Thinking about working from home permanently? It may introduce new challenges while solving others

By James Cassel

As businesses consider safely reopening, companies have been awakened to the possibilities of working from home on a larger scale. Necessity is the mother of invention, but moving the workplace to a home office setting permanently may introduce new challenges while solving others.

I like to dine out. But even with some restaurants reopening, I’m not sure I’m ready to return to my favorite places. So, as I write, I am waiting for the local fish lady from Shore to Door Fish Market in Coconut Grove to deliver a fresh catch from the Keys. At dinner, my family and I may discuss when it’s right to depend less on her while also considering when it’s best to return to our traditional workplaces. Like our dinner, it’s not a decision to rush nor an easy one to make. We all want out.

We’ve learned we may need less real estate to keep business operations running. Depending on the type of company, a hybrid work model may be coming for some. Flex hours, common practice on the West Coast, can be used, with some expected to come into the office at certain times and other times working from home. But that is not an option for everyone. Just ask someone on a production line, driving a delivery vehicle, frontline medical workers, or many other essential employees.

As this tale of two cities approaches — with those who can shift easily to working from home doing so, and those who can’t continuing to brave the outside world — let’s consider what the new workplace may look like and if it’s right for your business.

There are numerous examples and studies showing increased productivity while working from home (the environment also does better). But, I am not sure I concur. Some companies like Box liked the change so much that they’re allowing employees to work-from-home until 2021. Twitter and Square are offering to make that option permanent. Shopify is even paying for work- from-home supplies. But will this really work? In 2017, IBM had many employees working from home but ultimately brought them back into the office. The same was true at Yahoo!

Remember, company teams were frozen in amber when the pandemic hit, with most hiring coming to a standstill. Company culture at these businesses was already established, but as time goes on, new personnel will need to be nurtured to understand company culture, something work-from-home may not be as well suited for. We may also become less tolerant of awkward moments with children, pets and unsuspecting relatives making unwanted, often comedic cameos on Zoom chats.

Networking and developing the relationships successful companies need to grow, survive and pivot is also hard to accomplish working from home. Being out and about helps. It also takes looking beyond productivity statistics to identify potential company leaders adept at the social interaction and teambuilding that leadership requires.

There’s a difference between the salesperson tasked with building and maintaining relationships with customers and clients, and the techie who can tackle a problem remotely. Plus, have you ever tried mentoring via a computer? Also, working from home, for some, can be isolating, causing negative mental health effects.

We don’t know for sure when a vaccine will be ready, if we can achieve herd immunity, whether our own antibodies can keep us safe, or for how long. It’s a waiting game. Right now, for many, working from home is not a choice. Take advantage of this time to find out what works best for your company. It is probably too soon to set a permanent policy, but tinkering with different workforce models may prove fruitful.

I love the fish lady’s offerings, but I love dining out, too. Maybe in the future, I will enjoy a little bit of both. But I haven’t made a decision yet on the right course moving forward, and when it comes to your business, neither should you.

James S. 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.

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Cash-strapped businesses hit with new infection-control costs

By Yamil Berard

Some pass along costs to consumers while others turn to insurers, government for help

Having a family history of glaucoma, Liz Coyle was quick to schedule a visit to her eye doctor once coronavirus restrictions were lifted on some Georgia businesses. Around the same time, she wanted to catch up on her oral health by scheduling a visit to the dentist.

At each check-up, she was pleasantly surprised by what she saw – employees in masks, disposable gloves and isolation gowns; examination rooms sterilized between patients; chairs in waiting rooms roped-off to ensure social distancing; pumps of hand sanitizer everywhere.

What shocked her: A $40 fee tacked on to her dental bill.

“At the end of the day, I was, OK, fine,” said Coyle, who is executive director of the consumer advocacy group Georgia Watch. “But $40?”

It’s a new cost of doing business in the age of the coronavirus. As Georgia businesses attempt to recover from the financial shock of the pandemic and cover the skyrocketing prices of infection-control measures, consumers may be hit with additional fees or higher charges.

So far, the separate infection-control charges tend to be concentrated among health care providers.

On social media, metro area patients are reporting being billed for extra fees their insurance doesn’t cover following dental visits.

Nancy Jones, a health care consultant, says some of her clients — particularly specialists such as cardiologists, surgeons and physicians who serve patients with chronic illnesses – also have raised fees to compensate for the costs of personal protective equipment.

“If you’re going in before your scheduled surgery and you’re going in for a consult meeting with a general surgeon in his office to talk about the process, you may be seeing a surcharge fee for PPE,” said Jones, senior consultant with Atlanta-based JW Healthcare Consultants.

Instead of imposing separate surcharges to help cover additional PPE costs, other businesses, such as hair salons, have hiked prices.

Chris Clark, chief executive officer of the Georgia Chamber of Commerce, told the AJC he wouldn’t be surprised to see more businesses consider price increases.

Merchants from big-box retailers and corporations to mom-and-pop shops have been hit with additional costs under the new infection-control standards. He doesn’t see fast food restaurants, mostly restricted by fixed price menus, as likely to adopt the fees. But a bowling alley might be able to convince customers to pay a little more.

“Most small businesses I’ve talked to haven’t had revenue for four months,’’ Clark said. “Now, they can reopen, but there are all these things that the government requires them to do.”

The balancing act

 As they weigh the benefits of charging more, businesses are walking a tight rope with consumers, said James Cassel, an investment banker who handles mergers and acquisitions for companies across a broad spectrum of industries.

“Businesses are faced with – do they believe they have the pricing power on the one side, or simply do they have the customer base that understands it and is willing to pay a little more,” said Cassel, who is co-founder of the Florida-based Cassel Salpeter & Co.

Healthcare providers are struggling with that question already. Dentists say they were hit hardest because they were among the first to shut down. Now, patient volumes are still low, but their costs have shot up.

