Business Insider Magazine - Volume 3 - Issue 4 - 2nd Issue 2008

8/14/2019 Business Insider Magazine - Volume 3 - Issue 4 - 2nd Issue 2008

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BUSINESS insiderMAGAZINE

The South Bay Los AngelesBusiness-to-Business Magazine

Publisher & EditorDavid Whitehead

Contributing WritersDennis Branconier, Ed Burzminski,

Steve Goldstein, Ken Roberts,Brian Simon, Tony Traven, Cayley Vos,

David Whitehead, Lori Williams,R. Boyd Zack

Graphic Design & ProductionDavid Whitehead & Susan L. Wells

Copy Editing & ProofingBrian Simon

Advertising Sales ManagerDavid Whitehead

Assistant to the PublisherAlexandra C. Hart

BUSINESS insiderMAGAZINEWelcomes Input From The Community:All Letters to the Editor should be concise andinclude the writers name, address and phonenumber. BIM will publish select letters address-ing relevant issues and topics discussed in themagazine. We will not publish street address,email address or phone number. If the editorcomments about a letter, the reader mayrespond with at least as many words as wereused by the editor. We would like to stimulate asincere dialogue. All letters become property ofBUSINESS insiderMagazine and are subject toediting for length, content, grammar, punctua-tion, etc. Letters may be submitted by email to:

[email protected] mailed to:

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Palos Verdes Estates, CA 90274

(310) 872-9732www.BusinessInsider.uswww.TheBizBoard.net

BUSINESS insider MAGAZINE makes everyattempt to provide business decision-makerswith current and accurate information. How-ever, BUSINESS insiderMAGAZINE disclaimsany implied warranty about the correctness oraccuracy of information published in BIM andwww.BusinessInsider.us or its appropriatenessfor a particular purpose. You assume fullresponsibility for using the information andunderstand and agree that BUSINESS insider

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2008 BIM Publications& BUSINESS insiderMAGAZINE

All Rights Reserved


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In This Issue

COVER FEATURE:

Growth Strategies for Businesses 10, 25-37

Strategic Planning Starts With Strategic People 10

Strategic Planning Made Easy 25

Steps and Lessons for Trailblazing a Path to Long-Term Business Success

The Pros and Cons of Popular Growth Strategies 26

Finding the Right Investment Partners 30

Cash Management for Growth During Hard Economic Times 34

Special Feature

2nd Annual South Bay Technology Guide 1724

The Benefits of IT Investment in a Down Economy 18

Want Website Visibility? 22

Get prepared for Spiders

Profiles on South Bay Technology Providers 21, 23

Your IRA and Company Retirement Plans: 6

How to turn a Liability into a Significant Asset

The Stimulus Package Was Less Than Stimulating 9

Safe But Never Sorry 13

Farmers & Merchants Takes the Conservative Approach To the Bank

Processing Your Own Payroll Creates a Drag on a Growing Business 16

South Bay Calendar of Business Events 38

Meeting, Event And Banquet Resources 39


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Publishers MessageThis issue focuses on GrowthStrategies for Businesses. I plannedthis theme last year knowing wewould be facing a tough economymid-year in 2008. So far, the SouthBay is faring reasonably well andshould continue to do so as long our

key business sectors arent deeplyaffected by the growing nationalunemployment rate and if inflationremains manageable. That means itis just as important to understandhow to implement an effectivegrowth strategy in an up or downeconomy, or especially when youcant be entirely sure where itsheaded. When the economy isgrowing, there are new opportunitiesto exploit. And when the economyshrinks, every business needs to

grow its markets and diversify innew places to remain strong and sur-vive. Exit strategies are just as impor-tant so you dont back yourself into acorner with no good choices.Growth is always a crucial issue forbusinesses. Having spent most of myadult life in the publishing business,I learned this lesson well from myprevious employers. There are defi-nitely right and wrong ways to growa company. Local business profes-sionals, including myself, have con-

tributed insights on topics rangingfrom strategic planning and tech-niques to funding issues. I felt itimportant to address issues of risk sopeople understand they must growin a way that is not only right fortheir business, but right for them per-sonally. This issue also includes ourexpanded 2nd Annual South BayTechnology Guide. Business InsiderMagazineusually starts our Technol-ogy Insiderfeatures near the front ofthe magazine, but in this issue we

explore vital IT issues as a distinctcenterpiece to our magazine. Thisfeature is informative and also is akeepsake to refer to throughout theyear when you need quality SouthBay technology providers. Growsafe and dont get burned this sum-mer!

David WhiteheadPublisher


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retirement funds whether or not you want them. Taxdeductible plans are among the best ways to save money, butabsolutely the worst for distributing it. Thats why most peoplewill do all they can to live off other investment assets and takeonly the minimum required by law (Required Minimum Dis-tribution or RMD) from their pre-tax retirement plans. As aresult, trillions of dollars are ripening for tax harvest as theBoomers move into retirement.

Is there any way to get 100% of the value of my IRAto my loved ones upon my death?Yes, but you wont find it by researching retirement plans. In theU.S. tax code, which contains 7,500 pages and 3.4 millionwords, there is exactly one reference to creating income tax-free benefits for your family at death: life insurance. This exclu-sive treatment is granted to life insurance as a matter of soundpublic policy. Otherwise, millions of people would look to pub-lic resources to bail them out in the event of a breadwinnerspremature death. And the timing is perfect from a financial andestate planning standpoint: the situation that triggers taxation ofyour unused retirement funds, namely death, is precisely thesame situation that creates income tax-free dollars for your ben-eficiaries. So the problem is instantly neutralized.

As with all other uses of life insurance, the benefits soundgreat until you have to figure out how to pay for it. Its impor-tant to remember that insurance is the solution, not the prob-lem. The problem is this large wad of untaxed money, perhapsthe largest single liquid asset you have. So what about usingthe problem causer to pay for its own solution and having thegovernment be your partner rather than your adversary?Though it may seem counterintuitive to purposely withdrawretirement funds and pay tax on them now, you will be sur-prised to do the math and see what happens.

Please keep in mind that this strategy is potentially appro-

C O L U M N I N S I D E R

2 N D I S S U E 2 0 0 86 S O U T H B A Y B U S I N E S S I N S I D E R M A G A Z I N E

F I N A N C I A L I N S I D E R

ITS HEARTWARMING THAT OUR LAWMAKERS ARE BEINGSO NICE by allowing us to set aside individual income on atax deductible basis and grow it tax-deferred in IRAs andqualified plans such as 401(k)s. Truth is, theyre just beingpatient with us in their tax collection process. They know thatlifes other certainty death will eventually cause thetransfer of those assets to another person, thus creating a signif-icant opportunity for taxation down the road. If the retirementaccount has been invested prudently until then and you are ahigh net worth individual, the government is prepared to sendan even more sincere thank you note than usual, because itstands to receive 70% or more of your account by the imposi-tion of estate tax and ordinary income tax.

The good news is that you can turn the imminent tax liabilityinto an asset worth millions for your loved ones if you so desire.

What if I spend it all before I die?The best you can do is to spend 60% of your IRA or retire-ment plan funds during your lifetime because the governmentwill spend the other 40% for you, since you will pay incometax on every dollar distributed (remember, you paid no tax onthose dollars when earned).

If you meant to ask, What happens if I deplete my

account before I die? then you need not read any further.Or if all your retirement money is in a Roth IRA or Roth401(k), you dont have an income tax issue looming becauseyouve already jumped into the fire to get it over with alongthe way good move. Or if you plan to leave all unusedretirement funds to charity great!

On the other hand, what if I dont spend any of theIRA or company retirement plan money?The government does have limits on its patience. So it set yourage 70 1/2 as the trigger for taking distributions out of your

BYDENNISJ. BRANCONIER, CLU

Your IRA and

CompanyRetirement Plans:How to Turn a Liability into a Significant Asset


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priate not for everyone, but for those who will likely want toavoid taking any more out of their retirement plans than theymust in order to satisfy the law. It will be even more signifi-cant for families that will face estate taxes (retirement plans donot receive a step up in basis like other assets do). Hereswhy it makes sense in certain situations:

It is more likely that future tax rates will go upthan stay the same or go down.Given the nasty outlook for government entitlement pro-grams such as Social Security and Medicare, along with warefforts and other costs not yet known due to the aging pop-ulation, we may be at the lowest tax rates we will see in along while. Why not get some taxes out of the way nowwhile its relatively cheap? Remember, they will be due andpaid someday. If the block of money you pass on to yourloved ones (through insurance) is tax-free, will you worryabout what the tax rates are in the future? No, because yourfamily wont be paying them. Talk about peace of mind.

