Segueway to Success

Listen at – “Generational Change in the Family Business- Segueway2Success”

Previous Archived Shows - On Demand – “Segueway to Success” talk radio podcast

By: Brent Hamachek and Tom Kuchan

Our “Segueway to Success” show, talking about our blog, airs each Wednesday at 15:00 CST.  Find today’s show and the archives on our web site:  www.seguewaysolutions.com/Articles-and-Events.html

One of the most fundamental elements of the privately owned business is that of family succession; business being passed from one generation to the next.  It is an American tradition that is really at the heart of capitalism and the rights inherent in private property.  What can make a business founder/owner more proud than passing on the business they built to their progeny?

With that passing, however, comes great transitional risk.  It is commonly known that the third generation of family ownership often spells peril and doom for the company.  The experience of Segueway principals suggests it doesn’t need to wait until the third generation for problems to surface.  Difficulties can, and usually do, surface as soon as generation number two takes over.

There are a variety of reasons for this.  One of the most common is that mom/dad might be passing along the day to day operation of the company but they are not necessarily financially independent.  A large number of business owners never actually hide away enough money to completely retire.  That means they have a need for the business to continue to support them at some level.  This is happening, of course, at the same time that the business needs to fully support the next generation running it.  Absent a very profitable, growing company, this can pose a simple problem of inflows not being enough to service outflows.

Then we have the matter of siblings.  Segueway has extensive experience with succession companies being torn apart by the disagreements of siblings.  These problems can take on many forms.

First is the case where two or more siblings are essentially made co-in-charge of the company.  Let’s assume for the moment that each sibling is of equal intellect and drive (rarely the case).  This means that each dedicated new manager has different dreams and aspirations for the company.  Absent clear delineation (usually not present) of who has the ability to make a final decision, gridlock normally ensues.  Gridlock is good in government as it stops the behemoth from taking away more of our liberty.  In business, gridlock is a recipe for death.

More often the case is that the siblings are not of equal contribution to the business.  This is a problem because the departing parent(s) often make no provision for disparity in handing down the company.  The story of the prodigal son comes into play.  So often the sibling who is the “deadbeat” of the group is afforded a level of tolerance not witnessed in any other business environment.  That sibling might be the one who the family always had to make special allowances for from the time they were little.  Since the family has “carried” them for so long, continuing to carry them seems to be a natural extension.  Unfortunately, businesses are not welfare offices or rehab centers.  Those types of operations run as not for profit.  The family business will quickly become a not for profit if it tries to carry a non-productive family member (don’t forget they might still be carrying mom and dad to some extent, too).

Another problem arises when the heir-to-the-throne offspring works in the company while mom or dad are still there.  The new arrival wishes to make his or her imprimatur on the business while their parents might not be ready to yield control or accept the change.  This can create a conflict.  On occasion the children can seek a coup d’état and attempt to usurp their parents’ position/authority.  This is an obviously hostile situation and can lead to the disintegration of families.

One of the questions that Segueway often asks of family members in a family business situation is “How important is Thanksgiving dinner to you?”  The question might sound trivial but it is not.  Sorting through family business issues, especially with siblings and parents, can create hostilities that transcend the office very quickly.  Sometimes it is simply the case that the family members are unwilling to do what is necessary and sensible from a strict business perspective simply to avoid conflict at home.  The mafia phrase of “it isn’t personal, just business” never holds true.  Everything is personal, especially in the family business.

The solutions to these problems are not complex.  First, there needs to be clear, unequivocal communication about what is expected from the next generation.  If certain conditions, no matter how non-contributory they are to the business, are a given then make it clear they are a given.  Second, try to recognize the realities of what the business can sustain in order to remain viable and competitive.  Remember that when you take the last dollar out of a company it is the last dollar.

Finally, for the parents yielding control, do not assume that the business you built will always look the same or be run the same.  While the business might represent your life’s work it is not a painting.  Its image and shape can and must change over time to reflect the changes in the marketplace.  Do not hold your children to the way you used to do things (and, children, be mindful of the way your parents did do things; not every practice is obsolete just because it has time accrued to it.  In fact, the exact opposite is often the case.  Duration and effectiveness are often correlated).

Join us this week when John Jensen of Jensen IT located in Des Plaines, Illinois joins us as a guest to discuss transitioning the family business.  John is second generation in a company started by mom and dad.  He has entered new markets and products since joining the firm and has the long-term growth and success of the company in his hands.  He will share his experience and the challenges he faces in living a professional life with parents.

Segueway Solutions – http://www.seguewaysolutions.com/

+1 (847) 778-9474

Brent E. Hamachek spent the first 15 years of his professional life in banking, working in 6 different sectors including audit, credit and 9 years as a commercial banker.

After commercial banking, Brent formed Segueway Solutions in 2000 in order to assist privately held companies in transition. To date, he has worked in 40 different industries and has served in the capacity of CEO, CFO & EVP Sales for clients. Brent is a sought after consultant, speaker and trainer offering national and foreign expertise to clients.

brent@SeguewaySolutions.com

Tom Kuchan is a proven leader in global business expansion and effectiveness, risk management, finance and operations with experience in both Fortune 50 and entrepreneurial environments. He has a proven record of defining strategic objectives, translating them into operational tasks, and leading their implementation in diverse geographies and cultures across the globe.

Tom has lived overseas for over twenty years, including Switzerland, Germany and the United Arab Emirates, and has worked extensively across Europe, Latin America, Africa, the Middle East, and Asia.

tom@SeguewaySolutions.com

“The All Powerful King Inside of You”

Inside of you is an “All Powerful King” who is capable of making all of your dreams come true. Whatever you tell him you want with purpose and conviction he will make happen in your life. He has that much power and he resides inside of you right now even as you are reading this article however you must be very careful because he takes whatever you tell him literally, good or bad. So be careful of what you tell him want. He believes what you tell him to be true, even when it isn’t and he can make bad things happen just as well as good things. Good or bad whatever he produces for you he believes it is the right thing for you. He takes everything you say literally.

Does that sound like a fantasy or a crazy story? It isn’t. I am talking about your subconscious mind and what I have described to you is exactly how it works, whether you believe it or not. Very little of what we do we do is at a conscious level. Neuroscientist now know that only about 10% of what we do is at a conscious level and 90% is subconscious. Your subconscious mind controls every aspect and function of your body and mind. Your heart beating right now, the breath you just took, every chemical and hormone being released and used in your body right now is being controlled by your subconscious mind. If you think about it, you will realize how amazing that really is.

Many times the reason you seem to have such a hard time letting go of bad habits is you try to change them at a conscious level and that doesn’t work. Your subconscious mind believes the bad habit is actually good for you and will at some point override your conscious mind. It is how you can rationalize or make excuses for your bad habit. It is the reason for so many years I would lose 50 or 100+ pounds and then I would put the weight back on, even though I didn’t want to. My subconscious mind perceived me as being fat and that being fat was a good thing, even though that sound crazy. That is how you get stuck in such negative patterns in your life and can’t seem to change them.

So, how do you change these negative images and beliefs you have about yourself? Long term change almost never happens at a conscious level. It has to happen at a subconscious level first and then it becomes part of our conscious reality. When I changed the perception of myself from being fat to being thin, then I was able to change myself physically. Change happens from the inside out not the outside in. You have to change the movie that is running all day long inside your head. Your homework today will help you do that and it is simple, easy and fun to do.

Your Daily Homework

Do this exercise every night as you go to sleep.

As you are laying in bed ready to fall asleep close your eyes and visualize exactly how you want your life to be. See it in great detail. Hear the sounds you would hear if it were real and feel all the emotions you would feel. Then fall asleep on that visualization. All night long your subconscious mind will be working on that image you created and as you do it more and more you will begin to make adjustments in your habits , values and beliefs. It is simple and it is very powerful and overtime it can change your life! In Napoleon Hill’s classic book on success, “Think and Grow Rich” he discovered that the most successful people in the world did this every night as they were going to sleep. People like Thomas Edison, Henry Ford, Alexander Graham Bell, The Wright Brothers and many more did this powerful exercise

So do the exercise every night. You area going to go to sleep anyway and the exercise requires no additional time from your day. How great is that? You are amazing, so do things that help you discover how amazing you are.

