Minding Your Business/Inside the Deal: Three key points to keep in mind for 2016

By: James Cassel
December 20, 2015

James Cassel headshot

As we move toward the beginning of a new year, it is helpful for middle-market business owners to look ahead at the emerging trends and other factors likely to affect their businesses and consider how to best position themselves for success. They should be prepared for the possibility of continued volatility and keep a close pulse on three key issues: interest rates; employee retention and compensation; and pricing.

First, a few points to bear in mind: As far as the mergers and acquisitions market is concerned, if the fourth quarter is consistent with the first three quarters of 2015 as it appears to be, 2015 should be down from 2014 in terms of M&A. This may come as a surprise to some people. Moreover, there is no reason to think that 2016 will be a better year.

Additionally, there is no doubt that 2015 has been a year of significant stock market, currency and resources volatility. Some technology companies have gone public with fanfare and high expectations, but their stocks have not performed as well as they had hoped. Some unicorns (private companies valued at more than $1 billion) may be overvalued. In the second half of the year, some companies priced their initial public offerings below the price of their last private financing rounds. The question now is: are we looking at a potential bubble in certain sectors? It may be too soon to know for sure, but it is certainly possible.

Based on our experience assisting middle-market business owners through all types of economic cycles, the following are a few important issues that might affect business as we head into 2016.

Interest rates rising. During the past few years, there was speculation that interest rates would rise, but they did not. Now, with much warning and the U.S. economy in many sectors heating up, the rate increase is here. Although it is a minimal increase, it will be important to consider how to deal with any consequences. It also will be important to consider the impacts of any additional increases in 2016 as well as the environment that may result. The Fed was clear that the rate increases will be probable, gradual and measured, and neither predictable nor consistent.

If you are planning to sell your business any time in the next five years, now may be the time to pull the trigger. With interest rates beginning to rise, there will be an increase in borrowing costs and reduction in the price that buyers may be willing to pay as leverage becomes more costly. Moreover, today valuations are relatively high and private equity firms have lots of money to invest — all of which may not last.

Employee retention challenges. As unemployment continues to decline toward full employment, employers should be concerned about their ability to continue to attract and retain top talent. Today in many areas, there is a shortage of a trained, educated labor force. It would be wise to give some thought to enhancing compensation packages and employee retention initiatives. You may need to set up a training program. Bottom line: If you want to retain quality talent, you should make sure your employees are happy and engaged. Otherwise, you risk losing them to competitors or other companies, which is likely to cost you more in the long run.

Accurately pricing your products and services. As unemployment continues to decline and employers have to continue raising wages in order to retain their employees, it will be critical to ensure you are properly managing the pricing of your products and services. Specifically, you must closely watch your ability to raise your prices so you can retain margins without losing business. Although low costs of resources such as oil and a strong dollar have kept costs down, it may not be enough. For example, if you had to raise everyone’s salaries in the organization by 25 percent, can you continue charging customers today’s prices or would you have to reduce your service levels if you could not raise prices? How would this affect customer satisfaction and sales? In addition, it will be critical to minimize your expenses and other costs.

Further complicating matters for middle-market business owners, 2016 is an elections year. Therefore, it will be important to keep a close pulse on the hot-button issues, including the tax code, defense and immigration, and consider their likely impacts on the middle market and specifically on your business.

One of the areas that business owners, particularly the owners of small- and mid-sized businesses, tend to neglect is strategic business planning. While they may have the best intentions to do it, they often get so caught up in managing the day-to-day activities of their businesses that they fail to allocate the necessary time and resources for this critical task. Without a doubt, ensuring maximum success in 2016 will require planning and also remaining nimble and flexible to respond to changing dynamics. Those who do so stand to gain a significant competitive advantage and position their businesses to overcome the obstacles and seize the opportunities in the year ahead.


James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC. He may be reached via email at jcassel@casselsalpeter.com or via LinkedIn https://www.linkedin.com/in/jamesscassel

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Timios, FA Nov. 2015

Timios, Nov. 2015

Don’t Wait! Sell Your Business Now Before Rates Rise, Recession Hits

The Street
November 17, 2015

Thinking of selling your business in the next five years? If so, do it now, James Cassel, chairman and Co-founder of Cassel Salpeter & Co., tells TheStreet. Rising interest rates will raise borrowing costs and reduce what buyers may be willing to pay. Moreover, today’s valuations are relatively high and private equity firms have a lot of money to invest – all of which may not last. Click on the image below to watch the segment.


