Fall Leaders Conference 2022: A Scaling Up Sell Out
Most of the Virginia Council of CEOs’ events are for CEOs and sponsors only.
For this year’s Fall Leaders Conference we invited non-member CEOs and executive teams to engage with presenter Verne Harnish on the topic of “Scaling Up” your business. And we sold out the room at The Jefferson Hotel. There’s an appetite for growth!
Bringing my leadership team to this event was a game-changer. They were inspired by the concepts and are now thinking beyond their individual departments. This event established a common vocabulary and approach to scaling our business in the years ahead.
Chris Leone, WebStrategies Inc.
Verne spoke at a VACEOs luncheon in 2008 and we’ve been trying to get him back every since. A master story-teller, Verne connects the dots on trends, practices, models and techniques. He focused on the four key decisions every business must make in order to Scale Up: People, Strategy, Execution, and Cash.
We’ve already made plans for next year’s Fall Leaders Conference. It will be held on September 21, 2023 and will feature world famous sales coach Jack Daly. Save the date, tell your team, and get ready to “Get Jack’d”!
As a non-profit association, our sponsors provide expertise and resources that make events like this happen. Thanks to all of our them, and especially to those that backed this conference: Blue Ridge Bank, Fahrenheit Advisors, and Transact Capital Partners.
Corey Divine
Announcing: Roundtable Program for Key Executives
For years, our members have been asking for a peer learning experience for their second in command. The VACEOs Board of Directors asked staff to create a peer learning experience for COOs, GMs, number twos, etc., as a pilot program for 2023.
Learning with peers accelerates the abilities of professionals. We know that from decades of serving CEOs in this way.
VACEOs is offering a cohort-style program for key executives from member companies that will:
- Create meaningful connections with other professionals. A trusted network.
- Accelerate the learning and growth of these professionals by expanding their perspectives and exposing them to others’ experiences.
- Connect them with experts from the community in a wide range of disciplines.
Beginning on January 20, 2023, a group of 8 to 10 executives will meet monthly through September. These three-hour meetings will be led by a professional facilitator and consist of two elements.
- A confidential peer roundtable experience that gives everyone the chance to share issues and opportunities, and to learn from one another’s experiences. Essentially, a “lite” version of our CEO Roundtables format.
- Learning from subject matter experts, drawn from VACEOs sponsors, on topics like strategy, execution, culture, technology, compliance, finance, HR, marketing, sales, etc.
This is not a VACEOs membership, but a program that we are offering to key executives in our members’ companies. Participants are expected to commit to 100% attendance.
As of October 31 we are no longer taking applications. If you have any questions, please email info@vaceos.org.
3 Ways to Tackle Inflation Challenges
Inflation is the Darth Vader of every business today. For more than a year, rising prices have caused rising concern for CEOs distressed about protecting their profitability. With inflation giving us an unwelcome throwback to the 1980s, it’s no wonder it keeps CEOs up at night.
Experts and pundits disagree on whether we’ve seen the peak and even about what’s on the horizon. In July inflation rose 8.5 percent from just a year ago — lower than expected. Though perhaps easing a bit, inflation pressures remain historically strong.
So what’s a CEO to do?
It’s important to focus on what you can control and take action where it makes sense for your business. Here are 3 ways to tackle inflation challenges: strategic planning, forecasting and scenario planning, and automation. To give you additional proven insights from your peers, three VACEOs members share their perspective:
• Michael Matthews, President & COO, Froehling & Robertson
• Jacob Blondin, President & CEO, Intrics
• Scott Crawford, President & CEO, Virginia 811
CEOs and business owners don’t have to take it on the chin with inflation. There are strategic ways to mitigate and minimize risk in this environment. In fact, there may even be new opportunities to take advantage of and strengthen your business — right now and into the future.
3 WAYS TO TACKLE INFLATION CHALLENGES
1. STRATEGIC PLANNING
Strategic planning empowers long-term thinking about where you want your business to be, the roadblocks in your way, and how to overcome those roadblocks. It’s your roadmap for where you’re headed and how to get there. Especially in times of uncertainty it’s critical to reexamine your strategic plan to determine whether its assumptions are still valid, whether some initiatives should be put on hold, and whether there are new opportunities to explore.
The best way to hedge if you’re not in an inflation-shielded market is to establish yourself as an invaluable partner to your clients. You don’t want to be a fringe player right now. If your client is dropping partners, you want to be the last one standing.
Mike Matthews, Froehling & Robertson
“Strategic planning is all about establishing your unique value in the market, and the benefit is determining what value you’re providing and who your best clients really are,” he says. “In this environment, you should be focusing on those best clients and those areas in which you have the highest profit margins. You want to be the partner your best clients can’t live without.
