Does Your Company Need a Research and Development Team?

If you’re a big company that depends on growth and finding new revenue streams, it can be very important to have one. Read on to learn what goes into building a research and development wing in your business.

By Geoff Williams

Do you think your business needs a research and development department? That may be a sign that it’s time you started one—or at least started seriously thinking about it.

After all, if your company sells products and services, those products and services aren’t going to materialize out of thin air. You may need to devote money, time and resources to inventing them.

So if you’re exploring the idea of starting an R&D department, you may want to consider trying these steps.

1. Think about the size and scope of your research and development department.

According to brand consultant Peter Friederichsen, having some sort of research and development department can be beneficial. (Friederichsen is also partner at the Blake Project, a brand strategy consultancy headquartered in Westlake Village, California.)

“[Management consultant and author] Peter Drucker once observed that the only purpose of business is to create a customer,” he says, “therefore the two most important functions a business has are marketing and innovation. The rest is just overhead. So every business needs R&D to some degree in order to continue to innovate.”

Research and development can certainly be vital to the health of some companies. These companies use their departments to create products and services that can end up generating millions, if not more, in new revenue. If it wasn’t so important, companies wouldn’t invest as much as they do in R&D.

According to the data gathered by financial research company FactSet and supplied by a FactSet representative, spent the most on R&D in 2017: $16.1 billion. Plenty of other firms are spending billions, too: Intel spent $12.7 billion on R&D, while Microsoft spent $12.3, Johnson & Johnson, $9 billion and Ford, $7 billion.

If you own a small accounting firm staffed with three accountants, you might not be in the position to hire another two or three people to run a research and development team, much less spend billions on R&D. But you can still could devote some time and money to R&D.

There are plenty of informal ways of having a research and development team.

In the example of the small accounting firm, that can look like:

  • staying on top of customer trends, by, say, attending an industry conference once a year.
  • discussing with your employees once a month how customers and trends are changing.
  • collecting and organizing feedback from your customers.

“Every business should consider R&D,” says James Cassel, co-founder of the investment banking firm Cassel Salpeter, based out of Miami. “Even a company like a restaurant might want to develop new recipes or technology to better operate, innovate or simply cut its costs.”

2. Ask yourself how much funding you want to devote to your R&D.

“Different categories have different needs for R&D,” Friederichsen says. “Obviously electronics, technology or pharmaceuticals will always have a greater need than many other categories and will spend more against that in their business plan.”

Marketing can be a form of research and development, if you’re using marketing dollars to learn more about your consumer (think: focus groups).

“Small companies should allocate at least 1 to 2 percent of their marketing budget against ongoing research to their target, to make sure they stay on target and are aware of and addressing changing needs of their customers,” he suggests.

But there really isn’t a formula to help you determine how much your company should spend on research and development.

“Every business is different, and different industries can afford varying amounts,” Cassel says. “There are no given set of numbers that will fit every circumstance as to how many people or how much money a company should spend towards R&D.

“The important point,” he continues, “is to spend on it and not be left behind. Companies need to innovate, and they shouldn’t need to go outside the company to buy or license everything they need.”

3. Check with your tax accountant.

You may be eligible for the research and development tax credit, also known as the research and experimentation tax credit, which has been around since 1981.

According to the HR technology and payroll firm Gusto, which analyzed over 60,000 businesses from June 15, 2017 to April 16, 2018, the average federal R&D tax credit claim for Gusto customers was $31,890.

The same report also noted that while tech companies are the top claimants of the federal R&D tax credit on Gusto’s platform, numerous non-tech firms also routinely claim the credit, such as furniture stores and wholesalers.

Interested in the credit, but aren’t sure you qualify? Take heart: You don’t need an official research and development department to get the credit.

“The research and experimentation tax credit is a general business tax credit for companies that spend resources on research and development costs in the United States,” says Paul Joseph, a certified public accountant at Joseph & Joseph Tax and Payroll in Williamston, Michigan.

“There are a number of exclusions to the research and development credit and each individual company may qualify for the general tax credit,” he continues, “however, you should consult with a tax professional to determine whether or not an exclusion applies.”

That’s a good idea. There’s a special formula involved to come up with the dollar amount for the credit, which includes wages, cost of supplies, your overhead and other expenses. Unless you own a tax accounting firm and are an expert on these sorts of things, you may want a tax accountant or software to help guide your credit claim.

4. Make sure your R&D’s goals are identifiable and measurable.

As Nancy Shenker, CEO of theONswitch, a marketing firm in Scottsdale, Arizona, says, “You need to define what research means for your organization. Understanding and tracking trends or competition? Analyzing your current customer base?… Knowing what questions you’re asking, and why, is the first and most important step.”

Whatever your goals are, it’s important to make sure the people running research and development have a mission. It’s easy for a team to lose focus when a lot of time is spent brainstorming and being told, “Hey, if you fail, that’s okay, because it’s all part of the experimentation process.”

Don’t misunderstand: All of that encouragement—and being fine with ideas flopping—can be helpful. After all, a research and development team needs to take creative risks to come up with useful ideas; failure and a lot of dead ends and false starts are often part of the innovation process.

That said…”Hold R&D as accountable as every other department,” says Jan Bednar, CEO of ShipMonk, a fulfillment and shipping company based in Deerfield Beach, Florida.

“Obviously, R&D has different KPIs [key performance indicators] than your marketing, sales or customer support departments, but the team still updates me on their progress weekly along with every other department,” Bednar says. “This way, we can eliminate navel-gazing and ensure that we are moving forward towards the path to long-term solutions.”

It’s all too easy to imagine your research and development department as a place where money and time go to die. But as you saw earlier, some of the biggest and most successful companies generally have people working on R&D. If you’re able to create a successful research and development department, someday you may wonder how your company managed without one.