For the beneficiary, paying income tax on just theinvestment earnings is better than paying tax onevery dollar taken.While the stretch-out provisions are superior to the oldlump sum tax hit from past days, it still means every dollarthe beneficiary takes from the retirement plan is subject toincome tax when received. By contrast, the fund created bylife insurance proceeds is not taxable when taken out. Onlythe interest or investment returns on that fund are taxed.

My spouse is the beneficiary of my retirement plan;arent there special breaks for spouses?There are two main breaks for spouse beneficiaries. One isassociated with estate taxation. You can pass as much as youwant to your spouse upon your death and the unlimited mari-tal deduction will defer estate taxes until the second death.

The other break is associated with income taxes. Yourspouse can elect to stretch the IRA or company planaccount (which may well benefit from being rolled over intoan IRA first) and take distributions over his/her life expectancy.Again, this only defers taxation so that the account can have achance to continue growing, but it doesnt do away withincome taxes any more than the marital deduction does awaywith estate taxes.

In both scenarios, a significant asset is transferred at death tosomeone else who eventually has to acknowledge a tax liabilitybecause of that asset. But theres no reason that death mustequate to an economic loss to a spouse or family. Through thepower of insurance, the true value of the asset can be preserved.

How do I know the proper amount to insure?Good question. If you take only the RMD from your plan andleave the rest to continue growing, the account value andaccompanying taxation are moving targets. Again, as withother uses for life insurance, there is no way to know exactly

what the economic loss will be for family members or busi-ness partners due to someones death. The amount of insur-ance you choose will be based on an estimate of the loss atsome targeted future time and on your preferences for a cer-tain level of premium payments.

What is the best way to pay premiums?If you are a long way off from retirement, its unlikely youdtap into your retirement accounts for premiums (though it canbe arranged for your 401(k) or profit sharing plan to actuallyown and pay for insurance with pre-tax dollars). This providesa good reason for you to sit down with your financial advisorto review your financial and estate plans, because your retire-ment account is likely a substantial part of both.

The reference earlier in this article presumes that the retire-ment plan itself is the source of funding, which is easiest to con-sider at age 70 1/2 or older because youll be forced to takemoney out anyway (unless you are a non-owner of the businesswho is still actively working). For individuals who dont want totap into their retirement plans and will support their retirementlifestyle with other income producing assets, the after-tax RMDmight as well be used for something beneficial. Life insurancepolicies can be designed with a graduated premium over theyears to parallel the anticipated growing RMD payout.

Such a concept is also appealing for individuals who wantto make charitable gifts of life insurance (and the income taxdeduction can offset the unwanted income tax liability fromthe RMD distribution).

What other issues need to be addressed in pursuingthis strategy?

Due to space limitations, this article can only remind you thatyoull need to consult your financial advisor on the appropri-ateness of this approach for you, including decisions on:

Ownership of insurance inside or outside your tax-able estate.

Type of product single life or survivorship (second-to-die).

Integration with other aspects of your long-term planning.Advances in underwriting have liberally opened up the

playing field for individuals with medical histories. As with all


S O U T H B A Y B U S I N E S S I N S I D E R M A G A Z I N E 72 N D I S S U E 2 0 0 8

continued on page 8

For individuals who dont want to

tap into their retirement plans and will

support their retirement lifestyle with

other income producing assets, the after-tax RMD

might as well be used for something beneficial.Life insurance policies can be designed with a

graduated premium over the years to parallel the

anticipated growing RMD payout.


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great opportunities, acquiring insurancemust be taken advantage of while its stillavailable.

Dennis Branconier, CLU is Vice Presidentof M Advisory Group in Torrance. Foraffluent clients and entrepreneurial com-panies, the firm provides wealth preserva-tion and executive benefit planning,insurance expertise and 401(k) investmentadvisory services. He is past president ofthe South Bay Estate Planning Counciland active in several local communityorganizations. Dennis can be reached at(310) 530-5525 or [email protected].

This material is not intended to present an opin-ion on legal or tax matters. Please consult withyour attorney or tax advisor, as applicable.

Securities and advisory services offered throughM Holdings Securities, Inc., A Registered Bro-ker/Dealer and Investment Advisor, MemberNASD/SIPC.

Services provided through Cal-Surance BenefitPlans, Inc. Cal-Surance Benefit Plans, Inc. andM Advisory Group are independently ownedand operated.

YOUR IRAcontinued from page 8


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die Mac started including Conforming Jumbo in the regular pool.And most recently, a few lenders increased their product choicesto include seven- and 10-year fixed rate mortgages, some with aninterest-only option.

I hope this trend continues, but I fear that about the time theconsumer is all dressed up and ready to go, the party will be over.According to the legislation that created them, the increased loanlimits are temporary. They are due to expire at the end of this year.The biggest question remaining is will these limits be extendedbeyond December 31 and be made permanent? Certainly Califor-

nia needs the $729,750 Conforming loan limit. Also, who getselected this fall may have an impact on that decision.

In the Jumbo marketplace for loans over $729,750, there issome bad news and some good news. The bad news is thatlenders that sell Jumbo mortgages to the secondary market arefinding that investors still have no appetite. Rates for all loan pro-grams, fixed or adjustable, are disproportionately high. They areabove 7% with many quoting rates well above 8%. This is thehangover from the bad investments made in the sub-prime mort-gage marketplace that has left investors shunning anything per-ceived as having additional risk. They would rather buy five$200,000 loans than one $1,000,000 mortgage. The good news isthere are still a handful of portfolio lenders who are making loansup to several million dollars at rates near or below 6%. Suchlenders keep the loans on their books instead of selling them toinvestors, and service them (meaning they collect the paymentsalso). By not selling mortgages to investors, they dont have to con-form to investor guidelines or the current high market rates. Theproduct choices are limited to three, five, seven and 10-year fixed,some interest-only, and straight Adjustable Rate Mortgages. Beforewarned, however, that these lenders are extremely busy andbacklogs mean their turn times from application to funding arebetween 45 and 60 days, with some as long as 90 days! If you arecontemplating buying or selling this year, do yourself a favor andbuild in a longer escrow period of at least 60 days. You can always

close sooner by mutual consent between you and the other party ifthings come together sooner than expected.

We are seeing some extreme cherry picking by portfoliolenders. Underwriting criteria can be rigorous and at times very frus-trating. Financing for condos and townhouses is more difficult. First-time home buyers are certainly facing discrimination. I recently sawsome very strong (Id venture to say near-perfect) first-time homebuyers declined on the basis of payment shock (meaning they aregoing from a modest rental payment to a much larger mortgage pay-ment). Keep in mind their qualifying ratios were very low, they had

continued on page 12

The Stimulus PackageWas Less Than Stimulating

BYKEN ROBERTS

THAT PRETTY MUCH SUMS UP HOW I WAS FEELING afew months ago when guidelines were released for theincreased Conforming Loan limits, as part of the adminis-trations economic stimulus package. You may recall the last issuewhen I said that raising the loan limits from $417,000 to $729,750could be a boost to the South Bay real estate market. What wewere expecting was the full complement of loan products with sim-ilar guidelines for the new so-called Conforming Jumbo as we havefor Traditional Conforming loan amounts at $417,000 and below.We were fully prepared to pay a little more and see some tiered

pricing. But what we got instead of 31 flavors was your basicchocolate and vanilla, a 30-year fixed and a five-year fixed. And forpurchases, the maximum loan-to-value was 90% and required aminimum 700 FICO score. For refinances, the maximum loan-to-value would be 75% and couldnt combine an existing first mort-gage with an existing second mortgage nor take cash out. All loansrequired full income documentation (no stated income allowed)and were only applicable to single family residences, condos andplanned urban developments (no two to four units allowed).

All this stood in stark contrast to Traditional Conforming loans, inwhich there are numerous loan products (for the sake of brevity, Iwill spare you a list) to satisfy a variety of palates. It seemed the newConforming Jumbo loans werent going to be included in the samepool of mortgages in which Traditional Conforming loans were bun-dled and sold. Different pool and different guidelines meant differentpricing, and it wasnt pretty being .75% in rate higher across theboard for Conforming Jumbo vs. Traditional Conforming.