“Ideally strategic planning is an ongoing process, not just something you do when you’re in trouble. If you’re also focused on strategic planning when you’re at the top of your game, you can determine how to stand on that going forward,” he says. “Harvard economic and strategy expert Michael E. Porter says the essence of strategy is figuring out what not to do. It’s critical to not lose focus on your value in times of crisis — don’t act out of desperation. You can’t be all things to all people, so be selective and stay true to your unique value.”
2. FORECASTING AND SCENARIO PLANNING
Forecasting and scenario planning isn’t a crystal ball, but it will help you plan for a range of what-ifs — and right now there’s no shortage of what-ifs. Model future business scenarios and forecast possible outcomes so you’ll have the insight for better decision-making if and when those scenarios become real.
“The best thing to do right now is to be decisive, be aggressive with decision-making to manage costs,” says Blondin, adding that the lesson comes from his own past business experiences. “Don’t hold on too long in a downturn with the expectation things will change.
Leverage forecasting and scenario planning to anticipate future costs and make sure you’re structuring your revenue smartly. Don’t overspend. Don’t over hire. And be cautious with your investments.
Jacob Blondin, Intrics
“Learn from what we all just went through with COVID and apply the same strategies and the same mentality. But there’s a difference. With COVID, businesses had the safety net of government support. In a downturn, we won’t have that luxury — and the cards will fall where they may.
“Utilize forecasting and trending by experts — for example, with fuel prices — and pass on the costs of the core drivers of your business to your customers,” he says. “We restructured our revenue to control for inflation by passing on the costs of our core drivers, labor and fuel. When our costs go up, our customers’ costs go up. Our customers also understand when our costs go down, their costs go down. It was the largest shift we’ve ever made in our business design, and it’s a vastly more complex revenue model, which also includes localized pricing in micro markets. For business owners, now is an opportune time to do this because your customers are seeing and doing the same thing — awareness is high, and so is the feeling that we’re all in this together.”
3. AUTOMATION
In challenging economic times, businesses can’t afford mistakes. Automating accounting, sales, HR, and other processes minimizes errors and creates new efficiencies. It frees your team to tackle higher-value work. And it’s both affordable and attainable — with off-the-shelf as well as custom solutions.
“In my business, we can’t allow one ticket to have an error — it could result in loss of life, loss of property, or interruption of services people depend on,” says Crawford, whose company is responsible for alerting underground utility operators of excavation possibly affecting facilities so they can be marked. “Having the human resources to audit more than a million tickets a year would be insurmountable. We got a grant to work with Virginia Tech’s Statistical Applications and Innovations Group to develop an AI model to allow us to audit Web Ticket Entry tickets at 100 percent. If a ticket meets the threshold for a probability for error, then it’s directed to a human. Upon full implementation, we will have confidence that every ticket is being reviewed. And we created a new QA and QC department to focus on matters relating to possible errors.
“The benefits of automated processes are phenomenal. In a sense, AI is another team member. Humans work with AI to enhance what they’re doing. It’s not a replacement of the workforce,” he says. “Generally speaking, increasing the use of technology in business will bring cost savings, but people are afraid of the idea of lost jobs. There is some job loss due to attrition, but technology is actually creating new jobs to fill, just as ours did. We moved people to our new QA and QC department, which offers higher-level, higher-paying jobs. We’re also now working to apply machine learning to our AI model to become even more accurate in what it predicts.”
Companies not leveraging technology the best they can ultimately risk not being relevant to the needs of the market. They’ll be behind the curve — and they won’t be able to catch up. Companies afraid of change need to be more afraid of going out of business.
Scott Crawford, Virginia 811
WRAPPING UP
Rising inflation can put unprepared businesses on the backfoot. Strategic planning, forecasting and scenario planning, and automation are three ways to tackle inflation challenges efficiently, effectively — and confidently. As a bonus, they’ll also put businesses in position to grow faster when more normal economic dynamics return.
About the Author
Mark Vita is managing director at Fahrenheit Advisors. He leads the firm’s Business Advisory and Finance & Accounting practices. Contact him at mvita@fahrenheitadvisors.com.
Q&A with Lauren Sweeney, CEO of Dotted Line
Q: You are a native of Richmond and attended Randolph-Macon College. What is your favorite spot or activity in Richmond?
A: I love the river and some of the trails around Richmond, as I have recently gotten more into hiking. The close proximity to the mountains or beach also makes it easy to find things to do on the weekends. I believe Richmond is a great city to live in based on the market size – it’s easier to find a community and get around town than a larger city, and Richmond is large enough to offer a multitude of things to do.
Q: Who inspired you to become an entrepreneur?
A: I come from a family of small business owners. My grandfather owned a small oil and gas business in rural Virginia, and we were very close. Growing up, I saw and heard firsthand the power and impact of this engine of the economy. I also have an entrepreneurial spirit and love figuring out how to build new things.
Q: Please tell us about your journey to become a CEO.
A: My path was influenced by a combination of large corporate experience and early exposure to small business ownership. My first job out of college was at a Richmond-based Fortune 200 company, where I learned broader business knowledge and how important investments in learning and development are to building leaders. The first business I started was an e-commerce company that sold paper planners. As I evaluated my next move, I had a series of conversations with small business owners that revealed marketing challenges specific to their businesses. This was the genesis for Dotted Line. I started the agency in 2014, and we had our strongest year ever in 2021.
Q: What excites you most about your role as CEO?
A: I’ve learned that Dotted Line’s potential rests on the strength of its people. Growing our team members and leaders is one of my most important jobs as the CEO. At Dotted Line, we focus on developing leaders that our agency will need not only today, but five years from now. We also are at a transformational moment, as the agency just debuted on the Inc. 5000 list of the nation’s fastest-growing private companies. Our momentum and growth are continuing in 2022.
Q: How are you promoting leadership development at Dotted Line?
A: We make a significant investment in our people. For 2022, we launched a year-long Leadership Development program that’s designed to build confident, team-based leaders. This investment – which is rare for both a marketing firm and for an organization of our size – ensures that team members have the shared skills and background to grow into future roles with Dotted Line and beyond. The program is open to everyone at the agency, not just those in existing management roles, because I believe everyone needs fundamental leadership skills – like influencing and having difficult conversations – to be effective in their jobs. We also dedicate a percentage of our budget to coaching, skills-based learning and mentoring opportunities.
Q: Are there any national/business authors that you follow? What is it about them or their message that resonates with you?
A: I’m a big fan of Dave Ramsey. His book and coaching program EntreLeadership has been an exceptional resource for me as a small business owner. Dave focuses on how to be a great leader and grow a successful small business. I have participated in many of his conferences and coaching events over the years.
I am also a big fan of Jesse Itzler, a serial entrepreneur. Jesse leads with high levels of passion and excellence and believes that the more you experience in life, the more you have to give. Jesse encourages people to have one big, impossible goal each year. This is something that stretches you and has a lasting effect on you all year. This year, I’m participating in an ultra-endurance event called 29029 Everesting. We have 36 hours to reach 29029 feet – the equivalent height of Mt. Everest. It’s quite the challenge, and I am looking forward to experiencing something this transformational.
Q: You are very involved in the community, including the National Association of Women Business Owners and being on the board of directors for the Virginia Chamber of Commerce. How has your work with these organizations impacted you as a CEO?
A: Meeting, learning from, and networking other leaders has been formative to me as a business owner and CEO. As a young entrepreneur, I’m learning and leading at the same time. Outside guidance and expertise has been essential.
Q: You joined VACEOs in the height of the pandemic in 2020, what part of your membership has helped you grow the most as a leader?
A: I have loved getting to know and having the support of my roundtable members. Many of our businesses are similar in size, and we have similar aspirational goals. I am learning from them, and the support as a small business owner has been incredibly helpful.
Know the Risks so you can Reap the Rewards of your Company’s Retirement Plan
A guest post by Tripp Leonard, CFP ®, AIF ®, CEPA®, Partner at Irongate Capital Advisors, a VACEOs sponsor
A company’s retirement plan is more than just ‘table-stakes’ to attract & retain talented people. Well designed & closely monitored, a corporate retirement plan will ‘connect’ to the company’s culture, empower your workforce, and provide the owners with a tax-efficient tool to reward & incentivize growth.
A qualified retirement plan can also serve as a tax-efficient mechanism to support an owner’s exit or internal equity transition to key managers.
Qualified Retirement plans can seem complicated and come with significant fiduciary responsibility. Three (of many) key considerations:
1. Know exactly what you are paying for administrative expenses and how these costs are retrieved
- With more than 170 ERISA class action lawsuits filed in federal court the past couple of years1, 401k plan sponsors (the owners of the business) need to understand their fiduciary responsibility with respect to their company retirement plan.
- The main trouble-spot is revenue-sharing within the expense ratios of the plan’s investment line-up. The expense ratio a participant sees per investment is not always what is paid to the management team selecting their stocks or bonds within the fund. There may be sub-TA or 12b-1 revenue that is paid to other parties. This leads to administrative expenses increasing as the plan assets grow – and the potential for one participant to contribute more to plan expenses than another based on the fund selected.