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40 Under 40 Class of 2018 reveal Part 3: Here are the next 10

By Emon Reiser

Philip Cassel Director Cassel Salpeter & Co.

Here it is: The third installment of the South Florida Business Journal’s 2018 Class of 40 Under 40 honorees.

This year, we are announcing the honorees in four installments. We announced the first 10 on June 22the second 10 on June 25 and will reveal the final 10 on June 27. Honorees are revealed in random order.

See the third set of 10 honorees in the gallery above.

SFBJ received hundreds of nominations for our 40 Under 40 program.

The 40 Under 40 Awards recognize young professionals in Broward, Miami-Dade and Palm Beach counties for outstanding success and contributions to their community. They were selected from hundreds of nominations and represent some the region’s most entrepreneurial and influential young leaders.

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Is the decline in truth, accountability in Washington lowering standards for ethics in middle-market businesses?

By James S. Cassel

As the definition of truthfulness and the standards for personal accountability continue to decline in our nation’s capital, and many do not seem to care, are similar patterns trickling into middle-market businesses? Is it becoming more acceptable to have 50 shades of truth in business dealings?

Recent news reports of comments by 60 Minutes correspondent Lesley Stahl that President Donald Trump admitted to attacking the media to “discredit” journalists and minimize negative stories about himself are making these questions more pressing today. With our President publicly calling one of the leaders of our closest allies “dishonest,” who would have thought? Further intensifying matters, others around the President are reportedly following suit. Sometimes, after they learn what they said is not true, they seemingly fail to acknowledge or rectify their mistakes. They even double down! One wonders how anyone doing this could sleep at night. What lessons are our children learning?

It seems that years back the traditional values of integrity and honesty were more important than today, which is quite sad. Where is Honest Abe when we need him?

So, what should we do if we catch employees telling half-truths, some of which we know are deliberately fudged or outright lies? I never would have imagined myself having to dedicate a column to a topic that should be common sense, but unfortunately our nation’s current state of affairs leaves me no choice.

First, let us be clear: Our word should be paramount. It is not OK to be dishonest, lie or misrepresent the truth in any way. Honesty in business dealings starts at the top of a company and is set by example.

If one of our employees did to us what some members of our current administration are doing, would we give a warning or fire him or her outright? Of course, before doing anything, we should check with our human resources departments and legal counsel to help ensure we take the appropriate corrective measures to not create exposure or liability.

As it pertains to our clients: Is it OK for employees to make promises they know they cannot deliver? Is there a distinction between when they are lying to themselves versus lying to us or our clients? Simply put, any form of misrepresentation or alteration of the truth to clients is never acceptable. No matter how difficult, it is always best to deal with others with honesty, transparency and authenticity. In addition to it being the ethical and moral thing to do, it is also good for business — because ultimately, people find out and their trust in us deteriorates or is irreparably lost, which will hurt our business.

There is a big difference between a mistake and a lie. How should mistakes be handled? Again, it goes back to traditional values: Take ownership, apologize and do whatever is necessary to fix the problem and prevent it from happening again. Taking ownership and apologizing defuses the situation and helps us retain something priceless: our reputation and credibility. Additionally, in the event of a serious misrepresentation, including one that might involve criminal offenses, proactively taking the right steps such as immediately seeking legal counsel and notifying the authorities can reduce the penalties and/or jail time. The news is riddled with examples of high-profile business leaders brought down by wrongful acts that were further intensified by attempted cover-ups.

Without a doubt, as social media and sites like Glassdoor continue to put businesses in a glass house, it is critical to dress the part and follow the right protocols.

Regardless of what may be happening in our government, business owners should always do the right thing and heed the wise words of our mothers who told us that “honesty is the best policy.”

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19 Small Business Trends and Predictions for 2018

By Adam C. Uzialko

As we near the end of the second quarter of 2018, it’s important to take stock of how the year has panned out for businesses. Whether in the realms of technology, marketing, finance or public policy, this year has held some unexpected developments, as well as the continuation of some ongoing trends. Where do we stand today, and where might we be heading tomorrow?

Business News Daily got in touch to find out some of the major things on businesses’ radars. Here are 19 key ideas, trends, and predictions to keep in mind to make the most of the second half of 2018, for both your business and your customers.

Technology and cybersecurity

A shift in IT spending: “A significant number of enterprises will begin to invest in a dedicated security operations center as part of the shift away from prevention towards detection and response … Hybrid security offerings combining on-premise and SaaS/Cloud solutions will become the dominant architecture with customers beginning to integrate these offerings.” – Prakash Nagpal, vice president of Infoblox.

The rise of the sharing economy: “Digitization and the sharing economy will disrupt more industries. Already, retail (Amazon), automotive (Uber and Zipcar), and the server market (Google, Amazon) have been disrupted – and we have had two years without another major industry being disrupted. Given this, financial services and healthcare are ripe for disruption.” – Prakash Nagpal

Marketing and advertising

The personalization of marketing: “Marketing is becoming increasingly personal, and this trend will keep going as we move into the new year. No longer will stock images, generic nurturing campaigns, or impersonal calls to action convince consumers. In order to succeed, you’ll have to provide high- value and personalized content every step of the way.” – Harrison Doan, director of analytics at Saatva.

