More private equity firms moving to Florida as deal flow remains strong

By Brian Bandell

The number of private equity firms based in Florida has been steadily increasing, while the number of PE-backed deals in the state remained solid in the first half of 2018, according to an analysis of PitchBook data by Miami investment banking firm Cassel Salpeter & Co.

There were 118 PE deals in Florida in the first half of this year. That’s down from 145 deals in the first half of 2017, although that number was initially reported at 109 before being updated after the end of the year.

James Cassel, chairman and co-founder of Cassel Salpeter, said some PE firms don’t report their deals on time, so the deal total is typically updated later. He expects 2018 to finish with about the same or slightly fewer PE deals than the 281 recorded in 2017.

“It’s still pretty healthy numbers, especially compared to 2008, 2009, 2010 and 2011 when the market bottomed out,” Cassel said.

The biggest growth in PE deals in the first half of 2018 came from health care and IT companies. Cassel said there’s been major consolidation in health care, as companies seeks to combine services and become more efficient. IT and technology are seen as strong growth sectors, where a company can attract a capital transaction before it even brings a product to market, he said.

With the economy performing well, many company owners are considering whether this is a good time to sell since valuations are high, Cassel said. It’s better to sell before the economy eventually takes a downturn, he said.

Southeast Florida accounted for 36.4 percent of the PE deals in the state during the first half of 2018, more than any other region of the state.

The study found that 68 PE firms were based in Florida, up from 56 in 2017 and 34 in 2013.

Cassel said the state’s favorable tax climate, with no personal income taxes, has made this an attractive place to base a PE firm so many of them are moving here. In addition, some of the more mature Florida PE firms have seen junior-level executives leave to create their own firms and built investment portfolios, Cassel said.

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5 Things to Keep in Mind When Serving Underserved Markets

Going niche and catering to underserved markets has its pros and cons. Learn how you can determine whether or not going after an untapped market is right for you.

By Geoff Williams

Underserved markets sound like they would be a gold mine—but on the other hand, there may be reasons why businesses aren’t serving them.
Plenty of people go broke panning for gold, after all.

But some people strike it rich, too. So if you’re thinking of focusing your time and efforts on a niche, underserved market, here are some strategies you’ll want to consider.

1. Remember that “underserved markets” can mean a lot of things.

It’s important to think about underserved markets because you could be overlooking a potentially robust revenue stream. If you suddenly find a demographic that you had never considered to target as consumers, you could discover an entirely new customer base simply by shifting your marketing dollars.

Addressing an underserved market requires careful planning and consideration. Sometimes perception isn’t reality.
—James Cassel, founder and chairman, Cassel Salpeter & Co.

But remember, “underserved markets” can mean more than a gender or racial demographic.

It might be a location, such as a neighborhood or city that doesn’t have many or any businesses like yours. It could be a demographic that isn’t catered to much. Or it may be a group of people who have shared experiences. For instance, your business could target twins or military veterans or vegans.

2. Look for the barriers, and not competitors, in underserved markets.

If you own a burger joint, you compete with other restaurants selling burgers. And if you sell and install carpet, you’re competing against the other companies selling and installing carpet. (I could offer 23 more examples just like this, but you get the picture.)

Many underserved markets don’t have a lot of actual competitors (that’s why they’re underserved). But they often do have situations that you’ll have to consider.

Maybe the customers you want to target don’t have much extra money, and that’s why this market doesn’t have many businesses catering to them. (Would-be competitors may be afraid they can’t make a profit.)

Or maybe there are challenging zoning issues, and that’s why other businesses haven’t put themselves into a particular community.

In other words, while you may not have many competitors in your chosen market, your “competition” might be a knotty problem you have to untangle, like figuring out how to help cash-strapped people pay for your products or services or navigating city hall for those zoning issues.

And solving the issue may take time.

“We believe one of the keys to success in going after an underserved market is patience and being in it for the long term,” says Lou Hoffman, CEO of the Hoffman Agency, a communications consultancy.

“We entered China in 1998 and it took 10-plus years before it was a profitable enterprise,” Hoffman explains. “Today, it’s a growth engine not only for our Asia Pacific operation but [for] bringing business/revenue to the U.S.”

Last November, his agency opened an office in Jakarta, Indonesia.

“Indonesia looks similar to China 20 years ago,” he says, citing factors such as its population and it being a growing hub in a lucrative region in southeast Asia.

Hoffman expects the branch to be profitable by 2019 because of the lessons he learned in China. But he also recognizes that the money may not roll in right away. It takes patience and understanding to make it in underserved markets, he says.