Scott Schmaren’s Bio

Scott Schmaren is a nationally known speaker, coach and author. He has spent over 20 years learning powerful success technologies. He has used what he has learned and created to transform his life, losing 180 pounds and maintaining it while rediscovering his vitality. He has appeared on the Oprah Winfrey Show.  Oprah said, “If Scott can do it, I can do it and so can you!. Scott’s techniques are being used to increase sales and business, weight management, overcoming obstacles, achieving goals and many other great things. Athletes and sales professionals are using his systems to achieve, consistent, peak athletic and sales performance. Scott is co-author of the book, Stepping Stones to Success, along with Jack Canfield , Deepak Chopra and Dr. Denis Waitley. Scott’s forthcoming book is entitled, “Your Ultimate Visionary Mind: Transforming Your Life in 30 Minutes a Day.”

 Scott Schmaren, 847-331-5848

scott@ultimatevisionarymind.com

www.UltimateVisionaryMind.com

Segueway to Success

Listen at – “Segueway to Success – Community News”

Previous Archived Shows - On Demand – “Segueway to Success” talk radio podcast

By: Brent Hamachek and Tom Kuchan

Our “Segueway to Success” show, talking about our blog, airs each Wednesday at 15:00 CST.  Find today’s show and the archives on our web site:  www.seguewaysolutions.com/Articles-and-Events.html

“I was eight years old, runnin’ with a dime in my in my hand;

to the bus stop to pick up the paper for my old man”

From “My Hometown” Bruce Springsteen

Newspapers have a tradition in the United States that goes back before our birth as a nation.  The first regular daily newspaper printed in the Colonies was the Boston News-Letter and it commenced on April 24, 1704.  Apparently one of the big stories during its early run was the reporting of the death of Blackbeard the Pirate in hand to hand combat.  American interests have changed little over the centuries.

Newspapers grew in influence in America over time playing a significant role in the Civil War, the Industrial Revolution and Theodore Roosevelt’s “trust busting” initiatives to name a few household examples.  The editorial pages of both large city and local newspapers had much to do with shaping the consciousness of American citizens.  Indeed, the New Deal of FDR may have turned out quite differently absent the support of some major editorial boards.

With the rise to power of William Randolph Hearst (1863-1951) and his print empire, anchored in the newspaper industry, journalistic sensationalism came into play.  Hearst crossed the line between simply reporting or commenting on news and entered into the world of creating and outright fabricating news.  As is the case with many iconic figures and extremely powerful people the legend of the man far outstripped his actual greatness and his imprint on the world of journalism, not for the good, has never lifted.

Segueway principals grew up in the ‘60’s and ‘70’s when newspapers enjoyed immense popularity.  For kids it began with the Sunday “funnies” and migrated to the daily crossword puzzle.  Sunday newspapers were half-day destinations with all their feature sections and, at least for some, the interesting celebrity questions on the inside cover of Parade magazine.

For one Segueway principal, there is the distinct memory of his father calling home a half hour before he would leave work, mom putting a pitcher of martinis in the freezer and having the evening newspaper ready for him on his chair.  Conversation with dad was not really permitted until he had read the paper (and had that first martini).

So how lame does all this seem to a generation today that gets it news the same way this post is being typed – from a small high definition screen, a scrolling mouse and a few keystrokes?  They would likely laugh at people who said they missed the feel of black ink on their hands after reading the sports section.  Couldn’t imagine having to say “excuse me” to the person on the train next to them as they folded out their pages.  It is a different time.  Fewer and fewer newspapers seen; more and more “notebooks” present.  Progress!

Or is it?

Anyone who paid attention to their parents lamenting that the Beatles (or the Rolling Stones) were the end of civilization are mindful if they are careful not to confuse nostalgic feeling for the foreshadowing of the apocalypse.  I am certain there is risk in that because, for example, if the Beatles had never come along we likely would not have the E Street Band and that would have been a tragedy for humanity.

Nonetheless, the movement away from traditional newspapers to electronic media for news delivery feels just a bit wrought with peril.  People rave about how anyone now can be a journalist and post news and what a wonderful competitive balance that brings into the market.  Does it?  Just because anyone can write doesn’t mean anyone has anything worth writing.  The checks and balances that a complete news organization can bring to the reporting process theoretically leads to integrity of product.  The news that came from a printed paper was slow compared to the pace with which it appears today but that slower, deliberate process also provide a mechanism to heighten accuracy and reflection (Dewey Defeats Truman notwithstanding).