So we now had only two loan choices, more restrictive guide-lines and much higher pricing. No wonder the lending communityfound this less than stimulating! The only bright spot was FHAfinancing. Those loan limits were raised in the high cost areas (likeLA County) to the same $729,750, with guidelines more similar towhat theyd been with a few exceptions. The only problem wasthat many mortgage brokers didnt bother to get approved to makeFHA loans because previous loan limits had been so low. FHA

also has its limitations: limited product choices, no interest-onlyoptions, higher interest rates, plus up-front and monthly mortgageinsurance premiums. The strongest benefit, however, is that FHAallows for as little as 3% in down payment, which can come froma family gift or outside program.

Then things started to loosen, just a tad, for Conforming Jumbo.Guidelines now allow up to $100,000 cash out. Interest-only isavailable with some lenders. You can combine a first and secondmortgage into one loan in a refinance in some instances. Next, wesaw pricing for Conforming Jumbo loans drop enough to almostmirror Traditional Conforming loan rates as Fannie Mae and Fred-

A R E A L E S T A T E P R O S P E R S P E C T I V E


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Many companies have annual strategic planning meetingswhere a couple of days are set aside to focus the key execu-tives on strategic discussions and ask questions like: Where dowe want to be in five years? How are we going to get there?How can we improve internal communications? Maybe evenconduct a Strengths, Weaknesses, Opportunities and Threatsanalysis (SWOT).

Sometimes the meetings even include team building work-shops and fun exercises to help bring people together. Theseare all good practices and can benefit a company. However,this is not where strategic planning starts.

In reality, most strategic planning meetings are very well-planned, scripted presentations designed to communicatewhere the company is headed, build consensus and makeeveryone feel part of the team. The real strategic planning isdone beforethe meeting.

The fact is strategic/analytical people are always thinkingstrategically. It is not something to be turned on an off like aswitch, but it is the way the person processes information anddetermines what needs to be done. Strategic people are thefact finders not the fault finders in a company. They areconstantly looking for facts to verify the existence of a new

trend or figure out a complex problem to help move the com-pany forward.

They are continuously breaking things down and puttingthem back together to figure out a better way of doing busi-ness. Strategic thinking people naturally think in the futuretext and are asking what if questions both internally andexternally.

Future thinking is not something that is easily controlled,and often contributes to feelings of frustration because strate-gic thinking people clearly see what needs to be done and yetmay have little power to affect change.

Many scholars will debate and even condemn this overlysimplistic viewpoint and reference hundreds of books andclasses designed to teach strategic thinking skills and how fol-lowing specific processes can set a clear strategic direction forthe company. They will state emphatically that you can teachstrategic thinking and I would agree with them in part. Edu-cation, intelligence and work experience all contribute tohow effective an individual will be in the context of strategicplanning.

The in-depth discussions and classes that take place atcampuses throughout the country are extremely helpful in


BYTONYTRAVEN

WHEN YOU WANT TO CHANGE THE CONVERSATION IN YOUR COM-

PANY FROM PROCESS IMPROVEMENT, PERFORMANCE REVIEWS, COM-

PANY EVENTS AND P & LS INTO A TRUE STRATEGIC/ANALYTICAL

DISCUSSION, WHERE DO YOU START? START WITH STRATEGIC PEOPLE.

C O L U M N I N S I D E RC O L U M N I N S I D E RC O L U M N I N S I D E RC O L U M N I N S I D E RS M A R T G R O W T H S T R A T E G I E S


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understanding the steps, building theframework and providing the structureneeded for creating a comprehensivestrategic plan. All this education isvaluable and highly effective when itchallenges a strategic mind. They graspthe concepts and start to think abouthow this information and knowledge

applies in the future. But it starts with astrategic mind.

Of course this by itself does not makea strategic plan come to life. A well-designed and comprehensive strategicplan also includes input and a significantamount of discussion with individualswho ask, Have you thought about?or, Do you remember the last time?kinds of questions. These are the folkswho look at the outline of a strategicplan and start to fill in the details.

This process is similar to how a majorconstruction project goes from conceptto being built. The big picture concept ispitched along with a beautiful rendering,estimate of the overall cost and cash flowprojections based upon consumer orbusiness trends.

Those in this business know this isonly the beginning. Now the projectgets broken down into specific projects,the hundreds of steps within those pro-

jects all the way down to the smallestdetail. The same holds true with an

effective strategic plan.So you need both the big picture

strategists along with those compilingand questioning the details. Both typesof individuals need to work in concertand have an understanding as to the oth-ers point of view and mental reference.One is looking forward, mentally grind-ing on what is possible and weighingthe risk. The other is drawing upon


The biggest challenge most companies have is that the planning committee or executive team

is already in place handling all areas of strategic planning.

If the team is strategic and forward-thinking, great!

If not, then thats the way it is

However if you are a person who cannot accept this as fact, needs to challenge the status quo,likes to take risks and needs to push things forward for the sake of the company,

that is also understandable.

S M A R T G R O W T H S T R A T E G I E S


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knowledge, referencing the past and trying to eliminate orreduce risk. There are very few people that do both effectively.

Of course you have people in any organization who feelstrategic planning revolves around what the CEO or their

bosses want them to think about and are positioning them-selves politically for the next promotion. They can even par-rot what they have heard that sounds good and makes themseem progressive. In this case be careful, because whatsounds good may not end up being good for your companyor division.

The biggest challenge most companies have is that theplanning committee or executive team is already in placehandling all areas of strategic planning. If the team is strategicand forward-thinking, great! If not, then thats the way it is. Ifyou accept this as the way it is, that is understandable.

However if you are a person who cannot accept this asfact, needs to challenge the status quo, likes to take risks and

needs to push things forward for the sake of the company, thatis also understandable.

But how do you know precisely who is who withinyour organization and is it really that important? That dependson whether you want to be mediocre, good, great or theleader in your industry. In this case, lets assume you want tobe great or the leader in the industry.

How do you start to put together highly effective teams andstrategic plans that will grow your business and your profit?The fact is you can measure, through various assessmenttools, someones primary point of reference and if that personis strategic and forward-thinking. No need to guess. You canalso determine who would be a good complement to this typeof person and start designing highly effective teams.

You can change your company from a reactive to a pro-gressive, strategic company. But the first step in the process isto identify and develop your strategic people.

Tony Traven is a licensee for Culture Index in the Los Angelesmetro area. Tony works with strategic business leaders in devel-oping highly effective teams and can be reached at 310-683-3607 or [email protected].

perfect credit with very high scores, and came in with a large downpayment and plenty of money remaining as cash reserves. Ironically,had they been renting a larger and more expensive home, theywould have demonstrated their ability to make the new mortgage

payment. Yet clearly, they would not have saved nearly as much fora down payment and cash reserves. In 30 years in the real estateindustry in the South Bay, I have never seen more qualified borrow-ers declined. They did get financed at another bank.

The ability to put 10% down is quickly disappearing. Lenderswilling to provide Home Equity Lines of Credit (HELOC) and fixedrate seconds to piggyback behind an 80% first mortgage to avoidhaving to pay Private Mortgage Insurance (PMI) have discontinuedsecond mortgage lending altogether. Many have reduced the max-imum loan-to-value to a combined 80%. That means the firstmortgage added together with the new second mortgage cant bemore than 80% of the homes value. When purchasing, especiallywith Jumbo loans, a minimum of 20% down is the rule with few

exceptions. With loan amounts up to $729,750, you can still get90% financing with PMI. It can either be built into the rate or, ifpaid separately, can be tax-deductible if your income is $110,000a year or less. And for loan amounts over $1 million, it couldrequire 25-30% down. It seems that second mortgage lending alsofalls into the dreaded additional risk category being boycottedby investors and, consequently, lenders today.

I cant stress enough how important good credit scores havebecome. Learning how to manage your credit will be crucialmoving forward. People make what they think are logical deci-sions about how to maintain high credit scores, but oftentimeswhat they do actually hurts their scores. There is much misinfor-mation being disseminated to the general public about what todo and what not to do to retain a high score. Some of it is out-dated information passed on to the consumer by well-inten-tioned loan officers. The credit bureaus themselves are finallygiving more information about how credit scoring is deter-mined. Go online and learn how credit scoring works. It couldsave you thousands of dollars as lenders for real estate and evenconsumer loans move more to risk-based pricing based on your


F I N A N C I A L I N S I D E R / R E A L E S T A T E P R O

STRATEGIC PLANNING STARTS WITH STRATEGIC PEOPLEcontinued from page 11

STUMULUS PACKAGEcontinued from page 9



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FOR MANY FINANCIAL COMPANIES, UPPER LEVEL PERSONNELCHANGES ARE SO COMMONPLACE they barely elicit a yawn

from shareholders. But when it happens at Farmers & Mer-

chants Bank, its time to stop the presses. On March 11, 2008, Henry

Walker became Chief Executive Officer of the 101-year-old, Long Beach-

headquartered institution, succeeding his father who had merely held the

post since the Carter administration. Given that Henry is only 42, its

likely we wont be reading about another CEO coming aboard until close

to mid-century; and when we do, rest assured itll be someone named

Walker assuming the reins.

