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True Sales Support

in Columns/Sales
Tom Woodcock
Tom Woodcock

By Tom Woodcock

I understand sales personnel need to be as accurate as possible before moving transactions to sales support. The better the information on the front end, the better the support effort on the back. With that being said, true sales support is tough to find.

The sales process may vary from company to company or product to product, but each sale has a process. Securing the customer and landing the deal are only the first steps. In construction, there are many additional facets to the sales transaction, any one of which can make or break the transaction.

Efficiency in the sales process directly relates to the customer experience and success rate of the corporate sales effort. Don’t let paperwork, material ordering, or communication with subcontractors interrupt the project or sales schedule. Not keeping the customer first lets details get bogged down in procedures or red tape. Throw a dose of company politics, mixed with mutual disrespect between sales and administration, and a mess develops. This can cause customers dissatisfaction and frustration, which often ripens into negative reviews and lack of referrals. Perish the thought of ever getting another project if that customer has recurring business.

Many companies have brought me in to help generate greater business volume. They want a full backlog of work at great margins. They tend to feel their front end sales approach is the problem. Often, I find their sales process is lacking or broken. There is no sense of urgency, little initiative to help the selling party and often resistance to sales if the documentation isn’t perfect. Whether it’s an issue of control, lack of understanding of the customer’s experience, or a perceived respect problem, the customer takes the hit. This can manifest in delays or cost overruns.

Support personnel need to understand that securing business in a sales environment is the most important aspect of any business. No sales, no paper. Not that their position isn’t critical, but those charged with getting business are there to do just that. Internal support networks are built to do just that, support. They end up making the sales agent look like a rock star, or incompetent.

The reinforcement of the commitments made by the sales rep goes a long way towards the establishment of the company’s credibility. By counteracting the sales person’s commitments, they send the customer the message that the rep is less than genuine and the company is inefficient.

I’m very aware of the fact that many sales agents promise the impossible, but that’s a different topic. Doing everything that you can to meet the customer’s expectations, if at all possible, is the essence of great sales support. The easy thing to do is to not perform and then blame the sales individual. That may be accurate, but it’s not optimum for the company.

I’ve mediated many battles between sales and support, some of them pretty nasty situations. Mutual understanding and respect for each party’s role in the sales process closes the gap between them. Good communication back and forth, verbally if feasible, clears up discrepancies. Avoiding condescending tones, venting, and blaming shows a higher level of business maturity. Few companies take the time to cultivate this type of environment. They let these internal relationships develop organically hoping for the best. Rarely do they end up with the result they hoped for.

Merely stating that you need cohesion between sales and support isn’t enough. It’s a daily practice that needs to be nurtured and reinforced. Ignoring a problem can result in delayed transactions, disgruntled employees, and loss of personnel, all of which are detrimental to a strong sales effort. Investing in training on the internal customer for sales personnel and the critical aspect of sales for the support personnel can bring an awareness of each party’s role.

Companies that work to develop the relationship between sales and support end up with a smooth flowing machine. They achieve a higher standard and set the bar high for competitors. This all takes self-evaluation and effort to be successful. Companies willing to practice this development will enjoy the fruits of it: high morale, extra effort, and increased revenue. Not to mention the value it brings to customers.

The reasons are critical. Gaining separation from the competition is not just the result of value, which is what is often taught. It is also the culmination of team effort, a value proposition rarely taught and seldom seen. The greater the customer experience front to back, the greater the value they perceive. This can reduce competitive influence and breed loyalty.

True sales support is simply part of a more profitable equation. The alternative can only result in more price competition and number shopping. Usually, contractors blame the customer for this behavior. In reality, looking internally may be the solution. Interesting to realize that the way we interact with one another in the sales process is so influential on the sales success of our companies.

Tom Woodcock, president, seal the deal, is a speaker and trainer to the construction industry nationwide. He can be reached at his website: www.tomwoodcocksealthedeal.com or at 314-775-9217.

The Sun Does Not Shine on Homeowner’s Solar Panels

in Columns/Law
James R. Keller
James R. Keller

By James R. Keller

After three trials and one appeal, a homeowner must remove part of its solar panel system, because the homeowners’ association did not approve it, and pay up to $56,000 in attorney fees to the association.

The case is The Lake at Twelve Oaks Home Association, Inc. v. Hausman, 2016 WL 1579124 (W.D. Mo. April 19, 2016).

In July 2012, Matthew and Stacy Hausman installed a photovoltaic solar array system on various roofs and on the ground of their home, which is located within a subdivision in St. Joseph, MO.  The subdivision was part of The Lake at Twelve Oaks Homes Association, Inc. Homeowners were subject to a declaration of covenants, conditions and restrictions for the subdivision.

