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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 17–24

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

Publisher’s Message
T his issue focuses on “Growth
Strategies for Businesses.” I planned
this theme last year knowing we
would be facing a tough economy
mid-year in 2008. So far, the South
Bay is faring reasonably well and
should continue to do so as long our
key business sectors aren’t deeply
affected by the growing national
unemployment rate and if inflation
remains manageable. That means it
is just as important to understand
how to implement an effective
growth strategy in an up or down
economy, or especially when you
can’t be entirely sure where it’s
headed. When the economy is
growing, there are new opportunities
to exploit. And when the economy
shrinks, every business needs to
grow its markets and diversify in
new places to remain strong and sur-
vive. Exit strategies are just as impor-
tant so you don’t back yourself into a
corner with no good choices.
Growth is always a crucial issue for
businesses. Having spent most of my
adult life in the publishing business,
I learned this lesson well from my
previous employers. There are defi-
nitely right and wrong ways to grow
a company. Local business profes-
sionals, including myself, have con-
tributed insights on topics ranging
from strategic planning and tech-
niques to funding issues. I felt it
important to address issues of risk so
people understand they must grow
in a way that is not only right for
their business, but right for them per-
sonally. This issue also includes our
expanded 2nd Annual South Bay
Technology Guide. Business Insider
Magazine usually starts our Technol-
ogy Insider features near the front of
the magazine, but in this issue we
explore vital IT issues as a distinct
centerpiece to our magazine. This
feature is informative and also is a
keepsake to refer to throughout the
year when you need quality South
Bay technology providers. Grow
safe and don’t get burned this sum-
mer!
David Whitehead
Publisher
C IONLAUNMCNI AI L
F N SI INDSEI R
D E R
Your IRA and
Company
Retirement Plans:
How to Turn a Liability into a Significant Asset
BY DENNIS J. BRANCONIER, CLU
I T’S HEARTWARMING THAT OUR LAWMAKERS ARE BEING
SO NICE by allowing us to set aside individual income on a
tax deductible basis and grow it tax-deferred in IRAs and
qualified plans such as 401(k)s. Truth is, they’re just being
patient with us in their tax collection process. They know that
life’s other certainty — death — will eventually cause the
transfer of those assets to another person, thus creating a signif-
icant opportunity for taxation down the road. If the retirement
account has been invested prudently until then and you are a
high net worth individual, the government is prepared to send
an even more sincere thank you note than usual, because it
stands 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 liability
into 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 government
will spend the other 40% for you, since you will pay income
tax on every dollar distributed (remember, you paid no tax on
those 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 Roth
401(k), you don’t have an income tax issue looming because
you’ve already jumped into the fire to get it over with along
the way — good move. Or if you plan to leave all unused
retirement funds to charity — great!
On the other hand, what if I don’t spend any of the
IRA or company retirement plan money?
The government does have limits on its patience. So it set your
age 70 1/2 as the trigger for taking distributions out of your
6 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E
retirement funds whether or not you want them. Tax
deductible plans are among the best ways to save money, but
absolutely the worst for distributing it. That’s why most people
will do all they can to live off other investment assets and take
only the minimum required by law (Required Minimum Dis-
tribution or RMD) from their pre-tax retirement plans. As a
result, trillions of dollars are ripening for tax harvest as the
Boomers move into retirement.
Is there any way to get 100% of the value of my IRA
to my loved ones upon my death?
Yes, but you won’t find it by researching retirement plans. In the
U.S. tax code, which contains 7,500 pages and 3.4 million
words, 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 sound
public policy. Otherwise, millions of people would look to pub-
lic resources to bail them out in the event of a breadwinner’s
premature death. And the timing is perfect from a financial and
estate planning standpoint: the situation that triggers taxation of
your unused retirement funds, namely death, is precisely the
same 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 sound
great until you have to figure out how to pay for it. It’s impor-
tant to remember that insurance is the solution, not the prob-
lem. The problem is this large wad of untaxed money, perhaps
the largest single liquid asset you have. So what about using
the problem causer to pay for its own solution and having the
government be your partner rather than your adversary?
Though it may seem counterintuitive to purposely withdraw
retirement 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-
2 N D I S S U E 2008
 C O L U M N I N S I D E R
priate not for everyone, but for those who will likely want to
avoid taking any more out of their retirement plans than they
must in order to satisfy the law. It will be even more signifi-
cant for families that will face estate taxes (retirement plans do
not receive a “step up” in basis like other assets do). Here’s
why it makes sense in certain situations:
It is more likely that future tax rates will go up
than stay the same or go down.
Given the nasty outlook for government entitlement pro-
grams such as Social Security and Medicare, along with war
efforts and other costs not yet known due to the aging pop-
ulation, we may be at the lowest tax rates we will see in a
long while. Why not get some taxes out of the way now
while it’s relatively cheap? Remember, they will be due and
paid someday. If the block of money you pass on to your
loved ones (through insurance) is tax-free, will you worry
about what the tax rates are in the future? No, because your
family won’t be paying them. Talk about peace of mind.
For the beneficiary, paying income tax on just the
investment earnings is better than paying tax on
every dollar taken.
While the stretch-out provisions are superior to the old
lump sum tax hit from past days, it still means every dollar
the beneficiary takes from the retirement plan is subject to
income tax when received. By contrast, the fund created by
life insurance proceeds is not taxable when taken out. Only
the interest or investment returns on that fund are taxed.
My spouse is the beneficiary of my retirement plan;
aren’t there special breaks for spouses?
There are two main “breaks” for spouse beneficiaries. One is
associated with estate taxation. You can pass as much as you
want 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. Your
spouse can elect to “stretch” the IRA or company plan
account (which may well benefit from being rolled over into
an IRA first) and take distributions over his/her life expectancy.
Again, this only defers taxation so that the account can have a
chance to continue growing, but it doesn’t do away with
income taxes any more than the marital deduction does away
with estate taxes.
In both scenarios, a significant asset is transferred at death to
someone else who eventually has to acknowledge a tax liability
because of that asset. But there’s no reason that death must
equate to an economic loss to a spouse or family. Through the
power 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 and
leave the rest to continue growing, the account value and
accompanying taxation are moving targets. Again, as with
other uses for life insurance, there is no way to know exactly
2 N D I S S U E 2008 S O U T H
For individuals who don’t 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.
what the economic loss will be for family members or busi-
ness partners due to someone’s death. The amount of insur-
ance you choose will be based on an estimate of the loss at
some 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, it’s unlikely you’d
tap into your retirement accounts for premiums (though it can
be arranged for your 401(k) or profit sharing plan to actually
own and pay for insurance with pre-tax dollars). This provides
a good reason for you to sit down with your financial advisor
to 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 you’ll be forced to take
money out anyway (unless you are a non-owner of the business
who is still actively working). For individuals who don’t 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.
Such a concept is also appealing for individuals who want
to make charitable gifts of life insurance (and the income tax
deduction can offset the unwanted income tax liability from
the RMD distribution).
What other issues need to be addressed in pursuing
this strategy?
Due to space limitations, this article can only remind you that
you’ll 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
continued on page 8
B AY B U S I N E S S I N S I D E R M A G A Z I N E 7
F I N A N C I A L I N S I D E R

YOUR IRA
continued from page 8
great opportunities, acquiring insurance
must be taken advantage of while it’s still
available.

Dennis Branconier, CLU is Vice President

of M Advisory Group in Torrance. For
affluent clients and entrepreneurial com-
panies, the firm provides wealth preserva-
tion and executive benefit planning,
insurance expertise and 401(k) investment
advisory services. He is past president of
the South Bay Estate Planning Council
and active in several local community
organizations. Dennis can be reached at
(310) 530-5525 or dennis@madvisory.com.

This material is not intended to present an opin-

ion on legal or tax matters. Please consult with
your attorney or tax advisor, as applicable.

Securities and advisory services offered through

M Holdings Securities, Inc., A Registered Bro-
ker/Dealer and Investment Advisor, Member
NASD/SIPC.

Services provided through Cal-Surance Benefit

Plans, Inc. Cal-Surance Benefit Plans, Inc. and
M Advisory Group are independently owned
and operated.

8 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E 2 N D I S S U E 2008
 A R E A L E S T A T E
BY KEN ROBERTS
The Stimulus Package
Was Less Than Stimulating
T HAT PRETTY MUCH SUMS UP HOW I WAS FEELING a
few months ago when guidelines were released for the
increased Conforming Loan limits, as part of the adminis-
tration’s economic stimulus package. You may recall the last issue
when I said that raising the loan limits from $417,000 to $729,750
could be a boost to the South Bay real estate market. What we
were expecting was the full complement of loan products with sim-
ilar guidelines for the new so-called Conforming Jumbo as we have
for 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 basic
chocolate and vanilla, a 30-year fixed and a five-year fixed. And for
purchases, the maximum loan-to-value was 90% and required a
minimum 700 FICO score. For refinances, the maximum loan-to-
value would be 75% and couldn’t combine an existing first mort-
gage with an existing second mortgage nor take cash out. All loans
required full income documentation (no stated income allowed)
and were only applicable to single family residences, condos and
planned urban developments (no two to four units allowed).
All this stood in stark contrast to Traditional Conforming loans, in
which there are numerous loan products (for the sake of brevity, I
will spare you a list) to satisfy a variety of palates. It seemed the new
Conforming Jumbo loans weren’t going to be included in the same
pool of mortgages in which Traditional Conforming loans were bun-
dled and sold. Different pool and different guidelines meant different
pricing, and it wasn’t pretty being .75% in rate higher across the
board 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 community
found this less than stimulating! The only bright spot was FHA
financing. Those loan limits were raised in the high cost areas (like
LA County) to the same $729,750, with guidelines more similar to
what they’d been with a few exceptions. The only problem was
that many mortgage brokers didn’t bother to get approved to make
FHA loans because previous loan limits had been so low. FHA
also has its limitations: limited product choices, no interest-only
options, higher interest rates, plus up-front and monthly mortgage
insurance premiums. The strongest benefit, however, is that FHA
allows for as little as 3% in down payment, which can come from
a 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 is
available with some lenders. You can combine a first and second
mortgage into one loan in a refinance in some instances. Next, we
saw pricing for Conforming Jumbo loans drop enough to almost
mirror Traditional Conforming loan rates as Fannie Mae and Fred-
2 N D I S S U E 2008 S O U T H
P R O ’ S P E R S P E C T I V E
die Mac started including Conforming Jumbo in the regular pool.
And most recently, a few lenders increased their product choices
to include seven- and 10-year fixed rate mortgages, some with an
interest-only option.
I hope this trend continues, but I fear that about the time the
consumer is all dressed up and ready to go, the party will be over.
According to the legislation that created them, the increased loan
limits are temporary. They are due to expire at the end of this year.
The biggest question remaining is will these limits be extended
beyond December 31 and be made permanent? Certainly Califor-
nia needs the $729,750 Conforming loan limit. Also, who gets
elected this fall may have an impact on that decision.
In the Jumbo marketplace for loans over $729,750, there is
some bad news and some good news. The bad news is that
lenders that sell Jumbo mortgages to the secondary market are
finding that investors still have no appetite. Rates for all loan pro-
grams, fixed or adjustable, are disproportionately high. They are
above 7% with many quoting rates well above 8%. This is the
hangover 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 is
there are still a handful of portfolio lenders who are making loans
up to several million dollars at rates near or below 6%. Such
lenders keep the loans on their books instead of selling them to
investors, and service them (meaning they collect the payments
also). By not selling mortgages to investors, they don’t have to con-
form to investor guidelines or the current high market rates. The
product choices are limited to three, five, seven and 10-year fixed,
some interest-only, and straight Adjustable Rate Mortgages. Be
forewarned, however, that these lenders are extremely busy and
backlogs mean their turn times from application to funding are
between 45 and 60 days, with some as long as 90 days! If you are
contemplating buying or selling this year, do yourself a favor and
build in a longer escrow period of at least 60 days. You can always
close sooner by mutual consent between you and the other party if
things come together sooner than expected.
We are seeing some extreme “cherry picking” by portfolio
lenders. 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 saw
some very strong (I’d venture to say near-perfect) first-time home
buyers declined on the basis of payment shock (meaning they are
going 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
B AY B U S I N E S S I N S I D E R M A G A Z I N E 9
 C O L U M N I N S I D E R
S M A R T G R O W T H S T R A T E G I E S