Sadly, it seems that the printed newspapers have to a large degree yielded on integrity in order to compete with the new electronic media.  The New York Times is a ghost of what it once was as a true newspaper and you will not find anyone to disagree with that who does not also watch MSNBC.

This isn’t offered as a means to suggest that electronic media is bad and everyone needs to keep bundles of papers horded in their attics or in the bottom of their bird’s cages in order to save the Republic.  It is to suggest that progress, like magic, comes with a price.  In this case as internet content promulgates news information are we learning more or just seeing more?  Did the deliberate act of sitting down and folding out the pages of a newspaper, hopefully compiled by trained, committed professionals, have some intrinsic value?

Bob Newhart once joked that if you take an infinite number of monkeys and an infinite number of typewriters they would eventually type all the classics.

They’re working on it.

Join Brent and Tom on Wednesday, May 15, as they continue their discussion from last week’s show with Elliot Silber and Mimika Papavasiliou from What’s Happening! Community Newspapers.  This week they’ll be talking about what Elliot and Mimika are seeing and hearing on the ground in the small business communities where they operate and network.

Segueway Solutions – http://www.seguewaysolutions.com/

+1 (847) 778-9474

Brent E. Hamachek spent the first 15 years of his professional life in banking, working in 6 different sectors including audit, credit and 9 years as a commercial banker.

After commercial banking, Brent formed Segueway Solutions in 2000 in order to assist privately held companies in transition. To date, he has worked in 40 different industries and has served in the capacity of CEO, CFO & EVP Sales for clients. Brent is a sought after consultant, speaker and trainer offering national and foreign expertise to clients.

brent@SeguewaySolutions.com

Tom Kuchan is a proven leader in global business expansion and effectiveness, risk management, finance and operations with experience in both Fortune 50 and entrepreneurial environments. He has a proven record of defining strategic objectives, translating them into operational tasks, and leading their implementation in diverse geographies and cultures across the globe.

Tom has lived overseas for over twenty years, including Switzerland, Germany and the United Arab Emirates, and has worked extensively across Europe, Latin America, Africa, the Middle East, and Asia.

tom@SeguewaySolutions.com

The Secret to Success!!!

People are always looking to the “Secret” to success, that “Magic Pill” that will transform you into something great! The success you want can be anything; losing weight, growing your business, being a great partner or parent, anything. So, where is that “Magic Key” where do you find it and why is it being hidden from you? They say the greatest place to hide something is right under a person’s nose and that is exactly where the key to your success is. The key to your success, all your success is already inside of you. Every resource and skill you need to be successful; confidence, discipline, hard work and all the others, you are already using in some area of your life, you may not even be aware of it. Once you become aware of those skills in your mind, you can move them over to the other areas of your life to accomplish all you dreams.

Here is an example: I had a client once in her late forties. She came to me because she claimed that all her life she had no confidence or self-esteem. She had been telling herself this all her life. I noticed that when she was telling me her story of despair, she was sitting tall and erect, she was projecting her voice with power and force and her body language was very commanding. She was telling how little confidence she had, very confidently. I told her that and she didn’t want to believe me and she became even more forceful and more sure of her story of no confidence. I had her freeze and look at her body language, her voice and her words. It was the first time in her life that she made the connection to herself, that she really did have self confidence. Once she made that connection all she needed to do was move confidence she had in telling her story to the other areas of her life. She was able to do that and she is now a very successful salesperson and has taken back her power in all the areas of her life.

So how do you capture your powerful success skills you already have and apply them to the other areas of your life? The exercise below will show you how to do that.

Homework Exercise

“Circle of Power”

Close your eyes and remember at time in your life when you were successful doing something (it could be anything) or something that you know you do really well. Now explore it: see the things you see while doing it, hear the things  you hear while doing it and feel the things you feel while doing.

Now imagine a circle on the floor in front of you big enough so you can step in it.

Take all the skills, resources and feelings you are experiencing doing this thing you do well (successfully) and take all those things and put them into that circle. You will notice that the circle will change color and you will begin to feel its powerful energy of your success traits coming from it.

Now step into the circle and feel all of your success from that thing you do well. See that way again, hear that way again and feel that way again. You will notice how different you feel. Standing taller, more focused in thought and confident in your ability.