“All dental offices have been hit hard with huge costs that were unexpected,” said Florida dentist Keith Hutchinson, who is charging an extra $10 per appointment to try to offset the $60,000 he spent in recent weeks on office partitions, PPE, filtration systems and sanitation supplies. Hutchinson said he sees dozens of Georgia retirees and seasonal residents at his five clinics in the Tampa Bay area.

State Rep. Lee Hawkins, R-Gainesville, also a dentist, concurred that costs are becoming unmanageable for dentists. “Here’s the deal,’’ Hawkins said. “Our (shields) and masks do not last long. The burn rate is much faster on all this stuff, and the availability is still tough and that keeps prices very high.”

Still, Hawkins, whose son, Ben, is also a dentist, said their offices aren’t likely to charge fees. “I think most folks don’t like to see add-ons on their bills,’’ Hawkins said.

Dr. Andrew Reisman, a family care physician in Gainesville and the president of the Medical Association of Georgia, is sure his patients would be deterred. Many just can’t afford it.

“We are not charging for PPE,’’ Reisman said. “We probably should because it has been so expensive, but we don’t want to give patients yet another excuse not to come to the doctor’s office.”

Coyle said the fees will be a barrier to Georgians in critical need of essential services. “We are in the middle of a public health crisis,” she said, “it seems that we need to do more to make sure people don’t fall through the cracks.”

Teetering on insolvency

 Rather than pass along higher costs, some cash-strapped businesses are looking elsewhere for financial help. Healthcare providers pushed the federal government for additional relief payments, and last week the Department of Health and Human Services announced it would distribute up to $15 billion to those with heavy Medicaid patient loads. In addition, HHS mentioned it was working on an additional allocation for dentists but provided no details.

Meanwhile, some business groups are pursuing other strategies.

The American Dental Association, for example, is asking that insurers and other third-party payers alter their fees to help cover the increased infection- control costs.

Insurance companies are also being asked to help cover losses through their business interruption policies. Insurers, though, have largely rejected the claims because the policies often don’t outline provisions for pandemics.

Such disputes are winding up in court. Around the country, restaurants have sued insurers for pandemic-related losses. And last month, Hartford, the insurer for many of Georgia’s 33,000 dentists, was served with a putative class-action lawsuit for failure to cover pandemic-related businesses losses.

Marietta attorney Roy Barnes, the former governor representing plaintiffs in the lawsuit, said he is likely to expand the suit to include other health care professionals who are teetering on insolvency because of the closures and the additional costs to meet infection-control standards.

“Here’s the deal. Our (shields) and masks do not last long. The burn rate is much faster on all this stuff, and the availability is still tough and that keeps prices very high.” —State Rep. Lee Hawkins, R-Gainesville, who is also a dentist

 “There’s no question that this virus has affected a broad spectrum of businesses,” Barnes told the AJC.

Dr. Roy Johnson, the lead plaintiff in the suit, said he was lucky to qualify for the Paycheck Protection Program under the federal relief package, which delivered $100,000 in loans to ensure that the 11-member staff at his Smyrna dental office remained employed.

However, healthcare providers with a heavy debt burden and significant overhead before the pandemic hit will be severely strained, he said. “It’s been very hard,” Johnson, who has practiced dentistry for more than four decades. “There are going to be some dentists who have a lot of trouble.”

Among them is Dr. Robert Lee, who said he is struggling to survive as the only dentist in nine counties in one of the poorest corners of southern Georgia. “Our fees are the lowest in the country,’’ Lee said. “And now they are being eaten up by PPE.”

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How to Increase Your Small Business Market Share

By Joshua Stowers

Looking to increase your small business market share? Find out how to calculate and improve your share of the market.

Market share is the percentage of total sales in an industry generated by a business or product. If you have a large market share, your business is likely pretty successful. If you have a small market share, you may be looking for ways to increase it. To increase their market share, small businesses must implement a growth strategy, which often includes analyzing competitors, introducing more efficient products and services, and providing excellent customer service.

How do you calculate market share?

Knowing how you stack up against your competition is critical to running a successful business, and one of the ways to gain a clear picture of where you stand in your industry is to calculate your business’s market share.

Market share is the percentage of total sales within an industry that the sales of a particular business represents, said Ian Kelly, vice president of operations for NuLeaf Naturals.

“It’s calculated by dividing the total revenue a business makes per industry by the total revenue made within that defined industry,” Kelly told business.com.

For example, if your business reported its gross revenue of $2 million and the industry in which your business operates has a total gross revenue of $50 million, your market share would be 4%.

Company’s revenue ($2 million) / Entire market revenue ($50 million) = 0.04 (4% market share)

There are different types of small business accounting software that include digital marketing tools designed to help analyze your market share projection and provide up-to-date industry and market analysis.

What defines a business with small market share?

Businesses with small or low market share are usually defined as those that have small percentages of the total sales within their respective industries. Using a market share growth strategy, like the BCG matrix, can help your business gain insights on industry competition. The BCG matrix is a marketing strategy designed to support businesses with growth opportunities and long- term financial planning by evaluating its products and services.

“For small businesses, a small market share could easily be less than 1% or up to nearly half of the total revenue per industry, depending on the scope of the calculation and the number of competitors,” Kelly said. “This is because market share can be defined at different levels – global, national, statewide, countywide, or even within cities and neighborhoods.”

Kelly said businesses with small market share can be defined by their market leader because the competition depends on the industry as well. The shares of competitors may be higher in some industries and lower in others.

What is a good percentage of market share?

A good market share percentage depends on the product or service, business location, and industry competition. However, Robert Withers, founder of Natural Citizen, believes that businesses should aim to be No. 1 or 2 in a market.

“Uber Eats recently exited India because it did not think it could be first or second in that market,” he said. “Most consumers only keep a few choices at the top of their minds when considering a purchase of a good or service.”