Safe,

ButNeverSorry:

Farmers & MerchantsTakes Conservative Approachto the Bank

BYBRIAN SIMON



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It is just that level of consistency andsteadfast adherence to tradition that hasallowed Farmers & Merchants to navi-gate through the decades, weathering

significant industry shifts and variouseconomic storms along the way. Theterm conservative is often used todescribe the banks philosophy, but thatsuits Henry Walker just fine. A 21-yearveteran of F & M who has really spenthis entire life in and around the busi-ness, the new CEO has no plans to rein-vent the wheel. In fact, the banksstrategic direction had been wellplanned out by its executive manage-ment in advance to Walkers promotion.The course is to continue to be one of

the safest banks in the United States that is paramount to is, he said.

This recipe for safety has a number ofkey ingredients. On top of the list is astubborn insistence on a conservative loanto value ratio. It is critical to maintain asafe and sound loan portfolio, Walkersaid, noting that the bank typically maxesout at a 50 percent LTV on collateral.While such a ratio eliminates a certainrange of loan candidates, this is exactlyhow the bank wants it. Our typical bor-rower is also conservative and has a pro-file that matches the bank, so we end upwith the best borrower, Walker contin-ued. Its a great marketing plan and fewbanks have the fortitude the follow it.They are pushed to follow return onequity instead of safety and soundness.

Loan to deposit (or asset) ratio on theother hand, is considerably lower thanmany other banks. We are 70 percentloan to deposit, while most banks are100120 percent and therefore highly

loans, he said. We fund with our cap-ital and depositors funds and thats it.This has always been the case. Wereone of the few banks that operate thisway. Its a tradition that has served uswell for our entire lifetime.

Asked to conjecture on why Washing-ton Mutual would allow itself to get intosuch a bind, Dan Walker continued,

Wamu has a different business plan andthey set it up to generate the income theyhave and are willing to accept a higherlevel of risk in their lending portfolio.When the market turns, they are requiredto supplement their losses and their loanswith additional capital by making anoffering to continue their operation andbanking plan.

Henry Walker added, They have toraise capital or sell. The big banks aredoing it and getting away with it. I dontknow if the small banks have theresources.

F & Ms conservative approach servesto protect the bank, its depositors and itsshareholders while also making a goodreturn on investment. Ultimately, itcomes down to patience and lots of it.Most banks run with a short-term phi-losophy; we run with long-term, HenryWalker explained.

Though it is difficult to compare thedifferent economic downturns theUnites States has withstood over the last

century (e.g. during the Depression ofthe 1930s, farming was the primaryindustry and the countrys economy didnot have the diversification it doestoday), certain thought patterns havealways been in place whether the yearis 1933 or 2008. Most banks have notbeen willing to chart the course forlong-term returns and running a safeand sound bank, said Henry Walker.But the allure on high returns on

leveraged, said Walker. When you puton top of that liberal advances, it cre-ates a problem in a slow economybecause that bank counted on WallStreet being able to fund the takeoutloan, which isnt happening anymore.Typically, such loans would be paid offthrough cash accumulated, sale throughcollateral, or refinance (permanent

financing). According to Walker, WallStreet is not funding credits like it did inthe past. I know of more than a few sit-uations where the financing dried up inthis credit crisis, he said.

As an example, Washington Mutualrecently had to raise $7 billion by sell-ing stock to a private equity fund. HenryWalkers brother Dan, Chairman of theBoard of F & M with 32 years in theindustry, explained why. They neededto issue stock because they couldntmaintain the cash flow necessary tocontinue lending to their customers.Prior to this, they would sell their loansto create additional cash flow. Becausetheir focus is fee-driven, they wouldthen sell the loans off on a second profitto supplement income.

Dan Walker said F & M avoids thisproblem because it doesnt sell itsloans. We make good loans for ourown portfolio and dont rely on otheroutside sources in order to fund the


SAFE BUT NEVER SORRYcontinued from page 13

Our focus on long-term banking is to create a portfolio

that doesnt allow the economy to put us in danger.

We have to manage those dollars as well as our own capital

to not risk our livelihood and to continue lending and

supporting the communities were in.

Dan Walker, Chairman of the Board

Farmers & Merchants Bank

Most banks have not been willing to chart the course

for long-term returns and running a safe and sound bank.

But the allure on high returns on equity has a price.

When the economy turns, youre going to take losses.

Henry Walker, CEO

Farmers & Merchants Bank


15/40


equity has a price. When the economyturns, youre going to take losses.

Its hard to argue with the Walkersway of thinking. F & M is rated thesafest bank in California and has man-aged to thrive as an independent, family

managed operation from its inception.With over $3 billion in assets, it alsohas the flexibility to assist people whoare being turned away from lenders tohelp refinance existing mortgages orconsolidate other forms of debt. Thebanks legal lending limit exceeds $100million due to its unusually strong capi-tal position.

Our focus on long-term banking isto create a portfolio that doesnt allowthe economy to put us in danger, saidDan Walker. We have to manage those

dollars as well as our own capital to notrisk our livelihood and to continuelending and supporting the communi-ties were in. We are maintaining thecustomer relationship through the loanswe have. The customers affected great-est today are in real estate either infinancing, or in sales because of lim-ited cash flow. But we can be patientbecause our LTV still allows for a goodloan to give our customer time to turnthings around.

Conservatism and safety do not equateto being stuck in the Dark Ages, however;even though a stroll through the bankshistoric downtown Long Beach branchmight make one think the year is still1923. The Walkers say F & M is commit-ted to maintaining a high level of technol-ogy in order to serve the growingcustomer base on the information side.

Other important fringe benefits comewith the package as well. Borrowingfrom us is relatively inexpensive; thereare no points and low rates, Henry

Walker said. We also provide a stronglevel of customer service, which can-didly we do better than anyone else inour competitive field.

Dan Walker echoed the sentiment.We prefer to have a relationship withour customer through deposits and thenservice the loan. We want that customercoming back to F & M. Thats why wehave so many multi-generational cus-tomers.

Through careful management of itsmoney, F & M has also grown by delv-ing into expansion when appropriate.Of its now 22 offices, most are de novo(start-up from scratch) branches, thoughthe bank is also open to purchasing

facilities inside or outside its currentmarketplace areas if the deal makessense. The majority of its new branchesbroke even within the first two years ofoperation as compared to the normalfour or five industry-wide average.

F & M now has roughly 80,000 cus-tomers combined on the consumer andbusiness sides, though more than threequarters of the banks portfolio is realestate related. Despite documenteddownturns in that market, Henry Walkernoted that the banks bases of operation

Los Angeles and Orange counties are among the better economies nation-wide. Consumer spending hasntdropped significantly in the regions weserve, he said. Business is still movingalong and doing well, though some sec-

tors are in a big hurt.Though cautious in assessing the

future direction of the economy, HenryWalker can only control whats right infront of him. With respect to bankingwe are doing it right, he said. As for

the economy, well see what happenswith consumer spending.In any case, the Walker brothers and

the rest of the executive team (four peo-ple with a combined 158 years of bank-ing experience) are poised to ride outany storm. From our point of view, weare very excited to continue in bank-ing, said Dan Walker. We enjoy our

jobs day in and day out. We are on callto our staff 24-7 and are here to con-tinue the longevity of F & M. The liveli-hood of this bank and shareholder

responsibility is not something we takewith any ease in our minds. We live thisbank

Brian Simon is a freelance writer who

lives in El Segundo.



16/40


spent on payroll can be reduced to sim-ply reporting the hours worked. Thepayroll service provider shoulders boththe workload and the liability of the

payroll processing and business ownerscan now focus on bottom line run-ning and growing their business.The employer maintains complete con-trol over when and how the payroll isprocessed as well as wages, raises,reviews, hiring, and benefits. Access toinformation is also not a valid consider-ation as business owners have completeaccess to all reports, history and person-nel data plus report writing capabilitywith a Web-based service. Since thereare no contracts in payroll, noemployer is ever forced to stay with aservice they find unsatisfactory for anylength of time. All payroll services canbe terminated with a simple letter orphone call.