One of the restrictions was that homeowners must submit written plans and specifications and obtain written permission from the Association’s Design Review Committee (DRC) prior to construction of any structure that materially changed the exterior appearance of that homeowner’s property. The Hausmans did not submit anything to the DRC.  Ironically, Matthew Hausman was a member of the DRC.

The Association demanded that the Hausmans remove the solar array as being in violation of the restrictions of the subdivision. The Hausmans did not remove the system. The Association filed a lawsuit seeking a permanent injunction.

In the first trial, the judge ordered the Hausmans to present their plans for the solar array system to the DRC for its review and approval in total, in part or not at all.

Shortly thereafter, the St. Joseph City Council enacted an amendment to its zoning ordinances regarding solar energy systems within the city limits.  It provided in part that no homeowner’s agreement could be more restrictive than the new city ordinance.

The DRC approved the portion of the system installed on the rear roof but rejected the portion of the system that included the panels installed on the side roof of the garage and the ground-mounted panels on the south side of the garage. The DRC’s decision was based on a provision within the Solar Guidelines previously adopted by the DRC that required panels to be constructed only within a fenced yard or patio at the rear of the main structure.

The DRC also based its decision on how the solar panels affected the character of the subdivision and considered individual homeowner complaints plus compatibility with surrounding properties and impact on the value of subdivision homes.

After a second trial, the court ordered the Hausmans, consistent with the DRC decision, to remove the part of the solar array system erected on the garage and the ground-mounted panels on the south side of the garage.

The trial court then set aside its own judgment, deciding that the parties should have included the city as an indispensable party given its new ordinance on solar panels.

After a third trial, the trial court again found in favor of the Association and ordered the Hausmans to remove the solar arrays not approved by the DRC. The court also determined that the city’s solar ordinances could not be applied retroactively to the Association’s Solar Guidelines and further found that the DRC’s decision was reasonable.

Finally, the trial court awarded attorney fees (provided in the subdivision declarations) to the Association.

The Hausmans argued on appeal that the trial court erred in upholding the DRC’s decision as being reasonable. They argued that sale prices for homes in the subdivision actually increased after the solar panels were installed.

By contrast, the DRC chair testified at trial that most members of the DRC did not find the solar energy system to be esthetically pleasing.  He further testified that the Association had received complaints from approximately 20 neighbors who expressed negative views regarding the appearance of the solar system and concern that its installation lowered the value of surrounding properties.

The Hausmans’ former next-door neighbor testified that the glare from the solar panels focused on his property four to five hours a day.  He further testified that he made $20,000 in concessions in the sale price of his home due to the negative impact of the solar system.

Another neighbor who lives in the home across the street from the Hausmans testified that the glare from the panels during the evening penetrated into his front window and negatively affected the value of his home.

The appellate court discounted evidence from the Hausmans that the DRC had approved a solar array system of another homeowner in the subdivision and thus by denying the Hausmans’ system the DRC had acted in an arbitrary and capricious manner. The Western District noted that the system for this other homeowner could not be seen by anyone and that there were no complaints from the neighbors.

James R. Keller is a partner at Herzog Crebs LLP where he concentrates his practice on construction law, complex business disputes, real estate and ADR.  He also is an arbitrator and a mediator.

Are You and Your Company Suffering from Data Overload?

in Columns/Technology
Joe Balsarotti
Joe Balsarotti

By Joe Balsarotti

The amount of data on the Internet is staggering. Back in 2011, USC researchers estimated humans had already stored 295 billion gigabytes, and here I am adding to the total with this column. Here in 2016, tweets rack up at a rate of about 6000 every second. While I write this, there are over a billion separate websites, with over 3.89 billion pages (You can see the ‘size of the Internet’ change in real-time at http://www.worldwidewebsize.com/)

You’re wondering how this makes any difference to your business. The statistics above are interesting, but here’s the one that brings it home. Every second of every day, more than 2,000,000 emails are sent. How many are unread in YOUR inbox?

Data overload is happening to everyone. We’re inundated in emails, tweets, Facebook posts, pins, and a host of other calls for attention. Technology has not, as of yet, developed the solution for keeping up with it all, namely the 25th, 26th and 27th hour of the day. Since those extra hours aren’t here, yet, although I keep trying to invent them, how can one manage the time consumed by both ‘good’ emails and time wasters?