Modern marketing tools make personalization possible: “While email marketing has traditionally been a one-to-many medium, it’s a great example of this trend being brought to life as we continue to see an increased focus on more customized messaging. A major catalyst behind this shift toward one-to- one has been advances in personalization technology, especially click segmentation. Personalizing email marketing is especially valuable because small businesses often have a variety of products, yet not every offering will necessarily appeal to every customer on an email list.” – Dave Charest, director of content marketing at Constant Contact

AI will emerge as a critical marketing tool: “In the past executives may have tinkered with AI to schedule their calendars, but 2018 will see the end of the experimental phase and the beginning of applying artificial intelligence to solve the most soul-crushing marketing problems. For example, conversational AI companies like Conversica will make it possible for PR companies to harness conversational AI for lead nurturing and finding new clients. CRM companies like Helpshift will streamline customer service. AI however will not replace traditional media relations. Journalists deserve a human touch that AI will not yet be able to mimic.” – Curtis Sparrer, principal at Bospar PR

Social advertising will become more competitive: “For paid social ads in Facebook, the 2018 landscape will continue to get far more competitive. Facebook advertising is still in its ‘Golden Age,’ but the company is growing the number of advertisers at a very rapid pace. While large companies jumped on the Facebook ad bandwagon some time ago, there is significant long-tail growth among SMBs which still have not embraced Facebook ads fully and the vast majority are not advertising there. The end result of this, Facebook will continue to accelerate the number of advertisers it has with SMBs and CPM and CPC costs will rise for all Facebook advertisers.” – Toby Danylchuk, co- founder of 39 Celsius Web Marketing

There will be growth in small business cross-channel marketing: ” Very few small businesses today do any sort of cross-channel strategic advertising. Many owners even have separate vendors for Facebook, Google, web content, web maintenance, etc. Large brands do this rather well, and I believe … we will see small businesses utilizing integrated strategies – and these small businesses will outperform their competitors.” – Bil Gaines, digital marketing director of Custom Creatives


The economy is doing well, but tariffs create uncertainty: “The economy is in very good shape right now. It appears that we can absorb two or three more quarter-point interest rate hikes before year-end without any great material negative effect. However, the uncertainty around tariffs and the impending trade war could change that outlook.” – James Cassel, co-founder and chairman of Cassel Salpeter investment banking firm

The deficit must be addressed: “At present, nobody is talking about the deficit. With the recent tax cut increasing the deficit substantially, the increased borrowing needed to fund the deficit will ultimately become a problem. To reduce the deficit going forward, either taxes will have to increase, or alternatively, expenses will have to be reduced.” – James Cassel

Banking models will begin a radical shift: “Millennials want to bank wherever they want and whenever they want, which does not align with the traditional banking model. It’s predicted that digital banking will grow to more than 2 billion users by 2020. As a result of this shift, the traditional brick-and-mortar banking solution will be replaced with a technology first- mindset. In essence, your wallet will be your phone.” – Dave Mitchell, president of NYMBUS

Speed is key in modern banking: “The banking channel will strive for speed. Lending, banking services, statement processing and other banking channel players are scrambling to get online and get faster. We expect the scramble to continue as the industry seeks to eliminate middle men – like brokers – and better serve their customers.” – Vernon Tirey, co-founder and CEO of LeaseQ

Mobile banking means more mobile cyberattacks: “All are experiencing a big increase in attacks on their mobile banking and transactions. Expect that to continue. Approximately 80 percent of financial institutions’ customers are doing online banking, 50 percent are on mobile and that’s growing. More customers equals more opportunity for attacks.” – John Gunn, CMO of OneSpan

Artificial intelligence and machine learning

Machine learning and Blockchain will grow more prominent: “Two of the most interesting IoT developments to emerge [recently], with the most potential for innovation, were blockchain and machine learning. They likely won’t go straight to market … [this] year – we’ll likely see more proofs of concept instead – but, we have seen some fascinating PoCs already.” – Mike Bell, chief technology officer of Laird

Machine learning will become more responsive in customer service: “Machine learning will play a bigger role in sales and customer support. Lower costs and increased availability of speech analytics tools mean more businesses will record and monitor calls within their contact centers. Instead of simply guiding callers through prompts, speech analytics will help to categorize them and analyze responses in terms of what you say and how you say it. Insights like these will be used to guide agents, in real time, to get the best results from each interaction.” – Chad Hart, principal consultant at

AI implementation will help business capitalize on large troves of data: “Although discussions on the topic of data may not be new, until now most business have been focused on forming teams and building data pipelines, but the data itself has not produced much disruption. With the right people and tools in place, companies can now focus on using data to drive growth. Companies will look to incorporate artificial intelligence (AI) to gain a competitive edge.” – Jennifer Shin, founder and chief data scientist of 8 Path Solutions

The Internet of Things

IoT cyberattacks will become more common: “There will be an increase of random IoT hacks and attacks because the tools are easy to find and use, and also because of all the unsecured IoT devices – Gartner says there [were] 8 billion connected things in 2017 and expects 20 billion connected devices by 2020. Anyone can go onto the dark web and start using available malware code, not to mention the readily available services such as hacking, malware- and ransomware-as-a-service, which can all be hired for next to nothing. It’s very easy these days for someone with little knowledge to launch a sophisticated attack, and there’s clear financial incentive – in the last three years, business email compromise alone made $5.3 billion.” – Christian Vezina, CISO at VASCO Data Security

IoT devices will become more secure: “Expect to see at least two or three large-scale, botnet-style attacks on IoT-related hardware. To remedy this, the industrial space may pick up a trend from the consumer space, where device updates are downloaded automatically, and give the user little say in the process.” – Mike Bell

The modern workplace

The evolution of the workplace: “The physical workspace as we know it today is going to significantly change next year as businesses start to get smart about how they use space to drive productivity and adapt to new employee behaviors and tech tools. Large companies will also look to reduce their real estate commitments and move more to flex desk options as more employees work away from the office, while being connected to it by making use of better tools that help them do their work more effectively.” – Craig Walker

Workplaces will unveil bolstered anti-harassment policies: “With such a magnifying glass being put on men’s behavior in the workplace, [2018] is going to see a lot of anti-sexual harassment training in workplaces, as well as anti-harassment policies being beefed up.” – Rob Swystun, business communication specialist


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Aerospace and defense M&A will soar, says Cassel Salpeter

By Keith Button

Sky high

Factos driving Aerospace M&A

  • Global passenger air traffic growth
  • U.S. tax reform and defense spending
  • Historically low cost of capital
  • Increased competition throughout sector

Aircraft and aircraft parts companies–including maintenance, repair and overhaul businesses–will feed a strong environment for middle-market deal making in aerospace and defense in 2018, according to new report from a Miami investment bank.