  • To view video, click here.

7 Ways to Build a Winning Team for Long-Term Success

By: James Cassel
November 17, 2015

James Cassel headshotMany business owners struggle with one of the most important aspects affecting the success of their companies: hiring, training and empowering the right team members. Based on our experience, here is some practical guidance.

1. Find team members who fit your business culture.

This means much more than hiring financial planners at your wealth-management firm. This involves identifying your company’s key performance indicators and making strategic hiring decisions based on them. For example, if you have identified a correlation between great customer service leading to stronger sales at your company, then you should aim to hire team members with those skills and talents.

2. Consider standard skills and aptitude tests.

When hiring, it can be difficult to get the full picture on a potential candidate from a mere interview. In addition to asking various members of your team to participate in the interview process and share their perspectives of potential hires, you should consider using tools such as skills and aptitude tests. There are many to consider. Publix, which is widely noted for its excellent customer service, requires job applicants to complete aptitude tests that assess how they would react in various customer service scenarios.

3. Evaluate candidates outside the interview room.

Keep in mind that your prospects’ personal lives should be compatible with the professional lives they would have to maintain while working at your company. Consider having dinner with prospects to observe their demeanor outside of professional settings. Curious about how a potential executive might manage your team? Watch how they treat their significant other and the staff members at a restaurant. They probably would not treat your team members too differently. This rule of thumb is followed by so many CEOs that it has become known as the “Waiter Observation.”

4. Create a positive work environment.

It’s important to create a positive work environment with meaningful rewards and incentives that your team members appreciate. Whether it is money or recognition or both, find out what best motivates team members to keep them engaged. Different generations want different things.  Baby boomers and millennials want and need different things.

5. Encourage team members to do things like they like.

Pushing is not the only way to maximize productivity and performance. People are more likely to succeed when they are doing things they enjoy. Understand what knowledge, skills, and talents your team members have, and put them in roles that best suit them. For example, if you have an excellent graphic designer, do not assume that the best way to reward him or her is with a promotion to run the department. That person might not succeed in a director role simply because he or she does not enjoy or is not good at managing people.

6. Invest in Training

Training, coaching, and mentoring are worthwhile investments that can sharpen your team’s skills. Just as important, they show your team members that you care enough to invest in their future. You might bring in an outside speaker, encourage your team members to attend industry conferences, or provide an annual education allowance.

7. Let people go when necessary.

Ensuring you hire the right people is just as important as promptly terminating any mis-hires. When you recognize you have made a mistake, it is prudent to correct the error swiftly. Procrastinating the termination does no favors for your company, your team, or the mis-hire.

Investing the necessary time and resources to more strategically acquire, train and manage one of your biggest assets – your team – is critical to achieving your goals. Show your people what they mean to your company and how they fit into the big picture. They are likely to respond with appreciation and loyalty, and you will lay the foundation for a strong workforce ready to support your continued growth and success.

James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC. He may be reached via email at jcassel@casselsalpeter.com or via LinkedIn https://www.linkedin.com/in/jamesscassel

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Minding your Business/Inside the Deal: Millenials create new challenges and opportunities for middle-market business owners

By: James Cassel
November 15, 2015

For many middle-markJames Cassel headshotet business owners, millennials are creating quite a workplace conundrum. While dealing with today’s over-confident young Americans can be challenging, we must recognize the opportunities and find a way to work with the generation that is fast becoming the largest of our workforce.

The millennial generation (Americans born between 1982 and 2000, and currently ages 18 to 34) currently numbers 83.1 million. It has surpassed the 75.4 million baby boomer generation (born between 1946 and 1964, and currently ages 51 to 69), according to U.S. Census Bureau estimates. Clearly, the tide is turning. While everyone is different and should be evaluated individually, it is helpful to make certain generalizations to assess how to best approach this generation as a group.

Millennials tend to have rather strong views on the workplace — usually with themselves positioned at the center of it, sporting jeans, and with their bosses taking lessons from them. However, these attitudes are not helping them as much as they would like, since their baby boomer bosses are still running the show. For millennials, a healthy work-life balance is a challenge as well as a priority. Employers of all sizes and in all industries are experiencing this and struggling to find the right approach.