- Tibble v. Edison & Tussey v. ABB – two often-cited and important legal cases that are important for plan sponsors to understand – highlight the importance of a prudent process, transparency with respect to plan administration expenses, and share class selection.
- As Charlie Munger once said – “All I want to know is where I’m going to die, so that I’ll never go there.” Understand where the trouble spots lie with respect to fees, expenses, and regulatory precedent – reviewed, monitored, and benchmarked annually – and you will be an advocate for your workforce and create a tailwind for compounding their wealth.
2. Conflicts of Interest
- Depending on the recordkeeper you select for your company’s retirement plan, it is important to understand the various layers of economic incentives.
- For example, administrative pricing may be impacted by the target-date series you select for the plan. The target-date-series is often the Qualified Default Investment Account (QDIA). Be careful here. Ideally, as a decision maker, you do not want ‘constraints’ when it comes to selecting plan investments for your workforce.
- Stable Value v. Money Market Funds is another ‘category’ leading to multiple lawsuits against employers. Anthem had a class-action suit brought against their plan – one issue being the offering of Vanguard’s Prime Money Market instead of a Stable Value Fund. Stable Value Funds often have higher yields than money market funds with similar ‘stability’ of principal at the participant level.
- Not all Stable Value Funds are created equal – and often the recordkeeper selected may ‘encourage’ your stable value fund selection. You have options.
- Proactive understanding of various conflicts of interest will help guide decision making that benefits your plan and your team.
3. New Comparability Profit Sharing Formula and/or Cash Balance Plans
- Many 401k or corporate retirement plans include a company match. This may be done as a safe-harbor match or a discretionary match – creating an incentive for participants to save and an opportunity for the company, using cash flow from the business, to accelerate their pace of savings.
- The actual profit-sharing sleeve of the 401k retirement plan is often ignored. This sleeve allows a business to evaluate at year-end whether there is a portion of corporate earnings-before-taxes that should be directed to the retirement plan. These contributions are tax-deductible, not imputed as income to the participants, and often include a vesting schedule that provides a retention component.
- The default profit-sharing formula for most plan documents is ‘pro-rata.’ For closely held companies, changing that formula to ‘new comparability’ allows the flexibility to allocate profit sharing contributions to select or tiered groups. Your administrator has specific compliance guidelines that drive the allocation formulas; however, the flexibility will often surprise you.
- For example, you may want to emphasize rewarding the ownership/management team first, then project managers next, then superintendents, etc. There are multiple factors including ages, incomes, structure of any safe-harbor contributions; however, the flexibility of a new-comparability profit sharing formula justifies having iterations run so you know what is possible. A well-designed profit-sharing plan can provide a very tax-efficient executive benefit that has an ‘equity’ feel for your workforce.
- Lastly, cash-balance plans are a relatively flexible version of a defined benefit plan. For businesses with consistent, predictable cash flow, a well-designed cash balance plan can be the ‘4th leg’ to the qualified retirement plan (deferrals, match, profit sharing, cash balance) that allows owners (and key people) to receive large, tax-deductible retirement plan contributions on top of 401K Profit Sharing deposits. For example, the 2022 maximum contribution to a 401k profit sharing plan (if age 50+) is $67,500. A cash balance deposit for this individual can be as high as $343,000 in 2022 for a total contribution limit of $410,500. There is ample flexibility below these max-levels, but you get the point – potential for very high current year tax-deductions and the potential for a tax-efficient planning tool to prepare an owner for retirement, exit, or simply diversification.
As a decision maker, a well-designed and well monitored retirement plan involves looking at the right information in the right way and doing what is best for participants and their beneficiaries. The financial health of your workforce will benefit from your time, energy, and process. And with the right design, your company’s retirement plan can also be a highly effective capital allocation tool for the owners & management team.
1Bloomberg Law 4.5.22
About Tripp Leonard CFP ®, AIF ®, CEPA®
Tripp.Leonard@irongate-capital.com
Tripp Leonard is an equity partner of Irongate Capital Advisors. Since 1994, he has worked with private businesses, their owners, and their key people in the areas of business succession planning, capital allocation & investment management, risk management, and employee benefits. His practice is focused on fee-based corporate & personal financial planning and investment advisory services for individuals, corporations, and qualified retirement plans.
Financial Professionals do not provide specific tax/legal advice and this information should not be considered as such. You should always consult your tax/legal advisor regarding your own specific tax/legal situation.
Tripp Leonard is a Registered Representative and Investment Advisor Representative of Securian Financial Services Inc. Securities and Investment Advisory services offered through Securian Financial Services Inc. member FINRA/SIPC. Irongate Capital Advisors is independently owned and operated. 800 E Canal St. Suite 950, Richmond, VA 23225. TR: 4834629 DOFU: 07/2022
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