Cassel Salpeter & Co., which chiefly advises middle-market sellers in the sector, predicts in its Aviation Investment Banking Q1 2018 Update that tax reform and increased defense spending in the U.S. will help boost overall aerospace and defense M&A. Robust new jet plane orders and parts manufactured for those new planes will also contribute.

The key driver for the entire sector is the global increase in commercial passenger plane travel, says Joseph Smith, director, aviation services for Cassel Salpeter. According to the International Air Transport Association, passenger air traffic increased 7.6 percent in 2017, well above the 10-year average annual growth rate of 5.5 percent.

While the epicenter of the air traffic growth is in Asia, the effects are felt worldwide. The growth is fueling not only new passenger plane orders for Boeing Co. (NYSE: BA) and Airbus at the top of the food chain, but also business for the smaller maintenance, repair and overhaul companies— especially on engines; parts manufacturers, suppliers and distributors; providers of pilot flight simulators; airplane leasing companies; and secondary-market aircraft sales, repair and parts companies, Smith says.

“There are so many different levels and sublevels to the aviation/transportation supply chain marketplace,” Smith says. “It’s really very exciting from a growth driver perspective.”

The market for cargo planes—typically refurbished, middle-aged passenger planes–has also tightened recently with Amazon gobbling up aircraft to build its own fleet, in addition to demand from the traditional carriers like FedEx Corp. (NYSE: FDX), DHL and UPS (NYSE: UPS), Smith says.

Generally in the aerospace and defense M&A space, companies with Ebitda of more than $10 million can command acquisition prices of 10 times Ebitda or higher, Smith says. Prices fall to eight times Ebitda for companies under $10 million of Ebitda, and to five to seven times Ebitda for companies under $5 million. That means that sellers are looking for private equity firms as partners to help build their companies to the $10 million -plus Ebitda range for a “second bite of the apple” deal, when another PE firm or a strategic buyer will pay the higher prices.

“There’s a big delta between large middle-market and smaller middle-market companies,” he says. “The good news for those entrepreneurs and business owners is that the private equity world will pay up for being in the 10- to 15- plus Ebitda level. There’s so much money out there, and there’s so many different levels of financial sponsor buyers.”

According to the Cassel Salpeter report, 2017 was a record year for overall M&A in the aerospace and defense sector, with global deal value exceeding $70 billion. There were 454 total deals in 2017, about even with 2016, but the average deal size was $411 million, which was about 19 percent higher than 2016.

The volume of deals and the premium valuations are evidence that the sector continues to be a seller’s market, according to the report. The deal volume and price premiums, plus a historically low cost of capital, have produced some of the largest acquisitions ever for the industry. Increased competition throughout the aviation sector has put pressure on profit margins, creating demand for strategic growth, consolidation, supply chain synergies and partnership opportunities, according to the report.

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When the ‘Me Too’ movement impacts the middle market, will your business be ready?

By James S. Cassel

Middle-market business owners, beware: The “Me Too” movement will ultimately impact your business, and you would be wise to be proactive and prepared.

Without a doubt, big companies are not the only ones with serious exposure. Middle-market businesses can have significant liability, reputational risk and suffer serious damage if the company or any team members — senior or junior alike — are the target of allegations. Middle-market businesses face unique challenges, so accurate assessments of their particular situations and customized approaches are key.

Following are general considerations to keep in mind based on our experience working with middle-market business owners:

Salary discrepancies: Men and women performing the same job/output should have equal pay and be compensated appropriately. Employees should be compensated based on their roles, their work, performance and the value they bring to the company — not just because of their titles or gender. You should assess your company’s policies and compensation levels to ensure fairness and equality.

Board positions: While diversity is important, board members should neither be added nor kept in positions based on gender or race alone. They should be selected based on their qualifications and the value they bring. Additionally, their bandwidth should be considered — their ability to contribute their time and energy to the business, particularly when their personal or business lives become more demanding. That said, diversity is important, as it yields different points of view and helps better represent all constituencies. Today, many boards lack diversity as a result of the “good old boy” network. Appropriate, qualified, diverse candidates to fill any openings should be sought.

Sensitivity training: Starbuck’s, for example, has launched a sensitivity training program addressing discrimination. The same can be done for equality or sexual harassment concerns, etc. ADT provides employees with manuals and guides. Your training and policies should be as clear and detailed as possible, and include rules governing things like in-office photos, and what is appropriate and what is not. You must also follow the procedures. Having procedures alone is not enough.

Human resources: Have a good internal HR person, if you can afford it, or an external source, which could be a law firm or consulting firm. Many of the payroll companies have this resource available.

Internal communication: Have a system in place for employees to raise issues. Make sure their comments and concerns are properly documented, investigated, addressed and responded to. Do not ignore them.

Insurance coverage: Consider appropriate insurance coverage that offers protection for any employment-related issues that may arise. Middle-market business owners often neglect to obtain the necessary coverage. I have seen in my decades of experience that having a policy can make or break a company in the event of a lawsuit or other crisis. Many carriers provide proactive assistance and training to help ensure the appropriate policies and procedures are in place. In addition, when an event occurs, many carriers have expertise that they will make available to the insured to help minimize the exposure.