By not being one of the top competitors, Withers said, businesses will find it difficult to be successful unless they factor another marketing strategy into maintaining a steady customer base.

While there are numerous key factors to consider when determining a good market share percentage, it ultimately depends on your industry and the products or services you sell, according to James Cassel, co-founder and chairman of Miami-based investment banking firm Cassel Salpeter & Co.

“In a very large market with no dominant player, a company with a 10% market share might have a good percentage of that market,” Cassel said. “However, if, for example, there’s a market where two players each have 40%- plus of the market, a third player with just 5% market share could be rather small and insignificant, or it may fill a void in the market and be very important to the market.”

How do small businesses increase market share?

The U.S. Small Business Administration’s Office of Advocacy reported that small businesses accounted for about 44% of all economic activity in the U.S. as of 2014. While this is a great overall contribution, it’s a drop of four percentage points from the previous 16 years.

So, how can small businesses stop this decline in market share? There are two basic ways to do it for your business, according to Cassel.

“One is by organically growing your business by increasing your marketing and sales budget or developing new and innovative products, which will help you build your customer base and sales,” he said. “Alternatively, you can increase your market share by buying a competitor.”

Whether you intend to grow your market share organically or by acquisition, you need to consider how customer perception affects a buyer’s decision and how a strong brand image can amount to considerable market share. Finding a balanced mix of proven marketing strategies and innovative approaches to capture your target market’s attention can attract customers to your business and encourage them to choose you over your competition.

Here are a few pointers to keep in mind as you strategize how you will grow your market share:

  • Keep your revenue above the break-even point. Although it’s important to price your products or services competitively, you don’t want to lose money on each sale in your efforts to beat the competition
  • Identify your direct competitors and why they are successful in your industry. What are they doing better than you? Find out why your competitors’ customers choose their business over yours.
  • Improve your customer Look for ways to provide good customer service and personalize your communications with your customers.
  • Enhance your product and brand If your customers have been asking for improvements to your product or your brand image feels stale or outdated, it may be time to make some changes.

You can also increase your market share by competing in the market segments where your business’s strengths are more likely to be valued and where your major rivals are unlikely to compete.

Market segmentation is the formula of dividing your target market into approachable groups by creating subsets of a market based on characteristics such as age, income, personality or behavior. These segments can later be used to enhance products and target advertisements to various customers.

Generally, there are four categories of market segmentation: demographic, psychographic, behavioral and geographic. Here are some examples of each segment category.

  • Demographic: This is based on statistical data such as gender, education and income. This information is relatively easy for new businesses to find out about their target audience when prepping for launch.
  • Psychographic: This is based on attributes of your ideal customers, such as personality traits, values, interests, lifestyles, and opinions. You’ll need to conduct more in-depth research if you want to target customers based on this type of information.
  • Behavioral: This category refers to customer actions in terms of product usage and brand interaction. It primarily aims to target customers based on their purchasing behaviors.
  • Geographic: The geographic category is the simplest for businesses to identify, as groups may be segmented by ZIP code, city, distance from a certain location or type of area (such as climate or population density).

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Automating Home-Based Accounts Payable During COVID-19

By Mark Henricks
June 12, 2020

Automated accounts payable offers companies long- term benefits that extend to past the pandemic.

A few months ago, many companies were content with the analog approach to accounts payable (AP), having employees send paper invoices, manually process payments and deliver paper checks through the mail. However, as lockdowns forced businesses to migrate AP functions to employees’ homes, some businesses decided to automate AP services, discovering an additional suite of benefits that is likely to carry over even as more and more states emerge from lockdown and business begins in the next normal.

In addition to enabling employees to execute AP functions from virtually anywhere, automated AP can generate cost savings, faster turnaround, and improved accuracy in payment reporting. As more and more organizations look for ways to drive efficiencies and modernize, businesses that have yet to automate their AP services may want to consider doing so.

Automated Accounts Payable

For remote workers, the technological requirements for implementing modern automated accounts payable solutions are minimal. Virtually any desktop, laptop or tablet can be used by off-site employees to run the required software, most of which is cloud based. Some can be used with smartphones.

The main switch is to electronic payments — paper payments have become much less common.

“More and more businesses today don’t cut checks,” says James Cassel, co- founder of Miami-based investment banking firm Cassel Salpeter. “They’re paying with electronic transfer.”

In addition to businesses increasingly settling with vendors through automated clearinghouse (ACH) transfers and instant payment systems, card payments are also growing. In ordinary times, vendors like card payments because they receive payment instantly.

Today, many vendors simply don’t want paper checks at all. One reason is that no one is in their offices to receive them or visiting bank lockboxes to pick them up. As a result, there is little demand or need for employees to set up blank checks and check printers at home.

Businesses that are reluctant to abandon paper checks can instruct their banks to mail checks for them. The same goes for paper invoices. Businesses can ask vendors to email PDF-format copies or scanned images of printed documents. Smartphones can take photos of documents for the same purpose.

How to Start Automating Accounts Payable

Getting started with automated accounts payable starts with analyzing the payables workflow. Businesses can begin by tracking how invoices are currently being received and processed and who approves and initiates payments.

Part of this process is to set up the workflow that will be implemented in the automated solution. The workflow will describe a set of actions and a path that invoices and payments must follow from receipt to payment.

Next, the automated accounts payable software can be connected to the business’s existing accounting software. Accounts payable software can connect to many popular business accounting packages. This way, vendors are paid automatically on the due date and the payment information will flow instantly, automatically and directly to the accounting software.

That said, automated accounts payable solutions aren’t the only way to go. Accounting software can be configured to make automatic payments, and bank accounts can be set up to send repeating payments.

Ideally, whatever method is used will have the flexibility to stop or delay payments when needed. Flexibility can be especially important during a broad-scale business interruption like the one being experienced now.

Managing AP Automation

Managing accounts payable remotely can raise some issues, as well. For instance, businesses need to make sure payments leave an audit trail and that policies and practices conform to compliance requirements, Cassel says.