“I think the biggest macro pitfall is you simply can’t predict how things will go in the early going. There’s too much variability and volatility,” Hoffman says.

3. Recognize that your business may not be the right fit for an underserved market.

Boy, that sounds mean, doesn’t it? But the business laws of gravity still apply here: Do your research and make sure your business can serve an underserved market and make money doing so. (You want to be able to stay in business and continue to deliver products or services to your customers.)

James Cassel, founder and chairman of investment banking firm Cassel Salpeter & Co., based out of Miami, recalls working with a prepaid cellular phone company that attempted to offer its products to an underserved market. But it didn’t go well.

“The company was trying to do good and be successful at the same time, but they overpriced their service at a price point too high for that specific market. The result was a real negative for the company’s image after it was repeatedly accused of overcharging an already vulnerable community,” Cassel says.

You really need to do your research, Cassel adds.

“Addressing an underserved market requires careful planning and consideration,” he says. “Sometimes perception isn’t reality. You may think a market is underserved, but careful research may reveal that it is not. Sometimes the consumer just doesn’t really need or want the product.”

4. Ask yourself if your company can make the sacrifices to cater to an underserved market.

You probably will end up spending a lot of money or time, or both, in making underserved markets work out for your business. (Of course, sometimes it’s no picnic trying to make it in an oversaturated market either.)

Chad Rixse is the co-founder of a Seattle-based wealth management firm Millennial Wealth, LLC, which targets millennials.

Obviously, as a group, millennials aren’t underserved at all. But financial advisors and wealth management firms tend to go where the money is. Older adults generally have it; younger adults, not so much.

“It’s been a challenge to be highly profitable early on,” Rixse says, but he thinks it’ll pay off eventually since “this generation is going to be the next great holders of wealth in our nation and somebody will ultimately need to fill the gap that exists. I’m playing the long game here.”

5. Be prepared for other competitors to follow you.

Tres Roeder is the founder and president of Roeder Consulting, a project management and training firm based out of Cleveland. Years ago his consulting firm identified and entered an underserved market, aiming a program to help project managers develop people skills.

Whether project managers lacking people skills is an underserved market may be debatable—it’s definitely a niche market—Roeder makes a great point when he discusses what happens next.

“We had a great run—and we were a key part of a major transformation in our profession, and then everyone else entered the market,” he says.

So if you find that you’ve successfully entered an underserved market, expect to see other competitors follow after you.

“We trademarked a name for our program but found it very difficult to copyright and protect our unique content within the program. The main lesson has been to make sure we are clear on how to protect our investments in new markets. Entrepreneurs see gaps. That’s what we do. But how will you monetize and protect your product or service offering? That’s something you should think through from day one,” Roeder says.

He adds that this year, his company is launching a new service aimed at project leaders. And his company is thinking of ways to handle any competitors in the rearview mirror.

That’s the good and bad thing about being successful at offering products and services to people who have long been ignored. Underserved markets don’t tend to stay underserved for long.

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Growth in Florida private equity firms creating new opportunities for middle market business owners

By James S. Cassel

The recent growth in the number of private equity firms headquartered in Florida and news headlines surrounding ongoing PE activity is piquing the interest of middle-market business owners in selling to or partnering with private equity firms. Further fueling their interest — particularly for those who had envisioned doing this in the coming years — is the awareness that today’s healthy valuations might not last. At the same time, many are uncertain how to position their businesses to seize such opportunities. Following is some insight based on our experience.

The number of PE firms is growing nationwide, particularly in Florida. According to our latest Cassel Salpeter & Co. Private Equity Deal Report, the first half of 2018 saw a record high of 12 new Florida-based PE firms since year-end 2017, and a compound annual growth rate of approximately 13.1 percent from 2010 through the first half of 2018.

These firms come in all shapes and sizes. Some specialize in specific industries, such as technology, healthcare or consumer products. Some do large, middle-market or lower middle-market deals. Some, like Trivest, focus on buying founder/family owned businesses, while others, like Sun Capital Partners, specialize in distressed companies with untapped potential. Firms like H.I.G. Capital have a family of funds, including private equity, growth equity, real estate, debt/credit, lending and biohealth.

Generally, PE firms do not want to run companies. They seek majority stakes where they buy control of companies or they seek significant minority stakes in companies. They want to back strong management teams or put in place new management teams that they consider better positioned to grow and run the companies. PE firms can provide middle-market businesses with valuable support in a variety of areas, including process improvement, sourcing and supply chains, recruitment and human resources initiatives, and mergers and acquisitions assistance.

How can you determine whether selling to or partnering with a PE firm is right? First, make sure you understand your motivations and have confirmed this would be right for your business. Next, do not limit your options to PE firms. You might consider selling to strategic buyers or family offices. A lot depends on what you want to accomplish.

If a PE firm is your best route, then you need to find the best fit for you and your business, based on your specific motivations. Are you selling for estate- planning purposes or to retire? Do you want to take some money off the table or rearrange equity with other family or team members? Do you want growth capital to expand or help develop a growth/acquisition strategy, including support with analysis and sourcing? You might want a PE firm to leverage its relationships on your behalf, bring in capital, or help you restructure your debt. Some family-owned businesses might want help attracting different and/or better management teams.

We always recommend middle-market business owners consider an array of candidates and choose the one offering the right cultural fit and valuation. While the ideal target for a PE firm is a proprietary deal with minimal competition, this may not be best for the business owner. Sometimes, it is best to just deal with one PE firm, but this may affect your ability to maximize value. Running a competitive process is best to maximize value and understand all available options.

When conducting due diligence, speak with sellers or management of companies that the PE firms bought or partnered with and see how everything went. Ask lots of questions.
How do you find the right PE firm? Talking to industry experts, doing research and attending conferences and events is a great place to begin. Some PE firms have calling efforts or industry initiatives and attend events where they seek potential opportunities. It always is best to have an experienced investment banker and attorney assist you and serve as your advocates. Finding the right PE firm and protecting your interests in a deal is an art that requires experience and expertise, and it is critical to have the right professionals in your corner.

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 via LinkedIn at https://www.linkedin.com/in/jamesscassel.

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Private equity deals, PE-backed companies on the rise in Florida, new report says

By Margie Manning

After a record 2017, private equity deal flow in Florida remained strong in the first half of 2018.

A new report from Cassel Salpeter & Co. shows there were 118 private equity deals in the Sunshine State from Jan. 1 through June 30. That number may go up, the report said, because data reporting generally lags behind actual activity.

There were 145 private equity deals in the first half of 2017, including deals reported after the six-month period ended, the report said.

About 17.8 percent of the private equity deals in the first half of 2018 were in the Tampa Bay area, the report said. More than a third of the total deals, 36.4 percent, were in Southeast Florida. Central Florida had slightly more deals than Tampa Bay (18.6 percent of the total) while southwest Florida and northeast Florida had slightly fewer than Tampa Bay (15.3 percent and 10.2 percent, respectively).

Private equity is a key factor in business growth, said James Cassel, chairman and co-founder of the Miami-based investment banking firm.

Private equity is different than venture capital, Cassel said. Venture capital provides funding for earlier-stage companies and is usually the first institutional money after a round of funding from friends and families and angel investors. Private equity is generally more of a buyout and can be growth oriented or used to turn around a distressed company.

A private equity deal provides an exit strategy for owners, including those who still want to remain involved with their companies, or those who want to give their management teams a chance to partner with private equity investors to get an ownership stake. Private equity investors often bring expertise in management, mergers, recruiting and sourcing production material.

“They bring a depth and breadth the company may not have in its present configuration,” Cassel said.

The report shows the number of Florida companies backed by private equity firms has increased six-fold from 2000. There were 73 private equity-backed companies in Florida in 2000, compared to 449 by June 30, 2018.

“Because Florida is the third-largest state, there should be a fair amount of activity here,” he said.

One reason for more private equity activity is the growth of entrepreneurial initiatives in the Interstate 4 corridor, from Tampa to Orlando.

“Florida has companies that are maturing and as companies grow and mature they get to a point where it’s time for an exit or the next opportunity,” Cassel said.

The report tracked private equity exits for Florida firms. There were 32 private equity exits the first half of 2018, 19 of them corporate acquisitions and 13 of them secondary buyouts.

There’s also an increasing number of private equity investors based in the state. There were 27 private equity firms headquartered in Florida in 2010, and 68 PE firms by June 30, 2018.

In the first half of 2018 alone, there were a dozen new private equity firms opening up shop in Florida, the report said.

There are a couple of reasons for that growth, Cassel said.

“We’re a very tax advantageous state. When firms are considering where they want to be based, Florida and Texas have an advantage over New York, New Jersey, Connecticut and California. It puts 5 percent to 10 percent more in the pocket of principals and general partners,” Cassel said.

In addition, as the market matures, people leave firms to start their own private equity shops, and they don’t need to leave Florida to do that, Cassel said.

