Hobby or Business? Why It Matters

Posted on October 1, 2013 by in Blog, Media, Retirement, Taxes

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Hobby or Business? Why It Matters

Property Valuations and Insurance

Posted on July 13, 2012 by in Blog

Recently, a gentleman I was working with bought an 8,000 square foot concrete block building with no loan. He asked the carriers to insure it for $600,000 Replacement Cost. One insurance carrier came back with coverage for $600,000 in value, but for Actual Cash Value (ACV). ACV means replacement cost less depreciation. A second carrier offered Replacement Cost, the cost to replace the property at the same location with like quality and materials, but wanted to value the building at $900,000 which was an obvious hike in premium.

Both carriers believed that this 8,000 square foot cinder block building would cost over $100 per square foot to replace. The buyer and I thought this was ridiculous. This is a small deal, but this seems to be a trend in insurance for all real property. I have seen this in the past year with manufacturing facilities, Assisted Living and Office/Industrial space.

After a fair amount of haggling one of the carriers offered Replacement Cost at $720,000. This still seems a little high, but at least it is in the right ball park. The moral of the story… be prepared. It does not behoove an insurer or the insured to have improper valuations in the event of a loss. Have a third party appraisal done and update it regularly. It is relatively cheap. You will sleep better knowing you are properly insured and you will have ammunition for negotiation with carriers come renewal time. Don’t be afraid to push back. It pays off.

Is Your Office a BYOD?

Posted on June 26, 2012 by in Blog

Risk Management for business is not always about buying insurance. The following article from Fox Small Business Center is good food for thought. Protect your data, it could impact the value of your business.

BYOB may be a good policy at the restaurant, but should you be for BYOD at the office? According to business consultants, not so much, unless you are extra careful.

The premise is simple enough, allow your employees to use their personal smartphones, tablets and computers for work, logging the devices onto your business databases. It might seem like a smart way to save money, not having to pay for a work phone or computer for your employees. But along with the money in your pocket comes some extra risks.

Brian McGinley, senior vice president of Data Risk Management for Identity Theft 911, said the trend is growing for both small companies and large corporations due to the need for more productivity and connectivity before and after work.

“We have become entirely reliant on this in terms of immediate access,” McGinley said. “This is a mega-trend from that standpoint. But, it’s important to go in there with your eyes wide open, because without the appropriate tools and planning this can introduce significant vulnerabilities to your business.”

Scott Laliberte, managing director of Protiviti, said BYOD is becoming more popular because it also saves small companies money.

“If you allow people to bring their own device, you don’t have to pay for it and give it to them,” he said.

One of the biggest risks is that all of these different devices have their own operating systems, McGinley said. If hackers go after these specific systems and applications, your data—client contact information, personally identifiable information, email lists and directories—are all at risk. If these things leak, the ramifications for your reputation and bottom line can be major.

“When information is lost or stolen, even with a small data breach, it can cost your company literally hundreds of thousands of dollars to remediate,” he said.

Hackers may also find it easier to introduce malware onto your employees’ device, because it’s so hard to enforce anti-malware security software on their property, Laliberte said. Patching software should also be of concern, because it’s unclear whether or not your workers are downloading the latest upgrades for the programs they are using on these devices.

If you do decide to go the BYOD route, the experts said there are ways to proactively protect your business from potential disasters.

One way to have an across-the-board procedure for your business is to have a control server application layer, or a portal installed on your employees’ devices that they must log into before accessing company data. One example of this is Citrix, Laliberte said, which enforces at the very least, minimum standards for your employees and has security controls and patch levels that must be met.

“The cost to do this depends on the size of the [network] environment,” Laliberte said. “It can cost anywhere from tens of thousands to hundreds of thousands to do. It can be fairly expensive.”

McGinley said company-wide there should be a policy about password protecting and also enabling the ability to remotely wipe out the device if it is lost or stolen. Set up the devices with geolocation technology, so they can hopefully be found if misplaced.

Also have your workers set their device to wipe out after ten incorrect password attempts, he said. Even if you have to sit down and physically watch them activate these security settings, it will be worth it, Laliberte said, because just having a policy isn’t enough.

“If you have a policy but no way to enforce it, it is not in effect,” he said. ”You have no control.”

What Else Should Your CPA Be Doing for You: Management Consulting

Posted on June 12, 2012 by in Blog

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What Else Should Your CPA Be Doing for You: Management Consulting

Selling Your Business to a Third Party

Posted on April 27, 2012 by in Blog

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Selling Your Business to a Third Party

Risky Foreign Practices

Posted on March 26, 2012 by in Blog

Chubb Insurance rightly points out one of many risks that require attention overseas. Know the rules. An FCPA Investigation could be devastating to the value of your business.

For 35 years U.S. companies and foreign companies with operations in the United States have been prohibited from bribing foreign officials either directly or through third parties while securing overseas business under the Foreign Corrupt Practices Act (FCPA).  But, it has only been over the past few years that Federal prosecutors have really stepped up enforcement of this stringent U.S. law barring corrupt practices overseas.  In 2010, the U.S. government received $1.8 billion in sanctions from 23 companies that had violated the law. Meanwhile, laws similar to the FCPA are being enacted and enforced abroad, particularly in Western Europe.  

Of concern to companies that conduct business across borders are questions about what is considered a bribe of a foreign official. And companies are looking to the government to help clarify this issue.  In addition, there may be questions about whether a company’s D&O policy covers an FCPA investigation.

For now, there are many questions about the FCPA and few clear answers regarding this issue. But, the price for not taking a highly aggressive loss-prevention approach to this largely uninsurable risk can have life-changing consequences for directors and executives, and can be costly for organizations, both financially, and in the court of public opinion.

Could an Unisured Loss Decimate your Retirement?

Posted on February 8, 2012 by in Blog

In the years leading up to the sale or transfer of your business, it is more important than ever to consider the potential risks to your business. In a catastrophic loss, most businesses find that they are under insured. When planning an exit, the cost of carrying a larger limit or some enhanced coverage is often palatable compared to the potential loss to the value of the business.

Consider a number of things:

-It is always more costly to rebuild after a widespread catastrophe, as we learned in Ike. Contractors and supplies run short, so materials cost more and it takes more time to rebuild, which can significantly impact your balance sheet and income statement.

-Investors buy cash flow. A delayed recovery due to a loss will impact cash flow during the period in which you restore your business and for some time after as you restore your sales pipeline.

-Many manufacturing and supply companies have environmental disposal exposures. If your successor or your vendors who handle these go out of business, they could come looking for you if there is a problem.

The cost of insurance versus the loss in valuation to your business is cheap.