Alistair Bambridge, CEO of New York-based Bambridge Accountants, says maintaining communication between the various points in the payables chain may be challenging when people aren’t working in the same physical space.

Bambridge says his firm and his firm’s clients are turning to videoconferencing and messaging apps to stay in touch with team members.

Another consideration should be identifying an accounts payables solution with a view to the long game. That means one with integrated communication as well as tools for compliance and appropriate sign-offs. When employees are distributed, they can’t step into one another’s office to discuss a payment, for instance.

Those types of solutions are already available. Synaptic AP, for example, is a cloud-based solution that is compatible with Salesforce and other ERPs.

Synaptic AP clients can automate supplier payments via virtual card payments, automated reconciliation, and flexible payment options.

Ultimately, having employees remotely handle accounts payables is a technological and process challenge most businesses can handle. And no matter how businesses solve the accounts payable puzzle during the current crisis, it’s likely to have a lasting and ultimately positive impact.

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Look beyond the traditional valuation metrics when selling a middle-market company

May 22, 2020
By James S. Cassel and Paul Berkowitz

Economic uncertainty has increased for most middle market companies, with many owners weighing whether to sell their business. Even during this difficult time, some want to sell sooner rather than later, driven by concern about future prospects, the emergence of liquidity issues, or just because they’re ready to move on. The question is whether there is a buyer willing to pay an acceptable price.

In today’s environment, a successful sale means looking beyond traditional valuation metrics. Selling during the pandemic, and even the post-pandemic era, makes earnouts — promising the seller future consideration tied to predetermined financial goals — the best strategy for bridging the valuation gap and getting the best price. Used for years, earnouts will now become more prevalent.

For buyers prior to COVID-19, projections, along with trailing 12 months EBITDA — earnings before interest, taxes, depreciation, and amortization — or free cash flow, were in most cases the go-to performance metrics for establishing a company’s value. Comparable transaction values were also considered. Today, these may not be as relevant.

Approaching the negotiation table, the typical seller may claim business will get back to “normal,” pre-pandemic levels. But with most businesses having gone off a cliff in March and uncertainty helping to make historical metrics poor indicators, accurate projections are difficult to come by. Meanwhile, the savvy buyer has no guarantee if, or even when, business will get back to normal.

So, for the seller that has an interested buyer, earnouts and sharing the risk can bridge the valuation gap. But the devil is in the details when it comes to earnouts. Get them wrong and you could see trouble ahead. A great investment banker is a critical resource in getting them right, but here are some issues to consider:

  • What metric should you use? Should you base an earnout on revenue, gross margins, EBITDA, or net profit? Sellers should push for the metric most likely to hit earnout goals.
  • Include parameters outlining what the buyer must do to maximize the earnout, showing what operational procedures and expenditures made the company successful prior to the sale. Ensuring your consideration doesn’t fall short may mean pushing for continued funding for R&D, products/services promotion, and/or other initiatives.
  • Include provisions making the buyer keep separate books from their other businesses, while requiring they regularly provide financial information on the company you sold them.
  • Specify prohibitions on the buyer selling significant company assets, charging fees for overhead, or on diverting assets to other businesses. Require that the business continue to run as it has historically.
  • Determine how the day-to-day operations of the business will proceed and whether the seller will continue to operate the business.
  • Review all earnout tax considerations to maximize the value received.
  • Establish appropriate, reasonable periods for With getting to the new normal expected to take some time, longer earnouts may be better.
  • Include provisions for resolving disputes without litigation, with guidelines for hiring independent dispute resolution experts.
  • When defining rules that establish if a buyer breached the contract, avoid standards that require proving the buyer’s intent to reduce the earnout, which is hard to do.
  • Finally, a liquidated damages provision may be appropriate, providing for an earnout payment if the buyer breaches the contract.

Given today’s economy, with its uncertain future, earnouts are an effective means of bridging the valuation gap for a company sale. But availing yourself of this timely deal tool means thoughtful attention to details now, to avoid friction and/or litigation later, especially given courts often favor the buyer in earnout disputes.

Specific, detailed, unambiguous terms are best. Play it right, and you will achieve a win-win where you get fairly compensated, and the buyer feels they got a fair deal with a shared risk profile.

James S. 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. jcassel@casselsalpeter.com or https://www.linkedin.com/in/jamesscassel.

Paul Berkowitz is a shareholder in the Miami office of Greenberg Traurig, P.A. with a practice focusing on business matters. berkowitzp@gtlaw.com or https://www.linkedin.com/in/paulberkowitz68821219/

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What Can You Do With a Finance Degree?

By Ilana Kowarski
May 21, 2020

The ability to manage money is a skill that can be applied in nearly any industry, experts say.

PEOPLE WHO ENJOY working with numbers, excel at math and take pride in their ability to manage money wisely should consider pursuing a finance degree.

Find B-Schools That Lead to Good Jobs

“Is the field you want to enter associated with quantitative and logical thinking? If so, a finance degree might be a good challenge for you to consider,” Ahmed Mir, who earned a master of science degree in finance and investment from the University of Nottingham in the United Kingdom, suggested in an email.

Mir – the founder of Nature & Bloom, a London-based firm that sells CBD supplements – notes that a finance degree can pave the way for a career as an entrepreneur. “If you intend to own your own business, the ability to manage and understand your own finances is crucial to long term success and as a result, a degree in the field would set you up well to manage cashflow.”

Furthermore, individuals who prefer to work for an established company rather than for themselves can expect to qualify for a variety of jobs with a finance degree. Though it is common for finance professionals to work at banks, they can find employment elsewhere, experts say.

Mir, for example, entered the tech sector after obtaining his finance degree and spent more than six years working for Amazon. His personal experience aligns with the observation of recruiters who say that finance credentials are highly marketable in many industries.