The biggest benefit of tax filing serviceis that if ever a notice arrives from theIRS or EDD, a client simply faxes that toa service provider to be handled. Thesenotices often result from a mistake by theIRS or EDD and are cleared up veryquickly all without any effort from the

business once that fax is sent. Employerswho do it for themselves (for free) willspend many hours responding to suchnotices hours away from the businessthat can never be replaced.

Steve Goldstein is the founder andowner of Payroll Management Solutions,a South Bay provider of payroll servicesfor local companies. Steve can bereached at 310-491-3467 or by email [email protected].

drag on the process. Part of growingsmart is knowing how to outsource prop-erly and payroll outsourcing is a smartway to help keep your costs in line as

your business grows.There is also the added risk to con-

sider by handling your own payroll,especially as your business gets largerand more complicated. Every singlepaycheck includes at least five requiredtax deductions in each state which thenmust be added to other employer taxesand voluntary deductions. Every one ofthese items is an opportunity for a prob-lem to occur. The late or incorrectdeposit of these tax liabilities can resultin costly penalties and interest for abusiness owner.

For a company with as few as fiveemployees, a small boutique provider ofpayroll services might charge as little as$20 per pay period plus $1.65 percheck to completely outsource the taskof calculating payroll and properly pay-ing all state and federal taxes. The time

C O L U M N I N S I D E RI N V E S T M E N T I N S I D E R

AFTER 25 YEARS IN THE PAY-ROLL OUTSOURCING BUSI-NESS, the most commonmisconception I deal with every day is

that by processing their own payroll,employers save money or maintain adegree of control they would otherwisehave to give up as if their time is worthnothing and there is no risk involved.Like rent, payroll processing is a taskthat produces no revenue, though it is anecessary evil for business owners whowish to stay in business. Time spent pro-cessing payroll is time not available toadd to the bottom line, whether thatmight be increasing sales, collectingreceivables, developing new productsor strategies or even taking some time torelax and recharge the batteries. All ofthese things are more productive thanpayroll processing, which can only cre-ate risk for the owner as well as costtime and money.

If you are trying to grow your busi-ness, all these procedures can become a

Processing Your Own

Payroll Creates a DragOn a Growing BusinessBYSTEVEGOLDSTEIN


17/40


18/40

While the price of the technology may not seem to go down,

the amount of usefulness of the technology will go up at ahigher rate than the actual cost, thereby reducing the effectivecost of the technology. In other words, a $500 computer mightcost $500 or even $550 in the future, but what that future com-puter can do will exceed what the current $500 computer cando by far more than the price increase. This fact will help offsetother rises in the cost of doing business.

History has shown that companies that make strategic invest-ments during down times often emerge as leaders at the time ofthe upswing. In recent years, declining revenue in the entertain-ment industry has been very rough on some of the giants in thefield, allowing for the rise of underdogs such as Apple with itsiTunes technologies. While icons such as Warner Music Groupwere slashing costs in every area of their business, Apple wasinvesting heavily in its unproven technologies in an area it hadnot previously even had a presence.

Some areas of technology investment in tough economictimes can be easy to show a reasonable ROI in labor costsalone. Take system integration: the process of connecting sys-tems together in such a manner that they can share data andbecome a common source of information. By integrating sys-tems together, reductions in labor costs through a decrease inredundant data entry or elimination of work or errors can berealized. At the same time, increases in production or in featurescan be achieved without increasing costs associated with pro-

viding the products through increases in efficiencies.Another area where technology investment can provide a

high return is through server virtualization. The computingpower of todays computer servers is so great that through theuse of special operating system software, we can deploy severallogical (or virtual) servers on a single physical server. Virtualizedservers not only provide a higher level of reliability and availabil-ity, but they also consume less energy. This means they generateless heat, which can further reduce energy costs associated withserver room cooling. Again, when calculating the ROI from suchan investment, we cannot assume that energy costs will remain

T E C H N O L O G Y G U I D E 218 S O U T H B A Y B U S I N E S S I N S I D E R M A G A Z I N E

S O U T H B A Y T E C H N O L O G Y G U I D E

The Benefits ofIT Investment

ina Down Economy

BYR. BOYD ZACK

DURING AN ECONOMIC DOWNTURN,CUTBACKS ARE OFTEN UNAVOIDABLE.

However, IT is among the business cate-

gories in which cutbacks can actually cost a com-

pany more in the long run. As a business owner, it is

extremely likely that you are seeing price pressures

all around your office. Insurance costs seem to be on

a space race to the moon. Energy costs to power our

offices and factories are becoming very noticeableline items on our financials and blowing our budgets

beyond belief. Not to be left out, even the post office

is getting into the practice of raising rates.

Another area where technology investment

can provide a high return

is through server virtualization.

The computing power of todays computer serversis so great that through the use of

special operating system software

we can deploy several logical (or virtual) servers

on a single physical server.

Virtualized servers not only provide

a higher level of reliability and availability,

but they also consume less energy.


19/40

S O U T H B A Y B U S I N E S S I N S I D E R M A G A Z I N E 193 T E C H N O L O G Y G U I D E

constant or even increase as they havehistorically. Instead, we must assume theywill increase at an ever climbing rate.

Additionally, we should expect and evenplan on making greater use of our computerand technology resources to enable us to do

more with less. With current versions ofOutlook, users are finding they can retrievevoice message through e-mail and holdmeetings without leaving their desks.Through the use of remote desktop applica-tions, workers are finding increased produc-tivity operating from home, while stillhaving the full computer resources found inthe office. And with current cell phone (andPDA) technology, we can access our e-mailanytime and anywhere.

Lately it seems we cant pick up apaper, watch the news or visit any on-line

news source without hearing about theeconomic forecast. Are we headedtoward a recession? Are we in a reces-sion? How bad will it get and how longwill it last?

The answers to these questionsbecome crystal clear only after changehas taken place. And we know we arethrough the worst of it when we see asustained improvement. One challengewe must face and try to understand is thatwhat we do and how we respond whilewe are in it has a dramatic effect on thedownturn itself. Sometimes a seeminglylogical response to a bad situation doesnothing more than make that bad situa-tion even worse.

For example: A logical response to adownward trend in sales may be to cutcosts across the board. The problem withthis type of response is that it can veryeasily make the trend worse. If sales havedeclined due to additional features of acompetitors product, an increase in prod-uct development funding could have a

much more positive effect on the overallhealth of the organization. If the declineis the result of perceived value, anincrease in marketing or even an increasein price might better align the companywith its targets.

Unfortunately, business is not alwaysas simple as analyzing the situation andbrilliantly coming up with the solutionthat is counterintuitive. When faced withhigher costs, we tend to look at either

passing the increases to our customers orcutting back in other areas.

One problem with taking either ofthese two approaches is that they are sim-ply unsustainable. When we pass ourincreased costs to our customers, it forces

them to either do the same with their cus-tomers, cut costs in other areas or reducetheir spending with us. Similarly whenwe cut costs in reaction to increases incosts in other areas, we tend to be perpet-

uating the issue in those areas.What we need to do is find ways to get

more from what we have without thewholesale cutting and slashing that dimin-ishes our value to our customers. Often,accomplishing this can be challenging at

best and downright painful or potentiallyfatal at worst. One example of a counterin-tuitive approach to raising costs is to invest

Small- to Medium-Sized Business?

Were Your Outsourced IT Department!

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Network more efficiently for your business flow

Benefit from custom programming & support

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continued on Tech Guide page 4


20/40


in people. While we often look at trainingin times of plenty, we must not set it asidein lean times. Take management training,for example. The goal of management is to

accomplish objectives through others. Witheffective management training, we canoften learn to accomplish more throughothers, thereby either reducing our costs orincreasing our offering. With effective timemanagement training, we can learn tospend more time in our high payoff activi-ties and less in our lower return tasks.

Another means of getting more fromwhat we have in the area of IT is toexpand or refine our systems to do a bet-ter job at saving us time and money. Takea poll of the business system users within

your organization and ask them whatcould make their job easier and whatareas of the systems are difficult to use.Often you will find that with relativelyminor adjustments to the systems, majorproductivity gains can be achieved. Youmay also find that a complete replace-

ment of a system (or systems) can saveyou a significant amount in labor coststhrough increases in efficiencies.