Every time you need your success, power, strength and confidence…Close your eyes imagine that circle in front of you again, it beautiful color and powerful energy and then step into it. You will feel that way again and experience your success….Because….You are Amazing!!!

Scott Schmaren’s Bio

Scott Schmaren is a nationally known speaker, coach and author. He has spent over 20 years learning powerful success technologies. He has used what he has learned and created to transform his life, losing 180. He has appeared on the Oprah Winfrey Show. Scott’s techniques are being used for business, weight management, overcoming obstacles, achieving goals, stress management and many other things. Scott is co-author of the book, Stepping Stones to Success, along with Jack Canfield , Deepak Chopra and Dr. Denis Waitley. Scott’s forthcoming book is titled: “Your Ultimate Visionary Mind: Transforming Life in 30 Minutes a Day”.

 Being Proactive

Giving personnel access to decision-making tools, contextual data and strategic planning resources also builds the company culture that supports being proactive-rather than reactive. Personnel learn to make decisions independently, thoroughly researching cause-and-effect data and making fact-based decisions. Employees learn that slow response is no longer acceptable. Teams understand that there is no longer an excuse for guessing at historical data, demand trends of taking blame guesses at what customer are wanting. Accuracy, demand planning and forecasting improve, company-wide.

Access to data through the use of technology allows personnel to take an active part in ongoing process improvement. Recent surveys indicate that engaged employees are the most productive and make the greatest contribution.

Sharing information with employees also encourages participation and ownership of role-related data. Access to performance management data gives employees the responsibility of applying the information in order to improve outcomes. The employee becomes motivated to influence key issues and sees the results of such actions. Performance data gives critical ongoing feedback to the employee, reinforcing positive actions.

An engaged employee will be alert to ways to improve efficiency, quality performance or customer satisfaction anywhere in the manufacturing process. Access to performance data helps the employee recognize opportunities, research cause-and effect theories and uncover opportunities where changes can be made to streamline activities, speed delivery time, conserve use of resources or anticipate a customer need.

Personnel must be trained to look for such opportunities, feel motivated to utilize the software capabilities to their fullest advantage and receive positive feedback for taking “above and beyond” actions. Again, access to strategic business intelligence data makes this possible—enabling management to monitor workforce productivity and track trends in performance improvements by individuals or departments.

When it is now possible to maximize productivity, optimize the use of the workforce and be keenly attuned to customer needs and customer expectations through performance management systems, decision-making tools, collaborative environments and enhanced workspaces, a new attitude is fueled within companies one that is not willing to settle for ho-hum performance. Technology enables a proactive mindset for the company and fosters a sense of priority on fast, agile attention to NEW ideas.

Wendell Podulka|   wendell.podulka@infor.com | http://www.infor.com

Arlington Heights and Education Hubs Launch

HandsOn Suburban Chicago (HOSC) and Linked Local Network (LLN), as part of the Community Hub Network, have collaborated to launch two new websites focusing on Arlington Heights and Education.  The sites will be previewed on May 1^st at 8:30 am at the Forest View Education Center Theater in Arlington Heights.  In attendance will be Thomas Hayes Arlington Heights Mayor, Carl LaMells of Clearbrook, and Mike Fiel Director of Community Education at Township HS District 214.

These two new Internet websites are designed to share news, information and events that professionals can use to grow their organization, engage in community dialogue and create long-term, mutually beneficial relationships between business, nonprofit, public service agencies and education sectors.

There will be a short presentation on how organizations can get involved and an opportunity to ask questions. There will also be a virtual ribbon cutting. This event is free to attend.

For more information and to register visit:  http://ArlingtonEducationCHN.eventbrite.com.  Ceremony can also be viewed  online at the Linked Local Network Google+ Community by  joining the Hangout.

“What Do You Say When You Talk to Yourself ?” 