Issues management: When any issues do occur, it is important to investigate and address them head-on. Time is not your friend in these cases, and timely action is key. Work with communications consultants who can help ensure you take the right steps both internally and externally to avoid any potential negative publicity. Address problematic people, including terminating your biggest producer if he/she is a liability.

At all times, awareness is vital. Keeping a close pulse on your company can help you anticipate issues and nip them in the bud. If you see a problem, act!

As the Weinstein Company learned the hard way, ignoring the problem and neglecting to properly handle issues can lead to tremendous liability and even bankruptcy. Like it or not, the implications of the “Me Too” movement will be felt by middle-market businesses. The only question is “when.” Business owners who take the right steps will best position their businesses for continued success.

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3 Ways Family Offices Can Better Compete in a Deal Process

By Meghan Daniels

Family offices are the hot new buyers in the lower middle market, but involving them in a deal process is not without headaches. “Many of them will indicate they want deal flow, but when we call them about a deal they’re not very responsive,” says James Cassel, chairman and co-founder of Miami-based investment bank Cassel Salpeter & Co.

There are an estimated 3,000 family offices in the US alone, and about a quarter of them currently invest on a direct basis, according to a 2017 report by financial technology platform iCapital Network. Family offices are also one of the fastest growing classes of buyers on Axial — the number of family offices on the network has doubled in the last 12 months.

Here are three tips for family offices looking to compete more effectively with PE firms and other investors.

1. Communicate.

“If a family office wants to bow out at any point in the process — whether it’s the initial call or when they get the NDA, the teaser, or the deck — there’s nothing wrong with saying, ‘It’s not for us.’ The key is to do it quickly and as soon as possible once the office has reached that conclusion. It’s important to respect everyone’s time,” says Cassel.

Being transparent about how the approval process works is also helpful. In a private equity firm structure, everyone understands that an associate or VP isn’t going to make the final decision on an investment. But in a family office, roles and job titles aren’t so well-established, and it can be harder to know where the buck stops. “Sometimes family offices will tell you one thing in

terms of their process, but it turns out that process isn’t exactly how it works — for example, you might have a meeting without the key decision-maker there and end up wasting everyone’s time,” Cassel says.

2. Find your edge.

“In the court of a family office, preservation of wealth is very important,” says Cassel. Outbidding PE firms and strategic buyers often isn’t a viable option.

“In the court of a family office, preservation of wealth is very important.”

So how can family offices effectively compete? Find sellers who are looking for what you’re selling. An owner looking for a relatively passive minority partner with patient capital, for example, may be willing to leave money on the table. Sellers may also trade cash for relationships and industry expertise, especially those that seem likely to lead to valuable partnerships down the line.

Cassel suggests looking at companies in the industry where your family made their money initially and has expertise and knowledge. “Even if you can’t buy direct competitors, you may be able to buy suppliers,” or other tangentially related businesses. You are also more likely to get so-called proprietary deal flow and get into the process earlier, when you have less of a chance of being outbidded by PE firms. If investing in your industry of speciality isn’t an option, consider teaming up with another family who does have knowledge in the space. (For more on how family offices can successfully invest in complex or unfamiliar industries, see sidebar.)

3. Narrow your focus.

Carl Coughlin is partner at Coughlin Capital, a family office based in Corte Madera, CA and St. Louis. When the firm started out in 2007, it was broadly focused on investing in founder-led businesses that didn’t have a clear transition plan in place. But that universe was so large that it came to be overwhelming.

“We have since narrowed our focus to logistics and supply chain services,” says Coughlin. The firm chose these sub-sectors because of their existing expertise: two of their current entities are within these platforms, and their family business was a freight forwarding company which was eventually rolled up into DHL.

The improvement in deal flow was immediate. “We found that the better we defined what we were looking for, and put that out proactively on our website and on Axial, the better deals we found and the better shot we had at closing them. Once we fine-tuned that message, that’s when really good deals came to our doorstep. We were able to speak the sellers’ language and understand what’s important to them,” says Coughlin.

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Playing The Economic Boom While It Lasts

By Dale Buss

Everything has fallen into place in the Trump Boom. Now CEOs need to figure out how to exploit today’s prosperity for the long term as well. And they’d better be ready for the good times to end, as they inevitably will.

For now, all systems are go.

Tax cuts and regulation rollbacks—check. Cheap domestic energy—check. Accelerating job creation, including re-engagement of marginal workers— check. Rising incomes—check. Robust consumer confidence—check. Cascading business investment—check. Synchronous improvement in economies around the globe to create demand for U.S. exports—check. Unleashing of pent-up optimism—check. CEOs’ willingness to call a boom a “boom”—check.

The Business Roundtable’s CEO Economic Outlook is at its highest level in history, and small business owners have reported their highest optimism in 35 years. “I don’t remember, ever, a more positive economic environment for the right reasons than what I see right now,” says Robert Chapman, CEO of Barry-Wehmiller, a $3 billion diversified manufacturer of packaging and other goods based in St. Louis. “My board has been predicting an economic downturn for several years now, expecting a normal cycle. But there’s nothing normal going on now. I don’t see any red flags.”

Larry Harding, president of the consultancy division of Chicago-based TMF Group, says, “We’re tending to see the return of animal spirits that have been missing for a long, long time. It sort of feels like a return to that rarefied air of the Reagan years, which is nice.”