When evaluating returns on suchinvestments, we cannot take prior con-stants as constants. The world is changing

and will continue to change at an ever-increasing rate. Prices for many things aregoing up and will continue to go up,while some are going down and willeffectively continue to go down. If youwere considering purchasing a ToyotaPrius about 18 months ago, you mayhave looked at the mileage, number ofmiles you tend to drive and the price ofthe car and then compared that cost tothe truck you were driving at the time thatwas paid off and getting 15 miles per gal-lon. With the average price of gas at

$2.14/gallon it could have come to a 15-year payback, assuming the price of gaswas going to increase at the slow rate ithad been over the prior several years.Taking the current $4.00-plus/gallonprice, you could be looking at an eight-year payback. More realistically, the price

BENEFITS OF IT INVESTMENTcontinued from Tech Guide page 3


The 2008 South Bay Technology Guideis a special supplement of:

Main Website: www.BusinessInsider.us

Classified Advertising Site:www.TheBizBoard.net

BIM Publications Business Insider Magazine

P.O. Box 1032Palos Verdes Estates, CA 90274

(310) 872-9732

[email protected]

2008 BIM PublicationsAll Rights Reserved

of gas is not going to do much else otherthan continue to increase at higher rates,resulting in an even quicker payback.

We can bank on the fact that com-modities produced from natural resourceswill continue to go up while technology

products will effectively continue to fall inactual cost. Putting it into context, theactual cost of a loaf of bread will continueto rise due to the costs associated withproducing a loaf of bread and the amountof natural resources that go into the bread,while the effective cost of a piece of tech-nology will continue to go down.

While seeking the magic bullet that willenable our businesses to survive theserough economic times, we need to look atpayoff over longer periods of time than wemay be used to considering. Technology is

going to continue to progress at a veryrapid pace, even keeping up with the rais-ing price of gas. Our challenge is to makeeffective use of the technology available tous and to not waste it away as we havedone with gas. You have more computerpower on your desktop than was on boardthe first space shuttle, and more in yourcell phone than our astronauts brought tothe moon. Are you using it to the potentialunder your fingertips?

R. Boyd Zack is the president and CEO ofR.B. Zack & Associates, Inc, a Torrance,California-based company with 27 years ofexperience in developing, integrating,implementing, maintaining and support-ing custom business software and IT ser-vices. Building Business Applications thatWork Since 1981. Boyd can be con-tacted at [email protected] or via theWeb at www.rbza.com or by phone at310.303.3320.


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Alpha Computer Support, Inc.Alpha Computer Support is a small office-homeoffice/small business consulting company. We are cus-tomer oriented and as a small business ourself, weunderstand the value of keeping an eye on the bottomline. We have experience in all of the Microsoft Win-dows operating systems. Our server and desktop sup-port includes: migration, new systems and servers,training, back-ups, fault tolerance. disaster recovery,anti-virus, hardware, workstations, laptops andupgrades. Network services include: VPN, LAN/WAN,firewalls, routers, wireless networking, network cablingand troubleshooting and DSL/cable modems.310-374-0666611 Green Lane, Redondo Beach, CA 90278www.alphacomputersupport.com

The Cyber BoardroomThe Cyber Boardroom offers three amazinglyequipped conference rooms of various sizes andunique character that are ideal for any occasion. Everyroom (The Royal, The Lennox and the Manchester)comes equipped with a 40-inch monitor that can beused for everything from television viewing to pro-

jected presentations, a telephone capable of confer-

encing up to four outside parties, and our exclusiveGigabyte high-speed Internet access either througha wired or wireless connection. Each room is an inde-pendent sound zone with an adjustable volume con-trol for presentation audio or ambient music. TheCyber Boardroom also has a Wi-Fi lounge and a fullrange of powerhouse computers for office or graphicwork, scanners, faxes and printers. 310-393-79044451 Redondo Beach Blvd., Lawndale, CA 90269www.TheCyberBoardroom.com

DME Computer Consulting ServicesIf you run a small- to medium-sized business in theSouth Bay, save time and money by outsourcing yourIT department to DME Computer Consulting Services.Keep your network running efficiently, improve yourworkflow and benefit from custom programming andsupport. We also handle vacation fill-ins for your IT

staff. Get a fast response and quick solutions from anA+ Authorized service center with experience in awide range of industries. 310-991-14643418 W. 224th St., Torrance, CA 90505

Holden-Andrew CorporationSince 1991, Holden-Andrew Corporation has deliv-ered systems integration and support services to itsclients. With principal staff coming from security,finance, and aerospace related sectors, the firm hasalways maintained systems security as its foundation.With Holden-Andrew Corporation, youre not onlybringing on a company with industry partnerships, buta leader in the Information Technology field. Throughits suite of Evolution Connect Services, Holden-Andrew is leading the way for companies looking toutilize managed and cost effective technology solu-tions. Using products like VoIP Systems that deliverpowerful reporting tools, hosted application servers,

electronic and print marketing, interactive websitedesign and data storage services, Holden-Andrew givescompanies the opportunity to consolidate their busi-ness operations costs. Going beyond the desktop,Holden-Andrew Corporation is your total IT and busi-ness solutions provider. Ask for account executiveMelissa Stewart or e-mail her at [email protected] for more information. 310-792-49993528 Torrance Blvd, Suite 320, Torrance, CA 90503www.holdenandrew.com

IMiN Instant MessagingIMiN is the first true secure instant messaging solutiondesigned specifically for business users. IMiN is a fully

Technology Providers

continued on Tech Guide page 7


22/40

Because search engine algorithms are kept secret and arefrequently changed, preparing a site for high ranking andkeeping it there is a demanding task; one that is never fin-ished. There is no right and final answer, but there are muchdiscussed guidelines that follow search engine best practicesand can virtually guarantee you a slot on page one. SearchEngine Optimization, or SEO, is the generic term for the pro-cess of tuning a website so that it achieves the best possiblesearch results as close as possible to a page one listing.

Your website must be designed for effective communica-tion with a human being, and part of that design must be sat-isfying the search engines that bring it to the visitor. A site

must have strong elements that visitors can connect andengage with, as well as copious copy, well labeled imagesand keyword-rich title tags for search engines. This is not aslam dunk task.

Search engine spiders like an interesting buffet of copy,keywords, text and links. You want to have 200500 words ofcopy per page, well labeled images, plentiful navigation linksand a keyword-rich title tag. Common problems are sites thatare heavy in graphics, interactive media/flash/video andaudio. An easy test to see if your website fails the text test is touse the view source button on your browser or use this auto-

mated tool: www.netpaths.net/tool/spider .The web crawler has not dropped in to try an entre or

two. Its there as a sort of Digital Health Department with acritical eye and a long checklist: Are there incoming linksfrom other websites? What is the quantity and quality ofcontent? Is the content grammatically correct with no mis-spellings? Is the site unique or redundant? How manyinternal links are there and how many are broken? Howmany unique visitors, page views, revisits and conversionscan be measured? Is the source code technically precise?

It may seem like an intimidating checklist, but a fundamen-tally sound website will have a good chance at ranking well

in the search engines.We may not be afraid of spiders, but if we want good

search results, we must prepare for them.The spiders are coming. But dont call an exterminator.

Update the text on your website and prepare for more busi-ness.

Cayley Vos is the owner of www.Netpaths.net, a forward think-ing Web design company that focuses on providing high valueservices to the online market. You can improve the value of

your business with a well-designed and promoted website.Cayley can be reached at 310-372-3086.



Want Website Visibility?

Get Prepared For SpidersBYCAYLEYVOS

N

O, NOT THE CREEPY CRAWLERS THAT INVADE YOUR

HOUSE THERES NOTHING CREEPY ABOUT THE SPIDERS WERE

TALKING ABOUT these crawlers (thats the other

name for them) move through the Internet at nearly the speed

of light. Dispatched by search engines like Google, Yahoo, and

MSN Live, these spiders zip over every attribute of your website to

see how it measures up. They judge your site by algorithms that will

determine if a search will return your site listed on results page one,

page seven, or page 62.