Millennials are extremely connected, savvy on technology, entrepreneurial, and eager to jump ship the moment they are no longer feeling “the vibe” at work. It is not uncommon for them to have many different jobs in a short period. While older generations were taught to believe in the value of longevity, loyalty, and tenure in order to grow within an organization, today’s youth find it perfectly reasonable to change jobs once or twice a year. Some experts estimate that most millennials will have five or more jobs before they are 30 years old. This creates a significant obstacle for middle-market business owners who are trying to build a strong workforce with continuity and grow their businesses.

So, how do you deal with this situation? First, you must do your homework and understand the millennial mind. There is no shortage of writing on the subject, and a quick Google search will yield links to countless articles and books.

The MTV poll “No Collar Workers” sheds some light on what they want. Basically, “everything” and “now.” Fast-paced environments and promotions without traditional rules and procedures. Short on attention spans and long on sense of entitlement, they are not necessarily motivated by money (or so they say). Rather, they have a strong desire for constant mentoring, praise and reassurance, flexible hours, and office perks like gym memberships and goodies in the kitchen, including the right coffee. They do not want to be merely given instructions to follow or told what to do — they want to feel they are part of a team and making things happen.

Millennials would love to make the nine-to-five workday illegal. They want to work when and how they want — with flexible schedules that allow them to come to the office sometimes or never. They work in spurts, drifting off at different moments to dabble in social media or do other personal things. In the MTV poll, 70 percent of millennials said they need “me time” while working, compared with 39 percent of baby boomers. They want to “chill” (although I am not sure I know what this means).

As far as managing millennials, you should keep in mind that standard annual or bi-annual reviews do not lead to job satisfaction. They want continuous feedback, ahora. Some say this is partly because they grew up with social media, in which they are given instant gratification and responses whenever they tweet or post anything. Without a doubt, they require more attention than older employees who were raised to be more emotionally mature and work more independently.

Therefore, it is up to you to find ways to keep them engaged and motivated. Knowing that every team is different and has different dynamics, you should keep a close pulse on yours so you can develop the right culture. Consider the physical layout and decor of your office, and look for ways to improve it to help keep them engaged. For example, depending on the nature of your business, you might consider an open floor plan with lots of natural light and areas conducive to collaboration.

Consider also your company attire. If corporate attire is a must, you might strike a compromise by implementing Casual Fridays maybe on more days than just Fridays. The MTV study finds that 79 percent of millennials think they should be allowed to wear jeans to work at least sometimes, with 93 percent of them saying they want jobs where they can be themselves and dress how they feel most comfortable. While this is not uncommon in technology companies or startups, it can be an issue in more corporate environments.

Just as important, do not take it personally — or give up on hiring millennials — when they decide to quit for no legitimate reason only one year after you hired and trained them. Their behaviors reflect more about their unique values and perceptions than they do on anything grounded in reality.

Regardless, while hiring millennials might be challenging, you have no choice. They bring fresh ideas and great value to companies, and they are becoming our workforce. Find ways to make your company more conducive to their work patterns and preferences. By attracting and retaining the right millennials who will support your ongoing growth, you can gain a significant advantage.

James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC. He may be reached via email at jcassel@casselsalpeter.com or via LinkedIn https://www.linkedin.com/in/jamesscassel

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SciVac, Oct. 2015

Micromanagement: Do not let it happen to you

By: James Cassel
October 18, 2015


News flash: If your team members are accusing you of micromanagement, they are probably right. You are probably doing them, your company, and yourself more harm than good.

Senior-level micromanagement is as common as it is destructive to companies on so many levels. I was accused of micromanagement at one point. While I, of course, like most other culprits, did not believe this accusation at first, I quickly realized that I had to get better at delegating. Thankfully, because I worked with the right people, they embraced responsibility and exceeded my expectations.

Why is micromanagement an unnecessary evil? It hurts company morale and sends a message that you do not believe in your people’s judgment or consider them capable of doing their jobs. It usually is more a reflection of your insecurity and fear than an indication of your team’s capabilities. Micromanagement deflates people, takes away their power and inspiration to grow, motivates them to start looking for more rewarding employment elsewhere, prevents your senior people from focusing on the more strategic higher level work they should be doing, and the list goes on.