But now that they’ve finally arrived at a sort of nirvana perhaps unimaginable during the slow-growth years that followed the Great Recession, two aspects of the boom have CEOs concerned. One is that any of several factors or a combination thereof could bring an unwelcome end to prosperity. The second is their obligation to optimize the opportunities presented by the boom while it lasts.

“We’re going to go through ups and downs, but where will the opportunities be?” says Shahid Khan, CEO of Urbana, Illinois-based Flex-N-Gate, a $6 billion automotive supplier. “It is a great time to get ready for the non-boom ahead. And be ready to take advantage of it by getting people and money resources ready and securing the leverage you have. It’s Business Leadership 101.”

Andy Puzder, former CEO of CKE Restaurants and President Trump’s first nominee for Labor Secretary, urges peers to invest in their businesses. “Investing in new plants and equipment is crucial,” he says. “Use the extra money to grow and create more jobs, then go out and hire the best people by offering competitive salaries and benefits.”

Here are 12 ways that U.S. CEOs are taking advantage of the Trump Boom—or should be:

Believe in It

With so long between true boom times, some younger CEOs could make rookie mistakes by misperceiving the zeitgeist.

“There’s a level of nervousness about this that you didn’t see in 1999 or 2006 and 2007,” says Clarke Murphy, CEO of Russell Reynolds Associates, an advisory and executive search firm.

Today’s younger chiefs, Harding says, “may not be used to seeing the interplay that exists today if they haven’t been a CEO for 20 years. They may see
opportunities that look like they’re really there, and yet they may be hesitant to pull the trigger because they haven’t seen things so favorable before.” Fortunately, he notes, CEOs don’t have to go far to check their views with peers and internally. “People aren’t operating in silos these days,” he says. “There are networking organizations and lots of corroborative opportunities to see what the consensus is.”

Consolidate Gains

Many companies were already investing heavily in their operations and their people as economic growth puttered along over the last eight years. Now the bright-blue horizons give them some room for a breather.

Brembo North America, for instance, scrambled to quintuple its revenues to nearly $1 billion and its employment to about 1,500 people over the last several years by continually adding capacity to supply auto brakes and components.

“That’s a lot of growth and a lot of new people to absorb,” says Dan Sandberg, CEO of the U.S. arm of Italy-based Brembo S.p.A. “We’re going to take all of the inefficiencies left over from our growth, get our house in order and get our systems solidified.”

Diversify the Portfolio

Puzder urges CEOs to “expand your business however possible” during the boom.

David MacNeil is among the CEOs doing just that: The chief of Bolingbrook, Illinois-based WeatherTech, a $500 million maker of customized automotive floor mats, glorified his construction of a huge new factory addition with a Super Bowl commercial in February. It will manufacture a line of stainless- steel pet bowls made to human-safety standards and integrated into plastic mats.

“It’s right in our wheelhouse because we injection-mold many things already,” he says. “And we’re building another factory in America. Isn’t that the right thing to do?”

Acquire Other Companies

M&A activity keeps rising as CEOs look for bargains and synergies that can exploit the boom. Arby’s CEO Paul Brown, for example, bought Buffalo Wild Wings for $2.9 billion in February, and now the renamed “Inspire Brands” aims to buy more chains to protect against consumers losing their appetite for any one type of cuisine.

Meanwhile, Barry-Wehmiller acquired BICMA, a German hygiene technology company, in January for its 100th acquisition. “We did 12 acquisitions last year,” Chapman says. “We continue to find acquisitions around the world, though we’re not in a hurry.”

Reward Employees

Companies continue to spread the benefits of the tax cuts and flush business to their employees long after the initial wave of high-profile actions, such as Apple’s bonuses. SunTrust, for example, has raised its minimum wage to $15 an hour, boosted merit pay for about 20 percent of its workers, made a one-percent additional 401(k) contribution for all workers and offered $1,000 bonuses for those who complete its financial literacy program.

“There’s nothing more important now than retaining your top performers,” says Bill Rogers, CEO of the Atlanta-based financial services giant. “[For] the cost of just one turn of turnover, you can put a lot of money in employees’ pockets.”

There’s another long game at work here for the economy, too, says Puzder, who has codified his bullish views in a new book, The Capitalist Comeback: The Trump Boom and the Left’s Plot to Stop It. “Reward workers with increased compensation to show them that when companies are unshackled from government regulation and taxation and allowed to profit, everyone wins,” he says.

Beef Up R&D

Plant today’s seed corn in new innovation efforts for the best return for the long term, advisers and CEOs say, especially in areas of potentially huge technological returns or disruptions.

“If I’m in an innovation business where I need to constantly reinvent myself or how I manufacture something or need to expand in a unique way, I want to invest in R&D right now,” says Ray Rothrock, CEO of RedSeal, a Sunnyvale, California-based cybersecurity outfit. “If my margins are improving as a result of the tax cuts, I should put that in R&D. It’ll create new, innovative products and jobs and improve your brands. It’s an opportunity that doesn’t come along that often.”

Throw a Bone to Investors

CEOs want to share the fruits of the boom with investors, too, through net earnings, dividend increases and stock buybacks. Buybacks “are a perfectly
legitimate use” of profits for companies that “lack the ideas or the potential to grow,” Puzder says.

But Michael McGuire, CEO of Chicago-based advisory and accounting firm Grant Thornton, cautions that “if you don’t invest for the long term, your business might be for the short term. And if your investors just want you to distribute everything to them, maybe they’re in it for the short term, too.”

Rethink Your Talent Pool

Talent is everything for companies that want to take advantage of favorable business conditions and invest for the future, but the demand for digital skills is running up prices in traditional coastal tech hotbeds.

Consider recruiting outside them, McGuire advises. “For the longest time, people wanted to be in a place like Silicon Valley because they could be around the same kind of people,” he says. “But today’s technology means people can work anywhere.”

