James Cassel on why Miami is a great city to build a career

By Nina Lincoff

Where were you born? In Miami Beach at the old Mount Sinai. I may have been the youngest employee at Mount Sinai actually. At 14, I worked in the records department. It was an opportunity for a summer and I was paid, maybe $76 a week. I joke that I had more disposable income then than today because I had no expenses.

What did you use the money for? To buy my first car at 16, an Oldsmobile Cutlass from my mother for under $2,000. What’s worse was that when I was 17, I bought a brand new Buick Century. The problem was, when my future wife saw me in that car, she asked me if it was my father’s. I explained to her it wasn’t, it was the car I wanted, and she said it was better for a 40-year-old, not a 20-year-old.

How has Miami Beach changed? Miami Beach in the late 60s and early 70s …it was the James Bond era when “Goldfinger” was filmed at the Fontainebleau. It was a very small city and very much had a seasonality to it. In the summers a lot of stuff was closed and it was quiet. Today, of course, it’s very different. It’s a year-round community and the summers are as vibrant as the winters.

How did your family get to Miami? My family has been here since 1908. My grandmother had a house on 17th Street and Biscayne Boulevard and in the living room there were two grand pianos and an organ on a stage. She would have concerts there. My family has really grown up in Miami. I go to New York a lot, but Miami is different. It’s a great community and we have some very goods schools and there are great opportunities here. I never seriously thought about moving. As long as they can keep control of the rising sea, we’ll be in Miami.

Was the records department gig your first job? No, I worked as a delivery boy for the Miami Beach Sun, and then I worked for a gentleman by the name of Robert Hurwitz… on and off running political campaigns. We ran everything from a senate race to local races. Law school was a natural follow after that, because I had political aspirations at the time.

What happened to your political aspirations? Fortunately sanity prevailed. I was given advice that I didn’t want to seem like a politician who was in politics because they couldn’t do something else. The natural way to stay involved with politics was to get into law. I started as a real estate lawyer, working with my father. This was back in the 80s and I determined that I would be better in corporate law. In hindsight, it probably didn’t matter, but I started doing corporate law and I built my practice.

But you transitioned out of law? Yes, March 1, 1996 was my first day of not practicing law. I went into investment banking. In 1998, I started a boutique investment banking firm that I built with my partner Scott Salpeter and Gary Stein. We were ultimately acquired by Ladenburg Thalmann, in 2006. I ran private banking and had the opportunity to work with Phil Frost and he is more amazing than most people know. The depth and breadth of his knowledge is breathtaking.

And now you’re here, at Cassel Salpeter? At the end of ’09, which was a tough year, I left. From a technical standpoint, ’09 really sucked. In 2010 we founded Cassel Salpeter. We’ve been blessed, one of my children has joined up as has one of Scott’s kids. We’ve got a great team and we’re building a nice boutique South Florida firm.

What is the private equity environment like now? It changes in cycles. The industry is changing because of technology. If we had to do financial modeling 20 years ago it was very labor intensive, today tech gives you the ability to gather information much more easily. You still have to do a lot of work, don’t get me wrong, but technology has definitely made a different competitive environment.

What do you like to write about? To a certain extent I try to give back to the community. I try to write about things that are helpful to middle market businesses. Maybe they don’t get 50 points out of one article, but if they get one point, it has value. It’s also a way to stay in touch with people, because after all, we are a referral business.

James Cassel
Current position: Chairman and co-founder of Cassel Salpeter & Co.

Past position(s): Vice Chairman and head of investment banking at Ladenburg Thalmann, President, CEO and Chairman of Capitalink, Managing partner of the Miami office of Broad and Cassel; Chairman of the Retreat Psychiatric Hospital

Age: 60
Born: Miami Beach
Residence: Coconut Grove
Past boards: Equity One
Education: American University, University of Miami School of Law

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The 7 secrets of attracting and keeping top talent

By James S. Cassel

james-cassel-headshot-150x150While it is great that unemployment is trending toward full employment, it is not so great that finding new and qualified employees will become even more challenging. In markets like South Florida where access to talent is already limited, this will only make a difficult situation worse.

As the presidential candidates continue to talk about creating millions of new jobs, a glaring unanswered question remains: from where will the qualified talent come to fill these jobs?