BY TONY TRAVEN

W
HEN YOU WANT TO CHANGE THE CONVERSATION IN YOUR COM-
PANY FROM PROCESS IMPROVEMENT, PERFORMANCE REVIEWS, COM-

P & LS INTO A TRUE STRATEGIC/ANALYTICAL

PANY EVENTS AND

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

Many companies have annual strategic planning meetings
where a couple of days are set aside to focus the key execu-
tives on strategic discussions and ask questions like: Where do
we want to be in five years? How are we going to get there?
How can we improve internal communications? Maybe even
conduct a Strengths, Weaknesses, Opportunities and Threats
analysis (SWOT).
Sometimes the meetings even include team building work-
shops and fun exercises to help bring people together. These
are 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 communicate
where the company is headed, build consensus and make
everyone feel part of the team. The real strategic planning is
done before the meeting.
The fact is strategic/analytical people are always thinking
strategically. It is not something to be turned on an off like a
switch, but it is the way the person processes information and
determines what needs to be done. Strategic people are the
fact finders — not the fault finders in a company. They are
constantly 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 putting
them back together to figure out a better way of doing busi-
ness. Strategic thinking people naturally think in the future
text and are asking “what if” questions both internally and
externally.
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 yet
may have little power to affect change.
Many scholars will debate and even condemn this overly
simplistic viewpoint and reference hundreds of books and
classes designed to teach strategic thinking skills and how fol-
lowing specific processes can set a clear strategic direction for
the company. They will state emphatically that you can teach
strategic thinking… and I would agree with them in part. Edu-
cation, intelligence and work experience all contribute to
how effective an individual will be in the context of strategic
planning.
The in-depth discussions and classes that take place at
campuses throughout the country are extremely helpful in

10 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E 2 N D I S S U E 2008
S M A R T G R O W T H S T R A T E G I E S

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 that’s 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.

understanding the steps, building the

framework and providing the structure
needed for creating a comprehensive
strategic plan. All this education is
valuable and highly effective when it
challenges a strategic mind. They grasp
the concepts and start to think about
how this information and knowledge
applies in the future. But it starts with a
strategic mind.
Of course this by itself does not make
a strategic plan come to life. A well-
designed and comprehensive strategic
plan also includes input and a significant
amount of discussion with individuals
who ask, “Have you thought about…?”
or, “Do you remember the last time…?”
kinds of questions. These are the folks
who look at the outline of a strategic
plan and start to fill in the details.
This process is similar to how a major
construction project goes from concept
to being built. The big picture concept is
pitched along with a beautiful rendering,
estimate of the overall cost and cash flow
projections based upon consumer or
business trends.
Those in this business know this is
only the beginning. Now the project
gets broken down into specific projects,
the hundreds of steps within those pro-
jects all the way down to the smallest
detail. The same holds true with an
effective strategic plan.
So you need both the big picture
strategists along with those compiling
and questioning the details. Both types
of individuals need to work in concert
and 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 weighing
the risk. The other is drawing upon
continued on page 12

2 N D I S S U E 2008 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E 11
F I N A N C I A L I N S I D E R / R E A L
STRATEGIC PLANNING STARTS WITH STRATEGIC PEOPLE
continued from page 11
knowledge, referencing the past and trying to eliminate or
reduce risk. There are very few people that do both effectively.
Of course you have people in any organization who feel
strategic 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 them
seem progressive. In this case be careful, because what
sounds good may not end up being good for your company
or division.
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 that’s the way it is. If
you accept this as the way it is, that is understandable.
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.
But how do you know precisely “who” is “who” within
your organization and is it really that important? That depends
on whether you want to be mediocre, good, great or the
leader in your industry. In this case, let’s assume you want to
be great or the leader in the industry.
How do you start to put together highly effective teams and
strategic plans that will grow your business and your profit?
The fact is you can measure, through various assessment
tools, someone’s primary point of reference and if that person
is strategic and forward-thinking. No need to guess. You can
also determine who would be a good complement to this type
of 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 is
to identify and develop your strategic people.
Tony Traven is a licensee for Culture Index in the Los Angeles
metro area. Tony works with strategic business leaders in devel-
oping highly effective teams and can be reached at 310-683-
3607 or tonytraven@mac.com.
12 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E
E S T A T E P R O
STUMULUS PACKAGE
continued from page 9
perfect credit with very high scores, and came in with a large down
payment and plenty of money remaining as cash reserves. Ironically,
had they been renting a larger and more expensive home, they
would have demonstrated their ability to make the new mortgage
payment. Yet clearly, they would not have saved nearly as much for
a down payment and cash reserves. In 30 years in the real estate
industry 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. Lenders
willing to provide Home Equity Lines of Credit (HELOC) and fixed
rate seconds to piggyback behind an 80% first mortgage to avoid
having to pay Private Mortgage Insurance (PMI) have discontinued
second mortgage lending altogether. Many have reduced the max-
imum loan-to-value to a combined 80%. That means the first
mortgage added together with the new second mortgage can’t be
more than 80% of the home’s value. When purchasing, especially
with Jumbo loans, a minimum of 20% down is the rule with few
exceptions. With loan amounts up to $729,750, you can still get
90% financing with PMI. It can either be built into the rate or, if
paid separately, can be tax-deductible if your income is $110,000
a year or less. And for loan amounts over $1 million, it could
require 25-30% down. It seems that second mortgage lending also
falls into the dreaded “additional risk” category being boycotted
by investors and, consequently, lenders today.
I can’t stress enough how important good credit scores have
become. Learning how to manage your credit will be crucial
moving forward. People make what they think are logical deci-
sions about how to maintain high credit scores, but oftentimes
what they do actually hurts their scores. There is much misinfor-
mation being disseminated to the general public about what to
do 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 finally
giving more information about how credit scoring is deter-
mined. Go online and learn how credit scoring works. It could
save you thousands of dollars as lenders for real estate and even
consumer loans move more to risk-based pricing based on your
continued on page 33
2 N D I S S U E 2008
F I N A N C I A L I N S I D E R

Safe,
But
Never
Sorry:
Farmers & Merchants
Takes Conservative Approach
to the Bank
BY BRIAN SIMON

F OR MANY FINANCIAL COMPANIES, UPPER LEVEL PERSONNEL

CHANGES ARE SO COMMONPLACE they barely elicit a yawn

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

chants Bank, it’s 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, it’s

likely we won’t be reading about another CEO coming aboard until close

to mid-century; and when we do, rest assured it’ll be someone named

Walker assuming the reins.

continued on page 14

2 N D I S S U E 2008 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E 13
F I N A N C I A L I N S I D E R

SAFE BUT NEVER SORRY

continued from page 13 “Most banks have not been willing to chart the course
It is just that level of consistency and for long-term returns and running a safe and sound bank.
steadfast adherence to tradition that has But the allure on high returns on equity has a price.
allowed Farmers & Merchants to navi-
When the economy turns, you’re going to take losses.”
gate through the decades, weathering
significant industry shifts and various — Henry Walker, CEO
economic storms along the way. The Farmers & Merchants Bank
term “conservative” is often used to
describe the bank’s philosophy, but that
suits Henry Walker just fine. A 21-year leveraged,” said Walker. “When you put loans,” he said. “We fund with our cap-
veteran of F & M who has really spent on top of that liberal advances, it cre- ital and depositors’ funds and that’s it.
his entire life in and around the busi- ates a problem in a slow economy This has always been the case. We’re
ness, the new CEO has no plans to rein- because that bank counted on Wall one of the few banks that operate this
vent the wheel. In fact, the bank’s Street being able to fund the takeout way. It’s a tradition that has served us
strategic direction had been well loan, which isn’t happening anymore.” well for our entire lifetime.”
planned out by its executive manage- Typically, such loans would be paid off Asked to conjecture on why Washing-
ment in advance to Walker’s promotion. through cash accumulated, sale through ton Mutual would allow itself to get into
“The course is to continue to be one of collateral, or refinance (permanent such a bind, Dan Walker continued,
the safest banks in the United States — financing). According to Walker, Wall “Wamu has a different business plan and
that is paramount to is,” he said. Street is not funding credits like it did in they set it up to generate the income they
This recipe for safety has a number of the past. “I know of more than a few sit- have and are willing to accept a higher
key ingredients. On top of the list is a uations where the financing dried up in level of risk in their lending portfolio.
stubborn insistence on a conservative loan this credit crisis,” he said. When the market turns, they are required
to value ratio. “It is critical to maintain a As an example, Washington Mutual to supplement their losses and their loans
safe and sound loan portfolio,” Walker recently had to raise $7 billion by sell- with additional capital by making an
said, noting that the bank typically maxes ing stock to a private equity fund. Henry offering to continue their operation and
out at a 50 percent LTV on collateral. Walker’s brother Dan, Chairman of the banking plan.”
While such a ratio eliminates a certain Board of F & M with 32 years in the Henry Walker added, “They have to
range of loan candidates, this is exactly industry, explained why. “They needed raise capital or sell. The big banks are
how the bank wants it. “Our typical bor- to issue stock because they couldn’t doing it and getting away with it. I don’t
rower is also conservative and has a pro- maintain the cash flow necessary to know if the small banks have the
file that matches the bank, so we end up continue lending to their customers. resources.”
with the best borrower,” Walker contin- Prior to this, they would sell their loans F & M’s conservative approach serves
ued. “It’s a great marketing plan and few to create additional cash flow. Because to protect the bank, its depositors and its
banks have the fortitude the follow it. their focus is fee-driven, they would shareholders while also making a good
They are pushed to follow return on then sell the loans off on a second profit return on investment. Ultimately, it
equity instead of safety and soundness.” to supplement income.” comes down to patience and lots of it.
Loan to deposit (or asset) ratio on the Dan Walker said F & M avoids this “Most banks run with a short-term phi-
other hand, is considerably lower than problem because it doesn’t sell its losophy; we run with long-term,” Henry
many other banks. “We are 70 percent loans. “We make good loans for our Walker explained.
loan to deposit, while most banks are own portfolio and don’t rely on other Though it is difficult to compare the
100–120 percent and therefore highly outside sources in order to fund the different economic downturns the
Unites States has withstood over the last
century (e.g. during the Depression of
the 1930s, farming was the primary
“Our focus on long-term banking is to create a portfolio
industry and the country’s economy did
that doesn’t allow the economy to put us in danger. not have the diversification it does
We have to manage those dollars as well as our own capital today), certain thought patterns have
to not risk our livelihood and to continue lending and always been in place whether the year
is 1933 or 2008. “Most banks have not
supporting the communities we’re in. been willing to chart the course for
Dan Walker, Chairman of the Board long-term returns and running a safe
Farmers & Merchants Bank and sound bank,” said Henry Walker.
“But the allure on high returns on