Plunge into New Technology

James Cassel, founder of investment banking firm Cassel Salpeter in Coral Gables, Florida, believes that CEOs “should take X amount of hours per week and just sit and think about technology and read about it voraciously.”

Beyond that, McGuire advises CEOs to “overpronate dramatically on investing in technology right now. You may be at a cocktail party where people talk
about disruption, AI, machine learning and blockchain, and you may think your company can do it. But if you don’t have the right tech platform and your data aligned, you can’t.”

Boost Exports

Now that even Brazil has come out of recession, joining Europe’s recovering economy and the simmering cauldron of growth in Asia—and with a relatively low dollar—the boom should encourage more U.S. CEOs to consider or expand exports.

“There are a lot of companies going into Europe now, and we’re not trying to restrain them,” says Harding, the consultant.

“We just want to make sure CEOs understand uncertainties related to Brexit, for example.”

Speak Out

Puzder believes that CEOs can help the boom acquire a self-reinforcing effect “by speaking out about its positive effects. Let people know why things are better, why their compensation is increasing and why the government is taking less out of their paychecks.”

Adapt to Trump

CEOs can brace themselves for future shocks from President Trump on trade wars and other matters but should keep in mind that they’re his No. 1 constituency.

“If you only listen to his rhetoric,” Harding says, “you might just hide in your basement. But so far [Trump’s] rhetoric doesn’t seem to be hurting the reality.”


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In today’s uncertain times, planning for the unexpected is critical

By James S. Cassel

If a disaster or other unexpected event were to strike your business, would you be prepared, and would your brand be protected? How would a data breach, product contamination, loss of a key member, negative accusation, hurricane or earthquake affect your business?

Particularly in today’s uncertain times, planning for the unexpected and responding appropriately is critical. It can mean the difference between your business suffering irreparable damage or surviving unscathed, or if you manage to do things right – emerging stronger.

I have seen many middle-market business owners neglect to plan properly. Focusing too much on managing day-to-day operations, they are caught unprepared and therefore put their businesses at risk by taking reactive rather than proactive, strategic approaches. I know a business owner who racially profiled by adding tips to the bills of certain minorities. When a complaint was lodged against him, he defended his inappropriate behavior rather than apologizing. This killed his business. The practice was wrong and the response could have and should have been handled better.

Compare this to the steps taken by Starbucks last week after the manager at a Philadelphia location refused to allow two black men to use the bathroom while they waited for a colleague, calling police to have them arrested.

CEO Kevin Johnson took immediate action, flying to the location, speaking with national media and community groups, apologizing, and announcing the closing of over 8,000 company-owned U.S. stores for an afternoon to provide racial-bias education for U.S. Starbucks employees. Following this response, the store — which had been closed temporarily because of demonstrations — reopened and returned to business as usual, according to news reports.

In our experience counseling middle-market business owners through all types of disasters, we have found some general principles to be helpful. Following is some practical guidance:

Consult experts to prepare a SWOT analysis (strengths, weaknesses, opportunities and threats). This can help guide development of an appropriate crisis plan.

Consider the needs of your internal and external audiences. For example, what do your employees, clients, partners, investors and other stakeholders need from you — consistent service, effective communication, reassurances for future growth, etc.? Develop a road map to ensure their needs are met.

Work with a crisis-management expert to develop a communications strategy and train your people on it. Communications are critical, as they can provide the necessary reassurances to retain the trust and confidence of your internal and external stakeholders. In this fast-paced world of social media, crises move very rapidly.

▪ Cultivate, train and prepare someone to be the face of your company.

▪ Identify people to appoint as interim personnel if necessary, and train them to quickly assume the desired roles. You do not want anything similar to what happened with Alexander Haig after former President Ronald Reagan was shot.

▪ Run practice drills for your crisis plan.

▪ Have appropriate insurance. Some insurance policies cover certain types of crisis management as well as financial exposure.

▪ Every step of the way, you must acknowledge the problem (consulting with legal counsel, insurance providers, and communications experts) and consistently communicate your company’s unique value proposition, proven track record, and plans for continued growth and success.

Tylenol did this and emerged from its product recall scares as a stronger company. Consider Facebook’s response to its own crisis, first with denial and then finally with the CEO and COO issuing public statements and making the appropriate public appearances. Now Mark Zuckerberg has spent more time on Capitol Hill than he probably ever imagined — first trying to appear humble, then apologizing and finally talking about the steps Facebook is taking and needs to take to stop the problems from recurring. Time will tell how much damage has been done and how Facebook will fare.

Planning is vital work. Business owners who recognize that unthinkable disasters can strike, and who take the necessary steps to prepare and protect their best interests are more likely to position their companies for continued success. Those who bury their heads in the sand, as time has proved, tend to not be as fortunate.

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How to Help Spot and Minimize Employee Stress

Employee stress is a common problem that harms morale and productivity. These steps can help you identify and manage stress in your company.

By Julie Bawden Davis

April is Stress Awareness Month, and that’s probably a good thing for your business. According to the American Psychological Association’s 2017 Stress in America survey of 3,440 U.S. adults, employee stress is pervasive. Sixty-one percent of Americans are stressed about work.

“Stress is present in many areas of people’s lives, and the workplace is no exception,” says Daniel Clark, CEO of, which produces music to help people focus and sleep better. “Stress distracts employees from getting their jobs done. The distraction can be a few minutes an hour, but compounded over days, weeks and multiple employees, costs employers millions in lost time and productivity.”

Employee stress may very well be at an all-time high thanks to today’s advanced technology, believes James Cassel, chairman and founder of Cassel Salpeter & Co, a midmarket investment banking firm.