The latest data from the U.S. Bureau of Labor Statistics show the U.S. unemployment rate at 4.9 percent in February, unchanged from the January rate and steadily remaining at its lowest level since April 2008. By definition, full employment is when unemployment is at 3 percent for persons 20 years of age and older and 4 percent for persons 16 years of age and older.

Creating new jobs with higher income opportunities will motivate people to move from one job to another, leaving vacant job positions in their wake and a void of skilled talent to fill them. As it is, under the current administration, companies are having a difficult time finding qualified talent for current vacancies. How do you find the right people to fill open positions?

While there is no purple pill, the key is to keep an open mind and embrace innovative tactics. Following is some general guidance based on our experience working with middle-market businesses through all types of economic and employment cycles:

1. Hire and train young people. One of the main concerns with hiring young folks is they will leave after you have trained them. To avoid this, provide the necessary growth opportunity along with compensation, benefits and work environment that will help motivate them to stay loyal and help you build your organization. Make them feel like part of the family. This may require moving beyond your comfort zone to accommodate employees’ preferences. Depending on your industry, this may include letting employees have flexible schedules, wear casual attire, or even throw darts or play video games in the office. Develop a pipeline and a bench.

2. Strategically recruit employees from competitors or other companies. Use various online sites (Indeed, CareerBuilder, LinkedIn, etc.) to post positions and search for candidates. Post them on your own website, too, as part of a robust “Careers” page that positions your company as an employer of choice interested in quality talent. Stay abreast of the latest and growing number of sites used for specific industries such as tech and healthcare. You might also consider traditional employment or search firms such as Steven Douglas Associates or CAREERXCHANGE, both of which are local and specialize in certain job types and levels.

3. Lure back people who have left the workforce. Consider people who are underemployed, working part-time, and who would prefer to work full-time. Also, consider folks older than 50 who have strong experience and may have many years of work left in them.

4. Offer flexible solutions to attract people and enable them to work for you. For example, there are companies dedicated to finding part-time or home- based employment for stay-at-home caregivers with excellent educational backgrounds and experience who could be strong assets to organizations.

5. Rely on referrals. Reach out to your base of employees and offer a bounty for those who refer new hires. Consult with key clients and industry partners, as well.

6. Use marketing and social media to promote your company as a good place to work. Pursue “best place to work” awards. This visibility is very positive and a great way to attract potential hires and retain great talent.

7. Consider nontraditional arrangements like job-splitting, which can be successful if done right. Here is how it works: Two people get together and split a job, and rather than getting 50 plus 50, you may get 60 plus 60 because both people end up having to overlap to communicate.

Whatever steps you decide to take, it will be important to implement a solid plan so that you can operate from an offensive rather than a defensive position. Consult experts who can help you identify the right strategies and tactics to meet your unique needs. It is sad to have your company’s growth limited by a lack of available talent. Developing the right plan now can help ensure that you take the right steps and position your business for maximum success.

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

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Campaign 2016 and middle-market business: 4 of the hottest issues

February 22, 2016
By James S. Cassel

James Cassel headshotThe presidential candidates are discussing a myriad of key issues that could materially impact middle-market businesses, including everything from increasing operating costs to diminishing the local labor pool. As we make our voting decisions, it is critical for us to consider these and other issues and determine how our businesses may be affected.

Following is an overview of my take on four of the hottest issues likely to impact middle- market businesses: healthcare law, immigration, taxes and expenditures, the minimum wage and benefits.

Healthcare law. Some candidates want to eliminate Obamacare, some want to drastically change it, and some want to tweak it — any of which could change the benefits and/or costs for middle-market business owners and their employees. One thing many people agree on is that totally eliminating Obamacare is not an option. Some fundamental questions to consider: How would these scenarios affect your business and your employees? How will the proposed changes affect the costs for those covered, including higher premiums and/or higher taxes? Moreover, can you really take away what has already been given? Unfortunately, with all the rhetoric and one-liners without substantive, detailed proposals, not enough light has been shed on the actual impacts of the proposed changes.