14 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E 2 N D I S S U E 2008
C O L U M N I N S I D E R

equity has a price. When the economy Through careful management of its tors are in a big hurt.”
turns, you’re going to take losses.” money, F & M has also grown by delv- Though cautious in assessing the
It’s hard to argue with the Walkers’ ing into expansion when appropriate. future direction of the economy, Henry
way of thinking. F & M is rated the Of its now 22 offices, most are de novo Walker can only control what’s right in
safest bank in California and has man- (start-up from scratch) branches, though front of him. “With respect to banking
aged to thrive as an independent, family the bank is also open to purchasing we are doing it right,” he said. “As for
managed operation from its inception. facilities inside or outside its current the economy, we’ll see what happens
With over $3 billion in assets, it also marketplace areas if the deal makes with consumer spending.”
has the flexibility to assist people who sense. The majority of its new branches In any case, the Walker brothers and
are being turned away from lenders to broke even within the first two years of the rest of the executive team (four peo-
help refinance existing mortgages or operation as compared to the normal ple with a combined 158 years of bank-
consolidate other forms of debt. The four or five industry-wide average. ing experience) are poised to ride out
bank’s legal lending limit exceeds $100 F & M now has roughly 80,000 cus- any storm. “From our point of view, we
million due to its unusually strong capi- tomers combined on the consumer and are very excited to continue in bank-
tal position. business sides, though more than three ing,” said Dan Walker. “We enjoy our
“Our focus on long-term banking is quarters of the bank’s portfolio is real jobs day in and day out. We are on call
to create a portfolio that doesn’t allow estate related. Despite documented to our staff 24-7 and are here to con-
the economy to put us in danger,” said downturns in that market, Henry Walker tinue the longevity of F & M. The liveli-
Dan Walker. “We have to manage those noted that the bank’s bases of operation hood of this bank and shareholder
dollars as well as our own capital to not — Los Angeles and Orange counties — responsibility is not something we take
risk our livelihood and to continue are among the better economies nation- with any ease in our minds. We live this
lending and supporting the communi- wide. “Consumer spending hasn’t bank…”
ties we’re in. We are maintaining the dropped significantly in the regions we
customer relationship through the loans serve,” he said. “Business is still moving Brian Simon is a freelance writer who
we have. The customers affected great- along and doing well, though some sec- lives in El Segundo.
est today are in real estate — either in
financing, or in sales — because of lim-
ited cash flow. But we can be patient
because our LTV still allows for a good
loan to give our customer time to turn
things around.”
Conservatism and safety do not equate
to being stuck in the Dark Ages, however;
even though a stroll through the bank’s
historic downtown Long Beach branch
might make one think the year is still
1923. The Walkers say F & M is commit-
ted to maintaining a high level of technol-
ogy in order to serve the growing
customer base on the information side.
Other important fringe benefits come
with the package as well. “Borrowing
from us is relatively inexpensive; there
are no points and low rates,” Henry
Walker said. “We also provide a strong
level of customer service, which can-
didly we do better than anyone else in
our competitive field.”
Dan Walker echoed the sentiment.
“We prefer to have a relationship with
our customer through deposits and then
service the loan. We want that customer
coming back to F & M. That’s why we
have so many multi-generational cus-
tomers.”

2 N D I S S U E 2008 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E 15
ICNOVL EUSMTNM EI N
N S
T I D
I NE SR I D E R
Processing Your Own
Payroll Creates a Drag
On a Growing Business
A FTER 25 YEARS IN THE PAY-
ROLL OUTSOURCING BUSI-
NESS, the most common
misconception I deal with every day is
that by processing their own payroll,
employers save money or maintain a
degree of control they would otherwise
have to give up as if their time is worth
nothing and there is no risk involved.
Like rent, payroll processing is a task
that produces no revenue, though it is a
necessary evil for business owners who
wish to stay in business. Time spent pro-
cessing payroll is time not available to
add to the bottom line, whether that
might be increasing sales, collecting
receivables, developing new products
or strategies or even taking some time to
relax and recharge the batteries. All of
these things are more productive than
payroll processing, which can only cre-
ate risk for the owner as well as cost
time and money.
If you are trying to grow your busi-
ness, all these procedures can become a
16 S O U T H B AY B U S I N E S S
drag on the process. Part of growing
smart is knowing how to outsource prop-
erly and payroll outsourcing is a smart
way 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 larger
and more complicated. Every single
paycheck includes at least five required
tax deductions in each state which then
must be added to other employer taxes
and voluntary deductions. Every one of
these items is an opportunity for a prob-
lem to occur. The late or incorrect
deposit of these tax liabilities can result
in costly penalties and interest for a
business owner.
For a company with as few as five
employees, a small boutique provider of
payroll services might charge as little as
$20 per pay period plus $1.65 per
check to completely outsource the task
of calculating payroll and properly pay-
ing all state and federal taxes. The time
I N S I D E R M A G A Z I N E
BY STEVE GOLDSTEIN
spent on payroll can be reduced to sim-
ply reporting the hours worked. The
payroll service provider shoulders both
the workload and the liability of the
payroll processing and business owners
can now focus on bottom line — run-
ning and growing their business.
The employer maintains complete con-
trol over when and how the payroll is
processed as well as wages, raises,
reviews, hiring, and benefits. Access to
information is also not a valid consider-
ation as business owners have complete
access to all reports, history and person-
nel data plus report writing capability
with a Web-based service. Since there
are no “contracts” in payroll, no
employer is ever forced to stay with a
service they find unsatisfactory for any
length of time. All payroll services can
be terminated with a simple letter or
phone call.
The biggest benefit of tax filing service
is that if ever a notice arrives from the
IRS or EDD, a client simply faxes that to
a service provider to be handled. These
notices often result from a mistake by the
IRS or EDD and are cleared up very
quickly — all without any effort from the
business once that fax is sent. Employers
who do it for themselves (for “free”) will
spend many hours responding to such
notices — hours away from the business
that can never be replaced.
Steve Goldstein is the founder and
owner of Payroll Management Solutions,
a South Bay provider of payroll services
for local companies. Steve can be
reached at 310-491-3467 or by email at
payrollmgmt@yahoo.com.
2 N D I S S U E 2008
S O U T H B A Y T E C H N O L O G Y
The Benefits of
IT Investment
in
a Down Economy
BY R. BOYD ZACK
D
URING 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 noticeable
line 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 today’s computer servers
is 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.
18 S O U T H B AY B U S I N E S S I N S I D E R
G U I D E
While the price of the technology may not seem to go down,
the amount of usefulness of the technology will go up at a
higher rate than the actual cost, thereby reducing the effective
cost of the technology. In other words, a $500 computer might
cost $500 or even $550 in the future, but what that future com-
puter can do will exceed what the current $500 computer can
do by far more than the price increase. This fact will help offset
other 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 of
the upswing. In recent years, declining revenue in the entertain-
ment industry has been very rough on some of the giants in the
field, allowing for the rise of underdogs such as Apple with its
iTunes technologies. While icons such as Warner Music Group
were slashing costs in every area of their business, Apple was
investing heavily in its unproven technologies in an area it had
not previously even had a presence.
Some areas of technology investment in tough economic
times can be easy to show a reasonable ROI in labor costs
alone. Take system integration: the process of connecting sys-
tems together in such a manner that they can share data and
become a common source of information. By integrating sys-
tems together, reductions in labor costs through a decrease in
redundant data entry or elimination of work or errors can be
realized. At the same time, increases in production or in features
can 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 computing
power of today’s computer servers is 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 availabil-
ity, but they also consume less energy. This means they generate
less heat, which can further reduce energy costs associated with
server room cooling. Again, when calculating the ROI from such
an investment, we cannot assume that energy costs will remain
M A G A Z I N E T E C H N O L O G Y G U I D E 2
constant or even increase as they have passing the increases to our customers or uating the issue in those areas.
historically. Instead, we must assume they cutting back in other areas. What we need to do is find ways to get
will increase at an ever climbing rate. One problem with taking either of more from what we have without the
Additionally, we should expect and even these two approaches is that they are sim- wholesale cutting and slashing that dimin-
plan on making greater use of our computer ply unsustainable. When we pass our ishes our value to our customers. Often,
and technology resources to enable us to do increased costs to our customers, it forces accomplishing this can be challenging at
more with less. With current versions of them to either do the same with their cus- best and downright painful or potentially
Outlook, users are finding they can retrieve tomers, cut costs in other areas or reduce fatal at worst. One example of a counterin-
voice message through e-mail and hold their spending with us. Similarly when tuitive approach to raising costs is to invest
meetings without leaving their desks. we cut costs in reaction to increases in
continued on Tech Guide page 4
Through the use of remote desktop applica- costs in other areas, we tend to be perpet-
tions, workers are finding increased produc-
tivity operating from home, while still
having the full computer resources found in
Small- to Medium-Sized Business?
the office. And with current cell phone (and
PDA) technology, we can access our e-mail
We’re Your Outsourced IT Department!
anytime and anywhere.
ɻ Network more efficiently for your business flow
Lately it seems we can’t pick up a ɻ Benefit from custom programming & support
paper, watch the news or visit any on-line ɻ Vacation fill-ins for your regular IT staff
news source without hearing about the ɻ Fast response & quick solutions
economic forecast. Are we headed ɻ Experience with a wide range of industries
toward a recession? Are we in a reces-
sion? How bad will it get and how long
will it last?
DME (310) 991-1464
The answers to these questions Computer Consulting Services 18402 Hawthorne Blvd., Suite C, Torrance, CA 90504
become crystal clear only after change
has taken place. And we know we are
through the worst of it when we see a
sustained improvement. One challenge
we must face and try to understand is that
what we do and how we respond while
we are in it has a dramatic effect on the
downturn itself. Sometimes a seemingly
logical response to a bad situation does
nothing more than make that bad situa-
tion even worse.
For example: A logical response to a
downward trend in sales may be to cut
costs across the board. The problem with
this type of response is that it can very
easily make the trend worse. If sales have
declined due to additional features of a
competitor’s product, an increase in prod-
uct development funding could have a
much more positive effect on the overall
health of the organization. If the decline
is the result of perceived value, an
increase in marketing or even an increase
in price might better align the company
with its targets.
Unfortunately, business is not always
as simple as analyzing the situation and
brilliantly coming up with the solution
that is counterintuitive. When faced with
higher costs, we tend to look at either