That’s what happened when veteran Tampa dealmaker Scott Long left Palm Beach Capital and founded Canopy Capital Partners, a private equity firm focused on the lower middle market. Additionally, Scott Lee, previously a principal at HealthEdge Investment Partners in Tampa, opened a satellite office in Tampa for BelHealth Investment Partners, a New York-based private equity firm.

A strong economy now should keep private equity growth on track, but Cassel said there are a few factors that could derail it: interest rates rising too fast, labor shortages and restrictions on immigration. A smaller pool of potential workers drives up employee pay, he said.

Still, Florida private equity firms are positioned well, he said.

“Florida private equity firms are doing deals all over the country, partnering to make companies better and more efficient, and that gives the companies the ability to grow and survive longer term,” Cassel said.

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Pay higher wages? Here’s what many successful companies are doing

By James S. Cassel


As more middle-market business owners begin bumping compensation to offer their employees a true living wage, they are creating a more empowered workforce with more disposable income. While an unintended consequence might be inflation, in general these wage increases are further strengthening our economy and, by extension, our middle market.

Starbucks was among the first to lead the pack in an emerging trend that is trickling to middle-market businesses, making headlines by offering employees noteworthy compensation packages with stronger benefits, wages, stock options and job perks. The overwhelmingly positive impacts on Starbucks and its employees have been well-documented in the media. Similarly, Walmart and Target are raising salaries and making headlines. This is particularly noteworthy as it benefits those at the lower end of the earning spectrum.

Across the country, what is driving the trend to higher wages?

Companies are not just doing this out of benevolence. Rather, this is a case of supply and demand in a tight labor market where higher wages are a necessity to attract and retain talent. It also is important to note another factor driving this trend: the early growth of robotics. Advances in robotics are enabling companies to achieve more with fewer people and become more efficient and profitable, while lowering the total cost of labor and the number of people needed to perform a variety of tasks. As a result, companies can offer better compensation for their remaining employees, including those involved in the robotics operations, many of whom are required to have specialized technical training and skills.

Without a doubt, increased compensation and better benefits for employees helps diminish the need to work second jobs to make ends meet, and also reduces turnover and financial stress. This results in greater productivity and job satisfaction, loyalty and retention, as well as a stronger company culture. A more dedicated, productive workforce enables companies to derive greater value from their existing employees and run leaner operations.

How can you implement these models at your business?

Here is an overview of what many successful companies today are doing:

  • Increasing compensation and health benefits, and ensuring they are appropriate and competitive.
  • Eliminating certain employee perks, such as free breakfast in the office, for which deductibility is changing under the recently enacted tax code, and finding more tax-friendly perks.
  • Shifting insurance/healthcare costs to employees by raising deductibles to help employers save significant money. However, it is important to keep in mind that this can be problematic. While this money saving initiative can bring significant short-term benefits to the company, businesses (not to mention their employees’ health) can be hurt in the long run. Higher deductibles can discourage employees from seeking necessary medical care as soon as needed, including regular checkups or early detection of issues, causing them to become sicker and to need more sick leave. This creates additional expenses for their employers as well as their health insurance companies.
  • Adding wellness and mindfulness training and benefits, which have a positive impact on everything from employee job satisfaction to mental health.
    Offering innovative ways to provide assistance and education to employees as well as to new recruits, including using paid internship programs to recruit and train employees. This can enhance productivity and support recruiting while helping defray the growing costs of replacing lost employees.
  • Building a culture of innovation. Empowering employees to think outside the box and take risks can increase productivity and efficiency. Smart companies are using this to promote and retain younger employees, while maximizing profitability and providing financial rewards to their employees.

In today’s economy, middle-market business owners should consider the incredibly positive impact of innovative measures such as these on successful companies like Starbucks and find appropriate ways to implement measures at their own companies. Those who do will better position themselves – and the middle market as a whole – for continued success.

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Get to know the 40 Under 40 Class of 2018

Welcome to our 2018 40 Under 40 Awards package, which honors 40 business executives age 39 and younger for their innovation, leadership and community contributions.

While young, these men and women drive success at leading South Florida businesses and organizations in fields such as law, real estate, engineering, manufacturing, finance and sports.

And, despite their busy work schedules, these leaders understand the importance of giving back. They spend countless hours aiding nonprofits like Habitat for Humanity, Mary’s Kids, Special Olympics and United Way.

Vetting the nominations is never easy, due to the region’s breadth of talent. But that’s what makes reviewing these executives’ contributions to South Florida’s business and community landscapes so rewarding.

We feted our Class of 2018 at a fun-filled luncheon at Jungle Island in Miami. Thanks to our corporate sponsor, Florida International University’s College of Business.