All day long we talk to ourselves. Are you even aware of that and what you say to yourself? Most of us aren’t. Yet at least several hundreds times a day we say things, comment, compliment, criticize and sometimes put ourselves down. The conversations we have in our head are important. They help define who we are and what we are? They are an important part of creating the self-image we have about ourselves. Unfortunately, if you are not aware of your self talk then most of it is probably negative. You know what I am talking about, you are doing something and you make a mistake and the little voice in your mind says to you, “How could you be so stupid?”. This self talk and commentary we have is happening all day long and until you become aware of it, you can’t change it. We become what we say to ourselves all the time. So if we are saying negative things to ourselves, our lives most likely reflect that. Where did it come from? Many times it comes from our childhood, growing up. We hear things like; Your… Stupid…Dumb…To Fat…Ugly…Not Good Enough…Worthless…Unlovable…and there are many more. Our subconscious minds are very powerful and if you tell it something enough times, it will believe that it is true…even when it isn’t. When we hear those negative words enough times, we start acting that way and the world starts treating us that way. Fortunately, if we say great things about ourselves over and over, we believe that we are great and the world treats us that way. Positive or negative either one is and can become your reality.

How do we change our self talk? The first step is to become aware of it. You cannot change anything that you are not aware of. Being aware of who you are, what you are and what you think are the most powerful tools of change. Without them you are forever destined to live the current life you are living. Today’s Success Homework will allow you to become; awake and aware of your internal dialogue and then be able to change it. What should you be saying to yourself? Look at the picture in this article, “Strength” read the words surrounding it, those are great examples of what you should be saying to yourself, all day long, everyday. You are Amazing…accept that about yourself.

Your Success Homework

Every time you catch yourself saying something negative to yourself, freeze, stop what you are doing and repeat these words: CANCEL, CANCEL, CANCEL…and then replace your negative statement with a positive one. Here is an example: You make a mistake doing something and you say to yourself “Am I stupid”….Freeze…say: CANCEL, CANCEL, CANCEL…”I am learning new things everyday and getting wiser”. Does that sound simple, it is. At first you will not catch yourself that much because you are not that aware of your thoughts. Soon you will be aware and you will be “cancelling” yourself all day long. Eventually you negative self talk will subside and you will think more positively and you will be “cancelling” yourself  less and less.

Scott Schmaren’s Bio

Scott Schmaren is a nationally known speaker, hypnotist and author. He has spent over 20 years learning powerful success technologies. He has used what he has learned and created to transform his life, losing 180. He has appeared on the Oprah Winfrey Show.  Oprah said, “If Scott can do it, I can do it and so can you! Scott’s techniques are being used for business, weight management, overcoming obstacles, achieving goals and many other things. Scott is co-author of the book, Stepping Stones to Success, along with Jack Canfield , Deepak Chopra and Dr. Denis Waitley. Scott’s forthcoming book is titled, “Your Ultimate Visionary Mind: Transforming Your Life in 30 Minutes a Day”.

       SURVIVAL OF THE FASTEST

      Infor says speed is a competitive weapon.

      Why?

We believe that speed—not just scale—is the new basis for competition. It’s no longer about how big a company is; it’s about how fast you can execute. You may never be able to out-scale a competitor, but you can outrun them. Doing something faster than your competition is one of the most important things you can do to stay ahead of the game.

Our goal is to make sure you can move as quickly as possible. Whether it’s being first to market with a new product or providing the fastest delivery in your industry, speed wins.

How does Infor help companies gain speed?

When you look at it, technology has always been a driver of speed. Technology determines the speed at which decisions get made; how responsive your supply chains are; and the rate you get product to market. Technology has also driven an explosion of information and is now changing what we expect in terms of speed and access to information.

Our strategy is founded on three development principles that allow our customers to gain speed.  

The first is to build enterprise applications that are deeply specialized by industry. Software that’s designed to solve the specific issues in an industry can be deployed faster and with fewer time-sapping modifications.

The second is to build all our applications on an open, standards-based technology platform called Infor ION. Because Infor ION is based on industry standards, you can plug in Infor applications or third-party applications more easily—it makes your software as agile as your business. But it’s not just about integration. The foundation provided by Infor ION includes business process modeling built right into the core, which means you can quickly change your system to mirror a new or more efficient way of working.

Finally, and most importantly, we are delivering a completely new consumer-grade user experience that fundamentally changes the way people work.