3 T E C H N O L O G Y G U I D E S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E 19
S O U T H B A Y T E C H N O L O G Y
BENEFITS OF IT INVESTMENT
continued from Tech Guide page 3
in people. While we often look at training
in times of plenty, we must not set it aside
in lean times. Take management training,
for example. The goal of management is to
accomplish objectives through others. With
effective management training, we can
often learn to accomplish more through
others, thereby either reducing our costs or
increasing our offering. With effective time
management training, we can learn to
spend more time in our high payoff activi-
ties and less in our lower return tasks.
Another means of getting more from
what we have in the area of IT is to
expand or refine our systems to do a bet-
ter job at saving us time and money. Take
a poll of the business system users within
your organization and ask them what
could make their job easier and what
areas of the systems are difficult to use.
Often you will find that with relatively
minor adjustments to the systems, major
productivity gains can be achieved. You
may also find that a complete replace-
20 S O U T H B AY B U S I N E S S
G U I D E
ment of a system (or systems) can save
you a significant amount in labor costs
through increases in efficiencies.
When evaluating returns on such
investments, 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 are
going up and will continue to go up,
while some are going down and will
effectively continue to go down. If you
were considering purchasing a Toyota
Prius about 18 months ago, you may
have looked at the mileage, number of
miles you tend to drive and the price of
the car and then compared that cost to
the truck you were driving at the time that
was 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 gas
was going to increase at the slow rate it
had been over the prior several years.
Taking the current $4.00-plus/gallon
price, you could be looking at an eight-
year payback. More realistically, the price
I N S I D E R M A G A Z I N E
of gas is not going to do much else other
than continue to increase at higher rates,
resulting in an even quicker payback.
We can bank on the fact that com-
modities produced from natural resources
will continue to go up while technology
products will effectively continue to fall in
actual cost. Putting it into context, the
actual cost of a loaf of bread will continue
to rise due to the costs associated with
producing a loaf of bread and the amount
of 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 will
enable our businesses to survive these
rough economic times, we need to look at
payoff over longer periods of time than we
may be used to considering. Technology is
going to continue to progress at a very
rapid pace, even keeping up with the rais-
ing price of gas. Our challenge is to make
effective use of the technology available to
us and to not waste it away as we have
done with gas. You have more computer
power on your desktop than was on board
the first space shuttle, and more in your
cell phone than our astronauts brought to
the moon. Are you using it to the potential
under your fingertips?
R. Boyd Zack is the president and CEO of
R.B. Zack & Associates, Inc, a Torrance,
California-based company with 27 years of
experience in developing, integrating,
implementing, maintaining and support-
ing custom business software and IT ser-
vices. “Building Business Applications that
Work Since 1981.” Boyd can be con-
tacted at Boyd.Zack@rbza.com or via the
Web at www.rbza.com or by phone at
310.303.3320.
The 2008 South Bay Technology Guide
is a special supplement of:
Main Website: www.BusinessInsider.us
Classified Advertising Site:
www.TheBizBoard.net
BIM Publications —
Business Insider Magazine
P.O. Box 1032
Palos Verdes Estates, CA 90274
(310) 872-9732
info@BusinessInsider.us
©2008 BIM Publications
All Rights Reserved
T E C H N O L O G Y G U I D E 4
Technology Providers
Alpha Computer Support, Inc.
Alpha Computer Support is a small office-home
office/small business consulting company. We are cus-
tomer oriented and as a small business ourself, we
understand the value of keeping an eye on the bottom
line. 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 and
upgrades. Network services include: VPN, LAN/WAN,
firewalls, routers, wireless networking, network cabling
and troubleshooting and DSL/cable modems.
310-374-0666
611 Green Lane, Redondo Beach, CA 90278
www.alphacomputersupport.com

The Cyber Boardroom

The Cyber Boardroom offers three amazingly
equipped conference rooms of various sizes and
unique character that are ideal for any occasion. Every
room (The Royal, The Lennox and the Manchester)
comes equipped with a 40-inch monitor that can be
used for everything from television viewing to pro-
jected presentations, a telephone capable of confer-
encing up to four outside parties, and our exclusive
“Gigabyte” high-speed Internet access either through
a wired or wireless connection. Each room is an inde-
pendent sound zone with an adjustable volume con-
trol for presentation audio or ambient music. The
Cyber Boardroom also has a Wi-Fi lounge and a full
range of powerhouse computers for office or graphic
work, scanners, faxes and printers. 310-393-7904
4451 Redondo Beach Blvd., Lawndale, CA 90269
www.TheCyberBoardroom.com

DME Computer Consulting Services

If you run a small- to medium-sized business in the
South Bay, save time and money by outsourcing your
IT department to DME Computer Consulting Services.
Keep your network running efficiently, improve your
workflow and benefit from custom programming and
support. We also handle vacation fill-ins for your IT
staff. Get a fast response and quick solutions from an
A+ Authorized service center with experience in a
wide range of industries. 310-991-1464
3418 W. 224th St., Torrance, CA 90505

Holden-Andrew Corporation
Since 1991, Holden-Andrew Corporation has deliv-
ered systems integration and support services to its
clients. With principal staff coming from security,
finance, and aerospace related sectors, the firm has
always maintained systems security as its foundation.
With Holden-Andrew Corporation, you’re not only
bringing on a company with industry partnerships, but
a leader in the Information Technology field. Through
its suite of Evolution Connect Services, Holden-
Andrew is leading the way for companies looking to
utilize managed and cost effective technology solu-
tions. Using products like VoIP Systems that deliver
powerful reporting tools, hosted application servers,
electronic and print marketing, interactive website
design and data storage services, Holden-Andrew gives
companies 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 executive
Melissa Stewart or e-mail her at MStewart@HoldenAn-
drew.com for more information. 310-792-4999
3528 Torrance Blvd, Suite 320, Torrance, CA 90503
www.holdenandrew.com

IMiN Instant Messaging

IMiN is the first true secure instant messaging solution
designed specifically for business users. IMiN is a fully
continued on Tech Guide page 7

5 T E C H N O L O G Y G U I D E S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E 21
S O U T H B A Y T E C H N O L O G Y
Want Website Visibility?
Get Prepared For Spiders
BY CAYLEY VOS
N
O, NOT THE CREEPY CRAWLERS THAT INVADE YOUR
HOUSE… THERE’S NOTHING CREEPY ABOUT THE SPIDERS WE’RE
TALKING ABOUT — these crawlers (that’s 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.
Because search engine algorithms are kept secret and are
frequently changed, preparing a site for high ranking and
keeping it there is a demanding task; one that is never fin-
ished. There is no right and final answer, but there are much
discussed guidelines that follow search engine best practices
and can virtually guarantee you a slot on page one. Search
Engine Optimization, or SEO, is the generic term for the pro-
cess of tuning a website so that it achieves the best possible
search 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 and
engage with, as well as copious copy, well labeled images
and keyword-rich title tags for search engines. This is not a
slam dunk task.
Search engine spiders like an interesting buffet of copy,
keywords, text and links. You want to have 200–500 words of
copy per page, well labeled images, plentiful navigation links
and a keyword-rich title tag. Common problems are sites that
are heavy in graphics, interactive media/flash/video and
audio. An easy test to see if your website fails the text test is to
use the view source button on your browser or use this auto-
22 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E
G U I D E
mated tool: www.netpaths.net/tool/spider .
The web crawler has not dropped in to try an entrée or
two. It’s there as a sort of Digital Health Department with a
critical eye and a long checklist: — Are there incoming links
from other websites? — What is the quantity and quality of
content? — Is the content grammatically correct with no mis-
spellings? — Is the site unique or redundant? — How many
internal links are there and how many are broken? — How
many unique visitors, page views, revisits and conversions
can 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 don’t 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 value
services 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.
T E C H N O L O G Y G U I D E 6
TECHNOLOGY PROVIDERS
continued from Tech Guide page 5
scalable and secure instant messaging and communi-
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market. 310-303-3320
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www.ebs-imin.com
range computer environments. RBZ&A brings more
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cated customer. RBZ&A’s extensive experience with
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with an in-depth understanding of business processes
makes it uniquely qualified to migrate older systems
onto new platforms. 310-303-3320
23844 Hawthorne Blvd. #101, Torrance CA 90505
www.rbza.com
WeFixPrinters.com
WeFixPrinters.com has been repairing laser/ink jet
printers and fax machines in the Greater Los Angeles
area for almost 20 years. We also sell toner, ink and
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and e-commerce site, which features over 6,500 office
products. WeFixPrinters.com provides on-site service to
small and large companies, and services most major
makes and models. We are the South Bay’s only autho-
rized service facility for Canon inkjets, photo printers
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Konica Minolta Business Solutions

Konica Minolta Business Solutions USA Inc., a leader in
advanced imaging and networking technologies for the
desktop to the print shop, brings together unparalleled
advances in security, print quality and network integra-
tion via its award winning line of bizhub multifunction
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tems; magicolor desktop color laser printers and all-in-
ones; and Pagepro monochrome desktop laser printers
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ized applications.Headquartered in Ramsey, NJ, Konica
Minolta delivers expert professional services and client
support through an extensive network of direct sales
offices, authorized dealers, resellers and distribution
partners in the United States, Canada, Mexico, Central
America and South America. 310-214-6696
879 190th St., Suite 200, Gardena, CA 90248
www.konicaminolta.us

Netpaths
You can get a website anywhere, but Netpaths can get
you to the top of the search engines. Find out more
about how your website can be at the top of Google.
We offer you a forward thinking Web design company
focused on providing high-value services to the online
market. You can improve the value of your business
with a well designed and promoted website. We
design search engine-friendly websites that can attain
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23940 Madison St., Torrance, CA 90505
www.netpaths.net

R.B. Zack & Associates, Inc.