“The internet and the assumption it fosters that one should respond immediately is a great stress for many,” says Cassel. “Employees face constant deadlines and expectations to move quickly, many times without the opportunity to really think things through. This can cause substantial friction.”

There is perhaps no greater inhibitor to an employee’s performance than stress, notes Jason Hall, founder and CEO of FiveChannels Marketing. “If employees are stressed, they’re not thinking clearly, their creativity is reduced, and they’re more prone to mistakes, all of which can negatively impact your company.”

Causes of Employee Stress

A variety of factors in the workplace can lead to employee stress. “Unreasonable and unreachable deadlines, toxic coworkers with bad attitudes and poor job fit for a person’s skills are the three most common driving factors I see that cause unnecessary stress,” says Brian McHugh, owner of McHugh Construction

Tash Jefferies is co-founder of, a company that helps women and people of color find their dream tech jobs. She believes that stress often leads to people leaving their positions. “Stress results when people work long days, experience high job demands (too many tasks and responsibilities) and a lack of a community of peers or executive level support.”

It was a survey of his employees two years ago that alerted Justin Goodman, president of Goodman Insurance Services, to the pervasiveness of stress at his company. “The survey was performed in person by an outside company, and the employees were guaranteed anonymity,” he says. “The results were pretty sobering. Most of our employees explained that their stress came from fear of not performing to company expectations. They also feared that I as the president didn’t understand some of the day – to-day challenges they faced.”

Identifying Employee Stress

Without performing an employee survey or looking at the statistics, how can you spot employee stress? Here are some signs that your workers are heading for anxiety and burnout.

  • Confusion. “If you know tasks have been explained thoroughly and clearly and employees show confusion, this is a sign of stress,” says Casey Thomas, co-founder of the Creative Soul Music School . “In my opinion, confusion is the precursor to frustration.”
  • Change in behavior or performance. “Any real sudden change of performance and/or behavior is a good indicator that the job is getting to the employee,” says Lior Rachmany, founder and CEO of Dumbo Moving + Storage. “Changes for employers to look out for that indicate stress include lack of focus and attention to detail, taking longer than usual to finish tasks and showing up late to work.”
  • Physical clues. “Changes in skin coloring, hair texture, redness of the eyes, consistent nodding off and lack of energy, failure to eat or overeating are common signs of stress,” says’s Jefferies.
  • Mood swings. “Stress can cause people to experience emotional roller coasters more frequently, sometimes on a daily basis,” says Jefferies. “Be on the lookout for crying, anger, frustration, temper tantrums or any other disruptive emotional behavior.”

When an employee who is usually positive and outgoing suddenly seems overwhelmed and negative, suspect stress, according to Mike Grossman, CEO of GoodHire, an employment screening company. “If someone is more withdrawn than usual or displays unusually aggressive behavior, these can also be signs of stress.”

6 Tips to Help Ease Employee Stress

Once you’ve identified that employee stress may be at play and the potential causes, it’s ideal if you can ease the stress so that everyone can have a better work experience. Try the following ideas to help reduce stress.

1. Create an open door policy. “It’s important to foster an environment where employees feel comfortable speaking to their managers about stress-related issues,” says Kareem Bakhr, head of risk management at Selby Jennings, a recruitment company. “There’s often a stigma to admitting feeling overworked or overwhelmed. The first step to successful stress mitigation is establishing an open and accepting platform for people to feel comfortable sharing their challenges without being judged.”

2. Openly discuss the issue. “The best thing leaders can do when they spot employee stress is to bring it to the surface,” says Heather Younger, founder and CEO of Customer Fanatix, LLC, which provides coaching in leadership development and employee engagement. “Let employees vent, if they’re open to it. If they’re not forthcoming, make it clear that you’ve noticed a change in them and that you’re there to help.”

When you discuss the source of stress, you may even find that the employee’s state of mind has nothing to do with the workplace. “Employees have lives outside of work where stressors could be impacting both their home and work life,” says Jonathan Marsh, owner of Home Helpers of Bradenton, which provides in-home care.

3. Make expectations clear. “Prevent unnecessary stress by setting clear expectations about timelines and deadlines and follow up to ensure that the expectations are reasonable and that employees are able to meet those goals with a positive attitude,” says McHugh of McHugh Construction.

4. Provide opportunities to unwind during the workday. “Offer employees an area where they can socialize and decompress during breaks. Sitting at a desk all day alone is not conducive to a relaxing and enjoyable work atmosphere,” suggests Bob Ellis, owner of Bavarian Clockworks, an online shop that sells German cuckoo clocks.

“Find ways to create relaxed environments with an open communication policy and culture,” adds Nick Murphy, host of The Job Lab Podcast. “Whether it’s an employee lounge with beanbags and a Ping-Pong table or frequent team building events that get people away from their screens and out together in a relaxed environment—it’s important to encourage and support time to decompress.”

5. Ensure job fit. “Often, employee stress comes from someone being in the wrong role for the person’s personality type and abilities,” says Michael Maibach, CEO and founder Lab Society, which offers lab supplies and equipment. “It’s not easy finding the right set of tasks to suit each individual in a complex team with a lot of moving parts, but dedicating time to discover how to modify employee roles to better suit their personalities and skill-sets is well worth the effort.”

6. Provide workplace flexibility. “When possible, give employees the flexibility to choose the hours they work and to work from home if needed,” says Shane Green, founder & president of SGEI, a corporate training company.

Being open to giving employees some leeway in their schedules goes a long way toward a less stressful workplace, agrees Chris Padgett, co-founder and CEO of Fusion3 3D Printers. “Allowing workers to start a little later and leave a little earlier or work from home on occasion can have a positive impact on their overall quality of life.”

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