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scalable and secure instant messaging and communi-cations software solution adopted by some of the topfinancial, legal, gaming and entertainment businesses.The IMiN instant messaging server lets you capitalizeon the powerful new advantages of real-time enter-prise-accelerating revenue growth, productivity, oper-ational efficiency and profitability. Make faster, better

decisions. Empower managers and associates to domore in real time. Available through our network ofchannel partners and alliances, IMiN secure instantmessaging software is the securest, simplest and mostscalable instant messaging solution available in themarket. 310-303-332023844 Hawthorne Blvd. #101, Torrance CA 90505www.ebs-imin.com

Konica Minolta Business SolutionsKonica Minolta Business Solutions USA Inc., a leader inadvanced imaging and networking technologies for thedesktop to the print shop, brings together unparalleledadvances in security, print quality and network integra-tion via its award winning line of bizhub multifunctionproducts (MFPs); bizhub PRO production printing sys-tems; magicolor desktop color laser printers and all-in-ones; and Pagepro monochrome desktop laser printers

and all-in-ones. Konica Minolta also offers advancedsoftware solutions, wide-format printers, microform digi-tal imaging systems and scanning systems for special-ized applications.Headquartered in Ramsey, NJ, KonicaMinolta delivers expert professional services and clientsupport through an extensive network of direct salesoffices, authorized dealers, resellers and distributionpartners in the United States, Canada, Mexico, CentralAmerica and South America. 310-214-6696879 190th St., Suite 200, Gardena, CA 90248www.konicaminolta.us

NetpathsYou can get a website anywhere, but Netpaths can getyou to the top of the search engines. Find out moreabout how your website can be at the top of Google.We offer you a forward thinking Web design companyfocused on providing high-value services to the onlinemarket. You can improve the value of your businesswith a well designed and promoted website. Wedesign search engine-friendly websites that can attaintop placement in the big four search engines. We offercustom e-commerce solutions and organizationalwebsite development. We also offer economy devel-opment models for smaller start-ups and non-profits.You can view our new automated website builder.Create your own website with a Web-based automa-tion tool for free. We have been in the online businesssince 1998 and have successfully moved hundreds ofbusinesses online with an individually customizedWeb presence. We have been doing search engineoptimization before Google existed and have a 100%success rate for all online marketing campaigns. Net-paths Web design is consistently ranked among thetop Web development and SEO firms with a long his-tory of strong customer support. Get a fresh perspec-tive on your online initiatives and see how your

website can work for you. We make you look good.310-372-308623940 Madison St., Torrance, CA 90505www.netpaths.net

R.B. Zack & Associates, Inc.R.B. Zack & Associates, Inc. focuses on the develop-ment, implementation, maintenance and support ofcustom business software. The firm specializes inbrowser-based and desktop applications for the busi-ness world. RBZ&A can help you unleash the powerof the Web and realize its potential for your businessapplication. The company also has an extensive back-ground in database design work garnered from manyyears in client server and Web development as wellas an extensive past entrenched in the mini and mid-

range computer environments. RBZ&A brings morethan 26 years in computer services to the table withan excellent management team promoting a conta-gious can do mindset. It also has an uncanny abilityto understand complex business problems and toaccommodate the needs of even the most sophisti-cated customer. RBZ&As extensive experience withboth mainframe and client server technology coupledwith an in-depth understanding of business processes

makes it uniquely qualified to migrate older systemsonto new platforms. 310-303-332023844 Hawthorne Blvd. #101, Torrance CA 90505www.rbza.com

WeFixPrinters.comWeFixPrinters.com has been repairing laser/ink jet

printers and fax machines in the Greater Los Angelesarea for almost 20 years. We also sell toner, ink andother office supplies via our Redondo Beach retail storeand e-commerce site, which features over 6,500 officeproducts. WeFixPrinters.com provides on-site service tosmall and large companies, and services most majormakes and models. We are the South Bays only autho-rized service facility for Canon inkjets, photo printersand scanners. WeFixPrinters.com offers full service

printer repair and supplies. Our goal is to make servic-ing your equipment hassle-free so that we can reducedowntime, while extending the lifetime of your equip-ment. Call today to set up your corporate account!310-937-45882895 190th St., Redondo Beach, CA 90278www.WeFixPrinters.com

TECHNOLOGY PROVIDERScontinued from Tech Guide page 5


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tions recognize this necessity and invest ample resources towards

strategic planning efforts. However, small-to-mid-sized companiesoften fail to engage in strategy development activities. As a result,subtle changes in the competitive landscape go unnoticed and oncea new technology, process or change in cost structure enters themarketplace, the incumbents competitive advantages disappear. Inresponse, the corporation goes into reactive mode and ends up play-ing catch-up instead of proactively embracing new opportunities.

The dearth of strategic planning in smaller-sized companies isoften attributed to an absence of time and understanding. Ownersand company executives tend to become absorbed with the daily

Strategic Planning Made EasySteps and Lessons for Trailblazing a Path to Long-Term Business Success



COMPANIES OFTEN HAVE TROUBLE MAINTAINING

GROWTH even in favorable economic conditions. Themodern business landscape is ever changing: The infor-

mation highway remains supercharged; technology continues todevelop at warp speed, distribution channels change unexpectedly,and new competitors spring into action every day. And if growing abusiness wasnt challenging enough, business leaders now faceanother uphill battle. Whether or not current economic uncertaintygives way to a full-blown recession, most economic pundits agreethat a business slowdown is unavoidable.

In todays complex business environment, strategic thinking isessential for sustaining a long-term competitive position. Corpora-

BYLORI WILLIAMS


26/40


AS AN ENTREPRENEURIAL PUB-LISHER WHO HAS worked forboth large and small publishingorganizations, growth strategies for busi-nesses is a topic I have strong feelingsabout. I went through a misguided five-year strategic plan at a regional newspa-per that crashed and burned in three. Ialso served on the front lines with anothercompany that destroyed itself while exe-cuting an aggressive growth strategy.

Executing a deliberate growth strategyis something most companies do at somepoint. Sometimes growth makes sensewhen the demand is there and new mar-kets are wide open. However, highlyquestionable growth strategies often origi-nate from pressure by creditors orinvestors, especially with publicly held

ance for risk as they would if they were toengage in a speculative investment ven-ture. Its really no different when you thinkabout it because any investors you bringon board are certainly speculating onyour success. Ask yourself if you wouldinvest in somebody elses company whosproposing what you are; and base yourdecision on answers to tough questionsyou would surely ask if you didnt ownthe company yourself. The answers tothese kinds of questions will determine ifyou are headed in the right direction.

Grow for the Right ReasonsSecond, never decide to grow an existingventure simply because you want it or youthink you are somehow entitled to it as areward for your early success. The marketmust genuinely demand your heightenedpresence or you are doomed from theonset. Never fall in the trap of ignoringmarket data or not bothering to gather it

when your companys internal rhetoricmakes it sound like the best idea ever con-ceived. All departments, especially thefinance and marketing teams, must do theirdue diligence to determine viability andweigh risks before any decision is made togo forward. And for the good of all, theymust be prepared to disappoint people ifthey determine it is not the time or tem-per their plans if they are reaching too far.

companies. And all too often they arerationalized by making false assumptionsabout the feasibility of building on thecompanys initial success.

Know the Risksin Growing a BusinessI leaned from personal experience thatcertain elements must be in place beforeany decision should be made to deliber-ately grow a company beyond its naturalparameters for expansion.

First, the principals need to be fullyaware that any growth strategy is a ven-ture into the unknown. This holds trueregardless of the level of research con-ducted up front. That means aggressivegrowth is always a calculated risk. Theprincipals must evaluate their own toler-

The Pros

and Cons ofPopular Growth

StrategiesBYDAVID WHITEHEAD




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operations of the company and focus on immediate tasks instead oflong-term goals. Some company owners may recognize the impor-tance of strategic planning but simply lack clear understanding ofthe process. While vast libraries exist on the subject of strategic plan-

ning, many authors focus on the concerns of large corporations andkey in on issues that are non-applicable to smaller organizations.Strategic planning shouldnt be complicated. In its simplest

form, a strategic plan is a clear vision of a companys long-termposition based upon the value-add it provides to customers andshareholders. Strategic plans require knowledge of fundamentalindustry shifts and how customers and competitors are expected torespond to those changes. Flexibility is an inherent characteristic ofstrategic plans, which should be easily adaptable to the currentmarket. Evaluating strategic options is based on identifying choicesthat are most capable of providing value for all stakeholders andalign with the organizations vision and core competencies.

So, where to begin? First, become aware of the major changes

impacting your industry and begin to align those changes with yourorganizations core competencies. Your answers to the followingthree questions can help develop your starting point.