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

7 T E C H N O L O G Y G U I D E S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E 23
S M A R T G R O W T H S T R A T E G I E S

Strategic Planning Made Easy

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

C OMPANIES OFTEN HAVE TROUBLE MAINTAINING

GROWTH even in favorable economic conditions. The
modern business landscape is ever changing: The infor-
mation highway remains supercharged; technology continues to
develop at warp speed, distribution channels change unexpectedly,
and new competitors spring into action every day. And if growing a
business wasn’t challenging enough, business leaders now face
another uphill battle. Whether or not current economic uncertainty
gives way to a full-blown recession, most economic pundits agree
that a business slowdown is unavoidable.
In today’s complex business environment, strategic thinking is
essential for sustaining a long-term competitive position. Corpora-
tions recognize this necessity and invest ample resources towards
strategic planning efforts. However, small-to-mid-sized companies
often fail to engage in strategy development activities. As a result,
subtle changes in the competitive landscape go unnoticed and once
a new technology, process or change in cost structure enters the
marketplace, the incumbent’s competitive advantages disappear. In
response, 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 is
often attributed to an absence of time and understanding. Owners
and company executives tend to become absorbed with the daily
continued on page 27

2 N D I S S U E 2008 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E 25

S M A R T G R O W T H
The Pros
and Cons of
Popular Growth
Strategies
BY DAVID WHITEHEAD
A S AN ENTREPRENEURIAL PUB-
LISHER WHO HAS worked for
both large and small publishing
organizations, “growth strategies” for busi-
nesses is a topic I have strong feelings
about. I went through a misguided five-
year strategic plan at a regional newspa-
per that crashed and burned in three. I
also served on the front lines with another
company that destroyed itself while exe-
cuting an aggressive growth strategy.
Executing a deliberate growth strategy
is something most companies do at some
point. Sometimes growth makes sense
when the demand is there and new mar-
kets are wide open. However, highly
questionable growth strategies often origi-
nate from pressure by creditors or
investors, especially with publicly held
26 S O U T H B AY B U S I N E S S
C O L U M N
S T R A T E G I E S
companies. And all too often they are
rationalized by making false assumptions
about the feasibility of building on the
company’s initial success.
Know the Risks
in Growing a Business
I leaned from personal experience that
certain elements must be in place before
any decision should be made to deliber-
ately grow a company beyond its natural
parameters for expansion.
First, the principals need to be fully
aware that any growth strategy is a ven-
ture into the unknown. This holds true
regardless of the level of research con-
ducted up front. That means aggressive
growth is always a calculated risk. The
principals must evaluate their own toler-
I N S I D E R M A G A Z I N E
I N S I D E R
ance for risk as they would if they were to
engage in a speculative investment ven-
ture. It’s really no different when you think
about it because any investors you bring
on board are certainly speculating on
your success. Ask yourself if you would
invest in somebody else’s company who’s
proposing what you are; and base your
decision on answers to tough questions
you would surely ask if you didn’t own
the company yourself. The answers to
these kinds of questions will determine if
you are headed in the right direction.
Grow for the Right Reasons
Second, never decide to grow an existing
venture simply because you want it or you
think you are somehow entitled to it as a
reward for your early success. The market
must genuinely demand your heightened
presence or you are doomed from the
onset. Never fall in the trap of ignoring
market data or not bothering to gather it
when your company’s internal rhetoric
makes it sound like the best idea ever con-
ceived. All departments, especially the
finance and marketing teams, must do their
due diligence to determine viability and
weigh risks before any decision is made to
go forward. And for the good of all, they
must be prepared to disappoint people if
they determine it is not the time — or tem-
per their plans if they are reaching too far.
continued on page 29
2 N D I S S U E 2008
S M A R T G R O W T H S T R A T E G I E S
SMART GROWTH STRATEGIES
continued from page 25
operations of the company and focus on immediate tasks instead of
long-term goals. Some company owners may recognize the impor-
tance of strategic planning but simply lack clear understanding of
the process. While vast libraries exist on the subject of strategic plan-
ning, many authors focus on the concerns of large corporations and
key in on issues that are non-applicable to smaller organizations.
Strategic planning shouldn’t be complicated. In its simplest
form, a strategic plan is a clear vision of a company’s long-term
position based upon the value-add it provides to customers and
shareholders. Strategic plans require knowledge of fundamental
industry shifts and how customers and competitors are expected to
respond to those changes. Flexibility is an inherent characteristic of
strategic plans, which should be easily adaptable to the current
market. Evaluating strategic options is based on identifying choices
that are most capable of providing value for all stakeholders and
align with the organization’s 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 your
organization’s core competencies. Your answers to the following
three questions can help develop your starting point.
1. What business are we in?
The answer to this question isn’t always the most obvious. It is not
necessarily tied to the product or service your company offers. For
example, insurance companies have long recognized that they are
in the business of selling security and assurance. Small retail outlets
such as 7-Eleven stores understand that they are in the business of
selling convenience. Whole Foods realized that it was in the busi-
ness of social responsibility and identified a large consumer base
that would respond to this message. As a result, the market chain
has been rewarded with higher margins than commonly seen in a
traditional grocery store. Companies that understand what business
they are in are more adept at identifying niches, following trends
and responding to market demand. This flexibility makes them
more successful at formulating sustainable businesses models.
2. What changes are occurring in our industry?
New technologies can change the competitive landscape
overnight. Moreover, competitors may emerge from the most unex-
pected places. Today, candy bar companies compete with digital
music providers for teenagers’ discretionary income.
Make it a point to maintain a constant dialogue with your
customers, suppliers and industry experts. Schedule quarterly
meetings with your sales staff to learn what they are hearing in
the 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 your
competitive edge is to continually innovate. Upgrade your tech-
nologies, hone your internal processes or develop more efficient
distribution channels.
Core competencies can be repackaged, stripped down, re-bun-
2 N D I S S U E 2008 S O U T H
dled and reconfigured in order to appeal to a changing market-
place. Technology companies have a firm understanding of this
concept. New electronic gadgets are introduced to the market and
are quickly followed by advanced models. These products are in
turn succeeded by stripped-down, less expensive models that
appeal to a large consumer base. Fast food chain McDonalds built
an entire marketing campaign around the Happy Meal , a shining
TM
example 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, all
companies must participate in strategic planning activities. In the
new economy, knowledge has trumped raw materials as the essen-
tial business resource. Strategy development and execution is crucial
for long-term business success. Don’t 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 executives
may feel that a loss is swift and unexpected. Markets deteriorate
slowly over time and leave a trail of clues along the way. More
often than not, these clues go unnoticed. Usually the cause of a
company’s failure was an inability to identify looming changes in
the business environment and adjust corporate strategy accordingly.
One of the contributing factors to the lack of business acumen is an
executive’s 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 of
generation businesses or legacy organizations. Where once a busi-
ness model could be counted on to provide a successful foundation
for at least a decade, today’s companies may need to revamp them-
selves in as little as a year or two. Creative destruction is constantly
reshaping our business landscape. As a result, companies cannot
expect to operate from a position of assured continuity.
Financial Considerations
Strategy without financial analysis is incomplete and subject to
failure. Continual growth under any economic condition requires
a 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 adopt
strategies 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 qualified
CFO. Controllers with only basic accounting procedures are miss-
ing the advanced analytical skills required for close financial
examination of a strategic plan.
Industries are not created or destroyed equally. Some companies
are better positioned for economic uncertainty. Executives who
strive to become increasingly strategic in their financial decision-
making and engage in vigilant oversight of the company’s financial
condition have an edge over their competitors. Financial vigilance
includes evaluating the company’s fundamental economic position
by analyzing the industry, customer profitability, financial perfor-
mance, cost structure, availability of capital, debt leverage and
retained earnings.
The balance sheet will reveal your debt leverage and the
continued on page 28
B AY B U S I N E S S I N S I D E R M A G A Z I N E 27
 C O L U M N
S M A R T G R O W T H S T R A T E G I E S
SMART GROWTH STRATEGIES
continued from page 27
strength of your borrowing power. Retained
earnings examine the past performance of
your business model and your manage-
ment team. If the retained earnings reveal
past negative growth, the business model’s
ability to take an additional hit will be
questionable at best.
Revenues and costs should be carefully
monitored. A revenue loss may be
attributed to an overall reduction in
demand or foregone market share due to a
competitor’s introduction of a new product.
Operationally, the cost to bring the product
to market may increase or it may become
necessary to invest in new technology or
human capital. If additional costs cannot be
passed on to the consumer, pricing power
squeezes margins and net profit is ulti-
mately reduced.
Cost structures delineate your profit
margin and your company’s ability to
absorb overhead costs. Higher margins
allow greater cost flexibility. Additionally, a
reduction in overhead may be easier than
cutting production cost, particularly if infla-
28 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E
I N S I D E R
tion is a competing factor.
In the case of a company with a less
favorable financial position, innovation
may be the only solution. Since negative
growth and declining retained earnings
impact the balance sheet and reduce a
company’s ability to obtain debt or equity
investment, your business may need to
form a strategic alliance or joint venture to
allow reorganization without a substantial
reinvestment of funds. How do you ensure
that your firm’s desire for high product
quality and superior customer service trans-
fers to the entire partnership? Incorporate
best practices and monitor processes as you
would if they were operating directly under
your 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 processes
across the organization. Your partners will
likely be more than happy to support the
goal since it is in their best interest to do so.
If conformation proves impossible, look
elsewhere. There is always another firm
willing and capable to take their place.
The following outline provides a brief
summary of key takeaways to help you
develop your company plan:
• Watch for future trends and be pre-
pared to change your strategy
• Use technology to reduce cost and
drive efficiencies
• Strategic alliances (if well formed) can
provide a competitive advantage
• Keep a close eye on your financial
position
• Profit margins are not guaranteed —
competitors can change everything.
What’s the bottom line? Regardless of
economic conditions, your industry, busi-
ness model or financial position, company
executives should have a growth strategy
that is inclusive of financial performance
measures.
Lori Williams is the Chief Strategist for LW
and Associates (www.lwandassoc.com), a
strategic advisory and research firm, pro-
viding businesses with growth strategies
designed to increase revenues, profitability
and productivity. She is best known for
developing strategies that integrate finan-
cial modeling with strategic marketing to
build long-term sustainable growth. She
can be reached at lori@lwandassoc.com
310-473-9064
2 N D I S S U E 2008
S M A R T G R O W T H S T R A T E G I E S
PROS AND CONS OF POPULAR GROWTH STRATEGIES
continued from page 26
Make Sure You Are Capitalized
Beyond Your Projections
Smart 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 else
who’s in a better position to lose it than you are. Know that any
data you gather that returns positive indicators for growth can be
immediately vanquished by unexpected variables, including a
change in trends in your industry, a downturn in the economy,
competition you didn’t anticipate and changes in the structure of
your company that alter your profit/loss statements in an undesir-
able way. That said you must choose the growth course that fits
your tolerance for the level of risk you can at least calculate and
also realizes your desired objectives.
Growing by Your Own Bootstraps
First let’s examine the most common growth strategy, which is
also one of the most tedious, resource-consuming and often the
riskiest. That is growing by your own bootstraps using a direct
sales effort with your own money or borrowed money that
requires the principals to personally guarantee debt even if their
status is LLC or incorporated. If you are a small operator trying to
get to the next level, expect credit terms that pierce the corpo-
2 N D I S S U E 2008 S O U T H
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 will
not be paying for itself for some time — if at all. Even if your early
sales numbers sound exciting compared with your previous
efforts, your spending on the growth process will likely be much
greater than your early returns. You won’t really be boosting your
profits for some time and only if the new economics of your modi-
fied business model allow that to happen. This strategy really can
put the principals in a position where they are going to get buried
if it doesn’t work out. This is especially true when they commit
essential personal capital or worse, and go heavily into debt with
the payback entirely dependent on the growth strategy’s success.
Whatever your projections, you won’t really know how long it
will take or how much it will cost until you are well committed. If
you misread the market before you start, you are dead. If you’ve
dug in deep, you have put yourself in a position where there is no
good exit strategy. I’ve known people who dug in so deep they
risked personal financial ruin whether they ceased operations or
not. As a result, they didn’t quit when they should have and only
made things much worse for themselves and everyone else in the
end. Suffice to say, the “grow or die” position is best avoided. If
you are not a gambler by nature and conservative in your finan-
cial outlook, this is definitely not the strategy you want to use. It
continued on page 36
B AY B U S I N E S S I N S I D E R M A G A Z I N E 29