“A finance degree qualifies you for careers as a financial analyst, financial advisor, accountant, or financial manager for businesses of all sizes and industries,” Matt Erhard, a managing partner with Canadian recruiting firm Summit Search Group, wrote in an email. “This is one of the reasons these degrees are so valuable and versatile. Every company needs people who are knowledgeable about finances and accounting in order to run and grow effectively.”

What You Can Expect to Learn in a Finance Program

The field of finance focuses on the many strategic considerations involved in monetary decisions, including choices about borrowing, lending, saving, spending and investing, according to finance academics and practitioners.

Finance students are typically taught the art and science of financial analysis and financial modeling, including lessons on how to interpret complex data and create solid forecasts.

Knowledge of this academic discipline can help someone determine where to allocate limited financial resources when drafting a budget, and it can also inform financial predictions and facilitate financial planning. A sophisticated understanding of finance can clarify which business opportunities have the greatest profit potential as opposed to ventures that are unlikely to be successful, experts note, adding that such insight is essential for investment careers.

[ SEE: Best Graduate Finance Programs. ]

Finance training is also valuable when calculating how much an asset or company is worth and determining what price a company should charge for its product or service.

“Finance and the understanding of how money flows is the foundation of every business,” Adam Sanders, who has a bachelor’s degree and an MBA in finance, explained in an email. Sanders says the wide range of job options for finance grads is a significant advantage of pursuing a finance degree. “Any type of general business or money-related career is an option with a finance degree.”

Risk management is a career path where a finance degree often comes in handy, notes Sanders, an alumnus of Northwestern University’s Kellogg School of Management and director of Successful Release, an organization that helps former felons reenter the workforce. “It prepares you to better understand, evaluate and address the many risks that companies face. Risk management ultimately comes down to how much it will cost if things go wrong and how much it will cost to prevent it which is where finance professionals shine!”

[ READ: What You Need to Know About Becoming a Finance and Financial Management Services Major. ]

Finance degrees cultivate problem-solving skills that are attractive to employers, resulting in numerous career opportunities, according to experts. Degrees in finance-related fields such as economics, accounting and actuarial science can yield similar job prospects and serve as viable alternatives to finance degrees, experts say.

Additionally, industry-recognized certifications in finance such as Chartered Financial Analyst, or CFA, and Certified Financial Planner, or CFP, are extremely marketable and allow finance grads to differentiate themselves from their peers when competing for jobs.

Experts say the following positions are the sorts of jobs where finance training is especially helpful:

  • Financial analyst
  • Financial associate
  • Financial planner
  • Investment analyst
  • Budget analyst
  • Corporate planner
  • Portfolio manager
  • Wealth manager
  • Financial manager
  • High net worth money manager
  • Product manager
  • Head of product
  • Head of planning and analysis
  • Comptroller
  • Chief financial officer
  • Chief executive officer

Finance careers can be highly lucrative, especially for individuals who become managers in the field. According to the U.S. Bureau of Labor Statistics, the median annual salary among U.S. financial managers in 2019 was $129,890.

However, experts caution against pursuing a finance degree simply because of a desire to become rich, warning that it’s important for prospective finance students to think about whether they would actually enjoy a finance job and perform well in it.

[ READ: How to Choose Among the Many Types of Business Programs. ]

Andrew Temte, who has a Ph.D. in finance and a CFA certification, says liking money isn’t a good enough reason alone to enroll in a finance program, noting that he has witnessed many students make that mistake.

Temte, CEO of Kaplan Professional, which provides licensing exam preparation and continuing education, cautions that entry-level finance jobs aren’t necessarily glamorous. He encourages prospective finance students to arrange informational interviews with practicing finance professionals to get a sense of whether a finance career is a good fit.

Finance jobs require creativity and people skills in addition to hard skills, Temte notes. A finance professional must be able to make sense of numbers and explain those numbers, he emphasizes.

James Cassel, co-founder and chairman of the Miami-based investment bank Cassel Salpeter & Co., acknowledges that it is possible to work in a finance job without a finance degree. Cassel notes that he hires some individuals who have that credential and others who lack it.

Experts emphasize, however, that the technical skills gained via a finance degree can be very useful.

Steve Shreve, a mathematical sciences professor and co-founder of the master of science in computational finance program at Carnegie Mellon University, notes that quantitative finance programs are ideal for mathematically gifted students who are looking for practical ways to apply their numerical abilities.

The enormous amount of financial data available nowadays signals a growing need for data analysis, Shreve says.

Richard Bryant, the program’s executive director, says students who obtain more general, less math-focused finance degrees can follow a wide range of career paths ranging from mergers and acquisitions analysis to private equity investing.

Finance programs ultimately teach students how to use money optimally and increase wealth, a valuable skill no matter which sector they enter, experts say.

Searching for a business school? Get our complete rankings of Best Business Schools.

Top Finance MBA Programs

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This is the time for businesses to prepare for the ‘new normal’

By James Cassel

Take a deep breath: After weeks of enduring the pandemic’s economic challenges, middle-market leaders should take a step back to consider the transition to the new normal. Whether we see a dramatic reopening of business in May, as the president has suggested, or a later restart with a more gradual transition, this is the time to prepare.

Cash flow is your business’s lifeblood. Review your needs for the next six months, considering different scenarios for business ramping up during that time. With money now flowing, apply for loans and assistance through the CARES Act’s Paycheck Protection Program (PPP), and the Small Business Administration. The sooner you get started, the better. Support dollars are limited and banks like Wells Fargo and others are overwhelmed and turning away new and existing customers, but many aid programs operate on a first-come-first-serve basis.

Also, if you haven’t already, seek relief from landlords, banks, and creditors. It is in all your best interests. It’s very hard for landlords to find new tenants right now, and banks and suppliers/creditors want to keep your business.