First off, use more than one email address. Yes, more makes for simplicity. Use a Yahoo, Gmail of other ‘freebee’ email service for all those companies who send newsletters, sale fliers, blogs, and the like. Using something completely divorced from your primary work email address (which should NOT be your primary personal email address) gets right at the heart of the problem. When you have spare time, go to the freebee email portal and dig in. DO NOT have that address automatically sent to your phone, Outlook, Thunderbird or whatever you view normal emails with. There needs to be a barrier between that type of email and your business and personal correspondence.

After you have that general email address set up take an afternoon, subscribe only to the ones you want (times do change and your sign ups from 2005 may not be relevant anymore) at that new address. As soon as you do, unsubscribe from those lists on your ‘real’ email address. Use this opportunity to clean house and make your days easier.

Now, back to my pithy comment above, if you are using the same address for work and personal emails, time to split those up too. It’s fine to have those two addresses hitting your phone and computer, but when you await an important message about your child, you don’t want it mixed in with work and when that contract comes in, you shouldn’t need to sort through PTA emails to find it.

Next, use the power of the computer and the software you paid for. Create folders for general topics you deal with, be it your kid’s soccer team, church group, purchase orders, legal docs, etc. There’s no need to go hog wild with fifty folders when ten will do, but make those ten folders reflect topics you can easily prioritize on a hectic day. If a deadline is nearing, go straight for that project folder instead of having to sift through dozens of messages irrelevant to getting the job done on time.

Lastly, set rules for the incoming emails, this may be a time when you need your tech staff to assist you. When the sender is a subcontractor, have Outlook dump that email immediately into the folder for them, or for the project they are working on. If the sender is your child’s school, into the folder for that child it goes. Vendor invoices or correspondence goes into the vendor folder, then maybe a sub-folder for just them. What you have to learn to do is look at the folders for the highlight or number denoting new messages, rather than the inbox. In this way, you immediately know the topics of many of your incoming emails and can prioritize with just a glance.

Start with very general folders and rules and refine them as you become comfortable with the new ‘normal’. If do it correctly, you can deal with 200-400 emails a day (as I get) and still have time for lunch. Now, if only you can get your staff to do the same thing …

I welcome your questions or comments at businesstech@software-to-go.com

Joe Balsarotti, president of Software To Go, is a 36-year veteran of the computer industry, reaching back to the days of the Apple II. He served three terms as chairman of the National Federation of Independent Business’ (NFIB) Missouri Leadership Council, was chairman of the Clayton, Missouri, Merchant Association for a dozen years, chaired Region VII of the Federal Small Business Regulatory Fairness Board, and currently serves on the Dealer Advisory Panel of the ASCII Group, an organization of over 1000 independent computer and technology solution providers in North America.

Reducing Risk in the Internet Age

in Technology
Joe Balsarotti
Joe Balsarotti

By Joe Balsarotti

Seems every tech article nowadays is about the liabilities of technology. Hacking, lost data, damaged online reputations, and the legal and ethical ramifications of technology and stored data.

So, it seems appropriate to delve into how to, if not minimize, at least mitigate the liabilities that the digital world has created for all businesses large and small.

Does your business host its own website?

Unless you have private components to yours site for vendors or customers to access your database, there is no reason to host your own site. Cutting off that entry point to your network goes a long way in reducing your risk. Besides, except for keeping internal I.T. people busy, there’s not much upside in hosting your own website. Outsource it to professionals after you’ve done due diligence to make sure there are backups, redundant sites, and uptime guarantees. In short, let specialists deal with it.

How about email, why would you host your own?

Forget the security concerns for a moment. Since over 95 percent of all email transmitted gets rejected at the server as spam, that means that 95 percent of the Internet ‘pipe’ you are paying for is wasted on trash. Find a reputable provider whose focus is on providing email.  After all, there are very few individual businesses with access to datacenters across the country for redundancy, battery and generator backup, communication lines from multiple providers, and 24/7 staffing, but quality email providers do.

Granted, going with one of the ‘big guys’ for email or hosted Exchange has its own set of issues as they are larger targets to hackers. If someone breaches your in-house email server, however, you don’t really have recourse, but if a multimillion or billion dollar provider gets breached, they will have far more resources to bring to bear on restoring service and recovering damaged or lost data. Plus, it’s a fair bet that lawyers will be lined up to help you recover compensation for any losses you suffer.

Passwords, remember them?

One of the easiest ways to minimize liability with technology doesn’t cost a penny, but it is essential. ANY notebook, phone, tablet, or home PC that can access your company and/or customer data must always be password protected and should lock if unattended.

When replacing old PCs and servers, businesses generally know to keep the hard drives or get a certificate of destruction. However, the same precaution goes for those tablets or phones. Getting a couple bucks for trading in an old phone or tablet turns into a really bad deal when the tablet or phone falls into the hands of foreign hackers and organized crime, who buy old electronics by the pallet, looking for data off of hard drives.