S M A R T G R O W T H S T R A T E G I E S
Y OU’VE IDENTIFIED A GROWTH STRATEGY that is
rapid, will capture a significant amount of market
share and will require an investment in staff, market-
ing and an acquisition or two. Or you’ve created a new prod-
uct extension that is hot, but needs capital to properly launch,
create a marketing campaign, and hire staff. The money
required is substantial and having the company solely bear
the full financial risk could put a stranglehold on an otherwise
well-running operation.
Having an investment partner may be the way to take
advantage of the opportunity and put the pedal to the metal
on growth. So how do you begin? Where do you look and
what will you need?
In his book Seven Habits of Highly Effective People, Steven
Covey coined the phrase, “Begin with the end in mind.” To be
successful with your opportunity, you must help other people
be successful by helping you. Begin your process by clearly
envisioning what the end result of your opportunity will look
like and determine how those who help you also add to their
own success.
When attracting outside investors, one of the first things
they will want to know is: What is the exit strategy, how will
value be created and how long will it take before there is a
liquidity event? The businessperson who has spent the time
thinking this through stands a much better chance of attracting
the right kind of partner for the desired result. There are finan-
cial investors, strategic investors, investors with a relatively
short time horizon, those with patient money who can wait
10 years or more before an exit, and many other types.
One of the first questions to ask yourself is what are you
looking to accomplish? Is the goal to create an asset for future
30 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E
C O L U M N I N S I D E R
sale or do you simply enjoy running the operation and have
not really thought about what you’ll do in 10 years? Either one
is fine, but each one requires a different way to set up and
manage the business.
Building an organization to maximize value means taking a
hard look at the management structure and the processes to pro-
duce the product or deliver the service. Is the company driven
by a charismatic CEO or is there a strong management structure
in place with policies and procedures that will easily allow the
business to continue should the CEO suddenly pass away?
A company that has invested in management and developed
processes and procedures allowing the business to run on its
own will generally attract investors more readily and command
a higher sale price than one that has not invested in such an
organization. Conversely, someone who is happy running the
company and has no real desire to look too far down the road
can run a very nice and profitable business. It just means the
search for capital will have to take that into consideration and
find investors who are a good fit for that kind of business.
Take a good hard look at how much money you think
you’ll need and then reevaluate considering how much
money you will likely need to do it right from the start. Most
businesspeople tend to underestimate the amount of capital
they need and end up throttled back; the opportunity may not
make it. Do the hard work to come up with the numbers to
implement the project and don’t forget to include any market-
ing, advertising and additional labor or management that
might be required to do it right from the start.
Much of the work to find an investment partner can be
done on your own, provided you have a considerable amount
of time to invest in the process and are adept at writing com-
2 N D I S S U E 2008
S M A R T G R O W T H S T R A T E G I E S
pelling executive summaries for financial markets. The pro-
cess is actually kind of fun, but it really does take commit-
ment and time to create a summary, contact the appropriate
people, go to the networking meetings where money gathers,
and ultimately get a deal done.
A good investment banker or financial consultant generally
has the resources to get connected with the right people and
knows where to go to find investors for specialized compa-
nies. At the end of the day, you’ll still need representation
from an investment banker or lawyer who has expertise in
capital to draft, review and provide counsel on the documents
and the process.
So how do you find and qualify an investment banker?
Talking to your trusted advisors first, the CPA, lawyer, insur-
ance agent, investment advisor, they should each be able to
point you in the right direction if not directly recommend
someone. Calling a trade association in the particular industry
could help generate a lead. You can always try to Google
“investment banker” and the desired industry.
Like any other business relationship, chemistry is key to
success. The more you “click” with your consultant or invest-
ment banker, the better and more enjoyable the process will
be. And the better your relationship, the easier their job will
be in finding not only the money for your venture, but also
the capital partner with a personality that will fit with yours.
A good investment banker becomes an integral part of your
team of trusted advisors.
Be clear in your mind on the timeline to reach your goal
and be sure to convey that to any interested party. Some
investors like to see an exit strategy between four and five
years. Some are more patient and can go longer, while others
may go indefinitely if the business is profitable and adds value
to an investment portfolio.
Debt financing through banks or other sources is beyond
the scope of this article, but it is a viable option depending on
how much money is needed, how the loan will be collateral-
ized, how much leverage the company’s balance sheet can
support and how much free cash is available to service the
debt. Debt allows the owner to maintain 100% control of the
company and doesn’t dilute any ownership.
2 N D I S S U E 2008 S O U T H
Like any other business relationship,
chemistry is key to success.
The more you “click” with your consultant or
investment banker, the better
and more enjoyable the process will be.
And the better your relationship,
the easier their job will be in finding
not only the money for your venture,
but also the capital partner
with a personality that will fit with yours.
The drawback to debt is that there may be a personal guar-
antee required. If it’s an SBA loan that’s federally guaranteed,
the U.S. Government will usually want borrowers to put up
their primary residences as collateral in case of default.
A realtor friend once shared a very simple, very smart
adage: “Never encumber where you slumber.” It might seem
like things are going great and nothing can go wrong, but
unexpected things happen (e.g., 9/11). Business owners have
enough to keep them awake at night without adding the risk
of losing a house into the mix. Please ponder this very care-
fully before personally guaranteeing anything.
Friends and family are the tried and true way to go if the
amount you’re looking for is not that substantial. Amounts
ranging from several thousand dollars to sometimes even hun-
dreds of thousands may be possible to gain from friends, fam-
ily and business friendships. This route does have a way of
souring friendships and straining family relations when the
business venture doesn’t turn out as well as it sounded when
they lent you the money.
In my opinion, if money is coming from friends and family,
it’s best to borrow it and pay it back. Having a family member
as an owner in your business may not make for the best situa-
tion. It just depends on the kind of relationship you have with
family members. If things do go south, could you see yourself
continued on page 32
B AY B U S I N E S S I N S I D E R M A G A Z I N E 31

S M A R T G R O W T H S T R A T E G I E S
FINDING THE RIGHT INVESTMENT PARTNERS
continued from page 31
involved with them in the business? Or having a family mem-
ber force a sale of the business to get money back?
Angels may be more inclined to risk investing in a startup
company than other investors might be. Angel Investors or
Angel Groups are generally composed of high net worth indi-
viduals who have made their money in particular industries
and wish to invest in other businesses, generally in the same
or related industries. For example, Angel Groups in Silicon
Valley may tend to skew more toward technology companies.
Many groups can be found on the Internet; most require
some kind of pre-screening process to evaluate the Executive
Summary and/or an introduction through someone who is
connected to the group. Once invited, there may be a fee
required for the opportunity to make a presentation, filtering
only those who are very serious about their search for capital.
Angel Groups can provide valuable feedback on refining the
presentation and, if an investment is made, a good pool of
brainpower to help guide the project. An Angel investor may
take a minority ownership position. They may stay out of your
way as long as you’re making the projections or they may want
to have a seat on the board of directors. Or, they may not.
Angels may provide more patient money; that is, they may
not necessarily be looking for a three- to five-year exit strategy
— although they certainly will want to know what their exit
strategy will look like before making the investment.
Private Equity groups are similar to Angels but they man-
age significantly more money and require much higher invest-
ment levels than the others. They’ll definitely want a seat on
the board and, like Angels, may stay out of your way or they
may demand a significant amount of control. It really just
depends on the “personality” of the Private Equity group.
Some are comfortable with a minority position and others
want majority.
Private Equity groups generally want to invest in companies
that have a track record. They also like to see good manage-
ment. They’ll invest in growth strategies, acquisitions, man-
agement buy-outs, etc. There are groups that specialize in
troubled companies and turn-around situations and the
Turnaround Management Association is a good place to look
for help.
There are other investment options, including Venture Cap-
ital groups and Mezzanine financing, to name a few.
If you choose to make some calls yourself to Private Equity
groups, please be respectful of their time by having a very
brief synopsis of the opportunity you are presenting, the
amount of money you are looking for and ask if this is the sort
of project that interests them. If not, then ask if they know of
someone who might be interested. If they are interested,
they’ll ask for a write-up. In that case, send your Executive
Summary. If it’s not a right fit, then don’t be discouraged; just
move on to the next one until you find the right fit.
A good investment banker will already have an idea of
whom to to contact for direction. Having gone through the
32 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E
C O L U M N I N S I D E R
Having a strong idea
of how much money you’ll need is critical —
not only because you want to make sure
the venture is properly capitalized,
but also because the amount will determine
what kind of capital is best for you.
Generally speaking, an investment below
$10 million these days is considered
a small deal and is a little more difficult to find.
process both on my own and with an investment banker, I now
tend to lean toward having a good investment banker to help.
Having a strong idea of how much money you’ll need is
critical — not only because you want to make sure the ven-
ture is properly capitalized, but also because the amount will
determine what kind of capital is best for you. Generally
speaking, an investment below $10 million these days is con-
sidered a small deal and is a little more difficult to find.
Crossing the $10 million mark puts you on the radar screen
of larger investment partners, private equity groups and funds
that hold so much money that they are forced to do fewer
(and larger) investments due to limited manpower to review
so many prospective investments.
Good investment bankers will help work through the plan
and the financial requirement. Usually, they’ll write the busi-
ness plan for you. A clear Executive Summary is the opportu-
nity to showcase the way. It is a simple document giving a
40,000-foot overview of the opportunity being presented.
Keep it brief, concise and to the point.
Tell a little about the market, what you propose to do, dis-
cuss the opportunity, describe the competition and how
yours is unique. Include bios of the senior management and
show summarizing financials. Briefly discuss the operation
and finally how you see the investor benefiting financially at
the exit.
So what associations are there to help in your quest for
capital? Some useful organizations include The Association
for Corporate Growth, the Turnaround Management Associa-
tion and the Commercial Finance Conference of California.
There are many other terrific organizations, both local and
national, that can help.
Turn to your trusted advisors for guidance, use the Internet
for resources and get a good investment banker on your team.
Begin with the end in mind and the extra horsepower that
you’ll get from outside investors will both challenge you and
help speed you along on your way to realizing your goals.
Ed Burzminski is a Business and Management Consultant help-
ing business owners realize maximum performance and value
from their business. He was President and co-founder of Perfor-
mance Publishing Group, Inc. in El Segundo, CA. You can
email Ed at: edburzminski@roadrunner.com.
2 N D I S S U E 2008
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

STIMULUS PACKAGE expectations in line with the new tightening some rate quotes, choose the lowest rate,
continued from page 12 trends in lending, you won’t be blindsided and then you’re done. Isn’t it about time
credit score. If your credit score is one by the sometimes arduous roadblocks you put as much planning into financing
point lower than a benchmark set by a erected in your path along the way. Make your home as you do planning a vacation?
lender, you pay more — a lot more. sure you plan ahead. Consult with a mort- If you do, it can pay off big. Either way, it
Before last August’s credit crunch, the gage professional months in advance of promises to be very stimulating!
pendulum had swung too far in the loose your intended purchase or refinance. Find
direction, with what some have called out about your options. Identify the strong Ken Roberts is a mortgage planner with
“mirror underwriting:” Fog a mirror and points and weaknesses in your qualifica- nearly 30 years experience in the South
you’re approved. Now the pendulum has tions. Have a game plan. Gone are the days Bay real estate market. Ken can be
swung waaaaay too far in the opposite of being able to make a few calls, collect reached at (310) 792-7090.
direction. For all lenders, times have
changed. The message is when getting real
estate financing today, be prepared to jump
through numerous hoops. Expect guide-
lines to defy logic. You will have to write
letters of explanations for trivial things. You
will need to provide full documentation
and in some cases, even over-document
every source of income you have. Cash
reserves are very important, with many
banks requiring 6–12 months mortgage
payments in reserve. If you have circum-
stances, tell the story of what happened
and why. Banks are returning to the days of
subjective underwriting, and a human
being will make a judgment call about
your qualifications. If one bank says no,
another may say yes. Appraisals are being
scrutinized and appraised values are being
reduced or cut in appraisal reviews. The
rates for Jumbo loans should creep closer
to Conforming over the next year or so.
Normal will never be as things were just a
year ago. This is all an overreaction that
will ease some over time. Right now, banks
and lenders want to lend money only to
people who clearly don’t need it!
So as long as you go into a mortgage
transaction today with eyes wide open and

2 N D I S S U E 2008 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E 33
 C O L U M N I N S I D E R
S M A R T G R O W T H S T R A T E G I E S

Cash Management for

Growth During Hard
Economic Times
BY MICHELLE KING

G ROWING A BUSINESS DURING HARD ECONOMIC

times can be challenging. Yes, a business can still
actually grow during an economic downturn. How is
this possible? Oftentimes, opportunities for growth arise out of
economic downturns. Planning and a sound strategy can maxi-
mize a business’ readiness to improve current and future perfor-
mance. Preparation to fully leverage strengths can also serve as
the catalyst for creating the fundamental strategies necessary to
survive within the most hostile business environment.
This is the perfect time to improve the most critical finan-
cial function — cash flow management. The old saying “cash
is king” garners renewed respect during economic downturns.
Those with cash and/or access to it are positioned well to nav-
igate hard times. Given that 80% of all businesses struggle
with cash flow issues, chances are an economic downturn
equates to magnified problems for small to mid-sized busi-
nesses with limited working capital. But those with good busi-
ness practices and minimum resources can also emerge as
solid, well-managed operations after an economic storm. By
investing time into gaining a comprehensive understanding of
its financial strengths and weaknesses, a business can often exiting the marketplace. Cash can give your company negoti-
realize higher actual profits than by simply growing sales. ating strength as suppliers and vendors struggle to manage
During economic downturns, a business must do more than their cash flow. This may be the time to invest in more assets
just increase sales. It must also have the full picture on how to — those that aren’t subject to trends and obsolescence. Cash
best use its limited assets to ensure longevity. speaks loudly! This may be the time to invest in securing more
Some techniques for managing assets for optimal return on efficient equipment or reducing high-interest debt.
investments are simple and easy to identify and implement. For many businesses A/R is often a key cash driver. Yet if
For instance, revisiting your company’s credit policies and A/R is not a function of your business operations, there are
understanding industry averages may lead to a decision to other significant cash drivers that can be managed with mod-
reduce accounts receivable days outstanding. Reducing erate modifications. Many areas may need the attention of
accounts receivable just slightly, a two- or three-day reduc- management, but the process must start with clearly under-
tion, often results in noticeable improvements in profits. Free- standing the components of your company’s cash flow cycle.
ing up cash from accounts receivable can provide cash to take Securing the assistance of an outside consultant can provide
advantage of unique opportunities created by competitors insight into industry standards and risk management guidelines
used by lenders. However, the process must start with a clear
direction and understanding of the company’s goals and
Optimal utilization of a company’s assets visions. Optimal utilization of a company’s assets can only be
can only be gained when an entity is working gained when an entity is working with a focused and detailed
with a focused and detailed plan plan for conducting business. Cash management strategies
should clearly align with the company’s goals and visions.
for conducting business. Techniques enlisted to improve profits cannot exclude tactics
Cash management strategies should clearly align to improve cash flow. As a crucial element of growth and
with the company’s goals and visions. longevity, sound cash flow management should be based on a
comprehensive view that incorporates factors from the following:

34 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E 2 N D I S S U E 2008
S M A R T G R O W T H S T R A T E G I E S

A Dynamic Business Plan: This is a plan pitfalls while maximizing ROI. Early agement are knowing your options,
that incorporates “what if” scenarios and signs of trouble can serve as opportunity maintaining many options and utilizing
projections. The business plan should for change. Seek professional assistance only those options that match your
provide a framework for operating with from consultants and bankers as early company’s goals and objectives.
agility within different economic envi- as possible. Remember, banks really do
ronments. The business plan should also want your company’s business. Banks
Michelle King, CPA-MBA, is a business
be the start for identifying plans for want to lend money, and investors are consultant and coach specializing in
growth and thus, future cash needs. always seeking a sound operation to energizing cash flow. For more informa-
invest in; but if you wait until things are tion about her services, log onto
Cash Drivers: Recognizing the true cash desperate, your options become limited. www.info@es-concepts.com or contact
drivers is essential. Oftentimes, The keys to strength in financial man- her directly at 310-782-7920.
resources are not expended on the
products and/or activities that have the
greatest positive impact on cash, and
thus ROI. Are you investing time and
energy into products or services that are
truly generating the highest profits?
Incorrect cost allocation techniques and
hidden cost may serve to undermine
efforts to improve ROI. Be careful not to
overlook and underestimate products or
services that could hold hidden profits.

Industry Standards: Although your

operation may be unique, lenders will
use industry financial standards and
ratios to evaluate your performance. It is
essential that you know how your busi-
ness compares. The more informed you
are about your business’ financial per-
formance, the better prepared you are
to negotiate and leverage appropriately.

Loan Covenants: Since maintaining

good business relationships is essential
to positioning your company for
growth, it’s important to monitor your
company’s performance as it relates to
current loan covenants. Failing to main-
tain key ratios can result in your bank
reducing your available line of credit; or
worse, calling your loan for immediate
payment. For many businesses, this
could mean the end. But since most
financial crises don’t emerge without
warning, they often can be circum-
vented. Financial analyses that provide
a formula for monitoring key indicators
are relatively inexpensive to implement.
Consistently and proactively moni-
toring your company’s financial perfor-
mance is essential for growth and
longevity. Evaluating your business’
strengths and weaknesses is the first step
in creating a roadmap to circumvent