1. What business are we in?The answer to this question isnt always the most obvious. It is notnecessarily tied to the product or service your company offers. Forexample, insurance companies have long recognized that they arein the business of selling security and assurance. Small retail outletssuch as 7-Eleven stores understand that they are in the business ofselling convenience. Whole Foods realized that it was in the busi-ness of social responsibility and identified a large consumer basethat would respond to this message. As a result, the market chainhas been rewarded with higher margins than commonly seen in atraditional grocery store. Companies that understand what businessthey are in are more adept at identifying niches, following trendsand responding to market demand. This flexibility makes themmore successful at formulating sustainable businesses models.

2. What changes are occurring in our industry?New technologies can change the competitive landscapeovernight. Moreover, competitors may emerge from the most unex-pected places. Today, candy bar companies compete with digitalmusic providers for teenagers discretionary income.

Make it a point to maintain a constant dialogue with your

customers, suppliers and industry experts. Schedule quarterlymeetings with your sales staff to learn what they are hearing inthe marketplace.

3. How can we continue to make money?Recognizing the core competencies of your organization is criti-cal to building strategic flexibility. The best way to preserve yourcompetitive edge is to continually innovate. Upgrade your tech-nologies, hone your internal processes or develop more efficientdistribution channels.

Core competencies can be repackaged, stripped down, re-bun-

dled and reconfigured in order to appeal to a changing market-place. Technology companies have a firm understanding of thisconcept. New electronic gadgets are introduced to the market andare quickly followed by advanced models. These products are inturn succeeded by stripped-down, less expensive models thatappeal to a large consumer base. Fast food chain McDonalds built

an entire marketing campaign around the Happy MealTM

, a shiningexample of a product bundling strategy at work.By answering the three questions above, your organization can

begin to think in a more strategic manner. Independent of size, allcompanies must participate in strategic planning activities. In thenew economy, knowledge has trumped raw materials as the essen-tial business resource. Strategy development and execution is crucialfor long-term business success. Dont get blindsided by your compe-tition. Playing catch-up has never put a business in a good position.

Markets are not destroyed overnight even though executivesmay feel that a loss is swift and unexpected. Markets deteriorateslowly over time and leave a trail of clues along the way. Moreoften than not, these clues go unnoticed. Usually the cause of a

companys failure was an inability to identify looming changes inthe business environment and adjust corporate strategy accordingly.One of the contributing factors to the lack of business acumen is anexecutives false belief in continuity. Companies are firmly con-vinced of their own perpetuity and envelope themselves in a mis-guided sense of security and invincibility. This is especially true ofgeneration businesses or legacy organizations. Where once a busi-ness model could be counted on to provide a successful foundationfor at least a decade, todays companies may need to revamp them-selves in as little as a year or two. Creative destruction is constantlyreshaping our business landscape. As a result, companies cannotexpect to operate from a position of assured continuity.

Financial ConsiderationsStrategy without financial analysis is incomplete and subject tofailure. Continual growth under any economic condition requiresa strong financial plan. CEOs often find themselves in right-brain,left-brain quandaries how do you commingle visionary opti-mism with cost-conscious pessimism? Executives often adoptstrategies that do not consider the financial implications. Ineffec-tive strategic plans are devoid of comprehensive ROI analysis.Smaller firms are particularly at risk since they may lack a qualifiedCFO. Controllers with only basic accounting procedures are miss-ing the advanced analytical skills required for close financialexamination of a strategic plan.

Industries are not created or destroyed equally. Some companiesare better positioned for economic uncertainty. Executives whostrive to become increasingly strategic in their financial decision-making and engage in vigilant oversight of the companys financialcondition have an edge over their competitors. Financial vigilanceincludes evaluating the companys fundamental economic positionby analyzing the industry, customer profitability, financial perfor-mance, cost structure, availability of capital, debt leverage andretained earnings.

The balance sheet will reveal your debt leverage and the


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tion is a competing factor.In the case of a company with a less

favorable financial position, innovationmay be the only solution. Since negativegrowth and declining retained earningsimpact the balance sheet and reduce a

companys ability to obtain debt or equityinvestment, your business may need toform a strategic alliance or joint venture toallow reorganization without a substantialreinvestment of funds. How do you ensurethat your firms desire for high productquality and superior customer service trans-fers to the entire partnership? Incorporatebest practices and monitor processes as youwould if they were operating directly underyour sole supervision. Meet with each part-ner to share your goal of creating a seam-less existence and work together to adopt

common procedures, forms and processesacross the organization. Your partners willlikely be more than happy to support thegoal since it is in their best interest to do so.If conformation proves impossible, lookelsewhere. There is always another firmwilling and capable to take their place.

The following outline provides a briefsummary of key takeaways to help youdevelop your company plan:

Watch for future trends and be pre-pared to change your strategy

Use technology to reduce cost anddrive efficiencies

Strategic alliances (if well formed) canprovide a competitive advantage

Keep a close eye on your financialposition

Profit margins are not guaranteed competitors can change everything.

Whats the bottom line? Regardless ofeconomic conditions, your industry, busi-ness model or financial position, companyexecutives should have a growth strategythat is inclusive of financial performance

measures.

Lori Williams is the Chief Strategist for LWand Associates (www.lwandassoc.com), astrategic advisory and research firm, pro-viding businesses with growth strategiesdesigned to increase revenues, profitabilityand productivity. She is best known fordeveloping strategies that integrate finan-cial modeling with strategic marketing tobuild long-term sustainable growth. Shecan be reached at [email protected]

strength of your borrowing power. Retainedearnings examine the past performance ofyour business model and your manage-ment team. If the retained earnings reveal

past negative growth, the business modelsability to take an additional hit will bequestionable at best.

Revenues and costs should be carefullymonitored. A revenue loss may beattributed to an overall reduction indemand or foregone market share due to acompetitors introduction of a new product.Operationally, the cost to bring the productto market may increase or it may becomenecessary to invest in new technology orhuman capital. If additional costs cannot bepassed on to the consumer, pricing power

squeezes margins and net profit is ulti-mately reduced.

Cost structures delineate your profitmargin and your companys ability toabsorb overhead costs. Higher marginsallow greater cost flexibility. Additionally, areduction in overhead may be easier thancutting production cost, particularly if infla-

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Make Sure You Are CapitalizedBeyond Your ProjectionsSmart growth is a process of calculated risk that must be capital-ized well beyond your expectations with money you can afford

to lose or better yet, money that belongs to someone elsewhos in a better position to lose it than you are. Know that anydata you gather that returns positive indicators for growth can beimmediately vanquished by unexpected variables, including achange in trends in your industry, a downturn in the economy,competition you didnt anticipate and changes in the structure ofyour company that alter your profit/loss statements in an undesir-able way. That said you must choose the growth course that fitsyour tolerance for the level of risk you can at least calculate andalso realizes your desired objectives.

Growing by Your Own BootstrapsFirst lets examine the most common growth strategy, which is

also one of the most tedious, resource-consuming and often theriskiest. That is growing by your own bootstraps using a directsales effort with your own money or borrowed money thatrequires the principals to personally guarantee debt even if theirstatus is LLC or incorporated. If you are a small operator trying toget to the next level, expect credit terms that pierce the corpo-

rate veil if you want to borrow serious money and expect this sit-uation to get worse as the credit crunch continues.

This approach requires the accumulation of overhead that willnot be paying for itself for some time if at all. Even if your earlysales numbers sound exciting compared with your previousefforts, your spending on the growth process will likely be much

greater than your early returns. You wont really be boosting yourprofits for some time and only if the new economics of your modi-fied business model allow that to happen. This strategy really canput the principals in a position where they are going to get buriedif it doesnt work out. This is especially true when they commitessential personal capital or worse, and go heavily into debt withthe payback entirely dependent on the growth strategys success.

Whatever your projections, you wont really know how long itwill take or how much it will cost until you are well committed. Ifyou misread the market before you start, you are dead. If youvedug in deep, you have put yourself in a position where there is nogood exit strategy. Ive known people who dug in so deep theyrisked personal financial ruin whether they ceased operations or

not. As a result, they didnt quit when they should have and onlymade things much worse for themselves and everyone else in theend. Suffice to say, the grow or die position is best avoided. Ifyou are not a gambler by nature and conservative in your finan-cial outlook, this is definitely not the strategy you want to use. It


PROS AND CONS OF POPULAR GROWTH STRATEGIEScontinued from page 26


Business Insider Magazine - Volume 3 - Issue 4 - 2nd Issue 2008

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