Communicate with customers, clients, suppliers and partners regularly. This is about caring first and business second, but do discuss where they expect to be in the coming weeks and months, then plan your business strategy accordingly. Reflect on how you are going to relaunch and communicate your availability, products and services. Consider discounts or sales to jumpstart your reopening and generate cash.

Take care of yourself and your employees, physically and mentally. Remember, the CARES Act offers payroll protection with loan forgiveness, so examine bringing back furloughed or laid-off employees, but make sure you carefully comply with the requirements to assure you get the maximum forgiveness amount.

Strike the right tone while communicating. Understand there may be tough decisions ahead resolving the return of personnel. Not being sure how things will play out or how fast, companies must be cautious as they ramp back up, while being transparent with employees. Let your team know where your company is and where it’s headed and listen carefully. Employees should feel engaged and see themselves as part of the solution. Be attentive to their contributions, incorporating the best into your planning. Don’t forget they’re suffering too.

Now that many of us are smarter about social distancing, protection, and remote working, use your learnings to promote and codify developed efficiencies. If the virus reemerges, or some other disaster strikes, your business can act faster and more seamlessly transitioning to a remote, resilient operation.

Don’t forget that marketing and messaging still matters. Consumers, clients, and partners expect you to remain a trusted industry presence and a part of the conversation through this difficult period. Plan for the restart now, and start developing your future messaging so that it is in place and fine-tuned when the crisis subsides.

We need to be prepared for the new normal. Restaurants and entertainment venues, for example, may want to do more cleaning and disinfecting once they begin to reopen, as well as maintain some form of social distancing protocols whenever possible. There may also be new standards for wearing masks and gloves even after this lockdown. Will we ever shake hands again? I don’t know, but those are the types of things we should be thinking about now.

Work on becoming a better and a more efficient company. Don’t focus on the negative. Instead, communicate and strategize for coming out on the other side after things take a turn for the better. It’s hard to predict when, but we will eventually get back to business.

Remember, even though we’ve been through a major economic/health disruption, this crisis has also provided the opportunity to spend more time with our families and working on ourselves. It has allowed us to share more home-cooked meals surrounded by those closest to us, while trying out new things like Zoom and Instacart. Likewise, it provides an opportunity for your business to come out of this stronger, leaner and battle-tested.

S. 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.

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Decoding The Loss Making Startup Culture & Why To Invest In Loss Making Startups

By Nandini Marwah
April 28, 2020

 

A start-up is like a baby. You give birth to it; you take care of it and then you watch it go.

“What if equity value has nothing to do with current or future profits and instead is derived from a company’s ability to be disruptive, to provide social change, or to advance new beneficial technologies, even when doing so results in current and future economic loss but a lot of gain in the future?” Hedge fund billionaire David Einhorn, founder of Greenlight Capital

India is struggling to become the third-largest startup ecosystem in the whole world but it is actually going towards unemployment since more and more startups are getting shut down. A report was given by IBM Institute for Business Value and Oxford Economics where they found that 90% of the startups in India fail in the initial 5 years because of lack of innovation or too much innovation. Here are the few issues which lead to startup failure:

  1. Often it is told that if you make a different and out of the box product, your company will touch the sky. So then this saying is followed and a very unique product is trailed. Amidst this whole scenario, one very essential component is lost, the need for the product. Startups come up with such a unique product but forget that those products aren’t needed and aren’t right for the market.
  2. Lack of solving the market problem is another issue. Startups in India have a lot amount of data, technology, great advisors and a good reputation because of thorough marketing. But one issue that prevails is that of market understanding. They do not solve the market issue at large.
  3. India is the second-most populous country in the world and a major economy; however, most startups only cater to a section of the society and not a large chunk of it. The population in the rural areas remain untouched by this. In India, there are less than twenty retailers to serve the market chunk. but there exist way too many online retailers for the customers. likewise, there exist too many startups in a concentrated environment. The increasingly crowded startup ecosystem means there aren’t enough funds to go around for every startup. This is a major challenge that hampers the growth of a startup even when it has all things in its favour.
  4. Another major issue for the fall of startups has been lack of talent/ dedication and shortage of funds. Startups hire the wrong employees and go into the vicious circle of bad human personnel for the whole period. Startups were initially not able to gather a competent workforce due to the limited resources available and the inability to pay high salaries. There was simply the right talent shortage. In the second case, the founders wasted good two years with the wrong staff and paid them from the limited capital they had with negligible returns.

Why Are Startups Bought By Big Giants?

  • The big companies end up buying the startups because of the major reason, cost. Rather than acquiring services from them, they end up purchasing the startup so that in the long run, a very profitable alliance is formed. The entire setup, talent and technologies are purchased. The benefit of two service firms is way more than hiring the service.
  • One of the major reasons of merger and acquisition is that acquiring the startup, the sales of the startup merge with the parent company’s sales. The bigger organization has a win-win situation. The major example here can be of Kiva and Amazon. When the firm, Kiva built robots, Amazon uses that in their warehouses for all the in-house operations.
  • N Ganapathy Subramaniam made a statement that, “We continue to remain open and hungry for acquisitions. We have one of the best track records in terms of acquiring companies and integrating them… the approach is that clearly, we are in the market looking for the right asset which will add a certain amount of intellectual property, market reach or client addition.”
  • Another major reason is the research and development. Research takes up many years. People who start their own ventures have done their share of research. So when a big company acquires a startup, it ends up buying all the things associated with it in a package along with the killer and apt research ideologies.

Why Investors Invest In Loss Making Startups?

  • Going for profitability too early often means limiting growth. An extensive customer base needs to be developed and research needs to be done. Profit in the early stage means something isn’t right.
  • If a venture capitalist firm specializes in technology, they would try to dominate the tech sector by buying as many companies as possible. This way their competitors won’t have much choice but to buy the remaining less appealing firms. This unique strategy can create a favourable jump in their portfolios and often the word investment is deemed to be more attractive than the concept of profit.
  • Investors can still make money from unprofitable companies. VCs frequently sell their stake and often go ahead with the mergers and acquisitions.
  • There is also another very exquisite reason, the brand value. So uber isn’t making profits right now but if a VC invests in uber, he can benefit from it because of the popular name of the brand. The startups market themselves in unique ways and often become more popular than the conventional companies.