As a middle-market business owner, you must escape this common trap. Your role is to be a strong leader who sets policy, provides guidance, inspires and motivates, and creates a framework for growth so that your company can function — with or without you — like a well-oiled machine. You should be able to take a vacation without worrying your company will collapse while you are away.

If you are confident that your people cannot work independently, then they are either the wrong people, in the wrong positions, or probably should not be part of your company and should be replaced. It is a serious mistake to have people in positions where they cannot perform and excel. This is damaging for everyone involved, including your company and your clients or customers.

How do you create a framework for success? This requires building your management team while grooming several people for your senior-level positions. Larger companies do this, and middle-market businesses should more.

You do not want to have a company where your senior people are micromanaging or going around middle managers to your junior people and telling them what to do. While there are situations where this must take place, this practice should be the exception rather than the rule.

Along the way, when your colleagues make decisions or commitments, you have to be careful but you have to support them. Some of the people I work with have made decisions I would not have made, but once they made them, I supported their decisions so as not to undercut their authority. I have learned the vast majority of the time it is not the end of the world when someone makes a decision that differs from what I would have made. There is more than one right way to do things. On more than one occasion, their way has been just as good as or better than mine, and I have learned from my team. This is how it should be.

Clearly, if your people are making decisions that do not have positive outcomes, this issue must be evaluated and rectified. The key is that you must keep an open line of communication and establish different ways to monitor what your people are doing. You can set up a dashboard, but you do not want to be on top of them every minute because they need the space — and self-confidence — to do their jobs. You do not want to drive your people crazy. You would be surprised how often I hear this is going on.

To succeed, people must have well-defined roles and an accurate understanding of the nature of their work and what is expected of them. When they are given tasks, they must have the information they need so they can meet your expectations. They must be trained, mentored and motivated. They must know they can ask questions and get help when they need it. The right people will thrive in this environment.

Trust me, I know it can be difficult for middle-market business owners to let go and delegate. But you cannot be a control freak or you will limit your chances of growth and success. So after you have empowered your team to do their jobs, your job is to empower yourself to let go.

James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle-market companies. He may be reached via email at jcassel@casselsalpeter.com or via LinkedIn at https://www.linkedin.com/in/jamesscassel. His website is: www.casselsalpeter.com




Swings in China stock market: For middle market, impact is more about perception than reality

By: James Cassel
September 21, 2015

For South Florida’s middle-market businesses, the greatest threat from China’s recent stock market swings and economic slowdown is the negative perceptions — more so than any possible bottom-line impacts. Although the recent news of China’s unstable market and slowing economy has given rise to institutional panic, the continued direct volume of business between U.S. middle-market companies and Chinese companies — in China, as well as the current state of Sino-American trade relations — confirm that the situation is not as grim as some folks would have us believe.

One of the key complications of America’s economic relationship with China is a lack of transparency. It is difficult to say with any certainty whether the data is authentic or manufactured by the Chinese government. Either way, the impact of China’s stock market fluctuations is more about perception than reality. If people begin blaming any U.S. stock market drops on China’s stock market or the slowing Chinese economy, they will begin to clam up and buy fewer luxury products and focus more on necessities. Indeed, we have to be careful that perception does not become reality. If your middle-market business sells to Chinese companies or consumers, you may have a problem. Most Chinese consumers are not wealthy, but members of the middle class and even the wealthy who love Western luxury products are significantly cutting back on their purchases. We have seen this evidenced by major brands like Burberry, Chanel and Cartier, whose sales in China have taken a major nosedive. For Burberry in particular, China drives approximately 25 percent of total sales, which is indicative of how much luxury retailers have leaned on China for growth in recent years. It also has an effect on U.S. multinational corporations that rely on China for their growth.

Furthermore, the recent devaluation of the Chinese currency, the Renminbi, may also adversely affect middle-market businesses with ties to Greater China, as Chinese products are likely to become less expensive and thus more competitive on a global market.

In addition, the currency devaluation also may affect the number of middle-market companies that have been reaping the rewards of on-shoring: lower labor costs due to mechanizing and robotics, faster release to market, and reduced shipping costs. Despite China’s increasing labor costs, its lower currency value and production costs today may be beneficial in making it more attractive again to manufacture products in China, or at least stay in China. As China’s economy slows, it will be important to consider that its expected use of fewer natural resources may have a global ripple effect in terms of lowering the costs of natural resources as well as shipping and transportation, which may also negate some of the fiscal benefits of on-shoring.

