be non-American; alternatively, a party can use any preemptory challenges it has to strike American arbitrators during the arbitrator selection process.

Moreover, most international arbitrators (of whatever nationality) know that if they gain a reputation for favoring American (or any other nationality’s) businesses they will likely not be asked to arbitrate again. By contrast, an American judge is fully employed with cases regardless of how he treats foreigners, and his chances of reappointment or reelection will, if anything, be enhanced by ruling in favor of U.S. nationals vis a vis foreign nationals. Juries too will most likely be much more parochial than international arbitrators.

DEVISE A PROCESS RIGHT FOR YOU

In deciding to arbitrate the parties chose to opt-out of litigation — a one size fits all system administered by courts and government bureaucrats — and into a privately devised system, which they can tailor to their particular needs. For instance, if the parties’ transaction concerns the manufacture of ball bearings, they might agree that at least one of the arbitrators has some experience in the manufacturing of ball bearings. Or if they do not have the financial wherewithal to pay lawyers and arbitrators hundreds of thousands of dollars, they may wish to streamline the process by providing for only one arbitrator (rather than the normal three), by limiting the time each party has to present its case, by prohibiting the taking of pre-hearing testimony, or by eliminating pre-hearing discovery completely. Of course, if the transaction is worth hundreds of millions, or billions of dollars, then the parties can devise a process that provides for three arbitrators, all with extensive experience in handling such arbitrations or expertise in the industry, and for quite extensive pre-hearing discovery.

CONCLUSION

The American arbitration system is by no means perfect, but it has proven in many instances to be far superior to litigation in the courts, and this is true both for American and non-American parties. Thus, when an American company suggests arbitration in the United States, a developing country party should not necessarily resist. Rather it should seek to negotiate rules for the arbitration process that fit its particular needs.

Robert Y. Lewis is a founding partner of Freeman Lewis LLP, a business litigation and arbitration law firm in New York City. et more information about the arbitration process at http://www.freemanlewis.com.

Business Owner Burnout (BOB) is the most common reason for business owners to consider selling their businesses. Most owners do not have their businesses ready to sell when burnout has finally taken its toll. And business owners who do succumb to BOB usually take a significant financial loss.

How can you learn to protect yourself from the ravages of “BOB” Syndrome? The first step is to begin looking at your business in a completely different light. Your business is like a wheelbarrow: If you want it to go somewhere, you have to pick it up and push. But it takes energy to push a business. Physical, emotional and economic energy may be in short supply when they are needed most. What can be done to ensure an adequate supply of these essentials when they are most needed?

The secret may be found when we ask ourselves important questions about our own businesses–long before we reach the burnout stage. For example: