2017 South Florida Power Leaders

From the start – and every year since – it’s grown increasingly challenging to keep the list of executives to 100, especially given the breadth and scope of our dynamic region.

So, over the years, we’ve introduced the Power Leaders in Banking & Finance, Law & Accounting, Health Care, Real Estate and our most recent arrival,

Power Leaders in Human Resources. We plan to add two more – Power Leaders in Marketing and Power Leaders in Hospitality – before year-end.

Even with these new categories, it was a good time to refresh our approach as we marked the five-year anniversary our hallmark list – South Florida Power Leaders.

This year, we’ve made significant changes to both how the list is organized and how the honorees are selected.

First, and most importantly, you’ll notice that the list has 50 percent more honorees than in years past.

And to make the package more useful to our readers, we are also highlighting these honorees in a variety of categories, including naming nine icons — the true pillars of our thriving community.

In addition, you’ll note that 83 Power Leaders were not on last year’s list, reflecting our region’s dynamic nature.

We’ve also updated our criteria. Whether from our own reporting or on-the- ground realities of the impact leaders have had in their industries, the regional economy and our community’s character, this criteria better reflects the powerful role a successful and involved executive plays across the tri- county region.

South Florida truly is a dynamic and growing business and cultural community. We’re pleased to bring you this year’s installment of the South Florida Power Leaders. Hopefully you’ll find this a valuable resource, as it reflects where we’ve come from – and where we’re headed.

Best regards,

Melanie Dickinson
President and Publisher South Florida Business Journal

James S. Cassel
Chairman, co-founder and CEO,
Cassel Salpeter & Co. LLC
www.casselsalpeter.com
801 Brickell Ave., Suite 1900, Miami 33131
(305) 438-7701

Birthplace: Miami Beach

Education: B.S. in political science and economics, American University; J.D., University of Miami School of Law

Greatest professional achievement: Transitioning from a successful legal career to building a successful investment banking career. He first formed Capitalink LLC, which was sold to Ladenburg Thalmann and Co. After serving as vice chairman and head of investment banking at Ladenburg, he and his partner, Scott Salpeter, built Cassel Salpeter & Co.

Personal note: In junior high school, Cassel produced rock concerts for groups like Fleetwood Mac. He also worked on dozens of political campaigns.

Is this South Florida startup headed for an IPO?

By: 

Venture capital database CB Insights released Tuesday its 2017 IPO Pipeline list. Among the hundreds of companies predicted to be headed for an initial public offering next year is South Florida e-commerce platform Chewy.

Since being founded in 2011 with an investment of just $50,000, the Dania Beach company has passed the $1 billion revenue mark — a sizable bite out of the online pet product market, which projected to grow by about 9 percent annually, according to IbisWorld, a market research group. (Overall, the pet products market is worth about $40 billion — just $10 billion fewer than the U.S. auto industry.)

TATIANAPUT/SHUTTERSTOCK.COM

Chewy, now nearly 6 years old, has captured about 50 percent of the online pet market, according to some estimates, despite competing directly with established companies such as PetSmart. Just last month, it signed a lease for 663,000 square feet of industrial space in Dallas for a new distribution facility.

Now people familiar with the company say Goldman Sachs is helping it prepare for an initial public offering in 2017, Bloomberg reported. CB Insights’ IPO Pipeline bolsters the rumor.

Chewy declined to comment.

This year was a slow one for IPOs. Miami-based investment banking firm Cassel Salpeter & Co. released in October a quarterly review of technology investment activity, which showed a cluster of public offerings amid a mostly stagnant 2016. The slowdown can be attributed to a strong private equity market, the presidential election and even Brexit.

But momentum is expected to follow, said Jim Cassel of Cassel Salpeter & Co. CB Insights echoed the assessment in its IPO Pipeline report.

“2016 did not turn out to see a flurry of tech IPOs as companies continue to access funding privately. But as companies in the pipeline continue to mature, increasing calls by investors for companies to go public, and a slowing down of deep pocketed investors like mutual funds and hedge funds financing late-stage startups, the drumbeat for a busier 2017 is getting louder.”

Debora Lima covers technology, startups, biotech and transportation. Get the latest tech news with our free daily newsletter. Click here to subscribe.

Six tips for growing middle-market businesses in 2017

By James S. Cassel

james-cassel-headshot-150x150

James Cassel is co-founder and chairman of Cassel Salpeter & Co. Carl Juste MIAMI HERALD STAFF

With 2017 fast approaching and a new “sheriff” coming to town who has brought optimism for a better economy, it is beneficial for business owners to evaluate key factors that may affect their businesses and take the necessary steps to position themselves for maximum success.

First, consider our current economy. The national unemployment rate is 4.6 percent. Interest rates, currently at historic lows, have started to climb. Inflation is up slightly, and wage growth has started to come back.

Many businesses have been growing slowly. Even technology companies that might be finding faster growth than general service businesses are still finding their growth slower than anticipated. What does all this mean?

Employers are likely to find it increasingly difficult to find qualified talent and are much more likely to have to pay more to attract, hire and retain employees. Healthcare costs are going up next year, both for corporations and for employees. At the same time, other business costs are expected to rise as well. Depending on U.S. trade agreements, the cost to import parts and components for manufacturing might rise.

The spike in interest rates will slightly increase business costs, and business owners will be tasked with having to address a myriad of questions, including: How do they retain or improve profit margins, and can their industries institute price increases? How much, if anything, should they spend on capital equipment or improvements, and are there any ways they can reduce their costs by investing in robotics or other innovative technologies? Can they trim or eliminate other costs or expenses? How can they increase productivity? Most importantly, if there is increased economic growth, do they have the capacity to expand and, if not, what will expansion require?

So, what steps can be taken to prepare for growth in 2017? Following is a list of some general considerations and guidance based on our experience assisting middle-market business owners through all types of business and economic cycles:

1. Evaluate your current health insurance policies and consider sharing a larger portion of the costs with your employees. Otherwise, you can continue to carry the burdens and hope things will get better next year.

2. In light of inflation and wage growth, if your business is growing and can afford it, you should consider giving raises or risk losing employees to employers offering higher compensation packages. With a better economy, more employees will expect raises and be more likely to make a move in pursuit of the best offers.

3. Test your pricing power. Raise your pricing to compensate for the higher expenses you are likely to incur. Airlines have been successful at achieving this by creatively breaking up their services and offering things à la carte.

4. Cut waste. For example, a manufacturing company producing scrap would be wise to find ways to reduce the amount of scrap created or reuse the scrap and benefit from those savings.

5. Get higher utilization out of your people. A great book to read is Gallup’s newly released, expanded edition of the international bestselling management book “First, Break All the Rules.” Among other things, it explains how the best managers know how to assess people’s strengths and weaknesses and put them in positions where they will find greatest engagement and success.

6. Prepare your company for growth. Review your existing capacity to determine how much room you have for growth. Also, start determining what you need to expand and begin taking the necessary steps to get there. Evaluate both the lead time needed as well as the capital required.

Most important, keep in mind that if you can grow faster than inflation and increase your organic growth, then you will be in a good position to absorb any increased costs that you can expect to hit your business in 2017. If you can increase your revenues by 10 percent and your expenses by only 5 percent, then your profits will increase. Indeed, by giving some thought to these issues and taking the right steps now, you can help ensure your business grows in the coming year.

James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middlemarket 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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What could a Trump presidency mean for middle-market businesses?

By James A. Cassel

james-cassel-headshot-150x150Donald Trump is our president-elect, and his plans to “Make America Great Again” have been delivered without much meat on the bones, making it difficult to substantively assess the likely impacts of the election on the country’s middle-market companies and determine how business owners might best prepare and protect their interests. At least one thing, however, is certain: Prepare for a wild ride, if his presidency is anything like his campaign. Already, with public anti-Trump rallies and demonstrations going on around the country, it is clear the repercussions of this election could be more unpredictable and far-reaching than any of us can imagine.

While we wait to see which of his plans materialize and to what extent they become reality, it is important for middle-market business owners to be aware of certain key issues, understand how they might affect their companies and try to stay ahead of the changes. As the new administration is formed, we might get some clues from the people on the transition team and those who are nominated or appointed to better understand in which direction policy is likely to head. Also, if we listen closely, we might be able to find some clues from the comments and rhetoric from Republican leaders and members of the House and the Senate.

Following is a list of some of the most important things to watch that can affect middle-market businesses:

Jobs: The Republicans and the president-elect have talked about creating jobs by doing infrastructure projects and bringing manufacturing businesses back to the U.S. This might mean there will be plenty of new work and business opportunity for the construction trades and factory workers. One of the challenges when manufacturing returns is whether jobs are created or replaced by robotics.

Taxes: Lowering the capital gains and income tax rates of individuals, lowering business taxes and a comprehensive tax overhaul might be in the works, which could benefit businesses and provide more capital for investment. Using changes in the tax code to encourage more investment in the U.S. and discourage exportation of jobs also might be in the works. If tax rates are lowered, it might be smart to defer income until 2017 to take advantage of the lower rates.

Healthcare: The highly trumpeted abolition of Obamacare would require putting something else in its place, so it is unclear what changes will be implemented and when. President-elect Trump already has begun conceding and/or compromising on points, and modifying his campaign statements about eradicating Obamacare. While the tax associated with the Affordable Care Act might be dropped, some of the ACA’s provisions are likely to survive in some form, such as mandatory coverage for preexisting conditions and continued coverage for young adult children. The big issues are cost and coverage.

Energy: While Republicans continue to steadfastly support a reemergence of the coal industry and expansion of the oil and gas industries, at some point they cannot continue to ignore the reality of global warming and the undeniable effects we are already feeling. It is unclear what will happen to solar and other sources of alternative energy, as well as alternative energy- related advances made under President Barack Obama’s administration.

Trade: International trade could become a problematic issue. If we start retaliating, other countries can do the same, which could have a negative effect and begin a trade war. We need to wait and see the specifics, but it is clear this could have a major effect on the economy and not necessarily in a good way.

Cuba: The Trump administration has announced plans to review the U.S. relationship with Cuba and has suggested it will peel back the diplomatic progress of relations that Obama instituted during the past few years. Clearly, this would diminish any potential business and growth opportunities in Cuba for U.S. middle-market businesses.

Immigration: Expelling illegal immigrants from the country will leave huge job openings and hurt the GDP and economy. If visa programs are changed, companies might find it harder to find skilled workers among a limited labor pool.

Regulation: Rolling back government rules and regulation will lower overall costs and be good for business. A careful review might be very beneficial. This will enhance growth.

Most important, with many of the policies, we will see an increasing deficit and therefore should keep our eyes on the rise of interest rates and the possibility of inflation.

While we wait to see what the president-elect and the new administration do and Tweet about when he takes office, middle-market business owners should protect their best interests by studying the issues and preparing for the best- and worst-case scenarios.

We certainly live in interesting times.

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. 

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Reinvent your customer experience to maximize profitability

By James S. Cassel

James Cassel headshotMiddle-market business owners can improve profitability and customer loyalty by routinely evaluating and enhancing the quality of the experiences their companies provide for two of their most important stakeholders: customers and employees.

Consider the success story of Starbucks (NASDAQ:SBUX), which incorporated the right design and branding to turn coffee houses into institutions where people spend hours and pay a premium for what is perceived as the right experience that encourages folks to congregate. Apple (NASDAQ:AAPL) turned computers and other devices into status symbols by, among other things, using great design and strategically positioning its iconic logo on laptops to face onlookers rather than users. The Apple Store became the poster child of an innovative venue by implementing things like the genius bar for on-site consultations; a welcoming, open design; and an engaging atmosphere. Google (NASDAQ:GOOGL) is acclaimed for providing employees with uniquely generous benefits, including free meals and access to the latest technology, free massages on campus, permission to bring dogs to work, generous parental leave policies and spousal death benefits, among many other things.

Why are these companies going to these lengths? To a large extent, these trends are being driven by the desire to attract and retain loyal customers as well as quality talent. They are particularly interested in a new generation of workers, including millennials, who want the “total package”: innovative, forward-thinking business environments as well as stock options.

Recognizing this, middle-market businesses and even more traditionally conventional businesses, such as law firms and accounting firms, are beginning to take steps in this direction. As a middle-market business owner, how can you apply these learnings to help take your business to the next level? Here is some practical guidance based on my experience helping middle-market business owners navigate these questions.

While a variety of elements ultimately create your customer experience, addressing the following key factors is a good start: your office layout and design; your company atmosphere and activities; and your marketing and branding.

Before doing anything, it is important to engage your key stakeholders and ensure that you have established (a) consensus upfront that a modification of your business experience is necessary or beneficial and (b) an internal committee that will be able to weigh in on the process. Outside firms and consultants can be beneficial. Without this, you are likely to waste valuable time, money and other resources undertaking a process that may not lead to the right result, that may get road-blocked by internal resistance, and/or that may never get implemented due to lack of support for the financial and other investments that may be required.

The most important thing is to find the approach that will fit your company’s unique needs. Try evaluating what other companies in and outside your industry have done, and find bits and pieces that are a fit for you.

Identify a realistic budget. Not every company can afford to give employees the free meals, unlimited paid time off, and some of the other benefits that a growing number of technology companies are offering today. Work with qualified experts with proven experience helping similar companies in your industry to develop a plan for identifying and creating the right solution for you. It might not be necessary to move your office to a new location or to completely overhaul your culture or your brand; you might be able to get by with just making a few strategic adjustments. These adjustments could include creating special events and promotions to appeal to affinity groups. For example, lululemon (NASDAQ:LULU), which is credited for pioneering the “athleisure” clothing business, has achieved great success by providing free yoga classes at its stores and discounts for yoga instructors and company employees.

Your marketing programs also should be continuously evaluated for maximum impact. It is important to work with skilled marketers who can ensure your brand positioning and all aspects of your marketing — including your logo, business cards (if you still use them), messaging, and website — are consistent with the experience you wish to create. With folks relying on their technologies to evaluate companies and make business decisions, it is imperative for your brand across earned, owned and paid media channels to be consistent and effectively support the experience you seek to create. For example, it makes little sense for a company seeking to position itself as high-tech and appeal to consumers on mobile, to have an outdated website that is not optimized for mobile.

The key is to work with the right experts who can help guide you through this process and ensure you find the right solution for your needs — and to do so continuously to ensure you are keeping pace with the changing needs of your employees and customers.

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.

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Tech investments report highlights cluster of IPOs amid stagnant year

By Debora Lima

Miami-based investment banking firm Cassel Salpeter & Co. released this week its quarterly review of technology investment activity, which highlights a recent cluster of initial public offerings amid a mostly stagnant year.

The report covers the period between July 1 and September 30. It finds that a bulk of public offerings occurred during Q3 — five in September (Nutanix, Tabula Rasa Healthcare, The Trade Desk, Everbridge and Apptio) and Impinj in the previous month. The activity overwhelmed that of the preceding eight months’ combined — five IPOs in Q2 and none in Q1.

The average enterprise value of Q3 IPO companies was about $150 million, about half of Q1 IPO companies’ average enterprise value of $300 million.

The underwhelming pace of 2016 can be attributed to the robust private market, said Cassel technology director Ranjini Chandirakanthan, who helped compile the report.

“There is so much money in private equity,” she said. “There is a willingness to pay and value, more than the public markets do today.”

Acquisitions remain the most common — and attractive — exit options for high-growth startups, said Jim Cassel, a founding partner of the firm.

“[Firms are] looking for an exit strategy. They have a life in which they’re supposed to put money out, harvest and liquidate. IPO isn’t that event. Because they have to liquidate stock over time,” he said.

Startups are similarly drawn to M&A. Chandirakanthan estimates that “a vast majority” exit through those vehicles.

But it isn’t uncommon for startups to toy with the prospect of an IPO as a vehicle to private equity. According to Cassel, some companies prepare the necessary materials for a public offering and intentionally let word get out.

“It implies [to private equity] that, ‘If you buy now, you’ll pay less than later,’” once the company goes public, he said. “And that may or may not be true. The public markets are fickle. It’s just conjecture.”

Looking ahead, a number of IPOs are likely in the pipeline for 2017 — but the status quo holds.

“M&A will be the exit for many companies,” Cassel said. “There is a private equity market that is flush with cash that is looking for companies that fit their ethos.”

Cassel Salpeter & Co.’s full 2016 Q3 technology investment activity report is available online.

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How much should you spend to boost your non-core divisions?

By James S. Cassel

James Cassel headshot

Many middle-market business owners struggle to determine whether to continue pouring significant time, money and other resources into non-core business divisions or subsidiaries— that is, those that are not vital, essential or are no longer necessary to a company. For many, finding the right answer is a difficult task that often gets deprioritized while they focus almost exclusively on the immediate needs and daily operations of their businesses. Unfortunately, neglecting to address these questions often ends up hurting their businesses and diminishing their success.

How should you approach a division that is troubled, not growing, no longer fitting your core business or strategic plan, and/or consuming a disproportionate amount of time and capital? Following is some practical guidance based on my experience helping middle-market business owners evaluate the alternatives and navigate these complex issues.

First, an easy answer could be: If the non-core division is losing money and/or dragging down the rest of your business, you might shut it down. However, this quick fix is not always the best course of action. Another party might find value in the division and give you additional capital that you can redeploy for growth. Keep in mind that what is not good for you might be ideal for someone else. If the line of business has this type of potential, you might try to find a buyer capable of maximizing it.

So, how should you begin your analysis?

▪ Start by closely evaluating the financials for the business unit you might be looking to sell or shut down. You should also examine on a pro forma basis the financial situation of the remaining business as a standalone unit, thereby enabling you to examine the financial implications of the potential divestiture and make sure it will not hurt your business financially or otherwise. For example, the division might actually be contributing to help cover a part of your overhead. In this case, a divestiture could have more serious financial implications on your overall bottom line than you had imagined.

▪ Evaluate your company’s current management and employee headcount. If you divest the division, do you need to reduce management, as well as your company’s overall headcount? How would this impact your company? Would losing these employees hurt other areas of your business?

▪ Evaluate your real-estate facilities and determine what you should do with any physical space that will be vacated after the divestiture. Let’s say the division you are looking to sell occupies 30 percent of your warehouse. Would you be better off subleasing that space, moving other core business operations into that space, or leaving it open to accommodate future expansion?

▪ You must also evaluate the potential impact of the sale on your clients or customers. Do they currently choose to do business with you because of your ability to serve as their one-stop shop and offer those products or services, even if those products or services are non-core business areas that are unprofitable or loss leaders? Could the sale potentially cause you to lose customers or diminish their satisfaction? Also, what about your competitors — do they currently provide any of those sought-after products or services? If you were to eliminate that part of your business, would you be in effect giving your competitors a greater advantage by positioning them to serve your customers and steal your market share?

Big companies continuously evaluate the return on equity, performance and viability of their non-core business divisions or subsidiaries. This helps them to ensure that these lines of business are not hurting their growth rates, overall profitability and success by forcing them to devote disproportionate amounts of time and energy to these areas. Many large companies like GE and P&G continuously evaluate their varied lines of business and remain ready to sell any non-core assets. This best practice helps make them stronger and better focused on growth and acceptable levels of profitability.

Some companies may have the in-house expertise to handle these evaluations independently, but others may need assistance from outside consultants. Whatever the case, it is important for middle-market business owners to work with qualified professionals with proven expertise helping companies similar to theirs navigate these issues. While this may require some investment in terms of time, money and other resources, it will pay off in the long run by helping ensure your business is well positioned for continued 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. 

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Florida Private Equity Deal Flow Down In 2016

By Nina Lincoff

There were 96 private equity deals closed in Florida in the first half of 2016, which is slightly down from the 103 deals closed the same time last year, according to a new report form Miami-based private equity and investment banking firm Cassel Salpeter & Co.

But before investors run with news and declare a decline in private equity investment in the Sunshine State, there are a couple of factors to consider.

At this time last year, data revealed just 75 private equity deals in Florida – the first half of the year projections were updated later as a few more deals were reported.

“It’s a common thing that happens,” said James Cassel, chairman and co-founder of the firm. “Sometimes, a couple months later, adjusted numbers will come out and it’s not that the original data was wrong, it’s just that was the data available at that point in time.”

Cassel & Salpeter release private equity deal flow reports using data from PitchBook, an industry database and analyst. The reports include all private equity investments related to business growth – buyouts, add-ons, growth, recapitalization – made to companies headquartered in Florida, excluding real estate investments.

As with most businesses, deal flow has a lot to do with timing. Second quarter closures are often preceded by months of work, and when a deal closes, it’s largely circumstantial. Big events like tax changes and possible interest rate spikes can mean that companies prefer to close deals in one year as opposed to another, but largely when a deal closes depends on the players.

“Sometimes deals can slow down because of the due diligence,” Cassel said. “But everybody wants to close sooner rather than later. It’s just better that the deal is done.”

In talking to peer private equity firms, Cassel noted that some said January and February were slower months, which in turn affected second quarter closures.

Despite the slight drop in deals that close in the first half of 2016, the Florida market is still relatively stable.

“There are reasons why it should be a pretty healthy market. There is still plenty of private equity available, there is still plenty of debt available at [largely] historically low prices,” Cassel said.

One factor that could be contributing to a slowdown in private equity investments is simply a depleted supply of quality Florida-based deals. But it’s too early to tell whether or not supply has begun to dry up.

“There are businesses available,” Cassel said. However, private equity firms can cycle through businesses and do secondary buyouts, when one firm sells to another and that could buoy the deal flow pipeline in Florida.

Deal flow is also dependent on the buyer. Classic private equity firms buy on a five-year horizon, which limits possible investments. Strategic buyers can invest for life, or until it’s time to divest. Typically, when a family goes into business, it’s for a long time.

“Every private equity firm is a seller, whereas a strategic buyer is not and a family business may or may not be depending on the time,” he added.

Along with deals being down in the first half of the year, private equity exits are also up, meaning a firm has timed out and sold off the company. The Florida private equity investment-exit multiple hit an all-time low of 2.4x in the first half of the year. And while that’s a record low, it’s not a significant enough drop from 2015’s 3.1x multiple to sound an alarm, Cassel said.

The industries where private equity deals closed in Florida were largely consistent with past years. Business to consumer deals were high, as were business to business deals and healthcare. Financial services and IT were slightly less but consistent proportionally with last year, and energy and manufacturing were small to non-existent.

Florida is not an energy-rich or manufacturing state, so that’s not very surprising.

One challenge facing the business community in general is the difficulty of scaling up. It’s easier to start a small business and grow to five or 10 employees, but it gets exponentially harder to scale up to 50 employees or 100 or 500, Cassel said. As the inventory of small business increase, but middle-market firms remains stagnant or decrease slightly, private equity deal flow could be affected.

Moving forward through 2016, there are a couple variables that make it difficult to predict how deal flow will continue – the November elections, potential interest rate hikes, and in Florida, Zika.

“People are talking about one interest rate hike in December after the election, and there’s also talk about one in September, but who knows,” Cassel said. “If we really knew, my gosh what we could do with futures.”

 

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Use Great Finance Pros To Guide Planning, Strategy

By James S. Cassel

James Cassel headshotIn my experience working with middle-market business owners, I have often observed that many of them underestimate the importance of having access to solid and timely financial information and support from great finance professionals to guide their daily decision-making and strategic planning. Having seen companies and managers suffer the consequences of this risky practice, I have confirmed that it is critical to have the right financial support and infrastructure in place.

Why is this true? For one thing, many of today’s middle-market business owners may have started out with a spouse or other family member managing the company’s books and records on a part-time basis. However, as their companies begin to grow, it is important to determine whether people with different skills, sophistication and qualifications should be hired on a part-time or full-time basis, or whether those functions should be outsourced. Additionally, they must continuously evaluate and modify those roles and the personnel fulfilling the responsibilities as their businesses continue to evolve.

Middle-market companies may utilize different kinds of financial officers, such as certified public accountants, controllers and bookkeepers. Each of these professionals possesses different skill sets and sophistication relevant to providing financial data and information as well as managing relationships with banks, lenders, and suppliers, negotiating financial terms, dealing with customers in terms of reporting systems, providing financial oversight and strategic planning, etc. Depending on your needs, you may need finance professionals with more or less expertise and knowledge.

As you grow, you will need higher-level counsel and access to more information. It may become necessary to upgrade from a bookkeeper to a controller or from a controller to a chief financial officer, or even a CPA. Some individuals can step up to effectively assume the new roles, but other times you may have to bring in more experienced professionals. Outside consultants can also supplement or fill voids.

Many business owners get into trouble or lose potential opportunities because they didn’t have access to the right financial information on a timely basis. Again, the key is to take this seriously, accurately assess the level of expertise you need and hire accordingly. Staying ahead of the curve is always best. While some investment might sometimes be required, it will seem cheap in the long run when you reap the benefits.

Financial reporting should be done on a regular basis — daily, weekly or monthly. Developing appropriate flash reports and a dashboard is important. This will enable you to know — on a real-time basis — how your business is running and position yourself to make any necessary adjustments efficiently. Today, data analytics and business intelligence are crucial. Getting a first-quarter report at the end of the second quarter is not only virtually pointless — it can seriously hurt you because it may be too late for you to act. For some companies, obtaining an audit may be appropriate. While often costlier than a compilation or review, audits are valuable because they may be required by your lenders and can be helpful when you try to sell your business. Audits also bring a certain discipline to companies.

The types of financial management systems you put in place are important, too. Do you go with QuickBooks, QuickBooks Pro, or the more robust and sophisticated Microsoft Dynamics GP (formerly Great Plains), or other software solutions to obtain financial information and manage payroll, inventory, sales and other needs? Depending on your line of business, a fully integrated system that brings together your financial system with your inventory and other key aspects of your business can be important.