Save yourself some headaches and reduce your company’s risk in the digital world by getting a certificate of destruction for every device that you dispose of.

I welcome your questions or comments at businesstech@software-to-go.com

Joe Balsarotti is president of Software To Go and is a 35-year veteran of the computer industry, starting back in the days of the Apple II. He served three terms as chairman of the National Federation of Independent Business’ (NFIB) Missouri Leadership Council. He was chairman of the Clayton, Missouri Merchant Association for a dozen years, chaired Region VII of the Federal Small Business Regulatory Fairness Board and currently serves on the Dealer Advisory Panel of the ASCII Group, an organization of over 1000 independent computer and technology solution providers in North America.

Contractor and its Owners Liable for Damages and Attorney Fees

in Columns/Law
James R. Keller

By James R. Keller

The Missouri Court of Appeals for the Southern District has upheld a trial court’s judgment in favor of a homeowner and against a contractor and its owners for damages and attorney fees.

The case is Rogers v. Superior Metal, Inc., SD 33696, 2016 WL 442773 (S.D. Mo. Feb. 4, 2016).  This decision may open new personal liability against owners of construction companies.

Superior Metal, Inc. is a construction company that installs metal buildings, roofing, siding and windows.  In 2013, Harley Rogers decided he wanted to build a shed on his property for storage.  He discussed the project with Randy Mueller, one of the owners of Superior Metal.  Mueller told him that “it would be a stand up product” and that “the building would be straight, free of defects, and would be good lumber.”

Rogers and Superior Metal entered into a written agreement for $13,500.00 for Superior Metal to build a pole barn on Rogers’ property.

During construction, Rogers noticed defects and mentioned his concerns to Jonathan Holtzman, co-owner of Superior Metal.

Once completed, according to the appellate court opinion, the building had numerous construction defects.  Rogers demanded his money back.  Superior Metal refused to issue a refund.

Rogers sued for breach of contract, unjust enrichment, fraudulent misrepresentation, negligence, and violations of the Missouri Merchandising Practices Act (MMPA).  Rogers also sued Mueller and Holtzman individually based on an allegation of fraudulent misrepresentation.

The trial was in front of a judge instead of a jury.  The trial court found for Rogers on all counts, awarding $23,500.00 in damages, $10,000.00 in attorney fees, and $1.00 for punitive damages.  The appellate opinion offers no explanation why the award was $23,500.00 when the original contract price was $13,500.00.

The contractor’s first challenge on appeal was that the owner did not present any evidence as to how the alleged construction defects diminished the value of his property.  In Missouri, there are two measures of damages regarding defective performance of a building contract.

One is the cost-to-repair method, and the other is the diminished-value method.  The cost-to-repair method measures damages by the cost of repairing the defective work.  The diminished value method measures the difference between the value of the property before and after the defective work.

The Southern District noted that the cost method is the preferred method to recover damages and that the diminished-value measure should be used when the cost to repair method would cause “unreasonable economic waste.”  In other words, if the cost to repair far exceeds the diminished value of the property, then the diminished value of the property is the proper measure of damage.

In this case, once the landowner presented evidence on the cost to repair, the contractor has the burden to establish that the cost to repair is disproportionately high when compared to the diminution in value of the property.

The contractor presented evidence through an expert that it would cost only $445.00 to repair the defects in the building.  But the contractor presented no evidence regarding the diminution in the value of the property and thus the Southern District on appeal affirmed the trial court’s decision that the damages for faulty construction were $23,500.00.

The appellate court also decided that owners Mueller and Holtzman were individually liable given the trial court’s finding of fraudulent misrepresentation.  Their communications with Rogers, according to the court, were “affirmative participation in the actionable wrong and so justify imposition of individual liability.”  Their personal liability stemmed from fraud, not just breach of contract.  This result will trouble construction company owners.

Regarding attorney fees, the Missouri Merchandising Practices Act allows a trial court to award attorney fees based on the amount of time reasonably expended as well as punitive damages.  Defendants contended that there was no evidence to itemize any attorney fee time and thus no support for attorney fees.

The Southern District concluded that it is well within a trial court’s discretion, as an expert on attorney fees, as well as having familiarity with the case at hand, to decide what attorney fees are proper.

The Southern District also decided that on remand the trial court could determine what attorney fees should be assessed for the appeal since Missouri law allows that the award of attorney fees can include those attorney fees incurred on appeal.

There is no mention of the $1.00 assessed in punitive damages.  The trial court’s decision was affirmed on appeal.  It appears this award stood as well.  A $1.00 punitive damage award usually reflects a statement of disapproval with defendant conduct and is not intended to reflect plaintiff’s actual damages.