Competent examples which show that losses MIGHT lead to REVENUES

For about 20 years, Amazon was dependent on investors to grow and stay in business.

“One of the main reasons for Amazon’s success was their ability to raise capital and have a story where people believed they would be profitable,” said James Cassel, Founder, and Chairman of investment banking firm Cassel Salpeter & Co. This bond ultimately paid off. In the first quarter of 2019 the e-commerce giant reported about $60 billion in net sales, and it seems like they will maintain these types of massive profits for the foreseeable future because they are one of the biggest companies right now.

Comparing amazon and uber. Amazon took two decades to reach the profitability stage, maybe uber will too. “Until and unless Uber can find ways to overcome the numerous weaknesses in its business model, the company will never be profitable.” Said a great economist.

Each startup has its own strategy to achieve a certain level of dominance in their category, and their own timeline for a path to profitability. The reason why Indian startups end up being acquired is because of the lack of funding and a promise for a better future!

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Community Bank M&A Likely to Take a Twist With Covid-19, Advisors Say

By Surani Fernando
April 17, 2020

 

Takeaways

  • The ongoing economic crisis brought on by the coronavirus pandemic will likely see a shift in factors driving future M&A activity, including exposure to distressed industries and geographies, which may heighten the need for consolidation, advisors
  • Low valuations will dissuade sellers, and cash components of deals will need to be much higher, one advisor
  • Covid-19 may force even larger players to consider M&A options, and there could be more deals involving targets with $2 billion to $5 billion in assets, one advisor

The trend of community bank M&A will likely take a twist in the wake of the coronavirus pandemic as new challenges will reveal additional vulnerable targets, FIG sector advisors said. However, deal activity may not pick up until the end of the year as banks will take time after the financial markets stabilize to assess loan book damage, they added.

Prior to the pandemic, the industry was seeing a wave of consolidation among community banks looking to grow in scale and compete with the larger super-regional players, and the surge in 2019 M&A activity was expected to continue well into 2020, four advisors said.

In 2019, there were about 270 transactions, the highest in the last three years, said Jonathan Roberts, managing director of transaction advisory services at BDO. Macro trends and the need for scale were driving the consolidation especially in some of the larger states like Florida, Illinois and Texas, said Roberts. According to the Federal Deposit Insurance Corp. (FDIC), there are more than 5,000 community banks in the United States, which represent 92% of insured institutions.

Significant merger of equal deals in 2019 include First Horizon National’s combination with Iberiabank for $3.9 billion, and Texas Capital Bancshares’ merger with Independent Bank Group in a $3 billion deal.

The ongoing economic crisis brought on by the pandemic will likely see a shift in factors driving future M&A activity, including exposure to distressed industries and geographies, which may heighten the need for consolidation, advisors said. The pandemic is also expected to affect deals that are yet to close, as evidenced by Flushing Financial’s $111 million acquisition of Empire Capital, which was announced in October and has been delayed due to financial and stock market volatility.

M&A Dynamics to Change

Potential buyers need to focus on their own businesses now, and it will take time to build an offensive strategy, said James Cassel, chairman and co-founder of boutique bank Cassel Salpeter and Weber.

The more likely buyers for the smaller regional banks with $1 billion to $3 billion in assets are perhaps the institutions with $10 billion to $30 billion in assets, said Timothy Johnson, partner at KPMG’s transaction services, adding that mergers of equals between two banks each with $3 billion in assets are also a possibility.

When M&A activity in the space regains momentum, community banks in a position to use cash for deals are the likely consolidators, as depressed stock prices will deter sellers from agreeing to typical stock deals, Cassel and Johnson said. Low valuations will dissuade sellers, and cash components of deals will need to be much higher, agreed Osnat Naporano, managing director at independent investment bank Brean Capital.

Geographies will play a big role in where community bank M&A might occur, said Naporano. Florida has historically seen a high number of community bank mergers, while Arkansas, Louisiana and Oklahoma have also been active states, said Johnson. Traditionally banks within the same geography merge to build a larger community presence, but this could be an opportunity for regional banks to expand into another geography, said Cassel.

But for the time being, pre-Covid-19 negotiations have been halted as the industry waits for the financial markets to settle, advisors said. Only then will it be possible to evaluate the extent of the damage caused by the global shutdown, particularly to small businesses, the advisors added.

Once the economy is in a less volatile state, it could take up to three months to fully assess credit losses and the credit quality of the loan books, said Roberts. If that initial stability comes sometime in the summer, it may mean no deal flow until the fourth quarter at the earliest, Roberts said, with the other advisors agreeing on the timeline.

In 2019, a larger majority of community bank M&A involved targets with less than $1 billion in assets that were struggling to compete, said Johnson. The trends of the past year spoke to long-term community bank consolidation, and at the start of this year, given margin pressures and the lack of economies of scale, there was anticipation for mergers among smaller banks going as low as $250 million in assets, said Roberts. But Covid-19 may force even larger players to consider M&A options, and there could be more deals involving targets with $2 billion to $5 billion in assets.

Covid-19 Direct Impacts

Covid-19 will amplify the yearn for digital enablement as citizens get used to accessing their online account for banking needs, and given that expansion requires capital investment, M&A among smaller banks may be the only way to achieve that, Johnson said.

The next few months will be telling, and the major difference between now and the global financial crisis is capital, Cassel said. Regulators did a good job of making sure banks had adequate capital to withstand stress in their loan portfolios, said Johnson. Even so, being liquid will be much more important, said Naporano, adding that better deposit franchises will be more attractive.