Beyond supporting your daily business operations, having the right support from finance professionals and the right financial information in place upfront is important as you prepare for growth or a merger or acquisition. I’ve often seen business owners scrambling to come up with information at the last minute, which has put them at a disadvantage in negotiations. In a sale process, for example, not having the necessary information at the right time can negatively impact what potential buyers may be willing to pay for the business. Outside consultants like South Florida-based SCA Group can be helpful.

While it may be tempting to focus solely on running the day-to-day operations of your business, it is critical to keep in mind that your ultimate success depends on how well you manage the company’s finances. By investing the necessary time and resources from the outset, you can put your business in the best position for continued growth and 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 can be reached via email at jcassel@casselsalpeter.com or via LinkedIn at linkedin.com/in/jamesscassel. His website is casselsalpeter.com.

 

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Recession ahead? Prepare your business for risks

By James S. Cassel

James Cassel headshotSeveral timely issues and trends — today’s low interest and low growth rates, and the ultimate impact of Brexit — are making it critical for middle-market business owners to continually evaluate their businesses and implement the right strategies to protect their best interests.

While none of us have a crystal ball to know when the next recession will arrive, there is no doubt that every passing day brings us closer to it. So how do we plan for this and continue to grow our businesses without exposing our businesses to excessive risk when the next recession comes? While we should take risks as business owners, we should not bet the farm.

Following is some insight and guidance based on our experience helping clients navigate these issues throughout all types of economic cycles.

It is important to note that current estimates call for as many as three quarter-point increases in interest rates during the next 18 months. These increases are lower than previous estimates. In fact, some believe there will be fewer than three increases. Regardless, since interest rates will remain historically low, these increases should not be significant enough to warrant any concern.

Nonetheless, we should closely evaluate our balance sheets to make sure that we have taken adequate advantage of any opportunities in the near term and that we are well prepared for the downturn whenever it arrives. This includes determining whether we can extend the terms and fix the rates of any loans for as long as possible in order to take advantage of today’s low interest rates.

Now also is a good time to begin looking for opportunities to expand our businesses. While controlling costs is always important, profitable revenue growth is critical for success. We should consider strategic hires. The right hires with strategic relationships with potential new customers or clients can expedite growth. We should look for people with complementary skills that can offer more to current clients or customers can help deepen those relationships.

As the job market continues to tighten and we run the risk of losing some of our labor forces due to immigration policies, it will be important to evaluate new technologies that can help us increase efficiency and reduce the amount of labor required by our companies.

A good example may be found in the emerging trend of mechanization in the fast-food industry. New technologies that enable customers to place their own orders are making it possible for restaurants to need fewer employees. Restaurants also are increasing efficiency by equipping their servers with mobile devices that enable them to place orders online without having to go to the kitchen to place orders. Some restaurants are taking it a step further. Momentum Machines is attempting to replace human fast-food workers by fully automating the production of burgers — everything from cooking patties to adding all the accoutrements.

Car dealerships are another example. These days, they are giving mobile devices to employees to complete forms and speed up the process rather than giving them printed forms like in the old days. Computers, not only mechanics, are currently being used to do the diagnostics on cars. These all make businesses more efficient.

It also would be wise to explore new partnerships, joint ventures and other strategic relationships as well as potential acquisitions to strengthen and grow our businesses. We should consider investing in new businesses and/or new product lines in order to obtain organic growth. Research and development of new products should also continue.

Clearly, the domestic economy seems much better positioned than the foreign economy. No one knows what will happen in Europe with Brexit and what ultimate impact it will have. Thus, we might want to concentrate the majority of our efforts on domestic business, although not to the exclusion of any attractive opportunities for foreign sales. The uncertainty has strengthened the dollar, which will lower exports and make U.S. products less competitive abroad.

Although most U.S. businesses might not be doing great, they are still doing OK, so taking a longer-term view is important.

While middle-market business owners recognize they should be prepared for any expected obstacles and opportunities, they often fail to plan properly because they get too caught up running their day-to-day business operations and handling immediate issues as they arise. However, considering today’s dynamics, it is critical to work with trusted advisers who can provide the necessary guidance and help protect their best interests. Those who do can gain a significant competitive advantage and position their businesses for continued 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. 

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