Name: Philip Cassel
Title and company: Director, Cassel Salpeter & Co.
Age: 33
Twitter handle: @philcassel
Education: B.S. in mathematics, Massachusetts Institute of Technology, 2007 Birthplace: Miami
Residence: Coconut Grove
First job: Camp counselor at Swim Gym
Ultimate career goal: To build Cassel Salpeter into a business that outlasts its founders and my generation
Hot topic in my field: High valuations for family-owned business
Greatest business achievement: Working with Boxycharm, a high-growth consumer products business, to help it complete a minority recapitalization and majority recapitalization – all within the same year.
Civic/charitable organization involvement: Ransom Everglades School (co- chair, Young Benefactor Society); Lotus House (volunteer); Children’s Bereavement Center (volunteer)
Biggest professional mentor: My dad, James Cassel
Best career advice received: From my brother Seth: “Those who do what others won’t get what others don’t.”
Fantasy job: Owner of the Miami Dolphins
Guilty pleasure: Waffle and chocolate milk for breakfast every morning
Best stress reliever: Playing water polo
Favorite book: “The Orphan Master’s Son” by Adam Johnson
Favorite website: Twitter
Favorite local spot: Hard Rock Stadium
Favorite vacation spot: Cape Town, South Africa
In a movie, I’d be played by: Colin Farrell
I’d most like to have a business lunch with: Michael Bloomberg
My six-word memoir: Family first. The rest is secondary.

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Today’s heated political climate creates new set of potential internal/external conflicts

By James S. Cassel

Although the World Cup has traditionally been divisive on a country basis, people in the U.S. have generally retained their civility. The same cannot be said about the impact of today’s highly charged political climate on the U.S. middle-market workplace. It is creating new internal and external corporate divides with the potential to cause significant harm to businesses, including everything from their corporate culture to their bottom lines.

Increasingly, companies big and small are struggling with many of the conflicts nations are facing — with the added pressure of ensuring they do not encroach on their employees’ freedom of speech while they manage any potentially damaging conversations.

Consider when Delta Air Lines moved to end a discount for National Rifle Association members, a Republican politician spearheaded a fight in the legislature to kill $40 million in jet fuel tax breaks for the airline. Similarly, politics is causing companies to lose long-term customers, simply because business owners or employees have made their political views known.

Employees today are trying to shape who their companies do business with based on their own political or religious views. Some have voiced disapproval with doing business with governmental agencies, including the US Defense Department. Do we want countries like China having access to the best technology people and the U.S. not? These are complex, controversial issues.

Currently, if you and/or your company share political views on social media, your company might be judged for it, and you may lose valuable employees, clients, and community partners. For some, expressing their political views and standing up for their principles has become more important than retaining employees or clients. The key is to make conscious decisions and be prepared for the consequences.

Following are some considerations and guidelines based on our experience working with middle-market business owners:

First, you should decide whether and how your business will become involved in what might become controversial issues. Evaluate the companies that have gotten involved on both sides of the immigration issue and how this has impacted their businesses. For many businesses, expressing political viewpoints and/or taking sides is part of their culture and they should perhaps continue. Appropriate company policies — including rules for employee behavior on social media and other public forums — should be developed.

Companies of all sizes are beginning to learn this the hard way. Following its widely publicized firestorm last year after an employee circulated a memo regarding the role of gender differences in keeping women underrepresented

in the technology industry, Google introduced new rules for internal company debate within its hallways and online discussion forums, according to news reports. The rules are designed to help minimize the fallout of future controversies by managing the conversations before things spiral out of control publicly..

Effectively implementing policies will require mutual understanding and buy- in. Company-wide workshops should be considered.

If you are finding divisiveness among your employees and decide that you should get involved, consider sensitivity training or developing ways to help them find common ground. Political debates can be healthy when the participants respect each other and understand that everyone does not have to agree. Everyone should strive to understand each other’s viewpoints and ultimately make their own personal decisions. If the discussions become divisive, they should simply agree to stop talking about it from a company standpoint and continue working together productively. Civility is key.

Clearly, unlike with the World Cup, there are moral and political issues at stake that have significant impacts on people, their lives and our country. Companies that implement the right policies and protocols to manage the differing viewpoints will protect their best interests and position themselves for continued success — no matter how divisive our political climate continues to become.

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Does Your Company Need a Research and Development Team?

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

By Geoff Williams

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3. Check with your tax accountant.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

By Emon Reiser

Philip Cassel Director Cassel Salpeter & Co.

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

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

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

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

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

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

By James S. Cassel

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

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

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

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

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

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

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

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

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

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

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