The U.S. Federal CARES Act has resulted in a surge in applications for the Paycheck Protection Program (PPP), and smaller banks may struggle to service this demand, Johnson said. Consolidation may be one avenue to maintain customer service standards, which is  the main draw for community banks, he added.

A big concern is around commercial real estate, and the exposure that banks have in their unique geographies, Naporano and Cassel said. Johnson agreed, saying over the next three months, institutions over indexed to commercial real estate may need help sooner than later, and if they have a decent franchise that is distressed, it may push them closer to a transaction.

It will be unique to the institution, but banks with a fair amount of business in the hospitality and leisure space, will be exposed to higher risk. Community bank books reflect the health of the economies in their geographies. Florida and Southern California, for instance, have local communities that are dependent on tourism, while community banks in Texas could be suffering due to links to the energy industry, said Roberts.

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What Is Cash Basis Accounting?

By Mark Henricks
April 08, 2020

Learning about cash basis accounting, one of the most common business accounting methods around, can help your company’s cash flow.

The two most common methods of business accounting are cash basis accounting and accrual accounting.

While each has different characteristics and advantages, the basic difference between them comes down to timing.

Cash Basis Accounting: Examples

“Cash basis accounting captures transactions when there is cash involved,” explains Lisa Koonce, an accounting professor at the University of Texas at Austin. “For example, when buying office supplies, the company typically pays cash for them. Under cash basis accounting, the company then has a business expense and a reduction in their cash balance.”

For an example of how cash basis accounting would work with revenues, consider a small business that sells to other businesses. Its customers pay its invoices in 30 days. The business would record revenues from sales when the payment actually arrives, 30 days or so after the invoice is sent.

With expenses such as payroll, a similar small business would record the expense of paying workers on payday. In other words, cash basis accounting calls for recording payments to workers when paychecks are actually distributed, rather than when the workers earned the pay.

Cash basis accounting adequately reflects many small firms’ financial situations, says James Cassel, chairman and co-founder of Miami investment banking firm Cassel Salpeter. Restaurants, for instance, are often well-suited to cash accounting because there’s little difference in the timing of when they receive money and pay bills.

“With most restaurants if they’re paying bills on time, everything is within 30 days. They’re getting paid when the customer comes in with cash or a credit card, then receiving the credit card payments in a couple of days,” Cassel says. “It doesn’t make a lot of difference in how they manage the business whether they use cash or accrual.”

Accrual Basis Accounting: Examples

“In contrast, accrual basis accounting captures transactions when an economic event occurs, which may or may not involve cash,” Koonce elaborates. “So, for example, when a company uses electricity, they would under accrual accounting recognize electricity expense at that time. They would do so even if the payment for that month’s electricity bill occurs later on, like the next month once the bill arrives.”

Payroll provides another important example of how accrual basis accounting treats expenses. A business using accrual basis accounting would record the costs of paying its workers as they do the work, rather than when the paychecks are distributed.

Revenue works similarly. A business using accrual basis accounting records income when the company has earned the revenue. So a consultant would record revenue as billable hours are completed. A building contractor would record revenue when a remodeling job is finished. A manufacturer would record revenue when product has shipped.

In these cases, actual payment may not arrive for weeks or even months, but the revenue is recorded when it is earned.

Which to Use? Cash vs. Accrual Basis Accounting

Since cash basis accounting is focused on cash transactions, it highlights other differences between the two accounting methods. For instance, cash accounting doesn’t recognize accounts payable or accounts receivable, which are important parts of accrual accounting.

The cash accounting method is more popular among smaller businesses. Sole proprietors, especially those who don’t have inventory, are particularly likely to use cash basis accounting rather than accrual accounting.

“Cash basis accounting is much simpler than accrual basis accounting, so for small businesses it is a more cost effective way in which to keep track of transactions affecting the company,” Koonce says.

Although it’s simpler, cash basis accounting does have some limitations.

“The biggest disadvantage of cash basis accounting is that it doesn’t capture economic transactions in the right time period,” Koonce notes. (For instance, a business incurs expense for electricity when the business uses the electricity, not when it pays the bill the following month.)

Looking at cash flow seems more straightforward and less complicated for a business that uses cash basis accounting, Cassel notes.

“If you have more money in the bank at the end of the month than in the beginning of the month, and you have paid all your bills, it’s a good month,” he observes.

But accrual basis accounting can give a more accurate financial picture of business’ financial status, especially if there’s a time gap between having to make and receive payments. Accrual accounting is often more useful for long- term planning, Cassel says. This is part of the reason why larger companies are more likely to use accrual accounting.

Another key reason for using accrual accounting is when it is required by a third party. If a business is looking for a bank loan or preparing for sale, the lender or buyer might require accrual based accounting, Cassel says. In addition, public companies always use accrual based accounting.

Lenders, investors and private equity buyers often want a business to have audited books, he explains. And an audit performed under Generally Accepted Accounting Principles (GAAP) requires accrual accounting.

The Internal Revenue Service also has rules about using cash basis accounting. The IRS will accept either approach, including a hybrid of the two, with some exceptions. One is if a company that is not an S corporation has more than $25 million in annual sales. In that case, the IRS requires accrual accounting.

If accrual accounting is not required by some third party, companies are free to use either method. Some use a combination of the two, employing accrual method for sales and purchases of inventory and cash for other income and expenses. Companies may also use one method for managing the business and the other when it comes to filing taxes, Koonce says.

Companies can switch from cash basis accounting to accrual accounting for tax purposes by filing Form 3115 with the IRS. Switching often occurs as a company gets larger and long-range cash flow planning and dealing with investors and lenders becomes important, Cassel says.

But switching accounting methods isn’t common, and it usually means going from cash to accrual.

“From the IRS standpoint you can pick a method, but once you pick it you have to stick with it. You really can’t go back and forth,” Cassel says. “And generally, you see people change from cash to accrual. It’s rare you see someone go from accrual to cash.”

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