Immigration. Candidates have varied views concerning the accessibility of much- needed H-1B visas as well the availability of other types of visas presently available permitting potential employees to immigrate legally. Depending on the outcome of the election and the policies adopted as a result, you might lose some of your existing employees or not be able to bring in new employees — all of which could have a negative effect on your business. H1-B visas and other methods of legal immigration are critical to filling the ongoing void in terms of access to qualified candidates with the right skill sets, which is causing many job openings to remain unfilled and is hurting middle-market businesses.

In addition, the United States is noted as a country that provides an education for the rest of the world. Some candidates might require foreigners who have received an education in the U.S. to leave the country immediately upon graduation. What a waste of our resources! It is important to consider how the loss of this potential employee talent could impact your middle-market business.

Our growing population is one of the main reasons the U.S. has enjoyed continued growth. This population growth has been driven to a large extent by immigration, which has supported the success of our middle-market businesses. We need a sensible immigration policy that allows appropriate people to immigrate to the United States so all businesses will have access to the quality talent they need.

Taxes and expenditures. Tax rates are likely to change. Whether we get a major overhaul to the tax system remains to be seen. Some advocate large cuts in government spending while others would expand government spending. Some candidates advocate an increase in taxes while others advocate a reduction. Others argue for a flat tax. Some may support the implementation of programs to encourage companies to bring more money back to the U.S. from out of the country to increase domestic investment or distributions to shareholders. This could help stimulate growth. Depending on what economic school you subscribe to, how you decide to vote and what ultimately happens with our tax rates and government expenditures, our economy could either contract or grow.

Minimum wage and benefits. Some candidates support an increase in the minimum wage and benefits, and an increase in entitlements. Few, however, have provided a realistic estimate of the costs or meaningful proposals on how to realistically pay for any increase. Other candidates advocate a reduction in entitlements, which by some estimates now total approximately 48.7 percent of the federal budget. They believe the growth is unsustainable. The costs on middle-market businesses will continue to increase and could have a negative effect on the economy.

Candidates have different views on wages. Some favor raising the minimum wage, which could lead to increased labor costs and force some business owners to cut jobs. It could end up causing middle-market business owners to deploy more technology to reduce overall costs of labor, and therefore eliminate jobs. This is a very difficult issue to tackle, as it involves a delicate balancing act between a sustainable wage and the labor costs of running a business.

Without a doubt, the outcome of the upcoming presidential election will have a significant impact on South Florida’s economy and middle-market businesses. It is important to invest the time to do your research and closely evaluate, among other things, how each of the candidates, if elected president, would affect your and the country’s bottom line.

 

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

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Mergermania: Why Mergers Could Make for Big Winners in 2016

By: Lou Carlozo
January 19, 2016

Even if you’re watching that resolution to lose 10 pounds drown in a sea of ice cream, you can still hold out hope that 2016 will be a year of transformation. And so it is for a host of companies, bloated or cash- starved, trying to win back the adoring gazes of eager investors.

“More than half of mid-sized U.S. companies, those with annual revenue between $5 million and $2 billion, are looking for transformative deals to help them jump-start revenues,” says Bob Rubino, executive vice president and head of corporate finance and capital markets at Citizens Commercial Banking.

Yet the marketplace movement towards mergers goes beyond a simple case of turning on a faucet: How about stirring up a tsunami? Investments experts agree there wouldn’t be a drop of hyperbole to forecast 2016 as the Year of Mergermania.

“Last year’s record-breaking $3.8 trillion in mergers and acquisitions, which featured several mega-deals among very large corporations, seems to have had an impact on the thinking of many middle-market executives,” Rubino says. “Many feel this year could be their year to make a deal.”

Mergers and acquisitions are also known as M&As, but you could well nickname them M&M’s for their sweet power to tempt the C-suite executives. So stock market sugar rushes aside, what’s behind it all, really?

Last year’s monumental M&A record rested on a number of factors. For starters, M&A numbers have grown continuously every year for at least a decade. Second: Those blockbuster deals pumped plenty of rocket fuel into the pipeline. And as a recent Citizens report contends, revenue pressures have played a major role.

In this landscape of billion-dollar bets, tech and health care companies led the way. In one landmark deal between two firms barely known to the public, Netherlands-based NXP Semiconductors (ticker: NXPI) put up $16.67 billion to land Freescale Semiconductor (FSL).