James R. Keller is a partner at Herzog Crebs LLP where he concentrates his practice on construction law, complex business disputes, real estate and ADR.  He also is an arbitrator and a mediator.

Planning ESOPS for Construction and Real Estate Firms

in Columns/Finance

By Thomas H. Mug

Maybe it’s the preservation of a legacy, perhaps it’s the conclusion of thoughtful succession planning, or it might be a desire to motivate employees and enhance corporate performance … for whatever reason, the construction and real estate industry is increasingly embracing employee stock ownership plans (ESOP).

Indeed, this publication documented the trend three years ago, noting transfers to some form of employee ownership at Brinkmann Constructors, McCarthy Building Companies, CH2M Hill, Parsons, Black & Veatch, HDR, HNTB, Burns & McDonnell and Terracon. Last year, Lawrence Fabric & Metal Structures Inc. and Balke Brown Transwestern, Inc. joined the ranks of employee-owned companies with the help of our law firm, Greensfelder, Hemker & Gale. However, ESOPs are not for every situation and require considerable forethought and planning.

Many businesses begin considering ESOPs as they approach a transition in leadership and want to preserve the distinctive qualities that define the company and its culture and ensure the company’s long-term success. That has been accelerating with a wave of baby boomers entering retirement.

An ESOP is an intense planning process. Business owners should consider the following:

  • Is the firm suited for an ESOP? Business owners should conduct a feasibility study as a first step to determine whether the company is a suitable candidate for an ESOP. This will consider the motivating factors for establishing an ESOP, the financial capability of the company to finance ESOP debt and suitability of the company as an ESOP candidate. The feasibility study will also identify any issues or obstacles in the establishment of an ESOP.
  • Before entering into an ESOP, a business owner needs to know the value of the company. It is likely that the owner will have an expectation of the amount that will be paid for his or her stock. One of the first steps in examining the ESOP as an exit strategy is for the owner to obtain an independent valuation of the company stock. If the result is not to the owner’s satisfaction, the owner may elect to forgo the ESOP and consider other alternatives. Valuation typically involves projecting the future earnings of the company and will rely on those projections of company income. Industry outlook is also a major consideration, as well as the general economic forecast. If appropriate, the valuation may also consider book value and sales of comparable businesses.
  • Federal regulations. ESOPs are heavily regulated by both the U.S. Department of Labor and the Internal Revenue Service. As an ESOP is a retirement plan designed to invest in company stock, the interest of the Department of Labor is to see that plan participants and their retirement savings are adequately protected. Consequently, the Department of Labor will scrutinize an ESOP transaction to assure that the terms of the transaction, including the price paid for company stock, are fair. One way to assure compliance in this regard is to engage a well-qualified independent trustee to represent the interests of ESOP in the transaction.
  • Repurchase obligations. One major consideration for any ESOP, new or mature, is an understanding of the company’s repurchase obligation with respect to its ESOP shares. As employees approach retirement, they will seek to cash out the company stock in their ESOP accounts. In addition to retirement, a repurchase obligation can also occur due to termination of employment, death of an employee or a participant’s exercise of diversification rights. In order to prepare for this eventuality, a company will want to have a repurchase liability study performed and develop a plan to have adequate resources available when the need arises. Failure to plan for this eventuality can result in a crisis in future years.
  • Creating a culture of employee ownership. Critical to the success of any ESOP is the presence of an ownership culture. Some companies have a workplace culture that will give them a head start on this. Others will need to work harder at the developing the ownership mentality. What is important is to have a culture in which employees are engaged as owners and are aware of the responsibilities that come with ownership. This is enhanced through the sharing of information on the financial health and outlook of the company and by developing a team approach to achieve success. An old saying is that there is no “I” in ESOP.

In a sense, a transition to an ESOP takes on the same attributes of a personal family decision. Business owners need to work with financial, legal, and accounting advisors who are familiar with the culture of the firm and its mission. It is a significant advantage when the team has an understanding of the challenges unique to the construction and real estate industry.

It can be more remunerative and sometimes easier to sell to an outside buyer than to embark on an ESOP. The decision depends on the motivation and goals of the owner, the desire for the future of the business, and the feasibility of an ESOP as a succession alternative. Many St. Louis construction and real estate firms have found that properly planned ESOPs are an effective way to develop the next generation of leadership who will continue to advance the legacy of excellence that has defined the company since its inception.

Thomas H. Mug is an attorney in the employee benefits and trust and estates practice groups at the St. Louis law firm Greensfelder, Hemker & Gale, P.C.

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