Beyond this, there are some opportunities for middle-market businesses to reap benefits. Consider: Chinese companies have made a lot of money in recent years, posting an average 9.5 percent year-over-year growth since the 1990s. Wealthy Chinese nationals, eager for an exit strategy, are trying to get as many assets as they can out of the country, so there is a strong opportunity to sell to companies or partner with Chinese nationals who come to the U.S.

Another benefit: Since many U.S. manufacturers buy from Chinese manufacturers, lower prices will give those businesses greater margins, assuming that their sales numbers don’t otherwise dip. Lower costs of natural resources will also help increase margins.

So, what are the likely bottom-line impacts to South Florida’s middle-market businesses? Unless you have direct sales ties to China or have material customers who sell or supply a great deal to Chinese companies, it is not clear whether there will be any impacts. Since the economic fundamentals in the U.S. remain generally solid, the greatest threats will not come from the Chinese market swings but rather from any negative perceptions and concerns about possible impacts. So let us all relax, take a deep breath and keep our perceptions in check — it is in our best interest.

Five Tips to Consider Before Selling Your Business

By: James Cassel
September 10, 2015


There may not be better time to sell a business in the next few years than now. Values are high and interest rates are low. They may not stay that way for long. If you would like to sell your business now or any time in the foreseeable future, the time to begin planning is now. This can help minimize many of the obstacles that often delay or kill deals and help maximize your value and ensure a successful outcome.

Based on my experience as an investment banker helping clients during the sale, merger, and acquisition process, here are five tips to consider and act upon now:

  1. Early in the process, consult key decision-makers and those who will be affected by the deal. Determine who will have a say in the deal and consult with them, even if they are minority owners. If your business is family owned, talk to your family members as soon as possible. Involving your family at the outset can help minimize potential family problems later. This is particularly important if a second or third generation is involved and family members expect to take over or profit from the business. Making sure that family members understand what is going on can help keep harmony in the family.
  2. Determine whether and for how long you would like to continue to work after the sale. This can be a tough one. You have to be honest with yourself. It is not a bad idea to discuss this with your significant other. This decision is dictated for many by their age, health, and lifestyle preferences. Older business owners may be more prepared to retire and step away than younger ones who may need or want regular incomes to support their lifestyles or remain active. In general, at a minimum, it is a good idea to be prepared to continue working in some capacity during a transition period. In some cases with financial buyers, you might continue to run the business for years until the next sale.
  3. Organize your documents in advance.Well-structured corporate and financial documents and sound record-keeping practices always make good business sense. Getting your books and records in order now will help keep you from scrambling for documents when potential buyers conduct their due diligence. Keep all your financials, vendor contracts, and customer contracts easily accessible. You will derive immediate benefits from this, as you will be in better shape running your business today with good, timely information.
  4. Determine whether you want a partial or total exit. Private equity firms and other financial buyers can either buy control or minority positions. In a total exit, you might maximize the consideration you receive, especially if you sell to a strategic buyer (although financial buyers are currently aggressive when it comes to pricing). In a partial exit, there are many social issues to consider that might be just as important as what you receive. If you are going to partner with a private equity firm, the comfortability factor may be more crucial than the dollar amount, since you will not get that until the final exit when you sell your remaining ownership interest.
  5. Have realistic expectations of value. Ask your advisors to provide realistic guidance on the value of your business. Too often, I hear stories from frustrated sellers who regret having hired advisors who gave unrealistic valuation numbers just so they would get the job. It is equally important for sellers to be realistic and not merely pick whatever numbers they think they need to sustain their lifestyles. A multiple of earnings or EBITDA (earnings before interest, taxes, depreciation, and amortization) is the way most buyers determine what they are willing to pay for a business. The more you earn, and the higher your future projected growth, the more you can expect buyers to pay for your business. The amount buyers are willing to pay also will vary depending upon factors including your company’s size, stability, industry, and working capital needs. It also is important to have a diverse customer base, as your valuation will be hurt if your revenue is heavily concentrated with one or two clients.

Without a doubt, a little planning now can go a long way to help ensure you obtain the maximum value for your business and achieve your specific goals associated with the sale of your business.

James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle-market companies. www.casselsalpeter.com