Wendell Podulka| wendell.podulka@infor.com | http://www.infor.com

Segueway to Success

Listen at – “Factoring as a Segueway to Success”

Previous Archived Shows - On Demand – “Segueway to Success” talk radio podcast

Segueway Solutions

By: Brent Hamachek and Tom Kuchan

Our “Segueway to Success” show, talking about our blog, airs each Wednesday at 15:00 CST.  Find this week’s show and the archives on our web site:  www.seguewaysolutions.com/Articles-and-Events.html

The recession, which began in 2007, has changed the landscape of business financing.  Over the past few months, Segueway to Success has featured numerous guests from various sectors of the world of business finance.  This week we tackle the growing, and often-misunderstood world of factoring.

There is evidence that over 4,000 years ago the Mesopotamians began the practice of factoring.  The Roman Empire also had it as a common practice.  In the United States, factoring finds its origin in England during the 14^th through 17^th centuries and the burgeoning period of world exploration and trade.  Factoring is indeed as old and as practiced as is another famous human profession with a more colorful but no less tarnished image.

Factoring is actually very basic and simply involves the purchasing of an invoice from a business customer, on a discounted basis, to provide the business with immediate liquidity and to speed up its cash cycle.  The factor provides a vital service to the business sector, so why does factoring enjoy a less than favorable reputation?

In part, it is a function of not understanding what factors do, how they work, and when a company is an appropriate candidate for their use.  Another reason is that since they are used for business financing they are incorrectly compared to commercial banks who provide traditional account receivable financing at a lower interest rate.  As banks are adverse to significant credit risk they are not typically competing for the same client as the factor who advances funds to businesses with a riskier credit profile – at least until this recession started they were not direct competitors but that has changed a bit.  Finally, the idea of selling your assets for a high price to someone else to own has been glorified as the transaction between mobster and shop owner in American history, film and folklore.  People tend to reflexively think of factors as gangsters.

The truth, as is often the case, is actually quite different.  Factoring is necessary to make the economy run and provide “non-bankable” businesses with a way to fund their cash needs and become bankable again.  When a company has faced prior period losses, or is in an industry which experiences a downturn causing banks to exit, like construction, the factor can be the only solution for survival and recovery.

Rates vary but can run from 18 percent to the mid-30 percent range depending upon the industry and the client’s circumstances.  Advance rates can be as low as 50% and as high as 80-85%, again, depending upon the same conditions.

At one time, factoring carried a dark stained stigma, like a scarlet letter.  In recent years that has changed as so many companies were damaged by the recession and the banking industry responded by retreating like a French soldier, that businesses everywhere are used to seeing their vendor present them with a new factoring relationship.  The stigma, while not gone, has faded.

How and when to factor, and the advantages and disadvantages, need to be understood by the erstwhile business factoring prospect.  Because of the rigidity of banking today, companies with profit margins that can tolerate a factor’s rate may wish to factor even if they are bankable just to avoid the capriciousness of the bank’s loan committee changing their borrowing terms midstream.  Because factoring has traditionally been thought of as “something that sick companies do”, a business may pass on an opportunity that could provide significant benefit and facilitate rapid growth.

Join us on Segueway to Success this week when our guest will be Debra Wilson from Vertex Financial in Dallas, Texas.  Debra has been in the factoring industry for over 30 years and has watched it pass through various phases and client perceptions.  She will make a foreign topic feel domestic and perhaps enlighten one of our listeners enough to at least consider the unthinkable; factoring their assets as a choice, not as a necessity or last ditch effort.

Segueway Solutions – http://www.seguewaysolutions.com/

+1 (847) 778-9474

Brent E. Hamachek spent the first 15 years of his professional life in banking, working in 6 different sectors including audit, credit and 9 years as a commercial banker.

After commercial banking, Brent formed Segueway Solutions in 2000 in order to assist privately held companies in transition. To date, he has worked in 40 different industries and has served in the capacity of CEO, CFO & EVP Sales for clients. Brent is a sought after consultant, speaker and trainer offering national and foreign expertise to clients.

brent@SeguewaySolutions.com

Tom Kuchan is a proven leader in global business expansion and effectiveness, risk management, finance and operations with experience in both Fortune 50 and entrepreneurial environments. He has a proven record of defining strategic objectives, translating them into operational tasks, and leading their implementation in diverse geographies and cultures across the globe.