But that doesn’t mean the door’s open for any ambitious business to Pass Go and Collect $200 million, even if you boast clout aplenty. After years of trying, cable and communications giant Comcast Corp. (CMCSA) gave up its $45.2 billion bid to take over Time Warner (TWX) in 2015.

Then again, one pharmaceutical powerhouse did the dance twice. In February, Pfizer (PFE) announced plans to land injectable drug company Hospira for more than $17 billion. Then in November, it scooped up Botox maker Allergan for an astonishing $160 billion. Though they agree on practically nothing else, presidential candidates Bernie Sanders and Donald Trump decried the latter deal, even as Pfizer shopped around some more: this time for movers.

“Allergan is based in Ireland, where taxes are lower,” says E. Han Kim, a finance professor at the University of Michigan’s Ross School of Business. “The corporate tax rate in the United States is still one of the highest in the world, so unless that changes, the incentive for tax- inversion deals is still there.”

Rob Berick, senior vice president and managing director of Falls Communications in Cleveland, also sees mergers growing in popularity. “Mergers are increasingly global in nature for tax and market share/scalability reasons,” he says. Yet it can also spawn drama worthy of a daytime soap, one that would no doubt earn the title “As the Globe Turns.”

“Global and regional political instability, particularly in diversified companies, will provide heartburn to a lot of CEOs and boards,” says Robert Annas, senior managing director of SOLIC Capital in Chicago. “With world economies beginning to slow, financing markets will tighten a bit.”

And when markets tighten, corporate types loosen their ties, sometimes to the point of confusing even the sharpest investors. It’s tricky enough connecting the dots when two companies become one. But how about when two companies that hope to become one are already entertaining plans to become three?

Consider the proposed merger of Dow Chemical Co. (DOW) and DuPont (DD), a $120 billion pact that made headlines in December. “There are certain forces driving to put the two companies together, but once that’s accomplished, they’ve already indicated there’s an intent to spin off certain parts of the businesses,” says James Cassel, chairman and co- founder of Cassel Salpeter & Co., an investment banking firm in Miami. “They believe the spinoff companies will have critical mass with their respective business and will prosper. Whether or not that’s the case remains to be seen.”

As for the broader M&A landscape, experts see all sorts of fireworks on the horizon. One thing is for certain: 2016 will be another explosive year, but just how incendiary is anyone’s guess.

“There is a split decision on what 2016 will be,” says Steve Sapletal, a director in the Minneapolis office of West Monroe Partners. “Mergers will continue to be strong, but I would expect longer diligence time frames and much more attention on customer and employee diligence.”

Or perhaps not. “In most markets there are too many players and consolidation will take place,” says Philip Rooke, CEO of the e-commerce platform Spreadshirt. “We’ll see many mergers and acquisitions as well as big strategic partnerships in 2016 and 2017. In general the pressure will grow: Get big or die.”

 

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Minding Your Business/Inside The Deal: Positioning your business in today’s financial landscape

By: James Cassel
January 17, 2016

James Cassel headshot

During the past few years, the financial landscape in South Florida has changed significantly for the better. The market today is flush with capital, a trend that is expected to continue in 2016. Following is some insight into what we can expect to see this year.

First, the fact that interest rates have gone up a little should not have any material effect on the availability of capital in 2016. There should continue to be plenty of money available, and it should not be much more expensive than it has been in the recent past. Interest rates may go up another half percent to 1 percent in 2016, which in and of itself is not likely to have a material effect on the region. With the recent turmoil in the capital markets, the Fed might raise rates more slowly than it would otherwise have.

Banks. During the past few years, many of the smaller or weaker financial institutions have merged or been recapitalized. Today, these institutions are in a much better position than in previous years. Simply put, they are in significantly stronger financial shape and have a need to loan money. One recent noteworthy example is Professional Bank, a boutique Miami-based bank focused on professionals and high-net- worth clients, which recently announced its proposed acquisition of Palm Beach’s FirstCity Bank of Commerce as part of its continued growth in South Florida and the continued consolidation of the industry.

As banks have kept increasing in size, a significant void has been created for small- to medium-size companies to find places to access debt. As a result, they have begun turning to peer-lending sources like Lending Tree, merchant advance companies and other sources of debt from alternative lenders. These types of lenders are generally more expensive but provide an available source of capital. Also available are loans from asset-based lenders, SBICs or SBA loans.

Venture capital money. The past year has seen increased availability of venture capital money — another trend that we can expect to continue to see in 2016. However, the amount of money available locally from local sources is not large.

Although few venture capital firms currently have their headquarters or offices in South Florida, a growing number of East Coast VCs as well as strategic investors and a limited number of West Coast VCs are taking a closer look at the right types of opportunities in South Florida. Consider Magic Leap, MDLIVE and Modernizing Medicine, which received funding in 2015.

As for angel investors, there are growing groups of organized and unorganized angel networks in town. As South Florida continues to become attractive to people from other cities, many of whom are lured by our highly desirable tax rates in addition to our weather, we will continue to see growing numbers of wealthy individuals willing to invest as angels in local companies and other opportunities.

Additionally, the state’s incentive programs led by organizations like The Beacon Council and Miami-Dade County through its Economic Incentives program are also continuing to support and encourage all of these trends.

Private equity. Recent years have seen steady growth for the private equity community and increased availability of mezzanine money, a trend we can also expect to continue in 2016. In 2015, South Florida continued to see the growth of locally headquartered private equity firms as well as fund-less sponsors.

In addition, private equity firms from outside of Florida have continued to look for opportunities in the South Florida market that they can take control of and/or invest in. The local PE firms continue to do this as well.

Recognizing these trends and the widespread availability of capital in today’s market, now is a good time for South Florida’s middle-market business owners to begin consulting with experts and thinking about how they can use this to their advantage. By doing so, they can best protect their interests and put their businesses in the best position for continued growth and success.

For one thing, the turmoil in the capital markets the first week of 2016, driven by factors outside of the U.S., raises interesting questions. Some predict that the chance of a recession in 2016 is as much as 30 percent. If this continues, strengthening your balance sheet or bringing in an equity partner might be a very good thing to do at this time. This will protect your downside if you sell a piece of your company and take some money off the table. Also, converting short-term debt to long-term debt will place you in better position to weather any upcoming storm.

 

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

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Greater Miami Chamber summit: Economic outlook positive, cautious

 January 13, 2016
By Nancy Dahlberg

Untitled

At the Greater Miami Chamber of Commerce’s South Florida Economic Summit on Wednesday, the outlook for 2016 was optimistic with healthy undercurrents of caution.

In the Jungle Island ballrooms, the summit brought together economic development leaders and top industry experts in entrepreneurship, new media, capital investment and the retail sector to share their insights about the region’s economic drivers and the year ahead.

To kick off the half-day summit attended by several hundred people, Tom Hudson, vice president of news for WLRN and master of ceremonies for the event, presented a snapshot of the economy today versus six years ago when the Chamber began holding these annual events. In that six-year period, a million people have moved to the state, a third of them to South Florida, he said. Employment has risen from 2.5 million to 2.9 million, and the unemployment rate has fallen from 10 percent to about half that. Still, median wages have remained flat, he said.

Looking ahead, Ken Thomas, an economist and banking industry expert, believes the economic outlook for 2016 is very good and foresees a maximum of two Fed interest rate increases this year. But he puts up the caution flag for 2017 and beyond: “All bets are off. We will not get out of this decade without a recession.”

On that note, the three chiefs of economic development organizations discussed the need for a powerful war chest at the state and metro levels to attract and retain companies in order to strengthen the economic engine to ride out inevitable downturns.

New companies that the region can recruit grab the headlines, but company retention is just as important, the executives said. Larry Williams, president and CEO of Miami-Dade County’s Beacon Council, offered the example of successfully retaining TUUCI, an outdoor umbrella manufacturer, which was heavily recruited by North Carolina: “Its brand is made in Miami. We need to keep companies who can lean in.”

Bob Swindell, president and CEO of Greater Fort Lauderdale Alliance, and his team recently went to Austin, Texas, to research the tech-innovation culture there and learn how the city has successfully built a brand. He believes part of South Florida’s brand could be tied to the marine industry and the strong university research programs in the marine sciences: “We really don’t tell that story effectively.”

Regional challenges include filling the talent gap in the workforce, the executives said. Williams cited the work of the Academic Leaders Council and the Talent Development Network to combat brain drain and better connect university students with opportunities. Swindell said the Alliance and its partners are working to quantify the talent gap and want to have the funds to fix the problems they find.

Much of the discussion in the summit breakout session focused on the need to build on the economic momentum the region has been experiencing, while heeding the lessons of the last recession and preparing for the next downturn. For many at the summit, that means working to accelerate the tech and entrepreneurship sectors.

Diverse, young, bootstrapped, under the radar, creative and global by nature are some of the descriptions of South Florida entrepreneurship offered up in a panel that included CEOs Brian Brackeen, founder of Kairos, a human emotions analytics startup; Will Fleming, co-founder of MotionPoint, a website translation company; and Michael Simkins, a real estate developer working to develop the Miami Innovation District. To build upon the work of the nonprofit Knight Foundation, which has committed about $20 million in funding to about 165 entrepreneurship projects and organizations, help from the for-profit sector is also needed, said Simkins, who said he has sponsored events and offered free space to entrepreneurs.

Global exposure, big exits (successful sales of companies), and a larger base of mid-sized tech companies can help propel the innovation economy here, the panelists said. Both Fleming and Brackeen acknowledged that investors over the years have tried to lure their companies to California. “Our headquarters has been, is now and always will remain in South Florida,” said Fleming, who in 2000 co-founded the fast-growing Coconut Creek-based company that manages more than 1,500 websites.

Attracting growth capital continues to be a challenge for young entrepreneurs in South Florida, but it’s getting easier at the earliest “seed” stages. “There are almost three times as many angel investors in Florida as in California,” Brackeen said.

While that may be true, angel investors in California made their money in tech “and they bring a lot to the table we are not getting down here yet,” said James Cassel, chairman of Cassel Salpeter & Co., during a panel about capital availability. But Cassel said private equity firms and family offices are increasing in Florida and so are the number of deals: “The good news is there is plenty of money available for middle-market companies. Finding the right opportunities is the challenge.”

It’s important not to automatically link the innovation economy solely with tech, said Richard Florida, founder of Creative Class Group and an urban affairs expert. “The technology component is only a part of it, and it downplays our strengths,” he said. “Miami exemplifies the creative economy,” which incorporates not only science and technology, finance and law, but also arts, culture, media, fashion, entertainment and the entrepreneurs that are leading the creative innovation. Still, only about 25 percent South Florida’s current workforce is part of the creative economy: “We have to do more.”

In a study of 360 metro areas, Florida has found that the Miami metro area ranks relatively high in technology (40th), falls in about the middle of the pack in talent (138th) — “that’s the brain-drain problem we have to turn around” — but the area ranks 11th for tolerance, he said “These are places that are open to people from all over the world. Open-minded communities win.”

Viacom is betting big on Miami’s creative economy. Juan “JC” Acosta, executive vice president and chief operating officer of Viacom International Media Networks Americas, showed the crowd a presentation on the new Viacom International Studios, which produces shows for Nickelodeon, MTV and Comedy Central worldwide and is located in the Omni area of downtown Miami. It’s an 88,000-square-foot facility with two high-tech 15,000-square-foot sound stages, along with ample office space and post-production, dressing, wardrobe and conference rooms.

“We planted our production flag in Miami,” Acosta said, noting that Viacom International Media Networks has had a headquarters here since 1993. Today, the company produces 21 series in Miami representing more than 750 hours in content, and the company has hired for more than 6,000 jobs, from full-time employees to extras, he said. “We are optimistic our studios will show the value of generating new business in the local Miami community and bring other global players to the market. . . . We hope to create a best of class here in Miami.”

This world-class production hub is exactly the type of anchor institution that a thriving creative economy needs, Florida said. “This is an important foundation stone, along with our universities and colleges, in building a broad creative economy.”

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

By: James Cassel
December 20, 2015

James Cassel headshot

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

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

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

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

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

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

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

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

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

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

 

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

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

The Street
November 17, 2015

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

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

By: James Cassel
November 17, 2015

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

1. Find team members who fit your business culture.

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

2. Consider standard skills and aptitude tests.

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

3. Evaluate candidates outside the interview room.

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

4. Create a positive work environment.

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

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

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

6. Invest in Training

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

7. Let people go when necessary.

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

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

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

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

By: James Cassel
November 15, 2015

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

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

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

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

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

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

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

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

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

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

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

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

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

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