2 N D I S S U E 2008 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E 35

S M A R T G R O W T H S T R A T E G I E S
PROS AND CONS OF POPULAR GROWTH STRATEGIES
continued from page 29
forces principals to commit money they either don’t have or can’t
spare. It will cause tremendous tensions with partners and
employees at all levels. It can damage marriages when personal
assets, such as one’s home, are put at risk. And it really does
cloud everyone’s ability to make thoughtful decisions. Before
crossing that line, keep a cool head and change priorities instead
of digging in deeper than you know you can keep under control.
Bringing in Outside Investors
The next strategy, which is less risky for the principals finan-
cially but is not desirable if you are committed to maintaining
full control of your business, is to seek investors. If you go that
route, you want to be in a firm financial position before consid-
ering an aggressive growth strategy. You must accept the fact
you are going to have to give up some control if you want to get
to the next level with far less personal risk. The key to success is
finding investors who are like-minded with you, are unambigu-
ous about how much ownership you will retain in the company
(and willing to put it in writing), have realistic expectations
about the financial commitments required, and have a willing-
ness to see it through if unexpected problems arise.
Find investors with experience in your industry so they
know what to expect and aren’t shocked every time you hit a
bump in the road. It is important to negotiate an arrangement
while your company is on solid footing so you are leveraged
to negotiate a genuine merger that leaves you with meaningful
ownership and an acceptable degree of control. Naturally,
you should seek competent legal counsel to protect your posi-
tion during and after the merger. But realize you may no
longer be the majority owner and that is the correct position if
others have a bigger financial stake in the business than you
do. It’s important to find investment partners who really want
to work with you and not obtain a leveraged buyout of your
company in the guise of a merger.
Contrast this with certain venture capitalists looking to
make a quick return on what they undoubtedly see as one
high risk venture among many they may have going at any
given time. If you have a good thing going, these folks will be
knocking on your door from time to time. Remember, if all
you have is a good idea that could potentially be executed by
others, people with money can take it from you if you leave
yourself vulnerable. These are not the folks you want to work
with if you want to keep your dream alive and as much of it
as possible in your own hands. Avoid investors who want to
own your company from the onset, flip it when performance
levels are attained, dump it if it underperforms, and leave you
out of the money stream as much as possible. And remember,
nobody is going to tell you that up front. Remember, the easi-
est investment capital to obtain is usually the least desirable.
Growing by Acquisition
Another approach requiring investors, unless you are heavily
capitalized, is to grow by acquisition. If you are looking to
36 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E
C O L U M N I N S I D E R
Another approach requiring investors,
unless you are heavily capitalized,
is to grow by acquisition.
If you are looking to double or triple
the size of your company,
it can actually be more cost-effective
to buy out competitors when they are struggling
or perhaps when a principal with
no succession plan is getting ready to retire.
double or triple the size of your company, it can actually be
more cost-effective to buy out competitors when they are
struggling or perhaps when a principal with no succession
plan is getting ready to retire. Yet there are pitfalls in trying to
merge the cultures of the businesses together. Even if you exe-
cute a buyout of the company’s assets, or just the seemingly
desirable assets, you can’t completely avoid inheriting some
of its problems, especially if its reputation was tarnished prior
to the buyout. Struggling companies always create problems
with their customers and the extent of this damage to their
market position often requires a concerted effort on the
buyer’s part to investigate. Damage to the company’s reputa-
tion needs to be taken into consideration in determining the
value of the business and its customer base if purchased as a
separate asset. Suffice to say, a largely dissatisfied customer
base has far less value than a base of satisfied customers, but
it is up to the buyer to mend fences and keep customers satis-
fied following the merger.
There will of course be unknown costs and headaches
involved as you learn what you really purchased. However,
compared to the enormous cost of trying to outsell strong com-
petitors, acquisition can be a desirable option for companies that
want to reduce their risk while growing fast.
Growing by Diversification
Another approach is to diversify your product lines so you
have other viable markets you can move into without compet-
ing with yourself or exacerbating competition in your own
industry. This involves finding a complimentary market niche
to the one you are currently serving. This approach is often
safer because it allows you to dabble in something else at a
level where you can keep your costs under control and exit
the growth strategy easily if it doesn’t work out. In other
words, launch a new product or service line that works within
the framework of your existing business without bringing on a
lot of new people, equipment or overhead.
If the new venture is bigger than you can work into your
existing business, set up a second business, keep it com-
pletely separate from your main business and if you don’t
have capital you can afford to lose, fund it with investor
2 N D I S S U E 2008
money at the onset. This strategy allows
you to use investor capital for a new
venture without risking your existing
business while still retaining a viable
exit strategy.
A local South Bay entrepreneur once
told me a good way to test-market a
new idea is to set up a “shell company,”
which for him was really a new division
of his own company that was nothing
more than a website and a sales kit
used to test the market to see if there
was any interest before committing to
invest further. This is a low-budget way
to do some in-the-trenches R&D with
immediate feedback and reduce your
risk considerably when you launch a
new venture.

Keep Your Emotions at Bay

Never get emotionally caught up in
your business. A business venture
should be entered into thoughtfully. It
should be maintained and built upon if
the idea pencils out. And it should be
just as thoughtfully abandoned or
scaled back when all the best informa-
tion indicates it is the right thing to do.
Still, some people get so caught up in it
emotionally that they simply can’t let it
go and end up ruining themselves
financially as a result. There is the
humiliation of failure, which in many
cases friends and family exacerbate
because most people have never owned
a business themselves and simply don’t
understand the entrepreneurial life. But
it is a worse failure to keep digging the
holes deeper when there is no hope for
recovery, and this is extremely hard to
acknowledge when you’ve put your
heart and soul into a business. For those
who have been through challenges, it
makes eventual success all the sweeter
when it finally happens.
Whatever course you choose to grow
your business, move cautiously. I can’t
overemphasize the need for due dili-
gence at all levels. As much as you
strive for success, always make sure you
have an exit strategy that leaves your
core business intact.

David Whitehead is the publisher of

Business Insider Magazine

2 N D I S S U E 2008 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E 37
Architectural Icon Calendar of Events
Frank Gehry to Move
World Headquarters Save the Date!
to El Segundo El Segundo Chamber of Commerce largest networking event, the annual
For more information about the events Regional Mixer! Mingle with members of
Internationally renowned architect Frank listed, call 310-322-1220 or visit many chambers from the South Bay as well
Gehry has selected El Segundo as the home ElSegundoChamber.org as your local friends. Sample fabulous fare
for his new offices and design studios. The from a variety of local restaurants in this
public announcement was made to a large Evening Mixer: family-friendly atmosphere! Don’t miss this
group of civic and business leaders by Mayor Thursday, July 17, 2008 annual opportunity! The Regional Mixer is
Kelly McDowell during the annual State of 5:30–7:30 P.M. THE Mixer to be at in August!
the City address. Chevron Mixer in the Park
The move to El Segundo from west Los Network Café
Chevron Employee Park
Angeles resulted from Gehry Partners out-
(corner of El Segundo Blvd. & Illinois St.) Time: 11:30 A.M.–1 P.M.
growing their current facility. Gehry’s new
world headquarters will occupy 60,000 Enjoy a great lunch and learn about your
square feet of space in two adjoining build- Palos Verdes Peninsula fellow Chamber members and their
ings that can accommodate all the firm’s Chamber of Commerce businesses while promoting your own.
roughly 250 personnel. For more information about the events Each will get to present a 30-second
“To have someone of Frank Gehry’s listed, please call 310-377-8111 or go to commercial in front of the whole group.
stature headquartered here is a great coup www.palosverdeschamber.com. Advanced reservations are required and
for our city and fortifies El Segundo’s growing will save you $5. Members with
reputation as a prime destination and center Evening Mixers: reservations are $20 and guests and
for design, the arts and creative media,” Evening Mixers take place the members without a reservation are $25.
stated El Segundo Mayor Kelly McDowell. Please call 24 hours in advance to cancel.
third Thursday of every month from
“Frank Gehry is truly a giant in the field
5:30–7:30 P.M. No shows will be invoiced. Bring a door
of architecture and his works are world-
renowned for their synthesis of architecture Admission is $5.00 for chambers, prize to further market your business.
and art. We are proud to welcome him to $10.00 for guests and includes one drink
our community.” ticket. Call 310-377-8111 for schedule. Thursday, July 10, 2008
Gehry’s arrival continues a trend that has Catalina Restaurant
seen several prominent design, arts and Breakfast Mixers: 320 S. Catalina Ave.,
media companies migrate to El Segundo in Time: 7:15–9 A.M. on the first Wednesday Redondo Beach, CA 90277
recent years. In 2007, advertising agencies of every month.
Ignited Minds, LLC and David & Goliath Admission is $15 for members with Thursday, August 14, 2008
moved to El Segundo, as did Internet media R.S.V.P. or $18 for members without Red Robin Restaurant
firm Tandberg Television. 1815 Hawthorne Blvd., #150,
R.S.V.P or for guests.
“It’s no accident these companies are
at the South Bay Galleria
choosing our city,” added McDowell. “We
provide a number of appealing amenities as Wednesday, July 2 Redondo Beach, CA 90278
an ideally situated coastal community not to Marmalade Café, The Promenade on the
mention a favorable tax base, prime and rea- Peninsula, Rolling Hills Estates. Thursday, September 11, 2008
sonably priced office space and unparalleled Location: Captain Kidd’s Fish Market
customer service.” Redondo Beach 209 N. Harbor Dr.,
Gehry is expected to move into the new Chamber of Commerce Redondo Beach, CA 90277
space by the end of 2008 or early 2009. & Visitor’s Bureau
A Toronto native who moved to Califor- For more information about the events San Pedro Chamber of Commerce
nia at the age of 18, the Pritzker Prize win- listed, call 310-376-6911 or go to For more information about this event,
ning architect burst onto the scene in 1972 call 310-832-7272 or go to
www.RedondoChamber.org
with his innovative Easy Edges furniture
www.SanPedroChamber.com.
designs that incorporated cardboard as a
medium. Over his career, he has completed Business After Hours Mixers
dozens of widely acclaimed high-profile Time: 5:30–7:30 P.M. After Hours Mixers:
buildings, many of which have become Admission: $5.00 Members, Time: 5:30–7:30 P.M.
tourist attractions. $10.00 Guests Admission: $5 for members,
His best known works include the Walt $10 for guests. 2 free drinks with paid
Disney Concert Hall in Downtown Los Wednesday, July 23, 2008 admission.
Angeles; the Guggenheim Museum in Bil- Location: Splash Mediterranean Bistro
bao, Spain; Weisman Art House Museum in 300 N. Harbor Dr., Wednesday, July 23, 2008
Minneapolis; Dancing House in Prague; Redondo Beach, CA 90277 Plaza Automotive Center/Park Plaza Shell
Experience Music project in Seattle, and his 990 N. Western Avenue,
1978 residence in Santa Monica.
Thursday, August 28, 2008 San Pedro, CA 90732
Gehry is currently working on more
than 20 new designs, including the $2 bil- Annual Regional Mixer
lion Grand Avenue Project to revive Location: Seaside Lagoon Wednesday, September 24 2008
Downtown Los Angeles and a new mas- 200 Portofino Way, Puesta del Sol
sive-scale Guggenheim art museum in the Redondo Beach, CA 90277 1622 South Gaffey,
Persian Gulf. Be a part of the Redondo Beach Chamber’s San Pedro, CA 90731

38 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E 2 N D I S S U E 2008
C O L U M N I N S I D E R

BUSINESS MEETING, EVENT,

& BANQUET RESOURCES
Banquet & Meeting Rooms
DoubleTree Hotel LAX-El
Segundo
Our six conference and banquet rooms
and 4,500 sq. ft. of modern meeting
space can gracefully accommodate 10
to 150 guests. Whether your meeting
calls for state-of-the-art audio-visual
equipment or an elegant dinner party,
our experienced staff is dedicated to
providing flawless service for every
event. If you have attendees coming in
from out of town, we have 215 newly
renovated rooms and free 24-hour
complimentary shuttle service to and
from LAX.
310-322-0999
1985 E. Grand Ave.
El Segundo, CA 90245
www.DoubletreeLAX.com

Meeting Rooms
The Cyber Boardroom
The Cyber Boardroom offers three amazingly equipped conference rooms of various sizes
and unique character that are ideal for any occasion. Every room (The Royal, The Lennox
and the Manchester) comes equipped with a 40-inch monitor that can be used for
everything from television viewing to projected presentations, a telephone capable of
conferencing up to four outside parties, and our exclusive “Gigabyte” high-speed Internet
access either through a wired or wireless connection. Each room is an independent sound
zone with an adjustable volume control for presentation audio or ambient music. The
Cyber Boardroom also has a Wi-Fi lounge and a full range of powerhouse computers for
office or graphic work, scanners, faxes and printers.
310-303-7904
4451 Redondo Beach Blvd.
Lawndale, CA 90260
www.TheCyberBoardroom.com

2 N D I S S U E 2008 S O U T H B AY B U S I N E S S I N S I D E R M A G A Z I N E 39