Tom has lived overseas for over twenty years, including Switzerland, Germany and the United Arab Emirates, and has worked extensively across Europe, Latin America, Africa, the Middle East, and Asia.

tom@SeguewaySolutions.com

Segueway to Success

Listen at – “Inside Commercial RE Appraisals”

Previous Archived Shows - On Demand – “Segueway to Success” talk radio podcast

By: Brent Hamachek and Tom Kuchan

Our “Segueway to Success” show, talking about our blog, airs each Wednesday at 15:00 CST.  Find today’s show and the archives on our web site:  www.seguewaysolutions.com/Articles-and-Events.html

How commercial real estate appraisers do their job is a mystery to most.  Every business owner is impacted by their work, even if they don’t own their own space because somebody does and that somebody probably has a mortgage.  There is real science behind how an appraiser arrives at a value and there is also interpretative art.  That is why contracts often call for three appraisals to be performed and the average of the three used to set value.  The numbers can be very different.

In 1989, in response to the collapse of the savings & loan institutions earlier in the decade, President Bush signed into law the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA).  The regulation did many things including abolishing the Federal Home Loan Bank, made the FDIC the universal insurer of deposits, and created the Resolution Trust Corporation (RTC), which effectively became the federal government’s workout division for the banking industry.

There was something else that FIRREA did that had a much greater day to day impact on commercial banks and commercial borrowers than did all the other provisions combined.  The principals of Segueway were both making their living in commercial banking at the time the law was passed and a couple of years later when its regulations went into effect.  Once it did, the new, not-even-half-joking interpretation of the FIRREA acronym became “Finally I’m a Rich Real-Estate Appraiser”.

FIRREA had changed the requirements for banks obtaining real estate appraisals on commercial loans secured by real estate.  At one time, banks had it within their discretion to decide when an appraisal might be required.  No longer.  FIRREA mandated when appraisals had to be obtained and what the content needed to include.  Suddenly the commercial real estate appraiser had a very captive market.  From a sales perspective, the appraiser no longer had to convince a bank to get an appraisal, they only had to convince the bank to choose them to deliver it.

It really took the industry a few years to adapt to the changes.  Loopholes and exceptions in FIRREA led banks to try to circumvent the law when they could.  Regulators took a very strict interpretative view.  The two worlds collided for about 24 months before everything settled in.  And some form of new-normalcy took hold.

And then real estate collapsed in 2007.

While the provisions in Dodd-Frank regarding appraisals deal primarily with consumer loans and the residential market, the collapse in real estate in general has heightened interest and scrutiny of commercial real estate appraisals, as well.  While the real estate collapse in 2007 was primarily a result of government policies, the word in the press is that “bankers” caused it with reckless lending practices.  Now, more than ever, bankers are looking to commercial real estate appraisers to “lean on” for support in making their decisions.  Regulators are also looking at those appraisers as the independent voice who makes or breaks a loan decision or determination as to what to do with an existing loan.

Given how much influence the commercial real estate appraiser’s work has in today’s business marketplace, Segueway hosts thought our listeners would enjoy hearing from someone in the profession who has been around long enough to see all of the changes that have taken place in the industry over the last 25 years.

Join us this Wednesday when our guest will be David A. Kunkel, founder of Kunkel & Associates, a Lisle, Illinois based commercial real estate firm.  We will ask Dave how the industry has changed over the past few years and how his work impacts the lending practices of banks and, resultantly, how businesses can borrow, or not borrow, money.

Segueway Solutions – http://www.seguewaysolutions.com/

+1 (847) 778-9474

Brent E. Hamachek spent the first 15 years of his professional life in banking, working in 6 different sectors including audit, credit and 9 years as a commercial banker.

After commercial banking, Brent formed Segueway Solutions in 2000 in order to assist privately held companies in transition. To date, he has worked in 40 different industries and has served in the capacity of CEO, CFO & EVP Sales for clients. Brent is a sought after consultant, speaker and trainer offering national and foreign expertise to clients.

brent@SeguewaySolutions.com

Tom Kuchan is a proven leader in global business expansion and effectiveness, risk management, finance and operations with experience in both Fortune 50 and entrepreneurial environments. He has a proven record of defining strategic objectives, translating them into operational tasks, and leading their implementation in diverse geographies and cultures across the globe.

Tom has lived overseas for over twenty years, including Switzerland, Germany and the United Arab Emirates, and has worked extensively across Europe, Latin America, Africa, the Middle East, and Asia.

tom@SeguewaySolutions.com